What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2021-05-07 compared with 2020-11-06 · 271 added, 517 removed, 545 unchanged (59% of the section changed)

3 unchanged sentences

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

September 30,

2021 December 31,

Cash and cash equivalents $ 450.5 $ 391.3

Restricted cash 1.6 1.6

Investment advisory fees receivable 120.7 112.6

9 unchanged sentences

Affiliate assets held for sale 241.6 249.7

Assets of consolidated Funds:

Cash and cash equivalents, restricted 1.1 9.7

Investments (includes balances reported at fair value of $ 0.0 and $ 119.5 )

Other assets — 4.9

Assets of consolidated Funds held for sale:

Consolidated Funds’ assets held for sale 130.9 114.3

8 unchanged sentences

Other liabilities 1.3 1.5

Non-recourse borrowings — 35.0

Third party borrowings 475.5 394.3

1 unchanged sentence

Affiliate liabilities held for sale 224.3 226.9

Liabilities of consolidated Funds:

Accounts payable and accrued expenses — 5.2

Securities sold, not yet purchased, at fair value — 0.9

Other liabilities — 0.1

Consolidated Funds’ liabilities held for sale 0.1 —

Total liabilities 1,006.9 994.8

Commitments and contingencies

Redeemable non-controlling interests in consolidated Funds 85.6 83.9

Common stock (par value $ 0.001 ;

5 unchanged sentences

Non-controlling interests in consolidated Funds 93.7 80.3

Total equity and redeemable non-controlling interests in consolidated Funds 271.4 198.4

Total equity and non-controlling interests in consolidated Funds 430.0 384.4

Total liabilities and equity $ 1,436.9 $ 1,379.2

4 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

2020 2019 2020 2019

Management fees $ 125.3 $ 142.6

7 unchanged sentences

Impairment of goodwill — 16.4

Amortization of acquired intangibles 1.6 1.6 5.1 4.9

Depreciation and amortization 5.6 5.1

Consolidated Funds’ expense — 0.2 0.2 0.4

Total operating expenses 94.1 95.2

4 unchanged sentences

Interest expense ( 6.2 ) ( 7.8 )

Gain on sale of Affiliate 7.2 — 7.2 —

Net consolidated Funds’ investment gains 2.1 4.7 20.5 13.8

Loss on sale of subsidiary ( 1.3 ) —

Net consolidated Funds’ investment gains (losses) — ( 17.2 )

Total non-operating income (loss) ( 4.9 ) ( 38.4 )

Income from continuing operations before taxes 32.2 13.1

Income tax expense (benefit) 12.8 ( 32.0 ) 33.7 3.7

Income tax expense 10.3 6.4

Income from continuing operations 21.9 6.7

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

Income from discontinued operations, net of tax 18.5 15.4

Net income 40.4 22.1

4 unchanged sentences

Continuing operations earnings per share (basic) attributable to controlling interests

0.46 0.84 1.08 1.68

Continuing operations earnings per share (diluted) attributable to controlling interests

0.46 0.84 1.08 1.68

Weighted average common stock outstanding 79.3 85.1

5 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

2020 2019 2020 2019

Net income $ 40.4 $ 22.1

1 unchanged sentence

Amortization related to derivative securities, net of tax

0.6 0.6 1.7 1.8

Foreign currency translation adjustment 1.1 ( 2.1 )

5 unchanged sentences

Condensed Consolidated Statements of Changes in Stockholders’ Equity

For the three months ended September 30, 2020 and 2019

($ in millions except share data, unaudited)

(millions) Common stock,

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

comprehensive

income (loss) Total

stockholders’

interests Non-controlling

equity Redeemable non-controlling interests in consolidated

Funds Total equity and

non-controlling

June 30, 2019 91.6 $ 0.1 $ 585.2 $ ( 578.2 ) $ ( 19.8 ) ( 12.7 ) $ 1.8 $ 32.7 $ 21.8 $ 81.8 $ 103.6

Repurchase of common stock ( 2.8 ) — ( 25.5 ) — — ( 25.5 ) — — ( 25.5 ) — ( 25.5 )

Capital contributions (redemptions) — — — — — — — 0.9 0.9 ( 1.0 ) ( 0.1 )

Equity-based compensation — — 0.7 — — 0.7 — — 0.7 — 0.7

Foreign currency translation adjustment

— — — — ( 0.8 ) ( 0.8 ) — — ( 0.8 ) — ( 0.8 )

Amortization related to derivatives securities, net of tax

— — — — 0.6 0.6 — — 0.6 — 0.6

Other changes in non-controlling interests — — — — — — 0.1 — 0.1 — 0.1

Dividends ($ 0.10 per share)

— — — ( 8.9 ) — ( 8.9 ) — — ( 8.9 ) — ( 8.9 )

Net income — — — 75.4 — 75.4 — 6.5 81.9 1.1 83.0

September 30, 2019 88.8 $ 0.1 $ 560.4 $ ( 511.7 ) $ ( 20.0 ) $ 28.8 $ 1.9 $ 40.1 $ 70.8 $ 81.9 $ 152.7

June 30, 2020 80.1 $ 0.1 $ 500.6 $ ( 410.1 ) $ ( 18.2 ) $ 72.4 $ 1.4 $ 78.8 $ 152.6 $ 79.9 $ 232.5

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

Repurchase of common stock — — — — — — — — — — —

Capital contributions — — — — — — — 0.3 0.3 129.7 130.0

Equity-based compensation — — 0.4 — — 0.4 — — 0.4 — 0.4

Foreign currency translation adjustment — — — — 1.4 1.4 — — 1.4 — 1.4

Amortization related to derivative securities, net of tax

— — — — 0.6 0.6 — — 0.6 — 0.6

Other changes in non-controlling interests

— — — — — — — — — — —

Net de-consolidation of Funds — — — — — — — — ( 126.8 ) ( 126.8 )

Dividends ($ 0.01 per share)

— — — ( 0.8 ) — ( 0.8 ) — — ( 0.8 ) — ( 0.8 )

Net income — — — 37.2 — 37.2 — ( 6.1 ) 31.1 2.8 33.9

September 30, 2020 80.1 $ 0.1 $ 501.2 $ ( 373.7 ) $ ( 16.2 ) $ 111.4 $ 1.4 $ 73.0 $ 185.8 $ 85.6 $ 271.4

See Notes to Condensed Consolidated Financial Statements

BrightSphere Investment Group Inc.

Condensed Consolidated Statements of Changes in Stockholders’ Equity

For the nine months ended September 30, 2020 and 2019

For the three months ended March 31, 2021 and 2020

($ in millions except share data, unaudited)

9 unchanged sentences

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 0.2 — — — — — — — — — —

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

Repurchase of common stock ( 3.2 ) — ( 19.2 ) — — ( 19.2 ) — — ( 19.2 ) — ( 19.2 )

5 unchanged sentences

— — — — 0.5 0.5 — — 0.5 — 0.5

Other changes in non-controlling interests

— — — — — — 0.3 — 0.3 — 0.3

Dividends ($ 0.10 per share)

— — — ( 8.4 ) — ( 8.4 ) — — ( 8.4 ) — ( 8.4 )

Net income — — — 156.1 — 156.1 — 5.9 162.0 3.7 165.7

September 30, 2019 88.8 $ 0.1 $ 560.4 $ ( 511.7 ) $ ( 20.0 ) $ 28.8 $ 1.9 $ 40.1 $ 70.8 $ 81.9 $ 152.7

Net income (loss) — — — 32.6 — 32.6 — 0.1 32.7 ( 10.6 ) 22.1

March 31, 2020 82.5 $ 0.1 $ 516.2 $ ( 428.3 ) $ ( 19.1 ) $ 68.9 $ 1.3 $ 49.1 $ 119.3 $ 74.5 $ 193.8

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

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

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

Repurchase of common stock ( 5.7 ) — ( 35.3 ) — — ( 35.3 ) — — ( 35.3 ) — ( 35.3 )

Capital contributions — — — — — — 3.8 — 3.8 — 3.8

6 unchanged sentences

— — — — — — 0.1 — 0.1 — 0.1

Net de-consolidation of Funds — — — — — — — — — ( 126.8 ) ( 126.8 )

Dividends ($ 0.01 per share)

1 unchanged sentence

Net income (loss) — — — 27.0 — 27.0 — 13.4 40.4 — 40.4

September 30, 2020 80.1 $ 0.1 $ 501.2 $ ( 373.7 ) $ ( 16.2 ) $ 111.4 $ 1.4 $ 73.0 $ 185.8 $ 85.6 $ 271.4

