Acadian Asset Management Inc. 10-K

Item 8. Financial Statements and Supplementary Data. Page Index to financial statements Reports of Independent Registered Public Accounting Firm (PCAOB ID: 185) 83 Consolidated Balance Sheets as of December 31, 2023 and 2022 86 Consolidated Statements of Operations for the years ended December 31, 2023, 2022 and 2021 87 Consolidated Statements of Comprehensive Income for the years ended December 31, 2023, 2022 and 2021 88 Consolidated Statements of Changes in Stockholders’ Equity for the years ended December 31, 2023, 2022 and 2021 89 Consolidated Statements of Cash Flows for the years ended December 31, 2023, 2022 and 2021 90 Notes to Consolidated Financial Statements 92 82 Report of Independent Registered Public Accounting Firm To the Shareholders and Board of Directors BrightSphere Investment Group Inc.: Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated balance sheets of BrightSphere Investment Group Inc. and subsidiaries (the Company) as of December 31, 2023 and 2022, the related consolidated statements of operations, comprehensive income, changes in stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2023, and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2023, in conformity with U.S. 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, 2023, 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, 2024 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. 83 Assessment of the fair value measurement of the cash-settled affiliate awards liability As discussed in Notes 2, 12 and 19 to the consolidated financial statements, the Company has issued cash-settled equity awards to certain key employees of an affiliate which are liability classified. The total liability for these awards was $23.0 million at December 31, 2023. The liability is remeasured each reporting period to its fair value. The fair value is determined using discounted cash flow analysis which incorporate assumptions for the forecasted earnings information, growth rates, market risk adjustments, discount rates, and when award holders maximize value subject to post-vesting restrictions. 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 methodology 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 include forecasted earnings, growth rates, market risk adjustments, discount rates, and adjustments to reflect the impact of post-vesting restrictions and when award holders will maximize value. 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. The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls related to the Company’s process to determine the fair value of the cash-settled affiliate awards liability, including controls over the significant assumptions noted above. We compared forecasted earnings and growth rates to internal financial forecasts and historical results. We also compared certain inputs used in developing the forecasted earnings and growth rates 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 assess that puts occur when award holders maximize value. We involved valuation professionals with specialized skills and knowledge, who assisted in: • evaluating whether the methodology used to calculate the fair value of the awards was appropriate • performing calculations of market risk adjustments using data that was independently obtained or otherwise corroborated • evaluating the discount rates used by the Company by comparing them against discount rates that were developed using publicly available market data • performing calculations of the fair value of the liability using the Company’s forecasted earnings and a combination of independent assumptions and Company assumptions and comparing the result to the amount recorded by the Company. /s/ KPMG LLP We have served as the Company’s auditor since 2014. Boston, Massachusetts February 28, 2024 84 Report of Independent Registered Public Accounting Firm To the Shareholders and Board of Directors BrightSphere Investment Group Inc.: Opinion on Internal Control Over Financial Reporting We have audited BrightSphere Investment Group Inc. and subsidiaries' (the Company) internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023, 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, 2023 and 2022, the related consolidated statements of operations, comprehensive income, changes in stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2023, and the related notes (collectively, the consolidated financial statements), and our report dated February 28, 2024 expressed an unqualified opinion on those consolidated financial statements. Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Report of Management on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control Over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ KPMG LLP Boston, Massachusetts February 28, 2024 85 BrightSphere Investment Group Inc. Consolidated Balance Sheets (in millions, except for share and per share data) December 31, 2023 December 31, 2022 Assets Cash and cash equivalents $ 146.8 $ 108.4 Investment advisory fees receivable 143.4 122.5 Income taxes receivable 2.7 2.0 Fixed assets, net 44.2 47.7 Right of use assets 57.2 59.9 Investments 64.7 48.4 Goodwill 20.3 20.3 Other assets 27.2 27.7 Deferred tax assets 69.7 64.7 Assets of consolidated Funds: Cash and cash equivalents, restricted 0.8 12.8 Investments 33.9 1.9 Other assets 0.5 2.4 Total assets $ 611.4 $ 518.7 Liabilities and shareholders’ equity Accounts payable and accrued expenses $ 39.1 $ 31.0 Accrued incentive compensation 101.3 92.5 Other compensation liabilities 67.5 59.3 Accrued income taxes 2.6 4.6 Operating lease liabilities 72.4 75.8 Other liabilities 0.8 1.1 Revolving credit facility — — Third party borrowings 273.9 273.5 Liabilities of consolidated Funds: Accounts payable and accrued expenses 0.2 0.3 Derivative liabilities at fair value 0.1 2.2 Securities sold short at fair value 4.0 — Total liabilities 561.9 540.3 Commitments and contingencies Redeemable non-controlling interests in consolidated Funds 9.3 — Equity: Common stock (par value $ 0.001 ; 41,372,291 and 41,435,087 shares, respectively, issued) — — Additional paid-in capital — 1.5 Retained earnings (deficit) 46.9 ( 12.5 ) Accumulated other comprehensive loss ( 6.7 ) ( 10.6 ) Total equity and redeemable non-controlling interests in consolidated Funds 49.5 ( 21.6 ) Total liabilities and equity $ 611.4 $ 518.7 See Notes to Consolidated Financial Statements 86 BrightSphere Investment Group Inc. Consolidated Statements of Operations (in millions except for per share data) For the Years Ended December 31, 2023 2022 2021 Revenue: Management fees $ 373.2 $ 367.4 $ 433.3 Performance fees 50.4 49.4 84.8 Other revenue — — 5.7 Consolidated Funds’ revenue 3.0 0.4 — Total revenue 426.6 417.2 523.8 Operating expenses: Compensation and benefits 217.9 159.2 284.6 General and administrative expense 82.6 71.1 71.2 Amortization of acquired intangibles — 0.1 0.1 Depreciation and amortization 17.3 18.5 22.1 Consolidated Funds’ expense 2.8 0.4 — Total operating expenses 320.6 249.3 378.0 Operating income 106.0 167.9 145.8 Non-operating income and (expense): Investment income (loss) ( 0.1 ) 0.2 8.3 Interest income 6.1 0.8 0.2 Interest expense ( 19.6 ) ( 20.5 ) ( 24.8 ) Loss on extinguishment of debt — ( 3.2 ) — Gain on sale of subsidiaries — — 48.6 Net consolidated Funds’ investment gains (losses) 4.1 ( 0.4 ) — Total non-operating income (loss) ( 9.5 ) ( 23.1 ) 32.3 Income from continuing operations before taxes 96.5 144.8 178.1 Income tax expense 29.4 44.2 50.0 Income from continuing operations 67.1 100.6 128.1 Income from discontinued operations, net of tax — — 77.3 Gain on disposal of discontinued operations, net of tax — — 691.0 Net income 67.1 100.6 896.4 Net income attributable to non-controlling interests in consolidated Funds 1.3 — 68.0 Net income attributable to controlling interests $ 65.8 $ 100.6 $ 828.4 Earnings per share (basic) attributable to controlling interests $ 1.59 $ 2.39 $ 10.73 Earnings per share (diluted) attributable to controlling interests 1.55 2.33 10.29 Continuing operations earnings per share (basic) attributable to controlling interests 1.59 2.39 1.66 Continuing operations earnings per share (diluted) attributable to controlling interests 1.55 2.33 1.59 Weighted average shares outstanding 41.5 42.1 77.2 Weighted average diluted shares outstanding 42.5 43.2 80.5 See Notes to Consolidated Financial Statements 87 BrightSphere Investment Group Inc. Consolidated Statements of Comprehensive Income (in millions) For the Years Ended December 31, 2023 2022 2021 Net income $ 67.1 $ 100.6 $ 896.4 Other comprehensive income: Amortization related to derivative securities, net of tax 2.5 3.3 2.4 Foreign currency translation adjustment, net of tax 1.4 ( 3.1 ) 0.4 Total other comprehensive income 3.9 0.2 2.8 Total comprehensive income 71.0 100.8 899.2 Comprehensive income attributable to non-controlling interests in consolidated Funds 1.3 — 68.0 Total comprehensive income attributable to controlling interests $ 69.7 $ 100.8 $ 831.2 See Notes to Consolidated Financial Statements 88 BrightSphere Investment Group Inc. Consolidated Statements of Changes in Stockholders’ Equity For the Years Ended December 31, 2023, 2022 and 2021 ($ in millions, except share data) Common stock (millions) Common stock, par value Additional paid-in capital Retained earnings (deficit) Accumulated other comprehensive income (loss) Total stockholders’ equity Non- controlling interests Non-controlling interests in consolidated Funds Total equity Redeemable non-controlling interests in consolidated Funds Total equity and redeemable non-controlling interests in consolidated Funds December 31, 2020 79.4 $ 0.1 $ 492.4 $ ( 176.5 ) $ ( 13.6 ) $ 302.4 $ 1.7 $ 80.3 $ 384.4 $ — $ 384.4 Issuance of common stock 1.6 — 2.7 — — 2.7 — — 2.7 — 2.7 Repurchase of common stock ( 35.6 ) ( 0.1 ) ( 465.7 ) ( 655.9 ) — ( 1,121.7 ) — — ( 1,121.7 ) — ( 1,121.7 ) Capital contributions — — — — — — 3.8 29.7 33.5 — 33.5 Equity-based compensation — — 1.9 — — 1.9 — — 1.9 — 1.9 Foreign currency translation adjustment — — — — 0.4 0.4 — — 0.4 — 0.4 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 ) Dividends ($ 0.04 per share) — — — ( 2.8 ) — ( 2.8 ) — — ( 2.8 ) — ( 2.8 ) Net income — — — 828.4 — 828.4 — 68.0 896.4 — 896.4 December 31, 2021 45.4 $ — $ — $ ( 6.8 ) $ ( 10.8 ) $ ( 17.6 ) $ — $ — $ ( 17.6 ) $ — $ ( 17.6 ) Issuance of common stock 0.2 — — — — — — — — — — Repurchase of common stock ( 4.2 ) — — ( 103.2 ) — ( 103.2 ) — — ( 103.2 ) — ( 103.2 ) Equity-based compensation — — 2.4 — — 2.4 — — 2.4 — 2.4 Foreign currency translation adjustment — — — — ( 3.1 ) ( 3.1 ) — — ( 3.1 ) — ( 3.1 ) Amortization related to derivative securities, net of tax — — — — 3.3 3.3 — — 3.3 — 3.3 Withholding tax related to stock option exercise — — ( 0.9 ) ( 1.4 ) — ( 2.3 ) — — ( 2.3 ) — ( 2.3 ) Dividends ($ 0.04 per share) — — — ( 1.7 ) — ( 1.7 ) — — ( 1.7 ) — ( 1.7 ) Net income — — — 100.6 — 100.6 — — 100.6 — 100.6 December 31, 2022 41.4 $ — $ 1.5 $ ( 12.5 ) $ ( 10.6 ) $ ( 21.6 ) $ — $ — $ ( 21.6 ) $ — $ ( 21.6 ) Issuance of common stock 0.3 — — — — — — — — — — Repurchase of common stock ( 0.3 ) — ( 0.3 ) ( 4.8 ) — ( 5.1 ) — — ( 5.1 ) — ( 5.1 ) Capital contributions — — — — — — — — — 9.9 9.9 Equity-based compensation — — 1.2 — — 1.2 — — 1.2 — 1.2 Foreign currency translation adjustment, net of tax — — — — 1.4 1.4 — — 1.4 — 1.4 Amortization related to derivative securities, net of tax — — — — 2.5 2.5 — — 2.5 — 2.5 Withholding tax related to stock option exercise and restricted stock vesting — — ( 2.4 ) — — ( 2.4 ) — — ( 2.4 ) — ( 2.4 ) De-consolidation of Funds — — — — — — — — — ( 1.9 ) ( 1.9 ) Dividends ($ 0.04 per share) — — — ( 1.6 ) — ( 1.6 ) — — ( 1.6 ) — ( 1.6 ) Net income — — — 65.8 — 65.8 — — 65.8 1.3 67.1 December 31, 2023 41.4 $ — $ — $ 46.9 $ ( 6.7 ) $ 40.2 $ — $ — $ 40.2 $ 9.3 $ 49.5 See Notes to Consolidated Financial Statements 89 BrightSphere Investment Group Inc. Consolidated Statements of Cash Flows (in millions) For the Years Ended December 31, 2023 2022 2021 Cash flows from operating activities: Net income $ 67.1 $ 100.6 $ 896.4 Less: Income from discontinued operations, net of tax — — ( 77.3 ) Less: Net income attributable to non-controlling interests in consolidated Funds from continuing operations ( 1.3 ) — — Adjustments to reconcile net income to net cash flows from operating activities from continuing operations: Amortization of acquired intangibles — 0.1 0.1 Gain on sale of discontinued operations — — ( 691.0 ) Loss on extinguishment of debt — 3.2 — Gain on sale of subsidiaries — — ( 48.6 ) Depreciation and amortization 17.3 18.5 22.1 Amortization of debt-related costs 4.1 5.6 4.6 Amortization and revaluation of non-cash compensation awards 7.4 ( 30.3 ) 39.1 Net earnings from Affiliate accounted for using the equity method — — ( 2.6 ) Distributions received from equity method Affiliate — — 4.4 Distributions from discontinued operations — — 52.7 Deferred income taxes ( 6.0 ) 6.4 ( 1.5 ) (Gains) losses on other investments ( 5.6 ) 3.4 ( 8.8 ) Changes in operating assets and liabilities (excluding discontinued operations): (Increase) decrease in investment advisory fees receivable ( 20.9 ) 44.6 ( 87.9 ) (Increase) decrease in other receivables, prepayments, deposits and other assets 0.2 ( 2.1 ) 2.2 Increase (decrease) in accrued incentive compensation, operating lease liabilities and other liabilities 10.2 ( 33.4 ) 44.7 Increase (decrease) in accounts payable, accrued expenses and accrued income taxes 5.2 2.4 ( 153.0 ) Net cash flows from operating activities of continuing operations, excluding consolidated Funds 77.7 119.0 ( 4.4 ) Net income attributable to non-controlling interests in consolidated Funds from continuing operations 1.3 — — 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 ( 19.7 ) ( 0.2 ) — Sale of investments 13.6 0.1 — Losses on other investments ( 1.1 ) — — (Increase) decrease in receivables and other assets ( 3.5 ) ( 2.4 ) — Increase (decrease) in accounts payable and other