Acadian Asset Management Inc. 10-Q

Item 1. Financial Statements. BrightSphere Investment Group Inc. Condensed Consolidated Balance Sheets (in millions, except for share and per share data, unaudited) September 30, 2021 December 31, 2020 Assets Cash and cash equivalents $ 1,422.5 $ 371.3 Restricted cash 1.6 1.6 Investment advisory fees receivable 112.9 100.6 Income taxes receivable — 9.3 Fixed assets, net 51.6 62.8 Right of use assets 65.5 78.6 Investments (includes balances reported at fair value of $ 54.8 and $ 88.0 ) 54.8 90.0 Acquired intangibles, net 0.1 0.2 Goodwill 20.3 20.3 Other assets 30.8 33.1 Deferred tax assets 73.3 170.3 Assets held for sale 14.1 326.8 Consolidated Funds’ assets held for sale — 114.3 Total assets $ 1,847.5 $ 1,379.2 Liabilities and stockholders’ equity Accounts payable and accrued expenses $ 24.5 $ 31.3 Accrued incentive compensation 71.1 78.3 Due to OM plc 1.9 3.4 Other compensation liabilities 89.5 73.8 Accrued income taxes 70.6 4.1 Operating lease liabilities 77.9 94.8 Other liabilities 0.2 1.5 Debt: Revolving credit facility 33.0 — Third party borrowings 394.8 394.3 Liabilities held for sale — 313.3 Total liabilities 763.5 994.8 Commitments and contingencies Equity: Common stock (par value $ 0.001 ; 79,819,378 and 79,387,961 shares, respectively, issued) 0.1 0.1 Additional paid-in capital 485.0 492.4 Retained earnings (deficit) 610.4 ( 176.5 ) Accumulated other comprehensive loss ( 11.5 ) ( 13.6 ) Non-controlling interests — 1.7 Non-controlling interests in consolidated Funds — 80.3 Total equity and non-controlling interests 1,084.0 384.4 Total liabilities and equity $ 1,847.5 $ 1,379.2 See Notes to Condensed Consolidated Financial Statements 3 Table of Contents BrightSphere Investment Group Inc. Condensed Consolidated Statements of Operations (in millions except for per share data, unaudited) Three Months Ended September 30, Nine Months Ended September 30, 2021 2020 2021 2020 Revenue: Management fees $ 111.4 $ 123.3 $ 326.8 $ 366.4 Performance fees 3.4 1.2 28.4 2.5 Other revenue 3.1 1.6 5.7 5.2 Consolidated Funds’ revenue — 1.4 — 4.6 Total revenue 117.9 127.5 360.9 378.7 Operating expenses: Compensation and benefits 67.2 66.9 193.2 178.1 General and administrative expense 16.5 21.4 53.6 64.2 Impairment of goodwill — — — 16.4 Amortization of acquired intangibles 0.1 — 0.1 0.3 Depreciation and amortization 5.4 5.0 16.7 14.8 Consolidated Funds’ expense — — — 0.1 Total operating expenses 89.2 93.3 263.6 273.9 Operating income 28.7 34.2 97.3 104.8 Non-operating income and (expense): Investment income (loss) 0.3 3.9 7.6 ( 3.2 ) Interest income — — 0.1 0.5 Interest expense ( 6.2 ) ( 6.9 ) ( 18.7 ) ( 22.1 ) Gain on sale of subsidiaries 34.6 7.2 33.3 7.2 Net consolidated Funds’ investment gains (losses) — 2.8 — ( 7.7 ) Total non-operating income (loss) 28.7 7.0 22.3 ( 25.3 ) Income from continuing operations before taxes 57.4 41.2 119.6 79.5 Income tax expense 14.5 9.3 33.5 21.6 Income from continuing operations 42.9 31.9 86.1 57.9 Income from discontinued operations, net of tax 1.2 2.1 76.5 52.1 Gain on disposal of discontinued operations, net of tax 185.4 — 694.6 — Net income 229.5 34.0 857.2 110.0 Net income (loss) attributable to non-controlling interests in consolidated Funds — ( 3.2 ) 68.0 21.3 Net income attributable to controlling interests $ 229.5 $ 37.2 $ 789.2 $ 88.7 Earnings per share (basic) attributable to controlling interests $ 2.88 $ 0.46 $ 9.93 $ 1.08 Earnings per share (diluted) attributable to controlling interests 2.76 0.46 9.53 1.08 Continuing operations earnings per share (basic) attributable to controlling interests 0.54 0.36 1.08 0.72 Continuing operations earnings per share (diluted) attributable to controlling interests 0.52 0.36 1.04 0.72 Weighted average common stock outstanding 79.6 80.0 79.4 81.8 Weighted average diluted common stock outstanding 83.2 80.9 82.8 82.1 See Notes to Condensed Consolidated Financial Statements 4 Table of Contents BrightSphere Investment Group Inc. Condensed Consolidated Statements of Comprehensive Income (in millions, unaudited) Three Months Ended September 30, Nine Months Ended September 30, 2021 2020 2021 2020 Net income $ 229.5 $ 34.0 $ 857.2 $ 110.0 Other comprehensive income (loss): Amortization related to derivative securities, net of tax 0.6 0.6 1.8 1.7 Foreign currency translation adjustment ( 0.9 ) 1.4 0.3 ( 0.4 ) Total other comprehensive income (loss) ( 0.3 ) 2.0 2.1 1.3 Comprehensive income (loss) attributable to non-controlling interests in consolidated Funds — ( 3.2 ) 68.0 21.3 Total comprehensive income attributable to controlling interests $ 229.2 $ 39.2 $ 791.3 $ 90.0 See Notes to Condensed Consolidated Financial Statements 5 Table of Contents BrightSphere Investment Group Inc. Condensed Consolidated Statements of Changes in Stockholders’ Equity For the three months ended September 30, 2021 and 2020 ($ in millions except share data, unaudited) Common stock (millions) Common stock, par value Additional paid-in capital Retained earnings (deficit) Accumulated other comprehensive income (loss) Total stockholders’ equity Non- controlling interests Non-controlling interests in consolidated Funds Total equity Redeemable non-controlling interests in consolidated Funds Total equity and redeemable non-controlling interests in consolidated Funds 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 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 derivatives securities, net of tax — — — — 0.6 0.6 — — 0.6 — 0.6 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 June 30, 2021 79.4 $ 0.1 $ 493.4 $ 381.6 $ ( 11.2 ) $ 863.9 $ — $ — $ 863.9 $ — $ 863.9 Issuance of common stock 0.4 — 0.1 — — 0.1 — — 0.1 — 0.1 Equity-based compensation — — 0.4 — — 0.4 — — 0.4 — 0.4 Foreign currency translation adjustment — — — — ( 0.9 ) ( 0.9 ) — — ( 0.9 ) — ( 0.9 ) Amortization related to derivatives securities, net of tax — — — — 0.6 0.6 — — 0.6 — 0.6 Withholding tax related to stock option exercise — — ( 8.9 ) — — ( 8.9 ) — — ( 8.9 ) — ( 8.9 ) Dividends ($ 0.01 per share) — — — ( 0.7 ) — ( 0.7 ) — — ( 0.7 ) — ( 0.7 ) Net income — — — 229.5 — 229.5 — — 229.5 — 229.5 September 30, 2021 79.8 $ 0.1 $ 485.0 $ 610.4 $ ( 11.5 ) $ 1,084.0 $ — $ — $ 1,084.0 $ — $ 1,084.0 See Notes to Condensed Consolidated Financial Statements 6 Table of Contents BrightSphere Investment Group Inc. Condensed Consolidated Statements of Changes in Stockholders’ Equity For the nine months ended September 30, 2021 and 2020 ($ in millions except share data, unaudited) Common stock (millions) Common stock, par value Additional paid-in capital Retained earnings (deficit) Accumulated other comprehensive income (loss) Total stockholders’ equity Non- controlling interests Non-controlling interests in consolidated Funds Total equity Redeemable non-controlling interests in consolidated Funds Total equity and redeemable non-controlling interests in consolidated Funds December 31, 2019 85.9 $ 0.1 $ 534.3 $ ( 452.5 ) $ ( 17.5 ) $ 64.4 $ 1.3 $ 48.8 $ 114.5 $ 83.9 $ 198.4 Issuance of common stock 0.1 — 0.2 — — 0.2 — — 0.2 — 0.2 Retirement of common stock ( 0.2 ) — — — — — — — — — — Repurchase of common stock ( 5.7 ) — ( 35.3 ) — — ( 35.3 ) — — ( 35.3 ) — ( 35.3 ) Capital contributions — — — — — — — 1.4 1.4 130.1 131.5 Equity-based compensation — — 2.0 — — 2.0 — — 2.0 — 2.0 Foreign currency translation adjustment — — — — ( 0.4 ) ( 0.4 ) — — ( 0.4 ) — ( 0.4 ) Amortization related to derivatives securities, net of tax — — — — 1.7 1.7 — — 1.7 — 1.7 Other changes in non-controlling interests — — — — — — 0.1 — 0.1 — 0.1 Net de-consolidation of Funds — — — — — — — — — ( 126.8 ) ( 126.8 ) Dividends ($ 0.12 per share) — — — ( 9.9 ) — ( 9.9 ) — — ( 9.9 ) — ( 9.9 ) Net income (loss) — — — 88.7 — 88.7 — 22.8 111.5 ( 1.6 ) 109.9 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 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 0.4 — 0.2 — — 0.2 — — 0.2 — 0.2 Capital contributions — — — — — — 3.8 29.7 33.5 — 33.5 Equity-based compensation — — 1.3 — — 1.3 — — 1.3 — 1.3 Foreign currency translation adjustment — — — — 0.3 0.3 — — 0.3 — 0.3 Amortization related to derivative securities, net of tax — — — — 1.8 1.8 — — 1.8 — 1.8 Withholding tax related to stock option exercise — — ( 8.9 ) — — ( 8.9 ) — — ( 8.9 ) — ( 8.9 ) Other changes in non-controlling interests — — — — — — ( 5.5 ) — ( 5.5 ) — ( 5.5 ) Net de-consolidation of Funds — — — — — — — ( 178.0 ) ( 178.0 ) — ( 178.0 ) Dividends ($ 0.03 per share) — — — ( 2.3 ) — ( 2.3 ) — — ( 2.3 ) — ( 2.3 ) Net income — — — 789.2 — 789.2 — 68.0 857.2 — 857.2 September 30, 2021 79.8 $ 0.1 $ 485.0 $ 610.4 $ ( 11.5 ) $ 1,084.0 $ — $ — $ 1,084.0 $ — $ 1,084.0 See Notes to Condensed Consolidated Financial Statements 7 Table of Contents BrightSphere Investment Group Inc. Condensed Consolidated Statements of Cash Flows (in millions, unaudited) Nine Months Ended September 30, 2021 2020 Cash flows from operating activities: Net income 857.2 110.0 Less: Income from discontinued operations, net of tax ( 76.5 ) ( 52.1 ) Less: Net (income) loss attributable to non-controlling interests in consolidated Funds from continuing operations — 1.6 Adjustments to reconcile net income to net cash flows from operating activities from continuing operations: Impairment of goodwill — 16.4 Amortization of acquired intangibles 0.1 0.3 Gain on sale of discontinued operations, net of tax ( 694.6 ) — Gain on sale of subsidiaries ( 33.3 ) ( 7.2 ) Depreciation and other amortization 16.7 14.8 Amortization of debt-related costs 3.4 3.2 Amortization and revaluation of non-cash compensation awards 23.8 ( 11.5 ) Net earnings from Affiliate accounted for using the equity method ( 2.6 ) ( 2.2 ) Distributions received from equity method Affiliate 4.4 2.2 Distributions from discontinued operations 52.7 49.6 Deferred income taxes 3.3 30.6 (Gains) losses on other investments ( 6.6 ) 5.9 Changes in operating assets and liabilities (excluding discontinued operations): (Increase) decrease in investment advisory fees receivable ( 33.7 ) 24.5 Increase in other receivables, prepayments, deposits and other assets ( 0.1 ) ( 3.4 ) (Decrease) in accrued incentive compensation, operating lease liabilities and other liabilities ( 3.5 ) ( 27.5 ) (Decrease) in accounts payable, accrued expenses and accrued income taxes ( 88.4 ) ( 20.2 ) Net cash flows from operating activities of continuing operations, excluding consolidated Funds 22.3 135.0 Net income (loss) attributable to non-controlling interests in consolidated Funds from continuing operations — ( 1.6 ) 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 — 6.2 Purchase of investments — ( 98.2 ) Sale of investments — 66.7 (Increase) decrease in receivables and other assets — ( 28.7 ) Increase in accounts payable and other liabilities — 3.0 Net cash flows from operating activities of continuing operations of consolidated Funds — ( 52.6 ) Net cash flows from operating activities of continuing operations 22.3 82.4 Net cash flows from operating activities of discontinued operations ( 7.2 ) 9.6 Total net cash flows from operating activities 15.1 92.0 Cash flows from investing activities: Additions of fixed assets, excluding discontinued operations ( 11.1 ) ( 21.2 ) Cash proceeds from sale of discontinued operations 950.2 — Cash proceeds from sale of subsidiaries 46.2 — Purchase of investment securities ( 2.3 ) ( 12.6 ) Sale of investment securities 26.0 62.9 Cash flows from investing activities of consolidated Funds Deconsolidation of Funds — ( 86.0 ) Net cash flows from investing activities of continuing operations 1,009.0 ( 56.9 ) See Notes to Condensed Consolidated Financial Statements 8 Table of Contents BrightSphere Investment Group Inc. Condensed Consolidated Statements of Cash Flows (in millions, unaudited) Nine Months Ended September 30, 2021 2020 Net cash flows from investing activities of discontinued operations 3.1 ( 3.2 ) Total net cash flows from investing activities 1,012.1 ( 60.1 ) Cash flows from financing activities: Proceeds from third party and non-recourse borrowings 176.0 80.0 Repayment of third party and non-recourse borrowings ( 143.0 ) ( 175.0 ) Payment for debt issuance costs ( 0.4 ) — Proceeds from stock issuance 0.2 — Payment to OM plc for co-investment redemptions ( 1.5 ) ( 0.3 ) Dividends paid to stockholders ( 1.5 ) ( 6.7 ) Dividends paid to related parties ( 0.9 ) ( 3.3 ) Repurchases of common stock — ( 35.3 ) Withholding tax payments related to stock option exercise ( 8.9 ) — Cash flows from financing activities of consolidated Funds Redeemable non-controlling interest capital raised — 131.2 Redeemable non-controlling interest capital redeemed — ( 1.1 ) Net cash flows from financing activities of continuing operations 20.0 ( 10.5 ) Net cash flows from financing activities of discontinued operations ( 27.2 ) 1.5 Total net cash flows from financing activities ( 7.2 ) ( 9.0 ) Effect of foreign exchange rate changes on cash and cash equivalents — — Net increase in cash and cash equivalents 1,020.0 22.9 Cash and cash equivalents at beginning of period (including restricted cash) 372.9 82.1 Cash and cash equivalents at beginning of period classified within assets held for sale $ 31.2 $ 38.9 Cash and cash equivalents at end of period $ 1,424.1 $ 143.9 Less: cash and cash equivalents at end of period classified within assets held for sale — ( 59.7 ) Cash and cash equivalents at end of period from continuing operations (including restricted cash) $ 1,424.1 84.2 Supplemental disclosure of cash flow information: Interest paid (excluding consolidated Funds) $ 18.0 $ 22.3 Income taxes paid 114.0 4.1 See Notes to Condensed Consolidated Financial Statements 9 Table of Contents BrightSphere Investment Group Inc. Notes to Condensed Consolidated Financial Statements (unaudited) 1) Organization and Description of the Business BrightSphere Investment Group Inc. (“BrightSphere”, “BSIG” or the “Company”), through its subsidiaries, is a global asset management company. The Company provides investment management services globally to predominantly institutional investors. The Company historically held interests in a group of investment management firms (the “Affiliates”) individually headquartered in the United States. The Company completed the disposition of certain Affiliates and currently operates the business through one Affiliate, Acadian Asset Management LLC (“Acadian”), within its Quant & Solutions segment. The Company’s Affiliate is organized as a limited liability company. 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. The Company utilizes a profit-sharing model in structuring its compensation and ownership with its Affiliate. Variable compensation is based on the firm’s profitability. BSIG and Affiliate key employees share in profits after variable compensation according to their respective ownership interests. 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 currently conducts its operations through the following reportable segment (1)(2) : • 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 in developed and emerging markets, including global, non-U.S. and small-cap equities, as well as managed volatility, ESG, multi-asset, equity alternatives, and long/short strategies. This segment is comprised of the Company’s interest in Acadian. Campbell Global, LLC (“Campbell Global”), Investment Counselors of Maryland (“ICM”) and the corporate head office are included within the Other (1)(2) category. (1) Prior to March 31, 2021, the Company had an Alternatives reportable segment which was comprised of Landmark Partners, LLC (“Landmark”) and Campbell Global operating segments. On March 30, 2021, the Company entered into an agreement to sell all of the Company’s interests in Landmark. As a result of this transaction, Landmark was 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 reclassification of Campbell Global to “Other”. On June 21, 2021, the Company entered into an agreement to sell all of the Company’s interests in Campbell Global. See Note 3, Divestitures, Held for Sale and Discontinued Operations and Note 15, Segments for further discussion. (2) Prior to June 30, 2021, the Company had a Liquid Alpha reportable segment which was comprised of Thompson, Siegel & Walmsley LLC (“TSW”) and ICM. On February 6, 2021, the Company entered into an agreement to sell all of the Company’s interests in ICM, an equity-accounted Affiliate. On May 9, 2021, the Company entered into an agreement to sell all of the Company’s interests in TSW. As a result of this transaction, TSW has been reclassified to discontinued operations and the Liquid Alpha 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 TSW within discontinued operations. Also, the ICM operating segment has been reclassified to “Other” within the Company’s segment reporting for the three and nine months ended September 30, 2021. See Note 3, Divestitures, Held for Sale and Discontinued Operations and Note 15, Segments 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. On October 15, 2014, the 10 BrightSphere Investment Group Inc. Notes to Condensed Consolidated Financial Statements (unaudited) 1) Organization and Description of the Business (cont.) Company completed the initial public offering (the “Offering”) by OM plc pursuant to the Securities Act of 1933, as amended. 