As of March 31, 2017 or for the quarter then ended, and where
applicable, per Class A unit:
- GAAP net income attributable to
Oaktree Capital Group, LLC (“OCG”) increased to $54.9 million
($0.87 per unit), from $28.1 million ($0.45 per unit) for the first
quarter of 2016.
- Adjusted net income increased to
$162.1 million ($0.86 per unit), from $105.0 million ($0.49 per
unit) for the first quarter of 2016, driven by higher incentive
income and investment income.
- Distributable earnings increased
to $157.1 million ($0.86 per unit), from $125.7 million ($0.68 per
unit) for the first quarter of 2016, on higher incentive income and
investment income proceeds.
- Assets under management were
$100.3 billion, down slightly for the quarter and up 4% over the
last 12 months. Gross capital raised was $3.1 billion and $13.0
billion for the quarter and last 12 months, respectively. Uncalled
capital commitments as of March 31, 2017 were $21.8 billion.
- A distribution was declared of
$0.71 per unit, bringing aggregate distributions relating to the
last 12 months to $2.57.
Oaktree Capital Group, LLC (NYSE: OAK) today reported its
unaudited financial results for the first quarter ended March 31,
2017.
Jay Wintrob, Chief Executive Officer, said, “Highlighting a
solid beginning to 2017, Oaktree delivered a 25 percent increase in
distributable earnings and a 54 percent increase in adjusted net
income over the same quarter a year ago. We raised $3.1 billion of
gross capital in the first quarter and $13.0 billion over the last
twelve months. Continued strong investment performance across our
closed-end funds has led to 30 percent growth in net accrued
incentives over the last twelve months and bodes well for future
distributable earnings.”
GAAP-basis results for the first quarter of 2017 included net
income attributable to Oaktree Capital Group, LLC of $54.9 million,
up from $28.1 million for the first quarter of 2016, primarily
reflecting higher segment profits.
Assets under management (“AUM”) were $100.3 billion as of March
31, 2017, down slightly from $100.5 billion as of December 31,
2016, and up 4% from $96.9 billion as of March 31, 2016. Management
fee-generating assets under management (“management fee-generating
AUM”) were $79.3 billion as of March 31, 2017, down 1% from both
$79.8 billion as of December 31, 2016 and $79.9 billion as of March
31, 2016.
As of March 31, 2017, uncalled capital commitments (“dry
powder”) were $21.8 billion. Of these commitments, $13.1 billion
were not yet generating management fees (“shadow AUM”). Gross
capital raised was $3.1 billion and $13.0 billion for the quarter
and 12 months ended March 31, 2017, respectively.
Adjusted net income (“ANI”) grew to $162.1 million for the first
quarter of 2017, from $105.0 million for the first quarter of 2016,
reflecting higher incentive income and investment income, partially
offset by lower fee-related earnings. Distributable earnings grew
to $157.1 million for the first quarter of 2017, from $125.7
million for the first quarter of 2016, reflecting higher incentive
income and investment income proceeds, partially offset by lower
fee-related earnings.
In addition to ANI, Oaktree calculates economic net income
(“ENI”) to facilitate comparisons with other alternative asset
managers that report a measure similar to ENI as a performance
metric. Unlike ANI, ENI measures incentive income based on the
change in market value of the funds’ holdings (“incentives created
(fund level)”). ENI was $184.6 million for the first quarter of
2017, as compared to $41.2 million for the first quarter of 2016.
Per Class A unit, ENI was $1.02 for the first quarter of 2017, as
compared to $0.13 for the first quarter of 2016.
The table below presents (a) GAAP-basis results, (b) segment
results for both the Operating Group and per Class A unit,
and (c) assets under management and accrued incentives (fund
level) data. Please refer to the Glossary for definitions.
As of or for the Three MonthsEnded March 31,
2017 2016 GAAP-basis Results: (in
thousands, except per unit data or as otherwise indicated)
Revenues $ 289,585 $ 254,490 Net income attributable to
Oaktree Capital Group, LLC 54,915 28,078 Net income per Class A
unit 0.87 0.45
Segment Results: Segment revenues $
391,187 $ 312,935 Adjusted net income 162,094 105,025 Distributable
earnings revenues 375,562 324,339 Distributable earnings 157,099
125,725 Fee-related earnings revenues 185,565 201,270 Fee-related
earnings 48,197 62,359 Economic net income revenues 445,512 170,077
Economic net income 184,581 41,196
Per Class A Unit:
Adjusted net income $ 0.86 $ 0.49 Distributable earnings 0.86 0.68
Fee-related earnings 0.28 0.37 Economic net income 1.02 0.13
Operating Metrics: Assets under management (in millions):
Assets under management $ 100,313 $ 96,874 Management
fee-generating assets under management 79,329 79,908
Incentive-creating assets under management 32,337 31,205 Uncalled
capital commitments 21,770 21,400 Accrued incentives (fund level):
Incentives created (fund level) 201,518 (46,270 ) Incentives
created (fund level), net of associated incentive income
compensation expense 96,536 (16,991 ) Accrued incentives (fund
level) 2,068,422 1,442,359 Accrued incentives (fund level), net of
associated incentive income compensation expense 969,029 747,711
Note: Oaktree discloses in this earnings
release certain revenues and financial measures, including segment
measures such as segment revenues and adjusted net income, and
measures that are calculated and presented on a basis other than
generally accepted accounting principles in the United States
(“non-GAAP”), including adjusted net income per Class A unit,
distributable earnings revenues, distributable earnings,
distributable earnings per Class A unit, fee-related earnings
revenues, fee-related earnings, fee-related earnings per
Class A unit, economic net income revenues, economic net
income and economic net income per Class A unit.
Reconciliations of those segment and non-GAAP financial measures to
the most directly comparable GAAP financial measures are presented
at Exhibit A. All non-GAAP measures and all interim results
presented in this release are unaudited.
GAAP-basis Results
Oaktree consolidates entities in which it has a direct or
indirect controlling financial interest. Investment vehicles in
which we have a significant investment, such as collateralized loan
obligation vehicles (“CLOs”) and certain Oaktree funds, are
consolidated under GAAP. When a CLO or fund is consolidated, the
assets, liabilities, revenues, expenses and cash flows of the
consolidated funds are reflected on a gross basis, and the majority
of the economic interests in those consolidated funds, which are
held by third-party investors, are reflected as debt obligations of
CLOs or non-controlling interests. All of the revenues earned by us
as investment manager of the consolidated funds are eliminated in
consolidation. However, because the eliminated amounts are earned
from and funded by third-party investors, the consolidation of a
fund does not impact net income or loss attributable to OCG.
Total revenues increased $35.1 million, or 13.8%, to $289.6
million for the first quarter of 2017, from $254.5 million for the
first quarter of 2016. The increase reflected higher incentive
income, partially offset by lower management fees.
Total expenses increased $7.4 million, or 4.0%, to $192.6
million for the first quarter of 2017, from $185.2 million for the
first quarter of 2016. The increase primarily reflected higher
incentive income compensation expense, partially offset by lower
general and administrative expense.
Other income (loss) increased to income of $77.1 million for the
first quarter of 2017, from $26.5 million for the first quarter of
2016. The increase primarily reflected higher overall returns on
our funds’ performance.
Net income attributable to OCG increased to $54.9 million for
the first quarter of 2017, from $28.1 million for the first quarter
of 2016, primarily reflecting higher segment profits.
Operating Metrics
Assets Under Management
AUM was $100.3 billion as of March 31, 2017, $100.5 billion as
of December 31, 2016 and $96.9 billion as of March 31, 2016. The
$0.2 billion decrease since December 31, 2016 primarily reflected
$2.6 billion of distributions to closed-end fund investors and $1.0
billion of net outflows from open-end funds, largely offset by $1.9
billion in market-value gains and $1.1 billion of capital inflows
for closed-end funds.
The $3.4 billion increase in AUM since March 31, 2016 primarily
reflected $8.9 billion in market-value gains and $6.1 billion of
capital inflows for closed-end funds, partially offset by $8.3
billion of distributions to closed-end fund investors, $1.5 billion
of net outflows from open-end funds, $1.1 billion of uncalled
capital commitments for closed-end funds that have entered
liquidation and $0.7 billion of unfavorable foreign-currency
translation. Inflows for closed-end funds included $1.1 billion for
Oaktree European Principal Fund IV, $0.8 billion for Oaktree
Opportunities Fund Xb, $0.8 billion for Oaktree Real Estate
Opportunities Fund VII (“ROF VII”) and $0.8 billion from Oaktree
Real Estate Debt Fund II. Distributions to closed-end fund
investors included $2.7 billion from Control Investing funds, $2.4
billion from Distressed Debt funds and $2.3 billion from Real
Estate funds.
Management Fee-generating Assets Under
Management
Management fee-generating AUM, a forward-looking metric, was
$79.3 billion as of March 31, 2017, $79.8 billion as of December
31, 2016 and $79.9 billion as of March 31, 2016. The $0.5 billion
decrease since December 31, 2016 primarily reflected $1.1 billion
of net outflows from open-end funds and $1.0 billion attributable
to closed-end funds in liquidation, partially offset by $1.1
billion in market-value gains and $0.3 billion from capital drawn
by funds that pay fees based on drawn capital, NAV or cost
basis.
The $0.6 billion decrease in management fee-generating AUM since
March 31, 2016 primarily reflected $5.6 billion attributable to
closed-end funds in liquidation, $1.7 billion of net outflows from
open-end funds, $0.7 billion of distributions by closed-end funds
that pay fees based on NAV and $0.6 billion of unfavorable
foreign-currency translation, partially offset by $5.1 billion in
market-value gains, $1.5 billion from capital drawn by closed-end
funds that pay fees based on drawn capital, NAV or cost basis and
$1.5 billion of capital inflows to closed-end funds, principally
ROF VII and CLOs.
Incentive-creating Assets Under
Management
Incentive-creating assets under management (“incentive-creating
AUM”) were $32.3 billion as of March 31, 2017, $33.6 billion as of
December 31, 2016 and $31.2 billion as of March 31, 2016. The $1.3
billion decrease since December 31, 2016 reflected an aggregate
$2.7 billion decline primarily attributable to distributions by
closed-end funds, partially offset by an aggregate $1.4 billion in
drawdowns or contributions by closed-end and evergreen funds and
market-value gains. The $1.1 billion increase since March 31, 2016
reflected an aggregate $8.7 billion principally from drawdowns or
contributions by closed-end and evergreen funds and market-value
gains, partially offset by an aggregate decline of $7.6 billion
primarily attributable to distributions by closed-end funds.
Of the $32.3 billion in incentive-creating AUM as of March 31,
2017, $20.7 billion, or 64%, was generating incentives at the fund
level, as compared with $16.5 billion, or 53%, of the $31.2 billion
of incentive-creating AUM as of March 31, 2016.
Accrued Incentives (Fund Level) and
Incentives Created (Fund Level)
Accrued incentives (fund level) were $2.1 billion as of March
31, 2017, $2.0 billion as of December 31, 2016 and $1.4 billion as
of March 31, 2016. The first quarter of 2017 reflected $201.5
million of incentives created (fund level) and $147.2 million of
segment incentive income recognized.
Net of incentive income compensation expense, accrued incentives
(fund level) were $969.0 million as of March 31, 2017, $946.5
million as of December 31, 2016, and $747.7 million as of March 31,
2016. As of March 31, 2017, December 31, 2016 and March 31, 2016,
the portion of net accrued incentives (fund level) represented by
funds that were currently paying incentives was $179.6 million (or
19%), $201.7 million (21%) and $294.1 million (39%), respectively,
with the remainder arising from funds that as of that date were not
at the stage of their cash distribution waterfall where Oaktree was
entitled to receive incentives, other than possibly tax-related
distributions.
Uncalled Capital Commitments
Uncalled capital commitments were $21.8 billion as of March 31,
2017, $20.8 billion as of December 31, 2016, and $21.4 billion as
of March 31, 2016. Invested capital during the quarter and 12
months ended March 31, 2017 aggregated $1.7 billion and $8.3
billion, respectively, as compared with $1.9 billion and $7.5
billion for the comparable prior-year periods.
Segment Results
Revenues
Segment revenues grew $78.3 million, or 25.0%, to $391.2 million
in the first quarter of 2017, from $312.9 million in the first
quarter of 2016, reflecting $15.7 million in lower management fees,
$50.6 million in higher incentive income and $43.3 million in
higher investment income.
Management Fees
Management fees decreased $15.7 million, or 7.8%, to $185.6
million in the first quarter of 2017, from $201.3 million in the
first quarter of 2016. The decrease reflected an aggregate decline
of $23.5 million primarily attributable to closed-end funds in
liquidation, partially offset by an aggregate increase of $7.8
million principally from additional capital commitments to ROF VII
and closed-end funds that pay management fees based on drawn
capital, NAV or cost basis.
