Oaktree Capital : Announces Second Quarter 2016 Financial Results

As of June 30, 2016 or for the quarter then ended: GAAP net income attributable to Oaktree Capital Group, LLC (“OCG”) was $49.0 million (or $0.78 per Class A unit), up from $19.8 million ($0.41 per unit) for the second quarter of 2015. Adjusted net income was $142.6 million ($0.79 per unit), up 67% from $85.3 million ($0.44 per unit) for the second quarter of 2015, on higher incentive income, investment income and fee-related earnings. Distributable earnings were $127.5 million ($0.72 per unit), up 15% from $111.1 million ($0.59 per unit) for the second quarter of 2015, on higher incentive income and fee-related earnings. Assets under management were $98.1 billion, up 1% for the quarter and down 5% over the last 12 months. Uncalled capital commitments stood at a record high of $22.8 billion. A distribution was declared of $0.58 per Class A unit, bringing aggregate distributions relating to the last 12 months to $2.00.

Oaktree Capital Group, LLC (NYSE: OAK) today reported its unaudited financial results for the second quarter ended June 30, 2016.

Jay Wintrob, Chief Executive Officer, said, “We generated solid second quarter results with growth versus a year ago in all revenue categories and in FRE and ANI. Despite some significant market volatility at quarter-end following the Brexit vote, we delivered positive performance across virtually all of our investment strategies. Low interest rates, ample liquidity and a search for yield continue to sustain the credit markets and buoy equity markets, creating a somewhat challenging investment environment for our counter-cyclical investment strategies. However, with our record level of dry powder, experience in navigating market cycles and patient, opportunistic approach to deployment, we are well positioned to continue to serve our clients’ needs.”

GAAP-basis results for the second quarter and first six months of 2016 included net income attributable to Oaktree Capital Group, LLC of $49.0 million and $77.1 million, respectively, as compared to $19.8 million and $58.1 million for the comparable 2015 periods. Both periods’ increases reflected higher segment profits, as well as a larger allocation of income to OCG based on the average number of Class A units outstanding.

Assets under management (“AUM”) were $98.1 billion as of June 30, 2016, up 1% from $96.9 billion as of March 31, 2016, and down 5% from $103.1 billion as of June 30, 2015. Management fee-generating assets under management (“management fee-generating AUM”) were $79.5 billion as of June 30, 2016, down 1% from $79.9 billion as of March 31, 2016, and up 1% from $78.6 billion as of June 30, 2015.

As of June 30, 2016, uncalled capital commitments (so-called “dry powder”) stood at a record high of $22.8 billion. Of these commitments, $13.1 billion were not yet generating management fees (so-called “shadow AUM”). Gross capital raised was $3.0 billion for the second quarter of 2016 and $10.2 billion for the last 12 months.

Adjusted net income (“ANI”) grew to $142.6 million and $247.7 million for the second quarter and first six months of 2016, respectively, from $85.3 million and $235.3 million for the comparable 2015 periods. Distributable earnings grew to $127.5 million and $253.2 million for the second quarter and first six months of 2016, respectively, from $111.1 million and $246.3 million for the comparable 2015 periods. The second-quarter increases reflected higher incentive income and fee-related earnings and, for ANI, higher investment income. The increases in ANI and distributable earnings for the six-month period were primarily attributable to fee-related earnings.

In addition to ANI, Oaktree calculates economic net income (“ENI”) to facilitate comparisons with other alternative asset managers that report a measure similar to ENI as a performance metric. Unlike ANI, ENI measures incentive income based on the market values of the funds’ holdings. ENI was $166.2 million and $207.4 million for the second quarter and first six months of 2016, respectively, as compared to $17.6 million and $241.2 million for the comparable 2015 periods. Per Class A unit, ENI was $0.96 and a loss of $0.02 for the second quarters of 2016 and 2015, respectively.

