BEN 10-K & 10-Q changes, risk factors and insider trading

We derive substantially all of our operating revenues and income from providing investment management and related services to investors in jurisdictions worldwide through our investment products, which include our funds, as well as institutional and high-net-worth separate accounts, retail separately managed account programs, sub-advised products, and other investment vehicles. Related services include fund administration, sales and distribution, and shareholder servicing.servicing, Wewhich we may perform services directly or throughoutsource to third parties. The assetinvestment management industry continues to experience disruption and challenges, including continued fee pressure, regulatory changes, an increasing and changing role of technology in assetinvestment 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 currently and in the past experienced and may continue, from time to time, to experience volatility and disruption worldwide. Declines in global economic markets have periodically resulted, and may continue to result, in significant decreases in our AUM, revenues and income, and future declines may further negatively impact our financial results. Such declines have had, and may in the future have, a material adverse impact on our 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, operational, political, electoral, diplomatic or other changes and/or 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 ongoing Ukraine-Russia and Middle East wars and/or conflicts may continue to develop and/or expand globally and significantly impact the global economy and financial markets, which may 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 or market operations, 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.

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

Our business and operations are subject to adverse effects from the outbreak and spread of contagious diseases such as COVID-19.diseases.

The outbreak and spread of contagious diseases such as COVID-19 have had, and may in the future have, adverse effects on our business, financial condition and results of operations. TheFor example, the COVID-19 pandemic resulted in a widespread global public health crisis. Such infectious illness outbreaks or other adverse public health developments in countries where we operate, as well as local, state and/or national government restrictive measures implemented to control such outbreaks, could adversely affect the economies of many nations or the entire global economy, the financial condition of individual issuers or companies and capital markets, in ways that cannot necessarily be foreseen, and such impacts could be significant and long term. Such extraordinary events and their aftermaths can cause investor fear and panic, which can further adversely affect the operations and performance of companies, sectors, nations, regions and financial markets in general and in ways that cannot necessarily be foreseen. It is not possible to predict the full extent to which a pandemic may evolve and/or adversely impact our business, liquidity, capital resources, financial results and operations.

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

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

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

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

Due to our interconnectivity with and dependency upon third-party providers, includingincluding, for example, advisors, central agents, exchanges, clearing organizations andorganizations, other financial institutions, and other service providers supporting our business and technology needs, we may be adversely affected if any of them is subject to a successful cyber attack or other privacy or information security event or disruption. Cybersecurity issues affecting third-party providers are a growing concern in the asset management industry. Many services that we use in our business are delivered from and supported, upgraded and maintained by, third-party providers. A breach, suspension or termination of these services or related support, upgrades and maintenance could cause temporary system delays or interruptioninterruption, and/or unauthorized access to confidential or private data, that could adversely impact our business.business, including financial losses to us and our clients, legal and regulatory issues, and reputational harm.

Any significant limitation, failure or security breach of our information and cybersecurity infrastructure, software applications, technology or other systems, or those of our third-party providers, that are critical to our operations could disrupt our business and harm our operationsoperations, financial condition, and reputation.

We are highly dependent upon the use of various proprietary and third-party information and security technology, software applications, external third-party services and other technology systems, and remote equipment and connectivity infrastructure, to access critical business systems necessary to operate our business. We are also dependent on the continuity and effectiveness of our information and cybersecurity infrastructure, management oversight and reporting framework, policies, procedures and capabilities to protect our computer and telecommunications systems and the data that reside on or are transmitted through them and contracted third-party systems. We use technology and third-party providers on a daily basis in our business to, among other things, support our business continuity and operations, process and transmit confidential communications, store and maintain confidential and proprietary data including personal employee and/or client data, obtain securities pricing information, process client transactions, and provide reports and other services to our clients. In addition, developments in our use of process automation and artificial intelligence (“AI”) further heighten our dependency on technology.technology, as such technology may be complex and unpredictable. Any disruptions, inaccuracies, mismanagement, delays, theft, systems failures, data security or privacy breaches, cybersecurity threats, incidents, attacksattacks, individual or brand impersonations, or other cyber-related fraud, or other security breaches in these and other processes, could subject us to significant client dissatisfaction and financial losses and damage our reputation. We and our third-party providers have been, and we expect to continue to be, the subject of these types of risks, breaches and/or attacks, as well as attempts to co-opt our brand.attacks. Ongoing advances in technology, including generative artificial intelligence,AI, as well as the malicious use of such technology, could further heighten the risks to our business. Although we take protective measures, including measures to secure and protect information through system security technology and our internal security procedures, as well as measures to assess third-party provider security posture and controls, we can provide no assurance that any of these measures will prove effective or comply with evolving information security standards, particularly given the evolving nature and sophistication of cyber and technology threats and attacks. The technology systems we use or rely on, including those provided and/or leveraged by third-party providers, remain vulnerable to denial of service attacks, unauthorized access, computer viruses, human error and other events and circumstances that may have a security impact, such as an external or internal hacker attack by one or more cyber criminals (including through the use of social engineering, phishing attacks, malware, ransomware and other methods and activities maliciously designed to obtain and exploit confidential information and to cause system and service disruption and other damage) and to our personnel or vendors inadvertently or recklessly causing release of confidential information, which could materially harm our operations and reputation.