March 31, 2021 79.4 $ 0.1 $ 492.8 $ ( 150.3 ) $ ( 11.9 ) $ 330.7 $ 5.6 $ 93.7 $ 430.0 $ — $ 430.0

See Notes to Condensed Consolidated Financial Statements

2 unchanged sentences

(in millions, unaudited)

Nine Months Ended

September 30,

Three Months Ended

Cash flows from operating activities:

Net income $ 40.4 $ 22.1

Net income attributable to non-controlling interests in consolidated Funds ( 21.3 ) ( 9.6 )

Income from discontinued operations, net of tax ( 18.5 ) ( 15.4 )

Net (income) loss attributable to non-controlling interests in consolidated Funds from continuing operations — 10.6

Adjustments to reconcile net income to net cash flows from operating activities from continuing operations:

Impairment of goodwill — 16.4

Amortization of acquired intangibles 5.1 4.9

(Gain) on sale of Affiliate ( 7.2 ) —

Loss on sale of subsidiary 1.3 —

Depreciation and other amortization 5.6 5.1

3 unchanged sentences

Distributions received from equity method Affiliate 1.1 0.2

Distributions from discontinued operations 12.2 11.4

Deferred income taxes 2.3 22.7

1 unchanged sentence

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

Decrease in investment advisory fees receivable 26.2 12.2

Increase in other receivables, prepayments, deposits and other assets ( 2.6 ) ( 8.8 )

(Increase) decrease in investment advisory fees receivable ( 8.1 ) 17.1

(Increase) decrease in other receivables, prepayments, deposits and other assets 10.9 ( 17.8 )

Decrease in accrued incentive compensation, operating lease liabilities and other liabilities ( 58.3 ) ( 77.4 )

1 unchanged sentence

Net cash flows from operating activities of continuing operations, excluding consolidated Funds ( 20.2 ) ( 27.3 )

Net income attributable to non-controlling interests in consolidated Funds 21.3 9.6

Adjustments to reconcile net income (loss) attributable to non-controlling interests in consolidated Funds to net cash flows from operating activities from continuing operations of consolidated Funds:

Net income (loss) attributable to non-controlling interests in consolidated Funds from continuing operations — ( 10.6 )

Adjustments to reconcile net income (loss) attributable to non-controlling interests of consolidated Funds to net cash flows from operating activities from continuing operations of consolidated Funds:

Losses on other investments — 12.0

1 unchanged sentence

Sale of investments — 22.0

Earnings from equity method investees ( 28.1 ) ( 11.2 )

(Increase) decrease in receivables and other assets — ( 4.4 )

Increase (decrease) in accounts payable and other liabilities 3.0 ( 4.0 )

Increase in accounts payable and other liabilities — 1.6

Net cash flows from operating activities of continuing operations of consolidated Funds — ( 4.5 )

3 unchanged sentences

Cash flows from investing activities:

Additions of fixed assets ( 22.5 ) ( 26.7 )

Additions of fixed assets, excluding discontinued operations ( 3.5 ) ( 6.0 )

Purchase of investment securities ( 2.7 ) ( 4.8 )

Sale of investment securities 7.2 12.2

Cash flows from investing activities of consolidated Funds

Contributions in equity method investees ( 1.9 ) ( 8.0 )

Distributions received from equity method investees 1.3 3.8

Deconsolidation of Funds ( 86.0 ) —

Net cash flows from investing activities of continuing operations 1.0 1.4

5 unchanged sentences

(in millions, unaudited)

Nine Months Ended

September 30,

Three Months Ended

Cash flows from financing activities:

2 unchanged sentences

Payment for debt issuance costs ( 0.4 ) —

Payment to OM plc for DTA Deed — ( 32.7 )

Payment to OM plc for co-investment redemptions ( 1.3 ) —

3 unchanged sentences

Cash flows from financing activities of consolidated Funds

Non-controlling interest capital raised 1.9 8.0

Non-controlling interest capital redeemed ( 0.4 ) ( 3.1 )

Redeemable non-controlling interest capital raised — 1.1

Redeemable non-controlling interest capital redeemed ( 1.1 ) ( 1.7 )

Net cash flows from financing activities of continuing operations 78.4 42.2

2 unchanged sentences

Effect of foreign exchange rate changes on cash and cash equivalents — —

Net increase (decrease) in cash and cash equivalents, including cash classified within assets held for sale 22.9 ( 220.8 )

net (increase) in cash classified within Affiliate assets held for sale ( 12.2 ) —

net (increase) in cash classified within Consolidated funds' assets held for sale ( 0.8 ) —

Net increase (decrease) in cash and cash equivalents 9.9 ( 220.8 )

Cash and cash equivalents at beginning of period 121.0 345.5

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

$ 130.9 $ 124.7

Net increase in cash and cash equivalents 61.3 10.2

Cash and cash equivalents at beginning of period (including restricted cash) 392.9 105.3

Cash and cash equivalents at beginning of period classified within assets held for sale (Affiliate and consolidated funds) $ 11.2 $ 15.7

Cash and cash equivalents at end of period $ 465.4 $ 131.2

cash and cash equivalents at end of period classified within assets held for sale (Affiliate and consolidated funds) ( 13.3 ) ( 14.1 )

Cash and cash equivalents at end of period from continuing operations (including restricted cash) $ 452.1 117.1

Supplemental disclosure of cash flow information:

10 unchanged sentences

The Company provides investment management services globally to predominantly institutional investors, in asset classes that include U.S.

and global equities, fixed income, alternative assets, forestry and secondary strategies focused in real estate and private equity.

and global equities, fixed income, alternative assets and forestry.

Fees for services are largely asset-based and, as a result, the Company’s revenue fluctuates based on the performance of financial markets and investors’ asset flows in and out of the Company’s products.

4 unchanged sentences

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 the following three reportable segments:

The Company conducts its operations through the following two reportable segments (1) :

• 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., global, non-U.S.

and emerging markets equities, as well as fixed income.

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

See Note 3, Divestitures and Assets and Liabilities Held for Sale for further discussion of divestitures and Affiliate assets and liabilities held for sale.

• Liquid Alpha (2) —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) Prior to March 31, 2021, the Company had an Alternatives reportable segment which was comprised of the Landmark Partners, LLC (“Landmark”) and Campbell Global, LLC (“Campbell Global”) operating segments.

On March 30, 2021, the Company entered into an agreement to sell of all of the Company’s interests in Landmark.

As a result of this transaction, Landmark has been reclassified to discontinued operations, and the Alternatives segment no longer constitutes a reportable segment of the Company.

The reportable segments for all periods presented have been recast to reflect the reporting of Landmark within discontinued operations and the Campbell Global operating segment has been reclassified to “Other” within the Company’s segment reporting.

See Note 3, Divestitures, Held for Sale and Discontinued Operations and Note 15, Segments for further discussion.

(2) On February 6, 2021, the Company announced the divestiture of all of the Company’s interests in Investment Counselors of Maryland (“ICM”), an equity-accounted Affiliate.

See Note 3, Divestitures, Held for Sale and Discontinued Operations 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.

1 unchanged sentence

Additionally, between the Offering and February 25, 2019, the Company, OM plc and/or HNA Capital U.S.

(“HNA”) completed a series of transactions in the Company’s shares, including a two-step transaction announced on March 25, 2017 for a sale by OM plc of a 24.95 % shareholding in the Company to HNA and a two-step transaction announced on November 19, 2018 for a sale of the substantial majority of the ordinary shares held by HNA of the Company to Paulson & Co.

On February 25, 2019, this transaction was completed and Paulson held approximately 21.7 % of the ordinary shares of the Company.

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

On February 25, 2019, this transaction was completed and Paulson

BrightSphere Investment Group Inc.

1 unchanged sentence

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”).

The scheme of arrangement pursuant to which the Redomestication was effected was approved by the Company’s shareholders and the High Court of Justice of England and Wales.

Effective as of the close of business on July 12, 2019, all 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.

As a result, all outstanding shareholders of BrightSphere Investment Group plc became common stockholders of BrightSphere Investment Group Inc.

The common stock of BrightSphere Investment Group Inc.

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

For the three months ended September 30, 2020, the Company did no t repurchase any shares of common stock.

For the nine months ended September 30, 2020, the Company repurchased 5,667,962 shares of common stock at an average price of $ 6.20 per share, or approximately $ 35.3 million in total, including commissions.

held approximately 21.7 % of the shares of the Company.

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

For the three months ended March 31, 2021, the Company did no t repurchase any shares of common stock.

For the three months ended March 31, 2020, the Company repurchased 3,230,262 shares of common stock at an average price of $ 5.93 per share, or approximately $ 19.2 million in total, including commissions.