Closed-end funds that Oaktree is currently marketing include Oaktree Real Estate Opportunities Fund VII, Oaktree Opportunities Fund Xb, Oaktree Infrastructure Fund, Oaktree European Capital Solutions Fund, Oaktree European Principal Fund IV and Oaktree Real Estate Debt Fund II.

The table below presents (a) GAAP-basis results, (b) segment results for both the Operating Group and per Class A unit, and (c) assets under management and accrued incentives (fund level) data. Please refer to the Glossary for definitions.

				As of or for the Three Months Ended June 30,												As of or for the Six Months Ended June 30,
				2016						2015						2016						2015
GAAP-basis Results:				(in thousands, except per unit data or as otherwise indicated)
Revenues				$	282,716					$	51,487					$	537,206					$	102,306
Net income attributable to Oaktree Capital Group, LLC				49,047						19,814						77,125						58,067
Net income per Class A unit				0.78						0.41						1.24						1.24
Segment Results: (1)
Segment revenues				$	332,822					$	274,710					$	645,757					$	671,142
Adjusted net income				142,645						85,279						247,670						235,305
Distributable earnings revenues				306,660						289,717						630,999						665,448
Distributable earnings				127,506						111,140						253,231						246,336
Fee-related earnings revenues				197,450						190,197						398,720						380,292
Fee-related earnings				64,629						52,990						126,988						102,746
Economic net income revenues				416,317						149,507						586,394						658,522
Economic net income				166,187						17,619						207,383						241,167
Per Class A Unit: (1)
Adjusted net income				$	0.79					$	0.44					$	1.28					$	1.24
Distributable earnings				0.72						0.59						1.39						1.36
Fee-related earnings				0.38						0.34						0.75						0.62
Economic net income (loss)				0.96						(0.02		)				1.09						1.18
Operating Metrics:
Assets under management (in millions):
Assets under management				$	98,124					$	103,060					$	98,124					$	103,060
Management fee-generating assets under management				79,516						78,596						79,516						78,596
Incentive-creating assets under management				30,372						33,860						30,372						33,860
Uncalled capital commitments				22,817						20,141						22,817						20,141
Accrued incentives (fund level):
Incentives created (fund level)				171,142						(64,055		)				124,872						201,407
Incentives created (fund level), net of associated incentive income compensation expense				75,783						(36,066		)				58,792						100,233
Accrued incentives (fund level)				1,525,854						1,936,787						1,525,854						1,936,787
Accrued incentives (fund level), net of associated incentive income compensation expense				771,253						1,005,785						771,253						1,005,785

(1)			In the fourth quarter of 2015, the definition of adjusted net income was modified to reflect differences with respect to (a) third-party placement costs associated with closed-end funds, which under GAAP are expensed as incurred, but for ANI are capitalized and amortized as general and administrative expense in proportion to the associated management fee stream, and (b) gains and losses resulting from foreign-currency transactions and hedging activities, which under GAAP are recognized as general and administrative expense whether realized or unrealized in the current period, whereas 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. Foreign-currency transaction gains and losses are included in other income (expense), net. Prior periods have not been recast for the change related to third-party placement costs, but have been recast to retroactively reflect the change related to foreign-currency hedging. Placement costs associated with closed-end funds amounted to $2.8 million and $3.7 million for the second quarter and first six months of 2015, respectively, and remain expensed as incurred in those periods for both GAAP and ANI purposes. Please refer to the Glossary for more information.

Note: Oaktree discloses in this earnings release certain revenues and financial measures, including segment 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, that are calculated and presented on a basis other than generally accepted accounting principles in the United States (“non-GAAP”). Reconciliations of those non-GAAP financial measures to the most directly comparable GAAP financial measures are presented at Exhibit A. All non-GAAP measures and all interim results presented in this release are unaudited.

