As of June 30, 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 $117.3 million
($1.83 per unit), from $49.0 million ($0.78 per unit) for the
second quarter of 2016.
- Adjusted net income grew to
$281.7 million ($1.73 per unit), from $142.0 million ($0.79 per
unit) for the second quarter of 2016, driven by record-high
incentive income.
- Distributable earnings grew to
$282.5 million ($1.61 per unit), from $126.3 million ($0.71 per
unit) for the second quarter of 2016, on higher incentive income
and investment income proceeds.
- Assets under management were
$99.3 billion, down 1% for the quarter and up 1% over the last 12
months. Gross capital raised was $1.4 billion and $11.4 billion for
the quarter and last 12 months, respectively. Uncalled capital
commitments (“dry powder”) were $21.5 billion, of which $12.8
billion were not yet generating management fees (“shadow
AUM”).
- Management fee-generating assets
under management were $79.8 billion, up 1% for the quarter and
up slightly over the last 12 months.
- A distribution was declared of
$1.31 per unit, our highest quarterly distribution since 2013,
bringing aggregate distributions relating to the last 12 months to
$3.30.
Oaktree Capital Group, LLC (NYSE: OAK) today reported its
unaudited financial results for the second quarter ended June 30,
2017.
Jay Wintrob, Chief Executive Officer, said, “The second quarter
was exceptional. Oaktree delivered a 124 percent increase in
distributable earnings and a 98 percent increase in adjusted net
income over the same quarter a year ago due to record-high
incentive income. Strong closed-end fund investment performance of
4 percent gross for the quarter and 19 percent for the last twelve
months has driven year-over-year growth in net accrued incentives
and speaks to our team’s ability to deliver superior investment
results with risk under control.”
Distribution
The distribution of $1.31 per Class A unit attributable to
the second quarter of 2017 will be paid on August 11, 2017 to
Class A unitholders of record at the close of business on
August 7, 2017.
Conference Call
Oaktree will host a conference call to discuss its second
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 10109904, beginning approximately one hour
after the broadcast.
About Oaktree
Oaktree is a leader among global investment managers
specializing in alternative investments, with $99 billion in assets
under management as of June 30, 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.
The table below presents (a) GAAP results, (b) non-GAAP 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 June
30, As of or for the Six MonthsEnded June 30,
2017 2016 2017 2016
GAAP Results: (in thousands, except per unit data or as
otherwise indicated) Revenues $ 634,055 $ 282,716 $
923,640 $ 537,206 Net income-OCG 117,324 49,047 172,239 77,125 Net
income per Class A unit 1.83 0.78 2.71 1.24
Non-GAAP
Results: (1) Adjusted revenues $ 704,362 $ 332,822 $
1,095,549 $ 645,757 Adjusted net income 281,654 141,975 442,818
240,349 Adjusted net income-OCG 111,106 49,411 164,847 76,895
Distributable earnings revenues 693,060 306,660 1,068,622
630,999 Distributable earnings 282,490 126,296 439,529 245,317
Distributable earnings-OCG 103,400 44,393 157,684 83,538
Fee-related earnings revenues 186,314 197,450 371,879 398,720
Fee-related earnings 52,601 63,419 100,738 119,074 Fee-related
earnings-OCG 19,613 23,328 37,405 43,689 Economic net income
revenues 415,518 416,317 861,030 586,394 Economic net income
179,275 165,517 362,926 200,062 Economic net income-OCG 67,355
59,609 131,415 64,736
Per Class A Unit: Adjusted net
income $ 1.73 $ 0.79 $ 2.59 $ 1.24 Distributable earnings 1.61 0.71
2.48 1.34 Fee-related earnings 0.31 0.37 0.59 0.70 Economic net
income 1.05 0.95 2.07 1.04 Weighted average number of
Operating Group units outstanding 155,933 155,057 155,303 154,433
Weighted average number of Class A units outstanding 64,193 62,617
63,611 62,256
Operating Metrics: Assets under
management (in millions): Assets under management $ 99,260 $ 98,124
$ 99,260 $ 98,124 Management fee-generating assets under management
79,807 79,516 79,807 79,516 Incentive-creating assets under
management 30,826 30,372 30,826 30,372 Uncalled capital commitments
(2) 21,468 22,817 21,468 22,817 Accrued incentives (fund level):
Incentives created (fund level) 168,602 171,142 370,120 124,872
Incentives created (fund level), net of associated incentive income
compensation expense 85,093 75,783 181,629 58,792 Accrued
incentives (fund level) 1,779,578 1,525,854 1,779,578 1,525,854
Accrued incentives (fund level), net of associated incentive income
compensation expense 866,650 771,253 866,650 771,253
Note: Oaktree discloses in this earnings release certain
revenues and financial measures, including measures that are
calculated and presented on a basis other than generally accepted
accounting principles in the United States (“non-GAAP”) such as
adjusted revenues, adjusted net income, 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. These
measures should be considered in addition to, and not as a
substitute for or superior to, net income, net income per Class A
unit or other financial measures calculated in accordance with
GAAP. Reconciliations of these 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.
(1) Beginning with the second quarter of 2017, the
definition of adjusted net income was modified with respect to
third-party placement costs associated with closed-end funds and
liability-classified OCGH equity value units (“EVUs”) to conform to
the GAAP treatment. Under GAAP, placement costs are expensed as
incurred and liability-classified EVUs are remeasured as of each
reporting date. Previously for adjusted net income, placement costs
were capitalized and amortized in proportion to the associated
management fee stream, and liability-classified EVUs were treated
as equity-classified awards. All prior periods have been recast for
these changes. (2) 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.
GAAP 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 $351.4 million, or 124.3%, to $634.1
million for the second quarter of 2017, from $282.7 million for the
second quarter of 2016. The increase reflected higher incentive
income, partially offset by lower management fees.
Total expenses increased $231.8 million, or 121.0%, to $423.4
million for the second quarter of 2017, from $191.6 million for the
second quarter of 2016. The increase primarily reflected higher
incentive income compensation expense.
Other income increased to $90.4 million for the second quarter
of 2017, from $58.3 million for the second quarter of 2016. The
increase primarily reflected higher overall returns on our funds’
performance.
Net income attributable to OCG increased to $117.3 million for
the second quarter of 2017, from $49.0 million for the second
quarter of 2016, primarily reflecting higher operating profits.
Operating Metrics
Assets Under Management
Assets under management (“AUM”) were $99.3 billion as of June
30, 2017, $100.3 billion as of March 31, 2017 and $98.1 billion as
of June 30, 2016. The $1.0 billion decrease since March 31, 2017
primarily reflected $3.3 billion of distributions to closed-end
fund investors and $0.5 billion of net outflows from open-end
funds, partially offset by $1.8 billion in market-value gains and
$0.8 billion of favorable foreign-currency translation.
The $1.2 billion increase in AUM since June 30, 2016 primarily
reflected $9.2 billion in market-value gains and $4.9 billion of
capital inflows and fee-generating leverage for closed-end funds,
partially offset by $10.4 billion of distributions to closed-end
fund investors, $1.8 billion of net outflows from open-end funds
and $1.0 billion of uncalled capital commitments for closed-end
funds that have entered liquidation. Inflows for closed-end funds
included $0.9 billion for Oaktree Opportunities Fund Xb, $0.8
billion for Oaktree Real Estate Debt Fund II, $0.6 billion for
Oaktree Real Estate Value-Add and $0.5 billion for Oaktree Real
Estate Opportunities Fund VII (“ROF VII”). Distributions to
closed-end fund investors included $4.0 billion from Control
Investing funds, $3.0 billion from Distressed Debt funds and $2.2
billion from Real Estate funds.
Management Fee-generating Assets Under
Management
Management fee-generating assets under management (“management
fee-generating AUM”), a forward-looking metric, were $79.8 billion
as of June 30, 2017, $79.3 billion as of March 31, 2017 and $79.5
billion as of June 30, 2016. The $0.5 billion increase since March
31, 2017 primarily reflected $0.8 billion in market-value gains,
$0.8 billion of favorable foreign-currency translation and $0.4
billion from capital drawn by funds that pay fees based on drawn
capital, NAV or cost basis, partially offset by $0.9 billion
attributable to closed-end funds in liquidation and $0.5 billion of
net outflows from open-end funds.
The $0.3 billion increase in management fee-generating AUM since
June 30, 2016 primarily reflected $4.6 billion in market-value
gains, $1.8 billion of capital inflows and fee-generating leverage
to closed-end funds, and $1.6 billion from capital drawn by
closed-end funds that pay fees based on drawn capital, NAV or cost
basis. These increases were largely offset by $5.1 billion
attributable to closed-end funds in liquidation, $2.0 billion of
net outflows from open-end funds and $0.8 billion of distributions
by closed-end funds that pay fees based on NAV.