Incentive Income
Incentive income increased $50.6 million, or 52.4%, to $147.2
million in the first quarter of 2017, from $96.6 million in the
first quarter of 2016. The first quarter of 2017 included regular
and tax-related incentive income of $66.0 million and $81.2
million, respectively, as compared to $23.9 million and $72.7
million in the first quarter of 2016, respectively.
Investment Income
Investment income increased $43.3 million, to $58.4 million in
the first quarter of 2017, from $15.1 million in the first quarter
of 2016. Excluding the $22.7 million impairment charge taken in the
first quarter of 2016 on investments in certain of our CLOs,
investment income increased $20.6 million, primarily reflecting
higher overall returns on our fund investments. Our one-fifth
ownership stake in DoubleLine Capital LP and its affiliates
(collectively, “DoubleLine”) accounted for investment income of
$15.9 million and $15.1 million in the first quarters of 2017 and
2016, respectively, of which performance fees accounted for $0.2
million and $0.6 million, respectively.
Expenses
Compensation and Benefits
Compensation and benefits expense decreased $2.2 million, or
2.1%, to $102.1 million in the first quarter of 2017, from $104.3
million in the first quarter of 2016. The decrease was primarily
attributable to variations in bonus accruals, partially offset by a
$2.3 million unfavorable change in phantom equity expense, stemming
largely from each period’s change in the Class A unit trading
price.
Equity-based Compensation
Equity-based compensation expense increased $1.0 million, or
9.3%, to $11.7 million in the first quarter of 2017, from $10.7
million in the first quarter of 2016. The increase reflected
non-cash amortization expense associated with vesting of Class A
and OCGH unit grants made to employees and directors subsequent to
our 2012 initial public offering.
Incentive Income Compensation
Incentive income compensation expense increased $23.4 million,
or 47.1%, to $73.1 million in the first quarter of 2017, from $49.7
million in the first quarter of 2016. The increase reflected growth
in incentive income, partially offset by differences in the
applicable funds’ compensation percentages.
General and Administrative
General and administrative expense increased $0.9 million, or
2.9%, to $32.4 million in the first quarter of 2017, from $31.5
million in the first quarter of 2016.
Interest Expense, Net
Interest expense, net decreased $1.7 million, or 19.5%, to $7.0
million in the first quarter of 2017, from $8.7 million in the
first quarter of 2016, reflecting the maturity of $100.0 million in
senior notes in 2016 and higher interest income.
Adjusted Net Income
ANI increased $57.1 million, or 54.4%, to $162.1 million in the
first quarter of 2017, from $105.0 million in the first quarter of
2016, reflecting increases of $43.3 million in investment income
and $27.2 million in incentive income, net of incentive income
compensation expense (“net incentive income”), partially offset by
a $14.2 million decline in fee-related earnings. The portion of ANI
attributable to our Class A units was $54.1 million, or $0.86
per unit, and $30.2 million, or $0.49 per unit, for the first
quarters of 2017 and 2016, respectively.
The effective tax rate applied to ANI in the first quarters of
2017 and 2016 was 18% and 28%, respectively, resulting from
full-year effective rates of 20% and 23%, respectively. The rate
used for interim fiscal quarters is based on an estimated full-year
effective tax rate on income that can be reliably forecasted,
combined with tax expense in the current period on incentive income
and any other income that cannot be reliably estimated. We
generally expect variability in tax rates between periods, because
the effective tax rate is a function of the mix of income and other
factors, each of which can have a material impact on the particular
period's income tax expense and often vary significantly within or
between years. In general, the annual effective tax rate increases
as the proportion of ANI arising from fee-related earnings,
DoubleLine-related investment income and certain incentive and
investment income rises, and vice versa.
Distributable Earnings
Distributable earnings grew $31.4 million, or 25.0%, to $157.1
million in the first quarter of 2017, from $125.7 million in the
first quarter of 2016, reflecting increases of $27.2 million in net
incentive income and $16.3 million in investment income proceeds,
partially offset by a $14.2 million decline in fee-related
earnings. For the first quarter of 2017, investment income proceeds
totaled $42.8 million, including $29.1 million from fund
distributions and $13.7 million from DoubleLine, as compared with
total investment income proceeds in the prior-year quarter of $26.5
million, of which $12.9 million and $13.6 million was attributable
to fund distributions and DoubleLine, respectively. The portion of
distributable earnings attributable to our Class A units was
$0.86 and $0.68 per unit for the first quarters of 2017 and 2016,
respectively, reflecting distributable earnings per Operating Group
unit of $1.02 and $0.82, respectively, less costs borne by
Class A unitholders for professional fees and other expenses,
cash taxes attributable to the Intermediate Holding Companies, and
amounts payable pursuant to the tax receivable agreement.
Fee-related Earnings
Fee-related earnings decreased $14.2 million, or 22.8%, to $48.2
million in the first quarter of 2017, from $62.4 million in the
first quarter of 2016. The decline reflected $15.7 million of lower
management fees and $0.9 million of higher general and
administrative expense, partially offset by $2.2 million of lower
compensation and benefits expense. The portion of fee-related
earnings attributable to our Class A units was $0.28 and $0.37
per unit for the first quarters of 2017 and 2016, respectively.
The effective tax rate applicable to fee-related earnings for
the first quarters of 2017 and 2016 was 8% and 7%, respectively,
resulting from full-year effective rates of 8% and 7%,
respectively. The rate used for interim fiscal periods is based on
the estimated full-year effective tax rate, which is subject to
change as the year progresses. In general, the annual effective tax
rate increases as annual fee-related earnings increase, and vice
versa.
Capital and Liquidity
As of March 31, 2017, Oaktree had $1.0 billion of cash and U.S.
Treasury and time deposit securities, and $746 million of
outstanding debt, which included no borrowings outstanding against
its $500 million revolving credit facility. As of March 31, 2017,
Oaktree’s investments in funds and companies had a carrying value
of $1.5 billion, with the 20% investment in DoubleLine carried at
$26 million based on cost, as adjusted under the equity method of
accounting. Accrued incentives (fund level), net of associated
compensation expense, represented an additional $969 million as of
that date.
Distribution
A distribution attributable to the first quarter of 2017 was
declared of $0.71 per Class A unit. This distribution will be
paid on May 12, 2017 to Class A unitholders of record at the
close of business on May 8, 2017.
Conference Call
Oaktree will host a conference call to discuss its first quarter
2017 results today at 11:00 a.m. Eastern Time / 8:00 a.m. Pacific
Time. The conference call may be accessed by dialing
(844) 824-3833 (U.S. callers) or +1 (412) 317-5102
(non-U.S. callers), participant password OAKTREE. Alternatively, a
live webcast of the conference call can be accessed through the
Unitholders – Investor Relations section of the Oaktree website,
http://ir.oaktreecapital.com/.
For those individuals unable to listen to the live broadcast of
the conference call, a replay will be available for 30 days on
Oaktree’s website, or by dialing (877) 344-7529 (U.S. callers) or
+1 (412) 317-0088 (non-U.S. callers), access code 10103753,
beginning approximately one hour after the broadcast.
About Oaktree
Oaktree is a leader among global investment managers
specializing in alternative investments, with $100 billion in
assets under management as of March 31, 2017. The firm emphasizes
an opportunistic, value-oriented and risk-controlled approach to
investments in distressed debt, corporate debt (including high
yield debt and senior loans), control investing, convertible
securities, real estate and listed equities. Headquartered in Los
Angeles, the firm has over 900 employees and offices in 18 cities
worldwide. For additional information, please visit Oaktree’s
website at www.oaktreecapital.com.
Investor Relations Website
Investors and others should note that Oaktree uses the
Unitholders – Investor Relations section of its corporate website
to announce material information to investors and the marketplace.
While not all of the information that Oaktree posts on its
corporate website is of a material nature, some information could
be deemed to be material. Accordingly, Oaktree encourages
investors, the media, and others interested in Oaktree to review
the information that it shares on its corporate website at the
Unitholders – Investor Relations section of the Oaktree website,
http://ir.oaktreecapital.com/. Information contained on, or
available through, our website is not incorporated by reference
into this document.
Forward-Looking Statements
This release contains forward-looking statements within the
meaning of Section 27A of the U.S. Securities Act of 1933, as
amended, and Section 21E of the U.S. Securities Exchange Act
of 1934, as amended, which reflect the current views of Oaktree
Capital Group, LLC (“OCG”), with respect to, among other things,
our future results of operations and financial performance. In some
cases, you can identify forward-looking statements by words such as
“anticipate,” “approximately,” “believe,” “continue,” “could,”
“estimate,” “expect,” “intend,” “may,” “outlook,” “plan,”
“potential,” “predict,” “seek,” “should,” “will” and “would” or the
negative version of these words or other comparable or similar
words. These statements identify prospective information. Important
factors could cause actual results to differ, possibly materially,
from those indicated in these statements. Forward-looking
statements are based on our beliefs, assumptions and expectations
of our future performance, taking into account all information
currently available to us. Such forward-looking statements are
subject to risks and uncertainties and assumptions relating to our
operations, financial results, financial condition, business
prospects, growth strategy and liquidity, including, but not
limited to, changes in our anticipated revenue and income, which
are inherently volatile; changes in the value of our investments;
the pace of our raising of new funds; changes in assets under
management; the timing and receipt of, and impact of taxes on,
carried interest; distributions from and liquidation of our
existing funds; the amount and timing of distributions on our Class
A units; changes in our operating or other expenses; the degree to
which we encounter competition; and general political, economic and
market conditions. The factors listed in the item captioned “Risk
Factors” in our Annual Report on Form 10-K for the year ended
December 31, 2016 filed with the SEC on March 1, 2017, which is
accessible on the SEC’s website at www.sec.gov, provide examples of
risks, uncertainties and events that may cause our actual results
to differ materially from the expectations described in our
forward-looking statements.
Forward-looking statements speak only as of the date the
statements are made. Except as required by law, we do not undertake
any obligation to publicly update or review any forward-looking
statement, whether as a result of new information, future
developments or otherwise.
This release and its contents do not constitute and should not
be construed as (a) a recommendation to buy, (b) an offer
to buy or solicitation of an offer to buy, (c) an offer to
sell or (d) advice in relation to, any securities of OCG or
securities of any Oaktree investment fund.