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

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

The success of our business will continue to depend upon our key personnel, including our portfolio managers, investment analysts, sales and management personnel and other professionals as well as our executive officers and business unit heads. Competition for qualified, motivated, and highly-skilledhighly skilled executives, professionals and other key personnel in the investment management industry remains significant. Our success depends to a substantial degree upon our ability to find, attract, retain and motivate qualified individuals, including through competitive compensation packages, and upon the continued contributions of these people. Global and/or local laws and regulations could impose restrictions on compensation paid by financial institutions, which could restrict our ability to compete effectively for qualified professionals. As our business develops, we may need to increase the number of individuals that we employ. Moreover, in order to retain certain key personnel, we may be required to increase compensation to such individuals and increase our key management succession planning, resulting in additional expense without a corresponding increase in potential revenues. There is no assurance that we will be successful in finding, attracting and retaining qualified individuals, and the departure of key investment personnel, in particular, could cause us to lose clients, which could have a material adverse effect on our financial condition, results of operations and business prospects. In addition, due to the global nature of our business, our key personnel may, from time to time, have reasons to travel to regions susceptible to higher risk of civil unrest, organized crime or terrorism, and we may be unable to ensure the safety of our personnel traveling to such regions.

The laws and regulations applicable to our business generally involve restrictions and requirements in connection with a variety of technical, specialized, and expanding matters and concerns. Over the years, the U.S. federal corporate governance and securities laws, and laws in other jurisdictions, have been augmented substantially and made significantly more complex by various legislation. As we continue to address our legal and regulatory requirements or focus on meeting new or expanded requirements, we may need to continue to expend a substantial amount of additional time, costs and resources. Regulatory reforms may add further complexity to our business and operations and could require us to alter our investment management services and related activities, which could be costly, impede our growth and adversely impact our AUM, revenues and income. Regulatory reforms also may impact our clients, which could cause them to change their investment strategies or allocations in a manner adverse to our business. Certain key regulatory reforms and proposals in the U.S. and other jurisdictions that may impact or relate to our business, and may cause us to incur additional obligations, include regulatory matters related to antitrust rules and disclosure, cybersecurity disclosure, sustainable investing and ESG, climate-related disclosure,sustainability, privacy and data protection, SIFIs, derivatives and other financial products, fiduciary and fund-related reforms, digital assets, tax compliance, and other assetinvestment management disclosure and compliance requirements. The impacts of these and other regulatory reforms on us, now and in the future, could be significant. We expect that the regulatory requirements and developments applicable to us will cause us to continue to incur additional compliance and administrative burdens and costs. Any inability to meet applicable requirements within the required timeframes may subject us to sanctions or other restrictions by governments and/or regulators that could adversely impact our broader business objectives.

As in the U.S., regulatory and legislative actions outside the U.S. have beenbeen, and continue to be, augmented substantially and made more complex by measures such as the EU’s AIFMD and MiFID II.complex. Further, ongoing changes in the EU’s regulatory framework applicable to our business, including any new changes in the composition of the EU’s member states, may add further complexity to our global risks and operations. Moreover, the adoption of new laws, regulations or standards and changes in the interpretation or enforcement of existing laws, regulations or standards have directly affected, and will continue to affect, our business. With new laws and changes in interpretation of existing requirements, the associated time we must dedicate to and related costs we must incur in meeting the regulatory complexities of our business have increased. We may be required to continue to invest significant additional management time and resources to address new and changing regulations and laws. Outlays associated with meeting regulatory complexities have also increased as we expand our business into new jurisdictions.

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

We operate in a highly regulated industry and have received and routinely receive and respond to regulatory and governmental requests for documents or other information, subpoenas, examinations and, in some instances, investigations in connection with our business activities. For example, as noted in the “Legal Proceedings” section in Note 1615 - Commitments and Contingencies, our subsidiary, Western Asset Management Company (“WAM”) isremains the subject of parallel investigations by the SEC, the CFTCSEC and the DOJ. Further, regulatory or governmental examinations or investigations that have been inactive could become active. In addition, we are named as a party in litigation in the ordinary course of business. Claims made against us, including those without merit, have resulted and may continue to result in reputational harm and responding to such matters is an expensive process. Risks associated with legal liability often are difficult to assess or quantify and their existence and magnitude can remain unknown for significant periods of time. Regulatory enforcement and civil litigation matters can result in the imposition of a range of sanctions or orders against us, including, as applicable, monetary damages, injunctions, disgorgements, fines, penalties, cease and desist orders, censures, reprimands, and the revocation, cancellations, suspension or restriction of licenses, registration status or approvals held by us or our business. In addition, we may be obligated, and under our certificate of incorporation, bylaws and form of director indemnification agreement are obligated under certain conditions, or may choose, to indemnify directors, officers or personnel against liabilities and expenses they may incur in connection with such matters to the extent permitted under applicable law. Financial exposures, including AUM outflows, from and expenses incurred relating to any examinations, investigations, enforcement actions, litigation, and/or settlements have and may continue to adversely impact our AUM, increase costs, and negatively impact our reputation, profitability, and revenue any of which could have a material negative impact on our financial results. For a discussion of certain legal proceedings and regulatory matters in which we are involved, see “Legal Proceedings” in Note 1615 - Commitments and Contingencies in the notes to consolidated financial statements in Item 8 of Part II of this Annual Report.

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. Related services include fund administration, sales and distribution, and shareholder servicing.servicing, Wewhich we may perform services directly or throughoutsource to third parties. We offer our services and products under our various distinct brand names, including, but not limited to, FranklinAlcentra®, Templeton®, Legg Mason®, AlcentraApera®, Benefit Street Partners®, Brandywine Global Investment Management®, Canvas®, Clarion Partners®, ClearBridge Investments®, Fiduciary Trust International™, Franklin®, Franklin Mutual Series®, K2®, Legg Mason®, Lexington Partners®, Martin Currie®, O’Shaughnessy®, Putnam®, Royce®, Templeton®, and Western Asset Management Company®. We offer a broad product mix of equity, fixed income, 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.