2) Basis of Presentation and Significant Accounting Policies

2 unchanged sentences

These unaudited Condensed Consolidated Financial Statements reflect the historical balance sheets, statements of operations and of comprehensive income, statements of changes in stockholders’ equity and statements of cash flows of the Company.

Within these Condensed Consolidated Financial Statements, OM plc, HNA, Paulson and their related entities, as defined above, are referred to as “related parties.”

Within these Condensed Consolidated Financial Statements, Paulson and its related entities, as defined above, are referred to as “related parties.”

The Condensed Consolidated Financial Statements are prepared in accordance with accounting principles generally accepted in the United States (“U.S.

2 unchanged sentences

Transactions between the Company and its related parties are included in the Condensed Consolidated Financial Statements, however, material intercompany balances and transactions among the Company, its consolidated Affiliates and consolidated Funds are eliminated in consolidation.

As a result of the Redomestication on July 12, 2019, discussed in Note 1, the Company revised its equity accounts to reflect a U.S.

domiciled company presentation on the Condensed Consolidated Statements of Changes in Stockholders’ equity and the Condensed Consolidated Balance Sheets for all periods presented.

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 .

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.

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

As of March 31, 2021 the carrying value of the Company’s investment was approximately $ 2 million.

The criteria for discontinued operations were not met for this pending divestiture.

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

See Note 3, Divestitures, Held for Sale and Discontinued Operations for additional information.

BrightSphere Investment Group Inc.

1 unchanged sentence

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

On July 26, 2020, the Company and Barrow, Hanley, Mewhinney & Strauss, LLC (“Barrow Hanley”) entered into a purchase and sale agreement with Perpetual U.S.

Holdings Company Inc.

(“Perpetual”), pursuant to which Perpetual agreed to purchase all of the Company’s interests in Barrow Hanley in exchange for $ 319 million of cash consideration, on a cash-free, debt-free basis, subject to certain customary closing and post-closing adjustments.

The assets and liabilities of Barrow Hanley have been classified as held for sale as the criteria for held for sale accounting treatment was met and are presented separately in the Company’s Condensed Consolidated Balance Sheet as of September 30, 2020.

See Note 3, Divestitures and Assets and Liabilities Held for Sale, in these Notes for additional information.

On March 30, 2021, the Company entered into an Equity Purchase Agreement with Ares Holdings L.P.

(“Ares”), pursuant to which Ares agreed to purchase all of the Company’s interests in Landmark for $ 690 million of cash consideration, on a cash-free, debt-free basis subject to certain customary closing and post-closing adjustments.

The Company also agreed to sell its carried interest and co-investments in Landmark funds on the date of closing for approximately $ 34 million, subject to adjustment for certain related cashflow.

The pending divestiture of Landmark met the discontinued operations criteria as it represents a strategic shift that has a major effect on the Company’s operations and financial results.

As a result, the Company has reclassified the financial results of Landmark and consolidated Landmark Funds to income from discontinued operations, net of tax in the Condensed Consolidated Statements of Operations for the three months ended March 31, 2021 and March 31, 2020.

The assets and liabilities of Landmark and consolidated Landmark Funds have been reflected as assets and liabilities held for sale in the Condensed Consolidated Balance Sheet as of March 31, 2021 and December 31, 2020.

Cash flows from our discontinued operations are presented in the Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2021 and March 31, 2020.

The Notes to the Condensed Consolidated Financial Statements are presented on a continuing operations basis unless otherwise noted.

See Note 3, Divestitures, Held for Sale and Discontinued Operations for additional information.

Certain disclosures included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 (annual report on Form 10-K) are not required to be included on an interim basis in the Company’s quarterly reports on Form 10-Q.

4 unchanged sentences

The preparation of these Condensed 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 three and nine months ended September 30, 2020 were characterized by heightened uncertainty due to the COVID-19 pandemic which could impact estimates and assumptions made by management.

The three months ended March 31, 2021 were characterized by continued uncertainty due to the COVID-19 pandemic which could impact estimates and assumptions made by management.

Actual results could differ from such estimates, and the differences may be material to the Condensed Consolidated Financial Statements.

Recently adopted accounting standards

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.

In December 2019, the FASB issued Accounting Standard Update (“ASU”) 2019-12, ASC 740, “ Income Taxes (ASC 740):

Simplifying the Accounting for Income Taxes ”, which is intended to simplify various aspects related to accounting for income taxes.” ASU 2019-12 removes certain exceptions to the general principles in ASC 740 and also clarifies and amends existing guidance to improve consistent application.

The guidance is effective for all public business entities for fiscal years beginning after December 15, 2020, including interim periods therein.

The Company adopted the standard on January 1, 2020.

Notably, this guidance removes the disclosure requirements for the valuation processes for Level III 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 III of the fair value hierarchy.

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

New accounting standards not yet adopted

BrightSphere Investment Group Inc.

Notes to Condensed Consolidated Financial Statements

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

On March 12, 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848) - Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships and other transactions that reference London Interbank Offered Rate (“LIBOR”) or other reference rates expected to be discontinued because of reference rate reform.

This ASU is effective as of March 12, 2020 through December 31, 2022.

The Company has not adopted any of the optional expedients or exceptions as of March 31, 2021, but will continue to evaluate the possible adoption of any such expedients or exceptions during the effective period to determine the impact on its Condensed Consolidated Financial Statements and related disclosures.

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

2 unchanged sentences

Notes to Condensed Consolidated Financial Statements

3) Divestitures and Assets and Liabilities Held for Sale

Copper Rock Capital Partners LLC

On July 24, 2020 BrightSphere 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 three and nine months ended September 30, 2020, respectively.

Assets and Liabilities Held for Sale

Barrow Hanley

On July 26, 2020, the Company and Barrow Hanley entered into a purchase and sale agreement with Perpetual, pursuant to which Perpetual agreed to purchase all of the Company’s interests in Barrow Hanley in exchange for $ 319 million of cash consideration, on a cash-free, debt-free basis, subject to certain customary closing and post-closing adjustments.

As of September 30, 2020, the Company had assets of $ 151.0 million and liabilities of $ 80.4 million of Barrow Hanley classified as held for sale.

The transaction is expected to close in the fourth quarter of 2020.

Operational information for Barrow Hanley is included in the Company’s Liquid Alpha segment for the three and nine months ended September 30, 2020 and 2019, respectively.

Barrow Hanley’s income from continuing operations before taxes was $ 9.6 million and $ 20.4 million for the three months ended September 30, 2020 and 2019, respectively.

Barrow Hanley’s income from continuing operations before taxes was $ 33.1 million and $ 60.5 million for the nine months ended September 30, 2020 and 2019, respectively.

The Company also holds seed investments of $ 17.1 million in Barrow Hanley’s investment products as of September 30, 2020 which will be redeemed upon consummation of the sale.

The major classes of assets and liabilities comprising the Affiliate classified as held for sale are as follows at September 30, 2020 (in millions):

3) Divestitures, Held for Sale and Discontinued Operations

Investment Counselors of Maryland

On February 6, 2021, the Company entered into a definitive agreement to sell all of the Company’s interests in 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.

The criteria for discontinued operations were not met for this pending divestiture.

The transaction is expected to close in the second quarter of 2021.

Landmark Partners

On March 30, 2021, the Company entered into an Equity Purchase Agreement with Ares, pursuant to which Ares agreed to purchase all of the Company’s interests in Landmark for $ 690 million of cash consideration, on a cash-free, debt-free basis subject to certain customary closing and post-closing adjustments.

The pending divestiture of Landmark met the discontinued operations criteria as it represents a strategic shift that has a major effect on the Company’s operations and financial results.

The transaction is expected to close in the second quarter of 2021.

The Company also agreed to sell its carried interest and co-investments in Landmark funds on the date of closing for approximately $ 34 million, subject to adjustment for certain related cashflow.

BrightSphere International Ltd.

On March 17, 2021, BrightSphere completed the sale of its subsidiary BrightSphere International Ltd.

to Perpetual U.S.

Holdings Company Inc.

(“Perpetual”).

The Company recognized a pre-tax loss of $( 1.3 ) million within the Condensed Consolidated Statement of Operations for the three months ended March 31, 2021.

BrightSphere Investment Group Inc.

Notes to Condensed Consolidated Financial Statements

3) Divestitures and Assets Held for Sale (cont.)

September 30,

3) Divestitures, Held for Sale and Discontinued Operations (cont.)

