What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2021-03-01 compared with 2020-03-02 · 645 added, 500 removed, 1227 unchanged (48% of the section changed)

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Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Directors

BrightSphere Investment Group Inc.:

To the Shareholders and Board of Directors BrightSphere Investment Group Inc.:

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of BrightSphere Investment Group Inc.

(formerly BrightSphere Investment Group plc) and subsidiaries (the Company) as of December 31, 2019 and 2018, the related consolidated statements of operations, comprehensive income, changes in shareholders’ equity, and cash flows for each of the years in the three‑year period ended December 31, 2019, and the related notes (collectively, the consolidated financial statements).

and subsidiaries (the Company) as of December 31, 2020 and 2019, the related consolidated statements of operations, comprehensive income, changes in shareholders’ equity, and cash flows for each of the years in the three‑year period ended December 31, 2020, and the related notes (collectively, the consolidated financial statements).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the years in the three‑year period ended December 31, 2020, in conformity with U.S.

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The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgment.

(1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Evaluation of Cash-settled Affiliate Awards Liability

As discussed in Notes 2 and 19 to the consolidated financial statements, the Company records liabilities for awards of equity made to certain affiliate key employees.

The total liability for these awards was $221.8 million at December 31, 2019.

The liability is revalued each reporting period to its fair value.

Assessment of the fair value measurement of the cash-settled affiliate awards liability

As discussed in Notes 2, 13 and 20 to the consolidated financial statements, the Company records liabilities for equity awards made to certain affiliate key employees.

The liability for these awards is revalued each reporting period to its fair value.

The share-based payments liability was $213.8 million at December 31, 2020, which included the liability for these awards.

We identified the assessment of the fair value measurement of the cash-settled affiliate awards liability as a critical audit matter.

Complex and subjective auditor judgment was required in evaluating the methodologies and key assumptions used in determining the fair value of the liability related to the cash-settled affiliate

Report of Independent Registered Public Accounting Firm

We identified the assessment of the measurement of the cash-settled affiliate awards liability as a critical audit matter.

Complex and subjective auditor judgment was required in evaluating the methodologies and key assumptions used in determining the fair value of the liability related to the cash-settled affiliate awards.

The key assumptions that required complex and subjective auditor judgment include forecasted earnings, market risk adjustments, discount rates, and adjustments to reflect the impact of post-vesting restrictions.

Minor changes to these assumptions have an effect on the Company’s determination of the fair value of the cash-settled affiliate awards liability.

The primary procedures we performed to address this critical audit matter included the following.

We tested certain internal controls over the Company’s process related to measuring the fair value of the cash-settled affiliate awards liability.

This included controls over key assumptions used in the discounted cash flow models and the fair value computations provided by third party valuation professionals.

The significant assumptions that required complex and subjective auditor judgment include forecasted earnings, market risk adjustments, discount rates, and adjustments to reflect the impact of post-vesting restrictions.

Minor changes to these assumptions can have an effect on the Company’s determination of the fair value of the cash-settled affiliate awards liability.

The following are the primary procedures we performed to address this critical audit matter.

We evaluated the design and tested the operating effectiveness of certain internal controls over the Company’s process related to the fair value measurement of the cash-settled affiliate awards liability, including controls over the significant assumptions noted above.

We compared forecasted earnings to internal financial forecasts and historical results.

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We involved valuation professionals with specialized skills and knowledge, who assisted in:

evaluating that the methodology used to calculate fair values was appropriate for the awards being valued;

– evaluating if the methodology used to calculate fair values was appropriate for the awards being valued

– evaluating market risk adjustments

– evaluating the discount rates used by the Company by comparing them against a discount rate range that was developed using publicly available market data

performing corroborative calculations of the fair value of the liability using the Company’s forecasted earnings and a combination of independent assumptions and Company assumptions and comparing the result to the amount recorded by the Company.

– performing independent calculations of the fair value of the liability using the Company’s forecasted earnings and a combination of independent assumptions and Company assumptions and comparing the result to the amount recorded by the Company.

We have served as the Company’s auditor since 2014.

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Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Directors

BrightSphere Investment Group Inc.:

To the Shareholders and Board of Directors BrightSphere Investment Group Inc.:

Opinion on Internal Control Over Financial Reporting

We have audited BrightSphere Investment Group Inc.

(formerly BrightSphere Investment Group plc) and subsidiaries’ (the Company) internal control over financial reporting as of December 31, 2019, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

and subsidiaries’ (the Company) internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

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and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Report of Independent Registered Public Accounting Firm

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

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(in millions, except for share and per share data)

2020 December 31,

Cash and cash equivalents $ 401.9 $ 111.3

Restricted cash 1.6 —

Investment advisory fees receivable 112.8 151.9

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Fixed assets, net 71.6 65.8

Right of use assets 90.7 37.7

Investments (includes balances reported at fair value of $ 113.1 and $ 184.3 )

Acquired intangibles, net 58.4 65.1

Goodwill 182.1 274.6

Other assets 50.6 52.0

Deferred tax assets 170.8 243.6

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Investments (includes balances reported at fair value of $ — and $ 119.5 )

Other assets — 4.9

Total assets $ 1,379.2 $ 1,419.7

Liabilities and shareholders’ equity

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Accrued incentive compensation 120.8 137.8

Amounts due to OM plc

Due to OM plc 3.4 3.7

Other compensation liabilities 328.0 404.9

Accrued income taxes 4.1 12.8

Operating lease liabilities 107.9 42.5

Other liabilities 2.8 3.1

Non-recourse borrowings — 35.0

Third party borrowings 394.3 533.8

Other liabilities

Liabilities of consolidated Funds:

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For the Years Ended

2020 2019 2018

Management fees $ 697.9 $ 807.0 $ 905.0

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General and administrative expense 106.0 128.8 126.0

Impairment of goodwill 16.4 — —

Amortization of acquired intangibles 6.7 6.6 6.6

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Revaluation of DTA deed — — 20.0

Gain on sale of Affiliates 241.3 — —

Net consolidated Funds’ investment gains (losses) 29.9 20.9 ( 13.4 )

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Gain (loss) on disposal of discontinued operations, net of tax — — 0.1

Net income 315.5 240.0 130.3

Net income (loss) attributable to non-controlling interests in consolidated Funds 28.8 16.1 ( 6.1 )

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For the Years Ended

2020 2019 2018

Net income $ 315.5 $ 240.0 $ 130.3

Other comprehensive income (loss):

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Comprehensive income (loss) attributable to non-controlling interests in consolidated Funds

28.8 16.1 ( 6.1 )

Total comprehensive income attributable to controlling interests $ 290.6 $ 227.3 $ 137.1

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($ in millions, except share data)

Common stock,

Additional paid-in capital

Retained earnings (deficit)

(millions) Common stock,

value Additional paid-in capital Retained earnings (deficit) Accumulated

comprehensive

income (loss)

income (loss) Total

shareholders’

Non-controlling

Redeemable non-controlling interests in consolidated

Total equity and

interests Non-controlling

equity Redeemable non-controlling interests in consolidated

Funds Total equity and

non-controlling

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Repurchase of common stock ( 5.5 ) — ( 74.6 ) — — ( 74.6 ) — — ( 74.6 ) — ( 74.6 )

Capital contributions (redemptions)

Capital contributions — — — — — — — 9.3 9.3 78.9 88.2

Equity-based compensation — — 7.7 — — 7.7 — — 7.7 — 7.7

Foreign currency translation adjustment — — — — ( 1.7 ) ( 1.7 ) — — ( 1.7 ) — ( 1.7 )

Amortization of derivative securities, net of tax

Amendment of deferred tax asset deed

Amortization related to derivative securities, net of tax — — — — 2.4 2.4 — — 2.4 — 2.4

Other changes in non-controlling interests — — — — — — 0.3 — 0.3 — 0.3

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Dividends to shareholders ($ 0.39 per share)

Dividends to related parties ($0.36 per share)

— — — ( 42.3 ) — ( 42.3 ) — — ( 42.3 ) — ( 42.3 )

Net income (loss) — — — 136.4 — 136.4 — ( 1.8 ) 134.6 ( 4.3 ) 130.3

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Repurchase of common stock ( 19.5 ) — ( 236.5 ) — — ( 236.5 ) — — ( 236.5 ) — ( 236.5 )

Capital redemptions

Capital contributions — — — — — — — 9.2 9.2 36.2 45.4

Equity-based compensation — — 6.2 — — 6.2 — — 6.2 — 6.2

Foreign currency translation adjustment — — — — 1.0 1.0 — — 1.0 — 1.0

Amortization of derivative securities, net of tax

Amortization related to derivative securities, net of tax — — — — 2.4 2.4 — — 2.4 — 2.4

Other changes in non-controlling interests — — — — — — ( 0.3 ) — ( 0.3 ) — ( 0.3 )

Net de-consolidation of Funds

Dividends ($ 0.40 per share)

Net income (loss)

— — — ( 35.9 ) — ( 35.9 ) — — ( 35.9 ) — ( 35.9 )

Net income — — — 223.9 — 223.9 — 10.3 234.2 5.8 240.0

December 31, 2019 85.9 $ 0.1 $ 534.3 $ ( 452.5 ) $ ( 17.5 ) $ 64.4 $ 1.3 $ 48.8 $ 114.5 $ 83.9 $ 198.4

Issuance of common stock 0.1 — 0.2 — — 0.2 — — 0.2 — 0.2

Retirement of common stock ( 0.2 ) — — — — — — — — — —

Repurchase of common stock ( 6.4 ) — ( 46.0 ) — — ( 46.0 ) — — ( 46.0 ) — ( 46.0 )

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Foreign currency translation adjustment — — — — 1.6 1.6 — — 1.6 — 1.6

Amortization of derivative securities, net of tax

Amortization related to derivative securities, net of tax — — — — 2.3 2.3 — — 2.3 — 2.3

Other changes in non-controlling interests — — — — — — 0.4 — 0.4 — 0.4

Net de-consolidation of Funds — — — — — — — — — ( 236.0 ) ( 236.0 )

Other movements — — 1.4 — — 1.4 — — 1.4 — 1.4

Dividends ($ 0.13 per share)

— — — ( 10.7 ) — ( 10.7 ) — — ( 10.7 ) — ( 10.7 )

Net income — — — 286.7 — 286.7 — 28.4 315.1 0.4 315.5

December 31, 2020 79.4 $ 0.1 $ 492.4 $ ( 176.5 ) $ ( 13.6 ) $ 302.4 $ 1.7 $ 80.3 $ 384.4 $ — $ 384.4

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For the Years Ended

2020 2019 2018

Cash flows from operating activities:

Net income $ 315.5 $ 240.0 $ 130.3

Net (income) loss attributable to non-controlling interests in consolidated Funds ( 28.8 ) ( 16.1 ) 6.1

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(Gain) loss from discontinued operations, excluding consolidated Funds — — ( 0.1 )

Impairment of goodwill 16.4 — —

Amortization of acquired intangibles 6.7 6.6 6.6

(Gain) on sale of Affiliates ( 241.3 ) — —

Depreciation and amortization 21.0 17.2 14.5

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Amortization and revaluation of non-cash compensation awards ( 4.9 ) ( 13.4 ) 198.8

Net earnings from Affiliates accounted for using the equity method

Net earnings from Affiliate accounted for using the equity method ( 2.9 ) ( 2.8 ) ( 2.7 )

Distributions received from equity method Affiliates 3.0 2.7 11.9

Revaluation of DTA Deed — — ( 20.0 )

Impact of Tax Act on deferred income taxes

Gain on sale of investment in Affiliate — — ( 65.7 )

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Changes in operating assets and liabilities (excluding discontinued operations):

(Increase) decrease in investment advisory fees receivable and other amounts due from OM plc

(Increase) decrease in investment advisory fees receivable and other amounts due from related parties 13.5 7.1 49.5

(Increase) decrease in other receivables, prepayments, deposits and other assets 17.8 ( 24.4 ) 21.9

Increase (decrease) in accrued incentive compensation and other liabilities and amounts due to OM plc

Increase (decrease) in accrued incentive compensation, operating lease liabilities, other liabilities and amounts due to related parties ( 6.0 ) ( 264.9 ) ( 37.3 )

Increase (decrease) in accounts payable, accrued expenses and accrued income taxes ( 5.5 ) ( 50.1 ) ( 46.1 )

Net cash flows from operating activities of continuing operations, excluding consolidated Funds

165.8 ( 106.6 ) 252.3

Net income (loss) attributable to non-controlling interests in consolidated Funds 28.8 16.1 ( 6.1 )

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Earnings from equity method investees ( 35.1 ) ( 16.7 ) —

(Gains) losses on other investments

Losses on other investments 11.5 6.9 9.0

(Increase) decrease in receivables and other assets ( 32.2 ) 7.5 ( 14.1 )

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Net cash flows from operating activities of continuing operations

Net cash flows from operating activities of discontinued operations

Total net cash flows from operating activities

90.5 ( 138.5 ) 195.0

BrightSphere Investment Group Inc.

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For the Years Ended

2020 2019 2018

Net cash flows from operating activities of discontinued operations — — 0.1

Total net cash flows from operating activities 90.5 ( 138.5 ) 195.1

Cash flows from investing activities:

Purchase of fixed assets, excluding discontinued operations

Proceeds from sale of investment in Affiliate

Business acquisitions, net of cash acquired

Additions of fixed assets ( 27.2 ) ( 33.9 ) ( 21.7 )

Proceeds from sale of Affiliates 295.2 5.0 105.0

Purchase of investment securities ( 19.2 ) ( 26.5 ) ( 103.9 )

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Net cash flows from investing activities of continuing operations

270.0 9.0 17.4

Net cash flows from investing activities of discontinued operations — — —

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Payment to OM plc for promissory notes — — ( 4.5 )

Payment to OM plc for deferred tax arrangement

Payment to OM plc for DTA Deed — ( 32.7 ) —

Payment to OM plc for co-investment redemptions ( 0.3 ) ( 5.1 ) ( 3.9 )

Repurchase of common stock

Repurchases of common stock ( 46.0 ) ( 239.8 ) ( 71.2 )

Dividends paid to shareholders ( 7.2 ) ( 24.5 ) ( 31.8 )

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Net cash flows from financing activities of continuing operations

( 77.4 ) ( 95.0 ) ( 67.4 )

Net cash flows from financing activities of discontinued operations — — —

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Cash and cash equivalents at beginning of period 121.0 345.5 200.4

Cash and cash equivalents at end of period (including cash at consolidated Funds classified as restricted)

Cash and cash equivalents at end of period (including restricted cash and cash at consolidated Funds classified as restricted) $ 404.1 $ 121.0 $ 345.5

Supplemental disclosure of cash flow information:

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The profit-sharing model results in the alignment of BSIG and Affiliate key employee economic interests, which is critical to the Company’s talent management strategy and long-term growth of the business.

The Company conducts its operations through three reportable segments:

Quant & Solutions, Alternatives and Liquid Alpha.

The Company conducts its operations through the following three reportable segments:

• Quant & Solutions —comprised of versatile, often highly-tailored strategies that leverage data and technology in a computational, factor based investment process across a range of asset classes and geographies, including Global, non-U.S., emerging markets and managed volatility equities, as well as multi-asset products.