liabilities — 0.3 — Net cash flows from operating activities of continuing operations of consolidated Funds ( 9.4 ) ( 2.2 ) — Net cash flows from operating activities of continuing operations 68.3 116.8 ( 4.4 ) Net cash flows from operating activities of discontinued operations — — ( 7.1 ) Total net cash flows from operating activities 68.3 116.8 ( 11.5 ) 90 BrightSphere Investment Group Inc. Consolidated Statements of Cash Flows (Continued) (in millions) For the Years Ended December 31, 2023 2022 2021 Cash flows from investing activities: Additions of fixed assets ( 13.8 ) ( 16.1 ) ( 15.1 ) Proceeds from sale of discontinued operations — — 949.3 Proceeds from sale of subsidiaries — — 61.6 Purchase of investment securities ( 25.8 ) ( 5.5 ) ( 2.5 ) Sale of investment securities 8.2 8.6 42.7 Cash flows from investing activities of consolidated Funds: De-consolidation of Funds ( 12.5 ) — — Net cash flows from investing activities of continuing operations ( 43.9 ) ( 13.0 ) 1,036.0 Net cash flows from investing activities of discontinued operations — — 3.1 Total net cash flows from investing activities ( 43.9 ) ( 13.0 ) 1,039.1 Cash flows from financing activities: Proceeds from revolving credit facility 113.5 214.0 176.0 Repayment of third party borrowings and revolving credit facility ( 113.5 ) ( 339.0 ) ( 176.0 ) Payment of debt issuance costs — ( 0.9 ) ( 0.4 ) Proceeds from stock issuance — — 2.7 Payment to OM plc for co-investment redemptions ( 0.4 ) ( 1.1 ) ( 1.5 ) Repurchases of common stock ( 3.3 ) ( 103.2 ) ( 776.7 ) Repurchases of common stock from related parties — — ( 345.0 ) Dividends paid to shareholders ( 1.4 ) ( 0.8 ) ( 1.9 ) Dividends paid to related parties ( 0.6 ) ( 0.4 ) ( 1.0 ) Withholding tax payments related to stock option exercise and restricted stock vesting ( 2.4 ) ( 2.3 ) ( 28.6 ) Cash flows from financing activities of consolidated Funds: Redeemable non-controlling interest capital raised 9.9 — — Net cash flows from financing activities of continuing operations 1.8 ( 233.7 ) ( 1,152.4 ) Net cash flows from financing activities of discontinued operations — — ( 27.2 ) Total net cash flows from financing activities 1.8 ( 233.7 ) ( 1,179.6 ) Effect of foreign exchange rate changes on cash and cash equivalents 0.2 ( 1.0 ) — Net increase (decrease) in cash and cash equivalents 26.4 ( 130.9 ) ( 152.0 ) Cash and cash equivalents at beginning of period (including restricted cash) 121.2 252.1 372.9 Cash and cash equivalents at beginning of period classified within assets held for sale — — 31.2 Cash and cash equivalents at end of period 147.6 121.2 252.1 Less: cash and cash equivalents at end of period classified within assets held for sale — — — Cash and cash equivalents at end of period (including restricted cash) $ 147.6 $ 121.2 $ 252.1 Supplemental disclosure of cash flow information: Interest paid (excluding consolidated Funds) $ 15.5 $ 16.0 $ 19.6 Income taxes paid $ 37.8 $ 36.8 $ 205.0 Supplemental disclosure of non-cash investing and financing transactions: Payable for repurchases of common stock $ 1.8 $ — $ — De-consolidation of Funds $ ( 1.9 ) $ — $ — See Notes to Consolidated Financial Statements 91 BrightSphere Investment Group Inc. Notes to Consolidated Financial Statements December 31, 2023 and 2022 1) Organization and Description of the Business BrightSphere Investment Group Inc. (“BrightSphere”, “BSIG” or the “Company”), through its subsidiaries, is a global asset management company. The Company provides investment management services globally to predominantly institutional investors. The Company historically held interests in a diverse group of investment management firms (the “Affiliates”) individually headquartered in the United States. The Company completed the disposition of certain Affiliates and, since 2021, has operated the business through one Affiliate, Acadian Asset Management LLC (“Acadian”). Acadian comprises the Company’s Quant & Solutions reportable segment: • 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, systematic macro, equity alternatives, and credit strategies. 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. The corporate head office is included within the Other category, along with the Company’s previously disposed Affiliates, Campbell Global, LLC (“Campbell Global”) and Investment Counselors of Maryland (“ICM”) for the year ended December 31, 2021. Prior to 2014, the Company was a wholly-owned subsidiary of Old Mutual plc (“OM plc”), an international long-term savings, protection and investment group, listed on the London Stock Exchange. On October 15, 2014, the Company completed the initial public offering (the “Offering”) by OM plc pursuant to the Securities Act of 1933, as amended. As of December 31, 2023, Paulson & Co. Inc. (“Paulson”) held approximately 21.6 % of the common stock of the Company. 92 BrightSphere Investment Group Inc. Notes to Consolidated Financial Statements (Continued) December 31, 2023 and 2022 1) Organization and Description of the Business (cont.) 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. 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. In December 2023, the Company’s Board of Directors authorized a $ 100 million share repurchase program. For the year ended December 31, 2023, the Company repurchased 268,800 shares of common stock at an average price of $ 19.03 per share, or approximately $ 5.1 million in total, including commissions. In connection with these repurchases, a reduction to additional paid-in capital in the amount of $ 0.3 million was recorded until it was depleted, with the remaining $ 4.8 million of share repurchases recorded to retained earnings. For the year ended December 31, 2022, the Company repurchased 4,147,450 shares of common stock at an average price of $ 24.09 per share, or approximately $ 100 million in total, including commissions. A reduction to retained deficit was recorded for the full amount of these share repurchases. For the year ended December 31, 2021, the Company did not repurchase any shares of common stock in the open market other than the tender offer noted above. In connection with the shares repurchased in the tender offer, a reduction to additional paid-in capital in the amount of $ 465.7 million was recorded until it was depleted, with the remaining of $ 655.9 million of share repurchases recorded to retained deficit. All shares of common stock repurchased by the Company were retired. 93 BrightSphere Investment Group Inc. Notes to Consolidated Financial Statements (Continued) December 31, 2023 and 2022 2) Basis of Presentation and Significant Accounting Policies The Company’s significant accounting policies are as follows: Basis of presentation These Consolidated Financial Statements reflect the historical balance sheets, statements of operations, statements of comprehensive income, statements of changes in stockholders’ equity and statements of cash flows of the Company. 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. GAAP”). 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. Revenue recognition Revenue from contracts with customers The Company recognizes revenue when a customer obtains control of promised goods or services in an amount that reflects the consideration the entity expects to receive in exchange for those goods or services. A performance obligation is a promise in a contract to transfer a distinct good or service to the customer, and is the unit of account in accordance with the revenue recognition guidance. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. The majority of the Company’s contracts have a single performance obligation, as the promise to transfer the individual goods or services is not separately identifiable from other promises in the contracts and, therefore, not distinct. The Company’s management fee revenue is calculated based upon levels of assets under management multiplied by a fee rate. Management fee revenue is typically calculated on a monthly or quarterly basis, but is earned continuously as performance obligations are fulfilled. The transaction price is variable in contracts which calculate AUM on an average basis over a specified period and this variability is resolved at the end of the period, when the actual average AUM for the contract period may be calculated. 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. 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. Typically, revenue is recognized over time using a time-based output measure to measure progress. Management fees are recognized monthly as services are rendered. Affiliates that manage tangible property may also earn transaction fees at the time the underlying property is bought and sold. Dividend income received is recorded on the ex-dividend date. 94 BrightSphere Investment Group Inc. Notes to Consolidated Financial Statements (Continued) December 31, 2023 and 2022 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. Performance fees are recognized when they (i) become billable to customers (based on contractual terms of agreements) and (ii) are not subject to contingent repayment. The Company is required to capitalize certain costs directly related to the acquisition or fulfillment of a contract with a customer. 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 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). In instances where a customer reimburses the Company for a cost paid on the customer’s behalf, if the Company is acting as a principal, the reimbursement is recorded on a gross basis and if the Company is acting as an agent, the reimbursement is recorded on a net basis. Certain Funds reimburse the Company’s Affiliates for certain expenses where the Affiliate is acting as a principal, primarily for compensation expense for field office personnel at several Timber Funds, where revenue is recognized from log and fiber sales upon delivery to the customer. Revenue from expense reimbursement is accrued at cost as the corresponding reimbursable expenses are incurred and is recorded in other revenue in the Company’s Consolidated Statements of Operations. Revenue from other sources Revenue from other sources 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. 95 BrightSphere Investment Group Inc. Notes to Consolidated Financial Statements (Continued) December 31, 2023 and 2022 2) Basis of Presentation and Significant Accounting Policies (cont.) 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. Under these plans, the Company may award a portion of the aforementioned variable compensation arrangement through issuance of a profits interest in the Affiliate. The awards generally have a three - to five-year vesting period from the grant date, and the service period begins at the commencement of the financial period to which the variable compensation relates. Under these plans, Affiliate key employees are eligible to share in the profits of their respective Affiliates based on their respective percentage interest held. In addition, under certain circumstances, Affiliate key employees are eligible to receive repurchase payments upon exiting the plans based on a multiple of the last twelve months profits of their respective Affiliate, as defined. Profits allocated and movements in the potential repurchase value, determined based on a fixed multiple times trailing twelve month profits, as defined, are recognized as compensation expense. Profit interests compensation liabilities are re-measured at each reporting date at the twelve month earnings multiple, with movements treated as compensation expense in the Company’s Consolidated Statements of Operations. Share-based compensation plans The Company recognizes the cost of all share-based payments to directors, senior management and employees, including grants of restricted stock and stock options, as compensation expense in the Consolidated Statements of Operations over the respective vesting periods. Awards made under the Company’s equity plans are accounted for as equity settled, and the grant date fair value is recognized as compensation expense over the requisite service period, with a corresponding contribution to additional paid-in capital. Valuation of restricted stock awards (“RSAs”) and restricted stock units (“RSUs”) is determined based on the Company’s closing share price as quoted on the New York Stock Exchange on the measurement date. For performance-based awards and stock options, a Monte-Carlo simulation model is used to determine the fair value. Key inputs for the model include: assumed reinvestment of dividends, risk-free interest rate, expected volatility and term. All excess tax benefits and deficiencies on share-based payment awards are recognized as income tax expense or benefit in the Consolidated Statements of Operations. In addition, the tax effects of exercised or vested awards are treated as discrete items in the reporting period in which they occur and excess tax benefits or deficiencies are classified with other income tax cash flows as an operating activity in the Consolidated Statements of Cash Flows. The Company recognizes forfeitures as they occur. 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. Awards of equity made to Affiliate key employees are accounted for as cash settled, with the fair value recognized as compensation expense over the requisite service period, with a corresponding liability carried within other compensation liabilities on the Consolidated Balance Sheets until the award is settled. The fair value of the liability is determined with the assistance of third party valuation specialists using a discounted cash flow analysis which incorporate assumptions for the forecasted earnings information, growth rates, market risk adjustments, discount rates, when award holders maximize value and post-vesting restrictions. The liability is revalued at each reporting period, with any movements recorded within compensation expense. 