Assets and Liabilities Held for Sale

The major classes of assets and liabilities of discontinued operations of Landmark classified as held for sale in the Condensed Consolidated Balance Sheets as of March 31, 2021 and December 31, 2020 are as follows (in millions):

2021 December 31,

Cash and cash equivalents $ 10.8 $ 10.6

Investment advisory fees receivable — 0.2

Investments, at fair value 27.0

Goodwill 76.1

Fixed assets, net 6.9 6.9

Right of use assets 8.0 8.4

Intangible assets, net 56.6 58.2

Goodwill 148.1 148.1

Other assets 11.2 16.8

Deferred tax assets — 0.5

Affiliate assets held for sale $ 241.6 $ 249.7

3 unchanged sentences

Operating lease liabilities 8.6 9.0

Other liabilities $ 1.3 $ 1.3

Affiliate liabilities held for sale $ 224.3 $ 226.9

BrightSphere Investment Group Inc.

Notes to Condensed Consolidated Financial Statements

3) Divestitures, Held for Sale and Discontinued Operations (cont.)

The major classes of revenue and expenses constituting income from discontinued operations attributable to controlling interests for Landmark in the Condensed Consolidated Statement of Operations for the three months ended March 31, 2021 and 2020 are as follows (in millions):

Three Months Ended March 31,

Revenues $ 36.7 $ 35.9

Operating expenses:

Compensation and benefits 28.5 8.0

General and administrative expenses 2.9 3.4

Amortization of intangibles 1.6 1.6

Depreciation and amortization 0.2 0.2

Consolidated Funds other expense 0.1 0.1

Total operating expenses 33.3 13.3

Operating income 3.4 22.6

Investment gains of consolidated Funds 16.6 —

Income from discontinued operations before taxes 20.0 22.6

Income tax expense 1.5 7.2

Income from discontinued operations, net of tax 18.5 15.4

Income from discontinued operations attributable to non-controlling interests 13.4 0.1

Net income from discontinued operations attributable to controlling interests $ 5.1 $ 15.3

Consolidated Funds

The Barrow Hanley purchase and sale agreement provides for the redemption of all of the Company’s seed investments with Barrow Hanley.

The redemption will result in the deconsolidation of consolidated Funds considered to be VIEs.

The assets and liabilities of the consolidated Funds have been classified as held for sale as the criteria for held for sale accounting treatment was met and are presented separately in the Company’s Condensed Consolidated Balance Sheet.

As of September 30, 2020, the Company had assets of $ 114.3 million and liabilities of $ 0.1 million for consolidated Funds classified as held for sale.

The transaction is expected to close in the fourth quarter of 2020.

The consolidated Funds’ operational information is included in the Company’s Statement of Operations for the three and nine months ended September 30, 2020 and 2019.

The consolidated Funds’ income from continuing operations was $ 4.7 million and $ 1.0 million for the three months ended September 30, 2020 and 2019, respectively.

The consolidated Funds’ income from continuing operations was $( 2.0 ) million and $ 5.4 million for the nine months ended September 30, 2020 and 2019, respectively.

The major classes of assets and liabilities comprising the consolidated Funds classified as held for sale are as follows at September 30, 2020 (in millions):

September 30,

Cash and cash equivalents $ 0.8

Investments, at fair value 112.9

Other Assets 0.6

Consolidated Funds’ assets held for sale $ 114.3

Accounts payable and accrued expenses $ 0.1

Consolidated Funds’ liabilities held for sale $ 0.1

The Landmark Equity Purchase agreement provides for the redemption of all of the Company’s carried interest and co-investments in Landmark funds on the date of closing for approximately $ 34 million, subject to adjustment for certain related cashflow.

The redemption will result in the deconsolidation of consolidated Funds that are considered to be variable interest entities (“VIEs”).

The assets and liabilities of the consolidated Funds have been classified as held for sale as the criteria for held for sale and discontinued operations accounting treatment were met and are therefore presented separately in the Company’s Condensed Consolidated Balance Sheet as of March 31, 2021 and December 31, 2020.

The transaction is expected to close in the second quarter of 2021.

The consolidated Funds’ investments gains/(losses) from discontinued operations, net of tax, attributable to controlling interests was $ 3.1 million and $( 0.2 ) million in the Company’s Condensed Consolidated Statement of Operations for the three months ended March 31, 2021 and 2020, respectively.

The major classes of assets comprising the consolidated Funds classified as held for sale are as follows at March 31, 2021 and December 31, 2020 (in millions):

BrightSphere Investment Group Inc.

Notes to Condensed Consolidated Financial Statements

3) Divestitures, Held for Sale and Discontinued Operations (cont.)

2021 December 31,

Cash and cash equivalents $ 2.5 $ 0.6

Equity-accounted investments (1)

Consolidated Funds’ assets held for sale $ 130.9 $ 114.3

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

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.

4) Investments

Investments are comprised of the following as of the dates indicated (in millions):

September 30,

2021 December 31,

Investments of consolidated Funds held at fair value

Other investments held at fair value 37.6 40.1

1 unchanged sentence

Total investments held at fair value 112.6 113.1

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

Equity-accounted investment in Affiliate 2.0 2.0

Total investments per Condensed Consolidated Balance Sheets 114.6 115.1

Investments related to long-term incentive compensation plans of an Affiliate held for sale held at fair value (Note 3) 27.0 —

Investments of consolidated Funds held for sale held at fair value (Note 3) 112.9 —

Total investments held for sale 139.9 —

Total investments and investments held for sale per Condensed Consolidated Balance Sheets $ 358.3 $ 376.9

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

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.

Investment income is comprised of the following for the three and nine months ended September 30 (in millions):

Three Months Ended September 30, Nine Months Ended September 30,

2020 2019 2020 2019

Investment income is comprised of the following for the three months ended March 31 (in millions):

Three Months Ended March 31,

Realized and unrealized gains (losses) on other investments held at fair value $ 1.5 $ ( 14.3 )

Earnings from equity-accounted investments in Affiliates 1.0 0.8 2.2 2.1

Earnings from equity-accounted investment in Affiliate 1.1 0.6

Total investment income (loss) per Condensed Consolidated Statements of Operations

$ 2.6 $ ( 13.7 )

Investment gains (losses) on net consolidated funds is comprised of the following for the three and nine months ended September 30 (in millions):

Three Months Ended September 30, Nine Months Ended September 30,

2020 2019 2020 2019

Realized and unrealized gains (losses) on consolidated Funds held at fair value $ 2.9 $ ( 0.4 ) $ ( 7.6 ) $ 2.6

Earnings from equity-accounted investments ( 0.8 ) 5.1 28.1 11.2

Total net consolidated Funds’ investment gains per Condensed Consolidated Statements of Operations $ 2.1 $ 4.7 $ 20.5 $ 13.8

BrightSphere Investment Group Inc.

1 unchanged sentence

5) Fair Value Measurements

The following table summarizes the Company’s assets and liabilities that are measured at fair value on a recurring basis at September 30, 2020 (in millions):

The following table summarizes the Company’s assets that are measured at fair value on a recurring basis at March 31, 2021 (in millions):

Quoted prices

2 unchanged sentences

(Level III) Uncategorized Total value,

September 30, 2020

Assets of BSIG, consolidated Funds and assets held for sale (1)

March 31, 2021

Assets of BSIG (1)

Investments in separate accounts (2)

4 unchanged sentences

— — 2.6 12.3 14.9

BSIG total 82.6 13.0 2.7 16.4 114.7

Investments related to long-term incentive compensation plans (5)

27.0 — — — 27.0

Investments of Affiliate held for sale total (Note 3) 27.0 — — — 27.0

Common and preferred stock 5.9 — — — 5.9

Short-term investment funds 0.5 — — — 0.5

Bank loans — 106.5 — — 106.5

Investments of consolidated Funds held for sale total (Note 3) 6.4 106.5 — — 112.9

Total fair value assets $ 85.9 $ 11.8 $ 2.6 $ 12.3 $ 112.6

BrightSphere Investment Group Inc.

Notes to Condensed Consolidated Financial Statements

5) 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):

The following table summarizes the Company’s assets that are measured at fair value on a recurring basis at December 31, 2020 (in millions):

Quoted prices

2 unchanged sentences

(Level III) Uncategorized Total value December 31, 2020

Assets of BSIG and consolidated Funds (1)

Common and preferred stock $ 9.8 $ — $ — $ — $ 9.8

Short-term investment funds 0.1 — — — 0.1

Bank loans — 109.0 — — 109.0

Derivatives 0.5 0.1 — — 0.6

Consolidated Funds total 10.4 109.1 — — 119.5

Assets of BSIG (1)

Investments in separate accounts (2)

4 unchanged sentences

— — 2.6 16.2 18.8

BSIG total 122.0 11.1 3.0 48.2 184.3

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

Liabilities of consolidated Funds (1)

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 )

(1) 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.