• Alternatives —comprised of illiquid and differentiated liquid investment strategies that include private equity, real estate and real assets, including forestry, as well as a growing suite of liquid alternative capabilities in areas such as long/short, market neutral and absolute return.

• Liquid Alpha (1) —comprised of specialized investment strategies with a focus on alpha-generation across market cycles in long-only small-, mid-, and large-cap U.S.

equities, as well as fixed income.

(1) In July 2020, the Company completed the sale of Copper Rock Capital Partners LLC (“Copper Rock”) and in November 2020, the Company completed the sale of Barrow, Hanley, Mewhinney & Strauss, LLC (“Barrow Hanley”).

See Note 3, Divestitures, for further discussion.

Prior to 2014, the Company was a wholly-owned subsidiary of Old Mutual plc (“OM plc”), an international long-term savings, protection and investment group, listed on the London Stock Exchange.

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The remaining shares held by HNA were bought back by the Company in the first quarter of 2019.

On March 2, 2018, the Company announced the change of its name from OM Asset Management plc to BrightSphere Investment Group plc.

BrightSphere Investment Group Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2020 and 2019

1) Organization and Description of the Business (cont.)

On July 12, 2019, the BrightSphere corporate group, which consisted of BrightSphere Investment Group plc, a public company limited by shares incorporated under the laws of England and Wales and its operating subsidiaries (such operating subsidiaries and the holding company collectively, the “BrightSphere Group”), completed a redomestication, resulting in BrightSphere Investment Group Inc., a Delaware corporation, becoming the publicly traded parent company of BrightSphere Group (the “Redomestication”).

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began trading on July 15, 2019, and the Company’s trading symbol on the NYSE remained unchanged as “BSIG.”

BrightSphere Investment Group Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2019 and 2018

1) Organization and Description of the Business (cont.)

Ownership percentage following the transactions for:

Transaction description

October 15, 2014

IPO of BSIG shares by OM plc

June 22, 2015

Secondary public offering by OM plc

December 16, 2016

Secondary public offering by OM plc

December 16, 2016

Repurchase and retirement of shares

Sale of shares from OM plc to HNA

Secondary public offering by OM plc

Repurchase and retirement of shares

November 10, 2017

Sale of shares from OM plc to HNA

November 17, 2017

Secondary public offering by OM plc

November 19, 2018

Sale of shares from HNA to Paulson

February 21, 2019

Repurchase and retirement of shares by BSIG

February 25, 2019

Repurchase and retirement of shares by BSIG

February 25, 2019

Sale of shares from HNA to Paulson

Date Transaction description Total shares OM plc HNA Paulson Note

October 15, 2014 IPO of BSIG shares by OM plc 24,231,375 78.8 % — % — % (1)

June 22, 2015 Secondary public offering by OM plc 15,295,000 65.8 % — % — % (2)

December 16, 2016 Secondary public offering by OM plc 14,950,000 — % — % — % (3)

December 16, 2016 Repurchase and retirement of shares

by BSIG 6,000,000 51.1 % — % — % (4)

May 12, 2017 Sale of shares from OM plc to HNA 11,414,676 40.9 % 9.95 % — % (5)

May 19, 2017 Secondary public offering by OM plc 19,895,000 — % — % — % (6)

May 19, 2017 Repurchase and retirement of shares

by BSIG 5,000,000 20.1 % 10.4 % — % (4)

November 10, 2017 Sale of shares from OM plc to HNA 15,960,553 5.51 % 24.95 % — % (7)

November 17, 2017 Secondary public offering by OM plc 6,039,630 — % 24.95 % — % (8)

November 19, 2018 Sale of shares from HNA to Paulson 4,598,566 — % 21.4 % 4.9 % (9)

February 21, 2019 Repurchase and retirement of shares by BSIG 4,100,000 — % 19.4 % 5.4 % (4)

February 25, 2019 Repurchase and retirement of shares by BSIG 3,886,625 — % 16.0 % 5.7 % (4)

February 25, 2019 Sale of shares from HNA to Paulson 14,790,038 — % — % 21.7 % (9)

(1) Includes 2,231,375 shares purchased by the underwriters of the offering under their overallotment option.

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All shares repurchased by the Company were retired.

BrightSphere Investment Group Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2020 and 2019

1) Organization and Description of the Business (cont.)

(5) Following the May 12, 2017 sale of shares from OM plc to HNA, on May 24, 2017, OM plc appointed Dr.

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The final sale of shares from HNA to Paulson was completed on February 25, 2019.

BrightSphere Investment Group Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2019 and 2018

1) Organization and Description of the Business (cont.)

Change in Segments

The Company continually monitors and reviews its segment reporting structure in accordance with authoritative guidance to determine whether any changes have occurred that would impact its reportable segments.

Because of the change in the Chief Operating Decision Maker (“CODM”) of the Company at the end of 2018, the Company underwent a strategic shift in 2019 to refocus the Company’s businesses by its various investment strategies.

During the third quarter of 2019, the Company realigned the business and reportable segment information that the CODM regularly reviews to evaluate performance for operating decision-making purposes, including performance assessment and allocation of resources.

As a result, the Company’s segment reporting structure is based on the Company’s various investment strategies.

As a result of the change in segments, effective from the quarter ended September 30, 2019, the Company has the following business segments:

Quant & Solutions —comprised of versatile, often highly-tailored strategies that leverage data and technology in a computational, factor based investment process across a range of asset classes and geographies, including Global, non-U.S., emerging markets and managed volatility equities, as well as multi-asset products.

Alternatives —comprised of illiquid and differentiated liquid investment strategies that include private equity, real estate and real assets, including forestry, as well as a growing suite of liquid alternative capabilities in areas such as long/short, market neutral and absolute return.

Liquid Alpha —comprised of specialized investment strategies with a focus on alpha-generation across market cycles in long-only small-, mid-, and large-cap U.S., global, non-U.S.

and emerging markets equities, as well as fixed income.

On April 15, 2020, John Paulson succeeded Guang Yang as the Chairman of the Board.

Share Repurchase Program

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For the year ended December 31, 2020, the Company repurchased 6,412,663 shares at a weighted average price of $ 7.15 per share, or approximately $ 46.0 million in total, including commissions.

In 2018, the Company repurchased 5,549,861 shares on the open market at a weighted average price of $ 13.35 /share.

In 2017, the Company did not repurchase shares on the open market.

In 2019, the Company repurchased 19,479,945 shares at a weighted average price of $ 12.08 per share, or approximately $ 235.4 million in total, including commissions.

In 2018, the Company repurchased 5,549,861 shares on the open market at a weighted average price of $ 13.35 per share or approximately $ 74.2 million in total, including commissions.

On April 29, 2016, at the Company’s Annual General Meeting, shareholders (excluding OM plc) authorized a form of contract by which the Company would be permitted to repurchase shares directly from OM plc.

The shareholder authorization does not contain a maximum dollar or share amount for such purchases individually or in aggregate from OM plc.

On December 16, 2016 in connection with the secondary offering by OM plc, the Company repurchased 6,000,000 shares directly from OM plc at a price of $ 14.25 /share.

On May 19, 2017 in connection with the secondary offering by OM plc, the Company repurchased 5,000,000 shares directly from OM plc at a price of $ 14.55 /share.

On December 16, 2016 in connection with the secondary offering by OM plc, the Company repurchased 6,000,000 shares directly from OM plc at a price of $ 14.25 per share.

On May 19, 2017 in connection with the secondary offering by OM plc, the Company repurchased 5,000,000 shares directly from OM plc at a price of $ 14.55 per share.

All shares of common stock repurchased by the Company were retired.

BrightSphere Investment Group Inc.

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December 31, 2020 and 2019

1) Organization and Description of the Business (cont.)

All shares of common stock repurchased by the Company were retired.

2) Basis of Presentation and Significant Accounting Policies

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The previously issued ordinary shares of BrightSphere Investment Group plc were exchanged on a one-for-one basis for newly issued shares of common stock of BrightSphere Investment Group Inc.

The Redomestication and related internal reorganization was accounted for consistent with a reorganization of entities under common control in accordance with ASC 805 Business Combinations .

The Redomestication and related internal reorganization was accounted for consistent with a reorganization of entities under common control in accordance with Accounting Standards Codification (“ASC”) 805 Business Combinations .

Accordingly, the transfer of the assets and liabilities and exchange of shares was recorded in the new entity (BrightSphere Investment Group Inc.) at their carrying amounts from the transferring entity (BrightSphere Investment Group plc) at the date of transfer.

The Company has revised certain amounts in prior period financial statements to conform to the current period’s presentation.

The Company changed the presentation of the purchase and sale of investments by its consolidated Funds within cash flows from investing activities in the prior period’s Consolidated Statements of Cash Flows to conform to the current period’s presentation of showing such purchase and sale of investments within cash flows from operating activities.

The change had no impact on the total cash provided by or used in operating, investing or financing activities within the Consolidated Statements of Cash Flows, or any impact on the other Consolidated Financial Statements.

Revenue recognition

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The Company recognizes revenue when a customer obtains control of promised goods or services in an amount that reflects the consideration the entity expects to receive in exchange for those goods or services.

BrightSphere Investment Group Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2019 and 2018

2) Basis of Presentation and Significant Accounting Policies (cont.)

A performance obligation is a promise in a contract to transfer a distinct good or service to the customer, and is the unit of account in accordance with the revenue recognition guidance.

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For certain of the Company’s Alternative funds, management fee revenue is calculated based on a percentage of assets under management or total capital commitments.

These Alternative funds can also include “catch-up” provisions such that the Company records revenue for payments of fund management fees back to the initial closing date for funds with multiple closings, less placement fees paid to third parties related to these funds.

These Alternative funds can also

BrightSphere Investment Group Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2020 and 2019

2) Basis of Presentation and Significant Accounting Policies (cont.)

include “catch-up” provisions such that the Company records revenue for payments of fund management fees back to the initial closing date for funds with multiple closings, less placement fees paid to third parties related to these funds.

All of the Company’s performance obligations are satisfied ratably over time and there is no distinction in the methodology used to recognize management fee revenue in instances where there is more than one performance obligation.

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In instances where a customer reimburses the Company for a cost paid on the customer’s behalf, if the Company is acting as a principal, the reimbursement is recorded on a gross basis and if the Company is acting as an agent, the reimbursement is recorded on a net basis.

Certain Funds reimburse the Company’s Affiliates for certain expenses where the Affiliate is acting as a principal, primarily for compensation expense for field office personnel at several Timber Funds, where revenue is recognized from log and fiber sales upon delivery to the customer.

Revenue from expense reimbursement is accrued at cost as the corresponding reimbursable expenses are incurred and is recorded in other revenue in the Company’s Consolidated Statements of Operations.

Revenue from other sources

Other revenue also includes interest income on cash and cash equivalents and revenue from administration and consulting services.

BrightSphere Investment Group Inc.

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2) Basis of Presentation and Significant Accounting Policies (cont.)

Revenue from other sources

Other revenue also includes interest income on cash and cash equivalents and revenue from administration and consulting services.

The revenue of consolidated Funds that invest in Timber (the “Timber Funds”) is recognized from log and fiber sales upon delivery to the customer.

The Company is typically responsible for all logging and hauling costs.

However, under pay-as-cut timber contracts, title and risk of loss from stumpage sales transfer to the buyer as the trees are cut.

Revenue is recognized as timber is harvested.

The buyer is typically responsible for all logging and hauling costs.

Compensation arrangements

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Profit interests compensation liabilities are re-measured at each reporting date at the twelve month earnings multiple, with movements treated as compensation expense in the Company’s Consolidated Statements of Operations.

BrightSphere Investment Group Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2019 and 2018

2) Basis of Presentation and Significant Accounting Policies (cont.)

Share-based compensation plans

The Company recognizes the cost of all share-based payments to directors, senior management and employees, including grants of restricted stock and stock options, as compensation expense in the Consolidated Statements of Operations over the respective vesting periods.

Awards made previously under OM plc’s restricted stock and stock options plans are accounted for as equity settled, and the grant date fair value is recognized as compensation expense over the requisite service period, with a corresponding contribution to additional paid-in capital.

Awards made under the Company’s equity plans are accounted for as equity settled, and the grant date fair value is recognized as compensation expense over the requisite service period, with a corresponding contribution to additional paid-in capital.

6 unchanged sentences

The Company recognizes forfeitures as they occur.

BrightSphere Investment Group Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2020 and 2019

2) Basis of Presentation and Significant Accounting Policies (cont.)

The Company has compensation arrangements with certain of its Affiliates whereby in exchange for continued service, Affiliate equity is either purchased by, or granted to Affiliate key employees and may be repurchased either by Affiliate key employees or by the Company at a future date, subject to service requirements having been met.

7 unchanged sentences

The Company assesses consolidation requirements with respect to its Funds.

BrightSphere Investment Group Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2019 and 2018

2) Basis of Presentation and Significant Accounting Policies (cont.)

In evaluating whether or not a legal entity must be consolidated, the Company determines if such entity is a variable interest entity (“VIE”) or a voting interest entity (“VOE”).

4 unchanged sentences

Investments that are determined to be VIEs are consolidated if the Company or a consolidated Affiliate is the primary beneficiary of the investment.

BrightSphere Investment Group Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2020 and 2019

2) Basis of Presentation and Significant Accounting Policies (cont.)

In evaluating whether the Company is the primary beneficiary, the Company evaluates its economic interests in the entity held either directly by the Company or indirectly through related parties on a proportional basis.

11 unchanged sentences

Other investments are categorized as trading and recorded at estimated fair value.

Realized and unrealized gains and losses arising from changes in fair value of investments are reported within investment income in the Consolidated Statements of Operations.

See Note 4 for a summary of the fair value inputs utilized to determine the fair value of other investments held at fair value.

BrightSphere Investment Group Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2019 and 2018

2) Basis of Presentation and Significant Accounting Policies (cont.)

Realized and unrealized gains and losses arising from changes in fair value of investments are reported within net consolidated funds’ investment gains and losses in the Consolidated Statements of Operations.

See Note 5 for a summary of the inputs utilized to determine the fair value of other investments held at fair value.

Security transactions

3 unchanged sentences

The Company records interest income on an accrual basis and includes amortization of premiums and accretion of discounts.

Dividend income and expense on dividends sold short are recorded on the ex-dividend date, net of applicable withholding taxes.

Dividend income is recorded on the ex-dividend date, net of applicable withholding taxes.

Expenses are recorded on an accrual basis.

BrightSphere Investment Group Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2020 and 2019

2) Basis of Presentation and Significant Accounting Policies (cont.)

Certain Funds may sell a security they do not own in anticipation of a decline in the fair value of that security.

13 unchanged sentences

The gains or losses on Fund’s derivative instruments not designated for hedge accounting are included as net consolidated Funds gains or losses in the Company’s Consolidated Statements of Operations.

BrightSphere Investment Group Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2019 and 2018

2) Basis of Presentation and Significant Accounting Policies (cont.)

Foreign currency translation and transactions

6 unchanged sentences

The Company uses the equity method of accounting for investments that provide the Company with the ability to exercise significant influence over an entity, but that do not meet the requirements for consolidation.

Equity method investments include two Affiliates, Heitman (through November 30, 2017) and Investment Counselors of Maryland, LLC, as well as all unconsolidated Funds over which the Company exercises significant influence.

In August 2017, the Company agreed in principle to sell its stake in Heitman to Heitman’s management.