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 shares held by HNA of the Company to Paulson & Co. (“Paulson”). On February 25, 2019, this transaction was completed and Paulson 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 and nine months ended September 30, 2021, the Company did no t repurchase any shares of common stock. 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. 2) Basis of Presentation and Significant Accounting Policies The Company’s significant accounting policies are as follows: Basis of presentation 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, 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. GAAP”). In the opinion of management, all normal and recurring adjustments considered necessary for a fair presentation of the Company’s Condensed Consolidated Financial Statements have been included. All dollar amounts, except per-share data in the text and tables herein, are stated in millions unless otherwise indicated. 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. 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. The criteria for discontinued operations were not met for this divestiture. The transaction closed on July 19, 2021. See Note 3, Divestitures, Held for Sale and Discontinued Operations for additional information. 11 Table of Contents BrightSphere Investment Group Inc. Notes to Condensed Consolidated Financial Statements (unaudited) 2) Basis of Presentation and Significant Accounting Policies (cont.) On March 30, 2021, the Company entered into a definitive agreement with Ares Holdings L.P. (“Ares”), pursuant to which Ares agreed to purchase all of the Company’s interests in Landmark and the Company’s carried interest and co-investments in Landmark Funds. The transaction closed on June 2, 2021. The divestiture of Landmark met the discontinued operations criteria as it represented a strategic shift that had 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 and nine months ended September 30, 2021 and September 30, 2020. Cash flows from discontinued operations are presented in the Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2021 and September 30, 2020. On May 9, 2021, the Company entered into a definitive agreement with Pendal Group Limited (“Pendal”), pursuant to which Pendal agreed to purchase all of the Company’s interests in TSW and the Company’s seed investments in TSW strategies. The transaction closed on July 22, 2021. The divestiture of TSW met the discontinued operations criteria as it represented a strategic shift that had a major effect on the Company’s operations and financial results. As a result, the Company has reclassified the financial results of TSW to income from discontinued operations, net of tax in the Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2021 and September 30, 2020. Cash flows from discontinued operations are presented in the Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2021 and September 30, 2020. On June 21, 2021, the Company entered into a definitive agreement to sell all of the Company’s interests in Campbell Global and the Company’s co-investments in Campbell Global’s Funds. The transaction closed on August 31, 2021. The divestiture of Campbell Global did not meet the discontinued operations criteria as it did not represent a strategic shift that had a major effect on the Company’s operations and financial results. See Note 3, Divestitures, Held for Sale and Discontinued Operations for additional information. 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. The Company has condensed or omitted these disclosures. These unaudited Condensed Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements and notes thereto for the year ended December 31, 2020 included in the Company’s Annual Report on Form 10-K as filed with the Securities and Exchange Commission (“SEC”) on March 1, 2021. The Company’s significant accounting policies, which have been consistently applied, are summarized in those financial statements. 12 Table of Contents BrightSphere Investment Group Inc. Notes to Condensed Consolidated Financial Statements (unaudited) 2) Basis of Presentation and Significant Accounting Policies (cont.) Use of estimates 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, 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 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. 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 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 September 30, 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. The Company does not believe that any such guidance has or will have a material effect on its Condensed Consolidated Financial Statements and related disclosures. 13 Table of Contents BrightSphere Investment Group Inc. Notes to Condensed Consolidated Financial Statements (unaudited) 3) Divestitures, Held for Sale and Discontinued Operations Landmark Partners On March 30, 2021, the Company entered into a definitive agreement with Ares, pursuant to which Ares agreed to purchase all of the Company’s interests in Landmark and the Company’s co-investments in Landmark funds. On June 2, 2021, the Company completed the sale of all its interests in Landmark to Ares for cash consideration of $ 690.0 million, adjusted for customary closing adjustments. The Company recognized a gain on disposal of discontinued operations of $ 509.2 million, net of tax of $ 176.6 million for the nine months ended September 30, 2021. The divestiture of Landmark met the discontinued operations criteria as it represented a strategic shift that had a major effect on the Company’s operations and financial results. The Company utilized $ 87.9 million of its deferred tax asset in connection with the sale of all its interests in Landmark. The Company also redeemed co-investments of $ 31.5 million in Landmark’s funds as of June 2, 2021 upon consummation of the sale. Thompson Siegel & Walmsley, LLC On May 9, 2021, the Company entered into an agreement with Pendal to sell all of the Company’s interests in TSW and the Company’s seed investment in TSW strategies. On July 22, 2021, the Company completed the sale of all its interests in TSW to Pendal for cash consideration of $ 240.0 million. The Company recognized a gain on disposal of discontinued operations of $ 185.4 million net of tax of $ 74.0 million for the three and nine months ended September 30, 2021. The divestiture of TSW met the discontinued operations criteria as it represented a strategic shift that has a major effect on the Company’s operations and financial results. The Company utilized $ 6.9 million of its deferred tax asset in connection with the sale of all its interests in TSW. Campbell Global On June 21, 2021, the Company entered into a definitive agreement with J.P. Morgan to sell all of the Company’s interests in Campbell and the Company’s co-investments in Campbell funds. On August 31, 2021, the Company completed the sale of all its interests in Campbell to J.P. Morgan. Financial and operational results for Campbell are included within the “Other” category until August 31, 2021, the consummation of the sale. The divestiture of Campbell did not meet the criteria for discontinued operations. The Company also redeemed co-investments in Campbell’s funds as of August 31, 2021 upon consummation of the sale. 14 Table of Contents BrightSphere Investment Group Inc. Notes to Condensed Consolidated Financial Statements (unaudited) 3) Divestitures, Held for Sale and Discontinued Operations (cont.) The major classes of assets and liabilities held for sale in the Condensed Consolidated Balance Sheets as of September 30, 2021 and December 31, 2020 are as follows (in millions): September 30, 2021 December 31, 2020 Cash and cash equivalents $ — $ 30.6 Investment advisory fees receivable — 12.2 Fixed assets, net — 8.8 Right of use assets — 12.1 Investments — 25.1 Intangible assets, net — 58.2 Goodwill — 161.8 Other assets — 17.5 Deferred tax assets — 0.5 Assets of discontinued operations classified as held for sale (1) $ — $ 326.8 Other assets held for sale (2) 14.1 — Assets held for sale $ 14.1 $ 326.8 Accounts payable and accrued expenses $ — $ 2.2 Accrued incentive compensation — 42.5 Other compensation liabilities — 254.2 Operating lease liabilities — 13.1 Other liabilities — 1.3 Liabilities of discontinued operations classified as held for sale (1) $ — $ 313.3 (1) Includes assets and liabilities of discontinued operations of Landmark and TSW as of December 31, 2020. (2) Includes seed investments in TSW strategies as of September 30, 2021. 