What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2022-02-28 compared with 2021-03-01 · 528 added, 628 removed, 1244 unchanged (48% of the section changed)

1 unchanged sentence

Index to financial statements

Reports of Independent Registered Public Accounting Firm

Reports of Independent Registered Public Accounting Firm (PCAOB ID:

Consolidated Balance Sheets as of December 31, 2021 and 2020

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Report of Independent Registered Public Accounting Firm

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

To the Shareholders and Board of Directors

BrightSphere Investment Group Inc.:

Opinion on the Consolidated Financial Statements

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generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated March 1, 2021 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February 28, 2022 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

Basis for Opinion

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

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

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

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

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

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

As discussed in Notes 1 and 3 to the consolidated financial statements, the Company completed the sale of all its interests in Landmark Partners, LLC (Landmark) on June 2, 2021.

The Company recognized a gain on disposal of discontinued operations of $505.8 million.

Prior to the sale, the Company recorded liabilities for cash-settled equity awards made to certain affiliate key employees.

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

Report of Independent Registered Public Accounting Firm

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

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

We identified the assessment of the fair value measurement of the cash-settled affiliate awards liability, which was one of the inputs used in determining the gain on disposal, as a critical audit matter.

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

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

Minor changes to these assumptions could have had an effect on the Company’s determination of the fair value of the cash-settled affiliate awards liability and impact the gain on disposal of discontinued operations related to Landmark.

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

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

We also compared certain inputs used in developing the forecasted earnings to third party data.

We also compared revenue growth rates used in developing the forecasted earnings to third-party data.

We held discussions with finance personnel of the Company to further evaluate the forecasted earnings used in the discounted cash flow models.

We evaluated adjustments to reflect the impact of post-vesting restrictions on awards by comparing the restrictions to underlying plan documents and also assessing when award holders maximize value.

We evaluated adjustments to reflect the impact of post-vesting restrictions on awards by comparing the restrictions to underlying plan documents and assessing when award holders maximize value.

We evaluated the mathematical accuracy of the computations used to determine the fair value of the liability and compared the calculated fair values to the amounts recorded.

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

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

– evaluating market risk adjustments

• evaluating whether the methodology used to calculate the fair value of the awards was appropriate

• performing independent calculations of market risk adjustments using a combination of data that was independently obtained from third-party sources and data obtained from the previous transaction involving Landmark

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

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Boston, Massachusetts

March 1, 2021

February 28, 2022

Report of Independent Registered Public Accounting Firm

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

To the Shareholders and Board of Directors

BrightSphere Investment Group Inc.:

Opinion on Internal Control Over Financial Reporting

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In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2020 and 2019, the related consolidated statements of operations, comprehensive income, changes in shareholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2020, and the related notes (collectively, the consolidated financial statements), and our report dated March 1, 2021 expressed an unqualified opinion on those consolidated financial statements.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2021 and 2020, the related consolidated statements of operations, comprehensive income, changes in shareholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2021, and the related notes (collectively, the consolidated financial statements), and our report dated February 28, 2022 expressed an unqualified opinion on those consolidated financial statements.

Basis for Opinion

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Boston, Massachusetts

March 1, 2021

February 28, 2022

BrightSphere Investment Group Inc.

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Investments (includes balances reported at fair value of $ 54.5 and $ 88.0 )

Acquired intangibles, net 58.4 65.1

Goodwill 20.3 20.3

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Deferred tax assets 72.4 170.3

Assets of consolidated Funds:

Cash and cash equivalents, restricted 0.6 9.7

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

Other assets — 4.9

Assets held for sale — 326.8

Consolidated Funds’ assets held for sale — 114.3

Total assets $ 714.8 $ 1,379.2

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Accrued incentive compensation 117.4 78.3

Due to OM plc 3.4 3.7

Other compensation liabilities 103.7 73.8

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Other liabilities 2.5 4.9

Non-recourse borrowings — 35.0

Third party borrowings 394.9 394.3

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

Liabilities held for sale — 313.3

Total liabilities 732.4 994.8

Commitments and contingencies

Redeemable non-controlling interests in consolidated Funds — 83.9

Common stock (par value $ 0.001 ;

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Non-controlling interests in consolidated Funds — 80.3

Total equity and redeemable non-controlling interests in consolidated Funds 384.4 198.4

Total equity and non-controlling interests in consolidated Funds ( 17.6 ) 384.4

Total liabilities and equity $ 714.8 $ 1,379.2

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Interest expense ( 24.8 ) ( 28.5 ) ( 32.2 )

Revaluation of DTA deed — — 20.0

Gain on sale of Affiliates 241.3 — —

Gain on sale of subsidiaries 48.6 241.3 —

Net consolidated Funds’ investment gains (losses) — ( 5.2 ) 4.2

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Income from continuing operations 128.1 247.7 202.7

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

Income from discontinued operations, net of tax 77.3 67.8 37.3

Gain on disposal of discontinued operations, net of tax 691.0 — —

Net income 896.4 315.5 240.0

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

Net income attributable to non-controlling interests in consolidated Funds 68.0 28.8 16.1

Net income attributable to controlling interests $ 828.4 $ 286.7 $ 223.9

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Net income $ 896.4 $ 315.5 $ 240.0

Other comprehensive income (loss):

Other comprehensive income:

Amortization related to derivative securities, net of tax 2.4 2.3 2.4

Foreign currency translation adjustment 0.4 1.6 1.0

Total other comprehensive income 2.8 3.9 3.4

Total comprehensive income 899.2 319.4 243.4

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

28.8 16.1 ( 6.1 )

Comprehensive income attributable to non-controlling interests in consolidated Funds 68.0 28.8 16.1

Total comprehensive income attributable to controlling interests $ 831.2 $ 290.6 $ 227.3

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

Net consolidation (de-consolidation) of Funds — — — — — — — ( 28.8 ) ( 28.8 ) ( 76.7 ) ( 105.5 )

Dividends to shareholders ($ 0.39 per share)

Dividends ($ 0.40 per share)

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

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

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

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

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

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

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

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

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

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

Dividends ($ 0.13 per share)

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Issuance of common stock 1.6 — 2.7 — — 2.7 — — 2.7 — 2.7

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

Repurchase of common stock ( 35.6 ) ( 0.1 ) ( 465.7 ) ( 655.9 ) — ( 1,121.7 ) — — ( 1,121.7 ) — ( 1,121.7 )

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

Withholding tax related to stock option exercise — — ( 31.3 ) — — ( 31.3 ) — — ( 31.3 ) — ( 31.3 )

Other changes in non-controlling interests — — — — — — ( 5.5 ) — ( 5.5 ) — ( 5.5 )

Net de-consolidation of Funds — — — — — — — ( 178.0 ) ( 178.0 ) — ( 178.0 )

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

Dividends ($ 0.04 per share)

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Net income $ 896.4 $ 315.5 $ 240.0

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

Income from discontinued operations, net of tax ( 77.3 ) ( 67.8 ) ( 37.3 )

Net (income) loss attributable to non-controlling interests in consolidated Funds from continuing operations — ( 0.4 ) ( 5.8 )

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

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

Impairment of goodwill — 16.4 —

Amortization of acquired intangibles 0.1 0.3 0.2

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

Gain on sale of discontinued operations ( 691.0 ) — —

Gain on sale of subsidiaries ( 48.6 ) ( 241.3 ) —

Depreciation and amortization 22.1 19.8 16.2

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Net earnings from Affiliate accounted for using the equity method ( 2.6 ) ( 2.9 ) ( 2.8 )

Distributions received from equity method Affiliates 3.0 2.7 11.9

Revaluation of DTA Deed — — ( 20.0 )

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

Distributions received from equity method Affiliate 4.4 3.0 2.7

Distributions from discontinued operations 52.7 63.0 71.9

Deferred income taxes ( 1.5 ) 73.2 25.8

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

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

(Increase) decrease in investment advisory fees receivable ( 87.9 ) 13.6 3.6

(Increase) decrease in other receivables, prepayments, deposits and other assets 2.2 14.4 ( 14.9 )

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

Increase (decrease) in accrued incentive compensation, operating lease liabilities and other liabilities 44.7 ( 9.7 ) ( 259.1 )

Increase (decrease) in accounts payable, accrued expenses and accrued income taxes ( 153.0 ) ( 19.4 ) ( 48.0 )

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( 4.4 ) 170.6 ( 83.3 )

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

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 — 0.4 5.8

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:

Purchase of investments — ( 146.3 ) ( 186.9 )

Sale of investments — 91.3 149.1

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

Losses on other investments — 4.9 0.6

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( 4.4 ) 95.4 ( 115.1 )

Net cash flows from operating activities of discontinued operations ( 7.1 ) ( 4.9 ) ( 23.4 )

Total net cash flows from operating activities ( 11.5 ) 90.5 ( 138.5 )

BrightSphere Investment Group Inc.