Incentive-creating Assets Under
Management
Incentive-creating assets under management (“incentive-creating
AUM”) were $30.8 billion as of June 30, 2017, $32.3 billion as of
March 31, 2017 and $30.4 billion as of June 30, 2016. The $1.5
billion decrease since March 31, 2017 reflected an aggregate $3.5
billion decline primarily attributable to distributions by
closed-end funds, partially offset by an aggregate $2.0 billion in
drawdowns or contributions by closed-end and evergreen funds and
market-value gains. The $0.4 billion increase since June 30, 2016
reflected an aggregate $9.7 billion principally from drawdowns or
contributions by closed-end and evergreen funds and market-value
gains, partially offset by an aggregate decline of $9.3 billion
primarily attributable to distributions by closed-end funds.
Of the $30.8 billion in incentive-creating AUM as of June 30,
2017, $19.8 billion (or 64%), was generating incentives at the fund
level, as compared with $17.9 billion (59%), of the $30.4 billion
of incentive-creating AUM as of June 30, 2016.
Accrued Incentives (Fund Level) and
Incentives Created (Fund Level)
Accrued incentives (fund level) were $1.8 billion as of June 30,
2017, $2.1 billion as of March 31, 2017 and $1.5 billion as of June
30, 2016. The second quarter of 2017 reflected $168.6 million of
incentives created (fund level) and $457.4 million of incentive
income recognized.
Accrued incentives (fund level), net of incentive income
compensation expense (“net accrued incentives (fund level)”), were
$866.7 million as of June 30, 2017, $969.0 million as of March 31,
2017, and $771.3 million as of June 30, 2016. The portion of net
accrued incentives (fund level) represented by funds that were
currently paying incentives as of June 30, 2017, March 31, 2017 and
June 30, 2016, respectively, was $236.5 million (or 27%), $179.6
million (19%) and $274.5 million (36%), 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 $21.5 billion as of June 30,
2017, $21.8 billion as of March 31, 2017, and $22.8 billion as of
June 30, 2016. Invested capital during the quarter and 12 months
ended June 30, 2017 aggregated $1.8 billion and $7.6 billion,
respectively, as compared with $2.4 billion and $7.7 billion for
the comparable prior-year periods.
Non-GAAP Results
Adjusted Revenues
Adjusted revenues grew $371.6 million, to $704.4 million in the
second quarter of 2017, from $332.8 million in the second quarter
of 2016, reflecting $369.8 million in higher incentive income,
$12.9 million in higher investment income and $11.2 million in
lower management fees.
Management Fees
Management fees decreased $11.2 million, or 5.7%, to $186.3
million in the second quarter of 2017, from $197.5 million in the
second quarter of 2016. The decrease reflected an aggregate decline
of $21.2 million primarily attributable to closed-end funds in
liquidation, partially offset by an aggregate increase of $10.0
million principally from closed-end funds that pay management fees
based on drawn capital, NAV or cost basis and higher management
fees from open-end and evergreen funds.
Incentive Income
Incentive income increased $369.8 million, to $457.4 million in
the second quarter of 2017, from $87.6 million in the second
quarter of 2016. The increase was primarily attributable to the
sale of AdvancePierre Foods in the second quarter of 2017,
resulting in $427.8 million of incentive income from Oaktree
Principal Opportunities Fund IV (“POF IV”), which started paying
incentives in the quarter and benefited from the “catch-up” layer
of the European-style waterfall whereby 80% of a distribution is
paid to Oaktree and 20% to the investors.
Investment Income
Investment income increased $12.9 million, or 27.0%, to $60.6
million in the second quarter of 2017, from $47.7 million in the
second quarter of 2016. The increase primarily reflected 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 $18.9 million and
$16.6 million in the second quarters of 2017 and 2016,
respectively, of which performance fees accounted for $2.5 million
and $1.5 million, respectively.
Adjusted Expenses
Compensation and Benefits
Compensation and benefits expense increased $0.1 million, or
0.1%, to $99.3 million in the second quarter of 2017, from $99.2
million in the second quarter of 2016.
Equity-based Compensation
Equity-based compensation expense increased $1.9 million, or
16.0%, to $13.8 million in the second quarter of 2017, from $11.9
million in the second 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 $234.6 million,
to $270.0 million in the second quarter of 2017, from $35.4 million
in the second quarter of 2016. The increase reflected growth in
incentive income and a higher overall compensation percentage in
the second quarter of 2017, as a result of incremental incentive
interests awarded over the life of POF IV due to changes in senior
investment personnel.
General and Administrative
General and administrative expense increased $0.6 million, or
1.9%, to $32.4 million in the second quarter of 2017, from $31.8
million in the second quarter of 2016.
Depreciation and Amortization
Depreciation and amortization expense decreased $1.0 million, or
33.3%, to $2.0 million in the second quarter of 2017, from $3.0
million in the second quarter of 2016, primarily reflecting the
final amortization of certain leasehold improvements.
Interest Expense, Net
Interest expense, net decreased $1.5 million, or 18.8%, to $6.5
million in the second quarter of 2017, from $8.0 million in the
second quarter of 2016, reflecting the maturity of $100.0 million
in senior notes in 2016 and higher interest income.
Other Income (Expense), Net
Other income (expense), net amounted to income of $1.3 million
and expense of $1.5 million in the second quarters of 2017 and
2016, respectively, primarily reflecting foreign-currency
transaction gains and losses.
Adjusted Net Income
ANI increased $139.7 million, or 98.4%, to $281.7 million in the
second quarter of 2017, from $142.0 million in the second quarter
of 2016, reflecting increases of $135.2 million in incentive
income, net of incentive income compensation expense (“net
incentive income”), and $12.9 million in investment income,
partially offset by a $10.8 million decline in fee-related
earnings. The portion of ANI attributable to our Class A units
was $111.1 million, or $1.73 per unit, and $49.4 million, or $0.79
per unit, for the second quarters of 2017 and 2016,
respectively.
The effective tax rate applied to ANI in the second quarters of
2017 and 2016 was 4% and 14%, respectively, resulting from
full-year effective rates of 11% and 20%, 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 $156.2 million, to $282.5 million in
the second quarter of 2017, from $126.3 million in the second
quarter of 2016, reflecting increases of $135.2 million in net
incentive income and $27.7 million in investment income proceeds,
partially offset by a $10.8 million decline in fee-related
earnings. For the second quarter of 2017, investment income
proceeds totaled $49.3 million, including $37.3 million from fund
distributions and $12.1 million from DoubleLine, as compared with
total investment income proceeds in the prior-year quarter of $21.6
million, of which $10.7 million and $10.9 million was attributable
to fund distributions and DoubleLine, respectively. The portion of
distributable earnings attributable to our Class A units was
$1.61 and $0.71 per unit for the second quarters of 2017 and 2016,
respectively, reflecting distributable earnings per Operating Group
unit of $1.81 and $0.81, 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 $10.8 million, or 17.0%, to $52.6
million in the second quarter of 2017, from $63.4 million in the
second quarter of 2016, reflecting the $11.2 million decline in
management fees. The portion of fee-related earnings attributable
to our Class A units was $0.31 and $0.37 per unit for the
second quarters of 2017 and 2016, respectively.
The effective tax rate applicable to fee-related earnings for
both the second quarters of 2017 and 2016 was 8%, resulting from
full-year effective rates of 8% for both full-year periods. 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 June 30, 2017, Oaktree had $1.2 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 June 30, 2017,
Oaktree’s investments in funds and companies had a carrying value
of $1.5 billion, with the 20% investment in DoubleLine carried at
$21 million based on cost, as adjusted under the equity method of
accounting. Net accrued incentives (fund level) represented an
additional $867 million as of that date.
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,
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.
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.