DuringDespite periods of volatility driven by uncertainty regarding U.S. economic and trade policies, during the fiscal year ended September 30, 20242025 (“fiscal year 20242025”), U.S. and global equity markets provided positive returnsreturns, reflecting,due amongin otherpart things,to strong corporate earnings and easing of monetary policy and resilient economic activity.policy. The S&P 500 Index and MSCI World Index increased 36.4%14.8% and 33.0%17.8% for the fiscal year. The global bond markets were also positive as the Bloomberg Barclays Global Aggregate Index increased 12.0%7.9% for the fiscal year.

Our total AUM was $1,678.6$1,661.2 billion at September 30, 2024,2025, which1% was 22% higherlower than at September 30, 2023 driven by the positive impact of $186.0 billion of net market change, distributions and other, $148.3 billion from the acquisition of Putnam Investments (“Putnam”), and $2.7 billion of cash management net inflows, partially offset by $32.6 billion of long-term net outflows.2024. Simple monthly average AUM (“average AUM”) increased 12%3% during fiscal year 2024.2025.

AUM increaseddecreased $76.8$17.4 billion or 6%1% during fiscal year 20232025 primarily due to $97.4 billion of long-term net outflows, inclusive of $141.9 billion of long-term net outflows at Western Asset Management (“WAM”), partially offset by the positive impact of $58.9$67.6 billion of net market change, distributions and other, $34.9 billion from an acquisition, and $4.3$12.6 billion of cash management net inflows,inflows. partially offset by $21.3 billion of long-termLong-term net outflows, whichoutflows include $20.6$30.4 billion of long-term reinvested distributions. Net market change, distributions and other primarily consists of $94.4$125.8 billion of market appreciation,appreciation partially offset by $57.7 billion of long-term distributions, primarily from the equity and alternative asset classes, and a $4.6$0.5 billion increasedecrease from foreign exchange revaluation, partially offset by $40.1 billion of long-term distributions.revaluation,. The market appreciation occurred in all asset classes with the exception of the alternative asset class,classes, most significantly in the equity asset classclass, and reflected positive returns in the global equity and fixed income markets. 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, Indian Rupee, and Japanese Yen, partially offset by a weaker U.S. dollar compared to the Euro, British Pound and Brazilian Real.Euro.

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 38%,40%, 38%,39%, 37%39% and 35%36% of our total AUM as of September 30, 2024. Excludes funds scheduled to be closed.2025.

Investment management fees increased $369.3$159.6 million in fiscal year 20242025 primarily due to aone 12%additional quarter of revenue earned by Putnam, which was acquired on January 1, 2024, an increase in average equity AUM, and an increase in performance fees, partially offset by athe decreaseimpact inof performanceWAM fees,outflows certainand transaction-relatedcatch-up fees receivedrecognized in the prior year, and lower catch-up fees recognizedyear at the closing of fundraising rounds in a secondary private equity fund, which ended in January 2024. The increases in average AUM primarily occurred in the equity, fixed income and multi-asset asset classes, driven by net market appreciation and the acquisition of Putnam.fund.

Our effective investment management fee rate excluding performance fees (investment management fees excluding performance fees divided by average AUM) was 41.140.5 and 42.141.1 basis points for fiscal years 20242025 and 2023.2024. The rate decrease was primarily due to increasedhigher average AUM in lowerlower-fee feeequity products,products includingand those from the acquisition of Putnam, certain transaction-relatedcatch-up fees receivedrecognized in the prior year, and lower catch-up fees recognizedyear at the closing of fundraising rounds in a secondary private equity fund, whichpartially endedoffset by the impact of outflows in Januarylower-fee 2024.products at WAM.

Performance fees were $390.7$474.0 million and $550.1$390.7 million for fiscal years 20242025 and 2023.2024. The decreaseincrease was primarily due to lowerchanges in the amount of performance fees earned by certain of our alternative specialist investment managers, and a decrease of $72.2 million in performance fees earned by Lexington Partners L.P. (“Lexington”), which were passed through as compensation expense per the terms of the acquisition agreement.managers.

Sales-basedAsset-based distribution fees increased $40.2$84.4 million in fiscal year 20242025 primarily due to an increase of 12%4% in commissionablethe salesrelated andaverage sales-basedAUM, one additional quarter of asset-based revenue earnedrelated fromto Putnam products subsequentand toa thehigher acquisition.mix of non-U.S. equity and multi-asset funds, which generate higher fees.

Shareholder servicing fees are earned from our sponsored funds for providing transfer agency services, which include providing shareholder statements, transaction processing, client service and tax reporting. Shareholder servicing fees are primarily determined based on a contractual margin, or a percentage of AUM and either the number of transactions in shareholder accounts or the number of shareholder accounts. Shareholder servicing fees also include fund reimbursements of expenses incurred while providing transfer agency services.

Shareholder servicing fees increased $76.6$35.2 million in fiscal year 2024,2025, primarily due to one additional quarter of fees earned by Putnam subsequentand tohigher thelevels acquisition,of related AUM, partially offset by thelower impactfees ofdetermined on a changecontractual in fee structure for certain U.S. sponsored funds.margin.

The acquisition of Putnam acquisitionon January 1, 2024 had a significant impact on operating expenses for the fiscal yearyears ended September 30, 20242025; however, due to the ongoing integration of the combined businesses, it is not practicable to separately quantify the impact of the legacy Putnam business.

Salaries, wages and benefits increased $187.1$37.4 million in fiscal year 20242025 primarily due to higher headcount as a result of the acquisition of Putnam and annual salary increases,increases and one additional quarter of expenses related to Putnam, partially offset by the impact of other headcount reductions.reductions resulting from costs savings initiatives.