(1) Assets measured at fair value are comprised of financial investments managed by the Company's Affiliates.

Equity securities, including common and preferred stock and short-term investment funds 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.

2 unchanged sentences

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.

BrightSphere Investment Group Inc.

Notes to Condensed Consolidated Financial Statements

5) Fair Value Measurements (cont.)

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.

1 unchanged sentence

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.

(2) Investments in separate accounts of $ 29.5 million at September 30, 2020 consist of approximately 2 % of cash equivalents and 98 % of equity securities, fixed income securities, and other investments.

The Company performs due diligence

BrightSphere Investment Group Inc.

Notes to Condensed Consolidated Financial Statements

5) Fair Value Measurements (cont.)

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.

(2) Investments in separate accounts of $ 22.7 million at March 31, 2021 consist of approximately 1 % of cash equivalents and 99 % of equity securities, fixed income securities, and other investments.

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

The Company values these using the published price of the underlying securities (classified as Level I) or quoted price supported by observable inputs as of the measurement date (classified as Level II).

(3) Investments related to long-term incentive compensation plans of $ 66.1 million and $ 88.8 million at September 30, 2020 and December 31, 2019, respectively, were investments in publicly registered daily redeemable funds (some managed by Affiliates), which the Company has classified as trading securities and valued using the published price as of the measurement dates.

(3) Investments related to long-term incentive compensation plans of $ 75.0 million and $ 73.0 million at March 31, 2021 and December 31, 2020, respectively, were investments in publicly registered daily redeemable funds (some managed by Affiliates), which the Company has classified as trading securities and valued using the published price as of the measurement dates.

Accordingly, the Company has classified these investments as Level I.

(4) The uncategorized amounts of $ 16.4 million and $ 48.2 million at September 30, 2020 and December 31, 2019, respectively, relate to investments in unconsolidated Funds which consist primarily of investments in Funds advised by Affiliates 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.

(4) The uncategorized amounts of $ 12.3 million and $ 16.2 million at March 31, 2021 and December 31, 2020, respectively, relate to investments in unconsolidated Funds which consist primarily of investments in Funds advised by Affiliates 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 Condensed Consolidated Balance Sheets.

2 unchanged sentences

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

The real estate investment Funds of $ 5.9 million and $ 6.4 million at September 30, 2020 and December 31, 2019, respectively, are subject to longer than 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 year to eleven years from September 30, 2020.

The real estate investment Funds of $ 5.2 million and $ 6.2 million at March 31, 2021 and December 31, 2020, respectively, are subject to longer than 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 year to ten years from March 31, 2021.

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.

2 unchanged sentences

In connection with this process, changes in fair value measurements from period to period are evaluated for reasonableness, considering items such as market rents, capitalization and discount rates, and general economic and market conditions.

Investments in unconsolidated Funds categorized as Level III of $ 2.7 million and $ 3.0 million at September 30, 2020 and December 31, 2019, respectively, related to investments in Forestry Funds advised by Affiliates and are valued by the general partner of those Funds.

Investments in unconsolidated Funds categorized as Level III of $ 2.6 million and $ 2.6 million at March 31, 2021 and December 31, 2020, respectively, related to investments in Forestry Funds advised by an Affiliate and are valued by the general partner of those Funds.

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.

2 unchanged sentences

5) Fair Value Measurements (cont.)

(5) Affiliate investments held for sale is comprised of Investments related to long-term incentive compensation plans of $ 27.0 million at September 30, 2020.

These were investments in publicly registered daily redeemable funds, which the Company has classified as trading securities and valued using the published price as of the measurement dates.

Accordingly, the Company has classified these investments as Level I.

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

Three Months Ended September 30, Nine Months Ended September 30,

Three Months Ended March 31,

Investments in unconsolidated Funds 2021 2020

1 unchanged sentence

At beginning of the period $ 2.6 $ 3.0

Additions (redemptions) ( 0.3 ) 0.1 ( 0.3 ) 0.1

Transfers in (out) of Level III

Total net fair value gains/losses recognized in net income

— ( 0.1 ) — ( 0.1 )

Total Level III financial assets

$ 2.7 $ 3.0 $ 2.7 $ 3.0

There were no significant transfers of financial assets or liabilities between Levels II or III during the three and nine months ended September 30, 2020.

There were no significant transfers of financial assets or liabilities between Levels II or III during the three months ended March 31, 2021 and 2020, respectively.

BrightSphere Investment Group Inc.

7 unchanged sentences

The Company generally is not the primary beneficiary of Fund VIEs created to manage assets for clients unless the Company’s ownership interest, including interests of related parties, is substantial.

The following table presents the assets and liabilities of Funds that are VIEs and consolidated by the Company (in millions):

September 30,

The following table presents the assets of Funds that are VIEs and consolidated by the Company (in millions):

2021 December 31,

Investments at fair value $ — $ 119.5

Other assets of consolidated Funds 103.0 85.7

Assets of consolidated Funds held for sale (Note 3) 114.3 —

Consolidated Funds’ assets held for sale (Note 3) 130.9 114.3

Total Assets $ 130.9 $ 114.3

Liabilities of consolidated Funds $ — $ 6.2

Liabilities of consolidated Funds held for sale (Note 3) 0.1 —

Total Liabilities $ 0.1 $ 6.2

“Investments at fair value” consist of investments in bank loans, common and preferred stock, and other securities as of December 31, 2019.

These investments are included in the “assets of consolidated Funds held for sale” as of September 30, 2020.

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.

In connection with the pending divestiture of Landmark, the Company reclassified assets of consolidated Funds as “Consolidated Funds’ assets held for sale” in the Condensed Consolidated Balance Sheet as of March 31, 2021 and December 31, 2020.

See Note 3, Divestitures, Held for Sale and Discontinued Operations, in these Notes for additional information.

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

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.

Any debt or liabilities held by consolidated Funds have no recourse to the Company's general credit.

The Company’s involvement with Funds that are VIEs and not consolidated by the Company is generally limited to that of an investment manager and its investment in the unconsolidated VIE, if any.

6 unchanged sentences

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

September 30,

2021 December 31,

10 unchanged sentences

The Company’s borrowings and long-term debt was comprised of the following as of the dates indicated (in millions):

September 30, 2020 December 31, 2019

March 31, 2021 December 31, 2020

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

7 unchanged sentences

121.6 126.4 2 121.5 126.0 2

Total third party borrowings $ 474.2 $ 502.7 $ 533.8 $ 553.6

Non-recourse borrowings:

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

$ — $ — $ 35.0 $ 35.0 2

Total non-recourse borrowing $ — $ — $ 35.0 $ 35.0

Total borrowings $ 475.5 $ 509.2 $ 394.3 $ 424.9

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

(2) An amendment to the revolving credit facility was entered into on September 3, 2020 to reduce the revolving credit facility to $ 150 million upon the consummation of the sale of the Company’s equity interests in Barrow Hanley.

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

(2) On February 23, 2021, the Company’s $ 150 million revolving credit facility was assigned to Acadian Asset Management LLC (“Acadian”), an Affiliate within the Quant & Solutions segment, and amended to reduce the facility to $ 125 million.

(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 set to expire on January 15, 2021 was paid down in the third quarter and terminated.

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 “Credit Agreement”).

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

Under the 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 provides that, effective immediately upon the consummation of the Barrow Hanley Sale, the Lenders commitments under the Credit Agreement shall be $ 150 million.

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 the Company’s election 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

BrightSphere Investment Group Inc.

Notes to Consolidated Financial Statements

6) Borrowings and Debt (cont.)

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 and the Acadian interest coverage ratio must not be less than 4.0 x.

BrightSphere Investment Group Inc.

Notes to Condensed Consolidated Financial Statements

1 unchanged sentence

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.

The following table summarizes information about the Company’s operating leases for the three and nine months ended September 30, (in millions):

Three Months Ended September 30, Nine Months Ended September 30,

2020 2019 2020 2019

The following table summarizes information about the Company’s operating leases for the three months ended March 31, (in millions):

Three Months Ended March 31,

Operating lease cost $ 3.1 $ 3.4

Variable lease cost 0.1 0.1

Sublease income ( 0.1 ) — ( 0.1 ) —

Total operating lease expense $ 3.2 $ 3.5

3 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 nine months ended September 30, 2020 and 2019, the weighted average remaining lease term was 11.7 years and 4.5 years, respectively, and the weighted average discount rate was 3.47 % and 4.13 %, respectively.