Pursuant to that term sheet, BSIG entered into a redemption agreement on November 17, 2017.

Heitman continued to be recorded as an equity method investment through November 30, 2017, at which point the Company reclassified its investment in Heitman to a cost-method investment.

The transaction closed on January 5, 2018.

Equity method investments includes an Affiliate, Investment Counselors of Maryland, LLC, as well as all unconsolidated Funds over which the Company exercises significant influence.

BrightSphere Investment Group Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2020 and 2019

2) Basis of Presentation and Significant Accounting Policies (cont.)

Equity-accounted investments in consolidated Funds is comprised of investments in partnership interests where a portion of the return includes carried interest.

12 unchanged sentences

Assets and liabilities measured and reported at fair value are classified and disclosed in one of the following categories:

BrightSphere Investment Group Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2019 and 2018

2) Basis of Presentation and Significant Accounting Policies (cont.)

• Level I—Quoted prices are available in active markets for identical investments as of the reporting date.

11 unchanged sentences

In cases in which the fair value of an investment is established using the net asset value (or its equivalent) as a practical expedient, the investment is not categorized within the fair value hierarchy.

BrightSphere Investment Group Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2020 and 2019

2) Basis of Presentation and Significant Accounting Policies (cont.)

Use of estimates

The preparation of these Consolidated Financial Statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the period.

The year ended December 31, 2020 was characterized by heightened uncertainty due to the COVID-19 pandemic which could impact estimates and assumptions made by management.

Actual results could differ significantly from those estimates.

1 unchanged sentence

The Company operates in three reportable segments that provide investment management services and products primarily to institutional clients.

See Note 1 and Note 23 for further information regarding the Company’s change in segments.

See Note 24 for further information regarding the Company’s segments.

Derivatives and Hedging

4 unchanged sentences

The ineffective portion of the gain or loss is recognized in earnings immediately.

BrightSphere Investment Group Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2019 and 2018

2) Basis of Presentation and Significant Accounting Policies (cont.)

Cash and cash equivalents

1 unchanged sentence

Cash equivalents are stated at cost, which approximates market value due to the short-term maturity of these investments.

Cash held by consolidated Funds is not available to fund general liquidity needs of the Company and is therefore classified as restricted cash.

Restricted cash represents amounts held in escrow related to the Company's disposition of Barrow Hanley.

Cash held by consolidated Funds is not available to fund general liquidity needs of the Company and is therefore also classified as restricted cash.

Investment advisory fees receivable

The Company earns management and performance fees which are billed monthly, quarterly and annually in arrears, according to the terms of the relevant investment management agreement.

The Company earns management and performance fees which are billed monthly, quarterly and annually, according to the terms of the relevant investment management agreement.

Management and performance fees that have been earned, but have not yet been collected are presented as investment advisory fees receivable on the Consolidated Balance Sheets.

1 unchanged sentence

The Company typically does not record an allowance for doubtful accounts or bad debt expense, or any amounts recorded have been immaterial.

BrightSphere Investment Group Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2020 and 2019

2) Basis of Presentation and Significant Accounting Policies (cont.)

Fixed assets are recorded at historical cost and depreciated using the straight-line method over its estimated useful lives.

10 unchanged sentences

The Company also holds an indefinite-life intangible asset related to the trade name associated with the Landmark acquisition.

BrightSphere Investment Group Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2019 and 2018

2) Basis of Presentation and Significant Accounting Policies (cont.)

The Company tests for the possible impairment of definite-life intangibles whenever events or changes in circumstances indicate that the carrying amount of the asset is not recoverable.

5 unchanged sentences

Factors that could trigger an impairment review include significant underperformance relative to historical or projected future operating results, significant changes in the Company’s use of the acquired assets in a business combination or the strategy for the Company’s overall business, and significant negative industry or economic trends.

The Company performs its assessment for impairment of goodwill annually as of the first business day of the fourth quarter, or as necessary, and the Company has determined that it has six reporting units, consisting of the six consolidated Affiliates.

BrightSphere Investment Group Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2020 and 2019

2) Basis of Presentation and Significant Accounting Policies (cont.)

The Company performs its assessment for impairment of goodwill annually as of the first business day of the fourth quarter, or as necessary, and the Company has determined that it had five reporting units, consisting of the five consolidated Affiliates as of the annual goodwill impairment test date.

The Company first considers various qualitative factors to determine if it is more likely than not that the fair value of each of the reporting units is greater than its respective carrying amount, including goodwill.

9 unchanged sentences

At the close of each year, management assessed whether there were any conditions present during the fourth quarter that would indicate impairment subsequent to the initial assessment date and concluded that no such conditions were present.

Assets Held for Sale

The Company classifies its long-lived assets to be sold as held for sale in the period (i) it has approved and committed to a plan to sell the asset, (ii) the asset is available for immediate sale in its present condition, (iii) an active program to locate a buyer and other actions required to sell the asset have been initiated, (iv) the sale of the asset is probable, (v) the asset is being actively marketed for sale at a price that is reasonable in relation to its current fair value, and (vi) it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn.

The Company initially measures a long-lived asset that is classified as held for sale at the lower of its carrying value or fair value less any costs to sell.

Any loss resulting from this measurement is recognized in the period in which the held for sale criteria are met.

Conversely, gains are not recognized on the sale of a long-lived asset until the date of sale.

Upon designation as an asset held for sale, the Company stops recording depreciation expense on the asset.

The Company assesses the fair value of a long-lived asset less any costs to sell at each reporting period and until the asset is no longer classified as held for sale.

Upon determining that a disposal group meets the criteria to be classified as held for sale, the Company reports the assets and liabilities of the disposal group, if material, in the line items assets held for sale and liabilities held for sale on the Consolidated Balance Sheet.

BrightSphere Investment Group Inc.

2 unchanged sentences

2) Basis of Presentation and Significant Accounting Policies (cont.)

The Company and its Affiliates currently lease office space and equipment under various leasing arrangements, classified as operating leases.

Some lease agreements contain renewal options, rent escalation clauses or other inducements provided by the landlord.

Rent expense is accrued to recognize lease escalation provisions and inducements provided by the landlord, if any, on a straight-line basis over the lease term.

Contracts are evaluated at inception to determine whether such contract is or contains a lease.

The Company leases certain office space and equipment under non-cancelable operating leases.

As leases expire, they are normally renewed or replaced in the ordinary course of business.

Lease agreements may contain renewal options exercisable by the Company, rent escalation clauses and/or other incentives provided by the landlord.

Renewal options that have been determined to be reasonably certain to be exercised are included in the lease term.

Rights and obligations attributable to identified leases with a term in excess of twelve months are recognized on the Company’s Consolidated Balance Sheets in the form of right‐of‐use (ROU) assets and lease liabilities are recognized as of the date the underlying assets are available for use, which may be the date the Company gains access to begin leasehold improvements.

Lease payments related to short‐term leases with a term of twelve months or less are recognized on a straight‐line basis as short‐term lease expense.

Lease liabilities are initially and subsequently measured as the present value of future lease payments over the lease term.

For the purposes of this calculation, lease payments consist of fixed monthly lease payments related to use of the underlying assets.

As the Company's leases generally do not have a readily determinable implicit rate, the company uses its incremental borrowing rate to determine the present value of fixed lease payments based on information available at the lease commencement date.

ROU assets are initially valued equal to the corresponding lease liabilities, adjusted for any lease incentives payable to the Company.

Subsequently, the amortization of ROU assets is recognized as a component of operating lease expense.

The total cost of operating leases is recognized on a straight‐line basis over the life of the related leases, and is composed of imputed interest on lease liabilities measured using the effective interest method and amortization of the ROU asset.

Variable lease payments are primarily related to services such as common‐area maintenance and utilities, property taxes and insurance, and are recognized as variable lease expense when incurred.

ROU assets are tested for impairment whenever changes in facts or circumstances indicate that the carrying amount of an asset may not be recoverable.

Modification of a lease term would result in re‐measurement of the lease liability and a corresponding adjustment to the ROU asset.

Earnings per share

6 unchanged sentences

As appropriate, the Company’s policy is to apply the more dilutive methodology upon issuance of such instruments.

BrightSphere Investment Group Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2020 and 2019

2) Basis of Presentation and Significant Accounting Policies (cont.)

Deferred financing costs

4 unchanged sentences

The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date.

The Company’s deferred tax assets have been attributable to federal and state loss carry forwards, interest deductions, and accrued liabilities.

The Company’s deferred tax assets have been attributable to interest deductions, investment in partnerships, and employee compensation.

Deferred income tax assets are subject to a valuation allowance if, in management’s opinion, it is not more-likely-than-not that these benefits will be realized.

2 unchanged sentences

These assumptions require significant judgment about the forecasts of future taxable income and are consistent with the plans and estimates the Company is using to manage the underlying businesses.

BrightSphere Investment Group Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2019 and 2018

2) Basis of Presentation and Significant Accounting Policies (cont.)

The Company’s accounting policy is to treat the global intangible low-taxed income taxes which became effective January 1, 2018 as a result of the Tax Cuts and Jobs Act as period costs in the accounting and tax periods in which they are incurred.

9 unchanged sentences

Ownership interests held by Affiliate key employees are categorized as liabilities on the Consolidated Balance Sheets and are revalued each reporting date, with movements treated as compensation expense in the Consolidated Statements of Operations.

BrightSphere Investment Group Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2020 and 2019

2) Basis of Presentation and Significant Accounting Policies (cont.)

Non-controlling interests in consolidated Funds on the Consolidated Balance Sheets include undistributed income owned by the investors in the respective Funds.

7 unchanged sentences

For the Company’s purposes, comprehensive income (loss) represents net income (loss), as presented in the accompanying Consolidated Statements of Operations, adjusted for net foreign currency translation adjustments and adjustments to the valuation and amortization of certain derivative securities, net of tax.

BrightSphere Investment Group Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2019 and 2018

2) Basis of Presentation and Significant Accounting Policies (cont.)

Restructuring costs

2 unchanged sentences

Recently adopted accounting standards

In February 2016, the FASB issued Accounting Standards Update (“ASU”) 2016-02, “Leases” (“Topic 842”).

Topic 842 requires that lessees recognize right-of-use (“ROU”) assets and lease liabilities on the balance sheet for all leases with a lease term greater than 12 months.

The Company adopted the standard on January 1, 2019 using the modified retrospective approach, without restating prior comparative periods.

Most prominent among the changes in the standard is the recognition of ROU assets and lease liabilities by lessees for those leases classified as operating leases.

The Company recorded a ROU asset of approximately $ 44.2 million and a lease liability of approximately $ 49.9 million , primarily related to real estate operating leases on January 1, 2019, with no cumulative-effect adjustment to opening retained earnings.

The initial recognition of ROU asset and lease liability represented a non-cash activity.

The adoption of the new standard had a material impact on the Company’s Consolidated Balance Sheets, but did not have an impact on our Consolidated Statements of Operations.

The package of three practical expedients applicable to the Company have been elected which resulted in the Company not having to reassess whether expired or existing contracts upon adoption contained a lease.

It also allowed the Company to retain the historical classifications of our leases and initial direct costs.

The Company has also made an accounting policy election to apply short-term exemption to leases that meet the definition of short-term leases under the new standard.

On January 1, 2019, the Company early adopted ASU 2018-15, Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract, which aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software.

The capitalized implementation costs will be expensed over the term of the hosting arrangement.

The adoption of this ASU did not have a material impact on the Company’s Consolidated Financial Statements and related disclosures.

Accounting standards not yet adopted

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820).

This standard modifies the disclosure requirements on fair value measurements and is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019.

Notably, this guidance removes the disclosure requirements for the valuation processes for Level 3 fair value measurements.

This guidance also adds new disclosure requirements for the range and weighted average of significant unobservable inputs used to develop fair value measurements categorized within Level 3 of the fair value hierarchy.

The Company expects that the adoption of this standard will not have a material impact on its Consolidated Financial Statements and related disclosures.

The Company adopted the standard on January 1, 2020.

This guidance removes the disclosure requirements for the valuation processes for Level III fair value measurements.

The Company has determined that the adoption of this standard did not have a material impact on its Consolidated Financial Statements and related disclosures.

Accounting standards not yet adopted

The Company has considered all other newly issued accounting guidance that is applicable to the Company’s operations and the preparation of the Consolidated Financial Statements, including those that have not yet been adopted.

The Company does not believe that any such guidance has or will have a material effect on its Consolidated Financial Statements and related disclosures.

BrightSphere Investment Group Inc.

1 unchanged sentence

December 31, 2020 and 2019

3) Divestitures

Copper Rock Capital Partners LLC

On July 24, 2020 the Company completed the sale of all of its equity interests in Copper Rock to Spouting Rock Asset Management LLC.

The Company recognized a pre-tax gain of $ 7.2 million during the year ended December 31, 2020.

Barrow, Hanley, Mewhinney & Strauss LLC

On November 17, 2020 the Company completed the sale of all its interests in Barrow Hanley to Perpetual U.S.

Holdings Company Inc.

(“Perpetual”) for cash consideration totaling $ 292.3 million.

The Company recognized a pre-tax gain of $ 231.2 million during the year ended December 31, 2020.

Operational information for Barrow Hanley is included in the Company’s Liquid Alpha segment until November 17, 2020, the consummation of the sale.

Barrow Hanley’s income from continuing operations before taxes was $ 38.2 million, $ 106.0 million, and $ 88.7 million for the year ended December 31, 2020, 2019, and 2018 respectively.

The Company also redeemed seed investments of $ 49.0 million in Barrow Hanley’s investment products as of November 17, 2020 upon consummation of the sale.

Analytic Investors LLC

The Company recorded a pre-tax gain of $ 2.9 million during the year ended December 31, 2020 upon receipt of cash proceeds from a previously disposed of Affiliate, Analytic Investors LLC.

BrightSphere Investment Group Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2020 and 2019

4) Investments

4 unchanged sentences

Total investments held at fair value $ 113.1 $ 303.8

Equity-accounted investments in Affiliates and consolidated Funds (1)

Equity-accounted investments in Affiliate and consolidated Funds (1)

Total investments per Consolidated Balance Sheets $ 228.8 $ 376.9

1 unchanged sentence

These investments are accounted for within the scope of ASC 323, Investments - Equity Method and Joint Ventures because the Company has determined it has significant influence.

In August 2017, the Company executed a non-binding term sheet to sell its stake in Heitman to Heitman’s management for cash consideration totaling $ 110 million .

In August 2017, the Company executed a non-binding term sheet to sell its stake in Heitman LLC (“Heitman”) to Heitman’s management for cash consideration totaling $ 110 million.

Pursuant to this term sheet, BSIG entered into a redemption agreement on November 17, 2017 and the Company reclassified its investment in Heitman to a cost-method investment.

1 unchanged sentence

Investment income is comprised of the following for the years ended December 31 (in millions):

2020 2019 2018

Realized and unrealized gains (losses) on other investments held at fair value

Investment return of equity-accounted investments in Affiliates (Note 6)*

2.0 14.0 ( 1.9 )

Earnings from equity-accounted investments in Affiliate (Note 7) 2.9 2.8 2.7

Gain on sale of Affiliate carried at cost

Total investment income per Consolidated Statements of Operations

* As previously noted, the Company reclassified its investment in Heitman to a cost-method investment as of November 30, 2017, therefore earnings from Heitman as an equity-accounted investment are included in the table above for the first eleven months of 2017.