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2021 2020 2019

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

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

Cash flows from investing activities:

Additions of fixed assets ( 15.1 ) ( 25.6 ) ( 32.9 )

Proceeds from sale of Affiliates 295.2 5.0 105.0

Proceeds from sale of discontinued operations 949.3 — —

Proceeds from sale of subsidiaries 61.6 295.2 5.0

Purchase of investment securities ( 2.5 ) ( 17.8 ) ( 25.0 )

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Cash flows from investing activities of consolidated Funds:

Contributions in equity method investees ( 4.2 ) ( 12.6 ) —

Distributions received from equity method investees 1.3 3.9 —

Consolidation (de-consolidation) of Funds — ( 85.7 ) —

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Repayment of third party and non-recourse borrowings ( 176.0 ) ( 255.0 ) ( 330.0 )

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

Payment of debt issuance costs ( 0.4 ) — ( 1.8 )

Proceeds from stock issuance 2.7 — —

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

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Repurchases of common stock ( 776.7 ) ( 46.0 ) ( 239.8 )

Repurchases of common stock from related parties ( 345.0 ) — —

Dividends paid to shareholders ( 1.9 ) ( 7.2 ) ( 24.5 )

Dividends paid to related parties ( 1.0 ) ( 3.7 ) ( 11.5 )

Payment of debt issuance costs — ( 1.8 ) —

Withholding tax payments related to stock option exercise ( 28.6 ) — —

Cash flows from financing activities of consolidated Funds:

Non-controlling interest capital raised 4.1 12.6 —

Non-controlling interest capital redeemed ( 1.0 ) ( 3.4 ) —

Redeemable non-controlling interest capital raised — 152.8 37.9

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Total net cash flows from financing activities ( 1,179.6 ) ( 77.4 ) ( 95.0 )

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

Net increase (decrease) in cash and cash equivalents ( 152.0 ) 283.1 ( 224.5 )

Cash and cash equivalents at beginning of period 121.0 345.5 200.4

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

Cash and cash equivalents at beginning of period (including restricted cash) 372.9 82.1 283.0

Cash and cash equivalents at beginning of period classified within assets held for sale 31.2 38.9 62.5

Cash and cash equivalents at end of period 252.1 404.1 121.0

cash and cash equivalents at end of period classified within assets held for sale — ( 31.2 ) ( 38.9 )

Cash and cash equivalents at end of period (including restricted cash) $ 252.1 $ 372.9 $ 82.1

Supplemental disclosure of cash flow information:

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BrightSphere Investment Group Inc.

(“BrightSphere”, “BSIG” or the “Company”), through its subsidiaries, is a global asset management company with interests in a diverse group of investment management firms (the “Affiliates”) individually headquartered in the United States.

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.

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’s Affiliates are organized as limited liability companies.

The Company generally utilizes a profit-sharing model in structuring its compensation and ownership arrangements with its Affiliates.

The Affiliates’ variable compensation is generally based on each 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 conducts its operations through the following three reportable segments:

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

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

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

equities, as well as fixed income.

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

See Note 3, Divestitures, for further discussion.

(“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 diverse 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”).

Acadian comprises the Company’s Quant & Solutions 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.

Acadian is organized as a limited liability company.

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

The Company utilizes a profit-sharing model in structuring its compensation and ownership arrangements with Acadian.

Variable compensation is based on the firm’s profitability.

BSIG and Acadian 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 Acadian key employee economic interests, which is critical to the Company’s talent management strategy and long-term growth of the business.

Campbell Global, LLC (“Campbell Global”), Investment Counselors of Maryland (“ICM”) and the corporate head office are included within the Other 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 23, Segments for further discussion.

BrightSphere Investment Group Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2021 and 2020

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

(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 year ended December 31, 2021.

See Note 3, Divestitures, Held for Sale and Discontinued Operations and Note 23, 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.

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

BrightSphere Investment Group Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2020 and 2019

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

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

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

Ownership percentage following the transactions for:

Date Transaction description Total shares OM plc HNA Paulson Note

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

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

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

December 16, 2016 Repurchase and retirement of shares

by BSIG 6,000,000 51.1 % — % — % (4)

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

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

May 19, 2017 Repurchase and retirement of shares

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

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

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

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

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

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

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

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

(2) Includes 1,995,000 shares purchased by the underwriters of the offering under their overallotment option.

(3) Includes 1,950,000 shares purchased by the underwriters of the offering under their overallotment option.

(4) Purchased pursuant to the share repurchase program described below.

All shares repurchased by the Company were retired.

BrightSphere Investment Group Inc.

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

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

Guang Yang of HNA as an OM plc director.

(6) Includes 2,595,000 shares purchased by the underwriters of the offering under their overallotment option.

(7) Following the November 10, 2017 sale of shares from OM plc to HNA, HNA acquired the right to appoint two directors to the Company’s board.

(8) Upon completion of the November 17, 2017 offering, OM plc indirectly owned 1,000 of the Company’s outstanding ordinary shares.

(9) In connection with the November 19, 2018 sale of shares from HNA to Paulson, on November 16, 2018, HNA appointed John Paulson and Dr.

Guang Yang as HNA directors.

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

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

Share Repurchase Program

On February 3, 2016, the Company’s Board of Directors authorized a $ 150 million open market share repurchase program, which was approved by shareholders on March 15, 2016.

On April 18, 2018, the Company’s Board of Directors approved an amendment to the existing share repurchase contract, to permit the repurchase of shares, from time to time, up to an aggregate limit of $ 600 million of shares.

This amendment was subsequently approved by shareholders on June 19, 2018.

On November 4, 2021, the Company announced its plan to launch a fixed price tender offer to purchase up to 33,300,000 shares of its common stock (the “Shares”) at a purchase price of $ 31.50 per share.

Under the terms of the tender offer, stockholders who tender their shares would receive a fixed price of $ 31.50 for each share, subject to proration if the tender offer was oversubscribed.

The tender offer expired at 5:00 p.m., New York City Time, on December 6, 2021.

On December 7, 2021, the Company accepted for purchase 34,917,532 shares of common stock in the tender offer for a total cost of approximately $ 1.1 billion excluding fees and expenses relating to the tender offer.

The shares of common stock accepted for purchase includes 1,617,532 shares that the Company elected to purchase pursuant to its right to purchase up to an additional 2 % of its outstanding common stock.

On November 3, 2021, the Company entered into a repurchase agreement with Paulson and certain funds managed by Paulson and its affiliates pursuant to which the Company agreed that, on the 11th day after the expiration date of the tender offer, it would repurchase from Paulson and its affiliates, if necessary, a number of shares, such that, upon the closing of the repurchase, Paulson and its affiliates’ percentage ownership interest in the Company’s total outstanding shares shall not exceed 19.99 %.

In the repurchase agreement, Paulson and its affiliates agreed to tender in the tender offer at least 41.7 % of the total shares held by them.

In accordance therewith, on December 21, 2021, the Company consummated its repurchase of 690,000 shares of common stock from Paulson and its affiliates at $ 31.50 per share, following which Paulson and its affiliates owned 19.99 % of the Company’s total outstanding shares of common stock.

For the year ended December 31, 2021, a reduction to additional paid-in capital in the amount of $ 465.7 million was recorded for share repurchases until it was depleted, with the remaining $ 655.9 million of share repurchases recorded to retained deficit.

For the year ended December 31, 2021, the Company did not repurchase any shares of common stock in the open market under the share repurchase program.

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

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

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

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

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

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

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

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

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

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

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

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

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 Consolidated Financial Statements, however material intercompany balances and transactions among the Company, its consolidated Affiliates and consolidated Funds are eliminated in consolidation.

Transactions between the Company and its related parties are included in the 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.

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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.

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.

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 Consolidated Statements of Operations for the years ended December 31, 2021, 2020, and 2019.

Cash flows from discontinued operations are presented in the Consolidated Statements of Cash Flows for the years ended December 31, 2021, 2020, and 2019.

BrightSphere Investment Group Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2021 and 2020

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

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 Consolidated Statements of Operations for the years ended December 31, 2021, 2020, and 2019.

Cash flows from discontinued operations are presented in the Consolidated Statements of Cash Flows for the years ended December 31, 2021, 2020, and 2019.

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.

Revenue recognition

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The Company is able to resolve the variability and calculate the most likely amount to be recognized for any given period by estimating revenue based upon a daily average AUM.