GAAP-basis Results

Oaktree adopted the new consolidation guidance as of January 1, 2016 under the modified retrospective approach, which did not require prior periods to be recast. The adoption resulted in the deconsolidation of substantially all of our previously consolidated investment funds. Investment vehicles in which we have a significant investment, such as CLOs and certain Oaktree funds, remain 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 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 $231.2 million, or 448.9%, to $282.7 million in the second quarter of 2016, from $51.5 million in the second quarter of 2015. Total expenses decreased $54.3 million, or 22.1%, to $191.6 million in the second quarter of 2016, from $245.9 million in the second quarter of 2015. Other income (loss) increased to income of $58.3 million in the second quarter of 2016, from a loss of $116.7 million in the second quarter of 2015. In all three cases, the changes primarily reflected the deconsolidation of substantially all of Oaktree’s investment funds caused by the adoption of the new consolidation guidance, effective the first quarter of 2016.

Net income attributable to OCG was $49.0 million for the second quarter of 2016, as compared to $19.8 million for the second quarter of 2015. The increase reflected higher segment profits, as well as a larger allocation of income to OCG resulting from an increase in the average number of Class A units outstanding.

Operating Metrics

Assets Under Management

AUM was $98.1 billion as of June 30, 2016, $96.9 billion as of March 31, 2016 and $103.1 billion as of June 30, 2015. The $1.2 billion increase since March 31, 2016 primarily reflected $1.9 billion of aggregate capital inflows for closed-end funds and $1.6 billion in aggregate market-value gains, partially offset by $1.6 billion of aggregate distributions to closed-end fund investors and change in fee-generating leverage.

The $5.0 billion decrease in AUM since June 30, 2015 primarily reflected $5.1 billion of distributions to closed-end fund investors, $4.2 billion of net outflows from open-end funds and $1.8 billion in aggregate market-value declines, partially offset by $6.4 billion of aggregate capital inflows for closed-end funds. Capital inflows for closed-end funds included $1.8 billion for Oaktree Opportunities Funds X and Xb (“Opps X and Xb”), $1.1 billion for Oaktree Real Estate Opportunities Fund VII (“ROF VII”) and $0.9 billion for Oaktree European Principal Fund IV. Distributions to closed-end fund investors included $1.6 billion from Distressed Debt funds, $1.5 billion from Control Investing funds and $1.3 billion from Real Estate funds.

Management Fee-generating Assets Under Management

Management fee-generating AUM, a forward-looking metric, was $79.5 billion as of June 30, 2016, $79.9 billion as of March 31, 2016 and $78.6 billion as of June 30, 2015. The $0.4 billion decrease since March 31, 2016 primarily reflected a $1.7 billion aggregate decline attributable to closed-end funds in liquidation and fee-generating leverage, largely offset by $1.3 billion of aggregate market-value gains.

The $0.9 billion increase in management fee-generating AUM since June 30, 2015 primarily reflected an aggregate $7.6 billion principally from the investment-period commencement of Oaktree Power Opportunities Fund IV (“Power Fund IV”) and Oaktree Principal Fund VI (“PF VI”) in November 2015, and of Opps X and ROF VII as of January 1, 2016, and $1.3 billion of drawdowns by closed-end funds for which management fees are based on drawn capital, NAV or cost basis. These increases were partially offset by $4.2 billion of net outflows from open-end funds, $3.0 billion attributable to closed-end funds in liquidation and $1.1 billion in aggregate market-value declines.

Incentive-creating Assets Under Management

Incentive-creating assets under management (“incentive-creating AUM”) were $30.4 billion as of June 30, 2016, $31.2 billion as of March 31, 2016 and $33.9 billion as of June 30, 2015. The $0.8 billion decrease since March 31, 2016 reflected the net effect of $0.7 billion in drawdowns by closed-end funds, $1.6 billion in distributions from closed-end funds, $0.3 billion in aggregate market-value gains and $0.2 billion of unfavorable foreign-currency translation. The $3.5 billion decrease since June 30, 2015 reflected the net effect of $3.4 billion in drawdowns by closed-end funds, $5.9 billion in distributions from closed-end funds and $0.8 billion in aggregate market-value declines.