In connection with the pending divestiture of Barrow Hanley, the Company reclassified $ 12.4 million of Right of use assets and $ 12.7 million of Operating lease liabilities as of September 30, 2020 on the Condensed Consolidated Balance Sheet to Affiliate assets and liabilities held for sale, respectively.

See Note 3, Divestitures and Assets and Liabilities Held for Sale, in these Notes for additional information.

For the three months ended March 31, 2021 and 2020, the weighted average remaining lease term was 11.6 years and 12.3 years, respectively, and the weighted average discount rate was 3.34 % and 3.38 %, respectively.

Maturities of operating lease liabilities were as follows (in millions):

1 unchanged sentence

Year Ending December 31,

2020 (excluding the nine months ended September 30, 2020)

2021 (excluding the three months ended March 31, 2021)

Thereafter 75.1

1 unchanged sentence

Less imputed interest ( 21.9 )

Total $ 110.0

BrightSphere Investment Group Inc.

1 unchanged sentence

9) Goodwill and Intangible Assets

The following table presents the changes in goodwill for the nine months ended September 30, 2020 and 2019 (in millions):

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, 2019 $ 20.3 $ 148.1 $ 106.2 $ 274.6

Additions — — — —

Impairments — — ( 16.4 ) ( 16.4 )

Disposals — — — —

Decrease from reclassification to assets held

— — ( 76.1 ) ( 76.1 )

Goodwill 22.1 153.1 57.2 232.4

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

September 30, 2020 $ 20.3 $ 148.1 $ 13.7 $ 182.1

(1) In connection with the pending divestiture of Barrow Hanley, the Company assigned $ 76.1 million of goodwill to “Affiliate Assets held for sale” in the Condensed Consolidated Balance Sheet as of September 30, 2020.

See Note 3, Divestitures and Assets and Liabilities Held for Sale, in these Notes for additional information.

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 )

September 30, 2019 $ 20.3 $ 148.1 $ 106.2 $ 274.6

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.

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

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 three months ended March 31, 2020.

BrightSphere Investment Group Inc.

Notes to Condensed Consolidated Financial Statements

9) Goodwill and Intangible Assets (cont.)

impairment charges were recognized for the three months ended September 30, 2020 and the Company recognized a goodwill impairment charge of $ 16.4 million for the nine months ended September 30, 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 assets under management 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 comprised of client relationships for the nine months ended September 30, 2020 and 2019 (in millions):

Book Value Accumulated

Amortization &

Impairment Net Book

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

Additions — — —

Amortization — ( 5.1 ) ( 5.1 )

Disposals — — —

September 30, 2020 $ 108.3 $ ( 49.3 ) $ 59.0

Book Value Accumulated

Amortization &

Impairment Net Book

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

Additions — — —

Amortization — ( 4.9 ) ( 4.9 )

Disposals — — —

September 30, 2019 $ 108.3 $ ( 42.5 ) $ 65.8

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

As of September 30, 2020, these assets were being amortized over remaining useful lives of three to nine years .

The Company recorded amortization expense of $ 1.6 million and $ 1.6 million for the three months ended September 30, 2020 and 2019, respectively.

The Company recorded amortization expense of $ 5.1 million and $ 4.9 million for the nine months ended months ended September 30, 2020 and 2019, respectively.

BrightSphere Investment Group Inc.

Notes to Condensed Consolidated Financial Statements

9) Goodwill and Intangible Assets (cont.)

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 Condensed Consolidated Balance Sheets at September 30, 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 assets under management 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 both the definite and indefinite-lived intangible assets.

No impairment charges were determined for the definite and indefinite-lived intangible assets for the three months ended September 30, 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):

Year Ending December 31,

2020 (excluding the nine months ended September 30, 2020)

Thereafter 31.7

BrightSphere Investment Group Inc.

Notes to Condensed Consolidated Financial Statements

In connection with the pending divestiture of Landmark, the Company reclassified $ 148.1 million of goodwill to “Affiliate assets held for sale” in the Condensed Consolidated Balance Sheet as of March 31, 2021 and December 31, 2020.

The Company also reclassified $ 56.6 million and $ 58.2 million of net intangible assets to “Affiliate assets held for sale” in the Condensed Consolidated Balance Sheet as of March 31, 2021 and December 31, 2020, respectively.

See Note 3, Divestitures, Held for Sale and Discontinued Operations, in these Notes for additional information.

10) Commitments and Contingencies

Operational commitments

The Company had unfunded commitments to invest up to approximately $ 37 million in co-investments as of September 30, 2020.

The Company had unfunded commitments to invest up to approximately $ 5 million in co-investments as of March 31, 2021.

These commitments will be funded as required through the end of the respective investment periods ranging through fiscal 2022.

The Company also had unfunded commitments to invest up to approximately $ 29 million in co-investments for Landmark as of March 31, 2021.

On March 30 2021, the Company announced the divestiture of all of the Company’s interest in Landmark.

The pending divestiture of Landmark met the discontinued operations criteria.

The commitments will be funded as required through the disposition date, which is expected to occur in the second quarter of 2021.

See Note 3, Divestitures, Held for Sale and Discontinued Operations for additional information.

Certain Affiliates operate under regulatory authorities that require that they maintain minimum financial or capital requirements.

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This guaranty expires in 2022.

There are no liabilities recorded on the Condensed Consolidated Balance Sheet as of September 30, 2020 related to this guaranty.

There are no liabilities recorded on the Condensed Consolidated Balance Sheet as of March 31, 2021 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.

2 unchanged sentences

If an insurance claim or other indemnification for a litigation accrual is available to the Company, the associated gain will not be recognized until all contingencies related to the gain have been resolved.

As of September 30, 2020, there were no material accruals for claims, legal proceedings or other contingencies.

As of March 31, 2021, there were no material accruals for claims, legal proceedings or other contingencies.

BrightSphere Investment Group Inc.

Notes to Condensed Consolidated Financial Statements

10) Commitments and Contingencies (cont.)

Indemnifications

6 unchanged sentences

However, given the fact that uncertainty exists around the requirement, the Company has chosen to evaluate its potential exposure related to non-collection and remittance of these taxes.

At September 30, 2020, management of the Company has estimated the potential maximum exposure and concluded that it is not material.

No accrual for the potential exposure has been recorded as the probability of incurring any potential liability relating to this exposure is not probable at September 30, 2020.

BrightSphere Investment Group Inc.

Notes to Condensed Consolidated Financial Statements

10) Commitments and Contingencies (cont.)

At March 31, 2021, management of the Company has estimated the potential maximum exposure and concluded that it is not material.

No accrual for the potential exposure has been recorded as the probability of incurring any potential liability relating to this exposure is not probable at March 31, 2021.

Considerations of credit risk

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash and investments.

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash, cash equivalents, restricted cash and investments.

The Company maintains cash and cash equivalents and short term investments with various financial institutions.

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For the Company and certain Affiliates, cash deposits at a financial institution may exceed Federal Deposit Insurance Corporation insurance limits.

The majority of the Company’s cash equivalents consists of money market funds.

At March 31, 2021, approximately $ 333 million of the Company’s cash and cash equivalents were invested in money market funds.

Additionally, the Company holds insurance policies which cover historical and future tax benefits relating to certain of its deferred tax assets.

The insurers of the policies are considered a significant counterparty to the Company.

BrightSphere Investment Group Inc.

Notes to Condensed Consolidated Financial Statements

11) Earnings Per Share

2 unchanged sentences

The calculation of basic and diluted earnings per share of common stock is as follows (dollars in millions, except per share data):

Three Months Ended September 30, Nine Months Ended September 30,

2020 2019 2020 2019

Net income attributable to controlling interests $ 37.2 $ 75.4 $ 88.7 $ 156.1

Total income available to participating unvested securities (1)

— — — ( 0.1 )

Total net income attributable to common stock $ 37.2 $ 75.4 $ 88.7 $ 156.0

Three Months Ended March 31,

Income from continuing operations attributable to controlling interests $ 21.9 $ 17.3

Income from discontinued operations attributable to controlling interests (Note 3) $ 5.1 $ 15.3

Net income attributable to common stock $ 27.0 $ 32.6

Weighted-average shares of common stock outstanding—basic 79,319,556 85,081,166

80,001,360 89,970,871 81,832,607 92,996,289

Potential shares of common stock:

2 unchanged sentences

Weighted-average shares of common stock outstanding—diluted 82,320,668 85,099,059

80,851,538 89,972,300 82,126,530 93,076,064

Earnings per share of common stock attributable to controlling interests:

Basic $ 0.46 $ 0.84 $ 1.08 $ 1.68

Diluted $ 0.46 $ 0.84 $ 1.08 $ 1.68

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

Continuing operations $ 0.28 $ 0.20

Discontinued operations 0.06 0.18

Basic earnings per share of common stock attributable to controlling interests $ 0.34 $ 0.38

Continuing operations $ 0.27 $ 0.20

Discontinued operations 0.06 0.18

Diluted earnings per share of common stock attributable to controlling interests $ 0.33 $ 0.38

Employee options to purchase 9,330,000 shares were not included in the computation of diluted EPS for the three months ended March 31, 2020 because the assumed proceeds from exercising such options exceed the average price of the shares of common stock for the period and, therefore, the options are deemed antidilutive.