96 BrightSphere Investment Group Inc. Notes to Consolidated Financial Statements (Continued) December 31, 2023 and 2022 2) Basis of Presentation and Significant Accounting Policies (cont.) Consolidation Affiliates The Company evaluates each of its Affiliates and other operating entities to determine the appropriate method of accounting. Generally, majority-owned entities or otherwise controlled investments in which the Company holds a controlling financial interest as the principal shareholder, managing member, or general partner are consolidated. Funds In the normal course of business, the Company’s Affiliates sponsor and manage certain investment vehicles (the “Funds”). The Company assesses consolidation requirements with respect to its Funds. In evaluating whether or not a legal entity must be consolidated, the Company determines if such entity is a variable interest entity (“VIE”) or a voting interest entity (“VOE”). A VOE is considered an entity in which (i) the total equity investment at risk is sufficient to enable the entity to finance its activities independently and (ii) the equity holders at risk have the obligation to absorb losses, the right to receive residual returns, and the right to direct the activities of the entity that most significantly impact the entity’s economic performance. A VIE is an entity that lacks one or more of the characteristics of a VOE. Assessing whether an entity is a VIE or VOE involves judgment and analysis. Factors considered in this assessment include the entity’s legal organization, the entity’s capital structure and equity ownership and any related party or de-facto agent implications of the Company’s involvement with the entity. Investments that are determined to be VIEs are consolidated if the Company or a consolidated Affiliate is the primary beneficiary of the investment. 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. The primary beneficiary of the VIE is defined as the variable interest holder that has a controlling financial interest. A controlling financial interest is defined as (i) the power to direct the activities of the VIE that most significantly impacts its economic performance and (ii) the obligation to absorb losses of the entity or the right to receive benefits from the entity that could potentially be significant to the VIE. If no single party satisfies both criteria, but the Company and its related parties satisfy the criteria on a combined basis, then the primary beneficiary is the entity out of the related party group that is most closely associated to the VIE. The consolidation analysis can generally be performed qualitatively, however, if it is not readily apparent that the Company is not the primary beneficiary, a quantitative analysis may also be performed. The Company generally is not the primary beneficiary of Fund VIEs created to manage assets for clients unless the Company’s ownership interest in the fund, including interests of related parties on a proportional basis, is significant. The Company consolidates VOEs when it has control over significant operating, financial and investing decisions of the entity or holds the majority voting interest. Upon the occurrence of certain events (such as contributions and redemptions, either by the Company, its Affiliates, or third parties, or amendments to the governing documents of the Company’s investees or sponsored Funds) management reviews and reconsiders its previous conclusion regarding the status of an entity as a VIE or a VOE. Additionally, management continually reconsiders whether the Company is deemed to be a VIE’s primary beneficiary who consolidates such entity. 97 BrightSphere Investment Group Inc. Notes to Consolidated Financial Statements (Continued) December 31, 2023 and 2022 2) Basis of Presentation and Significant Accounting Policies (cont.) Investments and Investment Transactions Valuation of investments held at fair value Valuation of Fund investments is evaluated pursuant to the fair value methodology discussed below. Other investments are categorized as trading and recorded at estimated fair value. Realized and unrealized gains and losses arising from changes in fair value of investments are reported within net consolidated funds’ investment gains and losses in the Consolidated Statements of Operations. See Note 5 for a summary of the inputs utilized to determine the fair value of other investments held at fair value. Security transactions The Company generally records securities transactions on a trade-date basis. Realized gains and losses on securities transactions are generally determined on the average-cost method (net of foreign capital gain taxes) and for certain transactions determined based on the specific identification method. Income and expense recognition The Company records interest income on an accrual basis and includes amortization of premiums and accretion of discounts. Dividend income is recorded on the ex-dividend date, net of applicable withholding taxes. Expenses are recorded on an accrual basis. Short sales Certain Funds may sell a security they do not own in anticipation of a decline in the fair value of that security. When a Fund sells a security short, it must borrow the security sold short and deliver it to the broker-dealer through which it made the short sale. The short sales are secured by the long portfolio and available cash. The Fund records a gain, limited to the price at which the Fund sold the security short, or a loss, unlimited in size, upon the termination of a short sale. The amount of the gain or loss will be equal to the proceeds received in entering into the short sale less the cost of buying back the short security to close the short position. While the transaction is open, the Fund will incur an expense for any accrued dividends or interest which is paid to the lender of the securities. These short sales may involve a level of risk in excess of the liability recognized in the accompanying Consolidated Balance Sheets. 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, equity 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. 98 BrightSphere Investment Group Inc. Notes to Consolidated Financial Statements (Continued) December 31, 2023 and 2022 2) Basis of Presentation and Significant Accounting Policies (cont.) 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. Foreign currency translation and transactions Assets and liabilities of non-U.S. entities for which the local currency is the functional currency are translated at current exchange rates as of the end of the accounting period. The related revenues and expenses are translated at average exchange rates in effect during the period. Net exchange gains and losses resulting from translation are excluded from income and are recorded as part of accumulated other comprehensive income (loss). Transactions denominated in a foreign currency are revalued at the current exchange rate at the transaction date and any related gains and losses are recognized in earnings. Equity method investments 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 the Company’s former Affiliate, ICM. Fair value measurements In accordance with the accounting standards for fair value measurements, fair value is the price that the Company expects to be paid upon the sale of an asset or expects to pay upon the transfer of a liability in an orderly transaction between market participants. There is a three-level hierarchy for fair value measurements based upon the transparency of inputs to the valuation of an asset or liability. Inputs may be observable or unobservable and refer broadly to the assumptions that market participants would use in pricing the asset or liability. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability based on market data obtained from independent sources. Unobservable inputs reflect the Company’s own conclusions about the assumptions that market participants would use in pricing the asset or liability based on the best information available in the circumstances. Each investment is assigned a level based upon the observability of the inputs which are significant to the overall valuation. Assets and liabilities measured and reported at fair value are classified and disclosed in one of the following categories: • Level I—Quoted prices are available in active markets for identical investments as of the reporting date. The type of investments included in Level I include listed equities and listed derivatives. As required by U.S. GAAP, the Company does not adjust the quoted price for these investments. • 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. Investments which are generally included in this category include corporate bonds and loans, less liquid and restricted equity securities and certain over-the-counter derivatives. 99 BrightSphere Investment Group Inc. Notes to Consolidated Financial Statements (Continued) December 31, 2023 and 2022 2) Basis of Presentation and Significant Accounting Policies (cont.) • Level III—Pricing inputs are unobservable for the asset or liability and include assets and liabilities where there is little, if any, market activity for the investment. The inputs into the determination of fair value require significant management judgment or estimation. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an investment’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the investment. 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. 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. Actual results could differ from such estimates, and the differences may be material to the Consolidated Financial Statements. Operating segment The Company currently operates in one reportable segment that provides investment management services and products primarily to institutional clients. See Note 22 for further information regarding the Company’s segment. Derivatives and Hedging The Company may utilize derivative financial instruments to hedge the risk of movement of interest rates and foreign currency on financial assets and liabilities. These derivative financial instruments may or may not qualify as hedges for accounting purposes. The Company records all derivative financial instruments as either assets or liabilities on its Consolidated Balance Sheets and measures these instruments at fair value. For a derivative financial instrument that qualifies as a hedge for accounting purposes and is designated as a hedging instrument, the effective portion of the derivative’s gain or loss is initially reported as a component of other comprehensive income (loss) and subsequently reclassified into earnings over the life of the hedge. The ineffective portion of the gain or loss is recognized in earnings immediately. Cash and cash equivalents The Company considers all highly liquid investments, including money market mutual funds, with original maturities of three months or less to be cash equivalents. Cash equivalents are stated at cost, which approximates market value due to the short-term maturity of these investments. Cash held by consolidated Funds is not available to fund general liquidity needs of the Company and is therefore also classified as restricted cash. 100 BrightSphere Investment Group Inc. Notes to Consolidated Financial Statements (Continued) December 31, 2023 and 2022 2) Basis of Presentation and Significant Accounting Policies (cont.) Investment advisory fees receivable The Company earns management and performance fees which are billed monthly, quarterly and annually, according to the terms of the relevant investment management agreement. Management and performance fees that have been earned but have not yet been collected are presented as investment advisory fees receivable on the Consolidated Balance Sheets. Due to the short-term nature and liquidity of these receivables, the carrying amounts approximate their fair values. The Company typically does not record an allowance for doubtful accounts or bad debt expense, or any amounts recorded have been immaterial. Fixed assets 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 ten years . Leasehold improvements are amortized over the shorter of their estimated useful lives or the remaining term of the lease. 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 costs of improvements that extend the life of a fixed asset are capitalized, while the costs of repairs and maintenance are expensed as incurred. Goodwill 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. Goodwill is not amortized, but rather is tested for impairment annually or more frequently if events or circumstances occur that indicate impairment may exist. Factors that could trigger an impairment review include significant underperformance relative to historical or projected future operating results, significant changes in the Company’s use of the acquired assets in a business combination or the strategy for the Company’s overall business, and significant negative industry or economic trends. 101 BrightSphere Investment Group Inc. Notes to Consolidated Financial Statements (Continued) December 31, 2023 and 2022 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. 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. The fair value of a reporting unit is based on discounted estimated future cash flows. The assumptions used to estimate fair value include management’s estimates of future growth rates, operating cash flows, discount rates and terminal value. 