Consolidated Statements of Operations
Data (GAAP basis)
Three Months EndedMarch
31,
2017 2016 (in thousands, except per unit
data) Revenues: Management fees $ 180,928 $ 198,553 Incentive
income 108,657 55,937 Total revenues 289,585
254,490 Expenses: Compensation and benefits (104,487 )
(108,405 ) Equity-based compensation (14,953 ) (13,896 ) Incentive
income compensation (34,608 ) (9,807 ) Total compensation and
benefits expense (154,048 ) (132,108 ) General and administrative
(32,219 ) (47,831 ) Depreciation and amortization (3,824 ) (4,161 )
Consolidated fund expenses (2,471 ) (1,084 ) Total expenses
(192,562 ) (185,184 ) Other income (loss): Interest expense (48,770
) (27,705 ) Interest and dividend income 47,960 36,270 Net realized
gain (loss) on consolidated funds’ investments (1,872 ) 3,401 Net
change in unrealized appreciation (depreciation) on consolidated
funds’ investments 24,678 (20,672 ) Investment income 50,451 29,447
Other income (expense), net 4,663 5,801 Total other
income 77,110 26,542 Income before income taxes
174,133 95,848 Income taxes (12,302 ) (12,680 ) Net income 161,831
83,168 Less: Net (income) loss attributable to non-controlling
interests in consolidated funds (9,692 ) 4,944 Net income
attributable to non-controlling interests in consolidated
subsidiaries (97,224 ) (60,034 ) Net income attributable to Oaktree
Capital Group, LLC $ 54,915 $ 28,078 Distributions
declared per Class A unit $ 0.63 $ 0.47 Net income
per unit (basic and diluted): Net income per Class A unit $ 0.87
$ 0.45 Weighted average number of Class A units
outstanding 63,022 61,894
Segment Financial Data
As of or for the Three
MonthsEnded March 31,
2017 2016 Segment Statements of Operations
Data: (1)
(in thousands, except per unit data or as
otherwise indicated) Revenues: Management fees $ 185,565 $
201,270 Incentive income 147,193 96,588 Investment income 58,429
15,077 Total revenues 391,187 312,935
Expenses: Compensation and benefits (102,136 ) (104,270 )
Equity-based compensation (11,651 ) (10,703 ) Incentive income
compensation (73,144 ) (49,749 ) General and administrative (32,409
) (31,481 ) Depreciation and amortization (2,823 ) (3,160 ) Total
expenses (222,163 ) (199,363 ) Adjusted net income before interest
and other income (expense) 169,024 113,572
Interest expense, net of interest income
(2)
(6,971 ) (8,682 ) Other income (expense), net 41 135
Adjusted net income $ 162,094 $ 105,025
Adjusted net income-OCG $ 54,119 $ 30,160 Adjusted net income per
Class A unit 0.86 0.49 Distributable earnings 157,099 125,725
Distributable earnings-OCG 54,306 41,843 Distributable earnings per
Class A unit 0.86 0.68 Fee-related earnings 48,197 62,359
Fee-related earnings-OCG 17,814 23,059 Fee-related earnings per
Class A unit 0.28 0.37 Economic net income 184,581 41,196 Economic
net income-OCG 64,438 7,803 Economic net income per Class A unit
1.02 0.13 Weighted average number of Operating Group units
outstanding 154,666 153,808 Weighted average number of Class A
units outstanding 63,022 61,894
Operating Metrics:
Assets under management (in millions): Assets under management $
100,313 $ 96,874 Management fee-generating assets under management
79,329 79,908 Incentive-creating assets under management 32,337
31,205
Uncalled capital commitments (3)
21,770 21,400 Accrued incentives (fund level): (4) Incentives
created (fund level) 201,518 (46,270 ) Incentives created (fund
level), net of associated incentive income compensation expense
96,536 (16,991 ) Accrued incentives (fund level) 2,068,422
1,442,359 Accrued incentives (fund level), net of associated
incentive income compensation expense 969,029 747,711 (1)
Our business is comprised of one segment, our investment
management segment, which consists of the investment management
services that we provide to our clients. The components of revenues
and expenses used in determining ANI do not give effect to the
consolidation of the funds that we manage. Segment revenues include
investment income (loss) that is classified in other income (loss)
in the GAAP-basis statements of operations. Segment revenues and
expenses also reflect Oaktree's proportionate economic interest in
Highstar, whereby amounts received for contractually reimbursable
costs are classified for segment reporting as expenses and under
GAAP as other income. In addition, ANI excludes the effect of (a)
non-cash equity-based compensation expense related to unit grants
made before our initial public offering, (b) acquisition-related
items, including amortization of intangibles and changes in the
contingent consideration liability, (c) differences arising from
OCGH equity value units (“EVUs”) that are classified as liability
awards under GAAP but as equity awards for segment reporting, (d)
income taxes, (e) other income or expenses applicable to OCG or its
Intermediate Holding Companies, and (f) the adjustment for
non-controlling interests. Moreover, third-party placement costs
associated with closed-end funds under GAAP are expensed as
incurred, but for ANI are capitalized and amortized as general and
administrative expense in proportion to the associated management
fee stream. Gains and losses resulting from foreign-currency
transactions and hedging activities under GAAP are recognized as
general and administrative expense whether realized or unrealized
in the current period, but for ANI unrealized gains and losses from
foreign-currency hedging activities are deferred until realized, at
which time they are included in the same revenue or expense line
item as the underlying exposure that was hedged. Additionally, for
ANI, foreign-currency transaction gains and losses are included in
other income (expense), net. Incentive income and incentive income
compensation expense are included in ANI when the underlying fund
distributions are known or knowable as of the respective quarter
end, which may be later than the time at which the same revenue or
expense is included in the GAAP-basis statements of operations, for
which the revenue standard is fixed or determinable and the expense
standard is probable and reasonably estimable. CLO investments are
carried at fair value for GAAP reporting, whereas for segment
reporting they are carried at amortized cost, subject to any
impairment charges. Investment income on CLO investments is
recognized in ANI when cash distributions are received. Cash
distributions are allocated between income and return of capital
based on the effective yield method. ANI is calculated at the
Operating Group level. For additional information regarding the
reconciling adjustments discussed above, please see Exhibit A. (2)
Interest income was $1.7 million and $1.3 million for the three
months ended March 31, 2017 and 2016, respectively. (3) Uncalled
capital commitments represent undrawn capital commitments by
partners (including Oaktree as general partner) of our closed-end
funds through their investment periods and certain evergreen funds.
If a fund distributes capital during its investment period, that
capital is typically subject to possible recall, in which case it
is included in uncalled capital commitments. (4) Our funds record
as accrued incentives the incentive income that would be paid to us
if the funds were liquidated at their reported values as of the
date of the financial statements. Incentives created (fund level)
refers to the gross amount of potential incentives generated by the
funds during the period. We refer to the amount of incentive income
recognized as revenue by us as segment incentive income. Amounts
recognized by us as incentive income are no longer included in
accrued incentives (fund level), the term we use for remaining
fund-level accruals. Incentives created (fund level), incentive
income and accrued incentives (fund level) are presented gross,
without deduction for direct compensation expense that is owed to
our investment professionals associated with the particular fund
when we earn the incentive income. We call that charge “incentive
income compensation expense.” Incentive income compensation expense
varies by the investment strategy and vintage of the particular
fund, among many factors.
Operating Metrics
We monitor certain operating metrics that are either common to
the alternative asset management industry or that we believe
provide important data regarding our business. As described below,
these operating metrics include AUM, management fee-generating AUM,
incentive-creating AUM, incentives created (fund level), accrued
incentives (fund level) and uncalled capital commitments.
Assets Under Management As of March
31,2017 December 31,2016
March 31,2016 (in millions) Assets Under
Management: Closed-end funds $ 59,848 $ 60,104 $ 59,081
Open-end funds 35,125 35,105 33,008 Evergreen funds 5,340
5,295 4,785 Total $ 100,313 $ 100,504 $
96,874
Three Months EndedMarch
31,
Twelve Months EndedMarch
31,
2017 2016 2017 2016 (in
millions) Change in Assets Under Management: Beginning
balance $ 100,504 $ 97,359 $ 96,874 $ 99,903 Closed-end funds:
Capital commitments/other (1)
1,094 866 6,092 9,294
Distributions for a realization
event/other (2)
(2,553 ) (2,014 ) (8,286 ) (5,302 )
Change in uncalled capital commitments for
funds entering or in liquidation (3)
31 — (1,053 ) (527 ) Foreign-currency translation 106 341 (411 )
411
Change in market value (4)
870 365 4,259 (1,354 ) Change in applicable leverage 196 93 166 300
Open-end funds: Contributions 2,007 735 6,716 3,944 Redemptions
(2,977 ) (1,771 ) (8,254 ) (7,602 ) Foreign-currency translation
107 222 (245 ) 244
Change in market value (4)
883 620 3,900 (1,918 ) Evergreen funds: Contributions or new
capital commitments 7 66 200 211 Redemptions or distributions/other
(106 ) (59 ) (428 ) (404 ) Foreign-currency translation (2 ) (3 )
(1 ) (2 )
Change in market value (4)
146 54 784 (324 ) Ending balance $ 100,313
$ 96,874 $ 100,313 $ 96,874 (1)
These amounts represent capital commitments, as well as the
aggregate par value of collateral assets and principal cash related
to new CLO formations. (2) These amounts represent distributions
for a realization event, tax-related distributions, reductions in
the par value of collateral assets and principal cash resulting
from the repayment of debt as return of principal by CLOs, and
recallable distributions at the end of the investment period. (3)
The change in uncalled capital commitments reflects declines
attributable to funds entering their liquidation periods, as well
as capital contributions to funds in their liquidation periods for
deferred purchase obligations or other reasons. (4) The change in
market value reflects the change in NAV of our funds, less
management fees and other fund expenses, as well as changes in the
aggregate par value of collateral assets and principal cash held by
CLOs.
Management Fee-generating AUM As
of March 31,2017 December
31,2016 March 31,2016 Management
Fee-generating Assets Under Management: (in millions)
Closed-end funds: Senior Loans $ 7,721 $ 7,504 $ 7,184 Other
closed-end funds 32,340 32,990 35,956 Open-end funds 34,930 35,034
32,939 Evergreen funds 4,338 4,239 3,829 Total
$ 79,329 $ 79,767 $ 79,908
Three Months EndedMarch
31,
Twelve Months EndedMarch
31,
2017 2016 2017 2016 Change in
Management Fee-generating Assets Under Management: (in
millions) Beginning balance $ 79,767 $ 78,897 $ 79,908 $
78,497 Closed-end funds:
Capital commitments to funds that pay fees
based on committed capital/other (1)
17 686 1,456 7,433 Capital drawn by funds that pay fees based on
drawn capital, NAV or cost basis 327 201 1,516 1,112
Change attributable to funds in
liquidation (2)
(954 ) (381 ) (4,735 ) (2,332 ) Change in uncalled capital
commitments for funds entering or in liquidation that pay fees
based on committed capital (3) — — (881 ) 26
Distributions by funds that pay fees based
on NAV/other (4)
(165 ) (113 ) (688 ) (385 ) Foreign-currency translation 82 229
(389 ) 253
Change in market value (5)
88 85 430 (226 ) Change in applicable leverage 172 144 212 613
Open-end funds: Contributions 1,882 735 6,542 3,942 Redemptions
(2,971 ) (1,772 ) (8,223 ) (7,602 ) Foreign-currency translation
107 222 (245 ) 245 Change in market value 878 619 3,917 (1,903 )
Evergreen funds: Contributions or capital drawn by funds that pay
fees based on drawn capital or NAV 59 337 255 864 Redemptions or
distributions (90 ) (28 ) (475 ) (309 ) Change in market value 130
47 729 (320 ) Ending balance $ 79,329 $
79,908 $ 79,329 $ 79,908 (1)
These amounts represent capital commitments to funds that pay fees
based on committed capital, as well as the aggregate par value of
collateral assets and principal cash related to new CLO formations.
(2) These amounts represent the change for funds that pay fees
based on the lesser of funded capital or cost basis during the
liquidation period, as well as recallable distributions at the end
of the investment period. For most closed-end funds, management
fees are charged during the liquidation period on the lesser of (a)
total funded capital or (b) the cost basis of assets remaining in
the fund, with the cost basis of assets generally calculated by
excluding cash balances. Thus, changes in fee basis during the
liquidation period are not dependent on distributions made from the
fund; rather, they are tied to the cost basis of the fund’s
investments, which typically declines as the fund sells assets. (3)
The change in uncalled capital commitments reflects declines
attributable to funds entering their liquidation periods, as well
as capital contributions to funds in their liquidation periods for
deferred purchase obligations or other reasons. (4) These amounts
represent distributions by funds that pay fees based on NAV, as
well as reductions in the par value of collateral assets and
principal cash resulting from the repayment of debt as return of
principal by CLOs. (5) The change in market value reflects certain
funds that pay management fees based on NAV and leverage, as
applicable, as well as changes in the aggregate par value of
collateral assets and principal cash held by CLOs.
As of March 31,2017 December
31,2016 March 31,2016
Reconciliation of Assets Under Management to Management
Fee-generating Assets Under Management: (in millions)
Assets under management $ 100,313 $ 100,504 $ 96,874 Difference
between assets under management and committed capital or the lesser
of funded capital or cost basis for applicable closed-end funds
(1). (3,773 ) (4,183 ) (1,829 ) Undrawn capital commitments to
closed-end funds that have not yet commenced their investment
periods (10,542 ) (10,367 ) (8,143 ) Undrawn capital commitments to
funds for which management fees are based on drawn capital, NAV or
cost basis (2,593 ) (3,109 ) (4,095 )
Oaktree’s general partner investments in
management fee-generating funds
(1,928 ) (1,822 ) (1,727 ) Funds that are no longer paying
management fees and co-investments that pay no management fees (2)
(2,148 ) (1,256 ) (1,172 ) Management fee-generating assets under
management $ 79,329 $ 79,767 $ 79,908
(1) This difference is not applicable to closed-end funds
that pay management fees based on NAV or leverage. (2) This
includes certain accounts that pay fees intended to offset
Oaktree’s costs related to the accounts.
The period-end weighted average annual management fee rates
applicable to the respective management fee-generating AUM balances
above are set forth below.
As of Weighted Average Annual Management Fee
Rates: March 31,2017 December
31,2016 March 31,2016 Closed-end
funds: Senior Loans 0.50 % 0.50 % 0.50 % Other closed-end funds
1.50 1.50 1.52 Open-end funds 0.45 0.46 0.47 Evergreen funds 1.22
1.22 1.33 Overall 0.92 0.93 0.98
Incentive-creating AUM
As of March 31,2017 December
31,2016 March 31,2016
Incentive-creating Assets Under Management: (in
millions) Closed-end funds $ 28,943 $ 30,292 $ 29,251 Evergreen
funds 3,394 3,335 1,954 Total $ 32,337 $
33,627 $ 31,205
Accrued Incentives (Fund Level) and
Incentives Created (Fund Level)
As of or for the Three MonthsEnded March 31,
2017 2016 Accrued Incentives (Fund
Level): (in thousands) Beginning balance $ 2,014,097
$ 1,585,217 Incentives created (fund level):
Closed-end funds 190,021 (46,845 ) Evergreen funds 11,497
575 Total incentives created (fund level) 201,518
(46,270 ) Less: segment incentive income recognized by us (147,193
) (96,588 ) Ending balance $ 2,068,422 $ 1,442,359
Accrued incentives (fund level), net of associated incentive income
compensation expense $ 969,029 $ 747,711
Uncalled Capital Commitments
Uncalled capital commitments were $21.8 billion as of March 31,
2017, $20.8 billion as of December 31, 2016 and $21.4 billion as of
March 31, 2016.