BrightSphere Investment Group Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2019 and 2018

3) Investments (cont.)

$ 4.9 $ 16.8 $ 66.5

Investment gains (losses) on net consolidated funds is comprised of the following for the years ended December 31 (in millions):

2020 2019 2018

Realized and unrealized gains (losses) on consolidated Funds held at fair value

Investment return of equity-accounted investments

$ ( 5.2 ) $ 4.2 $ ( 13.4 )

Earnings from equity-accounted investments 35.1 16.7 —

Total net consolidated Funds’ investment gains (losses) per Consolidated Statements of Operations

$ 29.9 $ 20.9 $ ( 13.4 )

BrightSphere Investment Group Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2020 and 2019

5) Fair Value Measurements

1 unchanged sentence

Quoted prices

Uncategorized

Assets of BSIG and consolidated Funds (1)

Common and preferred stock

Short-term investment funds

Consolidated Funds total

(Level I) Significant

(Level II) Significant

(Level III) Uncategorized Total value,

Assets of BSIG

Investments in separate accounts (1)

9.7 11.6 — — 21.3

Investments related to long-term incentive compensation plans (2)

73.0 — — — 73.0

Investments in unconsolidated Funds (3)

— — 2.6 16.2 18.8

Total fair value assets $ 82.7 $ 11.6 $ 2.6 $ 16.2 $ 113.1

Liabilities of consolidated Funds (1)

Consolidated Funds total

Total fair value liabilities

BrightSphere Investment Group Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2019 and 2018

4) Fair Value Measurements (cont.)

The following table summarizes the Company’s assets and liabilities that are measured at fair value on a recurring basis at December 31, 2019 (in millions):

Quoted prices

Uncategorized

(Level I) Significant

(Level II) Significant

(Level III) Uncategorized Total value,

Assets of BSIG and consolidated Funds (4)

1 unchanged sentence

Short-term investment funds 0.1 — — — 0.1

Other investments

Bank loans — 109.0 — — 109.0

Derivatives 0.5 0.1 — — 0.6

Consolidated Funds total 10.4 109.1 — — 119.5

Investments in separate accounts (1)

33.2 11.1 — — 44.3

Investments related to long-term incentive compensation plans (2)

88.8 — — — 88.8

Investments in unconsolidated Funds (3)

— — 3.0 48.2 51.2

BSIG total 122.0 11.1 3.0 48.2 184.3

Total fair value assets $ 132.4 $ 120.2 $ 3.0 $ 48.2 $ 303.8

Liabilities of BSIG and consolidated Funds (4)

Common stock $ ( 0.5 ) $ — $ — $ — $ ( 0.5 )

Derivatives ( 0.1 ) ( 0.3 ) — — ( 0.4 )

Consolidated Funds total ( 0.6 ) ( 0.3 ) — — ( 0.9 )

Total fair value liabilities $ ( 0.6 ) $ ( 0.3 ) $ — $ — $ ( 0.9 )

Assets and liabilities measured at fair value are comprised of financial investments managed by the Company’s Affiliates.

Equity securities, including common and preferred stock, short-term investment funds, other investments and derivatives which are traded on a national securities exchange are stated at the last reported sales price on the day of valuation.

To the extent these securities are actively traded and valuation adjustments are not applied, they are classified as Level I.

The securities that trade in markets that are not considered to be active but are valued based on quoted market prices, dealer quotations or alternative pricing sources supported by observable inputs obtained by the Company from independent pricing services are classified as Level II.

BrightSphere Investment Group Inc.

2 unchanged sentences

5) Fair Value Measurements (cont.)

The Company obtains prices from independent pricing services that may utilize broker quotes, but generally the independent pricing services will use various other pricing techniques which take into account appropriate factors such as yield, quality, coupon rate, maturity, type of issue, trading characteristics and other data.

The Company has not made adjustments to the prices provided.

Assets of consolidated Funds also include investments in bank loans.

Interests in senior floating-rate loans for which reliable market participant quotations are readily available are valued at the average mid-point of bid and ask quotations obtained from a third-party pricing service.

These assets are classified as Level II.

If the pricing services are only able to (a) obtain a single broker quote or (b) utilize a pricing model, such securities are classified as Level III.

If the pricing services are unable to provide prices, the Company attempts to obtain one or more broker quotes directly from a dealer or values such securities at the last bid price obtained.

In either case, such securities are classified as Level III.

The Company performs due diligence procedures over third party pricing vendors to understand their methodology and controls to support their use in the valuation process to ensure compliance with required accounting disclosures.

The uncategorized amount of $ 0.0 million and $ 38.8 million at December 31, 2019 and December 31, 2018 , respectively, represents investments made by consolidated Funds and are valued using NAV which the Company relies on to determine their fair value as a practical expedient and has therefore not classified these investments in the fair value hierarchy.

The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to amounts presented in the Consolidated Balance Sheets.

These consolidated Funds consist of real estate and private equity investment Funds.

The NAVs that have been provided by investees have been derived from the fair values of the underlying investments as of the measurement dates.

Investments in separate accounts of $ 44.3 million at December 31, 2019 consist of approximately 3 % of cash equivalents and 97 % of equity securities, fixed income securities, and other investments.

(1) Investments in separate accounts of $ 21.3 million at December 31, 2020 consist of approximately 11 % of cash equivalents and 89 % of e quity securities, fixed income securities, and other investments.

Investments in separate accounts of $ 44.3 million at December 31, 2019, consist of approximately 3 % of cash equivalents and 97 % of equity securities.

7 unchanged sentences

UCITS and other investment vehicles are not subject to redemption restrictions.

BrightSphere Investment Group Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2019 and 2018

4) Fair Value Measurements (cont.)

The real estate investment Funds of $ 6.2 million and $ 6.4 million at December 31, 2020 and December 31, 2019, respectively, are subject to longer than monthly or quarterly redemption restrictions, and due to their nature, distributions are received only as cash flows are generated from underlying assets over the life of the Funds.

The range of time over which the underlying assets are expected to be liquidated by the investees is approximately one to twelve years from December 31, 2019 .

The range of time over which the underlying assets are expected to be liquidated by the investees is approximately one to eleven years from December 31, 2020.

The valuation process for the underlying real estate investments held by the real estate investment Funds begins with each property or loan being valued by the investment teams.

4 unchanged sentences

Determination of estimated fair value involves subjective judgment because the actual fair value can be determined only through negotiation between parties in a sale transaction and amounts ultimately realized may vary significantly from the fair value presented.

(4) Assets and liabilities measured at fair value are comprised of financial investments managed by the Company’s Affiliates.

BrightSphere Investment Group Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2020 and 2019

5) Fair Value Measurements (cont.)

To the extent these securities are actively traded and valuation adjustments are not applied, they are classified as Level I.

The Company has not made adjustments to the prices provided.

Assets of consolidated Funds also include investments in bank loans.

These assets are classified as Level II.

If the pricing services are only able to (a) obtain a single broker quote or (b) utilize a pricing model, such securities are classified as Level III.

If the pricing services are unable to provide prices, the Company attempts to obtain one or more broker quotes directly from a dealer or values such securities at the last bid price obtained.

In either case, such securities are classified as Level III.

The following table reconciles the opening balances of Level III financial assets to closing balances at December 31 (in millions):

Investments in unconsolidated Funds 2020 2019

Consolidated Funds’ other investments

Level III financial assets

At beginning of the period $ 3.0 $ 3.0

Change in recognition based on adoption of ASU 2016-01

Transfers into Level III

Additions (redemptions)

Funds de-consolidation

Total net fair value losses recognized in net income

Total Level III financial assets

During the year ended December 31, 2018, the Company transferred $ 26.5 million of consolidated Funds other assets into Level III.

These investments were not previously classified on the fair value hierarchy.

The Fund was subsequently de-consolidated in 2018.

There were no significant transfers of financial assets or liabilities among Levels I, II or III during the year ended December 31, 2019 .

There were no significant transfers of financial assets or liabilities between Levels II or III during the year ended December 31, 2020.

BrightSphere Investment Group Inc.

11 unchanged sentences

Other assets of consolidated Funds 114.3 85.7

Total Assets $ 114.3 $ 205.2

Liabilities of consolidated Funds $ — $ 6.2

2 unchanged sentences

To the extent the Company also has consolidated Funds that are not VIEs, the assets and liabilities of those Funds are not included in the table above.

“Other assets of consolidated Funds” consist of assets of consolidated Funds, which is comprised of investments in partnership interests where a portion of return includes carried interest that are accounted for within the scope of ASC 323, Investments - Equity Method and Joint Ventures because the Company has determined it has significant influence.

The assets of consolidated VIEs presented in the table above belong to the investors in those Funds, are available for use only by the Fund to which they belong, and are not available for use by the Company to the extent they are held by non-controlling interests.

2 unchanged sentences

The Company’s investment in any unconsolidated VIE generally represents an insignificant interest of the Fund’s net assets and assets under management, such that the majority of the VIE’s results are attributable to third parties.

The Company’s exposure to risk in these entities is generally limited to any capital contribution it has made or is required to make and any earned but uncollected management fees.

The Company has not issued any investment performance guarantees to these VIEs or their investors.

The Company’s exposure to risk in these entities is generally limited to any capital contribution it has made or is required to make and any

BrightSphere Investment Group Inc.

2 unchanged sentences

6) Variable Interest Entities (cont.)

earned but uncollected management fees.

The Company has not issued any investment performance guarantees to these VIEs or their investors.

The following information pertains to unconsolidated VIEs for which the Company holds a variable interest at December 31 (in millions):

3 unchanged sentences

Maximum risk of loss (1)

$ 19.3 $ 23.9

(1) Includes equity investments the Company has made or is required to make and any earned but uncollected management and incentive fees.

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7) Equity Accounted Investees

The following tables present summarized financial information for Affiliates and Funds accounted for under the equity method (in millions):

The following tables present summarized financial information for an Affiliate accounted for under the equity method (in millions):

For the year ended December 31,

2 unchanged sentences

Operating income 4.9 4.7 4.5

Other income, net

Income before income taxes 4.9 4.7 4.5

Less income tax expense

non-controlling interests income 2.0 1.9 1.8

Net income attributable to controlling interests $ 2.9 $ 2.8 $ 2.7

BSIG equity in net income of equity method investees (2)

BSIG equity in net income of equity method investee (1)

$ 2.9 $ 2.8 $ 2.7

As of December 31,

Balance Sheets 2020 2019

Total assets $ 4.3 $ 4.2

Total liabilities 2.0 1.9

2 unchanged sentences

BSIG equity investment and undistributed earnings of affiliated companies, before consolidating and reconciling adjustments

BSIG investment in equity method investees

Net revenues include advisory fees for asset management services and investment income, including interest and dividends from consolidated investment partnerships.

BSIG investment in equity method investee $ 2.0 $ 2.0

(1) ICM, an equity-accounted Affiliate, uses a revenue share model.

As disclosed in Note 4, as of November 30, 2017, the Company reclassified its investment in Heitman to a cost-method investment.

Heitman contributed to the Company’s financial results of operations for the eleven-month period from January 1, 2017 through November 30, 2017.

The financial results of operations from Heitman for this eleven-month period are therefore included in the summarized statements of income table above.

BrightSphere Investment Group Inc.

6 unchanged sentences

Furniture and fixtures 12.5 9.0

Building 2.9 2.9

Software and web development 97.9 78.5

5 unchanged sentences

The operating leases have remaining lease terms of 1 year to 13 years, some of which include options to extend the leases for up to 5 years, and some of which include options to terminate the leases within 1 year.

As of December 31, 2019 , the ROU asset of $ 37.7 million was included within other assets and the lease liability of $ 42.5 million was included within other liabilities on the Consolidated Balance Sheets.

The following table summarizes information about the Company’s operating leases for the years ended December 31 (in millions):

1 unchanged sentence

Variable lease cost 0.3 0.3

Sublease income ( 0.2 ) $ —

Total operating lease expense $ 15.8 $ 14.0

Cash paid for amounts included in the measurement of lease liabilities:

2 unchanged sentences

In determining the incremental borrowing rate, the Company considered the interest rate yield for the specific interest rate environment and the Company’s credit spread at the inception of the lease.

For the year ended December 31, 2019 , the weighted average remaining lease term was 4.3 years and the weighted average discount rate was 4.14 % .

For the years ended December 31, 2020 and 2019, the weighted average remaining lease term was 11.3 years and 4.3 years, respectively, and the weighted average discount rate was 3.5 % and 4.14 %, respectively.

BrightSphere Investment Group Inc.

5 unchanged sentences

Year Ending December 31,

Thereafter 77.4

Total lease payments 132.2

Less imputed interest ( 24.3 )

Excluded from the table above is an operating lease for office space that was entered into during the fourth quarter of 2019, but has not yet commenced.

The expected lease obligations are approximately $ 7.5 million and will be paid over an expected lease term of 12 years.

This operating lease will commence in 2020.

BrightSphere Investment Group Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2019 and 2018

Total $ 107.9

10) Goodwill and Intangible Assets

The following table presents the changes in goodwill in 2020 and 2019 (in millions):

Quant & Solutions

Quant & Solutions Alternatives Liquid Alpha Total

Goodwill $ 22.1 $ 153.1 $ 133.3 $ 308.5

Accumulated impairment ( 1.8 ) ( 5.0 ) ( 27.1 ) ( 33.9 )

December 31, 2018 $ 20.3 $ 148.1 $ 106.2 $ 274.6

Additions — — — —

Impairments — — — —

Disposals — — — —

Goodwill 22.1 153.1 133.3 308.5

Accumulated impairment ( 1.8 ) ( 5.0 ) ( 27.1 ) ( 33.9 )

December 31, 2019 $ 20.3 $ 148.1 $ 106.2 $ 274.6

Additions — — — —

Impairments — — ( 16.4 ) ( 16.4 )

Disposals (1)

— — ( 76.1 ) ( 76.1 )

Goodwill 22.1 153.1 57.2 232.4

Accumulated impairment ( 1.8 ) ( 5.0 ) ( 43.5 ) ( 50.3 )

December 31, 2020 $ 20.3 $ 148.1 $ 13.7 $ 182.1

BrightSphere Investment Group Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2020 and 2019

10) Goodwill and Intangible Assets (cont.)

(1) The disposal of $ 76.1 million pertains to the goodwill assigned to the Barrow Hanley reporting unit that was divested in November 2020.

See Note 3, Divestitures, for additional information.

The 2019 annual impairment assessment determined that no impairment existed at the annual assessment date.

Due to the decline in the Company’s assets under management for the three months ended March 31, 2020, management determined that an interim impairment assessment was necessary as of March 31, 2020 with respect to the Copper Rock reporting unit.

In the first quarter of 2020, the Company performed a quantitative impairment test for the Copper Rock reporting unit which was included within the Liquid Alpha segment prior to its disposition in July 2020.

The quantitative impairment test concluded that the fair value of the reporting unit did not exceed its carrying value.

Accordingly, the Company recognized a goodwill impairment charge of $ 16.4 million for the year end December 31, 2020.

The fair value of the reporting unit was estimated using the income approach, which calculates the fair value based on the present value of estimated future cash flows.

Cash flow projections are based on management’s estimates of Assets Under Management (“AUM”) growth rates, product mix and effective fee rates, taking into consideration industry and market conditions.