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 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 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. Assets Held for Sale The Company classifies its long-lived assets to be sold as held for sale in the period (i) it has approved and committed to a plan to sell the asset, (ii) the asset is available for immediate sale in its present condition, (iii) an active program to locate a buyer and other actions required to sell the asset have been initiated, (iv) the sale of the asset is probable, (v) the asset is being actively marketed for sale at a price that is reasonable in relation to its current fair value, and (vi) it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn. The Company initially measures a long-lived asset that is classified as held for sale at the lower of its carrying value or fair value less any costs to sell. Any loss resulting from this measurement is recognized in the period in which the held for sale criteria are met. Conversely, gains are not recognized on the sale of a long-lived asset until the date of sale. Upon designation as an asset held for sale, the Company stops recording depreciation expense on the asset. The Company assesses the fair value of a long-lived asset less any costs to sell at each reporting period and until the asset is no longer classified as held for sale. Upon determining that a disposal group meets the criteria to be classified as held for sale, the Company reports the assets and liabilities of the disposal group, if material, in the line items assets held for sale and liabilities held for sale on the Consolidated Balance Sheet. 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 102 BrightSphere Investment Group Inc. Notes to Consolidated Financial Statements (Continued) December 31, 2023 and 2022 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, Discontinued Operations for additional information. Leases Contracts are evaluated at inception to determine whether such contract is or contains a lease. The Company leases certain office space and equipment under non-cancelable operating leases. As leases expire, they are normally renewed or replaced in the ordinary course of business. Lease agreements may contain renewal options exercisable by the Company, rent escalation clauses and/or other incentives provided by the landlord. Renewal options that have been determined to be reasonably certain to be exercised are included in the lease term. Rights and obligations attributable to identified leases with a term in excess of twelve months are recognized on the Company’s Consolidated Balance Sheets in the form of right‐of‐use (ROU) assets and lease liabilities are recognized as of the date the underlying assets are available for use, which may be the date the Company gains access to begin leasehold improvements. Lease payments related to short‐term leases with a term of twelve months or less are recognized on a straight‐line basis as short‐term lease expense. Lease liabilities are initially and subsequently measured as the present value of future lease payments over the lease term. For the purposes of this calculation, lease payments consist of fixed monthly lease payments related to use of the underlying assets. As the Company's leases generally do not have a readily determinable implicit rate, the company uses its incremental borrowing rate to determine the present value of fixed lease payments based on information available at the lease commencement date. ROU assets are initially valued equal to the corresponding lease liabilities, adjusted for any lease incentives payable to the Company. Subsequently, the amortization of ROU assets is recognized as a component of operating lease expense. The total cost of operating leases is recognized on a straight‐line basis over the life of the related leases, and is composed of imputed interest on lease liabilities measured using the effective interest method and amortization of the ROU asset. Variable lease payments are primarily related to services such as common‐area maintenance and utilities, property taxes and insurance, and are recognized as variable lease expense when incurred. ROU assets are tested for impairment whenever changes in facts or circumstances indicate that the carrying amount of an asset may not be recoverable. Modification of a lease term would result in re‐measurement of the lease liability and a corresponding adjustment to the ROU asset. Earnings per share The Company calculates basic and diluted earnings per share (“EPS”) by dividing net income by its shares outstanding as outlined below. Basic EPS attributable to the Company’s shareholders is calculated by dividing “Net income attributable to controlling interests” by the weighted-average number of shares outstanding. Diluted EPS is similar to basic EPS, but adjusts for the effect of potential shares of common stock unless they are antidilutive. For periods with a net loss, potential shares of common stock are considered antidilutive. 103 BrightSphere Investment Group Inc. Notes to Consolidated Financial Statements (Continued) December 31, 2023 and 2022 2) Basis of Presentation and Significant Accounting Policies (cont.) 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. Deferred financing costs The Company records debt issuance costs of term loans as a direct deduction from the carrying amount of the associated debt liability. For debt issuance costs of revolving credit loans, the Company presents debt issuance costs as an asset and subsequently amortizes the deferred costs ratably over the term of the agreement. Income taxes Deferred income taxes are recognized for the effects of temporary differences between the tax basis of an asset or liability and its reported amount in the Consolidated Financial Statements. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date. The Company’s deferred tax assets have been attributable to investment in partnerships and employee compensation. Deferred income tax assets are subject to a valuation allowance if, in management’s opinion, it is not more-likely-than-not that these benefits will be realized. In evaluating the Company’s ability to recover its deferred tax assets, the Company considers all available positive and negative evidence including its past operating results, the existence of cumulative earnings or losses in the most recent years and its forecast of future taxable income. In estimating future taxable income, the Company develops assumptions including the amount of future pre-tax operating income and the reversal of temporary differences. These assumptions require significant judgment about the forecasts of future taxable income and are consistent with the plans and estimates the Company is using to manage the underlying businesses. The Company’s accounting policy is to treat the global intangible low-taxed income taxes as period costs in the accounting and tax periods in which they are incurred. A tax benefit should only be recognized if it is more-likely-than-not that the position will be sustained based on its technical merits. The Company recognizes the financial statement benefit of a tax position only after considering the probability that a tax authority would uphold the position in an examination. For tax positions meeting a “more-likely-than-not” threshold, the amount recognized in the financial statements is the largest cumulative amount of benefit greater than 50% likely of being sustained. The more-likely-than-not threshold must continue to be met in each reporting period to support continued recognition of the benefit. Unrecognized tax benefits and related interest and penalties are adjusted periodically to reflect changing facts and circumstances. The Company’s accounting policy is to classify interest and related charges as a component of income tax expense. 104 BrightSphere Investment Group Inc. Notes to Consolidated Financial Statements (Continued) December 31, 2023 and 2022 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. 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. Non-controlling interests in consolidated Funds on the Consolidated Balance Sheets include undistributed income owned by the investors in the respective Funds. The Company’s consolidated net income on the Consolidated Statements of Operations includes the income (loss) attributable to non-controlling interest holders of these consolidated entities. Redeemable non-controlling interests The Company includes redeemable non-controlling interests related to certain consolidated Funds as temporary equity on the Consolidated Balance Sheets. Non-controlling interests in certain consolidated Funds are subject to monthly or quarterly redemption by the investors. When redeemable amounts become legally payable to investors, they are classified as a liability and included in total liabilities of consolidated Funds on the Consolidated Balance Sheets. Other comprehensive income (loss) Other comprehensive income (loss) is defined as the change in equity of a business enterprise during a period from transactions and other events and circumstances, excluding those resulting from investments by and distributions to owners. For the Company’s purposes, comprehensive income (loss) represents net income (loss), as presented in the accompanying Consolidated Statements of Operations, adjusted for foreign currency translation adjustments, net of tax and adjustments to the valuation and amortization of certain derivative securities, net of tax. New accounting standards not yet adopted In November 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2023-07 - Segment Reporting (Topic 280) - Improvements to Reportable Segment Disclosures. The amendment requires annual and interim disclosures of significant segment expenses that are regularly provided to the chief operating decision maker by reportable segment and clarifies that single reportable segment entities are required to apply all existing segment disclosures in the guidance. The amendment is effective for fiscal year beginning after December 15, 2023 and is retrospectively applicable to all prior periods presented in its consolidated financial statements. We are currently evaluating the impact of adopting this standard, however, we expect the standard to result in additional segment footnote disclosures. In December 2023, the FASB issued Accounting Standards Update No. 2023-09 - Income Taxes (Topic 740) - Improvements to Income Tax Disclosures, which requires public entities, on an annual basis, to provide disclosure of specific categories in the rate reconciliation, as well as disclosure of income taxes paid disaggregated by 105 BrightSphere Investment Group Inc. Notes to Consolidated Financial Statements (Continued) December 31, 2023 and 2022 2) Basis of Presentation and Significant Accounting Policies (cont.) jurisdiction. This amendment is effective for fiscal year beginning after December 15, 2024. We are currently evaluating the impact of adopting this standard and have not yet determined our transition approach. The Company has considered all other newly issued accounting guidance that is applicable to the Company’s operations and the preparation of the Consolidated Financial Statements, including those that have not yet been adopted. The Company does not believe that any such guidance has or will have a material effect on its Consolidated Financial Statements and related disclosures. 3) 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 Partners (“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 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 Thompson Siegel & Walmsley, LLC (“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 had a major effect on the Company’s operations and financial results. 106 BrightSphere Investment Group Inc. Notes to Consolidated Financial Statements December 31, 2023 and 2022 3) 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): 2023 2022 2021 Revenues $ — $ — $ 115.1 Operating expenses: Compensation and benefits — — 91.2 General and administrative expenses — — 8.1 Amortization of intangibles — — 2.7 Depreciation and amortization — — 0.5 Consolidated Funds’ expense — — 0.1 Total operating expenses — — 102.6 Operating income — — 12.5 Investment gains of consolidated Funds — — 68.1 Income from discontinued operations before taxes — — 80.6 Income tax expense — — 3.3 Income from discontinued operations, net of tax — — 77.3 Gain on disposal, net of tax of $ 0.0 , $ 0.0 , and $ 253.4 — — 691.0 Total discontinued operations — — 768.3 Income from discontinued operations attributable to non-controlling interests — — 68.0 Net income from discontinued operations attributable to controlling interests $ — $ — $ 700.3 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 criteria for discontinued operations accounting treatment were met. 107 BrightSphere Investment Group Inc. Notes to Consolidated Financial Statements (Continued) December 31, 2023 and 2022 4) Investments Investments are comprised of the following at December 31 (in millions): 2023 2022 Investments of consolidated Funds $ 33.9 $ 1.9 Other investments 20.0 8.4 Investments related to long-term incentive compensation plans 44.7 40.0 Total investments per Consolidated Balance Sheets $ 98.6 $ 50.3 Investment income is comprised of the following for the years ended December 31 (in millions): 2023 2022 2021 Realized and unrealized gains (losses) on other investments $ ( 0.1 ) $ 0.2 $ 5.7 Earnings from equity-accounted investment in Affiliate — — 2.6 Total investment income per Consolidated Statements of Operations $ ( 0.1 ) $ 0.2 $ 8.3 Investment gains (losses) on net consolidated funds is comprised of the following for the years ended December 31 (in millions): 2023 2022 2021 Realized and unrealized gains (losses) on consolidated Funds $ 4.1 $ ( 0.4 ) $ — Total net consolidated Funds’ investment gains (losses) per Consolidated Statements of Operations $ 4.1 $ ( 0.4 ) $ — 108 BrightSphere Investment Group Inc. Notes to Consolidated Financial Statements (Continued) December 31, 2023 and 2022 5) Fair Value Measurements The following table summarizes the Company’s assets and liabilities that are measured at fair value on a recurring basis at December 31, 2023 (in millions): Quoted prices in active markets (Level I) Significant other observable inputs (Level II) Significant unobservable inputs (Level III) Uncategorized Total value, December 31, 2023 Assets of BSIG and consolidated Funds (1) Common and preferred stock $ 19.0 $ — $ — $ — $ 19.0 Corporate bonds — 14.8 — — 14.8 Derivatives $ — $ 0.1 $ — $ — $ 0.1 Consolidated Funds total 19.0 14.9 — — 33.9 Investments in separate accounts (2) 2.1 — — — 2.1 Investments related to