Segment Results
Our business is comprised of one segment, our investment
management segment, which consists of the investment management
services that we provide to our clients.
Adjusted Net Income
Adjusted net income and adjusted net income-OCG, as well as per
unit data, are set forth below:
Three MonthsEnded March
31,
2017 2016 (in thousands, except per unit
data) Revenues: Management fees $ 185,565 $ 201,270 Incentive
income 147,193 96,588 Investment income 58,429 15,077
Total revenues 391,187 312,935 Expenses: Compensation
and benefits (102,136 ) (104,270 ) Equity-based compensation
(11,651 ) (10,703 ) Incentive income compensation (73,144 ) (49,749
) General and administrative (32,409 ) (31,481 ) Depreciation and
amortization (2,823 ) (3,160 ) Total expenses (222,163 ) (199,363 )
Adjusted net income before interest and other income (expense)
169,024 113,572 Interest expense, net of interest income (6,971 )
(8,682 ) Other income (expense), net 41 135 Adjusted
net income 162,094 105,025 Adjusted net income attributable to OCGH
non-controlling interest (96,046 ) (62,762 ) Non-Operating Group
expenses (232 ) (264 ) Adjusted net income-OCG before income taxes
65,816 41,999 Income taxes-OCG (11,697 ) (11,839 ) Adjusted net
income-OCG $ 54,119 $ 30,160 Adjusted net income per
Class A unit $ 0.86 $ 0.49 Weighted average number of
Class A units outstanding 63,022 61,894
Management Fees
Three Months EndedMarch
31,
2017 2016 (in thousands) Management
fees: Closed-end funds $ 131,708 $ 148,251 Open-end funds 40,144
38,413 Evergreen funds 13,713 14,606 Total management fees $
185,565 $ 201,270
Investment Income
Three Months EndedMarch
31,
2017 2016 Income (loss) from investments in
funds:
(in thousands) Oaktree funds: Corporate Debt $ 8,912
$ (13,543 ) Convertible Securities 445 (944 ) Distressed Debt
19,841 8,891 Control Investing 3,422 (1,447 ) Real Estate 3,948
3,105 Listed Equities 3,687 3,488 Non-Oaktree funds 2,280 420
Income from investments in companies 15,894 15,107
Total investment income $ 58,429 $ 15,077
Distributable Earnings and Distribution Calculation
Distributable earnings and the calculation of distributions are
set forth below:
Three Months EndedMarch
31,
2017 2016 Distributable Earnings:
(in thousands, except per unit data) Revenues: Management
fees $ 185,565 $ 201,270 Incentive income 147,193 96,588
Receipts of investment income from funds
(1)
29,095 12,923
Receipts of investment income from
companies
13,709 13,558 Total distributable earnings revenues
375,562 324,339 Expenses: Compensation and benefits
(102,136 ) (104,270 ) Incentive income compensation (73,144 )
(49,749 ) General and administrative (32,409 ) (31,481 )
Depreciation and amortization (2,823 ) (3,160 ) Total expenses
(210,512 ) (188,660 ) Other income (expense): Interest expense, net
of interest income (6,971 ) (8,682 ) Operating Group income taxes
(1,021 ) (1,407 ) Other income (expense), net 41 135
Distributable earnings $ 157,099 $ 125,725
Distribution Calculation: Operating Group distribution with
respect to the period $ 132,595 $ 108,545 Distribution per
Operating Group unit $ 0.85 $ 0.70 Adjustments per Class A unit:
Distributable earnings-OCG income tax expense (0.05 ) (0.06 ) Tax
receivable agreement (0.08 ) (0.08 ) Non-Operating Group expenses
(0.01 ) (0.01 )
Distribution per Class A unit (2)
$ 0.71 $ 0.55 (1) This adjustment
characterizes a portion of the distributions received from funds as
receipts of investment income or loss. In general, the income or
loss component of a fund distribution is calculated by multiplying
the amount of the distribution by the ratio of our investment’s
undistributed income or loss to our remaining investment balance.
In addition, if the distribution is made during the investment
period, it is generally not reflected in distributable earnings
until after the investment period ends. Additionally, any
impairment charges on our CLO investments included in ANI are, for
distributable earnings purposes, amortized over the remaining
investment period of the respective CLO to align with the timing of
expected cash flows. (2) With respect to the quarter ended March
31, 2017, a distribution was announced on April 27, 2017 and is
payable on May 12, 2017.
Units Outstanding
Three Months EndedMarch
31,
2017 2016 (in thousands) Weighted
Average Units: OCGH 91,644 91,914 Class A 63,022 61,894
Total 154,666 153,808
Units Eligible for Fiscal Period
Distribution: OCGH 91,793 92,445 Class A 64,201 62,619
Total 155,994 155,064
Segment Statements of Financial
Condition
As of
March 31,2017
December 31,2016 March
31,2016 (in thousands) Assets: Cash and
cash-equivalents $ 362,889 $ 291,470 $ 342,079 U.S. Treasury and
time deposit securities 596,872 757,578 618,899 Corporate
investments 1,547,125 1,480,928 1,352,362 Deferred tax assets
404,740 404,614 425,904 Receivables and other assets 348,643
379,124 397,416 Total assets $ 3,260,269 $ 3,313,714
$ 3,136,660
Liabilities and Capital: Liabilities:
Accounts payable and accrued expenses $ 268,824 $ 353,451 $ 253,305
Due to affiliates 343,840 346,543 356,851 Debt obligations 746,117
745,897 845,736 Total liabilities 1,358,781
1,445,891 1,455,892 Capital: OCGH non-controlling interest
in consolidated subsidiaries 1,065,053 1,053,109 945,519
Unitholders’ capital attributable to Oaktree Capital Group, LLC
836,435 814,714 735,249 Total capital 1,901,488
1,867,823 1,680,768 Total liabilities and capital $
3,260,269 $ 3,313,714 $ 3,136,660
Corporate Investments
As of March 31,2017 December
31,2016 March 31,2016 Investments
in funds:
(in thousands) Oaktree funds: Corporate Debt $
493,478 $ 422,330 $ 381,456 Convertible Securities 27,180 1,735
1,579 Distressed Debt 404,317 426,108 379,507 Control Investing
258,064 265,919 258,753 Real Estate 140,569 141,234 127,731 Listed
Equities 122,572 116,988 111,185 Non-Oaktree funds 70,983 71,682
66,321 Investments in companies 29,962 34,932 25,830
Total corporate investments $ 1,547,125 $ 1,480,928 $
1,352,362
Fund Data
Information regarding our closed-end, open-end and evergreen
funds, together with benchmark data where applicable, is set forth
below. For our closed-end and evergreen funds, no benchmarks are
presented in the tables as there are no known comparable benchmarks
for these funds’ investment philosophy, strategy and
implementation.
Closed-end Funds
As of March 31, 2017 Investment
Period
Total Committed Capital
% Invested (1) %
Drawn (2)
Fund Net Income Since Inception Distri-
butions Since Inception
Net Asset Value Manage-
ment Fee-gener-
ating AUM
Oaktree Segment Incentive Income Recog-
nized
Accrued Incentives (Fund Level) (3)
Unreturned Drawn Capital Plus Accrued Preferred Return
(4) IRR Since Inception (5)
Multiple of Drawn Capital (6) Start Date
End Date
Gross
Net (in millions) Distressed Debt
Oaktree Opportunities Fund Xb (7) TBD — $ 8,872 — % — % $ — $ — $ —
$ — $ — $ — $ — n/a n/a n/a Oaktree Opportunities Fund X (7) Jan.
2016 Jan. 2019 3,603 68 38 502 43 1,514 3,335 — 97 1,103 57.7 %
35.6 % 1.7x Oaktree Opportunities Fund IX Jan. 2014 Jan. 2017 5,066
nm 100 190 409 4,847 4,868 — — 5,936 4.0 1.3 1.1 Oaktree
Opportunities Fund VIIIb Aug. 2011 Aug. 2014 2,692 nm 100 547 1,464
1,775 2,001 52 — 2,268 7.3 4.3 1.3 Special Account B Nov. 2009 Nov.
2012 1,031 nm 100 548 1,240 412 399 16 — 347 13.3 10.9 1.6 Oaktree
Opportunities Fund VIII Oct. 2009 Oct. 2012 4,507 nm 100 2,286
5,087 1,707 1,502 165 280 1,232 12.7 8.7 1.6 Special Account A Nov.
2008 Oct. 2012 253 nm 100 303 487 69 57 46 14 — 28.1 22.8 2.2 OCM
Opportunities Fund VIIb May 2008 May 2011 10,940 nm 90 8,893 17,633
1,104 996 1,523 205 — 21.9 16.6 2.0 OCM Opportunities Fund VII Mar.
2007 Mar. 2010 3,598 nm 100 1,474 4,697 375 574 85 — 503 10.3 7.6
1.5 OCM Opportunities Fund VI Jul. 2005 Jul. 2008 1,773 nm 100
1,294 3,064 3 — 252 1 — 11.9 8.8 1.8 OCM Opportunities Fund V Jun.
2004 Jun. 2007 1,179 nm 100 958 2,103 34 — 180 7 — 18.5 14.1 1.9
Legacy funds (8)
Various Various 9,543 nm 100 8,204 17,695 52 — 1,113 10 — 24.2
19.3 1.9 22.0 % 16.2 %
Real Estate
Opportunities Oaktree Real Estate Opportunities Fund VII
(9)(10) Jan. 2016 Jan. 2020 $ 2,920 48 % 10 % $ 42 $ 94 $ 240 $
2,496 $ — $ 8 $ 206 nm nm 1.4x Oaktree Real Estate Opportunities
Fund VI Aug. 2012 Aug. 2016 2,677 nm 100 1,121 1,171 2,627 2,006 22
195 2,172 16.4 % 10.9 % 1.5 Oaktree Real Estate Opportunities Fund
V Mar. 2011 Mar. 2015 1,283 nm 100 951 1,649 585 294 73 108 126
17.5 13.0 1.8 Special Account D Nov. 2009 Nov. 2012 256 nm 100 191
326 129 64 4 15 63 14.8 12.8 1.8 Oaktree Real Estate Opportunities
Fund IV Dec. 2007 Dec. 2011 450 nm 100 395 753 92 64 57 18 — 16.1
11.0 2.0 OCM Real Estate Opportunities Fund III Sep. 2002 Sep. 2005
707 nm 100 613 1,307 13 — 119 3 — 15.3 11.3 2.0
Legacy funds (8)
Various Various 1,634 nm 99 1,399 3,009 — — 112 — — 15.2
12.0 1.9 15.5 % 11.9 %
Real Estate Debt Oaktree Real
Estate Debt Fund II (9)(11) Mar. 2017 Mar. 2020 $ 765 10 % 2 % $ (2
) $ — $ 14 $ 71 $ — $ — $ 16 nm nm 1.0x Oaktree Real Estate Debt
Fund Sep. 2013 Oct. 2016 1,112 nm 58 116 430 327 623 6 11 234 26.7
% 20.0 % 1.3
Oaktree PPIP Fund (12)
Dec. 2009 Dec. 2012 2,322 nm 48 457 1,570 — — 47 — — 28.2 n/a 1.4
Real Estate Value-Add Special Account G (9)(11) Oct.
2016 Oct. 2020 $ 615 40 % 40 % $ 3 $ 4 $ 242 $ 237 $ — $ —
$
245 nm nm 1.0x
European Principal (13) Oaktree
European Principal Fund IV (7)(9)(14) TBD — € 1,104 15 % 3 % € (6 )
€ — € 25 € 240 € — € —
€
31
nm nm 1.0x Oaktree European Principal Fund III Nov. 2011 Nov. 2016
€ 3,164 nm 85 € 1,846 € 648 € 3,947 € 2,682 € — € 358
€
2,898
20.3 % 13.6 % 1.8 OCM European Principal Opportunities Fund II Dec.