15 Table of Contents BrightSphere Investment Group Inc. Notes to Condensed Consolidated Financial Statements (unaudited) 3) Divestitures, Held for Sale and Discontinued Operations (cont.) The major classes of revenue and expenses constituting net income from discontinued operations attributable to controlling interests for Landmark and TSW in the Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2021 and 2020 are as follows (in millions): Three Months Ended September 30, Nine Months Ended September 30, 2021 2020 2021 2020 Revenues $ 5.6 $ 54.9 $ 115.1 $ 161.0 Operating expenses: Compensation and benefits 3.6 42.8 91.2 105.9 General and administrative expenses 0.4 4.0 8.1 13.4 Amortization of intangibles — 1.6 2.7 4.8 Depreciation and amortization — 0.2 0.5 0.8 Consolidated Funds’ expense — — 0.1 0.1 Total operating expenses 4.0 48.6 102.6 125.0 Operating income (loss) 1.6 6.3 12.5 36.0 Investment income (loss) of consolidated Funds — ( 0.7 ) 68.1 28.2 Income from discontinued operations before taxes 1.6 5.6 80.6 64.2 Income tax expense 0.4 3.5 4.1 12.1 Income from discontinued operations, net of tax 1.2 2.1 76.5 52.1 Gain on disposal, net of tax of $ 74.0 , and $ 250.6 185.4 — 694.6 — Total discontinued operations 186.6 2.1 771.1 52.1 Income (loss) from discontinued operations attributable to non-controlling interests — ( 6.1 ) 68.0 22.9 Net income from discontinued operations attributable to controlling interests $ 186.6 $ 8.2 $ 703.1 $ 29.2 Consolidated Funds In connection with the sale of Landmark on June 2, 2021, the Company transferred its co-investment interests in Landmark funds to Ares for $ 31.5 million. The redemption resulted in the de-consolidation of consolidated Funds that were considered to be variable interest entities (“VIEs”) as of June 2, 2021 upon consummation of the sale. 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 December 31, 2020. The consolidated Funds’ investments gains/(losses) from discontinued operations, net of tax, attributable to controlling interests was $ 0.0 million and $ 0.0 million in the Company’s Condensed Consolidated Statement of Operations for each of the three and nine months ended September 30, 2021. The consolidated Funds’ investments gains/(losses) from discontinued operations, net of tax, attributable to controlling interests was $ 5.4 million and $ 5.2 million in the Company’s Condensed Consolidated Statement of Operations for the three and nine months ended September 30, 2020, respectively. The major classes of assets comprising the consolidated Funds classified as held for sale are as follows at September 30, 2021 and December 31, 2020 (in millions): 16 Table of Contents BrightSphere Investment Group Inc. Notes to Condensed Consolidated Financial Statements (unaudited) 3) Divestitures, Held for Sale and Discontinued Operations (cont.) September 30, 2021 December 31, 2020 Cash and cash equivalents $ — $ 0.6 Equity-accounted investments (1) — 113.7 Consolidated Funds’ assets held for sale $ — $ 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. Other divestitures 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 “Other” category. On July 19, 2021, the Company completed the sale of all its interest in ICM to William Blair Investment Management for cash consideration totaling $ 18.5 million. The criteria for discontinued operations were not met for this divestiture. 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”). Barrow, Hanley, Mewhinney & Strauss LLC On October 14, 2021 the Company received $ 15.8 million of cash proceeds from the sale of a previously disposed of Affiliate, Barrow, Hanley, Mewhinney & Strauss LLC. 4) Investments Investments are comprised of the following as of the dates indicated (in millions): September 30, 2021 December 31, 2020 Other investments held at fair value 9.2 40.0 Investments related to long-term incentive compensation plans held at fair value 45.6 48.0 Total investments held at fair value 54.8 88.0 Equity-accounted investment in Affiliate — 2.0 Total investments per Condensed Consolidated Balance Sheets 54.8 90.0 17 Table of Contents BrightSphere Investment Group Inc. Notes to Condensed Consolidated Financial Statements (unaudited) 4) Investments (cont.) 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, 2021 2020 2021 2020 Realized and unrealized gains (losses) on other investments held at fair value $ 0.1 $ 2.9 $ 5.0 $ ( 5.4 ) Earnings from equity-accounted investment in Affiliate 0.2 1.0 2.6 2.2 Total investment income (loss) per Condensed Consolidated Statements of Operations $ 0.3 $ 3.9 $ 7.6 $ ( 3.2 ) 5) Fair Value Measurements The following table summarizes the Company’s assets that are measured at fair value on a recurring basis at September 30, 2021 (in millions): Quoted prices in active markets (Level I) Significant other observable inputs (Level II) Significant unobservable inputs (Level III) Uncategorized Total value, September 30, 2021 Assets (1) Investments in separate accounts (2) 4.2 — — — 4.2 Investments related to long-term incentive compensation plans (3) 45.6 — — — 45.6 Investments in unconsolidated Funds (4) — — — 5.0 5.0 Total fair value assets $ 49.8 $ — $ — $ 5.0 $ 54.8 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 in active markets (Level I) Significant other observable inputs (Level II) Significant unobservable inputs (Level III) Uncategorized Total value December 31, 2020 Assets (1) Investments in separate accounts (2) 9.7 11.6 — — 21.3 Investments related to long-term incentive compensation plans (3) 48.0 — — — 48.0 Investments in unconsolidated Funds (4) — — 2.5 16.2 18.7 Total fair value assets $ 57.7 $ 11.6 $ 2.5 $ 16.2 $ 88.0 (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. 18 Table of Contents BrightSphere Investment Group Inc. Notes to Condensed Consolidated Financial Statements (unaudited) 5) Fair Value Measurements (cont.) The securities that trade in markets that are not considered to be active but are valued based on quoted market prices, dealer quotations or alternative pricing sources supported by observable inputs obtained by the Company from independent pricing services are classified as Level II. The Company obtains prices from independent pricing services that may utilize broker quotes, but generally the independent pricing services will use various other pricing techniques which take into account appropriate factors such as yield, quality, coupon rate, maturity, type of issue, trading characteristics and other data. The Company has not made adjustments to the prices provided. If the pricing services are only able to (a) obtain a single broker quote or (b) utilize a pricing model, such securities are classified as Level III. If the pricing services are unable to provide prices, the Company attempts to obtain one or more broker quotes directly from a dealer or values such securities at the last bid price obtained. In either case, such securities are classified as Level III. The Company performs due diligence procedures over third party pricing vendors to understand their methodology and controls to support their use in the valuation process to ensure compliance with required accounting disclosures. (2) Investments in separate accounts of $ 4.2 million at September 30, 2021 consist of approximately 100 % of equity 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 $ 45.6 million and $ 48.0 million at September 30, 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 $ 5.0 million and $ 16.2 million at September 30, 2021 and December 31, 2020, respectively, relate to investments in unconsolidated Funds which consist primarily of investments in Funds and are valued using NAV which the Company relies on to determine their fair value as a practical expedient and has therefore not classified these investments in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to amounts presented in the Condensed Consolidated Balance Sheets. These unconsolidated Funds consist primarily of real estate investment Funds, UCITS and other investment vehicles. The NAVs that have been provided by investees have been derived from the fair values of the underlying investments as of the measurement dates. UCITS and other investment vehicles are not subject to redemption restrictions. 