GAAP Consolidated Statements of
Operations
Three Months Ended June 30,
Six Months Ended June 30, 2017
2016 2017 2016 (in thousands, except
per unit data) Revenues: Management fees $ 180,028 $ 195,015 $
360,956 $ 393,568 Incentive income 454,027 87,701
562,684 143,638 Total revenues 634,055 282,716
923,640 537,206 Expenses: Compensation and
benefits (102,002 ) (103,002 ) (206,489 ) (211,407 ) Equity-based
compensation (14,748 ) (14,726 ) (29,701 ) (28,622 ) Incentive
income compensation (266,556 ) (35,461 ) (301,164 ) (45,268 ) Total
compensation and benefits expense (383,306 ) (153,189 ) (537,354 )
(285,297 ) General and administrative (34,388 ) (32,949 ) (66,607 )
(80,780 ) Depreciation and amortization (3,004 ) (4,048 ) (6,828 )
(8,209 ) Consolidated fund expenses (2,728 ) (1,462 ) (5,199 )
(2,546 ) Total expenses (423,426 ) (191,648 ) (615,988 ) (376,832 )
Other income (loss): Interest expense (44,251 ) (26,730 ) (93,021 )
(54,435 ) Interest and dividend income 51,914 37,138 99,874 73,408
Net realized gain (loss) on consolidated funds’ investments 235
6,682 (1,637 ) 10,083 Net change in unrealized appreciation
(depreciation) on consolidated funds’ investments 28,453 (5,301 )
53,131 (25,973 ) Investment income 49,106 41,000 99,557 70,447
Other income (expense), net 4,898 5,548 9,561
11,349 Total other income 90,355 58,337
167,465 84,879 Income before income taxes 300,984
149,405 475,117 245,253 Income taxes (5,541 ) (8,571 ) (17,843 )
(21,251 ) Net income 295,443 140,834 457,274 224,002 Less: Net
income attributable to non-controlling interests in consolidated
funds (3,861 ) (7,319 ) (13,553 ) (2,375 ) Net income attributable
to non-controlling interests in consolidated subsidiaries (174,258
) (84,468 ) (271,482 ) (144,502 ) Net income attributable to
Oaktree Capital Group, LLC $ 117,324 $ 49,047 $
172,239 $ 77,125 Distributions declared per Class A
unit $ 0.71 $ 0.55 $ 1.34 $ 1.02 Net
income per unit (basic and diluted): Net income per Class A unit $
1.83 $ 0.78 $ 2.71 $ 1.24 Weighted
average number of Class A units outstanding 64,193 62,617
63,611 62,256
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 June 30,
March 31, June 30, 2017
2017 2016 (in millions) Assets Under
Management: Closed-end funds $ 58,323 $ 59,848 $ 59,576
Open-end funds 35,628 35,125 33,667 Evergreen funds 5,309
5,340 4,881 Total $ 99,260 $ 100,313 $
98,124
Three Months Ended June 30, Twelve
Months Ended June 30, 2017 2016 2017
2016 (in millions) Change in Assets Under
Management: Beginning balance $ 100,313 $ 96,874 $ 98,124 $
103,060 Closed-end funds:
Capital commitments/other (1)
54 1,889 4,257 6,442
Distributions for a realization
event/other (2)
(3,323 ) (1,220 ) (10,389 ) (5,117 )
Change in uncalled capital commitments for
funds entering or in liquidation (3)
116 13 (950 ) 118 Foreign-currency translation 441 (188 ) 218 (26 )
Change in market value (4)
1,015 350 4,924 (795 ) Change in applicable leverage 172 (349 ) 687
(60 ) Open-end funds: Contributions 1,330 1,002 7,044 3,445
Redemptions (1,864 ) (1,225 ) (8,893 ) (7,638 ) Foreign-currency
translation 354 (126 ) 235 (16 )
Change in market value (4)
683 1,008 3,575 (937 ) Evergreen funds: Contributions or new
capital commitments 26 82 144 266 Redemptions or
distributions/other (176 ) (208 ) (396 ) (497 ) Foreign-currency
translation 1 (5 ) 5 (9 )
Change in market value (4)
118 227 675 (112 ) Ending balance $ 99,260
$ 98,124 $ 99,260 $ 98,124 (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 June 30, March 31, June
30, 2017 2017 2016 Management
Fee-generating Assets Under Management: (in millions)
Closed-end funds: Senior Loans $ 7,943 $ 7,721 $ 6,909 Other
closed-end funds 32,048 32,340 35,096 Open-end funds 35,429 34,930
33,597 Evergreen funds 4,387 4,338 3,914 Total
$ 79,807 $ 79,329 $ 79,516
Three
Months Ended June 30, Twelve Months Ended June 30,
2017 2016 2017 2016 Change in
Management Fee-generating Assets Under Management: (in
millions) Beginning balance $ 79,329 $ 79,908 $ 79,516 $
78,596 Closed-end funds:
Capital commitments to funds that pay fees
based on committed capital/other (1)
26 326 1,156 7,645 Capital drawn by funds that pay fees based on
drawn capital, NAV or cost basis 449 380 1,585 1,289
Change attributable to funds in
liquidation (2)
(893 ) (1,462 ) (4,166 ) (3,040 ) Change in uncalled capital
commitments for funds entering or in liquidation that pay fees
based on committed capital (3) — 13 (894 ) 75
Distributions by funds that pay fees based
on NAV/other (4)
(258 ) (101 ) (845 ) (350 ) Foreign-currency translation 402 (181 )
194 (66 )
Change in market value (5)
34 122 342 (82 ) Change in applicable leverage 170 (232 ) 614 318
Open-end funds: Contributions 1,329 1,005 6,866 3,446 Redemptions
(1,863 ) (1,231 ) (8,855 ) (7,644 ) Foreign-currency translation
354 (126 ) 235 (16 ) Change in market value 679 1,010 3,586 (920 )
Evergreen funds: Contributions or capital drawn by funds that pay
fees based on drawn capital or NAV 118 90 283 786 Redemptions or
distributions (179 ) (209 ) (445 ) (404 ) Change in market value
110 204 635 (117 ) Ending balance $ 79,807
$ 79,516 $ 79,807 $ 79,516 (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 June 30, March 31, June
30, 2017 2017 2016 Reconciliation of
Assets Under Management to Management Fee-generating Assets Under
Management: (in millions) Assets under management $
99,260 $ 100,313 $ 98,124
Difference between assets under management
and committed capital or the lesser of funded capital or cost basis
for applicable closed-end funds (1)
(2,585 ) (3,773 ) (2,392 ) Undrawn capital commitments to
closed-end funds that have not yet commenced their investment
periods (9,560 ) (10,542 ) (9,278 ) Undrawn capital commitments to
funds for which management fees are based on drawn capital, NAV or
cost basis (3,242 ) (2,593 ) (3,828 )
Oaktree’s general partner investments in
management fee-generating funds
(1,948 ) (1,928 ) (1,745 )
Funds that are no longer paying management
fees and co-investments that pay no management fees (2)
(2,118 ) (2,148 ) (1,365 )
Management fee-generating assets under
management
$ 79,807 $ 79,329 $ 79,516 (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 June 30, March 31,
June 30, Weighted Average Annual Management Fee
Rates: 2017 2017 2016 Closed-end funds:
Senior Loans 0.50 % 0.50 % 0.50 % Other closed-end funds 1.49 1.50
1.51 Open-end funds 0.46 0.45 0.46 Evergreen funds 1.21 1.22 1.22
Overall 0.92 0.92 0.97
Incentive-creating AUM
As of June 30, March 31,
June 30, 2017 2017 2016
Incentive-creating Assets Under Management: (in
millions) Closed-end funds $ 27,450 $ 28,943 $ 28,462 Evergreen
funds 3,376 3,394 1,910 Total $ 30,826 $
32,337 $ 30,372
Accrued Incentives (Fund Level) and
Incentives Created (Fund Level)
As of or for the Three MonthsEnded June
30, As of or for the Six MonthsEnded June
30, 2017 2016 2017
2016 Accrued Incentives (Fund Level): (in
thousands) Beginning balance $ 2,068,422 $ 1,442,359
$ 2,014,097 $ 1,585,217 Incentives created
(fund level): Closed-end funds 159,207 166,850 349,228 120,005
Evergreen funds 9,395 4,292 20,892 4,867
Total incentives created (fund level) 168,602 171,142
370,120 124,872 Less: incentive income
recognized by us (457,446 ) (87,647 ) (604,639 ) (184,235 ) Ending
balance $ 1,779,578 $ 1,525,854 $ 1,779,578 $
1,525,854 Accrued incentives (fund level), net of associated
incentive income compensation expense $ 866,650 $ 771,253
$ 866,650 $ 771,253
Non-GAAP Results
Our business is comprised of one segment, our investment
management business, which consists of the investment management
services that we provide to our clients. Management makes operating
decisions and assesses the performance of our business based on
financial data that are presented without the consolidation of our
funds. The data most important to management in assessing our
performance are adjusted net income, adjusted net income-OCG,
distributable earnings, distributable earnings-OCG, fee-related
earnings and fee-related earnings-OCG. Reconciliations of these
non-GAAP financial measures to the most directly comparable GAAP
financial measures are presented at Exhibit A.
Adjusted Net Income
Beginning with the second quarter of 2017, the definition of
adjusted net income was modified with respect to third-party
placement costs associated with closed-end funds and
liability-classified EVUs to conform to the GAAP treatment. Under
GAAP, placement costs are expensed as incurred and
liability-classified EVUs are remeasured as of each reporting date.
Previously for adjusted net income, placement costs were
capitalized and amortized in proportion to the associated
management fee stream, and liability-classified EVUs were treated
as equity-classified awards. All prior periods have been recast for
these changes.