long-term incentive compensation plans (3) 44.7 — — — 44.7 Investments in unconsolidated Funds (4) — — — 17.9 17.9 BSIG total 46.8 — — 17.9 64.7 Total fair value assets $ 65.8 $ 14.9 $ — $ 17.9 $ 98.6 Liabilities of consolidated Funds (1) Securities sold short $ ( 4.0 ) $ — $ — $ — $ ( 4.0 ) Derivatives $ — $ ( 0.1 ) $ — $ — $ ( 0.1 ) Consolidated Funds total ( 4.0 ) ( 0.1 ) — — ( 4.1 ) Total fair value liabilities $ ( 4.0 ) $ ( 0.1 ) $ — $ — $ ( 4.1 ) The following table summarizes the Company’s assets and liabilities that are measured at fair value on a recurring basis at December 31, 2022 (in millions): 109 BrightSphere Investment Group Inc. Notes to Consolidated Financial Statements (Continued) December 31, 2023 and 2022 5) Fair Value Measurements (cont.) Quoted prices in active markets (Level I) Significant other observable inputs (Level II) Significant unobservable inputs (Level III) Uncategorized Total value, December 31, 2022 Assets of BSIG and consolidated Funds (1) Derivatives 0.3 1.6 — — 1.9 Consolidated Funds total 0.3 1.6 — — 1.9 Investments in separate accounts (2) $ 4.2 $ — $ — $ — $ 4.2 Investments related to long-term incentive compensation plans (3) 40.0 — — — 40.0 Investments in unconsolidated Funds (4) — — — 4.2 4.2 BSIG total 44.2 — — 4.2 48.4 Total fair value assets $ 44.5 $ 1.6 $ — $ 4.2 $ 50.3 Liabilities of consolidated Funds (1) Derivatives ( 0.2 ) ( 2.0 ) — — ( 2.2 ) Consolidated Funds total ( 0.2 ) ( 2.0 ) — — ( 2.2 ) Total fair value liabilities $ ( 0.2 ) $ ( 2.0 ) $ — $ — $ ( 2.2 ) (1) Assets and liabilities measured at fair value are comprised of financial investments managed by the Company’s Affiliates. Equity securities and derivatives which are traded on a national securities exchange are stated at the last reported sales price on the day of valuation. To the extent these securities are actively traded and valuation adjustments are not applied, they are classified as Level I. The securities that trade in markets that are not considered to be active but are valued based on quoted market prices, dealer quotations or alternative pricing sources supported by observable inputs obtained by the Company from independent pricing services are classified as Level II. 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 with unobservable inputs, 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. 110 BrightSphere Investment Group Inc. Notes to Consolidated Financial Statements (Continued) December 31, 2023 and 2022 5) Fair Value Measurements (cont.) (2) Investments in separate accounts of $ 2.1 million at December 31, 2023 are composed of approximately 1 % cash equivalents and 99 % equity securities. Investments in separate accounts of $ 4.2 million at December 31, 2022, consist of approximately 100 % of equity securities and other investments. The Company values these using the published price of the underlying securities (classified as Level I) or quoted price supported by observable inputs as of the measurement date (classified as Level II). (3) Investments related to long-term incentive compensation plans of $ 44.7 million and $ 40.0 million at December 31, 2023 and December 31, 2022, respectively, are investments in publicly registered daily redeemable funds (some managed by Acadian), which the Company has classified as trading securities and valued using the published price as of the measurement dates. Accordingly, the Company has classified these investments as Level I. (4) The uncategorized amounts of $ 17.9 million and $ 4.2 million at December 31, 2023 and December 31, 2022, respectively, relate to investments in unconsolidated Funds which consist primarily of investments in Funds and are valued using NAV which the Company relies on to determine their fair value as a practical expedient and has therefore not classified these investments in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to amounts presented in the Consolidated Balance Sheets. These unconsolidated Funds consist primarily of real estate investment Funds and other investment vehicles. The NAVs that have been provided by investees have been derived from the fair values of the underlying investments as of the measurement dates. Other investment vehicles are not subject to redemption restrictions. The real estate investment Funds of $ 3.6 million and $ 4.1 million at December 31, 2023 and December 31, 2022, 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 year from December 31, 2023. The valuation process for the underlying real estate investments held by the real estate investment Funds begins with each property or loan being valued by the investment teams. The valuations are then reviewed and approved by the valuation committee, which consists of senior members of the portfolio management, finance, and research teams. For certain properties and loans, the valuation process may also include a valuation by independent appraisers. In connection with this process, changes in fair-value measurements from period to period are evaluated for reasonableness, considering items such as market rents, capitalization and discount rates, and general economic and market conditions. There were no significant transfers of financial assets or liabilities between Levels II or III during the year ended December 31, 2023. 111 BrightSphere Investment Group Inc. Notes to Consolidated Financial Statements (Continued) December 31, 2023 and 2022 6) Variable Interest Entities The Company, through its Affiliate, sponsors the formation of various entities considered to be variable interest entities (“VIEs”). These VIEs are primarily Funds managed by the Company’s Affiliate and other partnership interests typically owned entirely by third-party investors. Certain Funds may be capitalized with seed capital investments from the Company and may be owned partially by Affiliate key employees and/or individuals that have ownership interests in the Affiliate. The Company’s determination of whether it is the primary beneficiary of a Fund that is a VIE is based in part on an assessment of whether or not the Company and its related parties are exposed to absorb more than an insignificant amount of the risks and rewards of the entity. Typically the Fund’s investors are entitled to substantially all of the economics of these VIEs with the exception of the management fees and performance fees, if any, earned by the Company or any investment the Company has made into the Funds. The Company generally is not the primary beneficiary of Fund VIEs created to manage assets for clients unless the Company’s ownership interest, including interests of related parties, is substantial. The following table presents the assets and liabilities of Funds that are VIEs and consolidated by the Company (in millions): 2023 2022 Assets Investments $ 33.9 $ 1.9 Other assets of consolidated Funds 1.3 15.2 Total Assets $ 35.2 $ 17.1 Liabilities Liabilities of consolidated Funds $ 4.3 $ 2.5 Total Liabilities $ 4.3 $ 2.5 “Investments” consist of investments in equities, corporate bonds and derivative 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. 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 earned but uncollected management fees. The Company has not issued any investment performance guarantees to these VIEs or their investors. 112 BrightSphere Investment Group Inc. Notes to Consolidated Financial Statements (Continued) December 31, 2023 and 2022 6) Variable Interest Entities (cont.) The following information pertains to unconsolidated VIEs for which the Company holds a variable interest at December 31 (in millions): 2023 2022 Unconsolidated VIE assets $ 669.1 $ 728.1 Unconsolidated VIE liabilities $ 316.5 $ 303.6 Equity interests on the Consolidated Balance Sheets $ 3.6 $ 4.1 Maximum risk of loss (1) $ 3.6 $ 4.1 (1) Includes equity investments the Company has made or is required to make. 7) Fixed Assets Fixed assets consisted of the following at December 31 (in millions): 2023 2022 Leasehold improvements $ 30.0 $ 29.0 Office equipment 9.5 8.3 Furniture and fixtures 6.2 6.1 Software and web development 118.0 110.8 Fixed assets, at cost 163.7 154.2 Accumulated depreciation and amortization ( 119.5 ) ( 106.5 ) Fixed assets, net $ 44.2 $ 47.7 Depreciation and amortization expense for continuing operations was $ 17.3 million, $ 18.5 million and $ 22.1 million for the years ended December 31, 2023, 2022 and 2021, respectively. The Company disposed of property, plant, and equipment with a cost basis of $ 4.4 million and accumulated depreciation of $( 4.4 ) million during the year ended December 31, 2023. These disposals included leasehold improvements, office equipment, furniture and fixtures and software. There were no gains or losses on disposals recorded. 8) Leases The Company has operating leases for corporate offices, data centers and certain equipment. The operating leases have remaining lease terms of 1 to 10 years, some of which include options to extend the leases for up to 5 years, and some of which include options to terminate leases within 1 year. 113 BrightSphere Investment Group Inc. Notes to Consolidated Financial Statements (Continued) December 31, 2023 and 2022 8) Leases (cont.) The following table summarizes information about the Company’s operating leases for the years ended December 31 (in millions): 2023 2022 2021 Operating lease cost $ 8.6 $ 10.0 $ 11.2 Variable lease cost 0.1 0.1 0.1 Sublease income — ( 0.5 ) ( 0.5 ) Total operating lease expense $ 8.7 $ 9.6 $ 10.8 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases $ 9.3 $ 6.4 11.1 ROU asset obtained in exchange for new operating lease liabilities 3.4 2.2 3.0 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, 2023 and 2022, the weighted average remaining lease term was 9.5 and 10.5 years, respectively, and the weighted average discount rate was 3.53 % and 3.40 %, respectively. Maturities of operating lease liabilities were as follows (in millions): Operating Leases Year Ending December 31, 2024 $ 9.4 2025 8.9 2026 8.8 2027 8.4 2028 8.5 Thereafter 41.1 Total lease payments 85.1 Less imputed interest ( 12.7 ) Total $ 72.4 114 BrightSphere Investment Group Inc. Notes to Consolidated Financial Statements (Continued) December 31, 2023 and 2022 9) Goodwill The following table presents the changes in goodwill in 2023 and 2022 (in millions): Quant & Solutions Goodwill $ 22.1 Accumulated impairment ( 1.8 ) December 31, 2021 $ 20.3 Additions — Impairments — Goodwill 22.1 Accumulated impairment ( 1.8 ) December 31, 2022 $ 20.3 Additions — Impairments — Goodwill 22.1 Accumulated impairment ( 1.8 ) December 31, 2023 $ 20.3 10) Related Party Transactions Amounts due for investment advisory fee receivables from related parties were comprised of the following at December 31 (in millions): 2023 2022 Investment advisory fee receivable from unconsolidated Funds (1) $ 21.2 $ 23.4 Total amounts due for investment advisory fee receivables from related parties $ 21.2 $ 23.4 Related party transactions included in the Company’s Consolidated Statements of Operations for the years ended December 31 consisted of (in millions): Revenues: 2023 2022 2021 Management fees from unconsolidated Funds (1) $ 86.5 $ 93.6 $ 52.7 Performance fees from unconsolidated Funds (1) 1.0 3.6 2.0 Total related party revenues $ 87.5 $ 97.2 $ 54.7 115 BrightSphere Investment Group Inc. Notes to Consolidated Financial Statements (Continued) December 31, 2023 and 2022 10) Related Party Transactions (cont.) (1) Transactions with unconsolidated Affiliate-sponsored Funds are considered related party items on the basis of the Company’s significant influence over the activities of such entities in its capacity as investment advisor thereto. These transactions are comprised of fees for advisory services and investments in unconsolidated funds. 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. 11) Accounts Payable and Accrued Expenses Accounts payable and accrued expenses consisted of the following at December 31 (in millions): 2023 2022 Accounts payable $ 8.6 $ 4.7 Accrued expenses 24.9 20.6 Accrued interest payable 5.6 5.7 Total accounts payable and accrued expenses $ 39.1 $ 31.0 12) Other Compensation Liabilities Other compensation liabilities consisted of the following at December 31 (in millions): 2023 2022 Share-based payments liability (Note 19) $ 23.0 $ 19.4 Profit interests compensation liability — — Voluntary deferral plan liability (Note 18) 44.5 39.9 Total other compensation liabilities $ 67.5 $ 59.3 Profit interests compensation expense amounted to $ 0.0 million in 2023, $( 28.0 ) million in 2022, and $ 31.8 million in 2021. Redemptions of profit sharing interests from Affiliate key employees for cash were $ 0.0 million in 2023, $ 2.7 million in 2022, and $ 0.0 million in 2021. 116 BrightSphere Investment Group Inc. Notes to Consolidated Financial Statements (Continued) December 31, 2023 and 2022 13) Borrowings and Debt The Company’s borrowings and long-term debt were comprised of the following as of the dates indicated (in millions): December 31, 2023 December 31, 2022 (in millions) Carrying value Fair Value Fair Value Level Carrying value Fair Value Fair Value Level Revolving credit facility: $ 125 million revolving credit facility expiring March 7, 2025 (1) $ — $ — $ — $ — Total revolving credit facility $ — $ — $ — $ — Third party borrowings: $ 275 million 4.80 % Senior Notes Due July 27, 2026 (2) 273.9 263.1 2 273.5 249.7 2 $ 125 million 5.125 % Senior Notes Due August 1, 2031 (2)(3) — — — — Total third party borrowings $ 273.9 $ 263.1 $ 273.5 $ 249.7 (1) Fair value approximates carrying value because the credit facility has variable interest rates based on selected short term market rates. (2) 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. (3) On January 18, 2022, the Company completed the full redemption of the $ 125 million aggregate principal amount outstanding of its 5.125 % Senior Notes due August 1, 2031. As a result of this transaction, the Company recorded a $ 3.2 million loss on extinguishment of debt within the Consolidated Statement of Operations for the year ended December 31, 2022. Revolving credit facility On March 7, 2022, Acadian, Royal Bank of Canada, BMO Harris Bank, N.A., Goldman Sachs Bank USA, Morgan Stanley Bank, N.A., Bank of America N.A., the Bank of New York Mellon and Citibank, N.A., as an issuing bank and administrative agent (collectively, the “Lenders”), entered into a new revolving credit facility agreement (the “Acadian Credit Agreement”), which replaced the Company’s revolving credit facility dated as of August 20, 2019 (as amended by an amendment dated September 3, 2020 and an assignment and assumption and amendment agreement dated February 23, 2021, the “Original Credit Agreement”). The maturity date of this Original Credit Agreement was August 22, 2022, and the maturity date of the Acadian Credit Agreement is March 7, 2025. 