The discount rates used are based on the weighted-average cost of capital adjusted for the relevant risk associated with business-specific characteristics.

The Company’s quantitative impairment analysis at March 31, 2020 incorporated revised forecasts that took into account the market disruptions during the quarter and its impact on the results in future periods.

Given the significant level of uncertainty that currently exists, management also considered alternative scenarios for market and reporting unit performance over the next several years.

If the Company’s AUM are further impacted by the global economic conditions caused by COVID-19, such as adverse and significant declines in the value of global financial markets, additional impairments of goodwill or intangible assets are possible in future periods.

The following table presents the change in definite-lived acquired intangible assets in 2020 and 2019, comprised of client relationships (in millions):

Book Value Accumulated

Amortization &

Impairment Net Book

December 31, 2018 $ 108.3 $ ( 37.6 ) $ 70.7

Additions — — —

Amortization — ( 6.6 ) ( 6.6 )

Disposals — — —

December 31, 2019 $ 108.3 $ ( 44.2 ) $ 64.1

Additions — — —

Amortization — ( 6.7 ) ( 6.7 )

Disposals (1)

( 22.7 ) 22.7 —

December 31, 2020 $ 85.6 $ ( 28.2 ) $ 57.4

The Company’s definite-lived acquired intangibles are amortized over their expected useful lives.

As of December 31, 2019 , these assets were being amortized over remaining useful lives of three to ten years.

The Company recorded amortization expense of $ 6.6 million , $ 6.6 million and $ 6.6 million , respectively, for the years ended December 31, 2019 , 2018 and 2017 .

BrightSphere Investment Group Inc.

2 unchanged sentences

10) Goodwill and Intangible Assets (cont.)

(1) In connection with the divestitures of Copper Rock in July 2020 and Barrow Hanley in November 2020, the Company disposed fully amortized intangible assets of $ 2.3 million and $ 20.4 million, respectively, for the year ended December 31, 2020.

See Note 3, Divestitures.

The Company’s definite-lived acquired intangibles are amortized over their expected useful lives.

As of December 31, 2020, these assets were being amortized over remaining useful lives of three to nine years .

The Company recorded amortization expense of $ 6.7 million, $ 6.6 million and $ 6.6 million, respectively, for the years ended December 31, 2020, 2019 and 2018.

The Company also acquired a $ 1.0 million indefinite-lived intangible trade name in the acquisition of Landmark, included in acquired intangibles, net, on the Company’s Consolidated Balance Sheets at December 31, 2020 and 2019.

The 2019 annual impairment assessment of definite and indefinite-lived intangible assets determined that no impairment existed.

Due to the decline in the Company’s AUM in the three months ended March 31, 2020, the Company assessed definite and indefinite-lived intangible assets for possible impairment.

For indefinite-lived intangible assets, the Company performed a qualitative assessment and determined that it was more likely than not that the indefinite-lived intangible asset was not impaired.

For definite-lived intangible assets, no events or changes in circumstances indicated that the carrying amount of these assets may not be recoverable.

As such, no impairment charges were determined for the definite and indefinite-lived intangible assets for the year ended December 31, 2020.

The Company estimates that its consolidated annual amortization expense, assuming no useful life changes or additional investments in new or existing Affiliates, for each of the next five fiscal years is as follows (in millions):

Thereafter 25.4

BrightSphere Investment Group Inc.

Notes to Consolidated Financial Statements (Continued)

Notes to Consolidated Financial Statements

December 31, 2020 and 2019

3 unchanged sentences

Total amounts due for investment advisory fee receivables from related parties $ 9.3 $ 15.2

Investments in related parties consisted of the following at December 31 (in millions):

Investments in equity-accounted investees (Note 6)

Total related party investments

Investment in related party consisted of the following at December 31 (in millions):

Investment in equity-accounted investee (Note 7) $ 2.0 $ 2.0

Total related party investment $ 2.0 $ 2.0

Related party transactions included in the Company’s Consolidated Statements of Operations for the years ended December 31 consisted of (in millions):

Management fees from OM plc business units (1)

2020 2019 2018

Management fees from unconsolidated Funds (1)

208.5 211.8 266.4

Performance fees from unconsolidated Funds (1)

Total related party revenues $ 210.1 $ 213.0 $ 268.6

Rent and administrative costs recharged by OM plc business units (3)

Recharged OM plc operational costs (4)

Total related party expenses

OM plc was considered a related party through November 17, 2017, at which point OM plc sold all but a deminimus amount of the Company’s ordinary shares (see Note 1).

Therefore, revenue and expenses reported in the table above reflect OM plc as a related party through November 17, 2017.

OM plc was not considered a related party thereafter.

(1) Transactions with unconsolidated Affiliate-sponsored Funds are considered related party items on the basis of the Company’s significant influence over the activities of such entities in its capacity as investment advisor thereto.

These transactions are comprised of fees for advisory services and investments in unconsolidated funds.

The Company conducts a portion of its distribution activities out of the United Kingdom, and had entered into contractual arrangements with a related business units domiciled there to share their premises and leverage certain of their administrative functions.

BrightSphere Investment Group Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2019 and 2018

10) Related Party Transactions (cont.)

OM plc historically provided the Company with various oversight services, including governance, which included compensation for board and executive committees, investor relations, procurement of insurance coverage, human resources, financial reporting, internal audit, treasury, systems, risk and tax services.

All of these services were transitioned to the Company in 2017.

That portion of the above costs which (i) were directly attributable to the Company, (ii) were charged to the Company by OM plc and (iii) were paid to OM plc by the Company, have been recorded in the Company’s Consolidated Financial Statements and were $ 0.4 million for the year ended December 31, 2017 .

Other related party arrangements

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As a result of the amendment, the Company purchased approximately $ 39.6 million of seed investments from OM plc in September 2016.

The Company purchased the remaining seed capital investments covered by the Seed Capital Management Agreement valued at $ 63.4 million in July 2017, financed in part by borrowings under a non-recourse loan facility (see Note 13) and two promissory notes paid in the first quarter of 2018 in the amount of $ 4.5 million .

Amounts owed to OM plc associated with the Co-investment Deed were $ 3.7 million at December 31, 2019 , net of tax.

The Company purchased the remaining seed capital investments

BrightSphere Investment Group Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2020 and 2019

11) Related Party Transactions (cont.)

covered by the Seed Capital Management Agreement valued at $ 63.4 million in July 2017, financed in part by borrowings under a non-recourse loan facility (see Note 14) and two promissory notes paid in the first quarter of 2018 in the amount of $ 4.5 million.

Amounts owed to OM plc associated with the Co-investment Deed were $ 3.4 million at December 31, 2020 and $ 3.7 million at December 31, 2019, net of tax.

The Company uses the equity-method to account for its interests in Affiliates where it exercises significant influence over their operations, but does not hold a controlling interest.

During 2019 , 2018 and 2017 , the Company recorded earnings in respect of these investees of $ 2.8 million , $ 2.7 million and $ 14.5 million , respectively.

During 2020, 2019 and 2018, the Company recorded earnings in respect of this investee of $ 2.9 million, $ 2.8 million and $ 2.7 million, respectively.

The Company also exercises significant influence over unconsolidated Funds;

2 unchanged sentences

Certain Affiliates have provided loans to Affiliate employees.

At December 31, 2019 the balance of these loans to Affiliate employees was $ 16.1 million .

At December 31, 2020 and December 31, 2019 the balance of these loans to Affiliate employees was $ 8.4 million and $ 16.1 million, respectively.

As the Company is a member of a group of related businesses, it is possible that the terms of certain related party transactions are not the same as those that would result from transactions with wholly unrelated parties.

7 unchanged sentences

Accrued interest payable 6.8 7.0

Other 0.7 0.7

Total accounts payable and accrued expenses $ 33.5 $ 41.5

7 unchanged sentences

Redemptions of profit sharing interests from Affiliate key employees for cash were $ 6.1 million in 2020, $ 12.0 million in 2019, and $ 16.1 million in 2018.

The share-based payments liability includes the Landmark compensation arrangements which amounted to $ 188.6 million at December 31, 2019 and $ 350.6 million at December 31, 2018 .

BrightSphere Investment Group Inc.

3 unchanged sentences

The Company’s borrowings were comprised of the following as of the dates indicated (in millions):

December 31, 2019

December 31, 2018

(in millions)

Carrying value

Fair Value Level

Carrying value

Fair Value Level

December 31, 2020 December 31, 2019

(in millions) Carrying value Fair Value Fair Value Level Carrying value Fair Value Fair Value Level

Third party borrowings:

$ 150 million revolving credit facility expiring August 22, 2022 (1)(2)

$ — $ — $ 140.0 $ 140.0 2

$ 275 million 4.80 % Senior Notes Due July 27, 2026 (3)

272.8 298.9 2 272.4 287.2 2

$ 125 million 5.125 % Senior Notes Due August 1, 2031 (3)

121.5 126.0 2 121.4 126.4 2

Total third party borrowings

$ 394.3 $ 424.9 $ 533.8 $ 553.6

Non-recourse borrowing:

Non-recourse seed capital facility expiring January 15, 2021 (3)

Non-recourse seed capital facility (1)(4)

$ — $ — $ 35.0 $ 35.0 2

Total non-recourse borrowing

$ — $ — $ 35.0 $ 35.0

Total borrowings $ 394.3 $ 424.9 $ 568.8 $ 588.6

The difference between the principal amounts and the carrying values of the senior notes in the table above reflects the unamortized debt issuance costs and discounts.

Revolving credit facility of $ 350 million set to expire on October 15, 2019 was terminated.

A new revolving credit facility of $ 450 million was executed on August 20, 2019.

(1) Fair value approximates carrying value because the credit facilities have variable interest rates based on selected short term market rates.

Revolving credit facility

On August 20, 2019, the Company entered into a $ 450 million senior unsecured revolving credit facility with Citibank, as administrative agent and issuing bank, and RBC Capital Markets and BMO Capital Markets Corp.

as joint lead arrangers and joint book runners (the “Credit Facility”).

Subject to certain conditions, the Company may borrow up to an additional $ 150 million under the Credit Facility.

The Credit Facility has a maturity date of August 22, 2022.

The previous revolving credit facility with Citibank, which had a maturity date of October 15, 2019, was terminated.

Upon entry into the Credit Facility, the Company made an initial drawdown of $ 210 million under the Credit Facility to fully repay the $ 210 million outstanding under its previous credit facility.

The Company paid down $ 70 million of the amount outstanding under the Credit Facility during the third and fourth quarter of 2019.

Borrowings under the Credit Facility bear interest, at the Company’s option, at either the per annum rate equal to (a) the greatest of (i) the prime rate, (ii) the federal funds effective rate plus 0.5 % and (iii) the one month Adjusted LIBO Rate plus 1.0 % , plus, in each case an additional amount based on its credit rating or (b) the London interbank

(2) An amendment to the $ 450 million revolving credit facility was made on November 17, 2020 to reduce the revolving credit facility to $ 150 million upon consummation of the sale of the Company's equity interests in Barrow Hanley.

(3) The difference between the principal amounts and the carrying values of the senior notes in the table above reflects the unamortized debt issuance costs and discounts.

(4) Non-recourse seed capital facility that was set to expire on January 15, 2021 was paid down in the third quarter and terminated.

BrightSphere Investment Group Inc.

2 unchanged sentences

14) Borrowings and Debt (cont.)

offered rate for a period, at the Company’s election, equal to one, two, three or six months plus an additional amount ranging from 1.125 % to 2.00 % , with such additional amount based on its credit rating.

In addition, the Company is charged a commitment fee based on the average daily unused portion of the Credit Facility at a per annum rate ranging from 0.125 % to 0.45 % , with such amount based on the Company’s credit rating.

Revolving credit facility

On September 3, 2020, the Company, Royal Bank of Canada, BMO Harris Bank, N.A., Bank of China, New York Branch, Wells Fargo Bank, National Association, Barclays Bank PLC, Morgan Stanley Bank, N.A., Bank of America N.A., the Bank of New York Mellon and Citibank, N.A., as an issuing bank and administrative agent (collectively, the “Lenders”), entered into an amendment (the “Amendment") to the Revolving Credit Agreement dated as of August 20, 2019 (the “Original Credit Agreement”, and as amended by the Amendment, the “Amended Credit Agreement”).

The Amendment included changes to the Original Credit Agreement to permit the sale of the Company's equity interests in Barrow Hanley (the “Barrow Hanley Sale”).

Under the Original Credit Agreement, the Barrow Hanley Sale required consent of the Lenders given that Barrow Hanley accounted for more than 10 % of the Company's consolidated Adjusted EBITDA.

The Amendment provided that, effective immediately upon the consummation of the Barrow Hanley Sale, the Lenders commitments under the Credit Agreement would be $ 150 million.

The Barrow Hanley Sale was consummated on November 17, 2020 and the Lenders’ commitments under the Amended Credit Agreement were reduced to $ 150 million from thereon.

Borrowings under the Credit Facility bore interest, at the Company’s option, at either the per annum rate equal to (a) the greatest of (i) the prime rate, (ii) the federal funds effective rate plus 0.5 % and (iii) the one month Adjusted London interbank offered rate (“LIBOR”) plus 1.0 %, plus, in each case an additional amount based on its credit rating or (b) the LIBOR for a period, at the Company’s election, equal to one, two, three or six months plus an additional amount ranging from 1.125 % to 2.00 %, with such additional amount based on its credit rating.

In addition, the Company was charged a commitment fee based on the average daily unused portion of the Credit Facility at a per annum rate ranging from 0.125 % to 0.45 %, with such amount based on the Company’s credit rating.

Moody’s Investor Service, Inc.

1 unchanged sentence

As a result of the assignment of the credit ratings, the Company’s interest rate on outstanding borrowings was set at LIBOR + 1.50 % and the commitment fee on the unused portion of the revolving credit facility was set at 0.20 %.

Under the Credit Facility, the ratio of third-party borrowings to trailing twelve months Adjusted EBITDA cannot exceed 3.0 x, and the interest coverage ratio must not be less than 4.0 x.

Under the Amended Credit Agreement, the ratio of third-party borrowings to trailing twelve months Adjusted EBITDA as defined by the Amended Credit Agreement cannot exceed 3.0 x, and the interest coverage ratio must not be less than 4.0 x.

At December 31, 2020, the Company is in compliance with these debt covenants.

4 unchanged sentences

The 2026 Notes can be redeemed at any time prior to the scheduled maturity in part or in aggregate, at the greater of the 100 % principal amount at that time or the sum of the remaining scheduled payments discounted at the treasury rate (as defined) plus 0.5 %, together with any related accrued and unpaid interest.

5.125 % Senior Notes Due August 2031

The Company incurred debt issuance costs of $( 4.3 ) million in connection with the issuance of the $ 125.0 million 2031 Notes, which are being amortized to interest expense over the fifteen -year term.

The 2031 Notes can be redeemed at any time, on or after August 1, 2019 at a redemption price equal to 100.0 % of the principal amount together with any related accrued and unpaid interest.

The fair value of the senior notes was determined using broker quotes and any recent trading activity for each of the notes listed above, which are considered Level II inputs.

BrightSphere Investment Group Inc.

2 unchanged sentences

14) Borrowings and Debt (cont.)

5.125 % Senior Notes Due August 2031

The 2031 Notes can be redeemed at any time, on or after August 1, 2019 at a redemption price equal to 100.0 % of the principal amount together with any related accrued and unpaid interest.