The following schedules set forth the components of adjusted net
income and adjusted net income-OCG, as well as per unit data:
Adjusted
Revenues
Three Months Ended June 30, Six
Months Ended June 30, 2017 2016
2017 2016 (in thousands) Revenues:
Management fees $ 186,314 $ 197,450 $ 371,879 $ 398,720 Incentive
income 457,446 87,647 604,639 184,235 Investment income 60,602
47,725 119,031 62,802 Total adjusted revenues
$ 704,362 $ 332,822 $ 1,095,549 $ 645,757
Management Fees
Three Months Ended June
30, Six Months Ended June 30, 2017
2016 2017 2016 (in thousands)
Management fees: Closed-end funds $ 131,895 $ 145,953 $ 263,603 $
294,204 Open-end funds 40,481 38,776 80,625 77,189 Evergreen funds
13,938 12,721 27,651 27,327 Total management
fees $ 186,314 $ 197,450 $ 371,879 $ 398,720
Investment Income
Three Months Ended June
30, Six Months Ended June 30, 2017
2016 2017 2016 Income (loss) from
investments in funds:
(in thousands) Oaktree funds:
Corporate Debt $ 8,921 $ 12,637 $ 17,833 $ (906 ) Convertible
Securities 418 48 863 (896 ) Distressed Debt 11,809 10,276 31,650
19,167 Control Investing 7,648 1,280 11,070 (167 ) Real Estate
4,508 1,457 8,456 4,562 Listed Equities 6,739 2,270 10,426 5,758
Non-Oaktree funds 1,730 3,075 4,010 3,495 Income from investments
in companies 18,829 16,682 34,723 31,789
Total investment income $ 60,602 $ 47,725 $
119,031 $ 62,802
Adjusted
Expenses
Three Months Ended June 30, Six
Months Ended June 30, 2017 2016
2017 2016 (in thousands) Expenses:
Compensation and benefits $ (99,270 ) $ (99,173 ) $ (201,406 ) $
(203,443 ) Equity-based compensation (13,759 ) (11,905 ) (26,280 )
(22,555 ) Incentive income compensation (269,974 ) (35,407 )
(343,118 ) (85,156 ) General and administrative (32,439 ) (31,810 )
(64,908 ) (69,995 ) Depreciation and amortization (2,004 ) (3,048 )
(4,827 ) (6,208 ) Total adjusted expenses $ (417,446 ) $ (181,343 )
$ (640,539 ) $ (387,357 )
Adjusted Interest
and Other Income (Expense), Net
Three Months Ended June 30, Six
Months Ended June 30, 2017 2016
2017 2016 (in thousands) Interest
expense, net of interest income (1) $ (6,544 ) $ (7,977 ) $ (13,515
) $ (16,659 ) Other income (expense), net 1,282 (1,527 ) 1,323
(1,392 ) (1) Interest income was $2.3 million and
$4.0 million for the three and six months ended June 30, 2017,
respectively, and $1.6 million and $2.9 million for the three and
six months ended June 30, 2016, respectively.
Adjusted Net
Income
Three Months Ended June 30, Six
Months Ended June 30, 2017 2016
2017 2016 (in thousands, except per unit
data) Adjusted net income $ 281,654 $ 141,975 $ 442,818 $
240,349 Adjusted net income attributable to OCGH non-controlling
interest (165,706 ) (84,640 ) (261,200 ) (143,427 ) Non-Operating
Group expenses (255 ) (201 ) (487 ) (465 ) Adjusted net income-OCG
before income taxes 115,693 57,134 181,131 96,457 Income taxes-OCG
(4,587 ) (7,723 ) (16,284 ) (19,562 ) Adjusted net income-OCG $
111,106 $ 49,411 $ 164,847 $ 76,895
Adjusted net income per Class A unit $ 1.73 $ 0.79 $
2.59 $ 1.24 Weighted average number of Class A units
outstanding 64,193 62,617 63,611 62,256
Distributable Earnings and Distribution
Calculation
Distributable earnings and the calculation
of distributions are set forth below:
Three Months Ended June 30, Six
Months Ended June 30, 2017 2016
2017 2016 Distributable Earnings:
(in thousands, except per unit data) Adjusted net
income $ 281,654 $ 141,975 $ 442,818 $ 240,349 Investment income
(60,602 ) (47,725 ) (119,031 ) (62,802 ) Receipts of investment
income from funds (1) 37,250 10,694 66,345 23,617 Receipts of
investment income from companies 12,050 10,869 25,759 24,427
Equity-based compensation 13,759 11,905 26,280 22,555 Operating
Group income taxes (1,621 ) (1,422 ) (2,642 ) (2,829 )
Distributable earnings $ 282,490 $ 126,296 $ 439,529
$ 245,317
Distribution Calculation:
Operating Group distribution with respect to the period $ 240,651 $
108,460 $ 373,246 $ 217,005 Distribution per Operating Group unit $
1.54 $ 0.70 $ 2.39 $ 1.40 Adjustments per Class A unit:
Distributable earnings-OCG income tax expense (0.14 ) (0.03 ) (0.19
) (0.09 ) Tax receivable agreement (0.08 ) (0.08 ) (0.16 ) (0.16 )
Non-Operating Group expenses (0.01 ) (0.01 ) (0.02 ) (0.02 )
Distribution per Class A unit (2)
$ 1.31 $ 0.58 $ 2.02 $ 1.13 (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 June 30, 2017, a distribution was announced on July
27, 2017 and is payable on August 11, 2017.
Units Outstanding
Three Months Ended June 30, Six
Months Ended June 30, 2017 2016
2017 2016 (in thousands) Weighted
Average Units: OCGH 91,740 92,440 91,692 92,177 Class A 64,193
62,617 63,611 62,256 Total 155,933
155,057 155,303 154,433
Units Eligible for Fiscal
Period Distribution: OCGH 92,050 92,340 Class A 64,217
62,603 Total 156,267 154,943
GAAP Statement of Financial Condition
(Unaudited)
As of June 30, 2017 Oaktree and
Operating Consolidated
Subsidiaries Funds Eliminations
Consolidated (in thousands) Assets: Cash and
cash-equivalents $ 600,104 $ — $ — $ 600,104 U.S. Treasury and time
deposit securities 555,008 — — 555,008 Corporate investments
1,562,997 — (546,919 ) 1,016,078 Deferred tax assets 405,030 — —
405,030 Receivables and other assets 376,198 — (3,406 ) 372,792
Assets of consolidated funds — 5,565,389 —
5,565,389 Total assets $ 3,499,337 $ 5,565,389 $
(550,325 ) $ 8,514,401
Liabilities and Capital: Liabilities:
Accounts payable and accrued expenses $ 340,339 $ — $ 2,977 $
343,316 Due to affiliates 341,741 — — 341,741 Debt obligations
746,336 — — 746,336 Liabilities of consolidated funds —
4,502,967 (17,038 ) 4,485,929 Total liabilities 1,428,416
4,502,967 (14,061 ) 5,917,322 Non-controlling
redeemable interests in consolidated funds — — 497,406 497,406
Capital: Unitholders’ capital attributable to OCG 904,133 1,062,422
(1,062,422 ) 904,133 Non-controlling interest in consolidated
subsidiaries 1,166,788 — — 1,166,788 Non-controlling interest in
consolidated funds — — 28,752 28,752 Total
capital 2,070,921 1,062,422 (1,033,670 ) 2,099,673
Total liabilities and capital $ 3,499,337 $ 5,565,389
$ (550,325 ) $ 8,514,401
Corporate Investments
As of June 30, March 31,
June 30, 2017 2017 2016
Investments in funds:
(in thousands) Oaktree funds:
Corporate Debt $ 518,813 $ 493,478 $ 417,883 Convertible Securities
27,599 27,180 1,627 Distressed Debt 396,077 404,317 380,324 Control
Investing 236,099 258,064 251,612 Real Estate 135,751 140,569
113,406 Listed Equities 132,113 122,572 116,954 Non-Oaktree funds
72,326 70,983 70,551 Investments in companies 25,188 29,962
19,621 Total corporate investments 1,543,966
1,547,125 1,371,978 Adjustments (1) 19,031 3,802
(12,711 ) Total corporate investments – Oaktree and operating
subsidiaries 1,562,997 1,550,927 1,359,267 Eliminations (546,919 )
(493,433 ) (323,029 ) Total corporate investments – Consolidated $
1,016,078 $ 1,057,494 $ 1,036,238 (1)
This adjusts CLO investments carried at amortized cost to
fair value for GAAP reporting.
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 June 30, 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
Incentive Income Recog-
nized (Non-GAAP)
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 34 514 79 1,673 3,375 — 100
1,273 48.8% 29.3% 1.6x Oaktree Opportunities Fund IX Jan. 2014 Jan.
2017 5,066 nm 100 330 763 4,633 4,597 — — 5,695 4.7 2.0 1.1 Oaktree
Opportunities Fund VIIIb Aug. 2011 Aug. 2014 2,692 nm 100 613 1,559
1,746 1,924 52 — 2,216 7.6 4.7 1.3 Special Account B Nov. 2009 Nov.