117 BrightSphere Investment Group Inc. Notes to Consolidated Financial Statements (Continued) December 31, 2023 and 2022 13) Borrowings and Debt (cont.) Borrowings under the Acadian Credit Agreement bear interest, at Acadian’s option, at the per annum rate equal to either (a) the greatest of (i) the prime rate, (ii) the federal funds effective rate plus 0.5 % and (iii) the secured overnight financing rate for a one month period plus a credit spread adjustment of 0.10 % (“Adjusted Term SOFR”) plus 1 %, plus, in each case, an additional amount ranging from 0.5 % to 1.0 %, with such additional amount based on Acadian’s Leverage Ratio (as defined below) or (b) Adjusted Term SOFR for plus an additional amount ranging from 1.5 % to 2.0 %, with such additional amount based on Acadian’s Leverage Ratio. 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 6.19 %, 2.64 % and 1.60 % in 2023, 2022 and 2021, 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 2.5 x and the Acadian interest coverage ratio must not be less than 4.0 x. Senior Notes In July 2016, the Company issued $ 275.0 million of 4.80 % Senior Notes due 2026 (the “2026 Notes”). 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 plus 0.5 %, 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 the notes, which are considered Level II inputs. As of December 31, 2023, the aggregate maturities of debt commitments, based on their contractual terms, are as follows: Future minimum debt commitments 2024 $ — 2025 — 2026 275.0 2027 — 2028 — Thereafter — Total $ 275.0 The Company was in compliance with the required covenants related to borrowings and debt facilities as of December 31, 2023. 118 BrightSphere Investment Group Inc. Notes to Consolidated Financial Statements (Continued) December 31, 2023 and 2022 14) Income Taxes Income from continuing operations before income taxes consisted of the following for the years ended December 31 (in millions): 2023 2022 2021 Domestic $ 90.1 $ 139.1 $ 171.3 Foreign 6.4 5.7 6.8 Total $ 96.5 $ 144.8 $ 178.1 The components of income tax expense from continuing operations for the years ended December 31 are as follows (in millions): 2023 2022 2021 Current: Federal $ 22.6 $ 21.9 $ 36.4 State 11.2 14.4 16.3 Foreign 1.6 1.5 2.3 Total current expense (benefit) 35.4 37.8 55.0 Deferred: Federal ( 6.3 ) 4.7 ( 3.4 ) State 0.5 1.5 ( 1.3 ) Foreign ( 0.2 ) 0.2 ( 0.3 ) Total deferred expense (benefit) ( 6.0 ) 6.4 ( 5.0 ) Total tax expense (benefit) $ 29.4 $ 44.2 $ 50.0 The Company has recognized income tax expense related to derivative securities within other comprehensive income of $ 0.9 million, $ 1.3 million and $ 0.9 million in the years ended December 31, 2023, 2022 and 2021, respectively. The provision for income taxes in 2023, 2022 and 2021 included benefits of $ 0.0 million , $ 0.1 million and $ 0.5 million, respectively, related to the utilization of net operating loss carryforwards. 119 BrightSphere Investment Group Inc. Notes to Consolidated Financial Statements (Continued) December 31, 2023 and 2022 14) Income Taxes (cont.) The reconciliation of the difference between the Company’s U.S. Federal statutory income tax rate and the effective income tax rate for continuing operations for the years ended December 31 is as follows: 2023 2022 2021 Tax at U.S. federal statutory income tax rate 21.0 % 21.0 % 21.0 % State income taxes, net of federal benefit 7.3 % 8.0 % 6.8 % Other permanent tax items ( 0.2 ) % 0.1 % 0.2 % Executive Compensation 0.1 % 0.2 % 1.6 % Adjustment to liabilities for uncertain tax positions 0.2 % ( 0.1 ) % ( 1.7 ) % Effect of foreign operations 0.8 % 0.7 % 0.7 % Effect of changes in tax law 3.5 % — % — % Effect of disposal of Affiliates — % — % ( 0.1 ) % Effect of income from non-controlling interest ( 0.3 ) % — % — % Impact of increased state tax obligations to deferred tax assets ( 1.5 ) % ( 0.5 ) % ( 0.4 ) % Other ( 0.4 ) % 1.1 % — % Effective income tax rate for continuing operations 30.5 % 30.5 % 28.1 % The Company’s effective income tax rate is higher than the US federal tax rate of 21% primarily due to its state tax obligations. During the quarter ended December 31, 2023, Massachusetts enacted a change in the state’s apportionment formula for corporations. The Company measures its deferred tax assets and liabilities at the enacted rates for the period in which these items would reverse. As a result, the Company recorded the discrete tax impact due to the effect of the change in tax law. The Company reduced its liability for uncertain tax positions by $ 0.5 million, $ 0.9 million and $ 3.4 million during the years ended December 31, 2023, 2022 and 2021, respectively, due to the lapse of statute of limitations. 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 $ 0.6 million, $ 0.9 million and $ 0.9 million during the years ended December 31, 2023, 2022 and 2021, respectively, related to the GILTI tax. During the year ending December 31, 2023, the Company removed its indefinite reinvestment of foreign unremitted earnings assertion for multiple foreign subsidiaries. For foreign subsidiaries whose investments are permanent in duration, income and foreign withholding taxes have not been provided on the unremitted earnings of those subsidiaries. This amount may become taxable upon repatriation from the subsidiary or a sale or liquidation of the subsidiary. The amount of such unremitted earnings and the amount of any unrecognized deferred income tax liability on these unremitted earnings is immaterial at December 31, 2023. In connection with the sale of its Affiliates, the Company recorded tax expense of $ 0.0 million , $ 0.0 million , and $ 9.4 million, including tax impacts of non-deductible tax items, during the years ended December 31, 2023, 2022 and 2021, respectively. In addition, during the year ended December 31, 2021, the Company recorded income tax expense of $ 256.7 million in discontinued operations. 120 BrightSphere Investment Group Inc. Notes to Consolidated Financial Statements (Continued) December 31, 2023 and 2022 14) 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. The significant components of deferred tax assets and deferred tax liabilities for the years ended December 31 are as follows (in millions): 2023 2022 Deferred tax assets: Investment in partnerships 63.6 56.9 Employee compensation 1.6 2.4 Other 2.1 1.9 Cash flow hedge 2.6 3.6 Total deferred tax assets 69.9 64.8 Valuation allowance — — Deferred tax assets, net of valuation allowance 69.9 64.8 Deferred tax liabilities: Right of use assets 0.1 0.1 Investments 0.1 — Total deferred tax liabilities 0.2 0.1 Net deferred tax assets $ 69.7 $ 64.7 At December 31, 2023 and 2022, the Company’s net deferred tax asset primarily relates to its basis difference in its investment in Acadian Asset Management LLC, which is treated as a partnership for federal income tax purposes. The Company assesses whether a valuation allowance should be established against its deferred income tax assets based on consideration of all available evidence, both positive and negative, using a more likely than not standard. 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. The weight given to the evidence is commensurate with the extent to which it can be objectively verified. The more negative evidence that exists, the more positive evidence that is necessary and the more difficult it is to support a conclusion that a valuation allowance is not needed. The Company has three years of cumulative earnings as of December 31, 2023, 2022 and 2021. As of December 31, 2023, management believes it is more likely than not that the balance of the deferred tax assets will be realized based on forecasted taxable income. 121 BrightSphere Investment Group Inc. Notes to Consolidated Financial Statements (Continued) December 31, 2023 and 2022 14) Income Taxes (cont.) A reconciliation of the change in gross unrecognized tax benefits for the years ended December 31 is as follows (in millions): 2023 2022 2021 Balance as of January 1 $ 0.9 $ 1.0 $ 3.6 Additions based on current year tax positions 0.7 0.7 0.1 Reductions related to lapses of statutes of limitations ( 0.5 ) ( 0.8 ) ( 2.7 ) Balance as of December 31 $ 1.1 $ 0.9 $ 1.0 The Company’s liability for uncertain tax positions includes unrecognized benefits of $ 0.8 million and $ 0.7 million at December 31, 2023 and 2022, respectively, that if recognized would affect the effective tax rate on income from continuing operations. The Company recognized $ 0.1 million, $ 0.0 million , and $( 0.5 ) million in interest and penalties in its income tax provision for the years ended December 31, 2023, 2022 and 2021, respectively. The Company recognizes accrued interest and penalties relating to unrecognized tax benefits as income tax expense. The Company’s liability for uncertain tax positions at December 31, 2023, 2022 and 2021 includes accrued interest and penalties of $ 0.2 million, $ 0.1 million and $ 0.1 million, respectively. The Company is periodically under examination by various taxing authorities. 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, 2023 the Company is subject to examination in three 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, 2023, 2022 and 2021, 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 2019. At December 31, 2023, it is reasonably possible that the total amounts of unrecognized tax benefits will change within the next twelve months due to the expiration of statutes of limitations. The Company estimates a decrease of up to $ 0.1 million within the next twelve months. 122 BrightSphere Investment Group Inc. Notes to Consolidated Financial Statements (Continued) December 31, 2023 and 2022 15) Commitments and Contingencies Operational commitments A number of our subsidiaries operate under regulatory authorities that require that they maintain minimum financial or capital requirements. Management is not aware of any violations of such financial requirements occurring during the period. Guaranty The Company entered into a guaranty for an office space security deposit on behalf of 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 2033. There are no liabilities recorded on the Consolidated Balance Sheet as of December 31, 2023 and 2022, related to this guaranty. Litigation The Company and its Affiliate are subject to claims, legal proceedings and other contingencies in the ordinary course of their business activities. Each of these matters is subject to various uncertainties, and it is possible that some of these matters may be resolved in a manner unfavorable to the Company or its Affiliate. The Company and its Affiliate establish accruals for matters for which the outcome is probable and can be reasonably estimated. If an insurance claim or other indemnification for a litigation accrual is available to the Company, the associated gain will not be recognized until all contingencies related to the gain have been resolved. As of December 31, 2023, there were no material accruals for claims, legal proceedings or other contingencies. Indemnifications In the normal course of business, such as through agreements to enter into business combinations and divestitures of Affiliates, the Company enters into contracts that contain a variety of representations and warranties and which provide general indemnifications. The Company’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Company that have not yet occurred. Foreign tax contingency The Company has clients in non-U.S. jurisdictions which require entities that are conducting certain business activities in such jurisdictions to collect and remit tax assessed on certain fees paid for goods and services provided. The Company does not believe this requirement is applicable based on its limited business activities in these jurisdictions. However, given the fact that uncertainty exists around the requirement, the Company has chosen to evaluate its potential exposure related to non-collection and remittance of these taxes. At December 31, 2023, management of the Company has estimated the potential maximum exposure and concluded that it is not material. No accrual for the potential exposure has been recorded as the probability of incurring any potential liability relating to this exposure is not probable at December 31, 2023. 123 BrightSphere Investment Group Inc. Notes to Consolidated Financial Statements (Continued) December 31, 2023 and 2022 15) 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, cash equivalents, restricted cash and investments. The Company maintains cash and cash equivalents and short term investments with various financial institutions. These financial institutions are typically located in cities in which the Company and its Affiliate operate. For the Company and its Affiliate, cash deposits at a financial institution may exceed Federal Deposit Insurance Corporation insurance limits. Additionally, the Company holds insurance policies which cover historical tax benefits relating to certain of its deferred tax assets. The insurers of the policies are considered a significant counterparty to the Company. 