Incentive compensation increased $81.6$62.9 million in fiscal year 2024,2025, primarily due to thehigher acquisitionbonus expense based on our annual performance, higher performance fee compensation, one additional quarter of Putnamexpenses andrelated anto increasePutnam, inhigher expenseannual foracceleration of deferred compensation awards,expense related to retirement-eligible employees and higher sales related commissions, partially offset by lower incentive compensation at certain specialist investment managers.

Acquisition-related retention expenses increaseddecreased $98.7$101.2 million in fiscal year 2024,2025, primarily due to higherlower costs associated with recent acquisitions.

Other compensation and benefits increaseddecreased $41.9$21.2 million in fiscal year 2024,2025, primarily due to higherlower net market gains on investments related to our deferred compensation plans and ana increasedecrease in special termination benefits.benefits, partially offset by an increase in compensation related to minority interests. Special termination benefits increaseddecreased $12.6$6.1 million primarily due to the acquisition of Putnam, partially offset byhigher costs associated with workforce optimization initiatives in the prior year.

At September 30, 2024,2025, our global workforce had increaseddecreased to approximately 10,2009,800 employees from approximately 9,20010,200 at September 30, 2023, primarily due to the acquisition of Putnam.2024.

Asset-based expenses increased $201.5$115.7 million in fiscal year 20242025 primarily due to one additional quarter of expenses related to Putnam products subsequent to the acquisition,products, an increase of 4%3% in the related average AUM, excluding the impact of Putnam,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.

Sales-based expenses increased $36.5$14.3 million in fiscal year 20242025 primarily due to anone increaseadditional quarter of 12% in commissionable sales and sales-based expenses related to Putnam products subsequentand tohigher themarketing acquisition.support fees.

Information systems and technology expenses increased $115.1$23.5 million in fiscal year 2024,2025, primarily due to one additional quarter of expenses incurred by PutnamPutnam, subsequenthigher spending related to thestrategic acquisition,initiatives, and higher costs for software and marketexternal data services.services, partially offset by lower costs for hardware maintenance and purchases.

Occupancy expenses increaseddecreased $96.5$39.1 million in fiscal year 2024,2025. drivenThe byprior newyear leasedincluded office space located at One Madison Avenue andthe impairment of the right-of-useright of use asset related to office space vacated officein space, primarily associatedconnection with anthe initiativeconsolidation to consolidateof our office space in New York City, and the current year reflects lower costs due to the office space consolidation. The decrease was partially offset by one additional quarter of expenses incurred by Putnam subsequent to the acquisition.Putnam.

Amortization of intangible assets decreasedincreased $2.9$68.3 million in fiscal year 2024,2025, primarily due to a reduction in the netremaining useful life of definite-lived intangible assets related to WAM, partially offset by the effect of intangible assets which became fully amortized during the fiscal year, partially offset by the amortization of intangible assets recognized as part of the acquisitions of Putnam and Alcentra.year.

Impairment of intangible assets was $226.6 million in fiscal year 2025 and $389.2 million in fiscal year 2024. In fiscal year 2024,2025, we impaired our indefinite-lived intangible asset related to certain mutual fund contracts managed by WAM by $200.0 million, as compared to $389.2 million.million in fiscal year 2024. During fiscal year 2025, we also recognized impairment charges of $26.6 million related to certain other indefinite-lived intangible assets related to management contracts. See Critical Accounting Policies and Note 98 - Goodwill and Other Intangible Assets in the notes to consolidated financial statements in Item 8 of Part II of this Annual Report for additional information.

General, administrative and other expenses primarily consist of professional fees, fund-related service fees, advertising and promotion, travel and entertainment, and other miscellaneous expenses. For certain vehicles, we may agree to compensate third parties for services provided by sharing a portion of the performance fees we earn. These payments are classified as sub-advisory expenses.

General, administrative and other operating expenses increased $138.3$71.2 million in fiscal year 2024,2025, primarily due to theone acquisitionadditional quarter of expenses incurred by Putnam, anand increaseincreases of $45.9$21.2 million in sub-advisory expenses, primarily due to higher payments to third-parties related to performance fees, $17.7 million in transfer agency expenses, $16.0 million in advertising and promotion costs, and $2.9 million in legal and other professional fees, and an increaseinclusive of $14.0$65.6 million inof travelinsurance and entertainment expenses due to higher activity levels.recoveries. These increases were partially offset by aan $18.5 million decrease in acquisition-related costs, primarily related to the acquisition of $14.4 million in fund-related expenses.Putnam.

Dividend and interest income increaseddecreased $17.0$35.5 million in fiscal year 2024,2025, primarily due to higherlower yields.yields and lower average balances.

Investments held by the Company generated net gainslosses of $57.6$37.6 million, as compared to net gains of $39.5$57.6 million in the prior year,year. 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, partially offset by gains on assets invested for deferred compensation plans. 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 fromon investments measured at cost adjusted for observable price changes.

Equity method investees generated income of $78.0 million in fiscal year 2025 and $137.5 million in fiscal year 2024 and $45.4 million in fiscal year 2023. The current year income was2024, largely related to various global alternative and equity funds, while the prior year income was largely related to various global alternative funds.

Net foreign currency exchange losses decreased $6.8$8.3 million in fiscal year 2024,2025, primarily due to the U.S. dollar weakening less in the current fiscal year against the Euro,British Pound, which resulted in lower foreign exchange losses on cash and cash equivalents denominated in U.S. dollars held by certain of our European subsidiaries.