2012 1,031 nm 100 570 1,321 354 343 16 — 274 13.5 11.1 1.6 Oaktree
Opportunities Fund VIII Oct. 2009 Oct. 2012 4,507 nm 100 2,376
5,412 1,472 1,344 165 297 932 12.8 8.9 1.6 Special Account A Nov.
2008 Oct. 2012 253 nm 100 307 493 67 52 50 10 — 28.1 22.8 2.3 OCM
Opportunities Fund VIIb May 2008 May 2011 10,940 nm 90 8,931 17,743
1,032 881 1,534 201 — 21.9 16.6 2.0 OCM Opportunities Fund VII Mar.
2007 Mar. 2010 3,598 nm 100 1,471 4,742 327 591 85 — 473 10.3 7.5
1.5
Legacy funds (8)
Various Various 12,495 nm 100 10,454 22,912 37 — 1,555 8 — 23.6
18.5 1.9 22.0% 16.2%
Real Estate Opportunities Oaktree Real
Estate Opportunities Fund VII (9)(10) Jan. 2016 Jan. 2020 $2,921
50% 10% $59 $132 $219 $2,512 $— $11 $173 nm nm 1.5x Oaktree Real
Estate Opportunities Fund VI Aug. 2012 Aug. 2016 2,677 nm 100 1,175
1,342 2,510 1,925 22 205 2,053 16.1% 10.7% 1.5 Oaktree Real Estate
Opportunities Fund V Mar. 2011 Mar. 2015 1,283 nm 100 974 1,765 492
262 73 113 13 17.6 13.0 1.8 Special Account D Nov. 2009 Nov. 2012
256 nm 100 200 342 122 59 4 16 48 15.0 13.0 1.8 Oaktree Real Estate
Opportunities Fund IV Dec. 2007 Dec. 2011 450 nm 100 395 753 92 64
57 18 — 16.0 10.9 2.0
Legacy funds (8)
Various Various 2,341 nm 99 2,011 4,316 12 — 231 2 — 15.2 11.9 1.9
15.5% 11.9%
Real Estate Debt Oaktree Real Estate Debt Fund
II (9)(11) Mar. 2017 Mar. 2020 $773 41% 5% $— $— $36 $309 $— $— $37
nm nm 1.1x Oaktree Real Estate Debt Fund Sep. 2013 Oct. 2016 1,112
nm 59 135 479 308 594 6 14 203 26.7% 20.2% 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% $8 $19 $232 $237 $— $— $235 nm nm 1.1x
European Principal (13) Oaktree European
Principal Fund IV (7)(9)(14) TBD — €1,112 21% 3% €(9) €— €22 €307
€— €— €32 nm nm 1.0x Oaktree European Principal Fund III Nov. 2011
Nov. 2016 €3,164 nm 85 €1,915 €798 €3,866 €2,682 €— €372 €2,805
19.6% 13.2% 1.8 OCM European Principal Opportunities Fund II Dec.
2007 Dec. 2012 €1,759 nm 100 €442 €1,867 €307 €794 €29 €— €688 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 13.6% 9.1%
As of June 30, 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
Incentive Income Recog-nized (Non-GAAP)
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) European
Private Debt (13) Oaktree European Capital Solutions
Fund (7)(11) Dec. 2015 Dec. 2018 €703 41% 32% €7 €89 €134 €160 €—
€— €136 8.7% 5.6% 1.1x Oaktree European Dislocation Fund Oct. 2013
Oct. 2016 €294 nm 57 €37 €161 €58 €73 €2 €4 €38 21.5 15.3 1.2
Special Account E Oct. 2013 Apr. 2015 €379 nm 69 €60 €253 €68 €78
€4 €5 €47 14.4 11.1 1.3 15.3% 11.2%
Special Situations
(15) Oaktree Special Situations Fund (7) Nov. 2015 Nov. 2018
$1,377 75% 38% $133 $99 $551 $1,244 $— $26 $446 52.7% 28.4% 1.4x
Other funds: Oaktree Principal Fund V Feb. 2009 Feb. 2015 $2,827 nm
91% $431 $1,592 $1,425 $1,689 $50 $— $2,103 7.5% 3.3% 1.3x Special
Account C Dec. 2008 Feb. 2014 505 nm 91 206 405 261 286 21 — 266
11.1 7.8 1.6 OCM Principal Opportunities Fund IV Oct. 2006 Oct.
2011 3,328 nm 100 3,183 5,888 623 538 450 171 — 12.8 9.4 2.1
Legacy funds (8)
Various Various 3,701 nm 100 2,717 6,397 21 — 236 4 — 14.4 11.1 1.8
13.2% 9.5%
Power Opportunities Oaktree Power Opportunities
Fund IV Nov. 2015 Nov. 2020 $1,106 53% 45% $14 $1 $514 $1,078 $— $—
$534 12.2% 3.3% 1.1x Oaktree Power Opportunities Fund III Apr. 2010
Apr. 2015 1,062 nm 66 410 581 527 418 24 55 317 21.5 13.3 1.7
OCM/GFI Power Opportunities Fund II Nov. 2004 Nov. 2009 1,021 nm 53
1,439 1,982 — — 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% 26.3%
Infrastructure Investing
Highstar Capital IV (16)
Nov. 2010 Nov. 2016 $2,000 nm 100% $455 $476 $2,150 $1,372 $— $4
$2,214 14.1% 8.3% 1.4x
U.S. Private Debt (17)
Oaktree Mezzanine Fund IV (11) Oct. 2014 Oct. 2019 $852 58% 53% $56
$68 $442 $420 $— $8 $430 12.2% 8.6% 1.1x
Oaktree Mezzanine Fund III (18)
Dec. 2009 Dec. 2014 1,592 nm 89 414 1,502 335 339 15 23 302 15.0
10.4 / 8.4 1.4 OCM Mezzanine Fund II Jun. 2005 Jun. 2010 1,251 nm
88 498 1,504 101 — — — 160 11.0 7.5 1.6
OCM Mezzanine Fund (19)
Oct. 2001 Oct. 2006 808 nm 96 302 1,075 — — 38 — — 15.4 10.8 / 10.5
1.5 13.1% 8.7%
Emerging Markets Opportunities Oaktree
Emerging Market Opportunities Fund (20) Sep. 2013 Sep. 2017 $384
75% 75% $83 $1 $371 $222 $— $15 $343 15.1% 9.7% 1.3x Special
Account F Jan. 2014 Jan. 2018 253 96 96 56 105 193 191 — 11 172
14.5 10.1 1.3 31,535 (13) 1,747 (13) 14.8% 9.9% Other (21) 7,993 7
Total (22) $39,528 $1,754 (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, net of distributions to such
investors of uninvested capital, divided by committed capital. The
aggregate change in drawn capital for the three months ended June
30, 2017 was $1.2 billion. (3) Accrued incentives (fund level)
exclude non-GAAP 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 June 30, 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 June 30,
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 June 30, 2017 spot rate of $1.14. (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) 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 June 30, 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. (17) Effective April 2017, the Mezzanine Finance
strategy was renamed U.S. Private Debt, and includes our Mezzanine
Finance and Direct Lending funds. (18) 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 8.4%. The combined
net IRR for Class A and Class B interests was 9.5%. (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 10.8% and Class B interests was
10.5%. The combined net IRR for the Class A and Class B interests
was 10.6%. (20) 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. (21) This includes our closed-end Senior Loan funds, CLOs,
a non-Oaktree fund and certain separate accounts and
co-investments. (22) The total excludes two closed-end funds with
management fee-generating AUM aggregating $463 million as of June
30, 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
June 30, 2017
Twelve Months EndedJune 30,
2017
Since Inception through June 30, 2017 Strategy
Inception Rates of Return (1) Annualized Rates
of Return (1) Sharpe Ratio Oaktree
Rele-
vant Bench-
mark
Oaktree Rele-
vant Bench-
mark
Oaktree Gross Rele-
vant Bench-
mark
Gross Net Gross Net
(in millions) U.S. High Yield Bonds 1986 $ 17,172
10.4 % 9.9 % 12.0 % 9.3 % 8.8 % 8.4 % 0.81 0.57 Global High Yield
Bonds 2010 4,501 12.0 11.5 12.6 7.6 7.1 7.2 1.18 1.14 European High
Yield Bonds 1999 1,073 11.0 10.4 11.9 8.2 7.6 6.4 0.72 0.46 U.S.