19 Table of Contents BrightSphere Investment Group Inc. Notes to Condensed Consolidated Financial Statements (unaudited) 5) Fair Value Measurements (cont.) The real estate investment Funds of $ 4.7 million and $ 6.2 million at September 30, 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 two years from September 30, 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. The valuations are then reviewed and approved by the valuation committee, which consists of senior members of the portfolio management, acquisitions, and research teams. For certain properties and loans, the valuation process may also include a valuation by independent appraisers. 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 $ 0.0 million and $ 2.5 million at September 30, 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. 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, Investments in unconsolidated Funds 2021 2020 2021 2020 Level III financial assets At beginning of the period $ — $ 3.0 $ 2.5 $ 3.0 Redemptions — ( 0.3 ) ( 0.1 ) ( 0.3 ) Disposals — — ( 2.7 ) — Total net fair value gains/losses recognized in net income — — 0.3 — Total Level III financial assets $ — $ 2.7 $ — $ 2.7 There were no significant transfers of financial assets or liabilities between Levels II or III during the three and nine months ended September 30, 2021 and 2020, respectively. 20 Table of Contents BrightSphere Investment Group Inc. Notes to Condensed Consolidated Financial Statements (unaudited) 6) Variable Interest Entities The Company, through its Affiliates, sponsors the formation of various entities considered to be VIEs. These VIEs are primarily Funds managed by Affiliates and other partnership interests typically owned entirely by third party investors. Certain Funds may be capitalized with seed capital investments from the Company and may be owned partially by Affiliate key employees and/or individuals that own non-controlling interests in an Affiliate. The Company’s determination of whether it is the primary beneficiary of a Fund that is a VIE is based in part on an assessment of whether or not the Company and its related parties are exposed to more than an insignificant amount of the risks and rewards of the entity. Typically, the Fund’s investors are entitled to substantially all of the economics of these VIEs with the exception of the management fees and performance fees, if any, earned by the Company or any investment the Company has made into the Funds. 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 of Funds that are VIEs and consolidated by the Company (in millions): September 30, 2021 December 31, 2020 Assets Consolidated Funds’ assets held for sale (Note 3) — 114.3 Total Assets $ — $ 114.3 In connection with the sale of Landmark on June 2, 2021, the Company transferred its co-investment interests in Landmark funds to Ares for $ 31.5 million. The redemption resulted in the de-consolidation of consolidated Funds that were considered to be VIEs as of June 2, 2021 upon consummation of the sale. The Company reclassified assets of consolidated Funds as “Consolidated Funds’ assets held for sale” in the Condensed Consolidated Balance Sheet as of 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. 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. The Company’s investment in any unconsolidated VIE generally represents an insignificant interest of the Fund’s net assets and assets under management, such that the majority of the VIEs results are attributable to third parties. The Company’s exposure to risk in these entities is generally limited to any capital contribution it has made or is required to make and any earned but uncollected management fees. The Company has not issued any investment performance guarantees to these VIEs or their investors. 21 Table of Contents BrightSphere Investment Group Inc. Notes to Condensed Consolidated Financial Statements (unaudited) 6) Variable Interest Entities (cont.) The following information pertains to unconsolidated VIEs for which the Company holds a variable interest (in millions): September 30, 2021 December 31, 2020 Unconsolidated VIE assets $ 781.9 $ 6,437.1 Unconsolidated VIE liabilities $ 326.7 $ 4,332.1 Equity interests on the Condensed Consolidated Balance Sheets $ 4.7 $ 14.3 Maximum risk of loss (1) $ 5.3 $ 19.3 (1) Includes equity investments the Company has made or is required to make and any earned but uncollected management and incentive fees. The Company does not record performance or incentive allocations until it is probable that a significant reversal will not occur. 22 Table of Contents BrightSphere Investment Group Inc. Notes to Condensed Consolidated Financial Statements (unaudited) 7) Borrowings and Debt The Company’s borrowings and long-term debt was comprised of the following as of the dates indicated (in millions): September 30, 2021 December 31, 2020 (in millions) Carrying Value Fair Value Fair Value Level Carrying Value Fair Value Fair Value Level Revolving credit facility: $ 125 million revolving credit facility expiring August 22, 2022 (1)(2) $ 33.0 $ 33.0 2 $ — $ — Total revolving credit facility $ 33.0 $ 33.0 $ — $ — Third party borrowings: $ 275 million 4.80 % Senior Notes Due July 27, 2026 (3) $ 273.0 $ 298.0 2 $ 272.8 $ 298.9 2 $ 125 million 5.125 % Senior Notes Due August 1, 2031 (3) 121.8 128.6 2 121.5 126.0 2 Total third party borrowings $ 394.8 $ 426.6 $ 394.3 $ 424.9 (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 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. Revolving Credit Facility On September 3, 2020, the Company, Royal Bank of Canada, BMO Harris Bank, N.A., Bank of China, New York Branch, Wells Fargo Bank, National Association, Barclays Bank PLC, Morgan Stanley Bank, N.A., Bank of America N.A., the Bank of New York Mellon and Citibank, N.A., as an issuing bank and administrative agent (collectively, the “Lenders”), entered into an amendment (the “Amendment") to the Revolving Credit Agreement dated as of August 20, 2019 (the “Original Credit Agreement”, and as amended by the Amendment, the “Amended Credit Agreement”). 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 23 Table of Contents BrightSphere Investment Group Inc. Notes to Consolidated Financial Statements (unaudited) 7) Borrowings and Debt (cont.) amount ranging from 1.5 % to 2.0 %, with such additional amount based on Acadian’s Leverage Ratio (as defined below). In addition, Acadian is charged a commitment fee based on the average daily unused portion of the revolving credit facility under the Acadian Credit Agreement at a per annum rate ranging from 0.25 % to 0.375 %, with such amount based on Acadian’s Leverage Ratio. Under the Acadian Credit Agreement, the ratio of Acadian’s third-party borrowings to Acadian’s trailing twelve months Adjusted EBITDA, as defined by the Acadian Credit Agreement (the “Leverage Ratio”), cannot exceed 2.5 x and the Acadian interest coverage ratio must not be less than 4.0 x. 8) Leases The Company has operating leases for corporate offices, data centers, vehicles, and certain equipment. The operating leases have remaining lease terms of 1 year to 12 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, 2021 2020 2021 2020 Operating lease cost $ 2.8 $ 3.4 $ 8.6 $ 10.0 Variable lease cost — — 0.1 0.1 Total operating lease expense $ 2.8 $ 3.4 $ 8.7 $ 10.1 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases $ 2.5 $ 3.0 $ 8.6 $ 9.2 Right of use assets obtained in exchange for new operating lease liabilities — 0.3 1.6 74.8 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, 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 3.34 %, respectively. 