The fair value of the senior notes was determined using broker quotes and any recent trading activity for each of the notes listed above, which are considered Level II inputs.

Non-recourse seed capital facility

1 unchanged sentence

The Company financed this purchase in part through borrowings under a non-recourse seed capital facility collateralized by its seed capital holdings.

The Company entered into this facility as of July 17, 2017, and could borrow up to $ 65.0 million , so long as the borrowing does not represent more than 50 % of the value of the permitted seed capital collateral.

The Company entered into this facility as of July 17, 2017, and could borrow up to $ 65.0 million, so long as the borrowing did not represent more than 50 % of the value of the permitted seed capital collateral.

The non-recourse seed facility bears interest at LIBOR + 1.55 % with a commitment fee on the unused portion of this facility of 0.95 %.

The facility currently has a maturity date of January 15, 2021 and includes a six-month evergreen renewal option.

At December 31, 2019 , amounts outstanding under this non-recourse seed capital facility amounted to $ 35.0 million .

The non-recourse seed capital facility set to expire on January 15, 2021 was paid down in the third quarter and terminated.

Per the terms of the Company’s Credit Facility, drawdowns under this facility are excluded from the Company’s third party debt levels for purposes of calculating the Company’s credit ratio covenants.

3 unchanged sentences

The weighted average interest rate on all debt obligations, excluding consolidated Funds, was 5.08 %, 5.28 % and 6.08 % in each of 2020, 2019 and 2018, respectively.

BrightSphere Investment Group Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2020 and 2019

14) Borrowings and Debt (cont.)

As of December 31, 2020, the aggregate maturities of debt commitments, based on their contractual terms, are as follows:

1 unchanged sentence

debt commitments

Thereafter 400.0

Total $ 400.0

The Company was in compliance with the required covenants related to borrowings and debt facilities as of December 31, 2020.

Subsequent Event

On February 23, 2021, the Company, along with the Lenders, entered into an assignment and assumption and amendment agreement (the “Assignment”) to the Amended Credit Agreement.

Pursuant to the Assignment, the Amended Credit Agreement was assigned to and assumed by Acadian and the Amended Credit Agreement was amended (the Amended Credit Agreement, as amended by the Assignment, the “Acadian Credit Agreement”) to, among other things, reduce the Lenders’ commitments thereunder to $ 125 million.

The Acadian Credit Agreement has a maturity date of August 22, 2022.

Borrowings under the Acadian Credit Agreement bear interest, at Acadian’s option, at either the per annum rate equal to (a) the greatest of (i) the prime rate, (ii) the federal funds effective rate plus 0.5 % and (iii) the one month Adjusted LIBOR Rate plus 1.0 %, plus, in each case an additional amount based on its credit rating or (b) the London interbank offered rate for a period, at our, equal to one, three or six months plus an additional amount ranging from 1.5 % to 2.0 %, with such additional amount based on Acadian’s Leverage Ratio (as defined below).

In addition, Acadian is charged a commitment fee based on the average daily unused portion of the revolving credit facility under the Acadian Credit Agreement at a per annum rate ranging from 0.25 % to 0.375 %, with such amount based on Acadian’s Leverage Ratio.

Under the Acadian Credit Agreement, the ratio of Acadian’s third-party borrowings to Acadian’s trailing twelve months Adjusted EBITDA, as defined by the Acadian Credit Agreement (the “Leverage Ratio”), cannot exceed 2.5 x.

BrightSphere Investment Group Inc.

3 unchanged sentences

Income from continuing operations before income taxes consisted of the following for the years ended December 31 (in millions):

2020 2019 2018

Domestic $ 423.7 $ 237.8 $ 113.8

Foreign 3.9 20.2 21.4

Total $ 427.6 $ 258.0 $ 135.2

The components of income tax expense from continuing operations for the years ended December 31 are as follows (in millions):

2020 2019 2018

Federal $ 23.6 $ ( 20.0 ) $ 3.3

State 13.7 9.0 19.9

Foreign ( 0.2 ) 3.5 11.0

Total current expense (benefit) 37.1 ( 7.5 ) 34.2

Federal 61.0 24.4 ( 24.7 )

State 13.5 ( 0.4 ) ( 4.7 )

Foreign 0.5 1.5 0.2

Total deferred expense (benefit) 75.0 25.5 ( 29.2 )

1 unchanged sentence

The Company has recognized income tax expense (benefit) related to derivative securities within other comprehensive income of $ 0.8 million, $ 0.6 million and $ 0.4 million in the years ended December 31, 2020, 2019 and 2018, respectively.

Included in gain (loss) on disposal of discontinued operations is income tax expense (benefit) of $ 0.0 million , $ 0.0 million and $( 0.1 ) million in the years ended December 31, 2019 , 2018 and 2017 , respectively.

The provision for income taxes in 2020, 2019 and 2018 included benefits of $ 0.4 million, $ 0.4 million and $ 0.4 million, respectively, related to the utilization of net operating loss carryforwards.

5 unchanged sentences

Federal statutory income tax rate and the effective income tax rate for continuing operations for the years ended December 31 is as follows:

2020 2019 2018

federal statutory income tax rate 21.0 % 21.0 % 21.0 %

2 unchanged sentences

DTA Deed liability revaluation adjustment — % — % 1.2 %

Interest expense

Adjustment to liabilities for uncertain tax positions ( 2.0 ) % ( 15.8 ) % ( 32.5 ) %

3 unchanged sentences

Effect of changes in tax law — % ( 0.4 ) % ( 1.4 ) %

Effect of disposal of affiliate

Effect of disposal of Affiliates 2.9 % — % 2.9 %

Effect of income from non-controlling interest ( 1.4 ) % ( 1.3 ) % 0.9 %

1 unchanged sentence

Impact of Redomestication to deferred tax assets — % ( 0.9 ) % — %

Other ( 0.4 ) % ( 0.4 ) % 0.5 %

Effective income tax rate for continuing operations 26.2 % 7.1 % 3.7 %

The Company’s effective income tax rate is higher than the US federal tax rate of 21% primarily due to its state tax obligations, non-deductible tax items and the effects of foreign operations.

In connection with the sale of its Affiliates in 2020, the Company recorded tax expense of $ 77.6 million, including tax impacts of non-deductible tax items.

The Company reduced its liability for uncertain tax positions by $ 9.1 million, $ 40.8 million and $ 47.9 million during the years ended December 31, 2020, 2019 and 2018, respectively, due to the lapse of statute of limitations.

The Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) contains numerous income tax provisions including some that are effective retroactively.

Our Consolidated Balance Sheets reflect the benefit of a provision that increased the business interest limitation under IRC Section 163(j) from 30% to 50% for tax years 2019 and 2020.

This provision allowed the Company to utilize more of the deferred tax asset related to interest expense.

In connection with the Redomestication in 2019, the Company revalued certain deferred tax assets that were transferred to the U.S.

5 unchanged sentences

On December 22, 2017, the Tax Cuts and Jobs Act (the “Tax Act”) was enacted and became effective January 1, 2018.

The Tax Act enacted various measures of domestic and international corporate tax reform that were impactful to the Company including reduction of the federal statutory corporate tax rate from 35% to 21%, new limitations on executive compensation and the deductibility of interest expense, a one-time tax on mandatory deemed repatriation of non-U.S.

The Tax Act enacted various measures of domestic and international corporate tax reform that were impactful

BrightSphere Investment Group Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2020 and 2019

15) Income Taxes (cont.)

to the Company including reduction of the federal statutory corporate tax rate from 35% to 21%, new limitations on executive compensation and the deductibility of interest expense, a one-time tax on mandatory deemed repatriation of non-U.S.

earnings, and new taxes assessed on foreign earnings.

3 unchanged sentences

Additionally, the Company analyzed the impact of the international corporate tax reform measures which became effective January 1, 2018, including the new taxes on foreign earnings known as the global intangible low-taxed income (“GILTI”).

The Company has elected to treat GILTI taxes as period costs in the accounting and tax periods

BrightSphere Investment Group Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2019 and 2018

14) Income Taxes (cont.)

in which they are incurred.

The Company has recognized tax expense of $ 0.5 million and $ 0.7 million during the year ended December 31, 2019 and 2018, respectively, related to the GILTI tax.

The Company has elected to treat GILTI taxes as period costs in the accounting and tax periods in which they are incurred.

The Company has recognized tax expense of $ 0.8 million, $ 0.5 million and $ 0.7 million during the years ended December 31, 2020, 2019 and 2018, respectively, related to the GILTI tax.

In 2018, the Deferred Tax Asset Deed was terminated resulting in a tax net impact of $ 1.6 million.

In 2017 the deed was revalued due to the enactment of the Tax Act resulting in a tax impact of $ 18.1 million.

On November 16, 2017, the U.K.

Finance (No.2) Bill 2017 (the “Finance Bill”) received Royal Assent and enacted amendments to the hybrid mismatch rules which are effective from July 13, 2017.

Accordingly, the Company’s benefits from its intercompany financing arrangements were reduced as of the effective date.

The Company reduced its liability for uncertain tax positions by $ 40.8 million and $ 47.9 million during the years ended December 31, 2019 and 2018, respectively, as a result of a lapse of statute of limitations.

During 2018, the Company wrote-off its $ 8.6 million deferred tax asset for state net operating loss carryforwards and released the corresponding $ 8.6 million valuation allowance, as management has concluded that the tax benefits associated with the state net operating loss carryforwards will not be recognized.

Due to Pennsylvania legislation enacted during 2017 which limits the Company’s annual usage of net operating losses within the state, the Company recorded an additional $ 3.1 million valuation allowance in 2017 against its state net operating loss carryforwards as management concluded it is unlikely the tax benefits will be realized.

In general, it is the practice and intention of the Company to reinvest earnings of its non-U.S.

18 unchanged sentences

Employee compensation 3.9 4.4

Other 3.3 3.0

Cash flow hedge 5.5 6.2

1 unchanged sentence

Deferred tax liabilities:

Right of use assets 0.8 1.2

Investments 3.0 5.0

Total deferred tax liabilities 3.8 6.2

Net deferred tax assets $ 170.8 $ 243.6

At December 31, 2020, the Company has tax attributes that carry forward for varying periods.

The Company’s federal net operating loss carryforward of $ 4.4 million originated during 2004 and 2006 and will expire over a five to seven -year period.

The Company’s state net operating loss carryforward of $ 0.2 million originated in 2018 and will expire over a five to twenty -year period.

The Company’s federal net operating loss carryforward of $ 4.4 million originated during 2004 and 2006 and will expire over a four to six-year period.

The Company’s state net operating loss carryforward of $ 1.1 million originated in 2018 and 2019 and will expire over a five to twenty-year period.

In evaluating the Company’s ability to recover its deferred tax assets, the Company considers all available positive and negative evidence including the existence of cumulative income in the most recent fiscal years, changes in the business in which the Company operates, and the Company’s ability to forecast future taxable income.

2 unchanged sentences

The Company has three years of cumulative earnings as of December 31, 2020, 2019 and 2018.

As of December 31, 2019 , management believes it is more likely than not that the balance of the deferred tax asset will be realized based on forecasted taxable income.

As of December 31, 2020, management believes it is more likely than not that the balance of the deferred tax assets will be realized based on forecasted taxable income.

BrightSphere Investment Group Inc.

3 unchanged sentences

A reconciliation of the change in gross unrecognized tax benefits for the years ended December 31 is as follows (in millions):

2020 2019 2018

Balance as of January 1 $ 11.3 $ 46.9 $ 88.7

10 unchanged sentences

Examinations are inherently uncertain, may result in payment of additional taxes or the recognition of tax benefits and may be in process for extended periods of time.

At December 31, 2019 , there were two examinations underway and each are in the initial stages of the process.

At December 31, 2020, the Company is subject to examination in two jurisdictions.

The Company and its subsidiaries file tax returns in the U.K., U.S.

federal, state, local and other foreign jurisdictions.

As of December 31, 2019 , the Company is generally no longer subject to income tax examinations by U.K., U.S.

As of December 31, 2020, the Company is generally no longer subject to income tax examinations by U.S.

federal, state, local, or foreign tax authorities for calendar years prior to 2009.

In addition, as of December 31, 2020, the Company is no longer subject to income tax examinations by the U.K.

for calendar years prior to 2017.

BrightSphere Investment Group Inc.

7 unchanged sentences

Management is not aware of any violations of such financial requirements occurring during the period.

The Company entered into a guaranty for an office space security deposit on behalf of an Affiliate in the amount of $ 2.5 million in January 2020.

This represents the maximum potential amount of future (undiscounted) payments that the Company could be required to make under the guaranty in the event of default by the guaranteed party.

This guaranty expires in 2022.

There are no liabilities recorded on the Consolidated Balance Sheet as of December 31, 2020 related to this guaranty.

The Company and its Affiliates are subject to claims, legal proceedings and other contingencies in the ordinary course of their business activities.

28 unchanged sentences

The calculation of basic and diluted earnings per share of common stock for the years ended December 31, 2020, 2019 and 2018 is as follows (dollars in millions, except per share data):

2020 2019 2018

Net income attributable to controlling interests $ 286.7 $ 223.9 $ 136.4

Total income available to participating unvested securities (1)

( 0.1 ) ( 0.1 ) ( 0.4 )

Total net income attributable to common stock $ 286.6 $ 223.8 $ 136.0

2 unchanged sentences

Restricted stock units 60,276 63,540 191,371

Employee stock options 716,149 — —

Weighted-average shares of common stock outstanding—diluted 82,036,203 91,268,952 107,623,192

Earnings per share of common stock attributable to controlling interests:

Basic $ 3.53 $ 2.45 $ 1.27

Diluted $ 3.49 $ 2.45 $ 1.26

(1) Income available to participating unvested securities includes dividends paid on unvested restricted shares and their proportionate share of undistributed earnings.

3 unchanged sentences

17) Earnings Per Share (cont.)

Employee options to purchase 8,970,000 and 6,900,000 shares were not included in the computation of diluted EPS for the year ended December 31, 2019 and 2018 because the assumed proceeds from exercising such options exceed the average price of the common stock for the period and, therefore, the options are deemed antidilutive.

Employee options to purchase 8,970,000 shares were not included in the computation of diluted EPS for the year ended December 31, 2019 because the assumed proceeds from exercising such options exceed the average price of the common stock for the period and, therefore, the options were deemed antidilutive.

Management fees

10 unchanged sentences

In instances where a customer reimburses the Company for a cost paid on the customer’s behalf, the Company is acting as a principal and the reimbursement is accrued on a gross basis at cost as the corresponding reimbursable expenses are incurred.

Revenue from expense reimbursement amounted to $ 4.4 million , $ 8.0 million , and $ 0.0 million for the years ended December 31, 2019 , 2018 and 2017 , respectively, and is recorded in other revenue in the Company’s Consolidated Statements of Operations.

Revenue from expense reimbursements amounted to $ 4.6 million, $ 4.4 million, and $ 8.0 million for the years ended December 31, 2020, 2019 and 2018, respectively, and is recorded in other revenue in the Company’s Consolidated Statements of Operations.

Other revenue may also consist of other miscellaneous revenue, consisting primarily of administration and consulting services.