2007 Dec. 2012 € 1,759 nm 100 € 441 € 1,867 € 306 € 779 € 29 € — €
675 8.8 4.8 1.4 OCM European Principal Opportunities Fund Mar. 2006
Mar. 2009 $ 495 nm 96 $ 454 $ 927 $ — $ — $ 87 $ — $ — 11.7
8.9 2.1 13.7 % 9.2 %
As of March 31,
2017 Investment Period
Total Committed
Capital
% Invested (1)
%Drawn(2)
Fund Net Income Since
Inception
Distri-butions Since
Inception
Net AssetValue
Manage-ment
Fee-gener-ating AUM
Oaktree
Segment
Incentive Income
Recog-
nized
AccruedIncentives
(Fund Level) (3)
UnreturnedDrawn Capital
Plus Accrued Preferred Return
(4)
IRR Since Inception
(5)
Multiple of Drawn
Capital (6)
Start Date End Date
Gross
Net (in millions) European Private Debt
(13) Oaktree European Capital Solutions Fund (7)(9)(11)
Dec. 2015
Dec. 2018 € 703 37 % 31 % € 8 € 14 € 211 € 189 € — € — € 211 nm nm
1.1x Oaktree European Dislocation Fund Oct. 2013 Oct. 2016 € 294 nm
57 € 35 € 153 € 64 € 91 € 2 € 3 € 45 21.6 % 15.4 % 1.2 Special
Account E Oct. 2013 Apr. 2015 € 379 nm 69 € 58 € 248 € 71 € 100 € 4
€ 5 € 52 14.2 11.0 1.2 15.4 % 11.4 %
Special
Situations (15) Oaktree Special Situations Fund (7) Nov.
2015 Nov. 2018 $ 1,377 51 % 21 % $ 92 $ 86 $ 297 $ 1,216 $ — $ 18 $
229 49.5 % 24.4 % 1.5x Other funds: Oaktree Principal Fund V Feb.
2009 Feb. 2015 $ 2,827 nm 91 % $ 457 $ 1,592 $ 1,451 $ 1,695 $ 50 $
— $ 2,062 7.9 % 3.6 % 1.3x Special Account C Dec. 2008 Feb. 2014
505 nm 91 208 40 263 283 21 — 260 11.3 8.1 1.6 OCM Principal
Opportunities Fund IV Oct. 2006 Oct. 2011 3,328 nm 100 2,904 4,439
1,793 538 22 545 882 12.4 8.9 2.0 Legacy funds (8). Various Various
3,701 nm 100 2,719 6,397 23 — 236 4 — 14.4 11.1 1.8
13.1 % 9.4 %
Power Opportunities Oaktree Power Opportunities
Fund IV (9) Nov. 2015 Nov. 2020 $ 1,106 47 % 43 % $ 13 $ 1 $ 489 $
1,078 $ — $ — $ 500 nm nm 1.1x Oaktree Power Opportunities Fund III
Apr. 2010 Apr. 2015 1,062 nm 66 413 579 532 418 24 55 310 22.3 %
13.9 % 1.7 OCM/GFI Power Opportunities Fund II Nov. 2004 Nov. 2009
1,021 nm 53 1,446 1,982 5 — 100 — — 76.1 58.8 3.8 OCM/GFI Power
Opportunities Fund Nov. 1999 Nov. 2004 449 nm 85 251 634 — — 23 — —
20.1 13.1 1.8 34.6 % 26.4 %
Infrastructure
Investing Oaktree Infrastructure Fund (16) TBD — $ 409 — % — %
$ — $ — $ — $ — $ — $ — $ — n/a n/a
n/a
Highstar Capital IV (17)
Nov. 2010 Nov. 2016 2,000 nm 100 438 473 2,043 1,317 — 4 2,087 14.0
% 8.6 % 1.4x
U.S. Private Debt (18) Oaktree
Mezzanine Fund IV (11) Oct. 2014 Oct. 2019 $ 852 58 % 53 % $ 45 $ 3
$ 465 $ 408 $ — $ 7 $ 456 12.4 % 8.6 % 1.1x
Oaktree Mezzanine Fund III (19)
Dec. 2009 Dec. 2014 1,592 nm 89 409 1,451 381 376 15 23 341 15.1
10.4 / 8.6
1.4
OCM Mezzanine Fund II Jun. 2005 Jun. 2010 1,251 nm 88 507 1,504 110
— — — 157 11.1 7.6 1.6
OCM Mezzanine Fund (20)
Oct. 2001 Oct. 2006 808 nm 96 302 1,075 — — 38 — — 15.4 10.8
/ 10.5 1.5 13.1 % 8.8 %
Emerging Markets Opportunities
Oaktree Emerging Market Opportunities Fund (21)
Sep. 2013
Sep. 2017 $ 384 75 % 75 % $ 72 $ 1 $ 360 $ 279 $ — $ 13 $ 336 15.0
% 9.6 % 1.3x Special Account F
Jan. 2014
Jan. 2018 253 96 96 49 83 208 206 — 10 191 14.2
9.8
1.2
31,766
(13)
2,042
(13)
14.7 % 9.7 % Other (22) 7,811 6 Total (23) $ 39,577
$ 2,048 (1) For our incentive-creating
closed-end funds in their investment periods, this percentage
equals invested capital divided by committed capital. Invested
capital for this purpose is the sum of capital drawn from fund
investors plus net borrowings, if any, outstanding, under a
fund-level credit facility where such borrowings were made in lieu
of drawing capital from fund investors. (2) Represents capital
drawn from fund investors divided by committed capital. The
aggregate change in drawn capital for the three months ended March
31, 2017 was $480 million. (3) Accrued incentives (fund level)
exclude Oaktree segment incentive income previously recognized. (4)
Unreturned drawn capital plus accrued preferred return reflects the
amount the fund needs to distribute to its investors as a return of
capital and a preferred return (as applicable) before Oaktree is
entitled to receive incentive income (other than tax distributions)
from the fund. (5) The internal rate of return (“IRR”) is the
annualized implied discount rate calculated from a series of cash
flows. It is the return that equates the present value of all
capital invested in an investment to the present value of all
returns of capital, or the discount rate that will provide a net
present value of all cash flows equal to zero. Fund-level IRRs are
calculated based upon the actual timing of cash
contributions/distributions to investors and the residual value of
such investor’s capital accounts at the end of the applicable
period being measured. Gross IRRs reflect returns before allocation
of management fees, expenses and any incentive allocation to the
fund’s general partner. To the extent material, gross returns
include certain transaction, advisory, directors or other ancillary
fees (“fee income”) paid directly to us in connection with our
funds’ activities (we credit all such fee income back to the
respective fund(s) so that our funds’ investors share pro rata in
the fee income’s economic benefit). Net IRRs reflect returns to
non-affiliated investors after allocation of management fees,
expenses and any incentive allocation to the fund’s general partner
. (6) Multiple of drawn capital is calculated as drawn capital plus
gross income and, if applicable, fee income before fees and
expenses divided by drawn capital. (7) Fund data include the
performance of the main fund and any associated fund-of-one
accounts, except the gross and net IRRs presented reflect only the
performance of the main fund. Certain fund-of-one accounts pay
management fees based on cost basis, rather than committed capital.
(8) Legacy funds represent certain predecessor funds within the
relevant strategy that have substantially or completely liquidated
their assets, including funds managed by certain Oaktree investment
professionals while employed at the Trust Company of the West prior
to Oaktree’s founding in 1995. When these employees joined Oaktree
upon, or shortly after, its founding, they continued to manage the
fund through the end of its term pursuant to a sub-advisory
relationship between the Trust Company of the West and Oaktree. (9)
The IRR is not considered meaningful (“nm”) as the period from the
initial capital contribution through March 31, 2017 was less than
18 months. (10) A portion of this fund pays management fees based
on drawn, rather than committed, capital. (11) Management fees
during the investment period are calculated on drawn capital or
cost basis, rather than committed capital. As a result, as of March
31, 2017 management fee-generating AUM included only that portion
of committed capital that had been drawn. (12)
Due to differences in the allocation of
income and expenses to this fund’s two primary limited partners,
the U.S. Treasury and Oaktree PPIP Private Fund, a combined net IRR
is not presented. Of the $2,322 million in capital commitments,
$1,161 million related to the Oaktree PPIP Private Fund, whose
gross and net IRR were 24.7% and 18.6%, respectively.
(13) Aggregate IRRs or totals are based on the conversion of cash
flows or amounts, respectively, from euros to USD using the March
31, 2017 spot rate of $1.07. (14) Management fees are based on
aggregate contributed capital for the period from the initial
investment date until the investment period start date, which
includes indebtedness incurred in lieu of drawn capital. (15)
Effective November 2016, the Global Principal strategy was renamed
Special Situations. The aggregate gross and net IRRs presented for
this strategy exclude the performance of Oaktree Special Situations
Fund. (16) A portion of the $409 million of commitments to Oaktree
Infrastructure Fund is subject to certain contingencies. (17) The
fund follows the American-style distribution waterfall, whereby the
general partner may receive an incentive allocation as soon as it
has returned the drawn capital and paid a preferred return on the
fund’s realized investments (i.e., on a deal-by-deal basis).
However, such cash distributions of incentives may be subject to
repayment, or clawback. As of March 31, 2017, Oaktree had not
recognized any incentive income from this fund. The accrued
incentives (fund level) amount shown for this fund represents
Oaktree’s effective 8% of the potential incentives generated by
this fund in accordance with the terms of the Highstar acquisition.
(18) Effective April 2017, the Mezzanine Finance strategy was
renamed U.S. Private Debt, and includes our Mezzanine Finance and
Direct Lending funds. (19) The fund’s partnership interests are
divided into Class A and Class B interests, with the Class A
interests having priority with respect to the distribution of
current income and disposition proceeds. The net IRR for Class A
interests was 10.4% and Class B interests was 8.6%. The combined
net IRR for Class A and Class B interests was 9.6%. (20) The fund’s
partnership interests are divided into Class A and Class B
interests, with the Class A interests having priority with respect
to the distribution of current income and disposition proceeds. The
net IRR for Class A interests was 10.8% and Class B interests was
10.5%. The combined net IRR for the Class A and Class B interests
was 10.6%. (21) In the third quarter of 2016, the investment period
for Oaktree Emerging Market Opportunities Fund was extended for a
one year period until September 2017. However, management fees
stepped down to the post-investment period basis effective October
1, 2016. (22) This includes our closed-end Senior Loan funds, CLOs,
OCM Asia Principal Opportunities Fund, a non-Oaktree fund and
certain separate accounts and co-investments. (23) The total
excludes two closed-end funds with management fee-generating AUM
aggregating $484 million as of March 31, 2017, which has been
included as part of the Strategic Credit strategy within the
evergreen funds table.
Open-end Funds
Manage-
ment Fee-gener-
ating AUM
as of
Mar. 31, 2017
Twelve Months Ended
March 31, 2017
Since Inception through March 31, 2017
Strategy Inception
Rates of Return (1) Annualized Rates of Return
(1) Sharpe Ratio Oaktree
Rele-
vantBench-
mark
Oaktree
Rele-
vantBench-
mark
OaktreeGross
Rele-vantBench-mark
Gross Net Gross Net
(in millions) U.S. High Yield Bonds 1986 $ 16,816
12.5 % 11.9 % 16.3 % 9.3 % 8.8 % 8.4 % 0.81 0.57 Global High Yield
Bonds 2010 4,592 13.9 13.3 16.2 7.5 7.0 7.1 1.15 1.11 European High
Yield Bonds 1999 1,073 10.2 9.7 11.9 8.1 7.6 6.4
0.71
0.45 U.S. Convertibles 1987 3,142 13.6 13.1 18.1 9.4 8.8 8.2 0.49
0.37 Non-U.S. Convertibles 1994 1,335 7.2 6.7 4.2 8.4 7.8 5.6 0.78
0.41 High Income Convertibles 1989 945 16.5 15.6 16.7 11.4 10.6 8.2
1.06 0.60 U.S. Senior Loans 2008 1,726 10.9 10.3 9.7 6.2 5.7 5.3
1.11 0.66 European Senior Loans 2009 1,648 6.0 5.4 6.9 8.3 7.8 9.0
1.71 1.73 Emerging Markets Equities 2011 3,380 24.5 23.5 17.2 0.4
(0.4 ) (0.7 ) 0.02 (0.04 ) Other 273 Total $ 34,930
(1)
Returns represent time-weighted rates of
return, including reinvestment of income, net of commissions and
transaction costs. The returns for Relevant Benchmarks are
presented on a gross basis.
Evergreen Funds
As of March 31, 2017 Twelve Months
Ended
March 31, 2017
Since Inception throughMarch 31, 2017
AUM
Manage-mentFee-gener-ating AUM
AccruedIncen-
tives(FundLevel)
Strategy Inception
Rates of Return (1) Annualized Rates
of Return (1)
Gross Net Gross Net
(in millions) Strategic Credit (2). 2012 $ 3,038 $
2,482 $ 5 18.5 % 14.4 % 8.7 % 6.2 % Value Opportunities 2007 1,284
1,218 — (3) 21.0 19.1 9.4 5.5 Emerging Markets Debt Total Return
(4) 2015 413 373 4 22.8 18.0 16.5 12.9 Value Equities (5) 2012 385
315 3 41.8 35.9 20.0 14.5 4,388 12 Other (6) 434 4
Restructured funds — 4 Total (2) $ 4,822 $ 20
(1)
Returns represent time-weighted rates of
return.