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

BrightSphere Investment Group Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2020 and 2019

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

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

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

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Affiliates that manage tangible property may also earn transaction fees at the time the underlying property is bought and sold.

Any fees collected in advance are deferred and recognized as income over the period earned.

Dividend income received is recorded on the ex-dividend date.

BrightSphere Investment Group Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2021 and 2020

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

Performance fees are generally assessed as a percentage of the investment performance realized on a client’s account.

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The Company has noted no instances where sales-based compensation or similar costs met the definition of an incremental cost to acquire a contract with a customer in accordance with revenue recognition guidance.

There are no instances where the Company has incurred costs to fulfill a contract with a customer, therefore no intangible assets related to contract acquisition or fulfillment have been recognized.

There are no instances where the Company has incurred costs to fulfill a contract with a customer, therefore no assets related to contract acquisition or fulfillment have been recognized.

For each one of its contracts with customers, the Company identifies one or more performance obligations within the contract and then, for each performance obligation, determines if it is a principal (where the nature of its promise is to provide a specified good or service itself) or an agent (where the nature of its promise is to arrange for a good or service to be provided by another party).

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

Compensation arrangements

The Company operates short term variable compensation arrangements where generally, a percentage of each Affiliate’s annual pre-variable compensation earnings, as defined in each arrangement, is allocated to a “pool” of each respective Affiliate’s key employees, and subsequently distributed to individuals subject to recommendation and approval of a remuneration committee comprised of both the Company’s and each respective Affiliate’s management.

Additionally, a contractual percentage of Affiliate performance fee revenues and post-bonus profits are included in a deferred compensation pool.

The deferred compensation pool is allocated to Affiliate key employees and is subject to a three-year vesting period.

Variable compensation expense is accrued and recognized in the Consolidated Statements of Operations as services are provided by individual employees.

BrightSphere Investment Group Inc.

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

Compensation arrangements

The Company operates short term variable compensation arrangements where generally, a percentage of each Affiliate’s annual pre-variable compensation earnings, as defined in each arrangement, is allocated to a “pool” of each respective Affiliate’s key employees and subsequently distributed to individuals subject to recommendation and approval of a remuneration committee comprised of both the Company’s and each respective Affiliate’s management.

Variable compensation expense is accrued and recognized in the Consolidated Statements of Operations as services are provided by individual employees.

The Company operates longer term profit-interest plans whereby certain Affiliate key employees are granted (or have a right to purchase) awards representing a profits interest in their respective Affiliate, as distinct from an equity interest due to the lack of pari passu voting rights.

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The Company recognizes forfeitures as they occur.

BrightSphere Investment Group Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2020 and 2019

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

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

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The liabilities are revalued at each reporting period, with any movements recorded within compensation expense.

BrightSphere Investment Group Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2021 and 2020

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

Consolidation

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

BrightSphere Investment Group Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2020 and 2019

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

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

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Additionally, management continually reconsiders whether the Company is deemed to be a VIE’s primary beneficiary who consolidates such entity.

BrightSphere Investment Group Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2021 and 2020

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

Investments and Investment Transactions

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Expenses are recorded on an accrual basis.

BrightSphere Investment Group Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2020 and 2019

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

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

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The extent of such risk cannot be quantified.

Funds’ Derivatives

Certain Funds may use derivative instruments.

The Funds’ derivative instruments may include foreign currency exchange contracts, credit default swaps, interest rate swaps, financial futures contracts and warrants.

The fair values of derivative instruments are recorded as other assets of consolidated Funds or other liabilities of consolidated Funds on the Company’s Consolidated Balance Sheets.

The Funds have used foreign exchange forwards to hedge the risk of movement in exchange rates on financial assets on a limited basis.

The Company’s Funds have not designated any financial instruments for hedge accounting, as defined in the accounting literature, during the periods presented.

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

BrightSphere Investment Group Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2021 and 2020

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

Foreign currency translation and transactions

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

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

BrightSphere Investment Group Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2020 and 2019

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

Equity method investments includes the Company’s former Affiliate, ICM, as well as all unconsolidated Funds over which the Company exercises significant influence.

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

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GAAP, the Company does not adjust the quoted price for these investments.

BrightSphere Investment Group Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2021 and 2020

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

• Level II—Pricing inputs are other than quoted prices in active markets, which are either directly or indirectly observable as of the reporting date, and fair value is determined through the use of models or other valuation methodologies utilizing observable market inputs other than quoted prices.

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The inputs into the determination of fair value require significant management judgment or estimation.

Investments that are included in this category generally include general and limited partner interests in timber funds, corporate private equity, real estate funds, and funds of hedge funds.

Investments that are included in this category generally include general and limited partner interests in timber funds.

In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy.

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

BrightSphere Investment Group Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2020 and 2019

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

Use of estimates

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

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

The years ended December 31, 2021 and 2020 were characterized by heightened uncertainty due to the COVID-19 pandemic which could impact estimates and assumptions made by management.

Actual results could differ significantly from those estimates.

Operating segment

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

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

The Company currently operates in one reportable segment that provides investment management services and products primarily to institutional clients.

See Note 23 for further information regarding the Company’s segment.

Derivatives and Hedging

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

BrightSphere Investment Group Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2021 and 2020

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

Cash and cash equivalents

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

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

Restricted cash at December 31, 2020 represents amounts held in escrow related to the Company's disposition of a former affiliate, Barrow, Hanley, Mewhinney & Strauss (“Barrow Hanley”).

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

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

BrightSphere Investment Group Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2020 and 2019

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

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

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

The estimated useful lives of office equipment and furniture and fixtures range from three to five years .

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Computer software developed or obtained for internal use capitalized during the application development stage is amortized using the straight-line method over the estimated useful life of the software, which is generally seven years or less.

The estimated useful life of building assets is thirty-nine years .

The costs of improvements that extend the life of a fixed asset are capitalized, while the costs of repairs and maintenance are expensed as incurred.

Intangible assets

Acquired Affiliates have identifiable intangible assets arising from contractual or other legal rights with their clients.

In determining the value of acquired intangibles, the Company analyzes the net present value of each acquired Affiliate’s existing client relationships based on a number of factors.

The Company analyzes the Affiliate’s historical and potential future operating performance, the Affiliate’s historical and potential future rates of attrition among existing clients, the stability and longevity of existing client relationships, the Affiliate’s recent and long-term investment performance, the characteristics of the firm’s products and investment styles, the stability and depth of the Affiliate’s management team and the Affiliate’s history and perceived franchise or brand value.

The Company’s acquired intangible assets are predominately definite-life intangible assets and are generally amortized on a straight-line basis over their estimated useful lives, ranging from five to sixteen years , reflecting the expected duration of such relationships.

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

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

If such indicators exist, the Company compares the undiscounted cash flows related to the asset to the carrying value of the asset.

If the carrying value is greater than the undiscounted cash flows amount, an impairment charge is recorded in the Consolidated Statements of Operations for amounts necessary to reduce the carrying value of the asset to fair value.

Indefinite-life intangible assets are tested for impairment annually as of the first business day of the fourth quarter or more frequently if events or changes in circumstances indicate that the asset might be impaired.

The Company records goodwill when the consideration paid in a business acquisition exceeds the fair value of the net total of tangible assets acquired, identifiable intangible assets acquired and liabilities assumed.

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

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

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

If based on the qualitative assessment it is determined that it is more likely than not that the fair value of any reporting unit is below its respective carrying amount, therefore indicating that impairment may exist, the impact would be determined at that point through a quantitative assessment.

The Company performs its assessment for impairment of goodwill annually as of the first business day of the fourth quarter, or as necessary.

The Company has determined that it had one reporting unit, consisting of Acadian, as of the annual goodwill impairment test date.

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

If based on the qualitative assessment it is determined that it is more likely than not that the fair value of the reporting unit is below its respective carrying amount, therefore indicating that impairment may exist, the impact would be determined at that point through a quantitative assessment.

For purposes of assessing potential impairment, the fair value of the reporting unit is estimated and compared to the carrying value of the reporting unit.

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These assumptions and estimates can change in future periods based on market movement and factors impacting the expected business performance.

Changes in assumptions or estimates could materially affect the determination of the fair value of a reporting unit.

Changes in assumptions or estimates could materially affect the determination of the fair value of the reporting unit.

If it is determined that the carrying value of the reporting unit exceeds its fair value, an impairment charge is recognized in the amount equal to that excess;

not to exceed the total amount of goodwill allocated to that reporting unit.

Based on the Company’s most recent annual goodwill impairment test, the Company concluded that the fair value of each of its reporting units was more likely than not in excess of their carrying values.