24 Table of Contents BrightSphere Investment Group Inc. Notes to Condensed Consolidated Financial Statements (unaudited) 8) Leases (cont.) Maturities of operating lease liabilities were as follows (in millions): Operating Leases Year Ending December 31, 2021 (excluding the nine months ended September 30, 2021) $ 2.4 2022 5.8 2023 8.0 2024 7.5 2025 7.6 Thereafter 64.0 Total lease payments $ 95.3 Less imputed interest ( 17.4 ) Total $ 77.9 25 Table of Contents BrightSphere Investment Group Inc. Notes to Condensed Consolidated Financial Statements (unaudited) 9) Goodwill and Intangible Assets In connection with the divestitures of Landmark and TSW, the Company disposed of goodwill of $ 148.1 million and $ 13.7 million respectively, during the nine months ended September 30, 2021. The Landmark divestiture was consummated on June 2, 2021 and the TSW divestiture was consummated on July 22, 2021. 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 $ 1 million in co-investments at a former Affiliate as of September 30, 2021. These commitments will be funded as required through the end of the respective investment periods ranging through fiscal 2022. During 2021, the Company divested of all of its interests in Landmark and Campbell and funded its commitments as required through the transaction dates. As a result of these dispositions, the Company no longer had any unfunded commitments to Landmark or Campbell as of September 30, 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. Management is not aware of any violations of such financial requirements occurring during the period. Guaranty The Company entered into a guaranty for an office space security deposit on behalf of an Affiliate in the amount of $ 2.5 million in January 2020. This represents the maximum potential amount of future (undiscounted) payments that the Company could be required to make under the guaranty in the event of default by the guaranteed parties. This guaranty expires in 2022. There are no liabilities recorded on the Condensed Consolidated Balance Sheet as of September 30, 2021 related to this guaranty. Litigation The Company and its Affiliates are subject to claims, legal proceedings, and other contingencies in the ordinary course of their business activities. Each of these matters is subject to various uncertainties, and it is possible that some of these matters may be resolved in a manner unfavorable to the Company or its Affiliates. The Company and its Affiliates establish accruals for matters for which the outcome is probable and can be reasonably estimated. 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, 2021, there were no material accruals for claims, legal proceedings, or other contingencies. Indemnifications In the normal course of business, such as through agreements to enter into business combinations and divestitures of Affiliates, the Company enters into contracts that contain a variety of representations and warranties and which provide general indemnifications. The Company’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Company that have not yet occurred. 26 Table of Contents BrightSphere Investment Group Inc. Notes to Condensed Consolidated Financial Statements (unaudited) 10) Commitments and Contingencies (cont.) Foreign tax contingency The Company has clients in non-U.S. jurisdictions which require entities that are conducting certain business activities in such jurisdictions to collect and remit tax assessed on certain fees paid for goods and services provided. The Company does not believe this requirement is applicable based on its limited business activities in these jurisdictions. 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, 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 September 30, 2021. Considerations of credit risk 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. These financial institutions are typically located in cities in which the Company and its Affiliates operate. 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 September 30, 2021, approximately $ 1.4 billion 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. 27 Table of Contents BrightSphere Investment Group Inc. Notes to Condensed Consolidated Financial Statements (unaudited) 11) Earnings Per Share Basic earnings per share is calculated by dividing net income attributable to controlling interests by the weighted-average number of shares of common stock outstanding. Diluted earnings per share is similar to basic earnings per share, but is adjusted for the effect of potentially issuable common stock, except when inclusion is antidilutive. 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, 2021 2020 2021 2020 Numerator: Income from continuing operations attributable to controlling interests $ 42.9 $ 29.0 $ 86.1 $ 59.5 Income from discontinued operations attributable to controlling interests (Note 3) 186.6 8.2 703.1 29.2 Net income attributable to controlling interests $ 229.5 $ 37.2 $ 789.2 $ 88.7 Less: Total income available to participating unvested securities (1) — — ( 0.1 ) — Net income attributable to common stock $ 229.5 $ 37.2 $ 789.1 $ 88.7 Denominator: Weighted-average shares of common stock outstanding—basic 79,606,810 80,001,360 79,427,030 81,832,607 Potential shares of common stock: Restricted stock units 34,587 115,155 31,177 48,915 Employee stock options 3,603,178 735,023 3,373,301 245,008 Weighted-average shares of common stock outstanding—diluted 83,244,575 80,851,538 82,831,508 82,126,530 Earnings per share of common stock attributable to controlling interests: Basic Continuing operations $ 0.54 $ 0.36 $ 1.08 $ 0.72 Discontinued operations 2.34 0.10 8.85 0.36 Basic earnings per share of common stock attributable to controlling interests $ 2.88 $ 0.46 $ 9.93 $ 1.08 Diluted Continuing operations $ 0.52 $ 0.36 $ 1.04 $ 0.72 Discontinued operations 2.24 0.10 8.49 0.36 Diluted earnings per share of common stock attributable to controlling interests $ 2.76 $ 0.46 $ 9.53 $ 1.08 (1) Income available to participating unvested securities includes dividends paid on unvested restricted shares and their proportionate share of undistributed earnings. 28 Table of Contents BrightSphere Investment Group Inc. Notes to Condensed Consolidated Financial Statements (unaudited) 12) Revenue Management fees The Company’s management fees are a function of the fee rates the Affiliates charge to their clients, which are typically expressed in basis points, and the levels of the Company’s assets under management. 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. 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. Performance fees are recorded in revenues when the contractual performance criteria have been met and when it is probable that a significant reversal of revenue recognized will not occur in future reporting periods. Other revenue Included in other revenue are certain payroll and benefits costs and expenses paid on behalf of Funds by the Company’s Affiliates. 