(2)
Includes two closed-end funds with an
aggregate $494 million and $484 million of AUM and management
fee-generating AUM, respectively.
(3)
As of March 31, 2017, the aggregate
depreciation below high-water marks previously established for
individual investors in the fund totaled approximately $57 million
for Value Opportunities.
(4)
The rates of return reflect the
performance of a composite of accounts, including a single account
with a December 2014 inception date.
(5)
Includes performance of a proprietary fund
with an initial capital commitment of $25 million since its
inception in May 2012.
(6)
Includes the Emerging Markets Absolute
Return strategy and certain evergreen separate accounts in the Real
Estate Debt and Emerging Markets Opportunities strategies.
GLOSSARY
Accrued incentives (fund level) represents the incentive
income that would be paid to us if the funds were liquidated at
their reported values as of the date of the financial statements.
Incentives created (fund level) refers to the gross amount of
potential incentives generated by the funds during the period. We
refer to the amount of accrued incentives recognized as revenue by
us as segment incentive income. Amounts recognized by us as
incentive income are no longer included in accrued incentives (fund
level), the term we use for remaining fund-level accruals.
Adjusted net income (“ANI”) is a measure of profitability
for our investment management segment. The components of revenues
(“segment revenues”) and expenses used in the determination of ANI
do not give effect to the consolidation of the funds that we
manage. Segment revenues include investment income (loss) that is
classified in other income (loss) in the GAAP-basis statements of
operations. Segment revenues and expenses also reflect Oaktree's
proportionate economic interest in Highstar, whereby amounts
received for contractually reimbursable costs are classified for
segment reporting as expenses and under GAAP as other income. In
addition, ANI excludes the effect of (a) non-cash equity-based
compensation expense related to unit grants made before our initial
public offering, (b) acquisition-related items, including
amortization of intangibles and changes in the contingent
consideration liability, (c) differences arising from equity value
units (“EVUs”) that are classified as liability awards under GAAP
but as equity awards for segment reporting, (d) income taxes,
(e) other income or expenses applicable to OCG or its
Intermediate Holding Companies, and (f) the adjustment for
non-controlling interests. Moreover, third-party placement costs
associated with closed-end funds under GAAP are expensed as
incurred, but for ANI are capitalized and amortized as general and
administrative expense in proportion to the associated management
fee stream. Gains and losses resulting from foreign-currency
transactions and hedging activities under GAAP are recognized as
general and administrative expense whether realized or unrealized
in the current period, but for ANI unrealized gains and losses from
foreign-currency hedging activities are deferred until realized, at
which time they are included in the same revenue or expense line
item as the underlying exposure that was hedged. Additionally, for
ANI, foreign-currency transaction gains and losses are included in
other income (expense), net. Incentive income and incentive income
compensation expense are included in ANI when the underlying fund
distributions are known or knowable as of the respective quarter
end, which may be later than the time at which the same revenue or
expense is included in the GAAP-basis statements of operations, for
which the revenue standard is fixed or determinable and the expense
standard is probable and reasonably estimable. CLO investments are
carried at fair value for GAAP reporting, whereas for segment
reporting they are carried at amortized cost, subject to any
impairment charges. Investment income on CLO investments is
recognized in ANI when cash distributions are received. Cash
distributions are allocated between income and return of capital
based on the effective yield method. ANI is calculated at the
Operating Group level.
Adjusted net income–OCG, or adjusted net income per Class A
unit, a non-GAAP performance measure, is calculated to provide
Class A unitholders with a measure that shows the portion of
ANI attributable to their ownership. Adjusted net income-OCG
represents ANI including the effect of (a) the OCGH
non-controlling interest, (b) other income or expenses, such
as income tax expense, applicable to OCG or its Intermediate
Holding Companies and (c) any Operating Group income taxes
attributable to OCG. Two of our Intermediate Holding Companies
incur federal and state income taxes for their shares of Operating
Group income. Generally, those two corporate entities hold an
interest in the Operating Group’s management fee-generating assets
and a small portion of its incentive and investment
income-generating assets. As a result, historically our fee-related
earnings and investment income arising from our one-fifth ownership
stake in DoubleLine generally have been subject to corporate-level
taxation, and most of our incentive income and other investment
income generally has not been subject to corporate-level taxation.
Thus, the blended effective income tax rate has generally tended to
be higher to the extent that fee-related earnings and
DoubleLine-related investment income represented a larger
proportion of our ANI. Myriad other factors affect income tax
expense and the effective income tax rate, and there can be no
assurance that this historical relationship will continue going
forward.
Assets under management (“AUM”) generally refers to the
assets we manage and equals the NAV of the assets we manage, the
leverage on which management fees are charged, the undrawn capital
that we are entitled to call from investors in our funds pursuant
to their capital commitments and the aggregate par value of
collateral assets and principal cash held by our CLOs. Our AUM
includes amounts for which we charge no management fees.
- Management fee-generating assets
under management (“management fee-generating AUM”) is a
forward-looking metric and reflects the beginning AUM on which we
will earn management fees in the following quarter. Our closed-end
funds typically pay management fees based on committed capital,
drawn capital or cost basis during the investment period, without
regard to changes in NAV, and during the liquidation period on the
lesser of (a) total funded capital or (b) the cost basis
of assets remaining in the fund. The annual management fee rate
generally remains unchanged from the investment period through the
liquidation period. Our open-end and evergreen funds typically pay
management fees based on their NAV, and our CLOs pay management
fees based on the aggregate par value of collateral assets and
principal cash held by them, as defined in the applicable CLO
indentures. As compared with AUM, management fee-generating AUM
generally excludes the following:
- Differences between AUM and either
committed capital or cost basis for most closed-end funds, other
than for closed-end funds that pay management fees based on NAV and
leverage, as applicable;
- Undrawn capital commitments to
closed-end funds that have not yet commenced their investment
periods;
- Undrawn capital commitments to funds
for which management fees are based on drawn capital, NAV or cost
basis;
- Oaktree’s general partner investments
in management fee-generating funds; and
- Funds that are no longer paying
management fees and co-investments that pay no management
fees.
- Incentive-creating assets under
management (“incentive-creating AUM”) refers to the AUM that
may eventually produce incentive income. It represents the NAV of
our funds for which we are entitled to receive an incentive
allocation, excluding CLOs and investments made by us and our
employees and directors (which are not subject to an incentive
allocation). All funds for which we are entitled to receive an
incentive allocation are included in incentive-creating AUM,
regardless of whether or not they are currently generating
incentives. Incentive-creating AUM does not include undrawn capital
commitments.
Consolidated funds refers to the funds and CLOs that
Oaktree is required to consolidate as of the respective reporting
date.
Distributable earnings is a non-GAAP performance measure
derived from our segment results that we use to measure our
earnings at the Operating Group level without the effects of the
consolidated funds for the purpose of, among other things,
assisting in the determination of equity distributions from the
Operating Group. However, the declaration, payment and
determination of the amount of equity distributions, if any, is at
the sole discretion of our board of directors, which may change our
distribution policy at any time.
Distributable earnings and distributable earnings revenues
differ from ANI in that they exclude segment investment income or
loss and include the receipt of investment income or loss from
distributions by our investments in funds and companies.
Additionally, any impairment charges on our CLO investments
included in ANI are, for distributable earnings purposes, amortized
over the remaining investment period of the respective CLO, in
order to align with the timing of expected cash flows. In addition,
distributable earnings differs from ANI in that it is net of
Operating Group income taxes and excludes non-cash equity-based
compensation expense.
Distributable earnings–OCG, or distributable earnings per
Class A unit, a non-GAAP performance measure, is calculated to
provide Class A unitholders with a measure that shows the
portion of distributable earnings attributable to their ownership.
Distributable earnings-OCG represents distributable earnings,
including the effect of (a) the OCGH non-controlling interest,
(b) expenses, such as current income tax expense, applicable
to OCG or its Intermediate Holding Companies and (c) amounts
payable under a tax receivable agreement. The income tax expense
included in distributable earnings-OCG represents the implied
current provision for income taxes calculated using an approach
similar to that which is used in calculating the income tax
provision for adjusted net income-OCG.
Economic net income (“ENI”) is a non-GAAP performance
measure that we use to evaluate the financial performance of our
segment by applying the “Method 2,” instead of the “Method 1,”
revenue recognition approach to accounting for incentive income.
ANI follows Method 1, except incentive income is recognized when
the underlying fund distributions are known or knowable as of the
respective quarter end, as opposed to the fixed or determinable
standard of Method 1. The Method 2 approach followed by ENI
recognizes incentive income as if the funds were liquidated at
their reported values as of the date of the financial statements.
ENI is computed by adjusting ANI for the change in accrued
incentives (fund level), net of associated incentive income
compensation expense, during the period.
Economic net income revenues is a non-GAAP measure applying the
Method 2, instead of the Method 1, approach to accounting for
segment incentive income, and reflects the adjustments described
above and under the definition of ANI.
Economic net income–OCG, or economic net income per Class A
unit, a non-GAAP performance measure, is calculated to provide
Class A unitholders with a measure that shows the portion of
ENI attributable to their ownership. Economic net income-OCG
represents ENI, including the effect of (a) the OCGH
non-controlling interest, (b) other income or expenses, such
as income tax expense, applicable to OCG or its Intermediate
Holding Companies and (c) any Operating Group income taxes
attributable to OCG. The income tax expense included in economic
net income-OCG represents the implied provision for income taxes
calculated using an approach similar to that which is used in
calculating the income tax provision for adjusted net
income-OCG.
Equity value units (“EVUs”) represent special limited
partnership units in Oaktree Capital Group Holdings, L.P. (“OCGH”)
that entitle the holder the right to receive a one-time special
distribution that will be settled in OCGH units, based on value
created during a specified period (“Term”) in excess of a fixed
“Base Value.” The value created will be measured on a per unit
basis, based on Class A unit trading prices and certain components
of quarterly distributions with respect to the period during the
Term. EVUs also give the holder the right, subject to service
vesting and Oaktree performance relative to the accreting Base
Value, to receive certain quarterly distributions from OCGH. EVUs
do not entitle the holder to any voting rights.
Fee-related earnings (“FRE”) is a non-GAAP performance
measure that we use to monitor the baseline earnings of our
business. FRE is comprised of segment management fees (“fee-related
earnings revenues”) less segment operating expenses other than
incentive income compensation expense and non-cash equity-based
compensation expense. FRE is considered baseline because it applies
all cash compensation and benefits other than incentive income
compensation expense, as well as all general and administrative
expenses, to management fees, even though a significant portion of
those expenses is attributable to incentive and investment income.
FRE is presented before income taxes.
Fee-related earnings–OCG, or fee-related earnings per Class A
unit, is a non-GAAP performance measure calculated to provide
Class A unitholders with a measure that shows the portion of
FRE attributable to their ownership. Fee-related earnings–OCG
represents FRE including the effect of (a) the OCGH
non-controlling interest, (b) other income or expenses, such
as income tax expense, applicable to OCG or its Intermediate
Holding Companies and (c) any Operating Group income taxes
attributable to OCG. Fee-related earnings–OCG income taxes is
calculated excluding any segment incentive income or investment
income (loss).
Intermediate Holding Companies collectively refers to the
subsidiaries wholly owned by us.
Invested capital reflects deployed capital, whether
involving drawn or recycled equity capital, or borrowings from
fund-level credit facilities. This metric is used in connection
with incentive-creating closed-end funds and certain evergreen
funds.
Net asset value (“NAV”) refers to the value of all the
assets of a fund (including cash and accrued interest and
dividends) less all liabilities of the fund (including accrued
expenses and any reserves established by us, in our discretion, for
contingent liabilities) without reduction for accrued incentives
(fund level) because they are reflected in the partners’ capital of
the fund.
Oaktree, OCG, we, us, our or the Company refers to
Oaktree Capital Group, LLC and, where applicable, its subsidiaries
and affiliates.
Oaktree Operating Group (“Operating Group”) refers
collectively to the entities in which we have a minority economic
interest and indirect control that either (i) act as or control the
general partners and investment advisers of our funds or (ii) hold
interests in other entities or investments generating income for
us.