Based on the Company’s most recent annual goodwill impairment test, the Company concluded that the fair value of its reporting unit was more likely than not in excess of their carrying value.

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

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

Discontinued Operations

The Company reports financial results for discontinued operations separately from continuing operations to distinguish the financial impact of disposal transactions from ongoing operations.

Discontinued operations reporting occurs only when the disposal of a component or a group of components of the Company (i) meets the held-for-sale classification criteria, is disposed of by sale, or other than by sale, and (ii) represents a strategic shift that will have a major effect on the Company's operations and financial results.

The results of operations and cash flows of a

BrightSphere Investment Group Inc.

2 unchanged sentences

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

discontinued operation are restated for all comparative periods presented.

Unless otherwise noted, discussion in the Notes to Consolidated Financial Statements refers to the Company's continuing operations.

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

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

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For periods with a net loss, potential shares of common stock are considered antidilutive.

The Company considers two ways to measure dilution to earnings per share:

(a) calculate the net number of shares that would be issued assuming any related proceeds are used to buy back outstanding shares (the treasury stock method), or (b) assume the gross number of shares are issued and calculate any related effects on net income available for shareholders (the if-converted or two-class method).

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

BrightSphere Investment Group Inc.

2 unchanged sentences

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

The Company considers two ways to measure dilution to earnings per share:

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

Deferred financing costs

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The Company’s accounting policy is to classify interest and related charges as a component of income tax expense.

Non-controlling interests

For certain entities that are consolidated, but not 100% owned, the Company reports non-controlling interests as equity on its Consolidated Balance Sheets.

The Company's consolidated net income on the Consolidated Statements of Operations includes the income (loss) attributable to non-controlling interest holders of the Company's consolidated Affiliates and Funds.

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

BrightSphere Investment Group Inc.

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

Non-controlling interests

For certain entities that are consolidated, but not 100% owned, the Company reports non-controlling interests as equity on its Consolidated Balance Sheets.

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

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The costs included in a restructuring liability are those costs that are either incremental or incurred as a direct result of the plan, or are the result of a continuing contractual obligation with no continuing economic benefit to the Company, or a penalty incurred to cancel the contractual obligation.

BrightSphere Investment Group Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2021 and 2020

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

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, 2021.

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 Consolidated Financial Statements and related disclosures.

Accounting standards not yet adopted

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 December 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 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 Consolidated Financial Statements, including those that have not yet been adopted.

3 unchanged sentences

December 31, 2021 and 2020

3) Divestitures

Copper Rock Capital Partners LLC

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

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

Barrow, Hanley, Mewhinney & Strauss LLC

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

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 $ 505.8 million, net of tax of $ 179.5 million for the year ended December 31, 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 $ 88.2 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 $ 185.2 million net of tax of $ 73.9 million for the year ended December 31, 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 $ 10.2 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 Global and the Company’s co-investments in Campbell Global funds.

On August 31, 2021, the Company completed the sale of all its interests in Campbell Global to J.P.

Financial and operational results for Campbell Global are included within the “Other” category until August 31, 2021, the consummation of the sale.

The divestiture of Campbell Global did not meet the criteria for discontinued operations.

The Company also redeemed co-investments in Campbell Global’s funds as of August 31, 2021 upon consummation of the sale.

BrightSphere Investment Group Inc.

Notes to Consolidated Financial Statements

December 31, 2021 and 2020

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

The major classes of assets and liabilities held for sale consisted of the following at December 31 (in millions):

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)

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)

(1) Includes assets and liabilities of discontinued operations of Landmark and TSW as of December 31, 2020.

BrightSphere Investment Group Inc.

Notes to Consolidated Financial Statements

December 31, 2021 and 2020

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 Consolidated Statements of Operations for the years ended December 31 are as follows (in millions):

2021 2020 2019

Revenues $ 115.1 $ 219.0 $ 224.9

Operating expenses:

Compensation and benefits 91.2 145.6 167.6

General and administrative expenses 8.1 18.0 21.7

Amortization of intangibles 2.7 6.4 6.4

Depreciation and amortization 0.5 1.2 1.0

Consolidated Funds’ expense 0.1 0.1 0.1

Total operating expenses 102.6 171.3 196.8

Operating income 12.5 47.7 28.1

Investment gains of consolidated Funds 68.1 35.1 16.7

Income from discontinued operations before taxes 80.6 82.8 44.8

Income tax expense 3.3 15.0 7.5

Income from discontinued operations, net of tax 77.3 67.8 37.3

Gain on disposal, net of tax of $ 253.4

Total discontinued operations 768.3 67.8 37.3

Income from discontinued operations attributable to non-controlling interests 68.0 28.4 10.3

Net income from discontinued operations attributable to controlling interests $ 700.3 $ 39.4 $ 27.0

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 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 Consolidated Balance Sheet as of December 31, 2020.

The consolidated Funds’ investments gains from discontinued operations, net of tax, attributable to controlling interests was $ 0.0 million , $ 6.6 million, and $ 6.3 million in the Company’s Consolidated Statement of Operations for the years ended December 31, 2021, 2020 and 2019, respectively.

BrightSphere Investment Group Inc.

Notes to Consolidated Financial Statements

December 31, 2021 and 2020

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

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

Cash and cash equivalents $ — $ 0.6

Equity-accounted investments (1)

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 the “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”) for cash consideration totaling $ 292.3 million.

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

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

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

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

Analytic Investors LLC

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

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.

BrightSphere Investment Group Inc.

3 unchanged sentences

Investments are comprised of the following at December 31 (in millions):

Investments of consolidated Funds held at fair value

Other investments held at fair value 9.5 40.0

1 unchanged sentence

Total investments held at fair value $ 54.5 $ 88.0

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

Equity-accounted investment in Affiliate — 2.0

Total investments per Consolidated Balance Sheets $ 54.5 $ 90.0

(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.

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

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

This transaction closed on January 5, 2018 and resulted in a gain of $ 65.7 million included in the table below.

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

1 unchanged sentence

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

2.0 14.0 ( 1.9 )

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

Gain on sale of Affiliate carried at cost

Earnings from equity-accounted investment in Affiliate 2.6 2.9 2.8

Total investment income per Consolidated Statements of Operations

$ 8.3 $ 4.9 $ 16.8

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

2020 2019 2018

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

$ ( 5.2 ) $ 4.2 $ ( 13.4 )

Earnings from equity-accounted investments 35.1 16.7 —

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

$ 29.9 $ 20.9 $ ( 13.4 )

BrightSphere Investment Group Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2020 and 2019

5) Fair Value Measurements

4 unchanged sentences

(Level III) Uncategorized Total value,

Assets of BSIG

Investments in separate accounts (2)

5 unchanged sentences

Total fair value assets $ 49.6 $ — $ — $ 4.9 $ 54.5

BrightSphere Investment Group Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2021 and 2020

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, 2020 (in millions):

3 unchanged sentences

(Level III) Uncategorized Total value,

Assets of BSIG and consolidated Funds (4)

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

Investments in separate accounts (2)

4 unchanged sentences

— — 2.6 16.1 18.7

BSIG total 122.0 11.1 3.0 48.2 184.3

Total fair value assets $ 57.7 $ 11.6 $ 2.6 $ 16.1 $ 88.0

Liabilities of BSIG and consolidated Funds (4)

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

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

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

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

(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.

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 $ 4.6 million at December 31, 2021 consist of approximately 100 % of e quity 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).

BrightSphere Investment Group Inc.

2 unchanged sentences

5) Fair Value Measurements (cont.)

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

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

(3) Investments related to long-term incentive compensation plans of $ 45.0 million and $ 48.0 million at December 31, 2021 and December 31, 2020, respectively, are 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.

6 unchanged sentences

The real estate investment Funds of $ 4.8 million and $ 6.2 million at December 31, 2021 and December 31, 2020, respectively, are subject to longer than monthly or quarterly redemption restrictions, and due to their nature, distributions are received only as cash flows are generated from underlying assets over the life of the Funds.

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

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 December 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.

4 unchanged sentences

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

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

BrightSphere Investment Group Inc.

2 unchanged sentences

5) Fair Value Measurements (cont.)

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

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

The Company has not made adjustments to the prices provided.

Assets of consolidated Funds also include investments in bank loans.

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

These assets are classified as Level II.

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

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

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

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

2 unchanged sentences

At beginning of the period $ 2.6 $ 3.0

Additions (redemptions)

Total net fair value losses recognized in net income

Redemptions ( 0.1 ) ( 0.3 )

Disposals ( 2.8 ) —

Total net fair value gains/(losses) recognized in net income 0.3 ( 0.1 )

Total Level III financial assets

There were no significant transfers of financial assets or liabilities between Levels II or III during the year ended December 31, 2021.