Convertibles 1987 2,935 11.8 11.2 16.8 9.3 8.8 8.2 0.49 0.37
Non-U.S. Convertibles 1994 1,443 10.2 9.6 6.9 8.4 7.8 5.6 0.79 0.41
High Income Convertibles 1989 975 11.6 10.7 12.3 11.4 10.5 8.2 1.07
0.61 U.S. Senior Loans 2008 1,764 8.6 8.0 7.5 6.1 5.6 5.3 1.11 0.66
European Senior Loans 2009 1,718 6.0 5.4 6.3 8.2 7.6 8.8 1.72 1.72
Emerging Markets Equities 2011 3,575 30.4 29.4 23.7 1.3 0.5 0.3
0.06 0.01 Other 273 Total $ 35,429 (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 June 30, 2017
Twelve Months EndedJune 30,
2017
Since Inception throughJune 30, 2017
AUM Manage-
ment
Fee-gener-
ating AUM
Accrued Incen-
tives (Fund Level)
Strategy Inception Rates of Return (1)
Annualized Rates
of Return (1)
Gross Net Gross Net
(in millions)
Strategic Credit (2)
2012 $ 3,050 $ 2,562 $ 10 16.2 % 12.8 % 9.0 % 6.5 % Value
Opportunities 2007 1,126 1,059 —
(3)
14.3 12.6 9.3 5.5 Emerging Markets Debt Total Return (4) 2015 423
378 1 21.4 16.8 16.0 12.5 Value Equities (5) 2012 404 379 5
44.0 36.6 20.2 14.7 4,378 16 Other (6) 472 6 Restructured
funds — 4 Total (2) $ 4,850 $ 26
(1) Returns represent time-weighted rates of return. (2)
Includes two closed-end funds with an aggregate $439 million and
$463 million of AUM and management fee-generating AUM,
respectively. (3) As of June 30, 2017, the aggregate depreciation
below high-water marks previously established for individual
investors in the fund totaled approximately $37 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 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.
Adjusted net income (“ANI”) is a measure of profitability
for our investment management business. The components of revenues
(“adjusted revenues”) and expenses (“adjusted expenses”) used in
the determination of ANI do not give effect to the consolidation of
the funds that we manage. Adjusted revenues include investment
income (loss) that is classified in other income (loss) in the GAAP
statements of operations. Adjusted revenues and expenses also
reflect Oaktree’s proportionate economic interest in Highstar,
whereby amounts received for contractually reimbursable costs are
classified for ANI 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) income taxes, (d) other income or
expenses applicable to OCG or its Intermediate Holding Companies,
and (e) the adjustment for non-controlling interests.
Moreover, 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 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 ANI 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.
Beginning with the second quarter of 2017, the definition of ANI
was modified with respect to third-party placement costs associated
with closed-end funds and liability-classified EVUs to conform to
the GAAP treatment. Under GAAP, placement costs are expensed as
incurred and liability-classified EVUs are remeasured as of each
reporting date. Previously for ANI, placement costs were
capitalized and amortized in proportion to the associated
management fee stream, and liability-classified EVUs were treated
as equity-classified awards. All prior periods have been recast for
these changes.
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 non-GAAP 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 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
business 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
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 Base Value will be reduced by certain
distributions and profit sharing payments received by the holder
and the full value of certain OCGH units granted. 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 derived from our non-GAAP results and is comprised
of management fees (“fee-related earnings revenues”) less operating
expenses other than incentive income compensation expense and
non-cash equity-based compensation expense. FRE is considered
baseline because it excludes all non-management fee revenue sources
(such as earnings from our minority equity interest in DoubleLine)
and 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 those
expenses also support the generation of 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 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, net
income, net income per Class A unit or other financial measures
presented in accordance with GAAP.
Reconciliation of GAAP to Non-GAAP Results
The following table reconciles net income attributable to
Oaktree Capital Group, LLC to adjusted net income, fee-related
earnings and distributable earnings.
Three Months Ended June 30, Six
Months Ended June 30, 2017 2016
2017 2016 (in thousands) Net income
attributable to Oaktree Capital Group, LLC $ 117,324 $ 49,047 $
172,239 $ 77,125 Incentive income (1) 3,418 (54 ) 41,954 39,888
Incentive income compensation (1) (3,418 ) 54 (41,954 ) (39,888 )
Investment income (2) (18,275 ) (3,149 ) (22,647 ) (13,578 )
Equity-based compensation (3) 989 2,821 3,421 6,066
Foreign-currency hedging (4) 1,869 3,665 (127 ) 9,531
Acquisition-related items (5) 861 (1,889 ) 2,463 (1,498 ) Income
taxes (6) 5,541 8,571 17,843 21,251 Non-Operating Group expenses
(7) 255 201 487 465 Non-controlling interests (7) 173,090
82,708 269,139 140,987 Adjusted net income
281,654 141,975 442,818 240,349 Incentive income (457,446 ) (87,647
) (604,639 ) (184,235 ) Incentive income compensation 269,974
35,407 343,118 85,156 Investment income (60,602 ) (47,725 )
(119,031 ) (62,802 ) Equity-based compensation (8) 13,759 11,905
26,280 22,555 Interest expense, net of interest income 6,544 7,977
13,515 16,659 Other (income) expense, net (1,282 ) 1,527
(1,323 ) 1,392 Fee-related earnings 52,601 63,419 100,738
119,074 Incentive income 457,446 87,647 604,639 184,235 Incentive
income compensation (269,974 ) (35,407 ) (343,118 ) (85,156 )
Receipts of investment income from funds (9) 37,250 10,694 66,345
23,617 Receipts of investment income from companies 12,050 10,869
25,759 24,427 Interest expense, net of interest income (6,544 )
(7,977 ) (13,515 ) (16,659 ) Other (income) expense, net 1,282
(1,527 ) 1,323 (1,392 ) Operating Group income taxes (1,621 )
(1,422 ) (2,642 ) (2,829 ) Distributable earnings $ 282,490
$ 126,296 $ 439,529 $ 245,317 (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 ANI are accounted for at amortized cost,
subject to impairment. (3) This adjustment adds back the effect of
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. (4) 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. (5) 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. (6) Because adjusted
net income and fee-related earnings are pre-tax measures, this
adjustment adds back the effect of income tax expense. (7) 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. (8) 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. (9) 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.
The following table reconciles net income attributable to
Oaktree Capital Group, LLC to adjusted net income-OCG, fee-related
earnings-OCG and distributable earnings-OCG.
Three Months Ended June 30, Six
Months Ended June 30, 2017 2016
2017 2016 (in thousands) Net income
attributable to Oaktree Capital Group, LLC $ 117,324 $ 49,047 $
172,239 $ 77,125 Incentive income attributable to OCG (1) 1,407 (22
) 17,109 16,051 Incentive income compensation attributable to OCG
(1) (1,407 ) 22 (17,109 ) (16,051 ) Investment income attributable
to OCG (2) (7,523 ) (1,271 ) (9,304 ) (5,468 ) Equity-based
compensation attributable to OCG (3) 407 1,138 1,398 2,445
Foreign-currency hedging attributable to OCG (4) 770 1,481 (43 )
3,840 Acquisition-related items attributable to OCG (5) 354 (763 )
1,006 (605 ) Non-controlling interests attributable to OCG (5) (226
) (221 ) (449 ) (442 ) Adjusted net income-OCG (6) 111,106 49,411
164,847 76,895 Incentive income attributable to OCG (188,317 )
(35,395 ) (248,294 ) (74,263 ) Incentive income compensation
attributable to OCG 111,140 14,298 140,944 34,318 Investment income
attributable to OCG (24,948 ) (19,274 ) (48,757 ) (25,341 )
Equity-based compensation attributable to OCG (7) 5,665 4,808
10,769 9,093 Interest expense, net of interest income attributable
to OCG 2,577 3,181 5,345 6,644 Other (income) expense attributable
to OCG (528 ) 616 (544 ) 562 Non-fee-related earnings income taxes
attributable to OCG (8) 2,918 5,683 13,095
15,781 Fee-related earnings-OCG (6) 19,613 23,328 37,405
43,689 Incentive income attributable to OCG 188,317 35,395 248,294
74,263 Incentive income compensation attributable to OCG (111,140 )
(14,298 ) (140,944 ) (34,318 ) Receipts of investment income from
funds attributable to OCG 15,334 4,319 27,190 9,519 Receipts of
investment income from companies attributable to OCG 4,961 4,389
10,547 9,845 Interest expense, net of interest income attributable
to OCG (2,577 ) (3,181 ) (5,345 ) (6,644 ) Other (income) expense
attributable to OCG 528 (616 ) 544 (562 ) Non-fee-related earnings
income taxes attributable to OCG (8) (2,918 ) (5,683 ) (13,095 )
(15,781 ) Distributable earnings-OCG income taxes (7,223 ) (1,303 )
(11,335 ) (4,683 ) Tax receivable agreement (5,415 ) (5,106 )
(10,778 ) (10,212 ) Income taxes of Intermediate Holding Companies
3,920 7,149 15,201 18,422 Distributable
earnings-OCG (6) $ 103,400 $ 44,393 $ 157,684
$ 83,538 (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 ANI are
accounted for at amortized cost, subject to impairment. (3) This
adjustment adds back the effect of 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. (4) 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. (5) 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 ANI. (6) Adjusted net income-OCG,
fee-related earnings-OCG and distributable earnings-OCG are
calculated to evaluate the portion of adjusted net income,
fee-related earnings and distributable 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. Reconciliations of fee-related earnings to
fee-related earnings-OCG and distributable earnings to
distributable earnings-OCG are presented below.