Relevant Benchmark refers, with respect to:
- our U.S. High Yield Bond strategy, to
the Citigroup U.S. High Yield Cash-Pay Capped Index;
- our Global High Yield Bond strategy, to
an Oaktree custom global high yield index that represents 60% BofA
Merrill Lynch High Yield Master II Constrained Index and 40% BofA
Merrill Lynch Global Non-Financial High Yield European Issuers 3%
Constrained, ex-Russia Index – USD Hedged from inception through
December 31, 2012, and the BofA Merrill Lynch Non-Financial
Developed Markets High Yield Constrained Index – USD Hedged
thereafter;
- our European High Yield Bond strategy,
to the BofA Merrill Lynch Global Non-Financial High Yield European
Issuers excluding Russia 3% Constrained Index (USD Hedged);
- our U.S. Senior Loan strategy (with the
exception of the closed-end funds), to the Credit Suisse Leveraged
Loan Index;
- our European Senior Loan strategy, to
the Credit Suisse Western European Leveraged Loan Index (EUR
Hedged);
- our U.S. Convertible Securities
strategy, to an Oaktree custom convertible index that represents
the Credit Suisse Convertible Securities Index from inception
through December 31, 1999, the Goldman Sachs/Bloomberg
Convertible 100 Index from January 1, 2000 through
June 30, 2004, and the BofA Merrill Lynch All U.S.
Convertibles Index thereafter;
- our non-U.S. Convertible Securities
strategy, to an Oaktree custom non-U.S. convertible index that
represents the JACI Global ex-U.S. (Local) Index from inception
through December 31, 2014 and the Thomson Reuters Global Focus
ex-U.S. (USD hedged) Index thereafter;
- our High Income Convertible Securities
strategy, to the Citigroup U.S. High Yield Market Index; and
- our Emerging Markets Equities strategy,
to the Morgan Stanley Capital International Emerging Markets Index
(Net).
Sharpe Ratio refers to a metric used to calculate
risk-adjusted return. The Sharpe Ratio is the ratio of excess
return to volatility, with excess return defined as the return
above that of a riskless asset (based on the three-month U.S.
Treasury bill, or for our European senior loan strategy, the Euro
Overnight Index Average) divided by the standard deviation of such
return. A higher Sharpe Ratio indicates a return that is higher
than would be expected for the level of risk compared to the
risk-free rate.
EXHIBIT
A
Use of Non-GAAP Financial Information
Oaktree discloses certain non-GAAP financial measures in this
earnings release. Reconciliations of these non-GAAP financial
measures to the most directly comparable financial measures
calculated and presented in accordance with GAAP are presented
below. Management makes operating decisions and assesses the
performance of Oaktree’s business based on these non-GAAP financial
measures. These non-GAAP financial measures should be considered in
addition to and not as a substitute for, or superior to, financial
measures presented in accordance with GAAP.
Reconciliation of GAAP Net Income to Segment Results
The following table reconciles net income attributable to
Oaktree Capital Group, LLC to adjusted net income and fee-related
earnings.
Three Months Ended March 31, 2017
2016 (in thousands) Net income attributable to
Oaktree Capital Group, LLC $ 54,915 $ 28,078 Incentive income (1)
38,536 39,942 Incentive income compensation (1) (38,536 ) (39,942 )
Investment income (2) (4,372 ) (10,429 ) Equity-based compensation
(3) 3,302 3,192 Placement costs (4) 60 6,704 Foreign-currency
hedging (5) (1,996 ) 5,866 Acquisition-related items (6) 1,602 391
Income taxes (7) 12,302 12,680 Non-Operating Group expenses (8) 232
264 Non-controlling interests (8) 96,049 58,279
Adjusted net income 162,094 105,025 Incentive income (147,193 )
(96,588 ) Incentive income compensation 73,144 49,749 Investment
income (58,429 ) (15,077 ) Equity-based compensation (9) 11,651
10,703 Interest expense, net of interest income 6,971 8,682 Other
(income) expense, net (41 ) (135 ) Fee-related earnings $ 48,197
$ 62,359
(1)
This adjustment adds back the effect of
timing differences associated with the recognition of incentive
income and incentive income compensation expense between adjusted
net income and net income attributable to OCG.
(2)
This adjustment adds back the effect of
differences in the recognition of investment income related to
corporate investments in CLOs which under GAAP are marked-to-market
but for segment reporting are accounted for at amortized cost,
subject to impairment.
(3)
This adjustment adds back the effect of
(a) equity-based compensation expense related to unit grants made
before our initial public offering, which is excluded from adjusted
net income and fee-related earnings because it is a non-cash charge
that does not affect our financial position, and (b) differences
arising from EVUs that are classified as liability awards under
GAAP but as equity awards for segment reporting.
(4)
This adjustment adds back the effect of
timing differences with respect to the recognition of third-party
placement costs associated with closed-end funds between adjusted
net income and net income attributable to OCG.
(5)
This adjustment adds back the effect of
timing differences associated with the recognition of unrealized
gains and losses related to foreign-currency hedging between
adjusted net income and net income attributable to OCG.
(6)
This adjustment adds back the effect of
acquisition-related items associated with the amortization of
intangibles and changes in the contingent consideration liability,
which are excluded from adjusted net income.
(7)
Because adjusted net income and
fee-related earnings are pre-tax measures, this adjustment adds
back the effect of income tax expense.
(8)
Because adjusted net income and
fee-related earnings are calculated at the Operating Group level,
this adjustment adds back the effect of items applicable to OCG,
its Intermediate Holding Companies or non-controlling
interests.
(9)
This adjustment adds back the effect of
equity-based compensation expense related to unit grants made after
our initial public offering, which is excluded from fee-related
earnings because it is non-cash in nature and does not impact our
ability to fund our operations.
The following table reconciles net income attributable to
Oaktree Capital Group, LLC to adjusted net income-OCG and
fee-related earnings-OCG.
Three Months Ended March 31, 2017
2016 (in thousands) Net income attributable to
Oaktree Capital Group, LLC $ 54,915 $ 28,078 Incentive income
attributable to OCG (1) 15,702 16,073 Incentive income compensation
attributable to OCG (1) (15,702 ) (16,073 ) Investment income
attributable to OCG (2) (1,781 ) (4,197 ) Equity-based compensation
attributable to OCG (3) 1,345 1,285 Placement costs attributable to
OCG (4) 24 2,698 Foreign-currency hedging attributable to OCG (5)
(813 ) 2,359 Acquisition-related items attributable to OCG (6) 652
158 Non-controlling interests attributable to OCG (6) (223 ) (221 )
Adjusted net income-OCG (7) 54,119 30,160 Incentive income
attributable to OCG (59,977 ) (38,868 ) Incentive income
compensation attributable to OCG 29,804 20,020 Investment income
attributable to OCG (23,809 ) (6,067 ) Equity-based compensation
attributable to OCG (8) 4,748 4,307 Interest expense, net of
interest income attributable to OCG 2,768 3,463 Other (income)
expense attributable to OCG (16 ) (54 ) Non-fee-related earnings
income taxes attributable to OCG (9) 10,177 10,098
Fee-related earnings-OCG (7) $ 17,814 $ 23,059
(1) This adjustment adds back the effect of timing
differences associated with the recognition of incentive income and
incentive income compensation expense between adjusted net
income-OCG and net income attributable to OCG. (2) This adjustment
adds back the effect of differences in the recognition of
investment income related to corporate investments in CLOs which
under GAAP are marked-to-market but for segment reporting are
accounted for at amortized cost, subject to impairment. (3) This
adjustment adds back the effect of (a) equity-based compensation
expense attributable to OCG related to unit grants made before our
initial public offering, which is excluded from adjusted net
income-OCG and fee-related earnings-OCG because it is a non-cash
charge that does not affect our financial position, and (b)
differences arising from EVUs that are classified as liability
awards under GAAP but as equity awards for segment reporting. (4)
This adjustment adds back the effect of timing differences with
respect to the recognition of third-party placement costs
associated with closed-end funds between adjusted net income-OCG
and net income attributable to OCG. (5) This adjustment adds back
the effect of timing differences associated with the recognition of
unrealized gains and losses related to foreign-currency hedging
between adjusted net income-OCG and net income attributable to OCG.
(6) This adjustment adds back the effect of (a) acquisition-related
items associated with the amortization of intangibles and changes
in the contingent consideration liability and (b) non-controlling
interests, which are both excluded from segment reporting. (7)
Adjusted net income-OCG and fee-related earnings-OCG are calculated
to evaluate the portion of adjusted net income and fee-related
earnings attributable to Class A unitholders. These measures are
net of income taxes and other income or expenses applicable to OCG
or its Intermediate Holding Companies. A reconciliation of
fee-related earnings to fee-related earnings-OCG is presented
below.
Three Months Ended March 31,
2017 2016 (in thousands, except per unit
data) Fee-related earnings $ 48,197 $ 62,359 Fee-related
earnings attributable to OCGH non-controlling interest (28,558 )
(37,264 ) Non-Operating Group expenses (305 ) (295 ) Fee-related
earnings-OCG income taxes (1,520 ) (1,741 ) Fee-related
earnings-OCG $ 17,814 $ 23,059 Fee-related
earnings-OCG per Class A unit $ 0.28 $ 0.37
(8) This adjustment adds back the effect of equity-based
compensation expense attributable to OCG related to unit grants
made after our initial public offering, which is excluded from
fee-related earnings-OCG, because it is non-cash in nature and does
not impact our ability to fund our operations. (9) This adjustment
adds back income taxes associated with segment incentive income,
incentive income compensation expense or investment income or loss,
which are not included in the calculation of fee-related
earnings-OCG.
The following table reconciles GAAP revenues to segment revenues
and fee-related earnings revenues.
Three Months Ended March 31, 2017
2016 (in thousands) GAAP revenues $ 289,585 $
254,490 Consolidated funds (1) 16,987 (515 ) Incentive income (2)
38,536 39,942 Investment income (3) 46,079 19,018
Segment revenues 391,187 312,935 Incentive income (147,193 )
(96,588 ) Investment income (58,429 ) (15,077 ) Fee-related
earnings revenues $ 185,565 $ 201,270 (1)
This adjustment adds back the amounts attributable to the
consolidated funds that were eliminated in consolidation, the
reclassification of gains and losses related to foreign-currency
hedging activities from general and administrative expense to
revenues, and the elimination of non-controlling interests from
segment revenues. (2) This adjustment adds back the effect of
timing differences associated with the recognition of incentive
income between segment revenues and GAAP revenues. (3) This
adjustment reclassifies consolidated investment income from other
income (loss) to revenues and adds back the effect of differences
in the recognition of investment income related to corporate
investments in CLOs between segment revenues and GAAP revenues.
The following table reconciles net income attributable to
Oaktree Capital Group, LLC to adjusted net income and distributable
earnings.
Three Months Ended March 31, 2017
2016 (in thousands) Net income attributable to
Oaktree Capital Group, LLC $ 54,915 $ 28,078 Reconciling
adjustments (1) 107,179 76,947 Adjusted net income
162,094 105,025 Investment income (2) (58,429 ) (15,077 ) Receipts
of investment income from funds (3) 29,095 12,923 Receipts of
investment income from companies 13,709 13,558 Equity-based
compensation (4) 11,651 10,703 Operating Group income taxes (1,021
) (1,407 ) Distributable earnings $ 157,099 $ 125,725
(1) Please refer to the table on page 30 for a
detailed reconciliation of net income attributable to Oaktree
Capital Group, LLC to adjusted net income. (2) This adjustment
eliminates segment investment income, which with respect to
investments in funds is initially largely non-cash in nature and is
thus not available to fund our operations. (3) This adjustment
reflects the portion of distributions received from funds
characterized as receipts of investment income or loss. In general,
the income or loss component of a distribution from a fund is
calculated by multiplying the amount of the distribution by the
ratio of our investment’s undistributed income or loss to our
remaining investment balance. In addition, if the distribution is
made during the investment period, it is generally not reflected in
distributable earnings until after the investment period ends. (4)
This adjustment adds back the effect of equity-based compensation
expense related to unit grants made after our initial public
offering, which is excluded from distributable earnings because it
is non-cash in nature and does not impact our ability to fund our
operations.
The following table reconciles net income attributable to
Oaktree Capital Group, LLC to adjusted net income-OCG and
distributable earnings-OCG.
Three Months Ended March 31, 2017
2016 (in thousands) Net income attributable to
Oaktree Capital Group, LLC $ 54,915 $ 28,078 Reconciling
adjustments (1) (796 ) 2,082 Adjusted net income-OCG (2)
54,119 30,160 Investment income attributable to OCG (23,809 )
(6,067 ) Receipts of investment income from funds attributable to
OCG 11,856 5,200 Receipts of investment income from companies
attributable to OCG 5,586 5,456 Equity-based compensation
attributable to OCG (3) 4,748 4,307 Distributable earnings-OCG
income taxes (4,112 ) (3,380 ) Tax receivable agreement (5,363 )
(5,106 ) Income taxes of Intermediate Holding Companies 11,281
11,273 Distributable earnings-OCG (2) $ 54,306
$ 41,843 (1) Please refer to the table
on page 31 for a detailed reconciliation of net income attributable
to Oaktree Capital Group, LLC to adjusted net income-OCG. (2)
Adjusted net income-OCG and distributable earnings-OCG are
calculated to evaluate the portion of adjusted net income and
distributable earnings attributable to Class A unitholders. These
measures are net of income taxes and expenses applicable to OCG or
its Intermediate Holding Companies. A reconciliation of
distributable earnings to distributable earnings-OCG is presented
below.