BrightSphere Investment Group Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2020 and 2019

6) Variable Interest Entities

6 unchanged sentences

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

Investments at fair value $ — $ 119.5

Other assets of consolidated Funds 114.3 85.7

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

Total Assets $ — $ 114.3

Liabilities of consolidated Funds $ — $ 6.2

Total Liabilities $ — $ 6.2

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

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

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

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

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.

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

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

BrightSphere Investment Group Inc.

2 unchanged sentences

6) Variable Interest Entities (cont.)

earned but uncollected management fees.

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 Consolidated Balance Sheets 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 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 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.

4 unchanged sentences

Maximum risk of loss (1)

$ 19.3 $ 23.9

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

3 unchanged sentences

December 31, 2021 and 2020

7) Equity Accounted Investees

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

For the year ended December 31,

Statements of Income 2020 2019 2018

Net revenues $ 14.0 $ 13.5 $ 12.9

Operating income 4.9 4.7 4.5

Income before income taxes 4.9 4.7 4.5

non-controlling interests income 2.0 1.9 1.8

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

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

$ 2.9 $ 2.8 $ 2.7

As of December 31,

Balance Sheets 2020 2019

Total assets $ 4.3 $ 4.2

Total liabilities 2.0 1.9

Non-controlling interests in subsidiaries

Members’ equity $ 2.0 $ 2.0

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

BSIG investment in equity method investee $ 2.0 $ 2.0

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

BrightSphere Investment Group Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2020 and 2019

7) Fixed Assets

3 unchanged sentences

Furniture and fixtures 6.2 10.9

Building 2.9 2.9

Software and web development 103.2 97.8

3 unchanged sentences

Depreciation and amortization expense for continuing operations was $ 22.1 million, $ 19.8 million and $ 16.2 million for the years ended December 31, 2021, 2020 and 2019, respectively.

The Company disposed of property, plant, and equipment with a cost basis of $ 13.6 million and accumulated depreciation of $( 13.6 ) million during the year ended December 31, 2021.

These disposals included leasehold improvements and other assets.

There was no gain or loss on disposals recorded.

The Company also disposed of property, plant, and equipment related to divestitures with a cost basis of $ 8.1 million and accumulated depreciation of $( 2.6 ) million during the year ended December 31, 2021.

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

The Company has operating leases for corporate offices, data centers, vehicles and certain equipment.

8 unchanged sentences

ROU asset obtained in exchange for new operating lease liabilities

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

BrightSphere Investment Group Inc.

2 unchanged sentences

8) Leases (cont.)

For the years ended December 31, 2021 and 2020, the weighted average remaining lease term was 11.3 years and 10.0 years, respectively, and the weighted average discount rate was 3.35 % and 3.35 %, respectively.

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

4 unchanged sentences

Less imputed interest ( 16.9 )

Total $ 107.9

BrightSphere Investment Group Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2021 and 2020

9) Goodwill and Intangible Assets

7 unchanged sentences

Disposals (1)

— — ( 76.1 ) ( 76.1 )

Goodwill 22.1 5.0 — 27.1

4 unchanged sentences

Disposals — — — —

— — ( 76.1 ) ( 76.1 )

Goodwill 22.1 — — 22.1

1 unchanged sentence

December 31, 2021 $ 20.3 $ — $ — $ 20.3

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

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

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

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

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

The 2021 annual impairment assessment determined that no impairment existed at the annual assessment date.

BrightSphere Investment Group Inc.

2 unchanged sentences

9) Goodwill and Intangible Assets (cont.)

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

See Note 3, Divestitures, for additional information.

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

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

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

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

4 unchanged sentences

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

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

Book Value Accumulated

Amortization &

Impairment Net Book

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

Additions — — —

Amortization — ( 6.6 ) ( 6.6 )

Disposals — — —

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

Additions — — —

Amortization — ( 6.7 ) ( 6.7 )

Disposals (1)

( 22.7 ) 22.7 —

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

BrightSphere Investment Group Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2020 and 2019

10) Goodwill and Intangible Assets (cont.)

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

See Note 3, Divestitures.

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

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

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

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

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

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

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

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

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

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

Thereafter 25.4

BrightSphere Investment Group Inc.

Notes to Consolidated Financial Statements

December 31, 2020 and 2019

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 year ended December 31, 2021.

The Company also reclassified goodwill pertaining to Landmark and TSW of $ 148.1 million and $ 13.7 million, respectively, within “Assets held for sale” as of December 31, 2020.

In connection with the divestiture of Landmark, the Company disposed of $ 55.5 million of intangible assets during the year ended December 31, 2021.

The Company also reclassified intangible assets of $ 58.2 million pertaining to Landmark within “Assets held for sale” as of December 31, 2020.

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

10) Related Party Transactions

2 unchanged sentences

Total amounts due for investment advisory fee receivables from related parties $ 14.1 $ 7.6

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

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

Total related party investment $ 2.0 $ 2.0

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

6 unchanged sentences

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

Other related party arrangements

During 2016, the Company and OM plc agreed to amend the Deferred Tax Asset Deed (the “DTA Deed”).

Under the terms of the DTA Deed, as amended, the Company agreed to make a payment of the net present value of the future tax benefits due to OM plc valued as of December 31, 2016.

This payment, originally valued at $ 142.6 million, was to be made over three installments, on June 30, 2017, December 31, 2017 and June 30, 2018.

The initial payment of $ 45.5 million was paid to OM plc on June 30, 2017.

The reduction of the corporate tax rate and other provisions of the Tax Act resulted in a decrease to the value of the DTA Deed of approximately $ 51.8 million for the year ended December 31, 2018.

In 2018, the Company agreed to terminate the DTA Deed with OM plc.

The Company recorded a revaluation gain of $ 20.0 million in connection with the settlement of the DTA Deed for the year ended December 31, 2018.

In the first quarter of 2019, the final cash payment of $ 32.7 million was made to OM plc to settle the outstanding liability under the DTA Deed.

During 2014, the Company entered into a Seed Capital Management Agreement and a Co-Investment Deed with OM plc and/or OM plc’s subsidiaries.

During 2016, the Company and OM plc agreed to amend the Seed Capital Management Agreement.

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

The Company purchased the remaining seed capital investments

BrightSphere Investment Group Inc.

2 unchanged sentences

10) Related Party Transactions (cont.)

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

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

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

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

The Company also exercises significant influence over unconsolidated Funds;

however in order to report in a manner consistent with consolidated Funds, it has elected to apply the fair value option for its investments therein.

Additional information with respect to equity-accounted investees is disclosed in Note 7.

Certain Affiliates have provided loans to Affiliate employees.

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

Other related party arrangements

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

BrightSphere Investment Group Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2020 and 2019

11) Accounts Payable and Accrued Expenses

3 unchanged sentences

Accrued interest payable 6.8 6.8

Other 0.7 0.7

Total accounts payable and accrued expenses $ 35.2 $ 31.3

14 unchanged sentences

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

Third party borrowings:

Revolving credit facility:

$ 125 million revolving credit facility expiring August 22, 2022 (1)(2)

$ — $ — $ — $ —

Total revolving credit facility $ — $ — $ — $ —

Third party borrowings:

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

4 unchanged sentences

$ 394.9 $ 412.9 $ 394.3 $ 424.9

Non-recourse borrowing:

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

$ — $ — $ 35.0 $ 35.0 2

Total non-recourse borrowing

$ — $ — $ 35.0 $ 35.0

Total borrowings $ 394.3 $ 424.9 $ 568.8 $ 588.6

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

(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.

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

BrightSphere Investment Group Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2020 and 2019

14) Borrowings and Debt (cont.)

Revolving credit facility

4 unchanged sentences

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

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

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

Moody’s Investor Service, Inc.

and Standard & Poor’s have each assigned an investment-grade rating to the Company’s senior, unsecured long-term indebtedness.

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

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

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

In July 2016, the Company issued $ 275.0 million of 4.80 % Senior Notes due 2026 (the “2026 Notes”) and $ 125.0 million of 5.125 % Senior Notes due 2031 (the “2031 Notes”).

The Company used the net proceeds of these offerings to finance the acquisition of Landmark in August 2016, settle an outstanding interest rate lock, purchase seed capital from OM plc and pay down the balance of the Company’s previous revolving credit facility.

4.80 % Senior Notes Due July 2026

The $ 275.0 million 2026 Notes were sold at a discount of $( 0.5 ) million and the Company incurred debt issuance costs of $( 3.0 ) million, which are being amortized to interest expense over the ten-year term.

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

BrightSphere Investment Group Inc.