Three Months Ended June 30, Six Months
Ended June 30, 2017 2016 2017
2016 (in thousands, except per unit data)
Fee-related earnings $ 52,601 $ 63,419 $ 100,738 $ 119,074
Fee-related earnings attributable to OCGH non-controlling interest
(30,947 ) (37,810 ) (59,467 ) (71,068 ) Non-Operating Group
expenses (372 ) (241 ) (677 ) (536 ) Fee-related earnings-OCG
income taxes (1,669 ) (2,040 ) (3,189 ) (3,781 ) Fee-related
earnings-OCG $ 19,613 $ 23,328 $ 37,405 $
43,689 Fee-related earnings per Class A unit $ 0.31 $
0.37 $ 0.59 $ 0.70 Weighted average number of
Class A units outstanding 64,193 62,617 63,611
62,256
Three Months
Ended June 30, Six Months Ended June 30, 2017
2016 2017 2016 (in thousands,
except per unit data) Distributable earnings $ 282,490 $
126,296 $ 439,529 $ 245,317 Distributable earnings attributable to
OCGH non-controlling interest (166,197 ) (75,293 ) (259,245 )
(146,419 ) Non-Operating Group expenses (255 ) (201 ) (487 ) (465 )
Distributable earnings-OCG income taxes (7,223 ) (1,303 ) (11,335 )
(4,683 ) Tax receivable agreement (5,415 ) (5,106 ) (10,778 )
(10,212 ) Distributable earnings-OCG $ 103,400 $ 44,393
$ 157,684 $ 83,538 Distributable earnings per
Class A unit $ 1.61 $ 0.71 $ 2.48 $ 1.34
Weighted average number of Class A units outstanding 64,193
62,617 63,611 62,256 (7)
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. (8) This adjustment adds back
income taxes associated with 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 adjusted
revenues, fee-related earnings revenues and distributable earnings
revenues.
Three Months Ended June 30, Six
Months Ended June 30, 2017 2016
2017 2016 (in thousands) GAAP revenues
$ 634,055 $ 282,716 $ 923,640 $ 537,206 Consolidated funds (1)
36,058 12,309 53,045 11,794 Incentive income (2) 3,418 (54 ) 41,954
39,888 Investment income (3) 30,831 37,851 76,910
56,869 Adjusted revenues 704,362 332,822 1,095,549
645,757 Incentive income (457,446 ) (87,647 ) (604,639 ) (184,235 )
Investment income (60,602 ) (47,725 ) (119,031 ) (62,802 )
Fee-related earnings revenues 186,314 197,450 371,879 398,720
Incentive income 457,446 87,647 604,639 184,235 Receipts of
investment income from funds 37,250 10,694 66,345 23,617 Receipts
of investment income from companies 12,050 10,869
25,759 24,427 Distributable earnings revenues $
693,060 $ 306,660 $ 1,068,622 $ 630,999
(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 adjusted revenues. (2) This adjustment adds back the
effect of timing differences associated with the recognition of
incentive income between adjusted 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 adjusted revenues and GAAP
revenues.
The following table reconciles net income attributable to
Oaktree Capital Group, LLC to adjusted net income and economic net
income.
Three Months Ended June 30, Six Months
Ended June 30, 2017 2016 2017
2016 (in thousands) Net income attributable to
Oaktree Capital Group, LLC $ 117,324 $ 49,047 $ 172,239 $ 77,125
Reconciling adjustments (1) 164,330 92,928 270,579
163,224 Adjusted net income 281,654 141,975 442,818
240,349
Change in accrued incentives (fund level),
net of associated incentive income compensation (2)
(102,379 ) 23,542 (79,892 ) (40,287 ) Economic net income
(3) $ 179,275 $ 165,517 $ 362,926 $ 200,062
(1) Please refer to the table on page 26 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 June 30, Six Months
Ended June 30, 2017 2016 2017
2016 (in thousands) Net income attributable to
Oaktree Capital Group, LLC $ 117,324 $ 49,047 $ 172,239 $ 77,125
Reconciling adjustments (1) (6,218 ) 364 (7,392 ) (230 )
Adjusted net income-OCG (2) 111,106 49,411 164,847 76,895 Change in
accrued incentives (fund level), net of associated incentive income
compensation attributable to OCG (42,147 ) 9,507 (32,983 ) (16,179
) Economic net income-OCG income taxes (6,191 ) (7,032 ) (16,733 )
(15,542 ) Income taxes-OCG 4,587 7,723 16,284
19,562 Economic net income-OCG (2) $ 67,355 $ 59,609
$ 131,415 $ 64,736 (1) Please
refer to the table on page 27 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
June 30, Six Months Ended June 30, 2017
2016 2017 2016 (in thousands, except
per unit data) (in thousands, except per unit data)
Economic net income $ 179,275 $ 165,517 $ 362,926 $ 200,062
Economic net income attributable to OCGH non-controlling interest
(105,474 ) (98,675 ) (214,291 ) (119,319 ) Non-Operating Group
expenses (255 ) (201 ) (487 ) (465 ) Economic net income-OCG income
taxes (6,191 ) (7,032 ) (16,733 ) (15,542 ) Economic net income-OCG
$ 67,355 $ 59,609 $ 131,415 $ 64,736
Economic net income per Class A unit $ 1.05 $ 0.95 $
2.07 $ 1.04 Weighted average number of Class A units
outstanding 64,193 62,617 63,611 62,256
The following table reconciles GAAP revenues to adjusted
revenues and economic net income revenues.
Three Months Ended June 30, Six Months
Ended June 30, 2017 2016 2017
2016 (in thousands) GAAP revenues $ 634,055 $
282,716 $ 923,640 $ 537,206 Consolidated funds (1) 36,058 12,309
53,045 11,794 Incentive income (2) 3,418 (54 ) 41,954 39,888
Investment income (3) 30,831 37,851 76,910
56,869 Adjusted revenues 704,362 332,822 1,095,549 645,757
Incentives created 168,602 171,142 370,120 124,872 Incentive income
(457,446 ) (87,647 ) (604,639 ) (184,235 ) Economic net income
revenues $ 415,518 $ 416,317 $ 861,030 $
586,394 (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 adjusted revenues. (2) This
adjustment adds back the effect of timing differences associated
with the recognition of incentive income between adjusted 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 adjusted
revenues and GAAP revenues.
The following tables reconcile GAAP consolidated financial data
to non-GAAP data:
As of or for the Three Months Ended June 30, 2017
Consolidated Adjustments ANI
(in thousands) Management fees (1) $ 180,028 $ 6,286 $
186,314 Incentive income (1) 454,027 3,419 457,446 Investment
income (1) 49,106 11,496 60,602 Total expenses (2) (423,426 ) 5,980
(417,446 ) Interest expense, net (3) (44,251 ) 37,707 (6,544 )
Other income (expense), net (4) 4,898 (3,616 ) 1,282 Other income
of consolidated funds (5) 80,602 (80,602 ) — Income taxes (5,541 )
5,541 — Net income attributable to non-controlling interests in
consolidated funds (3,861 ) 3,861 — Net income attributable to
non-controlling interests in consolidated subsidiaries (174,258 )
174,258 — Net income attributable to Oaktree Capital
Group, LLC/Adjusted net income $ 117,324 $ 164,330 $
281,654 (1) The adjustment (a) adds back
amounts earned from the consolidated funds, (b) for management
fees, reclassifies $1,684 of net gains related to foreign-currency
hedging activities from general and administrative expense, (c) for
incentive income, includes $3,418 related to timing differences in
the recognition of incentive income between net income attributable
to OCG and adjusted net income, and (d) for investment income,
includes $18,275 related to corporate investments in CLOs, which
under GAAP are marked-to-market but for ANI accounted for at
amortized cost, subject to impairment. (2) The expense adjustment
consists of (a) equity-based compensation expense of $989 related
to unit grants made before our initial public offering, (b)
consolidated fund expenses of $3,375, (c) expenses incurred by the
Intermediate Holding Companies of $372, (d) the effect of timing
differences in the recognition of incentive income compensation
expense between net income attributable to OCG and adjusted net
income of $3,418, (e) acquisition-related items of $861, (f)
adjustments of $4,729 related to amounts received for contractually
reimbursable costs that are classified as other income under GAAP
and as expenses for ANI, and (g) $928 of net gains related to
foreign-currency hedging activities. (3) The interest expense
adjustment removes interest expense of the consolidated funds and
reclassifies interest income from other income of consolidated
funds. (4) The adjustment to other income (expense), net represents
adjustments related to (a) amounts received for contractually
reimbursable costs of $4,729 that are classified as other income
under GAAP and as expenses for ANI, and (b) the reclassification of
$1,113 in net gains related to foreign-currency hedging activities
from general and administrative expense. (5) The adjustment to
other income of consolidated funds removes interest, dividend and
other investment income attributable to third-party investors in
our consolidated funds, and reclassifies investment income to
revenues and interest income to interest expense, net.