Three Months Ended March 31,
2017 2016 (in thousands, except per unit
data) Distributable earnings $ 157,099 $ 125,725 Distributable
earnings attributable to OCGH non-controlling interest (93,086 )
(75,132 ) Non-Operating Group expenses (232 ) (264 ) Distributable
earnings-OCG income taxes (4,112 ) (3,380 ) Tax receivable
agreement (5,363 ) (5,106 ) Distributable earnings-OCG $ 54,306
$ 41,843 Distributable earnings-OCG per Class A unit
$ 0.86 $ 0.68 (3) This adjustment adds
back the effect of equity-based compensation expense attributable
to OCG related to unit grants made after our initial public
offering, which is excluded from distributable earnings because it
is non-cash in nature and does not impact our ability to fund our
operations.
The following table reconciles GAAP revenues to segment revenues
and distributable earnings revenues.
Three Months Ended March 31, 2017
2016 (in thousands) GAAP revenues $ 289,585 $
254,490 Consolidated funds (1) 16,987 (515 ) Incentive income (2)
38,536 39,942 Investment income (3) 46,079 19,018
Segment revenues 391,187 312,935 Investment income (58,429 )
(15,077 ) Receipts of investment income from funds 29,095 12,923
Receipts of investment income from companies 13,709 13,558
Distributable earnings revenues $ 375,562 $ 324,339
(1) This adjustment adds back the amounts
attributable to the consolidated funds that were eliminated in
consolidation, the reclassification of gains and losses related to
foreign-currency hedging activities from general and administrative
expense to revenues, and the elimination of non-controlling
interests from segment revenues. (2) This adjustment adds back the
effect of timing differences associated with the recognition of
incentive income between segment revenues and GAAP revenues. (3)
This adjustment reclassifies consolidated investment income from
other income (loss) to revenues and adds back the effect of
differences in the recognition of investment income related to
corporate investments in CLOs between segment revenues and GAAP
revenues.
The following table reconciles net income attributable to
Oaktree Capital Group, LLC adjusted net income and economic net
income.
Three Months Ended March 31, 2017
2016 (in thousands) Net income attributable to
Oaktree Capital Group, LLC $ 54,915 $ 28,078 Reconciling
adjustments (1) 107,179 76,947 Adjusted net income
162,094 105,025 Change in accrued incentives (fund level), net of
associated incentive income compensation (2). 22,487 (63,829
) Economic net income (3) $ 184,581 $ 41,196
(1) Please refer to the table on page 30 for a
detailed reconciliation of net income attributable to Oaktree
Capital Group, LLC to adjusted net income. (2) The change in
accrued incentives (fund level), net of associated incentive income
compensation expense, represents the difference between (a) our
recognition of net incentive income and (b) the incentive income
generated by the funds during the period that would be due to us if
the funds were liquidated at their reported values as of that date,
net of associated incentive income compensation expense. (3) Please
see Glossary for the definition of economic net income.
The following table reconciles net income attributable to
Oaktree Capital Group, LLC to adjusted net income-OCG and economic
net income-OCG.
Three Months Ended March 31, 2017
2016 (in thousands) Net income attributable to
Oaktree Capital Group, LLC $ 54,915 $ 28,078 Reconciling
adjustments (1) (796 ) 2,082 Adjusted net income-OCG (2)
54,119 30,160 Change in accrued incentives (fund level), net of
associated incentive income compensation attributable to OCG 9,164
(25,686 ) Economic net income-OCG income taxes (10,542 ) (8,510 )
Income taxes-OCG 11,697 11,839 Economic net
income-OCG (2) $ 64,438 $ 7,803 (1)
Please refer to the table on page 31 for a detailed reconciliation
of net income attributable to Oaktree Capital Group, LLC to
adjusted net income-OCG. (2) Adjusted net income-OCG and economic
net income-OCG are calculated to evaluate the portion of adjusted
net income and economic net income attributable to Class A
unitholders. These measures are net of income taxes and other
income or expenses applicable to OCG or its Intermediate Holding
Companies. A reconciliation of economic net income to economic net
income-OCG is presented below.
Three Months
Ended March 31, 2017 2016 (in
thousands, except per unit data) Economic net income $ 184,581
$ 41,196 Economic net income attributable to OCGH non-controlling
interest (109,369 ) (24,619 ) Non-Operating Group expenses (232 )
(264 ) Economic net income-OCG income taxes (10,542 ) (8,510 )
Economic net income-OCG $ 64,438 $ 7,803 Economic net
income per Class A unit $ 1.02 $ 0.13
The following table reconciles GAAP revenues to segment revenues
and economic net income revenues.
Three Months Ended March 31, 2017
2016 (in thousands) GAAP revenues $ 289,585 $
254,490 Consolidated funds (1) 16,987 (515 ) Incentive income (2)
38,536 39,942 Investment income (3) 46,079 19,018
Segment revenues 391,187 312,935 Incentives created 201,518 (46,270
) Incentive income (147,193 ) (96,588 ) Economic net income
revenues $ 445,512 $ 170,077 (1) This
adjustment adds back the amounts attributable to the consolidated
funds that were eliminated in consolidation, the reclassification
of gains and losses related to foreign-currency hedging activities
from general and administrative expense to revenues, and the
elimination of non-controlling interests from segment revenues. (2)
This adjustment adds back the effect of timing differences
associated with the recognition of incentive income between segment
revenues and GAAP revenues. (3) This adjustment reclassifies
consolidated investment income from other income (loss) to revenues
and adds back the effect of differences in the recognition of
investment income related to corporate investments in CLOs between
segment revenues and GAAP revenues.
The following tables reconcile segment information to
consolidated financial data:
As of or for the Three Months Ended March 31, 2017
Segment Adjustments Consolidated
(in thousands) Management fees (1) $ 185,565 $ (4,637 ) $
180,928 Incentive income (1) 147,193 (38,536 ) 108,657 Investment
income (1) 58,429 (7,978 ) 50,451 Total expenses (2) (222,163 )
29,601 (192,562 ) Interest expense, net (3) (6,971 ) (41,799 )
(48,770 ) Other income (expense), net (4) 41 4,622 4,663 Other
income of consolidated funds (5) — 70,766 70,766 Income taxes —
(12,302 ) (12,302 ) Net income attributable to non-controlling
interests in consolidated funds — (9,692 ) (9,692 ) Net income
attributable to non-controlling interests in consolidated
subsidiaries — (97,224 ) (97,224 )
Adjusted net income/net income attributable to Oaktree Capital
Group, LLC $ 162,094 $ (107,179 ) $ 54,915 Corporate
investments (6) $ 1,547,125 $ (489,631 ) $ 1,057,494
Total assets (7) $ 3,260,269 $ 4,870,091 $ 8,130,360
(1)
The adjustment represents (a) the
elimination of amounts earned from the consolidated funds, (b) for
management fees, the reclassification of $415 of net gains related
to foreign-currency hedging activities to general and
administrative expense, and (c) for investment income, differences
of $4,372 related to corporate investments in CLOs, which under
GAAP are marked-to-market but for segment reporting accounted for
at amortized cost, subject to impairment.
(2) The expense adjustment consists of (a) equity-based
compensation expense of $2,432 related to unit grants made before
our initial public offering, (b) consolidated fund expenses of
$1,457, (c) expenses incurred by the Intermediate Holding Companies
of $305, (d) the effect of timing differences in the recognition of
incentive income compensation expense between adjusted net income
and net income attributable to OCG of $38,536, (e)
acquisition-related items of $1,602, (f) adjustments of $4,661
related to amounts received for contractually reimbursable costs
that are classified as expenses for segment reporting and as other
income under GAAP, (g) differences of $870 arising from EVUs that
are classified as liability awards under GAAP but as equity awards
for segment reporting, (h) $60 related to third-party placement
costs, and (i) $2,452 of net gains related to foreign-currency
hedging activities. (3) The interest expense adjustment represents
the inclusion of interest expense attributable to third-party
investors in our CLOs, non-controlling interests of the
consolidated funds and the exclusion of segment interest income.
(4)
The adjustment to other income (expense),
net represents adjustments related to (a) amounts received for
contractually reimbursable costs of $4,661 that are classified as
expenses for segment reporting and as other income under GAAP, and
(b) the reclassification of $41 in net gains related to
foreign-currency hedging activities to general and administrative
expense.
(5) The adjustment to other income of consolidated funds primarily
represents the inclusion of interest, dividend and other investment
income attributable to third-party investors in our CLOs and
non-controlling interests of the consolidated funds. (6) The
adjustment to corporate investments is to remove from segment
assets our investments in the consolidated funds, including
investments that are treated as equity- or cost-method investments
for segment reporting. The $1.5 billion of corporate investments
included $1.3 billion of equity-method investments. (7) The total
assets adjustment represents the inclusion of investments and other
assets of the consolidated funds, net of segment assets eliminated
in consolidation, such as corporate investments in funds and
incentive income receivable.
As of or for the
Three Months Ended March 31, 2016 Segment
Adjustments Consolidated (in thousands)
Management fees (1) $ 201,270 $ (2,717 ) $ 198,553 Incentive income
(1) 96,588 (40,651 ) 55,937 Investment income (1) 15,077 14,370
29,447 Total expenses (2) (199,363 ) 14,179 (185,184 ) Interest
expense, net (3) (8,682 ) (19,023 ) (27,705 ) Other income
(expense), net (4) 135 5,666 5,801 Other income of consolidated
funds (5) — 18,999 18,999 Income taxes — (12,680 ) (12,680 ) Net
loss attributable to non-controlling interests in consolidated
funds — 4,944 4,944 Net income attributable to non-controlling
interests in consolidated subsidiaries —
(60,034 ) (60,034 ) Adjusted net income/net income
attributable to Oaktree Capital Group, LLC $ 105,025 $
(76,947 ) $ 28,078 Corporate investments (6) $ 1,352,362
$ (306,785 ) $ 1,045,577 Total assets (7) $ 3,136,660
$ 3,222,154 $ 6,358,814 (1) The
adjustment represents (a) the elimination of amounts earned from
the consolidated funds, (b) for management fees, the
reclassification of $662 of net gains related to foreign-currency
hedging activities to general and administrative expense, and (c)
for investment income, differences of $10,429 related to corporate
investments in CLOs, which under GAAP are marked-to-market but for
segment reporting accounted for at amortized cost, subject to
impairment. (2) The expense adjustment consists of (a) equity-based
compensation expense of $3,245 related to unit grants made before
our initial public offering, (b) consolidated fund expenses of
$4,311, (c) expenses incurred by the Intermediate Holding Companies
of $295, (d) the effect of timing differences in the recognition of
incentive income compensation expense between adjusted net income
and net income attributable to OCG of $39,942, (e)
acquisition-related items of $391, (f) adjustments of $5,801
related to amounts received for contractually reimbursable costs
that are classified as expenses for segment reporting and as other
income under GAAP, (g) differences of $53 arising from EVUs that
are classified as liability awards under GAAP but as equity awards
for segment reporting, (h) $6,704 related to third-party placement
costs, and (i) $5,069 of net losses related to foreign-currency
hedging activities. (3) The interest expense adjustment represents
the inclusion of interest expense attributable to third-party
investors in our CLOs and non-controlling interests of the
consolidated funds and the exclusion of segment interest income.
(4) The adjustment to other income (expense), net represents
adjustments related to (a) amounts received for contractually
reimbursable costs of $5,801 that are classified as expenses for
segment reporting and as other income under GAAP, and (b) the
reclassification of $135 of net gains related to foreign-currency
hedging activities to general and administrative expense. (5) The
adjustment to other income of consolidated funds primarily
represents the inclusion of interest, dividend and other investment
income (loss) attributable to third-party investors in our CLOs and
non-controlling interests of the consolidated funds. (6) The
adjustment to corporate investments is to remove from segment
assets our investments in the consolidated funds, including
investments in our CLOs, that are treated as equity- or cost-method
investments for segment reporting. The $1.4 billion of corporate
investments included $1.2 billion of equity-method investments. (7)
The total assets adjustment represents the inclusion of investments
and other assets of the consolidated funds, net of segment assets
eliminated in consolidation, such as corporate investments in funds
and incentive income receivable.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20170427005569/en/
Investor Relations:Oaktree Capital Group, LLCAndrea D.
Williams(213)
830-6483investorrelations@oaktreecapital.comorPress
Relations:Sard Verbinnen & CoJohn Christiansen(415)
618-8750jchristiansen@sardverb.comorAlyssa
Linn(310) 201-2040alinn@sardverb.com
Oaktree Capital (NYSE:OAK)
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