124 BrightSphere Investment Group Inc. Notes to Consolidated Financial Statements (Continued) December 31, 2023 and 2022 16) Earnings Per Share Basic earnings per share is calculated by dividing net income attributable to controlling interests by the weighted average number of shares of common stock outstanding. Diluted earnings per share is similar to basic earnings per share, but is adjusted for the effect of potentially issuable common stock, except when inclusion is antidilutive. The calculation of basic and diluted earnings per share of common stock for the years ended December 31, 2023, 2022 and 2021 is as follows (dollars in millions, except per share data): 2023 2022 2021 Numerator: Income from continuing operations attributable to controlling interests $ 65.8 $ 100.6 $ 128.1 Income from discontinued operations attributable to controlling interests (Note 3) — — 700.3 Net income attributable to controlling interests 65.8 100.6 828.4 Less: Total income available to participating unvested securities (1) — — ( 0.1 ) Total net income attributable to common stock $ 65.8 $ 100.6 $ 828.3 Denominator: Weighted-average shares of common stock outstanding—basic 41,493,154 42,056,278 77,213,010 Potential shares of common stock: Restricted stock units 7,448 14,147 33,175 Employee stock options 1,037,341 1,085,844 3,239,739 Weighted-average shares of common stock outstanding—diluted 42,537,943 43,156,269 80,485,924 Earnings per share of common stock attributable to controlling interests: Basic: Continuing operations $ 1.59 $ 2.39 $ 1.66 Discontinued operations — — 9.07 Basic earnings per share of common stock attributable to controlling interests $ 1.59 $ 2.39 $ 10.73 Diluted Continuing operations $ 1.55 $ 2.33 $ 1.59 Discontinued operations — — 8.70 Diluted earnings per share of common stock attributable to controlling interests $ 1.55 $ 2.33 $ 10.29 (1) Income available to participating unvested securities includes dividends paid on unvested restricted shares and their proportionate share of undistributed earnings. 125 BrightSphere Investment Group Inc. Notes to Consolidated Financial Statements (Continued) December 31, 2023 and 2022 17) Revenue Management fees The Company’s management fees are a function of the fee rates the Affiliates charge to their clients, which are typically expressed in basis points, and the levels of the Company’s assets under management. The most significant driver of increases or decreases in this average fee rate is changes in the mix of the Company’s assets under management caused by net inflows or outflows in certain asset classes or disproportionate market movements. Performance fees The Company’s products subject to performance fees earn these fees upon exceeding high-water mark performance thresholds or outperforming a hurdle rate. Performance fees are recorded in revenues when the contractual performance criteria have been met and when it is probable that a significant reversal of revenue recognized will not occur in future reporting periods. Other revenue Included in other revenue are certain payroll and benefits costs and expenses paid on behalf of Funds by the Company’s Affiliates. In instances where a customer reimburses the Company for a cost paid on the customer’s behalf, the Company is acting as a principal and the reimbursement is accrued on a gross basis at cost as the corresponding reimbursable expenses are incurred. There was no revenue from expense reimbursements for the year ended December 31, 2023 and 2022. Revenue from expense reimbursements amounted to $ 2.9 million for the year ended December 31, 2021, and is recorded in other revenue in the Company’s Consolidated Statements of Operations. Other revenue may also include other miscellaneous revenue, consisting primarily of administration and consulting services. Disaggregation of management fee revenue The geographic disaggregation of management fee revenue for the years ended December 31 (in millions) is presented below: 2023 2022 2021 Quant & Solutions U.S. $ 281.9 $ 279.1 $ 313.1 Non-U.S. 91.3 88.3 106.3 Other (1) U.S. — — 10.2 Non-U.S. — — 3.7 Management fee revenue $ 373.2 $ 367.4 $ 433.3 (1) The Company’s previously divested Affiliates, Campbell Global and ICM, are included within the Other category for year ended December 31, 2021. 126 BrightSphere Investment Group Inc. Notes to Consolidated Financial Statements (Continued) December 31, 2023 and 2022 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. The Company has established a Deferred Compensation Plan under which the Board of Directors makes awards that may be invested by the recipient in investments deemed available under the plan. Vesting of awards under the Deferred Compensation Plan is based on the number of years of service already provided by the employee at the date of the grant. In addition, the Company has established a Voluntary Deferral Plan that provides officers of the Company the opportunity to voluntarily defer a portion of their compensation. The compensation deferred is deemed to be invested in one or more investment options available under the plan. These non-qualified plans are unfunded, although the Company does make contributions to a Rabbi Trust to hedge its risks in terms of providing returns to employees on their deemed investments held in the plan. As of December 31, 2023 and 2022, a total of $ 44.5 million and $ 39.9 million, respectively, had been recorded as long-term compensation liabilities and a total of $ 44.7 million and $ 40.0 million had been invested under the Deferred Compensation and Voluntary Deferral plans, respectively. The change in the fair value of long-term compensation liabilities and the change in fair value of the assets invested under the Deferred Compensation and Voluntary Deferral plans was $ 4.8 million and $ 4.9 million, respectively, for the year ended December 31, 2023, $ 4.9 million and $ 4.9 million, respectively, for the year ended December 31, 2022, and $ 3.5 million, and $ 3.5 million, respectively, for the year ended December 31, 2021. 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, 2023, 2022 and 2021 of $ 5.5 million, $ 6.0 million and $ 8.5 million, respectively. 127 BrightSphere Investment Group Inc. Notes to Consolidated Financial Statements (Continued) December 31, 2023 and 2022 19) Equity-based Compensation Cash-settled Affiliate awards 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. 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 the vesting date. The Company accounts for these arrangements as “cash-settled” share-based payments, and accordingly a corresponding share-based payment liability is recorded. The fair value of the liabilities are determined with the assistance of third party valuation specialists using discounted cash flow analyses, which incorporate assumptions for the forecasted earnings information, market risk adjustments, discount rates, when award holders maximize value and post-vesting restrictions. Vested Affiliate equity liabilities are revalued at each period end until settlement date, with changes in the liabilities included within compensation expense. The following table presents the changes in the share-based payments liability for the years ended December 31 (in millions): 2023 2022 2021 Balance, beginning of period $ 19.4 $ 28.1 $ 25.0 Amortization and revaluation of granted awards 6.2 ( 4.6 ) 5.4 Affiliate disposals — — ( 0.8 ) Repurchases (cash-settled) ( 2.6 ) ( 4.1 ) ( 1.5 ) Balance, end of period $ 23.0 $ 19.4 $ 28.1 Equity-settled corporate awards BrightSphere Investment Group equity incentive plan The Company has established various plans under which it is authorized to grant restricted stock awards (“RSAs”), restricted stock units (“RSUs”), performance-based restricted stock awards (“Performance-based RSAs”), performance-based restricted stock units (“Performance-based RSUs”) and stock option awards. These plans are maintained to provide equity-based compensation arrangements to employees and non-executive directors. Equity ownership encourages employees and directors to act in the best long-term interests of the Company. As of December 31, 2023, the Company had 4.6 million shares of common stock available to be granted under the various plans. 128 BrightSphere Investment Group Inc. Notes to Consolidated Financial Statements (Continued) December 31, 2023 and 2022 19) Equity-based Compensation (cont.) Compensation expense recognized by the Company for the years ended December 31, 2023, 2022 and 2021 in relation to these awards was $ 1.2 million, $ 2.4 million, and $ 1.9 million respectively. The related income tax benefit recognized for years ended December 31, 2023, 2022 and 2021 was $ 0.2 million, $ 0.3 million and $ 0.3 million respectively. Unamortized compensation expense related to unvested RSUs at December 31, 2023 of $ 1.0 million is expected to be recognized over a weighted-average period of 1.6 years. The service inception date for annual awards granted in 2023 is deemed to be January 1, 2022. It is anticipated that annual awards for 2023 with a fair value of $ 0.6 million will be granted during 2024 with a service inception date of January 1, 2023. The following summarizes the grant date fair value of the instruments granted by the Company during the year ended December 31: 2023 2022 2021 BrightSphere Investment Group Inc. awards Shares granted Weighted average fair value Shares granted Weighted average fair value Shares granted Weighted average fair value RSUs 49,494 24.04 59,999 22.62 15,548 22.06 Grants of restricted stock in BrightSphere Investment Group Inc. The following table summarizes the activity related to restricted stock awards: 2023 2022 2021 BrightSphere Investment Group Inc. RSAs Number of shares Weighted average grant date fair value per share Number of shares Weighted average grant date fair value per share Number of shares Weighted average grant date fair value per share Outstanding at beginning of the year — $ — 2,500 $ 10.09 14,010 $ 13.26 Granted during the year — — — — — — Forfeited during the year — — ( 125 ) 10.09 ( 1,500 ) 10.09 Vested during the year — — ( 2,375 ) 10.09 ( 10,010 ) 14.53 Outstanding at end of the year — $ — — $ — 2,500 $ 10.09 The grant date fair value per share, calculated based on the closing price as quoted on the New York Stock Exchange on the measurement date, is used to determine the fair value of restricted stock awards granted to employees. There were no RSAs granted by the Company during the years ended December 31, 2023, 2022 and 2021. Restricted stock awards under the plan generally have a vesting period of one to three years . 129 BrightSphere Investment Group Inc. Notes to Consolidated Financial Statements (Continued) December 31, 2023 and 2022 19) Equity-based Compensation (cont.) Grants of restricted stock units in BrightSphere Investment Group Inc. The following table summarizes the activity related to restricted stock units: 2023 2022 2021 BrightSphere Investment Group Inc. RSUs Number of shares Weighted average grant date fair value per share Number of shares Weighted average grant date fair value per share Number of shares Weighted average grant date fair value per share Outstanding at beginning of the year 71,664 $ 20.95 38,703 $ 15.33 60,364 $ 10.53 Granted during the year 49,494 24.04 59,999 22.62 15,548 22.06 Forfeited during the year ( 15,823 ) 25.05 ( 3,003 ) 17.55 ( 2,345 ) 10.30 Vested during the year ( 56,538 ) 19.72 ( 24,035 ) 16.51 ( 34,864 ) 10.35 Outstanding at end of the year 48,797 $ 24.19 71,664 $ 20.95 38,703 $ 15.33 The grant date fair value per share, calculated based on the closing price as quoted on the New York Stock Exchange on the measurement date, is used to determine the fair value of restricted stock units granted to employees. Restricted stock units under the plan generally have a vesting period of one to three years . Grants of Performance-based restricted stock awards in BrightSphere Investment Group Inc. The following table summarizes the activity related to performance-based restricted stock awards: 2023 2022 2021 BrightSphere Investment Group Inc. Performance-based RSAs Number of shares Weighted average grant date fair value per share Number of shares Weighted average grant date fair value per share Number of shares Weighted average grant date fair value per share Outstanding at beginning of the year — $ — — $ — 83,092 $ 9.78 Vested during the year — — — — ( 36,007 ) 9.78 Other movements — — — — ( 47,085 ) 9.78 Outstanding at end of the year — $ — — $ — — $ — 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, 2023, 2022, and 2021. 