Interest expense decreased $26.5$2.3 million in fiscal year 20242025 primarily due to interest expense recognized in the prior year on our term loan that was terminated on July 25, 2023 and lower accretion on Lexington deferred purchase consideration.consideration, partially offset by an increase in interest recognized on tax reserves.

Investments held by CIPs generated investment and other income of $108.4 million in fiscal year 2025, as compared to investment and other income of $149.9 million in fiscal year 2024,2024. asThe comparedcurrent to investment and otheryear income of $115.8 million in fiscal year 2023,was largely related to netvarious investmentglobal gainsalternative, (fixed income and multi-asset funds, partially offset by losses) on holdingsglobal ofequity funds, while the prior year income was largely related to various equity, fixed income funds, and in the current year period, multi-asset funds.

Our effective income tax rate for fiscal year 20242025 was 26.2%30.2% as compared to 23.3%26.2% in fiscal year 2023.2024. The rate increase in fiscal year 20242025 was primarily due to thea net impact of valuation allowances for capital losses, an increasereduction in foreign earnings, andrate benefits in the prior year related to the release of tax reserves, partially offset byand activity of CIPs for which there is no related tax impact.impact, partially offset by the release of valuation allowances for foreign tax credits and higher federal and state provision to return adjustments in the current year.

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

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

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

Net cash provided by operating activities decreasedincreased in fiscal year 20242025 primarily due to lowerhigher net income adjusted for non-cash items,items and an increase in accounts payable and accrued expenses, partially offset by lowerhigher netpayments purchasesfor ofincentive investmentscompensation byand CIPs.income taxes. Net cash used in investing activities decreased as compared to the prior year primarily due to lower cash paid for acquisitions in the current year, lower net purchases of investments by collateralized loan obligations (“CLOs”) and net liquidations of our investments as compared to net purchases in the prior year, partially offset by higherlower payments of deferred consideration liabilities in the current year offset by net purchases of our investments as compared to net liquidations in the prior year and net impact of an acquisition in the prior year. Net cash provided by financing activities decreased as compared to the prior year primarily due to net payments on repurchase agreements in the current year as compared tolower net proceeds inon thedebt priorof yearCIPs and lowernet repayment of debt, partially offset by net subscriptionsproceeds infrom CIPsrepurchase by noncontrolling interest.agreements.

In prior fiscal years, we issued senior unsecured unsubordinated notes for general corporate purposes and to redeem outstanding notes. At September 30, 2024,2025, Franklin’s outstanding senior notes had an aggregate principal amount due of $1,600.0$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 $1,586.9$1,188.5 million. At September 30, 2024,2025, 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 $1,193.4$1,173.5 million. OnThe July 15, 2024, we repaid all of the outstanding $250.0$400.0 million 3.950%2.850% senior notes due JulyMarch 20242025 issuedwere byrepaid Leggon MasonMarch at31, the2025 principalusing amountexisting plus accruedcash and unpaidborrowings interestfrom ofour $4.9revolving million.credit facility.

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, including the terms of any 10b5-1 stock purchase plan that may be in effect at any given time. During fiscal years 20242025 and 2023,2024, we repurchased 12.010.7 million and 9.612.0 million shares of our common stock at a cost of $274.4$240.3 million and $256.3$274.4 million. In December 2023, our Board of Directors authorized the repurchase of up to an additional 27.2 million shares of our common stock in either open market or private transactions, for a total of up to 40.0 million shares available for repurchase under the stock repurchase program.program as of such authorization date. At September 30, 2024,2025, 29.919.2 million shares remained available for repurchase under thethis authorization approved by our Board of Directors.authorization.

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,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.

During our secondthird fiscal quarter, U.S. and global equity markets declinedprovided amidpositive heightenedreturns volatility,on drivenlower byenergy theprices, escalationresilient ofcorporate geopoliticalearnings, tensionsand continued investment in theartificial Middle East, rising energy and gas prices, and renewed inflation concerns.intelligence. The S&P 500 Index and the MSCI World Index decreasedincreased by 4.3%15.2% and 3.5%,13.9%, respectively, for the quarter, and by 1.8%13.1% and 0.4%13.5% for the fiscal year to date. Global bond markets declinedremained relatively flat as the Bloomberg Global Aggregate Index decreasedincreased 1.1%0.9% during the quarter and 0.8%remained flat for the fiscal year to date.

Our total AUM at MarchJune 31,30, 2026 was $1,682.1$1,791.6 billion, 1%8% higher than at September 30, 2025 and 9%11% higher than at MarchJune 31,30, 2025. Monthly average AUM (“average AUM”) for the three and sixnine months ended MarchJune 31,30, 2026 increased 8%12% and 5%7% from the same periods in the prior fiscal year.

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

AUM decreasedincreased $1.9$109.5 billion during the three months ended MarchJune 31,30, 2026 due to the negativepositive impact of $30.2$98.0 billion of net market change, distributions and other,other partiallyand offset by $16.9$18.4 billion of long-term net inflows, inclusive of $4.1$1.1 billion of long-term net outflows at WAM, andpartially $11.4offset by $7.0 billion of cash management net inflows.outflows. Long-term net inflows include $3.2$4.1 billion of long-term reinvested distributions. Net market change, distributions and other primarily consists of $17.3$110.0 billion of market depreciationappreciation, andpartially $10.9offset by $10.2 billion of distributions. The market depreciationappreciation occurred primarilyin all asset classes, most significantly in the equity asset classclass, and reflected negativepositive returns in the global equity markets, partially offset by appreciation in the alternative and multi-asset classes.markets.