As of or for the Three Months Ended June 30, 2016
Consolidated Adjustments ANI
(in thousands) Management fees (1) $ 195,015 $ 2,435 $
197,450 Incentive income (1) 87,701 (54 ) 87,647 Investment income
(1) 41,000 6,725 47,725 Total expenses (2) (191,648 ) 10,305
(181,343 ) Interest expense, net (3) (26,730 ) 18,753 (7,977 )
Other income (expense), net (4) 5,548 (7,075 ) (1,527 ) Other
income of consolidated funds (5) 38,519 (38,519 ) — Income taxes
(8,571 ) 8,571 — Net income attributable to non-controlling
interests in consolidated funds (7,319 ) 7,319 — Net income
attributable to non-controlling interests in consolidated
subsidiaries (84,468 ) 84,468 — Net income
attributable to Oaktree Capital Group, LLC/Adjusted net income $
49,047 $ 92,928 $ 141,975 (1)
The adjustment (a) adds back amounts earned from the consolidated
funds, (b) for management fees, reclassifies $27 of net gains
related to foreign-currency hedging activities from general and
administrative expense, (c) for incentive income, includes $54
related to timing differences in the recognition of incentive
income between net income attributable to OCG and adjusted net
income, and (d) for investment income, includes $3,149 related to
corporate investments in CLOs, which under GAAP are
marked-to-market but for ANI accounted for at amortized cost,
subject to impairment. (2) The expense adjustment consists of (a)
equity-based compensation expense of $2,821 related to unit grants
made before our initial public offering, (b) consolidated fund
expenses of $1,635, (c) expenses incurred by the Intermediate
Holding Companies of $241, (d) the effect of timing differences in
the recognition of incentive income compensation expense between
net income attributable to OCG and adjusted net income of $54, (e)
acquisition-related items of $1,889, (f) adjustments of $5,545
related to amounts received for contractually reimbursable costs
that are classified as other income under GAAP and as expenses for
ANI, and (g) $5,168 of net losses related to foreign-currency
hedging activities. (3) The interest expense adjustment removes
interest expense of the consolidated funds and reclassifies
interest income from other income of consolidated funds. (4) The
adjustment to other income (expense), net represents adjustments
related to (a) amounts received for contractually reimbursable
costs of $5,545 that are classified as other income under GAAP and
as expenses for ANI, and (b) the reclassification of $1,530 in net
losses related to foreign-currency hedging activities from general
and administrative expense. (5) The adjustment to other income of
consolidated funds removes interest, dividend and other investment
income attributable to third-party investors in our consolidated
funds, and reclassifies investment income to revenues and interest
income to interest expense, net.
As of or for the
Six Months Ended June 30, 2017 Consolidated
Adjustments ANI (in thousands)
Management fees (1) $ 360,956 $ 10,923 $ 371,879 Incentive income
(1) 562,684 41,955 604,639 Investment income (1) 99,557 19,474
119,031 Total expenses (2) (615,988 ) (24,551 ) (640,539 ) Interest
expense, net (3) (93,021 ) 79,506 (13,515 ) Other income (expense),
net (4) 9,561 (8,238 ) 1,323 Other income of consolidated funds (5)
151,368 (151,368 ) — Income taxes (17,843 ) 17,843 — Net income
attributable to non-controlling interests in consolidated funds
(13,553 ) 13,553 — Net income attributable to non-controlling
interests in consolidated subsidiaries (271,482 ) 271,482 —
Net income attributable to Oaktree Capital Group,
LLC/Adjusted net income $ 172,239 $ 270,579 $ 442,818
(1) The adjustment (a) adds back amounts
earned from the consolidated funds, (b) for management fees,
reclassifies $2,099 of net gains related to foreign-currency
hedging activities from general and administrative expense, (c) for
incentive income, includes $41,954 related to timing differences in
the recognition of incentive income between net income attributable
to OCG and adjusted net income, and (d) for investment income,
includes $22,647 related to corporate investments in CLOs, which
under GAAP are marked-to-market but for ANI accounted for at
amortized cost, subject to impairment. (2) The expense adjustment
consists of (a) equity-based compensation expense of $3,421 related
to unit grants made before our initial public offering, (b)
consolidated fund expenses of $4,832, (c) expenses incurred by the
Intermediate Holding Companies of $677, (d) the effect of timing
differences in the recognition of incentive income compensation
expense between net income attributable to OCG and adjusted net
income of $41,954, (e) acquisition-related items of $2,463, (f)
adjustments of $9,390 related to amounts received for contractually
reimbursable costs that are classified as other income under GAAP
and as expenses for ANI, and (g) $3,380 of net gains related to
foreign-currency hedging activities. (3) The interest expense
adjustment removes interest expense of the consolidated funds and
reclassifies interest income from other income of consolidated
funds. (4) The adjustment to other income (expense), net represents
adjustments related to (a) amounts received for contractually
reimbursable costs of $9,390 that are classified as other income
under GAAP and as expenses for ANI, and (b) the reclassification of
$1,154 in net gains related to foreign-currency hedging activities
from general and administrative expense. (5) The adjustment to
other income of consolidated funds removes interest, dividend and
other investment income attributable to third-party investors in
our consolidated funds, and reclassifies investment income to
revenues and interest income to interest expense, net.
As of or for the Six Months Ended June 30, 2016
Consolidated Adjustments ANI
(in thousands) Management fees (1) $ 393,568 $ 5,152 $
398,720 Incentive income (1) 143,638 40,597 184,235 Investment
income (1) 70,447 (7,645 ) 62,802 Total expenses (2) (376,832 )
(10,525 ) (387,357 ) Interest expense, net (3) (54,435 ) 37,776
(16,659 ) Other income (expense), net (4) 11,349 (12,741 ) (1,392 )
Other income of consolidated funds (5) 57,518 (57,518 ) — Income
taxes (21,251 ) 21,251 — Net income attributable to non-controlling
interests in consolidated funds (2,375 ) 2,375 — Net income
attributable to non-controlling interests in consolidated
subsidiaries (144,502 ) 144,502 — Net income
attributable to Oaktree Capital Group, LLC/Adjusted net income $
77,125 $ 163,224 $ 240,349 (1)
The adjustment (a) adds back amounts earned from the consolidated
funds, (b) for management fees, reclassifies $689 of net gains
related to foreign-currency hedging activities from general and
administrative expense, (c) for incentive income, includes $39,888
related to timing differences in the recognition of incentive
income between net income attributable to OCG and adjusted net
income, and (d) for investment income, includes $13,578 related to
corporate investments in CLOs, which under GAAP are
marked-to-market but for ANI accounted for at amortized cost,
subject to impairment. (2) The expense adjustment consists of (a)
equity-based compensation expense of $6,066 related to unit grants
made before our initial public offering, (b) consolidated fund
expenses of $2,676, (c) expenses incurred by the Intermediate
Holding Companies of $536, (d) the effect of timing differences in
the recognition of incentive income compensation expense between
net income attributable to OCG and adjusted net income of $39,888,
(e) acquisition-related items of $1,498, (f) adjustments of $11,346
related to amounts received for contractually reimbursable costs
that are classified as other income under GAAP and as expenses for
ANI, and (g) $10,237 of net losses related to foreign-currency
hedging activities. (3) The interest expense adjustment removes
interest expense of the consolidated funds and reclassifies
interest income from other income of consolidated funds. (4) The
adjustment to other income (expense), net represents adjustments
related to (a) amounts received for contractually reimbursable
costs of $11,346 that are classified as other income under GAAP and
as expenses for ANI, and (b) the reclassification of $1,395 in net
losses related to foreign-currency hedging activities from general
and administrative expense. (5) The adjustment to other income of
consolidated funds removes interest, dividend and other investment
income attributable to third-party investors in our consolidated
funds, and reclassifies investment income to revenues and interest
income to interest expense, net.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20170727005441/en/
Investor Relations:Oaktree Capital Group, LLCAndrea D.
Williams(213)
830-6483investorrelations@oaktreecapital.comorPress
Relations:Sard Verbinnen & CoJohn Christiansen(415)
618-8750jchristiansen@sardverb.comorSard Verbinnen
& CoAlyssa Linn(310)
201-2040alinn@sardverb.com
Oaktree Capital (NYSE:OAK)
Historical Stock Chart
From Aug 2024 to Sep 2024
Oaktree Capital (NYSE:OAK)
Historical Stock Chart
From Sep 2023 to Sep 2024