130 BrightSphere Investment Group Inc. Notes to Consolidated Financial Statements (Continued) December 31, 2023 and 2022 19) Equity-based Compensation (cont.) Grants of Performance-based restricted stock units in BrightSphere Investment Group Inc. The following table summarizes the activity related to performance-based restricted stock units: 2023 2022 2021 BrightSphere Investment Group Inc. Performance-based RSUs Number of shares Weighted average grant date fair value per share Number of shares Weighted average grant date fair value per share Number of shares Weighted average grant date fair value per share Outstanding at beginning of the year — $ — 9,013 $ 14.62 9,013 $ 14.62 Vested during the year — — ( 7,932 ) 14.62 — — Other movements — — ( 1,081 ) 14.62 — — Outstanding at end of the year — $ — — $ — 9,013 $ 14.62 Other movements includes performance-based RSUs that did not meet the market vesting condition and did not vest during the year ended December 31, 2022. There were no performance-based RSUs granted by the Company during the years ended December 31, 2023, 2022, and 2021. Performance-based RSUs under the plan have a vesting period of three years . Grants of Stock Options in BrightSphere Investment Group Inc. The following tables summarizes the activity related to the Company’s stock option awards: 2023 Stock Options Weighted average exercise price Weighted average remaining contractual term (in years) Aggregate intrinsic value Outstanding at beginning of the year 2,470,463 $ 10.97 1.6 Granted during the year — — Forfeited during the year ( 75,000 ) 10.00 Exercised during the year ( 736,463 ) 11.80 Outstanding at end of the year 1,659,000 $ 10.64 0.8 $ 14,128,440 Exercisable at end of the year 1,659,000 $ 10.64 0.8 $ 14,128,440 131 BrightSphere Investment Group Inc. Notes to Consolidated Financial Statements (Continued) December 31, 2023 and 2022 19) Equity-based Compensation (cont.) 2022 Stock Options Weighted average exercise price Weighted average remaining contractual term (in years) Aggregate intrinsic value Outstanding at beginning of the year 2,969,963 $ 11.09 2.5 Exercised during the year ( 499,500 ) 11.70 Outstanding at end of the year 2,470,463 $ 10.97 1.6 $ 23,746,573 Exercisable at end of the year 1,441,463 $ 11.03 1.5 $ 13,767,753 2021 Stock Options Weighted average exercise price Weighted average remaining contractual term (in years) Aggregate intrinsic value Outstanding at beginning of the year 7,375,000 $ 11.38 3.4 Exercised during the year ( 4,405,037 ) 11.57 Outstanding at end of the year 2,969,963 $ 11.09 2.5 $ 43,091,497 Exercisable at end of the year 911,963 $ 11.56 2.3 $ 12,802,697 There were no stock options granted by the Company during the year ended December 31, 2023, 2022, and 2021. The total fair value of options vested during the years ended December 31, 2023, 2022 and 2021 was $ 1.3 million, $ 1.3 million and $ 1.3 million, respectively. The total intrinsic value of options exercised during the years ended December 31, 2023, 2022 and 2021 was $ 5.1 million, $ 6.0 million and $ 75.5 million, respectively. The Company received $ 0.0 million , $ 0.0 million and $ 2.7 million related to the exercise of options for the year ended December 31, 2023, 2022, and 2021, respectively. The Company realized tax benefits of $ 0.3 million, $ 0.3 million, and $ 0.6 million related to the exercise of options for the year ended December 31, 2023, 2022, and 2021, respectively. Shares issued upon exercise of the options represent newly issued shares. 132 BrightSphere Investment Group Inc. Notes to Consolidated Financial Statements (Continued) December 31, 2023 and 2022 20) Accumulated Other Comprehensive Income (Loss) The components of accumulated other comprehensive income (loss) for the years ended December 31, 2023, 2022 and 2021 were as follows (in millions): Foreign currency translation adjustment Valuation and amortization of derivative securities Total Balance, as of December 31, 2020 $ 4.4 $ ( 18 ) $ ( 13.6 ) Foreign currency translation adjustment before tax 0.4 — 0.4 Amortization related to derivatives securities, before tax — 3.3 3.3 Tax impact — ( 0.9 ) ( 0.9 ) Other comprehensive income 0.4 2.4 2.8 Balance, as of December 31, 2021 $ 4.8 $ ( 15.6 ) $ ( 10.8 ) Foreign currency translation adjustment before tax ( 3.1 ) — ( 3.1 ) Amortization related to derivatives securities, before tax (1) — 4.6 4.6 Tax impact — ( 1.3 ) ( 1.3 ) Other comprehensive income ( 3.1 ) 3.3 0.2 Balance, as of December 31, 2022 $ 1.7 ( 12.3 ) $ ( 10.6 ) Foreign currency translation adjustment before tax 1.4 — 1.4 Amortization related to derivatives securities, before tax — 3.4 3.4 Tax impact — ( 0.9 ) ( 0.9 ) Other comprehensive income (loss) 1.4 2.5 3.9 Balance, as of December 31, 2023 $ 3.1 $ ( 9.8 ) $ ( 6.7 ) (1) On January 18, 2022, the Company completed the full redemption of the $ 125 million aggregate principal amount outstanding of its 5.125 % Senior Notes due August 1, 2031. As a result of this transaction, the Company recorded $ 1.3 million of amortization expense included in the Amortization related to derivative securities, before tax. 133 BrightSphere Investment Group Inc. Notes to Consolidated Financial Statements (Continued) December 31, 2023 and 2022 21) Derivatives and Hedging Cash flow hedge In July 2015, the Company entered into a series of $ 300.0 million notional Treasury rate lock contracts which were designated and qualified as cash flow hedges. The Company documented its hedging strategy and risk management objective for this contract in anticipation of a future debt issuance. The Treasury rate lock contract eliminated the impact of fluctuations in the underlying benchmark interest rate for future forecasted debt issuances. The Company assessed the effectiveness of the hedging contract at inception and on a quarterly basis thereafter. The forecasted debt issuances occurred in July 2016 and the Treasury rate lock, which had an accumulated fair value of $( 34.4 ) million, was settled. Amounts recorded in accumulated other comprehensive income in connection with the settled Treasury rate lock were $ 2.5 million, net of tax of $( 0.9 ) million for the year ended December 31, 2023. As of December 31, 2023, the balance in accumulated other comprehensive income (loss) in connection with the Treasury rate lock contract amounted to $( 9.8 ) million, net of tax. This balance will be reclassified to earnings through interest expense over the life of the issued debt. Amounts of $ 3.4 million, $ 4.6 million and $ 3.3 million have been reclassified for the years ended December 31, 2023, 2022 and 2021, respectively. During the next twelve months the Company expects to reclassify approximately $ 3.6 million to interest expense. On January 18, 2022, the Company completed the full redemption of the $ 125 million aggregate principal amount outstanding of its 5.125 % Senior Notes due August 1, 2031. As a result of this transaction, amortization expense of $ 1.3 million (of the $ 4.6 million interest expense reclassified to earnings for the year ended December 31, 2022) was reclassified to earnings as interest expense. 22) Segment Information The Company has the following reportable segment: • 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, systematic macro, equity alternatives, and credit strategies. This segment is comprised of the Company’s interest in Acadian. The corporate head office is included within the Other category, along with its previously disposed Affiliate, Campbell Global, for the year ended December 31, 2021. The Company completed the sale of its equity interests in Campbell Global in August 2021. ICM is included in the Other category for the year ended December 31, 2021. The Company completed the sale of its equity interests in ICM in July 2021. 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. 134 BrightSphere Investment Group Inc. Notes to Consolidated Financial Statements (Continued) December 31, 2023 and 2022 22) Segment Information (cont.) Performance Measure The primary measure used by the CODM in measuring performance and allocating resources to the segments is economic net income (“ENI”). The Company defines economic net income for the segments as ENI revenue less (i) ENI operating expenses, (ii) variable compensation and (iii) key employee distributions. The ENI adjustments to U.S. GAAP include both reclassifications of U.S. GAAP revenue and expense items, as well as adjustments to U.S. GAAP results, primarily to exclude non-cash, non-economic expenses, or to reflect cash benefits not recognized under U.S. GAAP. This measure supplements and should be considered in addition to, and not in lieu of, the Consolidated Statements of Operations prepared in accordance with U.S. GAAP. The Company does not disclose total asset information for its reportable segments as the information is not reviewed by the CODM. ENI revenue includes management fees, performance fees and other revenue under U.S. GAAP, adjusted to include management fees paid to Affiliates by consolidated Funds and the Company’s share of earnings from its equity-accounted Affiliate. ENI revenue is also adjusted to exclude the separate revenues recorded under U.S. GAAP for certain Fund expenses reimbursed to our Affiliates. 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, amortization of acquired intangible assets, capital transaction costs, restructuring costs, and the separate expenses recorded under U.S. GAAP for certain Fund expenses reimbursed to Affiliates. Additionally, variable compensation and Affiliate key employee distributions are segregated from ENI operating expenses. ENI segment results are also adjusted to exclude the portion of consolidated Fund revenues, expenses and investment return recorded under U.S. GAAP. 135 BrightSphere Investment Group Inc. Notes to Consolidated Financial Statements (Continued) December 31, 2023 and 2022 22) Segment Information (cont.) Segment Presentation The following tables set forth summarized operating results for the Company’s segments and related adjustments necessary to reconcile the segment economic net income to arrive at the Company's consolidated U.S. GAAP net income (loss). The following table presents the financial data for the Company’s segment for the year ended December 31, 2023 (in millions): Quant & Solutions Other Reconciling Adjustments Total U.S. GAAP (1) ENI revenue $ 423.6 $ — $ 3.0 (a) $ 426.6 ENI operating expenses 184.2 14.2 4.9 (b) 203.3 Earnings before variable compensation 239.4 ( 14.2 ) ( 1.9 ) 223.3 Variable compensation 102.2 2.7 7.3 (c) 112.2 ENI operating earnings (after variable comp) 137.2 ( 16.9 ) ( 9.2 ) 111.1 Affiliate key employee distributions 5.1 — — 5.1 Earnings after Affiliate key employee distributions 132.1 ( 16.9 ) ( 9.2 ) 106.0 Net interest expense — ( 11.8 ) ( 1.7 ) (d) ( 13.5 ) Net investment income — — 4.0 (e) 4.0 Net (income) loss attributable to non-controlling interests in consolidated Funds — — ( 1.3 ) (e) ( 1.3 ) Income tax expense — ( 27.7 ) ( 1.7 ) (f) ( 29.4 ) Economic net income $ 132.1 $ ( 56.4 ) $ ( 9.9 ) $ 65.8 136 BrightSphere Investment Group Inc. Notes to Consolidated Financial Statements (Continued) December 31, 2023 and 2022 22) Segment Information (cont.) The following table presents the financial data for the Company’s segments for the year ended December 31, 2022 (in millions): Quant & Solutions Other Reconciling Adjustments Total U.S. GAAP (1) ENI revenue $ 416.8 $ — $ 0.4 (a) $ 417.2 ENI operating expenses 165.5 16.6 ( 38.2 ) (b) 143.9 Earnings before variable compensation 251.3 ( 16.6 ) 38.6 273.3 Variable compensation 96.0 4.3 — 100.3 ENI operating earnings (after variable comp) 155.3 ( 20.9 ) 38.6 173.0 Affiliate key employee distributions 5.1 — — 5.1 Earnings after Affiliate key employee distributions 150.2 ( 20.9 ) 38.6 167.9 Net interest expense — ( 17.3 ) ( 2.4 ) (d) ( 19.7 ) Net investment loss — — ( 0.2 ) (e) ( 0.2 ) Loss on extinguishment of debt — — ( 3.2 ) (e) ( 3.2 ) Income tax expense — ( 30.4 ) ( 13.8 ) (f) ( 44.2 ) Economic net income $ 150.2 $ ( 68.6 ) $ 19.0 $ 100.6 137 BrightSphere Investment Group Inc. Notes to Consolidated Financial Statements (Continued) December 31, 2023 and 2022 22) Segment Information (cont.) The following table presents the financial data for the Company’s segments for the year ended December 31, 2021 (in millions): Quant & Solutions Liquid Alpha Other Reconciling Adjustments Total U.S. GAAP (1) ENI revenue $ 488.1 $ — $ 35.4 $ 0.3 (a) $ 523.8 ENI operating expenses 160.8 — 32.0 41.3 (b) 234.1 Earnings before variable compensation 327.3 — 3.4 ( 41.0 ) 289.7 Variable compensation 100.8 — 28.8 0.9 (c) 130.5 ENI operating earnings (after variable comp) 226.5 — ( 25.4 ) ( 41.9 ) 159.2 Affiliate key employee distributions 12.4 — 1.0 — 13.4 Earnings after Affiliate key employee distributions 214.1 — ( 26.4 ) ( 41.9 ) 145.8 Net interest expense — — ( 22.3 ) ( 2.3 ) (d) ( 24.6 ) Net investment income — — — 8.3 (e) 8.3 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 — — ( 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 (1) The most directly comparable U.S. GAAP measure of ENI revenue is U.S. GAAP revenue. The most directly comparable U.S. GAAP measure of ENI operating expenses is U.S. GAAP operating expenses, which is comprised of ENI operating expenses, variable compensation and Affiliate key employee distributions above. The most directly comparable U.S. GAAP measure of earnings after Affiliate key employee distributions is U.S. GAAP operating income. The most directly comparable U.S. GAAP measure of ENI is U.S. GAAP net income attributable to controlling interests. Reconciling Adjustments: (a) Adjusted to exclude earnings from equity-accounted Affiliate, which are included in U.S. GAAP investment income, and to include consolidated Funds revenues and the separate revenues recorded for certain Fund expenses reimbursed by customers, which are included in U.S. GAAP revenue. 138 BrightSphere Investment Group Inc. Notes to Consolidated Financial Statements (Continued) December 31, 2023 and 2022 22) Segment Information (cont.) (b) Adjusted to include non-cash expenses for key employee equity and profit interest revaluations, capital transaction costs, amortization of acquired intangible assets, restructuring costs, consolidated Funds’ operating expenses and the Fund expenses reimbursed by customers, each of which are included in U.S. GAAP operating expenses. (c) Adjusted to include restructuring costs which are included in U.S. GAAP compensation expense. (d) Adjusted to include the cost of seed financing and amortization of debt issuance costs, which is included in U.S. GAAP interest expense. (e) Adjusted to include net investment income (loss), the loss on extinguishment of debt, net (income) loss attributable to non-controlling interests in consolidated Funds, and the gain on sale of subsidiaries, all of which are included in U.S. GAAP net income attributable to controlling interests. (f) Adjusted to include the impact of deferred tax attributable to the amortization of goodwill and acquired intangibles. 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. 23) Subsequent Events During the period from January 1, 2024 through February 26, 2024, the Company repurchased 3.3 million shares of common stock at a weighted average price of $ 20.93 per share, or approximately $ 68.9 million in total, including commissions. As of February 27, 2024, the outstanding balance on Acadian’s revolving credit facility was $ 84 million. 139 Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure. None.