Long-term inflows increased 36%61% to $118.2$122.0 billion, as compared to the prior year period, driven by higher inflows in equity,equity and 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, andequity exchange traded funds, fixed income and equity institutional separate accounts.accounts, alternative private funds, and equity sub-advised mutual funds. Long-term outflows decreasedincreased 10%22% to $101.3$103.6 billion, substantiallyprimarily duereflecting tohigher 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, partially offset by higher outflows in equity open-end funds and exchange traded funds.WAM.

AUM increased $20.9$130.4 billion, or 1%,8%, during the sixnine months ended MarchJune 31,30, 2026 due to $44.9$63.3 billion of long-term net inflows, inclusive of $10.6$11.7 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 negativepositive impact of $40.3$57.7 billion of net market change, distributions and other.other, $6.2 billion from the acquisition of Apera and $3.2 billion of cash management net inflows. Long-term net inflows include $32.1$36.2 billion of long-term reinvested distributions. Net market change, distributions and other primarily consists of $54.1$126.4 billion of distributions,market primarily from the equity and alternative asset classes,appreciation, partially offset by $16.4$64.3 billion of market appreciation.distributions. The market appreciation occurred in all asset classes.classes, most significantly in the equity asset class, and reflected positive returns in the global equity markets.

Long-term inflows increased 29%38% to $236.8$358.8 billion, as compared to the prior year period, driven by higher inflows in equity, multi-asset,equity and fixed incomemulti-asset open-end funds, alternative private funds, equity and fixed income exchange traded funds, fixed income,equity, multi-asset, and equityfixed income separately managed accounts, alternative andprivate funds, fixed income and alternative 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%14% to $191.9$295.5 billion, substantiallyprimarily 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 slightly higher outflows in equity open-end funds, separately managed accounts, exchange traded funds and fixedinstitutional incomeseparate vehicles across other investment groups.accounts.

1Cash management at MarchJune 31,30, 2025 includes $6.3 billion of AUM and $3.7 billion of net inflows related to two money market mutual fund share classes previously closed to third-party investors.

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 39%,40%, 39%,40%, 38%39% and 35%36% of our total AUM as of MarchJune 31,30, 2026.

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 56%, 55%, 54%, 54%55% and 50%51% of our total AUM as of MarchJune 31,30, 2026.

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 17%16% and 12% of our total AUM at MarchJune 31,30, 2026.

Investment management fees increased $145.7$225.4 million and $194.3$419.7 million for the three and sixnine months ended MarchJune 31,30, 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.

Our effective investment management fee rate excluding performance fees (annualized investment management fees excluding performance fees divided by average AUM) was 41.0 and 40.840.7 basis points for the three and sixnine months ended MarchJune 31,30, 2026, as compared to 41.4 and 40.740.5 basis points for the same periods in the prior fiscal year.

Performance fees were $100.8$78.1 million and $232.4$310.5 million for the three and sixnine months ended MarchJune 31,30, 2026 and $71.9$60.6 million and $213.5$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.

Asset-based distribution fees increased $23.8$37.8 million and $39.3$77.1 million for the three and sixnine months ended MarchJune 31,30, 2026 primarily due to increases of 6%9% and 4%6% in the related average AUM and a higher mix of equity funds, non-U.S. equity and multi-asset funds and U.S. equity and alternative funds, which generate higher fees.

Sales-based fees increased $7.9$14.8 million and $5.6$20.4 million for the three and sixnine months ended MarchJune 31,30, 2026, primarily due to increases of 20%31% and 7%14% in commissionable sales, partially offset by a higher mix of non-U.S. sales, which generate lower fees.

Shareholder servicing fees increased $7.1$14.4 million and $14.5$28.9 million for the three and sixnine months ended MarchJune 31,30, 2026 primarily due to higher levels of related AUM and increased revenue related to fees earned on a contractual basis.basis and higher levels of related AUM.

Other revenue increased $5.3$7.3 million for the sixnine months ended MarchJune 31,30, 2026 primarily due to higher loan origination fees earned by certain of our alternative investment groups.

Salaries, wages and benefits increased $11.8$16.6 million and $16.7$33.3 million for the three and sixnine months ended MarchJune 31,30, 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.

Incentive compensation increased $28.3$42.0 million and $59.9$101.9 million for the three and sixnine months ended MarchJune 31,30, 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 for the six month period, partially offset by lower sales-related commissions.expense.

Acquisition-related retention expenses decreased $4.3$71.5 million and $14.4$85.9 million for the three and sixnine months ended MarchJune 31,30, 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.

Other compensation and benefits increased $13.4$68.7 million and $112.3 million for the three and nine months ended MarchJune 31,30, 2026, primarily due to aincreases $12.8of $50.3 million increase in special termination benefits, and increased $43.6$78.7 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.

At MarchJune 31,30, 2026, our global workforce remained flat at approximately 10,00010,100 employees, as compared to MarchJune 31,30, 2025.

Asset-based expenses increased $36.4$58.5 million and $66.0$124.5 million for the three and sixnine months ended MarchJune 31,30, 2026 primarily due to increases of 7%8% and 6% in the related average AUM, higher marketing support fees, and a higher mix of non-U.S. equity andfunds, non-U.S. multi-asset funds and U.S. equity and 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.

Sales-based expenses increased $3.0$9.9 million and $9.3 million for the three and nine months ended MarchJune 31,30, 2026 primarily due to an increaseincreases of 20%31% and 14% in commissionable sales, partially offset by a higher mix of non-U.S. sales, and decreased $0.6 million for the six months ended March 31, 2026 primarily due to a higher mix of non-U.S. sales, partially offset by an increase of 7% in commissionable sales and lower sales-based marketing support fees.sales.

Occupancy expenses decreased $2.2 million and $10.5$8.6 million for the three and sixnine months ended MarchJune 31,30, 2026, primarily due to consolidation of our office space in New York City.