2 unchanged sentences

13) Borrowings and Debt (cont.)

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

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

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

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

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

The weighted average interest rate for the revolving credit facility was 1.60 %, 2.27 % and 3.54 % in 2021, 2020 and 2019, respectively.

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 2.5x and the ratio of Acadian’s trailing twelve months Adjusted EBITDA to Acadian’s interest expense (the “Interest Coverage Ratio”) must be not less than 4.0 x.

At December 31, 2021, the Company is in compliance with these debt covenants.

In July 2016, the Company issued $ 275.0 million of 4.80 % Senior Notes due 2026 (the “2026 Notes”) and $ 125.0 million of 5.125 % Senior Notes due 2031 (the “2031 Notes”).

4.80 % Senior Notes Due July 2026

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

5.125 % Senior Notes Due August 2031

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

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

Non-recourse seed capital facility

In July 2017, the Company purchased all remaining seed capital investments covered by the Seed Capital Management Agreement from OM plc for $ 63.4 million.

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

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

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

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

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

Interest expense

Interest expense incurred amounted to $ 28.5 million, $ 32.2 million and $ 24.9 million for the years ended December 31, 2020, 2019 and 2018 respectively.

Interest expense consists of interest accrued on the long-term debt and credit facilities, commitment fees and amortization of debt-related costs.

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

BrightSphere Investment Group Inc.

2 unchanged sentences

13) Borrowings and Debt (cont.)

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

As of December 31, 2021, the aggregate maturities of debt commitments, based on their contractual terms, are as follows:

4 unchanged sentences

The Company was in compliance with the required covenants related to borrowings and debt facilities as of December 31, 2021.

Subsequent Event

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

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

Subsequent Events

On December 17, 2021, the Company issued a notice for the full redemption of the $ 125 million aggregate principal amount outstanding of its 5.125 % Senior Notes due August 1, 2031.

On January 18, 2022 the Company completed the full redemption of the 2031 Notes.

The redemption price for the 2031 Notes was $1,011.53 per $1,000.00 of principal amount of the 2031 Notes, which is equal to 100 % of the principal amount, plus accrued and unpaid interest on the principal amount being redeemed up to, but excluding, the date of redemption.

The aggregate interest paid upon redemption was approximately $ 1.4 million.

In February 2022, the Company drew down $ 125 million on the revolving credit facilit y.

BrightSphere Investment Group Inc.

30 unchanged sentences

Non-deductible expenses 0.2 % 0.2 % 0.3 %

DTA Deed liability revaluation adjustment — % — % 1.2 %

Executive Compensation 1.6 % 0.1 % 0.4 %

Adjustment to liabilities for uncertain tax positions ( 1.7 ) % ( 2.5 ) % ( 19.2 ) %

Change in valuation allowance — % — % ( 6.3 ) %

Write-off of state net operating loss carryforwards — % — % 6.3 %

Effect of foreign operations 0.7 % 0.2 % 0.3 %

6 unchanged sentences

Effective income tax rate for continuing operations 28.1 % 28.2 % 4.9 %

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

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

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

In connection with the sale of its Affiliates, the Company recorded tax expense of $ 9.4 million, $ 77.6 million, and $ 0.0 million , including tax impacts of non-deductible tax items, during the years ended December 31, 2021, 2020 and 2019, respectively.

In addition, during the year ended December 31, 2021, the Company recorded income tax expense of $ 256.7 million in discontinued operations.

The Company reduced its liability for uncertain tax positions by $ 3.4 million, $ 9.1 million and $ 40.8 million during the years ended December 31, 2021, 2020 and 2019, respectively, due to the lapse of statute of limitations.

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

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

The Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) included a provision that increased the business interest limitation under IRC Section 163(j) from 30% to 50% for tax years 2019 and 2020.

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

1 unchanged sentence

parent from the former U.K.

These deferred tax assets are now measured using applicable U.S.

These deferred tax assets are measured using applicable U.S.

and state income tax rates.

1 unchanged sentence

These changes have resulted in an increase to the state income tax rate and accordingly to the state deferred tax assets.

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

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

BrightSphere Investment Group Inc.

2 unchanged sentences

14) Income Taxes (cont.)

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

earnings, and new taxes assessed on foreign earnings.

In accordance with SEC issued Staff Accounting Bulletin No.

118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act (“SAB 118”), the Company was permitted to provide provisional amounts for recording the tax effects of the enacted tax law during a specified measurement period, ending one year after the enactment date.

The Company recorded a $ 1.0 million income tax benefit during the year ended December 31, 2018 related to refinement of the Section 965 toll charge tax liability on the mandatory deemed repatriation of foreign earnings.

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

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

The Company has elected to treat global intangible low-taxed income (“GILTI”) taxes as period costs in the accounting and tax periods in which they are incurred.

The Company has recognized tax expense of $ 0.9 million, $ 0.8 million and $ 0.5 million during the years ended December 31, 2021, 2020 and 2019, respectively, related to the GILTI tax.

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

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

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

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

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It is not practical for the Company to determine the potential unrecognized deferred tax liability related to unremitted earnings due to numerous assumptions associated with the determination.

BrightSphere Investment Group Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2020 and 2019

15) Income Taxes (cont.)

Deferred tax assets and liabilities reflect the expected future tax consequences of temporary differences between the book carrying amounts and tax bases of the Company’s assets and liabilities.

3 unchanged sentences

Federal net operating loss 0.1 0.5

State net operating loss carry forwards — 0.2

Investment in partnerships 62.4 156.1

4 unchanged sentences

Total deferred tax assets 72.9 174.1

Valuation allowance — —

Deferred tax assets, net of valuation allowance 72.9 174.1

Deferred tax liabilities:

3 unchanged sentences

Net deferred tax assets $ 72.4 $ 170.3

At December 31, 2021, the Company’s net deferred tax assets decreased as compared to December 31, 2020 primarily due to the divestitures of Landmark, TSW, Campbell, and ICM, and the redemptions of the co-investment funds.

BrightSphere Investment Group Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2021 and 2020

14) Income Taxes (cont.)

At December 31, 2021, the Company has tax attributes that carry forward for varying periods.

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

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

The Company’s federal net operating loss carryforward of $ 0.3 million originated during 2004 and 2006 and will expire over a three to five-year period.

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

3 unchanged sentences

As of December 31, 2021, management believes it is more likely than not that the balance of the deferred tax assets will be realized based on forecasted taxable income.

BrightSphere Investment Group Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2020 and 2019

15) Income Taxes (cont.)

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

2 unchanged sentences

Additions based on current year tax positions 0.1 0.1 0.1

Reductions for tax provisions of prior years — — ( 0.9 )

Reductions related to lapses of statutes of limitations ( 2.7 ) ( 7.8 ) ( 35.7 )

7 unchanged sentences

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

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

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

federal, state, local and other foreign jurisdictions.

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

At December 31, 2021, 2020 and 2019, the Company is subject to examination in two jurisdictions.

The Company and its subsidiaries file tax returns in the U.S., U.K., state, local, and other foreign jurisdictions.

As of December 31, 2021, 2020 and 2019, the Company is generally no longer subject to income tax examinations by U.S.

federal, state, local, or foreign tax authorities for calendar years prior to 2018.

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

for calendar years prior to 2017.

In the U.K., as of December 31, 2021, the Company continues to be subject to an income tax examination for calendar year 2017 but otherwise is generally no longer subject to income tax examinations for tax years before 2020.

BrightSphere Investment Group Inc.

5 unchanged sentences

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 disposition dates.

As a result of these dispositions, the Company no longer had any unfunded commitments to Landmark or Campbell as of December 31, 2021.

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

Included in cash and cash equivalents is $ 1.5 million pertaining to the wind-down of BrightSphere Investment UK, Ltd.

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.

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.

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

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

This guaranty expires in 2022.

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

There are no liabilities recorded on the Consolidated Balance Sheet as of December 31, 2021 and 2020, related to this guaranty.

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

6 unchanged sentences

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.

BrightSphere Investment Group Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2021 and 2020

15) Commitments and Contingencies (cont.)

Foreign tax contingency

5 unchanged sentences

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 December 31, 2021.

BrightSphere Investment Group Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2020 and 2019

16) Commitments and Contingencies (cont.)