11 unchanged sentences

Management fee revenue by segment and asset class is comprised of the following for the years ended December 31 (in millions):

2020 2019 2018

Quant & Solutions

Global / non-U.S.

equity $ 346.8 $ 370.8 $ 377.4

Alternatives 170.6 165.0 208.3

Liquid Alpha (1)

Global / non-U.S.

equity 73.0 90.7 112.9

Fixed income 22.1 26.0 26.8

equity 85.4 154.5 179.6

Management fee revenue

$ 697.9 $ 807.0 $ 905.0

(1) In July 2020, the Company completed the sale of Copper Rock.

In November 2020, the Company completed the sale of Barrow Hanley.

See Note 3, Divestitures, for further discussion of divestitures.

The financial results of Copper Rock are included in the Liquid Alpha segment until July 24, 2020, the completion of the sale.

The financial results of Barrow Hanley are included in the Liquid Alpha segment until November 17, 2020, the completion of the sale.

19) Employee Benefits

1 unchanged sentence

In addition to pre-tax contributions made by employees, the Company also makes contributions to the qualified plans annually.

BrightSphere Investment Group Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2020 and 2019

19) Employee Benefits (cont.)

The Company also has non-qualified defined contribution plans covering certain senior employees.

3 unchanged sentences

The compensation deferred is deemed to be invested in one or more investment options available under the plan.

These non-qualified plans are unfunded,

BrightSphere Investment Group Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2019 and 2018

18) Employee Benefits (cont.)

although the Company does make contributions to a Rabbi Trust to hedge its risks in terms of providing returns to employees on their deemed investments held in the plan.

These non-qualified plans are unfunded, although the Company does make contributions to a Rabbi Trust to hedge its risks in terms of providing returns to employees on their deemed investments held in the plan.

As of December 31, 2020 and 2019, a total of $ 72.8 million and $ 88.3 million, respectively, had been recorded as long-term compensation liabilities and a total of $ 73.0 million and $ 88.8 million had been invested under the Deferred Compensation and Voluntary Deferral plans, respectively.

17 unchanged sentences

The following table presents the changes in the share-based payments liability for the years ended December 31 (in millions):

2020 2019 2018

Balance, beginning of period $ 221.8 $ 386.1 $ 188.8

14 unchanged sentences

The following summarizes the grant date fair value of the instruments granted by the Company during the year ended December 31:

2020 2019 2018

BrightSphere Investment Group Inc.

Shares granted

Weighted average fair value

Shares granted

Weighted average fair value

Shares granted

Weighted average fair value

awards Shares granted Weighted average fair value Shares granted Weighted average fair value Shares granted Weighted average fair value

RSAs — $ — 18,000 $ 10.09 304,389 $ 15.84

RSUs 105,678 10.20 88,980 12.40 48,930 14.98

Performance-based RSAs — — — — 83,092 9.78

7 unchanged sentences

The following table summarizes the activity related to restricted stock awards:

2020 2019 2018

BrightSphere Investment Group Inc.

Number of shares

Weighted average grant date fair value per share

Number of shares

Weighted average grant date fair value per share

Number of shares

Weighted average grant date fair value per share

RSAs Number of shares Weighted average grant date fair value per share Number of shares Weighted average grant date fair value per share Number of shares Weighted average grant date fair value per share

Outstanding at beginning of the year

77,217 $ 14.43 325,976 $ 14.83 422,927 $ 14.26

Granted during the year — — 18,000 10.09 304,389 15.84

1 unchanged sentence

Exercised during the year ( 56,760 ) 14.75 ( 219,306 ) 14.45 ( 387,204 ) 15.00

Other transfers

Outstanding at end of the year

14,010 $ 13.26 77,217 $ 14.43 325,976 $ 14.83

The grant date fair value per share, calculated based on the closing price as quoted on the New York Stock Exchange on the measurement date, is used to determine the fair value of restricted stock awards granted to employees.

There were no RSAs granted by the Company during the year ended December 31, 2020.

Restricted stock awards under the plan generally have a vesting period of one to three years .

1 unchanged sentence

The following table summarizes the activity related to restricted stock units:

2020 2019 2018

BrightSphere Investment Group Inc.

Number of shares

Weighted average grant date fair value per share

Number of shares

Weighted average grant date fair value per share

Number of shares

Weighted average grant date fair value per share

RSUs Number of shares Weighted average grant date fair value per share Number of shares Weighted average grant date fair value per share Number of shares Weighted average grant date fair value per share

Outstanding at beginning of the year

62,899 $ 11.79 47,191 $ 14.46 76,223 $ 14.70

Granted during the year 105,678 10.20 88,980 12.40 48,930 14.98

2 unchanged sentences

Outstanding at end of the year

60,364 $ 10.53 62,899 $ 11.79 47,191 $ 14.46

6 unchanged sentences

The following table summarizes the activity related to performance-based restricted stock awards:

2020 2019 2018

BrightSphere Investment Group Inc.

Performance-based RSAs

Number of shares

Weighted average grant date fair value per share

Number of shares

Weighted average grant date fair value per share

Number of shares

Weighted average grant date fair value per share

Performance-based RSAs Number of shares Weighted average grant date fair value per share Number of shares Weighted average grant date fair value per share Number of shares Weighted average grant date fair value per share

Outstanding at beginning of the year

258,678 $ 10.11 258,678 $ 10.11 175,586 $ 10.26

Granted during the year — — — — 83,092 9.78

Forfeited during the year

Exercised during the year

Other movements ( 175,586 ) 10.26 — — — —

Outstanding at end of the year

There were no Performance-based RSAs granted by the Company during the year ended December 31, 2019 .

83,092 $ 9.78 258,678 $ 10.11 258,678 $ 10.11

Other movements includes performance-based RSAs that did not meet the market vesting condition and vested at 0 % during the year ended December 31, 2020.

There were no performance-based RSAs granted by the Company during the year ended December 31, 2020 and December 31, 2019.

The Performance-based RSAs granted in 2018 by the Company have a market vesting condition;

therefore a Monte-Carlo simulation model has been used to determine the fair value of the restricted units granted to employees.

Significant assumptions utilized in the Monte-Carlo simulation model include assumed reinvestment of dividends, the risk-free interest rate of 2.39 %, and expected volatility of 26.57 %, which is based on an average volatility of the Company’s peer group.

Performance-based RSAs under the plan have a vesting period of three years .

BrightSphere Investment Group Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2020 and 2019

20) Equity-based Compensation (cont.)

Grants of Performance-based restricted stock units in BrightSphere Investment Group Inc.

The following table summarizes the activity related to performance-based restricted stock units:

2020 2019 2018

BrightSphere Investment Group Inc.

Performance-based RSUs

Number of shares

Weighted average grant date fair value per share

Number of shares

Weighted average grant date fair value per share

Number of shares

Weighted average grant date fair value per share

Performance-based RSUs Number of shares Weighted average grant date fair value per share Number of shares Weighted average grant date fair value per share Number of shares Weighted average grant date fair value per share

Outstanding at beginning of the year

9,013 $ 14.62 189,335 $ 10.92 640,992 $ 20.59

Granted during the year — — 9,013 14.62 — —

Forfeited during the year

Exercised during the year — — ( 193,125 ) 10.98 ( 532,956 ) 23.21

1 unchanged sentence

Outstanding at end of the year 9,013 $ 14.62 9,013 $ 14.62 189,335 $ 10.92

The Performance-based RSUs granted by the Company have a market vesting condition;

therefore a Monte-Carlo simulation model was used to determine the fair value of the restricted units granted to employees.

Significant assumptions utilized in the Monte-Carlo simulation model include assumed reinvestment of dividends, a risk-free interest rate of 2.48 % , and an expected volatility of 26.11 % , which is based on an average volatility of the Company’s peer group.

There were no performance-based RSUs granted by the Company during the year ended December 31, 2020 and December 31, 2018.

The Performance-based RSUs granted in 2019 by the Company have a market vesting condition;

therefore a Monte-Carlo simulation model has been used to determine the fair value of the restricted units granted to employees.

Significant assumptions utilized in the Monte-Carlo simulation model include assumed reinvestment of dividends, the risk-free interest rate of 2.48 %, and expected volatility of 26.11 %, which is based on an average volatility of the Company’s peer group.

Performance-based RSUs under the plan have a vesting period of three years .

Grants of Stock Options in BrightSphere Investment Group Inc.

The following tables summarizes the activity related to the Company’s stock option awards:

Stock Options Weighted average exercise price Weighted average remaining contractual term (in years) Aggregate intrinsic value

Outstanding at beginning of the year 8,970,000 $ 12.00 4.0

Granted during the year

2,820,000 10.37 4.8

Forfeited during the year

( 4,396,000 ) 12.00

Exercised during the year

( 19,000 ) 12.00

Outstanding at end of the year

7,375,000 11.38 3.4 $ 58,290,000

Exercisable at end of the year

4,288,000 $ 11.73 3.2 $ 32,366,640

BrightSphere Investment Group Inc.

2 unchanged sentences

20) Equity-based Compensation (cont.)

Grants of Stock Options in BrightSphere Investment Group Inc.

The following table summarizes the activity related to the Company’s stock option awards:

Stock Options

Weighted average exercise price

Weighted average remaining contractual term (in years)

Aggregate intrinsic value

Stock Options

Weighted average exercise price

Weighted average remaining contractual term (in years)

Aggregate intrinsic value

Stock Options Weighted average exercise price Weighted average remaining contractual term (in years) Aggregate intrinsic value

Outstanding at beginning of the year

6,900,000 $ 12.00 5.0

Granted during the year

2,070,000 12.00 5.0

Forfeited during the year

1 unchanged sentence

Outstanding at end of the year

8,970,000 $ 12.00 4.0 $ —

Exercisable at end of the year

The Company granted stock options with a fair value of $ 5.1 million and $ 11.7 million during the years ended December 31, 2019 and 2018 , respectively.

The total fair value of options vested during the years ended December 31, 2019 and 2018 was $ 4.3 million and $ 2.3 million , respectively.

3,174,000 $ 12.00 4.0 $ —

Stock Options Weighted average exercise price Weighted average remaining contractual term (in years) Aggregate intrinsic value

Outstanding at beginning of the year

Granted during the year

6,900,000 12.00 5.0

Forfeited during the year

Exercised during the year

Outstanding at end of the year

6,900,000 $ 12.00 5.0 $ —

Exercisable at end of the year

1,380,000 $ 12.00 5.0 $ —

The Company granted stock options with a fair value of $ 1.8 million, $ 5.1 million and $ 11.7 million during the years ended December 31, 2020, 2019 and 2018, respectively.

The total fair value of options vested during the years ended December 31, 2020, 2019 and 2018 was $ 1.5 million, $ 4.3 million and $ 2.3 million, respectively.

The Company received $ 0.2 million related to the exercise of options for the year ended December 31, 2020.

Shares issued upon exercise of the options represent newly issued shares.

The fair value of the stock options grant was estimated on the grant date using a Monte-Carlo simulation valuation model.

The weighted average fair value of stock options granted during the years ended December 31, 2020, 2019 and 2018 was $ 0.65 , $ 2.48 and $ 1.69 per option, respectively, based on the grant date assumptions stated below.

BrightSphere Investment Group Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2020 and 2019

20) Equity-based Compensation (cont.)

2020 2019 2018

Weighted-average grant date fair value per option $ 0.65 $ 2.48 $ 1.69

Dividend yield (1)

3.9 % to 7.4 %

Expected volatility (2)

29.7 % to 41.3 %

28.4 % 28.3 %

Risk-free interest rate (3)

1.4 % to 0.3 %

Expected life of options (4)

BrightSphere Investment Group Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2019 and 2018

19) Equity-based Compensation (cont.)

4.7 to 5.0 years

5.0 years 5.0 years

(1) Dividend yield assumption represents the Company’s expected dividend yield based on its historical dividend payouts and the stock price at the date of grant.

3 unchanged sentences

(4) Expected life of options is based on the contractual term and the expected exercise behavior

OM plc equity compensation plans

OM plc maintained various equity-based compensation arrangements, including stock options and restricted stock awards, in which the Company’s employees participated in the periods presented.

The cost of these equity-based programs is not material, and has been included in the Company’s financial results where applicable.

The following table summarizes the activity related to the various equity compensation arrangements maintained by OM plc in which the Company’s employees participated.

Weighted average grant date fair value per share GBP

Weighted average grant date fair value per share USD

Weighted average grant date fair value per share GBP

Weighted average grant date fair value per share USD

Weighted average grant date fair value per share GBP

Weighted average grant date fair value per share USD

Outstanding at the beginning of the year

Granted during the year

Forfeited during the year

Exercised during the year

Other transfers

Outstanding at the end of the year

BrightSphere Investment Group Inc.

3 unchanged sentences

The components of accumulated other comprehensive income (loss) for the years ended December 31, 2020, 2019 and 2018 were as follows (in millions):

Foreign currency translation adjustment

Valuation and amortization of derivative securities

Foreign currency translation adjustment Valuation and amortization of derivative securities Total

Balance, as of December 31, 2017 $ 3.5 $ ( 25.1 ) $ ( 21.6 )

1 unchanged sentence

Amortization related to derivatives securities, before tax

Tax impact — ( 0.4 ) ( 0.4 )

Other comprehensive income ( 1.7 ) 2.4 0.7

2 unchanged sentences

Amortization related to derivatives securities, before tax

Tax impact — ( 0.6 ) ( 0.6 )

Other comprehensive income (loss) 1.0 2.4 3.4

2 unchanged sentences

Amortization related to derivatives securities, before tax

Tax impact — ( 0.8 ) ( 0.8 )

Other comprehensive income 1.6 2.3 3.9

1 unchanged sentence

The Company reclassified $ 3.1 million, $ 3.0 million, and $ 2.8 million from accumulated other comprehensive income (loss) to interest expense on the Consolidated Statements of Operations for the twelve months ended December 31, 2020, 2019 and 2018 respectively.

21) Non-controlling interests

Non-controlling interests on the Consolidated Balance Sheets include capital and undistributed profits of certain entities that are consolidated, but not 100% owned, which amounted to $ 1.3 million at December 31, 2019 and $ 1.6 million at December 31, 2018 .

BrightSphere Investment Group Inc.

Notes to Consolidated Financial Statements (Continued)

Notes to Consolidated Financial Statements

December 31, 2020 and 2019

21) Non-controlling Interests (cont.)

22) Non-controlling Interests

Non-controlling interests on the Consolidated Balance Sheets include capital and undistributed profits of certain entities that are consolidated, but not 100% owned, which amounted to $ 1.7 million at December 31, 2020 and $ 1.3 million at December 31, 2019.

Non-controlling interests in consolidated Funds

16 unchanged sentences

During the next twelve months the Company expects to reclassify approximately $ 3.3 million to interest expense.

BrightSphere Investment Group Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2020 and 2019

23) Derivatives and Hedging (cont.)

Derivatives of consolidated Funds

7 unchanged sentences

The Funds manage the risks associated with derivatives on an aggregate basis, along with the risks associated with its trading and as part of its overall risk management policies.

BrightSphere Investment Group Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2019 and 2018

24) Segment Information

Change in Segments

During the third quarter of 2019, the Company realigned the information that the Chief Operating Decision Maker (“CODM”) regularly reviews to evaluate performance for operating decision-making purposes, including performance assessment and allocation of resources.