Information systems and technology expenses decreased $1.1$1.9 million and $0.1$2.0 million for the three and sixnine months ended MarchJune 31,30, 2026, primarily due to lower technology consulting and spending related to strategic initiatives,depreciation, substantially offset by higher costs for software and external data services.

Amortization of intangible assets decreased $61.9$61.5 million and $119.4$180.9 million for the three and sixnine months ended MarchJune 31,30, 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.

DuringWe recognized impairment charges totaling $33.0 million during the three and nine months ended MarchJune 31,30, 2025,2026, we recognized an impairment charge ofand $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.

General, administrative and other operating expenses increased $4.8$129.1 million and $15.2$144.3 million for the three and sixnine months ended MarchJune 31,30, 2026.2026, primarily due to a $100.0 million regulatory settlement in the current year period. The increase for the three months ended MarchJune 31,30, 2026 was primarilyalso duedriven toby ana $19.3 million 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$18.3 million increase in fund-related expenses, drivenprimarily bydue to higher transfer agency and sub-advisory expenses, partially offset by lower fund administration costsexpenses and lowerhigher placement and platform fees. These increases were partially offset by a $10.6$7.7 million decrease in advertising expenses. The increase for the sixnine months ended MarchJune 31,30, 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 fund-related expenses, driven by higher transfer agencylegal and sub-advisoryother expenses,professional and an increase of $3.1 million in travel and entertainment,fees, partially offset by a $6.3$13.9 million decrease in advertising expenses.

Dividend and interest income increaseddecreased $19.3 million and $30.8$7.8 million for the three months ended June 30, 2026, primarily due to lower dividend and sixinterest income earned from investments in collateralized loan obligations, and increased $23.0 million for the nine months ended MarchJune 31,30, 2026, primarily due to higher dividend and interest income earned from a strategic investments and assets invested for deferred compensation plans.investment.

Investments held by the Company generated net lossesgains of $20.7$62.1 million and $29.3$32.8 million for the three and sixnine months ended MarchJune 31,30, 2026, as compared to net gainslosses of $46.8$31.4 million and net losses of $10.3$41.7 million for the three and sixnine months ended MarchJune 31,30, 2025. The net lossesgains in the three months ended MarchJune 31,30, 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 gainslosses in the prior year period were primarily from investment activity from investments in nonconsolidated funds and separate accountsaccounts, and assets invested for deferredthe compensationprior plans,year partially offset by losses fromperiod investments measured at cost adjusted for observable price changes. The net lossesgains in the sixnine months ended MarchJune 31,30, 2026 were primarily from investments in nonconsolidated funds and separate accounts, partially offset by gains on investments measured at cost adjusted for observable price changesaccounts 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.

Equity method investees generated income of $24.3$22.8 million and $35.8$58.6 million for the three and sixnine months ended MarchJune 31,30, 2026, as compared to income of $23.1$23.0 million and $15.5$38.5 million in the prior year, largely related to various global alternative and equity funds.

Net foreign currency exchange gains were $1.5$2.7 million and $0.2 million for the three and nine months ended MarchJune 31,30, 2026, as compared to net losses of $7.5$14.4 million and $7.4 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,periods, as changes in the value of the U.S. dollar against the Euro and British Pound resulted in net foreign exchange lossesgains in the current year periods, as compared to net gainslosses in the prior year.

Other, net increased $11.6 million and $27.1$31.9 million for the three and sixnine months ended MarchJune 31,30, 2026, primarily due to gains recognized on the sale of owned office space.

Interest expense decreased $0.9$2.3 million and $3.6$5.9 million for the three and sixnine months ended MarchJune 31,30, 2026 primarilyreflecting duethe torepayment interestof recognized$450 million of senior notes in theMarch prior2026 year on theand $400 million of senior notes which were repaid in March 31, 2025, partially offset by interest recognized on borrowings under our revolving credit facility.

Investments held by consolidated investment products (“CIPs”) generated gains and other income of $96.5$54.8 million and $221.4$276.2 million for the three and sixnine months ended MarchJune 31,30, 2026, largely related to gains on holdings of various alternative,alternative equity,funds, and multi-assetfor the nine month period gains on holdings of various equity funds. Investments held by CIPs generated lossesgains of $164.7 million and $50.6$35.9 million for the three months ended June 30, 2025, largely related to gains on holdings of various equity, fixed income, and sixmulti-asset funds, and losses of $14.7 million for the nine months ended MarchJune 31,30, 2025, largely related to losses on holdings of various global equity funds, partially offset by gains on holdings of various alternative funds, and for the six month period, globalalternative, fixed incomeincome, and multi-asset funds.

Expenses of CIPs decreased $1.3$3.8 million and increased $5.4$1.6 million for the three and sixnine months ended MarchJune 31,30, 2026, due to activity of the funds.

Our effective income tax rate was 22.2%31.2% and 22.7%25.2% for the three and sixnine months ended MarchJune 31,30, 2026, as compared to 72.8%33.9% and 31.5%32.3% for the three and sixnine months ended MarchJune 31,30, 2025. The rate decreasedecreases for the three month period was primarily due to activity of CIPs for which there is no related tax impact and valuation allowances on net operating losses and capital losses recognized in the prior year period. The rate decrease for the six month period waswere primarily due to activity of CIPs for which there is no related tax impact, excesspartially taxoffset benefitsby the impact of the charge related to stock-baseda compensationsignificant inregulatory thesettlement currentwhich year,is asnot compareddeductible tofor excessincome tax expense in the prior year, and valuation allowances on net operating losses and capital losses recognized in the prior year.purposes.

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.