Considerations of credit risk

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

1 unchanged sentence

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 December 31, 2021, approximately $ 176 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 Consolidated Financial Statements (Continued)

December 31, 2021 and 2020

16) Earnings Per Share

3 unchanged sentences

2021 2020 2019

Income from continuing operations attributable to controlling interests 128.1 247.3 196.9

Income from discontinued operations attributable to controlling interests (Note 3) 700.3 39.4 27.0

Net income attributable to controlling interests 828.4 286.7 223.9

8 unchanged sentences

Earnings per share of common stock attributable to controlling interests:

Basic $ 3.53 $ 2.45 $ 1.27

Diluted $ 3.49 $ 2.45 $ 1.26

Continuing operations $ 1.66 $ 3.04 $ 2.16

Discontinued operations $ 9.07 $ 0.49 $ 0.29

Basic earnings per share of common stock attributable to controlling interests $ 10.73 $ 3.53 $ 2.45

Continuing operations $ 1.59 $ 3.01 $ 2.16

Discontinued operations $ 8.70 $ 0.48 $ 0.29

Diluted earnings per share of common stock attributable to controlling interests $ 10.29 $ 3.49 $ 2.45

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

7 unchanged sentences

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).

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

2 unchanged sentences

Revenue from expense reimbursements amounted to $ 2.9 million, $ 4.6 million and $ 4.4 million for the years ended December 31, 2021, 2020 and 2019, respectively, and is recorded in other revenue in the Company’s Consolidated Statements of Operations.

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

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

BrightSphere Investment Group Inc.

3 unchanged sentences

Disaggregation of management fee revenue

The Company classifies its revenue (including only consolidated Affiliates that are included in management fee revenue) among the following asset classes:

equity, which includes small cap through large cap securities and substantially value or blended investment styles;

Global / non-U.S.

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 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 years ended December 31 (in millions):

The geographic disaggregation of management fee revenue for the years ended December 31 (in millions) is presented below:

2021 2020 2019

Quant & Solutions

Global / non-U.S.

equity $ 346.8 $ 370.8 $ 377.4

Alternatives 170.6 165.0 208.3

$ 313.1 $ 249.7 $ 261.4

106.3 97.1 109.4

Liquid Alpha (1)

Global / non-U.S.

equity 73.0 90.7 112.9

Fixed income 22.1 26.0 26.8

equity 85.4 154.5 179.6

Management fee revenue

10.2 17.1 18.2

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

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

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

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

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

19) Employee Benefits

The Company has various defined contribution plans covering substantially all of its full-time employees and several of its Affiliates.

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

Management fee revenue $ 433.3 $ 478.9 $ 582.1

(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 year ended December 31, 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 23, Segments for further discussion.

(2) Prior to March 31, 2021, the Company had an 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 23, Segments for further discussion.

BrightSphere Investment Group Inc.

1 unchanged sentence

December 31, 2021 and 2020

19) Employee Benefits (cont.)

18) Employee Benefits

The Company has various defined contribution plans covering substantially all of its full-time employees.

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

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

7 unchanged sentences

The Company recorded total expenses in relation to its qualified and non-qualified plans within compensation and benefits in its Consolidated Statements of Operations for the years ended December 31, 2021, 2020 and 2019 of $ 8.5 million, $ 9.0 million and $ 12.0 million, respectively.

BrightSphere Investment Group Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2021 and 2020

19) Equity-based Compensation

1 unchanged sentence

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

Pre-acquisition equity units held by employees of acquired Affiliates that are subject to service conditions are also accounted for as equity-based compensation arrangements.

Compensation expense is recognized over the requisite service period equal to the cumulative vested fair value of the award at the end of each period up to vesting date.

2 unchanged sentences

Vested Affiliate equity liabilities are revalued at each period end until settlement date, with changes in the liabilities included within compensation expense.

In conjunction with the Landmark acquisition, BSIG entered into compensation arrangements with employees of Landmark where an additional acquisition-related payment of $ 207.6 million was earned based on the growth of Landmark’s business.

This arrangement was accounted for as cash-settled equity-based compensation and fair valued as of the closing date of the acquisition.

The amount vested on December 31, 2018 and was paid in February 2019.

BrightSphere Investment Group Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2020 and 2019

20) Equity-based Compensation (cont.)

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

2 unchanged sentences

Amortization and revaluation of granted awards 5.4 2.0 ( 0.4 )

Affiliate disposals ( 0.8 ) — —

Repurchases (cash-settled) ( 1.5 ) ( 10.2 ) ( 1.8 )

5 unchanged sentences

Equity ownership encourages employees and directors to act in the best long-term interests of the Company.

A total of 14.8 million shares of common stock have been reserved for issuance under the various plans.

As of December 31, 2021, the Company had 4.6 million shares of common stock available to be granted under the various plans.

BrightSphere Investment Group Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2021 and 2020

19) Equity-based Compensation (cont.)

Compensation expense recognized by the Company for the years ended December 31, 2021, 2020 and 2019 in relation to these awards was $ 1.9 million, $ 2.5 million, and $ 6.2 million respectively.

9 unchanged sentences

RSUs 15,548 22.06 105,678 10.20 88,980 12.40

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

Performance-based RSUs — — — — 9,013 14.62

Stock options — — 2,820,000 0.65 2,070,000 2.48

BrightSphere Investment Group Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2020 and 2019

20) Equity-based Compensation (cont.)

Grants of restricted stock in BrightSphere Investment Group Inc.

7 unchanged sentences

Forfeited during the year ( 1,500 ) 10.09 ( 6,447 ) 14.19 ( 47,453 ) 15.43

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

Vested during the year ( 10,010 ) 14.53 ( 56,760 ) 14.75 ( 219,306 ) 14.45

Outstanding at end of the year

3 unchanged sentences

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

BrightSphere Investment Group Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2021 and 2020

19) Equity-based Compensation (cont.)

Grants of restricted stock units in BrightSphere Investment Group Inc.

7 unchanged sentences

Forfeited during the year ( 2,345 ) 10.30 ( 30,927 ) 10.83 ( 24,591 ) 14.46

Exercised during the year ( 77,286 ) 10.99 ( 48,681 ) 14.14 ( 77,962 ) 15.02

Vested during the year ( 34,864 ) 10.35 ( 77,286 ) 10.99 ( 48,681 ) 14.14

Outstanding at end of the year

2 unchanged sentences

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

BrightSphere Investment Group Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2020 and 2019

20) Equity-based Compensation (cont.)

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

5 unchanged sentences

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

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

Vested during the year ( 36,007 ) 9.78 — — — —

Other movements ( 47,085 ) 9.78 ( 175,586 ) 10.26 — —

1 unchanged sentence

— $ — 83,092 $ 9.78 258,678 $ 10.11

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

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

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

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

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

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

Other movements includes performance-based RSAs that did not meet the market vesting condition and did not vest during the year ended December 31, 2021.

There were no performance-based RSAs granted by the Company during the years ended December 31, 2021, 2020, and 2019, respectively.

BrightSphere Investment Group Inc.

10 unchanged sentences

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

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

Vested during the year — — — — ( 193,125 ) 10.98

Other movements — — — — 3,790 14.15

Outstanding at end of the year 9,013 $ 14.62 9,013 $ 14.62 9,013 $ 14.62

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

There were no performance-based RSUs granted by the Company during the years ended December 31, 2021 and 2020, respectively.

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

7 unchanged sentences

Granted during the year

2,820,000 10.37 4.8

Forfeited during the year

( 4,396,000 ) 12.00

Exercised during the year

14 unchanged sentences

Forfeited during the year

( 4,396,000 ) 12.00

Exercised during the year

( 19,000 ) 12.00

Outstanding at end of the year

4 unchanged sentences

Outstanding at beginning of the year

6,900,000 $ 12.00 5.0

Granted during the year

6 unchanged sentences

3,174,000 $ 12.00 4.0 $ —

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

There were no stock options granted by the Company during the year ended December 31, 2021.

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

The total fair value of options vested during the years ended December 31, 2021, 2020 and 2019 was $ 1.3 million, $ 1.5 million and $ 4.3 million, respectively.

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

The Company received $ 2.7 million and $ 0.2 million related to the exercise of options for the year ended December 31, 2021, and 2020, respectively.

The Company realized tax benefits of $ 0.6 million and $ 0.0 million related to the exercise of options for the year ended December 31, 2021, and 2020, respectively.

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

11 unchanged sentences

29.7 % to 41.3 %

28.4 % 28.3 %

Risk-free interest rate (3)

1 unchanged sentence

Expected life of options (4)

4.7 to 5.0 years

5.0 years 5.0 years

0 4.7 years to 5.0 years

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

33 unchanged sentences

Net income (loss) attributable to non-controlling interests in consolidated Funds in the Consolidated Statements of Operations is comprised of the net income or loss and net gains and losses allocated to equity-holders, other than BSIG, of consolidated Funds.

For the years ended December 31, 2020, 2019 and 2018 this net income (loss) was $ 28.8 million, $ 16.1 million, and $( 6.1 ) million, respectively.