BrightSphere Investment Group Inc.

Notes to Condensed Consolidated Financial Statements

11) Earnings Per Share (cont.)

Employee options to purchase 8,970,000 shares were not included in the computation of diluted EPS for the three and nine months ended September 30, 2019 because the assumed proceeds from exercising such options exceed the average price of the shares of common stock for the period and, therefore, the options are deemed antidilutive.

Management fees

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The most significant driver of increases or decreases in this average fee rate is changes in the mix of the Company’s assets under management caused by net inflows or outflows in certain asset classes or disproportionate market movements.

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.

Performance fees

The Company’s products subject to performance fees earn these fees upon exceeding high-water mark performance thresholds or outperforming a hurdle rate.

Conversely, the separate accounts / other products, which primarily earn management fees, are potentially subject to performance adjustments up or down based on investment performance versus benchmarks (i.e.

fulcrum fees).

Other revenue

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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 $ 1.1 million and $ 0.9 million for the three months ended September 30, 2020 and 2019, respectively.

Revenues from expense reimbursement amounted to $ 3.3 million and $ 3.2 million for the nine months ended September 30, 2020 and 2019, respectively, are recorded in other revenue in the Company’s Condensed Consolidated Statements of Operations.

Revenue from expense reimbursements amounted to $ 1.0 million and $ 1.1 million for the three months ended March 31, 2021 and 2020, respectively, and is recorded in other revenue in the Company’s Condensed Consolidated Statements of Operations.

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

4 unchanged sentences

equity, which includes global and international equities including emerging markets;

Fixed income, which includes government bonds, corporate bonds and other fixed income investments in the United States;

Alternatives, which is mainly comprised of forestry.

BrightSphere Investment Group Inc.

1 unchanged sentence

12) Revenue (cont.)

Fixed income, which includes government bonds, corporate bonds and other fixed income investments in the United States;

Alternatives, which is 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.

Management fee revenue by segment and asset class is comprised of the following for the three and nine months ended September 30 (in millions):

Three Months Ended September 30, Nine Months Ended September 30,

2020 2019 2020 2019

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

Three Months Ended March 31,

Quant & Solutions

1 unchanged sentence

equity $ 98.9 $ 85.2

Alternatives 43.2 37.2 126.4 124.5

Liquid Alpha (1)

Global / non-U.S.

2 unchanged sentences

equity 6.3 26.8

Alternatives 4.9 5.5

Management fee revenue

$ 125.3 $ 142.6

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

See Note 3, Divestitures and Assets and Liabilities Held for Sale for further discussion of divestitures.

The financial results of Barrow Hanley are included in the Liquid Alpha segment for the three and nine months ended September 30, 2020.

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

(1) Prior to March 31, 2021, the Company had the Alternatives reportable segment which consisted of Landmark and Campbell Global operating segments.

On March 30, 2021, the Company entered into an agreement to sell of all of the Company’s interests in Landmark.

As a result of this transaction, Landmark has been reclassified to discontinued operations, and the Alternatives segment no longer constitutes a reportable segment of the Company.

See Note 3, Divestitures, Held for Sale and Discontinued Operations and Note 15, Segments for further discussion.

BrightSphere Investment Group Inc.

1 unchanged sentence

13) Accumulated Other Comprehensive Income (Loss)

The components of accumulated other comprehensive income (loss), net of tax, for the three months ended September 30, 2020 and 2019 are as follows (in millions):

Foreign currency translation adjustment Valuation and amortization of derivative securities Total

Balance, as of June 30, 2020

$ 1.0 $ ( 19.2 ) $ ( 18.2 )

Foreign currency translation adjustment 1.4 — 1.4

Amortization related to derivatives securities, before tax

Tax impact — ( 0.2 ) ( 0.2 )

Other comprehensive income 1.4 0.6 2.0

Balance, as of September 30, 2020

$ 2.4 $ ( 18.6 ) $ ( 16.2 )

Foreign currency translation adjustment Valuation and amortization of derivative securities Total

Balance, as of June 30, 2019

$ 1.7 $ ( 21.5 ) $ ( 19.8 )

Foreign currency translation adjustment ( 0.8 ) — ( 0.8 )

Amortization related to derivatives securities, before tax

Tax impact — ( 0.1 ) ( 0.1 )

Other comprehensive income (loss) ( 0.8 ) 0.6 ( 0.2 )

Balance, as of September 30, 2019

$ 0.9 $ ( 20.9 ) $ ( 20.0 )

For the three months ended September 30, 2020 and 2019, the Company reclassified $ 0.8 million and $ 0.7 million, respectively, from accumulated other comprehensive income (loss) to interest expense on the Condensed Consolidated Statements of Operations.

The components of accumulated other comprehensive income (loss), net of tax, for the nine months ended September 30, 2020 and 2019 were as follows (in millions):

The components of accumulated other comprehensive income (loss), net of tax, for the three months ended March 31, 2021 and 2020 were as follows (in millions):

Foreign currency translation adjustment Valuation and amortization of derivative securities Total

3 unchanged sentences

Tax impact — ( 0.2 ) ( 0.2 )

Other comprehensive income (loss) ( 0.4 ) 1.7 1.3

Balance, as of September 30, 2020

Other comprehensive income 1.1 0.6 1.7

Balance, as of March 31, 2021

$ 5.5 $ ( 17.4 ) $ ( 11.9 )

BrightSphere Investment Group Inc.

Notes to Condensed Consolidated Financial Statements

13) Accumulated Other Comprehensive Income (Loss) (cont.)

Foreign currency translation adjustment Valuation and amortization of derivative securities Total

4 unchanged sentences

Other comprehensive income (loss) ( 2.1 ) 0.5 ( 1.6 )

Balance, as of September 30, 2019

Balance, as of March 31, 2020

$ 0.7 $ ( 19.8 ) $ ( 19.1 )

For the nine months ended September 30, 2020 and 2019, the Company reclassified $ 2.3 million and $ 2.2 million, respectively, from accumulated other comprehensive income (loss) to interest expense on the Condensed Consolidated Statements of Operations.

For the three months ended March 31, 2021 and 2020, the Company reclassified $ 0.8 million and $ 0.7 million, respectively, from accumulated other comprehensive income (loss) to interest expense on the Condensed Consolidated Statements of Operations.

14) Derivatives and Hedging

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Refer to Note 7, Borrowings and Debt, for additional information on the debt issuances.

As of September 30, 2020, the balance recorded in accumulated other comprehensive income (loss) was $( 18.6 ) million, net of tax.

As of March 31, 2021, the balance recorded in accumulated other comprehensive income (loss) was $( 17.4 ) million, net of tax.

This balance will be reclassified to earnings through interest expense over the life of the issued debt.

Amounts of $ 0.8 million and $ 0.7 million have been reclassified for each of the three months ended September 30, 2020 and 2019, respectively.

Amounts of $ 2.3 million and $ 2.2 million have been reclassified for the nine months ended September 30, 2020 and 2019, respectively.

Amounts of $ 0.8 million and $ 0.7 million have been reclassified for the three months ended March 31, 2021 and

BrightSphere Investment Group Inc.

Notes to Condensed Consolidated Financial Statements

14) Derivatives and Hedging (cont.)

2020, respectively.

During the next twelve months the Company expects to reclassify approximately $ 3.4 million to interest expense.

Derivatives of consolidated Funds

In the normal course of business, the Company’s consolidated Funds may enter into transactions involving derivative financial instruments in connection with Funds’ investing activities.

Derivative instruments may be used as substitutes for securities in which the Funds can invest, to hedge portfolio investments or to generate income or gain to the Funds.

The Funds may also use derivatives to manage duration;

sector and yield curve exposures and credit and spread volatility.

Derivative financial instruments base their value upon an underlying asset, index or reference rate.

These instruments are subject to various risks, including leverage, market, credit, liquidity and operational risks.

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.

2 unchanged sentences

• 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., global, non-U.S.

and emerging markets equities, as well as fixed income.

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

See Note 3, Divestitures and Assets and Liabilities Held for Sale, 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 for the three and nine months ended September 30, 2020.