Net cash usedprovided inby operating activities increaseddecreased during the sixnine months ended MarchJune 31,30, 2026 primarily due to higher net purchases of investments by consolidated investment products and timing of cash receipts reflected in changes in receivables and lowerother net income adjusted for non-cash items, partially offset by lower payments for incentive compensation, accounts payable and accrued expenses.assets. 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 netlower proceeds from the saleadditions of property, plantproperty 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.interests, partially offset by higher repurchases of common stock.

Liquid assets consist of cash and cash equivalents, receivables and certain investments. Cash and cash equivalents at MarchJune 31,30, 2026 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.

In prior fiscal years, we issued senior unsecured unsubordinated notes for general corporate purposes and to redeem outstanding notes. At MarchJune 31,30, 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 $1,189.3$1,189.6 million. At MarchJune 31,30, 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 $714.0$712.3 million at MarchJune 31,30, 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.

On December 11, 2025, we entered into a Joinder and Commitment Increase Agreement (the “Joinder Agreement”) which amends the Credit Agreement dated as of April 30, 2025. Pursuant to the Joinder Agreement, the aggregate commitments have increased by $400.0 million such that the total aggregate commitments under the Credit Agreement are $1.5 billion. On July 30, 2026, we entered into an amendment and restatement of the Amended and Restated Credit Agreement (the “Second Amended and Restated Credit Agreement”). The Second Amended and Restated Credit Agreement amends and restates the Company’s existing revolving credit agreement to, among other things, increase the aggregate commitments and extend its maturity to July 30, 2031. The Second Amended and Restated Credit Agreement provides for a five-year revolving credit facility with $1.5 billion of aggregate commitments with the option to increase the aggregate commitments by a maximum of $500.0 million. We expect to utilize the Credit Agreement periodically as part of our normal operations.

On January 8, 2026, we borrowed $150.0 million under the Credit Agreement which was repaid on February 9, 2026. On March 16, 2026, we borrowed $350.0 million under the Credit Agreement, the proceeds of which were used to repay the 4.750% Senior Notes due March 2026. OnDuring Aprilthe 13,quarter ended June 30, 2026, we borrowed an additional $50.0$150.0 million and on July 9, 2026, an additional $200.0 million under the Credit Agreement. The aggregate borrowings of $400.0$700.0 million remain outstanding at the time of this filing. Interest is payable semi-annually on any outstanding amounts and is based on the Term Secured Overnight Financing Rate (“Term SOFR”) plus a credit spread of 87.5 basis points and a Term SOFR adjustment of 10 basis points. The Credit Agreement contains a financial performance covenant requiring that the Company maintain a consolidated net leverage ratio, measured as of the last day of each fiscal quarter, of no greater than 3.25 to 1.00. We were in compliance with all debt covenants at MarchJune 31,30, 2026.

At MarchJune 31,30, 2026, 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.

We typically declare cash dividends on a quarterly basis, subject to approval by our Board of Directors. We declared regular dividends of $0.66$0.99 per share during the sixnine months ended MarchJune 31,30, 2026 and $0.64$0.96 per share during the sixnine months ended MarchJune 31,30, 2025. 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, including the terms of any 10b5-1 stock purchase plan that may be in effect at any given time. During the three and sixnine months ended MarchJune 31,30, 2026, we repurchased 2.310.4 million and 4.114.5 million shares of our common stock at a cost of $57.1$348.1 million and $99.0$447.1 million and we repurchased 0.57.3 million and 0.88.1 million shares of our common stock at a cost of $10.0$157.4 million and $15.8$173.2 million in the prior year periods. The fiscal 2026 repurchases included 6.2 million shares repurchased from Great-West Lifeco Inc. (“Great-West”) for an aggregate purchase price of $208.0 million. In December 2025, our Board of Directors authorized the repurchase of up to an additional 20.8 million shares of our common stock in either open market or private transactions, for a total of up to 40.0 million shares available for repurchase under the stock repurchase program as of such authorization date. At MarchJune 31,30, 2026, 35.925.6 million shares remained available for repurchase under this authorization.

As part of our acquisition of Putnam, which closed on January 1, 2024, we will pay up to $375.0 million between the third and seventh anniversaries of the closing date related to revenue growth targets from the strategic partnership with Great-West Lifeco, Inc.,Great-West, which will be recognized in operating income.

While we have no legal or contractual obligation to do so, we routinely make cash investments in the course of launching sponsored funds. 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. We have in certain instances voluntarily elected to provide the funds with direct or indirect financial support based on our business objectives. We did not provide significant additional financial or other support to our sponsored funds during the sixnine months ended MarchJune 31,30, 2026.

Our cash, cash equivalents and investments portfolio by asset class and accounting classification at MarchJune 31,30, 2026, excluding third-party assets of CIPs, was as follows:

Subsequent to the annual impairment tests performed as of August 1, 2025, 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 other 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 sixnine months ended MarchJune 31,30, 2026, there were no events or circumstances which would indicate that goodwill, indefinite-lived intangible assetsgoodwill or definite-lived intangible assets might be impaired. We performed a quantitative impairment test for certain indefinite-lived assets related to acquired management contracts due to decreased AUM in related products and recognized impairments totaling $33.0 million during the quarter ended June 30, 2026. There were no other impairments of indefinite-lived intangible assets, as no events occurred or circumstances changed that would indicate these assets might be impaired.

As of MarchJune 31,30, 2026, Level 3 assets represented 4% of total assets measured at fair value, which primarily related to CIPs’ investments in equity and debt securities. There were $25.6$27.1 million of transfers into and $16.8$16.9 million of transfers out of Level 3 during the sixnine months ended MarchJune 31,30, 2026.