For the years ended December 31, 2021, 2020 and 2019 this net income was $ 68.0 million, $ 28.8 million, and $ 16.1 million, respectively.

Non-controlling interests in consolidated Funds on the Consolidated Balance Sheets represents the share of net assets of the Funds attributable to those equity holders who are restricted in their ability to redeem their interests, which amounted to $ 0.0 million at December 31, 2021, and $ 80.3 million at December 31, 2020.

Redeemable non-controlling interests in consolidated Funds on the Consolidated Balance Sheets represents the share of net assets of the Funds attributable to those equity holders who are not restricted in their ability to redeem their interests, which amounted to $ 0.0 million at December 31, 2020, and $ 83.9 million at December 31, 2019.

22) Derivatives and Hedging

14 unchanged sentences

December 31, 2021 and 2020

23) Derivatives and Hedging (cont.)

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.

23) Segment Information

The Company has the following business segments:

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

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

equities, as well as fixed income.

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

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

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

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

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

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

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

BrightSphere Investment Group Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2020 and 2019

24) Segment Information (cont.)

The Company has the following reportable segment (1)(2) :

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”.

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” within the Company’s segment reporting for the year ended December 31, 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

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 its equity-accounted Affiliate.

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

BrightSphere Investment Group Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2021 and 2020

23) Segment Information (cont.)

accounted Affiliate.

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

1 unchanged sentence

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

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

GAAP, 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.

1 unchanged sentence

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

BrightSphere Investment Group Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2020 and 2019

24) Segment Information (cont.)

Segment Presentation

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.

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) for the year ended December 31, 2021 (in millions):

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

Quant & Solutions Other Reconciling Adjustments Total U.S.

ENI revenue $ 488.1 $ 35.4 $ 0.3 (a) $ 523.8

5 unchanged sentences

Earnings after Affiliate key employee distributions 214.1 ( 26.4 ) ( 41.9 ) 145.8

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

Net interest expense — ( 22.3 ) ( 2.3 ) (d) ( 24.6 )

Net investment income — — 8.3 (e) 8.3

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

Gain on sale of subsidiaries — — 48.6 (e) 48.6

Net income attributable to non-controlling interests in consolidated Funds — — ( 68.0 ) (e) ( 68.0 )

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

Income tax expense — ( 47.1 ) ( 2.9 ) (f) ( 50.0 )

Income from discontinued operations, net of tax — — 77.3 (g) 77.3

Gain on disposal of discontinued operations, net of tax — — 691.0 (h) 691.0

Economic net income $ 214.1 $ ( 95.8 ) $ 710.1 $ 828.4

3 unchanged sentences

23) Segment Information (cont.)

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

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

The following table presents the financial data for the Company’s segments for the year ended December 31, 2020 (in millions):

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

ENI revenue $ 354.8 $ 111.1 $ 26.4 $ 7.2 (a) $ 499.5

1 unchanged sentence

Earnings before variable compensation 205.8 71.7 ( 18.7 ) ( 6.5 ) 252.3

220.0 99.6 185.0 ( 35.0 ) 25.2 494.8

Variable compensation 72.8 29.0 6.1 4.2 (c) 112.1

ENI operating earnings (after variable comp) 133.0 42.7 ( 24.8 ) ( 10.7 ) 140.2

144.4 62.9 122.6 ( 45.0 ) 10.5 295.4

Affiliate key employee distributions 4.3 3.9 0.3 — 8.5

6.4 23.0 23.7 — ( 8.0 ) (g) 45.1

Earnings after Affiliate key employee distributions 128.7 38.8 ( 25.1 ) ( 10.7 ) 131.7

138.0 39.9 98.9 ( 45.0 ) 18.5 250.3

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

Net investment income — — — ( 0.3 ) (e) ( 0.3 )

Net income attributable to non-controlling interests in consolidated Funds

— — — — ( 16.1 ) (e) ( 16.1 )

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

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

Income tax (expense) benefit — — ( 32.5 ) ( 64.6 ) (f) ( 97.1 )

Income from discontinued operations, net of tax — — — 67.8 (g) 67.8

Economic net income $ 128.7 $ 38.8 $ ( 79.2 ) $ 198.4 $ 286.7

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

BrightSphere Investment Group Inc.

2 unchanged sentences

23) Segment Information (cont.)

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

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

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

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

ENI revenue $ 380.6 $ 180.3 $ 25.5 $ 8.2 (a) $ 594.6

1 unchanged sentence

Earnings before variable compensation 220.0 126.2 ( 31.9 ) 66.0 380.3

242.7 156.3 227.1 ( 42.7 ) ( 187.1 ) 396.3

Variable compensation 75.6 43.7 12.0 6.7 (c) 138.0

ENI operating earnings (after variable comp) 144.4 82.5 ( 43.9 ) 59.3 242.3

156.5 97.4 153.2 ( 54.4 ) ( 192.3 ) 160.4

Affiliate key employee distributions 6.4 13.7 — — 20.1

9.5 34.1 33.0 — — 76.6

Earnings after Affiliate key employee distributions 138.0 68.8 ( 43.9 ) 59.3 222.2

147.0 63.3 120.2 ( 54.4 ) ( 192.3 ) 83.8

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

Net investment income — — — 21.0 (e) 21.0

Net income attributable to non-controlling interests in consolidated Funds

— — — — 6.1 (e) 6.1

Revaluation of DTA deed

— — — — 20.0 (h) 20.0

Net income attributable to non-controlling interests in consolidated Funds — — — ( 16.1 ) (e) ( 16.1 )

Income tax (expense) benefit — — ( 37.7 ) 27.2 (f) ( 10.5 )

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

— — — — 0.1 (e) 0.1

Income from discontinued operations, net of tax — — — 37.3 (g) 37.3

Economic net income $ 138.0 $ 68.8 $ ( 102.6 ) $ 119.7 $ 223.9

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

(1) The most directly comparable U.S.

14 unchanged sentences

GAAP revenue.

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

(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.

BrightSphere Investment Group Inc.

2 unchanged sentences

23) Segment Information (cont.)

GAAP compensation expense.

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

3 unchanged sentences

(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.

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

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

GAAP non-operating income.

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

Years ended December 31,

2020 2019 2018

$ 526.3 $ 607.0 $ 687.6

171.6 200.0 217.4

Management fee revenue

$ 697.9 $ 807.0 $ 905.0

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.

(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.

BrightSphere Investment Group Inc.

1 unchanged sentence

December 31, 2021 and 2020

25) Selected Quarterly Financial Data (unaudited)

24) Selected Quarterly Financial Data

The following is a summary of the quarterly results of operations of the Company for the years ended December 31, 2021 and 2020 ($ in millions, unless otherwise noted):

4 unchanged sentences

27.6 34.6 57.4 58.5

Income from discontinued operations, net of tax 21.9 53.4 1.2 0.8

Gain (Loss) on disposal of discontinued operations, net of tax — 509.2 185.4 ( 3.6 )

Net income 40.4 587.3 229.5 39.2

3 unchanged sentences

Diluted earnings per share ($) $ 0.33 $ 6.42 $ 2.76 $ 0.53

Continuing operations basic earnings per share ($) $ 0.23 $ 0.31 $ 0.54 $ 0.59

Continuing operations diluted earnings per share ($) $ 0.22 $ 0.29 $ 0.52 $ 0.57

Basic shares outstanding (in millions) 79.3 79.4 79.6 70.6

5 unchanged sentences

2.3 36.0 41.2 265.3

Net income (loss) 61.1 21.6 83.0 74.3

Net income (loss) attributable to controlling interests

52.7 28.0 75.4 67.8

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

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

Income from discontinued operations, net of tax 23.3 26.7 2.1 15.7

Net income 22.1 53.9 34.0 205.5

Net income attributable to controlling interests 32.6 18.9 37.2 198.0

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

Diluted earnings per share ($) $ 0.38 $ 0.23 $ 0.46 $ 2.42

Continuing operations basic earnings per share ($) $ 0.06 $ 0.26 $ 0.36 $ 2.36

Continuing operations diluted earnings per share ($) $ 0.09 $ 0.26 $ 0.36 $ 2.30

Basic shares outstanding (in millions) 85.1 80.4 80.0 79.6

4 unchanged sentences

25) Subsequent Events

Sale of Investment Counselors of Maryland

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

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

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

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

During the period from January 1, 2022 through February 24, 2022, the Company repurchased 1,630,691 shares at a weighted average price of $ 24.51 per share, or approximately $ 40.0 million in total, including commissions.

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

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

What changed 10-K

Item 8. Financial Statements and Supplementary Data