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 reimbursements amounted to $ 0.7 million and $ 1.1 million for the three months ended September 30, 2021 and 2020, respectively. Revenue from expense reimbursements amounted to $ 2.9 million and $ 3.3 million for the nine months ended September 30, 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. Disaggregation of management fee revenue The geographic disaggregation of management fee revenue for the three and nine months ended September 30 (in millions) are presented below: Three Months Ended September 30, Nine Months Ended September 30, 2021 2020 2021 2020 Quant & Solutions U.S. $ 80.3 $ 63.7 $ 234.7 $ 183.9 Non-U.S. 27.7 24.2 78.2 71.4 Liquid Alpha (1) U.S. $ — $ 22.8 $ — $ 70.7 Non-U.S. — 6.7 — 23.0 Other (2) U.S. 2.4 4.2 10.2 12.1 Non-U.S. 1.0 1.7 3.7 5.3 Management fee revenue $ 111.4 $ 123.3 $ 326.8 $ 366.4 29 Table of Contents BrightSphere Investment Group Inc. Notes to Condensed Consolidated Financial Statements (unaudited) 12) Revenue (cont.) (1) Prior to June 30, 2021, the Company had a Liquid Alpha reportable segment which was comprised of TSW and ICM. On May 9, 2021, the Company entered into an agreement to sell all of the Company’s interests in TSW and completed the sale on July 22, 2021. As a result of this transaction, TSW was reclassified to discontinued operations and the Liquid Alpha no longer constitutes a reportable segment of the Company. The ICM operating segment was reclassified to “Other” within the Company’s segment reporting for the three and nine months ended September 30, 2021. On July 19, 2021, the Company completed the sale of all its equity interests in ICM. See Note 3, Divestitures, Held for Sale and Discontinued Operations for further discussion and Note 15, Segments for further discussion. (2) 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 and completed the sale on June 2, 2021. As a result of this transaction, Landmark was reclassified to discontinued operations, and the Alternatives segment no longer constitutes a reportable segment of the Company. The Campbell Global operating segment was reclassified to “Other” within the Company’s segment reporting. On August 31, 2021 the Company sold all of its equity interests in Campbell Global. See Note 3, Divestitures, Held for Sale and Discontinued Operations and Note 15, Segments for further discussion. 30 Table of Contents BrightSphere Investment Group Inc. Notes to Condensed Consolidated Financial Statements (unaudited) 13) Accumulated Other Comprehensive Income (Loss) The components of accumulated other comprehensive income (loss), net of tax, for the three months ended September 30, 2021 and 2020 are as follows (in millions): Foreign currency translation adjustment Valuation and amortization of derivative securities Total Balance, as of June 30, 2021 $ 5.6 $ ( 16.8 ) $ ( 11.2 ) Foreign currency translation adjustment ( 0.9 ) — ( 0.9 ) Amortization related to derivatives securities, before tax — 0.8 0.8 Tax impact — ( 0.2 ) ( 0.2 ) Other comprehensive income (loss) ( 0.9 ) 0.6 ( 0.3 ) Balance, as of September 30, 2021 $ 4.7 $ ( 16.2 ) $ ( 11.5 ) 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 — 0.8 0.8 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 ) For each of the three months ended September 30, 2021 and 2020, the Company reclassified $ 0.8 million 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, 2021 and 2020 are as follows (in millions): Foreign currency translation adjustment Valuation and amortization of derivative securities Total Balance, as of December 31, 2020 $ 4.4 $ ( 18.0 ) $ ( 13.6 ) Foreign currency translation adjustment 0.3 — 0.3 Amortization related to derivatives securities, before tax — 2.4 2.4 Tax impact — ( 0.6 ) ( 0.6 ) Other comprehensive income 0.3 1.8 2.1 Balance, as of September 30, 2021 $ 4.7 $ ( 16.2 ) $ ( 11.5 ) 31 Table of Contents BrightSphere Investment Group Inc. Notes to Condensed Consolidated Financial Statements (unaudited) 13) Accumulated Other Comprehensive Income (Loss) (cont.) Foreign currency translation adjustment Valuation and amortization of derivative securities Total Balance, as of December 31, 2019 $ 2.8 $ ( 20.3 ) $ ( 17.5 ) Foreign currency translation adjustment ( 0.4 ) — ( 0.4 ) Amortization related to derivatives securities, before tax — 2.3 2.3 Tax impact — ( 0.6 ) ( 0.6 ) Other comprehensive income (loss) ( 0.4 ) 1.7 1.3 Balance, as of September 30, 2020 $ 2.4 $ ( 18.6 ) $ ( 16.2 ) For the nine months ended September 30, 2021 and 2020, the Company reclassified $ 2.4 million and $ 2.3 million, respectively, from accumulated other comprehensive income (loss) to interest expense on the Condensed Consolidated Statements of Operations. 14) Derivatives and Hedging Cash flow hedge In July 2015, the Company entered into a series of $ 300.0 million notional Treasury rate lock contracts which were designated and qualified as cash flow hedges. The Company documented its hedging strategy and risk management objective for this contract in anticipation of a future debt issuance. The Treasury rate lock contract eliminated the impact of fluctuations in the underlying benchmark interest rate for future forecasted debt issuances. The Company assessed the effectiveness of the hedging contract at inception and on a quarterly basis thereafter. The forecasted debt issuances occurred in July 2016 and the Treasury rate lock, which had an accumulated fair value of $( 34.4 ) million, was settled. Refer to Note 7, Borrowings and Debt, for additional information on the debt issuances. As of September 30, 2021, the balance recorded in accumulated other comprehensive income (loss) was $( 16.2 ) million, net of tax. This balance will be reclassified to earnings through interest expense over the life of the issued debt. The Company reclassified $ 0.8 million for each of the three months ended September 30, 2021 and 2020, respectively. Amounts of $ 2.4 million and $ 2.3 million have been reclassified for the nine months ended September 30, 2021 and 2020, respectively. During the next twelve months the Company expects to reclassify approximately $ 3.5 million to interest expense. 32 Table of Contents BrightSphere Investment Group Inc. Notes to Condensed Consolidated Financial Statements (unaudited) 15) Segments The Company has the following reportable segment (1)(2) : • 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 in developed and emerging markets, including global, non-U.S. and small-cap equities, as well as managed volatility, ESG, multi-asset, equity alternatives, and long/short strategies. This segment is comprised of the Company’s interest in Acadian. The corporate head office is included within Other (1)(2) category. The corporate head office expenses are not allocated to the Company’s business segment but the Chief Operating Decision Maker (“CODM”) does consider the cost structure of the corporate head office when evaluating the financial performance of the segment. (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 all of the Company’s interests in Landmark. On June 2, 2021, the Company completed the sale of all 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 reclassification of Campbell Global to “Other” category. On August 31, 2021, the Company completed the sale of all its interests in Campbell Global. The financial results of Campbell Global are included in the “Other” category until August 30, 2021, the consummation of the sale. See Note 3, Divestitures, Held for Sale and Discontinued Operations for further discussion. (2) Prior to June 30, 2021, the Company had a Liquid Alpha reportable segment which was comprised of TSW and ICM. On May 9, 2021, the Company entered into an agreement to sell all of the Company’s interests in TSW. On July 19, 2021, the Company completed the sale of all the Company’s interest in TSW. As a result of this transaction, TSW has been reclassified to discontinued operations and Liquid Alpha no longer constitutes a reportable segment of the Company. The ICM operating segment was reclassified to “Other” category within the Company’s segment reporting for the three and nine months ended September 30, 2021. On July 19, 2021 the Company completed the sale of all its interests in ICM, an equity-accounted Affiliate. The financial results of ICM are included in the “Other” category until July 19, 2021, the consummation of the sale. See Note 3, Divestitures, Held for Sale and Discontinued Operations for further discussion. Performance Measure The primary measure used by the CODM in measuring performance and allocating resources to the segments is Economic Net Income (“ENI”). The Company defines ENI for the segments as ENI revenue less (i) ENI operating expenses, (ii) variable compensation and (iii) key employee distributions. The ENI adjustments to U.S. GAAP include both reclassifications of U.S. GAAP revenue and expense items, as well as adjustments to U.S. GAAP results, primarily to exclude non-cash, non-economic expenses, or to reflect cash benefits not recognized under U.S. GAAP. This measure supplements and should be considered in addition to, and not in lieu of, the Condensed Consolidated Statements of Operations prepared in accordance with U.S. GAAP. The Company does not disclose total asset information for its reportable segment as the information is not reviewed by the CODM. 