As a result of this change in segment reporting (see Note 1), the Company retrospectively revised prior period results, by segment, to conform to the current period presentation.

This structure includes three reportable segments:

Quant & Solutions, Alternatives, and Liquid Alpha.

The structure is based on the Company’s various investment strategies.

As a result of the change noted above, effective for the quarter ended September 30, 2019, the Company began reporting the following business segments:

The Company has the following business segments:

• Quant & Solutions —comprised of versatile, often highly-tailored strategies that leverage data and technology in a computational, factor based investment process across a range of asset classes and geographies, including Global, non-U.S., and emerging markets equities, as well as multi-asset and managed volatility products.

Liquid Alpha —comprised of specialized investment strategies with a focus on alpha-generation across market cycles in long-only small-, mid-, and large-cap U.S., global, non-U.S.

and emerging markets equities, as well as fixed income.

• Liquid Alpha (1) —comprised of specialized investment strategies with a focus on alpha-generation across market cycles in long-only small-, mid-, and large-cap U.S.

equities, as well as fixed income.

(1) In July 2020, the Company completed the sale of Copper Rock, and in November 2020, the Company completed the sale of Barrow Hanley.

See Note 3, Divestitures, for further discussion of divestitures.

The financial results of Copper Rock are included in the Liquid Alpha segment until July 24, 2020, the completion of the sale.

The financial results of Barrow Hanley are included in the Liquid Alpha segment until November 17, 2020, the completion of the sale.

The Company has a corporate head office that is included in “Other”.

The corporate head office supports the segments by providing infrastructure and administrative support in the areas of accounting/finance, operations, information technology, strategy and relationship management, legal, compliance and human resources.

The corporate head office expenses are not allocated to the Company’s three business segments but the CODM does consider the cost structure of the corporate head office when evaluating the financial performance of the segments.

The corporate head office supports the segments by providing infrastructure and administrative support in the areas of accounting/finance, information technology, legal, compliance and human resources.

The corporate head office expenses are not allocated to the Company’s three business segments but the Chief Operating Decision Maker (“CODM”) does consider the cost structure of the corporate head office when evaluating the financial performance of the segments.

BrightSphere Investment Group Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2020 and 2019

24) Segment Information (cont.)

Performance Measure

8 unchanged sentences

ENI revenue includes management fees, performance fees and other revenue under U.S.

GAAP, adjusted to include management fees paid to Affiliates by consolidated Funds and the Company’s share of earnings from equity-accounted Affiliates.

GAAP, adjusted to include management fees paid to Affiliates by consolidated Funds and the Company’s share of earnings from its equity-accounted Affiliate.

ENI revenue is also adjusted to exclude the separate revenues recorded under U.S.

GAAP for certain Fund expenses reimbursed to our Affiliates.

BrightSphere Investment Group Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2019 and 2018

23) Segment Information (cont.)

ENI operating expenses include compensation and benefits, general and administrative expense, and depreciation and amortization under U.S.

GAAP, adjusted to exclude non-cash expenses representing changes in the value of Affiliate equity and profit interests held by Affiliate key employees, non-cash amortization of acquisition-related contingent consideration, as well as the value of employee equity owned pre-acquisition that occurred as a result of the Landmark transaction, goodwill impairment and amortization of acquired intangible assets, capital transaction costs, restructuring costs, the impact of a one-time compensation arrangement entered into that includes advances against future compensation payments, and the separate expenses recorded under U.S.

GAAP for certain Fund expenses reimbursed to Affiliates.

1 unchanged sentence

ENI segment results are also adjusted to exclude the portion of consolidated Fund revenues, expenses and investment return recorded under U.S.

BrightSphere Investment Group Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2020 and 2019

24) Segment Information (cont.)

Segment Presentation

1 unchanged sentence

GAAP net income (loss) for the year ended December 31, 2020 (in millions):

Quant & Solutions

Alter-natives

Reconciling Adjustments

ENI operating expenses

Quant & Solutions Alter-natives Liquid Alpha Other Reconciling Adjustments Total U.S.

ENI revenue $ 354.8 $ 172.8 $ 183.3 $ 0.4 $ 7.2 (a) $ 718.5

ENI operating expenses 149.0 64.6 63.5 24.4 15.4 (b) 316.9

Earnings before variable compensation 205.8 108.2 119.8 ( 24.0 ) ( 8.2 ) 401.6

Variable compensation

Variable compensation 72.8 39.2 44.0 3.6 21.1 (c) 180.7

ENI operating earnings (after variable comp) 133.0 69.0 75.8 ( 27.6 ) ( 29.3 ) 220.9

1 unchanged sentence

Earnings after Affiliate key employee distributions 128.7 43.9 63.7 ( 27.6 ) ( 29.3 ) 179.4

Net interest income (expense)

Net investment income

Net income attributable to non-controlling interests in consolidated Funds

Income tax (expense) benefit

Net interest income (expense) — — — ( 21.6 ) ( 6.3 ) (d) ( 27.9 )

Net investment income — — — — 34.8 (e) 34.8

Gain on sale of Affiliates — — — — 241.3 (e) 241.3

Net income attributable to non-controlling interests in consolidated Funds — — — — ( 28.8 ) (e) ( 28.8 )

Income tax (expense) benefit — — — ( 43.5 ) ( 68.6 ) (f) ( 112.1 )

Economic net income $ 128.7 $ 43.9 $ 63.7 $ ( 92.7 ) $ 143.1 $ 286.7

4 unchanged sentences

The following table presents the financial data for the Company’s three segments for the year ended December 31, 2019 (in millions):

Quant & Solutions

Alter-natives

Reconciling Adjustments

ENI operating expenses

Quant & Solutions Alter-natives Liquid Alpha Other Reconciling Adjustments Total U.S.

ENI revenue $ 380.6 $ 166.5 $ 263.8 $ 0.4 $ 8.2 (a) $ 819.5

ENI operating expenses 160.6 66.9 78.8 35.4 ( 17.0 ) (b) 324.7

Earnings before variable compensation

Variable compensation

220.0 99.6 185.0 ( 35.0 ) 25.2 494.8

Variable compensation 75.6 36.7 62.4 10.0 14.7 (c) 199.4

ENI operating earnings (after variable comp)

144.4 62.9 122.6 ( 45.0 ) 10.5 295.4

Affiliate key employee distributions

6.4 23.0 23.7 — ( 8.0 ) (g) 45.1

Earnings after Affiliate key employee distributions

Net interest income (expense)

Net investment income

138.0 39.9 98.9 ( 45.0 ) 18.5 250.3

Net interest income (expense) — — — ( 21.0 ) ( 9.0 ) (d) ( 30.0 )

Net investment income — — — — 37.7 (e) 37.7

Net income attributable to non-controlling interests in consolidated Funds

Revaluation of DTA deed

Income tax (expense) benefit

Gain (loss) on disposal of discontinued operations, net of tax

— — — — ( 16.1 ) (e) ( 16.1 )

Income tax (expense) benefit — — — ( 50.0 ) 32.0 (f) ( 18.0 )

Economic net income

$ 138.0 $ 39.9 $ 98.9 $ ( 116.0 ) $ 63.1 $ 223.9

BrightSphere Investment Group Inc.

3 unchanged sentences

The following table presents the financial data for the Company’s three segments for the year ended December 31, 2018 (in millions):

Quant & Solutions

Alter-natives

Reconciling Adjustments

ENI operating expenses

Quant & Solutions Alter-natives Liquid Alpha Other Reconciling Adjustments Total U.S.

ENI revenue $ 389.0 $ 218.1 $ 311.6 $ 0.4 $ 9.1 (a) $ 928.2

ENI operating expenses 146.3 61.8 84.5 43.1 196.2 (b) 531.9

Earnings before variable compensation

Variable compensation

242.7 156.3 227.1 ( 42.7 ) ( 187.1 ) 396.3

Variable compensation 86.2 58.9 73.9 11.7 5.2 (c) 235.9

ENI operating earnings (after variable comp)

156.5 97.4 153.2 ( 54.4 ) ( 192.3 ) 160.4

Affiliate key employee distributions

9.5 34.1 33.0 — — 76.6

Earnings after Affiliate key employee distributions

Net interest income (expense)

Net investment income

147.0 63.3 120.2 ( 54.4 ) ( 192.3 ) 83.8

Net interest income (expense) — — — ( 13.6 ) ( 8.1 ) (d) ( 21.7 )

Net investment income — — — — 53.1 (e) 53.1

Net income attributable to non-controlling interests in consolidated Funds

— — — — 6.1 (e) 6.1

Revaluation of DTA deed

Income tax (expense) benefit

— — — — 20.0 (h) 20.0

Income tax (expense) benefit — — — ( 62.7 ) 57.7 (f) ( 5.0 )

Gain (loss) on disposal of discontinued operations, net of tax

— — — — 0.1 (e) 0.1

Economic net income

GAAP equivalent of ENI revenue is U.S.

$ 147.0 $ 63.3 $ 120.2 $ ( 130.7 ) $ ( 63.4 ) $ 136.4

(1) The most directly comparable U.S.

GAAP measure of ENI revenue is U.S.

GAAP revenue.

GAAP equivalent of ENI operating expenses is U.S.

The most directly comparable U.S.

GAAP measure of ENI operating expenses is U.S.

GAAP operating expenses, which is comprised of ENI operating expenses, variable compensation and Affiliate key employee distributions above.

GAAP equivalent of earnings after Affiliate key employee distributions is U.S.

The most directly comparable U.S.

GAAP measure of earnings after Affiliate key employee distributions is U.S.

GAAP operating income.

GAAP equivalent of Economic Net Income is U.S.

The most directly comparable U.S.

GAAP measure of ENI is U.S.

GAAP net income attributable to controlling interests.

Reconciling Adjustments:

Adjusted to exclude earnings from equity-accounted Affiliates, which are included in U.S.

(a) Adjusted to exclude earnings from equity-accounted Affiliate, which are included in U.S.

GAAP investment income, and to include consolidated Funds revenues and the separate revenues recorded for certain Fund expenses reimbursed by customers, which are included in U.S.

GAAP revenue.

Adjusted to include non-cash amortization expense for acquisition-related consideration and pre-acquisition employee equity, non-cash expenses for key employee equity and profit interest revaluations, capital transaction costs, amortization of acquired intangible assets, restructuring costs, consolidated Funds’ operating expenses and the Fund expenses reimbursed by customers, each of which are included in U.S.

(b) Adjusted to include non-cash amortization expense for acquisition-related consideration and pre-acquisition employee equity, non-cash expenses for key employee equity and profit interest revaluations, capital transaction costs, goodwill impairment and amortization of acquired intangible assets, restructuring costs, consolidated Funds’ operating expenses and the Fund expenses reimbursed by customers, each of which are included in U.S.

GAAP operating expenses.

Adjusted to include restructuring costs, which are included in U.S.

(c) Adjusted to include restructuring costs and the impact of a one-time compensation arrangement entered into during the first quarter of 2020 that includes advances against future compensation payments, which are included in U.S.

GAAP compensation expense.

Also adjusted to include variable compensation related to restructuring at an Affiliate that will be reimbursed through a reduction of Affiliate key employee distributions.

BrightSphere Investment Group Inc.

2 unchanged sentences

24) Segment Information (cont.)

Adjusted to exclude the amount of variable compensation related to restructuring at an Affiliate, which will be reimbursed through Affiliate key employee distributions.

Adjusted to include the cost of seed financing, which is included in U.S.

(d) Adjusted to include the cost of seed financing and amortization of debt issuance costs, which is included in U.S.

GAAP interest expense.

Adjusted to include net investment income (loss), net income (loss) attributable to non-controlling interests in consolidated Funds, and the gain on disposal of discontinued operations, all of which are included in U.S.

(e) Adjusted to include net investment income (loss), net income (loss) attributable to non-controlling interests in consolidated Funds, and the gain on sale of Affiliates, all of which are included in U.S.

GAAP net income attributable to controlling interests.

Adjusted to exclude the revaluation gain associated with the settlement of the DTA Deed with OM plc , which is included in U.S.

GAAP non-operating income.

Adjusted to include the impact of deferred taxes resulting from changes in tax law and the amortization of goodwill and acquired intangibles.

(f) Adjusted to include the impact of deferred tax attributable to the amortization of goodwill and acquired intangibles.

Also adjusted to include tax expense or benefits relating to uncertain tax positions, the tax impact of certain ENI adjustments and other unusual items that are not included in current operating results for ENI purposes.

Manageme nt fee revenue by principal geographic area is comprised of the following for the years ended December 31, 2019 , 2018 and 2017 (in millions):

(g) Adjusted to exclude the amount of variable compensation related to restructuring at an Affiliate, which will be reimbursed through Affiliate key employee distributions.

(h) Adjusted to exclude the revaluation gain associated with the settlement of the DTA Deed with OM plc, which is included in U.S.

GAAP non-operating income.

Management fee revenue by principal geographic area is comprised of the following for the years ended December 31, 2020, 2019 and 2018 (in millions):

Years ended December 31,

2020 2019 2018

$ 526.3 $ 607.0 $ 687.6

171.6 200.0 217.4

Management fee revenue

$ 697.9 $ 807.0 $ 905.0

BrightSphere Investment Group Inc.

3 unchanged sentences

The following is a summary of the quarterly results of operations of the Company for the years ended December 31, 2020 and 2019 ($ in millions, unless otherwise noted):

First Quarter

Second Quarter

Third Quarter

Fourth Quarter

First Quarter Second Quarter Third Quarter Fourth Quarter

Revenue $ 182.6 $ 174.7 $ 182.4 $ 178.8

Operating income 74.1 26.2 40.5 38.6

Income from continuing operations before income taxes

35.7 61.2 46.8 283.9

Net income 22.1 53.9 34.0 205.5

Net income attributable to controlling interests

32.6 18.9 37.2 198.0

Basic earnings per share ($) $ 0.38 $ 0.23 $ 0.46 $ 2.49

2 unchanged sentences

Diluted shares outstanding (in millions) 85.1 80.4 80.9 81.8

First Quarter

Second Quarter

Third Quarter

Fourth Quarter

First Quarter Second Quarter Third Quarter Fourth Quarter

Revenue $ 207.2 $ 207.1 $ 197.8 $ 207.4

Operating income 68.0 46.6 51.9 83.8

Income from continuing operations before income taxes

82.7 35.7 51.0 88.6

Net income (loss) 61.1 21.6 83.0 74.3

Net income (loss) attributable to controlling interests

52.7 28.0 75.4 67.8

Basic earnings (loss) per share ($) $ 0.54 $ 0.31 $ 0.84 $ 0.79

2 unchanged sentences

Diluted shares outstanding (in millions) 97.8 91.5 90.0 85.9

BrightSphere Investment Group Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2020 and 2019

26) Subsequent Events

Sale of Investment Counselors of Maryland

On February 6, 2021 the Company entered into a definitive agreement to sell all of the Company’s interests in Investment Counselors of Maryland (“ICM”), an equity-accounted Affiliate within the Liquid Alpha segment in exchange for approximately $ 19 million of cash consideration, subject to certain customary closing and post-closing adjustments.

As of December 31, 2020 the carrying value of the Company’s investment was $ 2.0 million.

ICM comprised $ 2.9 million of the Company’s net income attributable to controlling interests of $ 286.7 million for the year ended December 31, 2020.

The transaction is expected to close during second quarter of 2021.

Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data