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

• 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.

equities, as well as fixed income.

(1) Prior to March 31, 2021, the Company had an Alternatives reportable segment which was comprised of Landmark and Campbell Global operating segments.

On March 30, 2021, the Company entered into an agreement to sell of all of the Company’s interests in Landmark.

As a result of this transaction, Landmark has been reclassified to discontinued operations, and the Alternatives segment no longer constitutes a reportable segment of the Company.

See Note 3, Divestitures, Held for Sale and Discontinued Operations for further discussion.

(2) On February 6, 2021, the Company announced the divestiture of all of the Company’s interests in Investment Counselors of Maryland (“ICM”), an equity-accounted Affiliate.

See Note 3, Divestitures, Held for Sale and Discontinued Operations for further discussion.

The Company also 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, 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.

The corporate head office expenses are not allocated to the Company’s two 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.

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 equity-accounted Affiliate.

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

4 unchanged sentences

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 employee equity owned pre-acquisition that occurred as a result of 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, adjusted to exclude non-cash expenses representing changes in the value of Affiliate equity and profit interests held by Affiliate key employees, goodwill impairment and amortization of acquired intangible assets, capital transaction costs, restructuring costs, and the separate expenses recorded under U.S.

GAAP for certain Fund expenses reimbursed to Affiliates.

2 unchanged sentences

Segment Presentation

The following tables set forth summarized operating results for the Company's three segments and related adjustments necessary to reconcile the segment economic net income to arrive at the Company's consolidated U.S.

GAAP net income (loss):

The following table presents the financial data for the Company’s three segments for the three months ended September 30, 2020 (in millions):

Three Months Ended September 30, 2020

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

The following tables set forth summarized operating results for the Company's two segments and related adjustments necessary to reconcile the segment economic net income to arrive at the Company's consolidated U.S.

GAAP net income (loss) for the three months ended March 31, 2021 (in millions):

Three Months Ended March 31, 2021

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

ENI revenue $ 103.5 $ 22.6 $ 5.2 $ ( 0.1 ) (a) $ 131.2

11 unchanged sentences

Net investment income — — — 2.6 (e) 2.6

Gain on sale of Affiliate — — — — 7.2 (e) 7.2

Net income attributable to non-controlling interests in consolidated Funds

— — — — 3.2 (e) 3.2

Income tax expense — — — ( 11.8 ) ( 1.0 ) (f) ( 12.8 )

Economic net income

$ 33.0 $ 11.1 $ 17.2 $ ( 23.6 ) $ ( 0.5 ) $ 37.2

BrightSphere Investment Group Inc.

Notes to Condensed Consolidated Financial Statements

15) Segments (cont.)

The following table presents the financial data for the Company’s three segments for the three months ended September 30, 2019 (in millions):

Three Months Ended September 30, 2019

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

ENI revenue $ 93.1 $ 37.4 $ 65.2 $ 0.1 $ 2.0 (a) $ 197.8

ENI operating expenses 40.8 16.1 18.5 8.3 5.5 (b) 89.2

Earnings before variable compensation

52.3 21.3 46.7 ( 8.2 ) ( 3.5 ) 108.6

Variable compensation 18.8 7.8 15.6 1.9 — (c) 44.1

ENI operating earnings (after variable comp)

33.5 13.5 31.1 ( 10.1 ) ( 3.5 ) 64.5

Affiliate key employee distributions

1.5 5.0 6.1 — — 12.6

Earnings after Affiliate key employee distributions

32.0 8.5 25.0 ( 10.1 ) ( 3.5 ) 51.9

Net interest expense — — — ( 5.7 ) ( 2.2 ) (d) ( 7.9 )

Net investment loss — — — — 7.0 (e) 7.0

Net income attributable to non-controlling interests in consolidated Funds

— — — — ( 7.6 ) (e) ( 7.6 )

Loss on sale of subsidiary — — — ( 1.3 ) (e) ( 1.3 )

Net loss attributable to non-controlling interests in consolidated Funds — — — ( 13.4 ) (e) ( 13.4 )

Income tax (expense) benefit — — ( 10.4 ) 0.1 (f) ( 10.3 )

Economic net income $ 32.0 $ 8.5 $ 25.0 $ ( 28.1 ) $ 38.0 $ 75.4

The following table presents the financial data for the Company’s three segments for the nine months ended September 30, 2020 (in millions):

Nine Months Ended September 30, 2020

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

ENI revenue $ 257.9 $ 128.2 $ 147.5 $ 0.3 $ 5.8 (a) $ 539.7

ENI operating expenses 109.3 47.6 52.7 19.4 0.4 (b) 229.4

Earnings before variable compensation

148.6 80.6 94.8 ( 19.1 ) 5.4 310.3

Variable compensation 52.7 29.0 36.0 2.6 17.4 (c) 137.7

ENI operating earnings (after variable comp)

95.9 51.6 58.8 ( 21.7 ) ( 12.0 ) 172.6

Affiliate key employee distributions

2.9 20.0 8.9 — — 31.8

Earnings after Affiliate key employee distributions

93.0 31.6 49.9 ( 21.7 ) ( 12.0 ) 140.8

Net interest expense — — — ( 16.5 ) ( 5.1 ) (d) ( 21.6 )

Net investment income — — — — 17.3 (e) 17.3

Gain on sale of Affiliate — — — — 7.2 (e) 7.2

Net income attributable to non-controlling interests in consolidated Funds

— — — — ( 21.3 ) (e) ( 21.3 )

Income tax expense — — — ( 31.4 ) ( 2.3 ) (f) ( 33.7 )

Income from discontinued operations, net of tax — — — 18.5 (g) 18.5

Economic net income

3 unchanged sentences

15) Segments (cont.)

The following table presents the financial data for the Company’s three segments for the nine months ended September 30, 2019 (in millions):

Nine Months Ended September 30, 2019

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

The following table presents the financial data for the Company’s two segments for the three months ended March 31, 2020 (in millions):

Three Months Ended March 31, 2020

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

ENI revenue $ 86.1 $ 52.5 $ 6.1 $ 2.0 (a) $ 146.7

10 unchanged sentences

Net interest expense — — ( 5.6 ) ( 1.9 ) (d) ( 7.5 )

Net investment income — — — — 25.2 (e) 25.2

Net investment income (loss) — — — ( 30.9 ) (e) ( 30.9 )

Net income attributable to non-controlling interests in consolidated Funds

1 unchanged sentence

Income tax (expense) benefit — — ( 8.5 ) 2.1 (f) ( 6.4 )

Income from discontinued operations, net of tax — — — 15.4 (g) 15.4

Economic net income

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GAAP revenue.

(b) Adjusted to include non-cash amortization expense for 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.

(b) Adjusted to include 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.

(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.

1 unchanged sentence

GAAP interest expense.

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

GAAP net income attributable to controlling interests.

BrightSphere Investment Group Inc.

1 unchanged sentence

15) Segments (cont.)

(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 Affiliate, all of which are included in U.S.

GAAP net income attributable to controlling interests.

(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.

Management fee revenue by principal geographic area is comprised of the following for the three and nine months ended September 30 (in millions):

Three Months Ended September 30, Nine Months Ended September 30,

2020 2019 2020 2019

$ 134.1 $ 148.2 $ 395.9 $ 459.4

Also adjusted to include the tax impact of certain ENI adjustments;

exclude the tax expense or benefits relating to uncertain tax positions, and exclude the tax impact of other unusual items that are not related to current operating results for ENI purposes.

(g) Adjusted to include the results of discontinued operations, which is included in U.S.

GAAP net income attributable to controlling interests.

Management fee revenue by principal geographic area is comprised of the following for the three months ended March 31 (in millions):

Three Months Ended March 31,

$ 99.8 $ 107.3

2 unchanged sentences

16) Related Party Transactions

Certain Affiliates have provided loans to Affiliate employees.

At September 30, 2020 and December 31, 2019, the balance of the loans to Affiliate employees was $ 11.9 million and $ 16.1 million, respectively.

Landmark has provided loans to its employees.

At March 31, 2021 and December 31, 2020, the balance of the loans to Affiliate employees was $ 3.9 million and $ 8.4 million, respectively.

These loans will be repaid by 2022.

On March 30 2021, the Company announced the divestiture of all of the Company’s interest in Landmark.

The pending divestiture of Landmark met the discontinued operations criteria.

The balance of the loans to Affiliate employees will be deconsolidated on disposition date, which is expected to occur in the second quarter of 2021.

See Note 3, Divestitures, Held for Sale and Discontinued Operations for additional information.

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-Q

Item 1. Financial Statements