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- 33 Table of Contents BrightSphere Investment Group Inc. Notes to Condensed Consolidated Financial Statements (unaudited) 15) Segments (cont.) accounted Affiliate. ENI revenue is also adjusted to exclude the separate revenues recorded under U.S. GAAP for certain Fund expenses reimbursed to our Affiliates. 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, 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. Additionally, variable compensation and Affiliate key employee distributions are segregated from ENI operating expenses. ENI segment results are also adjusted to exclude the portion of consolidated Fund revenues, expenses and investment return recorded under U.S. GAAP. Segment Presentation The following tables set forth summarized operating results for the Company's 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 segment for the three months ended September 30, 2021 (in millions): Three Months Ended September 30, 2021 Quant & Solutions Other Reconciling Adjustments Total U.S. GAAP (1) ENI revenue $ 110.6 $ 6.8 $ 0.5 (a) $ 117.9 ENI operating expenses 39.4 7.6 10.1 (b) 57.1 Earnings before variable compensation 71.2 ( 0.8 ) ( 9.6 ) 60.8 Variable compensation 23.5 3.5 0.1 (c) 27.1 ENI operating earnings (after variable comp) 47.7 ( 4.3 ) ( 9.7 ) 33.7 Affiliate key employee distributions 3.8 1.2 — 5.0 Earnings after Affiliate key employee distributions 43.9 ( 5.5 ) ( 9.7 ) 28.7 Net interest expense — ( 5.8 ) ( 0.4 ) (d) ( 6.2 ) Net investment income — — 0.3 (e) 0.3 Gain on sale of Affiliates — — 34.6 (e) 34.6 Income tax expense — ( 9.0 ) ( 5.5 ) (f) ( 14.5 ) Income from discontinued operations, net of tax — — 1.2 (g) 1.2 Gain on disposal of discontinued operations, net of tax — — 185.4 (h) 185.4 Economic net income $ 43.9 $ ( 20.3 ) $ 205.9 $ 229.5 34 Table of Contents BrightSphere Investment Group Inc. Notes to Condensed Consolidated Financial Statements (unaudited) 15) Segments (cont.) The following table presents the financial data for the Company’s segments for the three months ended September 30, 2020 (in millions): Three Months Ended September 30, 2020 Quant & Solutions Liquid Alpha Other Reconciling Adjustments Total U.S. GAAP (1) ENI revenue $ 89.0 $ 30.3 $ 6.6 $ 1.6 (a) $ 127.5 ENI operating expenses 37.2 10.0 10.9 5.5 (b) 63.6 Earnings before variable compensation 51.8 20.3 ( 4.3 ) ( 3.9 ) 63.9 Variable compensation 18.0 8.4 1.4 0.1 (c) 27.9 ENI operating earnings (after variable comp) 33.8 11.9 ( 5.7 ) ( 4.0 ) 36.0 Affiliate key employee distributions 0.8 0.8 0.2 — 1.8 Earnings after Affiliate key employee distributions 33.0 11.1 ( 5.9 ) ( 4.0 ) 34.2 Net interest expense — — ( 5.3 ) ( 1.6 ) (d) ( 6.9 ) Net investment income — — — 6.7 (e) 6.7 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 — — ( 9.0 ) ( 0.3 ) (f) ( 9.3 ) Income from discontinued operations, net of tax — — — 2.1 (g) 2.1 Economic net income $ 33.0 $ 11.1 $ ( 20.2 ) $ 13.3 $ 37.2 35 Table of Contents BrightSphere Investment Group Inc. Notes to Condensed Consolidated Financial Statements (unaudited) 15) Segments (cont.) The following table presents the financial data for the Company’s segment for the nine months ended September 30, 2021 (in millions): Nine Months Ended September 30, 2021 Quant & Solutions Other Reconciling Adjustments Total U.S. GAAP (1) ENI revenue $ 325.2 $ 35.4 $ 0.3 (a) $ 360.9 ENI operating expenses 116.8 26.8 26.7 (b) 170.3 Earnings before variable compensation 208.4 8.6 ( 26.4 ) 190.6 Variable compensation 68.1 14.8 0.9 (c) 83.8 ENI operating earnings (after variable comp) 140.3 ( 6.2 ) ( 27.3 ) 106.8 Affiliate key employee distributions 8.4 1.1 — 9.5 Earnings after Affiliate key employee distributions 131.9 ( 7.3 ) ( 27.3 ) 97.3 Net interest expense — ( 16.6 ) ( 2.0 ) (d) ( 18.6 ) Net investment income — — 7.6 (e) 7.6 Gain on sale of Affiliates — — 33.3 (e) 33.3 Net loss attributable to non-controlling interests in consolidated Funds — — ( 68.0 ) (e) ( 68.0 ) Income tax expense — ( 29.0 ) ( 4.5 ) (f) ( 33.5 ) Income from discontinued operations, net of tax — — 76.5 (g) 76.5 Gain on disposal of discontinued operations, net of tax — — 694.6 (h) 694.6 Economic net income $ 131.9 $ ( 52.9 ) $ 710.2 $ 789.2 36 Table of Contents BrightSphere Investment Group Inc. Notes to Condensed Consolidated Financial Statements (unaudited) 15) Segments (cont.) The following table presents the financial data for the Company’s segments for the nine months ended September 30, 2020 (in millions): Nine Months Ended September 30, 2020 Quant & Solutions Liquid Alpha Other Reconciling Adjustments Total U.S. GAAP (1) ENI revenue $ 257.9 $ 95.5 $ 19.5 $ 5.8 (a) $ 378.7 ENI operating expenses 109.3 34.7 34.8 3.3 (b) 182.1 Earnings before variable compensation 148.6 60.8 ( 15.3 ) 2.5 196.6 Variable compensation 52.7 24.8 4.3 3.5 (c) 85.3 ENI operating earnings (after variable comp) 95.9 36.0 ( 19.6 ) ( 1.0 ) 111.3 Affiliate key employee distributions 2.9 3.2 0.4 — 6.5 Earnings after Affiliate key employee distributions 93.0 32.8 ( 20.0 ) ( 1.0 ) 104.8 Net interest expense — — ( 16.5 ) ( 5.1 ) (d) ( 21.6 ) Net investment income (loss) — — — ( 10.9 ) (e) ( 10.9 ) 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) benefit — — ( 24.1 ) 2.5 (f) ( 21.6 ) Income from discontinued operations, net of tax — — — 52.1 (g) 52.1 Economic net income $ 93.0 $ 32.8 $ ( 60.6 ) $ 23.5 $ 88.7 (1) The most directly comparable U.S. GAAP measure of ENI revenue is U.S. GAAP revenue. The most directly comparable U.S. GAAP measure of ENI operating expenses is U.S. GAAP operating expenses, which is comprised of ENI operating expenses, variable compensation, and Affiliate key employee distributions above. The most directly comparable U.S. GAAP measure of earnings after Affiliate key employee distributions is U.S. GAAP operating income. The most directly comparable U.S. GAAP measure of ENI is U.S. GAAP net income attributable to controlling interests. Reconciling Adjustments: (a) Adjusted to exclude earnings from equity-accounted Affiliate, which are included in U.S. GAAP investment income, and to include consolidated Funds revenues and the separate revenues recorded for certain Fund expenses reimbursed by customers, which are included in U.S. GAAP revenue. (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 which are included in U.S. GAAP compensation expense. (d) Adjusted to include the cost of seed financing, which is included in U.S. GAAP interest expense. 37 Table of Contents BrightSphere Investment Group Inc. Notes to Condensed Consolidated Financial Statements (unaudited) 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 Affiliates, 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 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, net of tax, which is included in U.S. GAAP net income attributable to controlling interests. (h) Adjusted to include the gain on disposal of discontinued operations, net of tax, which is included in U.S. GAAP net income attributable to controlling interests. 16) Related Party Transactions Certain Affiliates have provided loans to Affiliate employees. There are no loans outstanding as of September 30, 2021. At December 31, 2020, the balance of the loans to Affiliate employees was $ 8.4 million. 17) Subsequent Events Commencement of Common Stock Cash Tender Offer On November 4, 2021, the Company commenced a tender offer (the “Tender Offer”) to purchase up to 33.3 million shares of the Company’s common stock, that are properly tendered and not properly withdrawn, at a price of $ 31.50 per share to the seller in cash, less any applicable withholding taxes and without interest. The Tender Offer is scheduled to expire at 5:00 p.m. on December 6, 2021 and is subject to certain conditions. Repurchase of 5.125 % Senior Notes Subsequent to September 30, 2021, the Company’s Board approved the repurchase of 5.125 % Senior Notes in the near term up to the maximum aggregate principal amount of $ 125 million. 38 Table of Contents