Of the $30.4 billion in incentive-creating AUM as of June 30, 2016, $17.9 billion, or 59%, was generating incentives at the fund level, as compared with $20.1 billion, or 59%, of the $33.9 billion of incentive-creating AUM as of June 30, 2015.

Accrued Incentives (Fund Level) and Incentives Created (Fund Level)

Accrued incentives (fund level) were $1.5 billion as of June 30, 2016, $1.4 billion as of March 31, 2016 and $1.9 billion as of June 30, 2015. The second quarter of 2016 reflected $171.1 million of incentives created (fund level) and $87.6 million of segment incentive income recognized.

Net of incentive income compensation expense, accrued incentives (fund level) were $771.3 million as of June 30, 2016, $747.7 million as of March 31, 2016 and $1.0 billion as of June 30, 2015. As of June 30, 2016, March 31, 2016 and June 30, 2015, the portion of net accrued incentives (fund level) represented by funds that was currently paying incentives was $274.5 million, $294.1 million and $371.1 million, respectively, with the remainder arising from funds that as of that date were not at the stage of their cash distribution waterfall where Oaktree was entitled to receive incentives, other than possibly tax-related distributions.

Uncalled Capital Commitments

Uncalled capital commitments were $22.8 billion as of June 30, 2016, $21.4 billion as of March 31, 2016 and $20.1 billion as of June 30, 2015. Invested capital by incentive-creating closed-end and similar funds during the quarter and 12 months ended June 30, 2016 aggregated $2.4 billion and $7.7 billion, respectively, as compared with $2.2 billion and $9.3 billion for the comparable 2015 periods.

Segment Results

Revenues

Segment revenues grew $58.1 million, or 21.2%, to $332.8 million in the second quarter of 2016, from $274.7 million in the second quarter of 2015, reflecting increases of $7.3 million in management fees, $26.5 million in incentive income and $24.3 million in investment income.

Management Fees

Management fees increased $7.3 million, or 3.8%, to $197.5 million in the second quarter of 2016, from $190.2 million in the second quarter of 2015. The growth reflected an aggregate increase of $31.3 million principally from the start of investment periods for Power Fund IV, PF VI, Opps X and ROF VII. This increase was partially offset by an aggregate decline of $24.0 million primarily attributable to closed-end funds in liquidation and net outflows and market-value declines in open-end funds.

Incentive Income

Incentive income increased $26.5 million, or 43.4%, to $87.6 million in the second quarter of 2016, from $61.1 million in the second quarter of 2015. The second quarter of 2016 reflected incentive distributions from five funds across four investment strategies.

Investment Income

Investment income grew $24.3 million, or 103.8%, to $47.7 million in the second quarter of 2016, from $23.4 million in the second quarter of 2015. The increase largely 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 $16.6 million and $12.5 million in the second quarters of 2016 and 2015, respectively, of which performance fees accounted for $1.5 million and $0.6 million.

Expenses

Compensation and Benefits

Compensation and benefits decreased $5.6 million, or 5.3%, to $99.2 million for the second quarter of 2016, from $104.8 million for the second quarter of 2015, reflecting variations in annual bonus accruals, as well as a favorable fluctuation of $2.4 million in phantom equity expense stemming largely from each period’s change in the Class A unit trading price.

Equity-based Compensation

Equity-based compensation increased $0.5 million, or 4.2%, to $12.4 million for the second quarter of 2016, from $11.9 million for the second quarter of 2015. 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 $5.8 million, or 19.6%, to $35.4 million for the second quarter of 2016, from $29.6 million for the second quarter of 2015. The percentage increase was smaller than the corresponding increase of 43.4% in incentive income, primarily due to differences in the applicable funds’ compensation percentages.

General and Administrative

General and administrative expense increased $0.3 million, or 1.0%, to $30.6 million for the second quarter of 2016, from $30.3 million for the second quarter of 2015, primarily reflecting higher professional fees and other general operating items, partially offset by lower expense for placement costs associated with closed-end funds.

Depreciation and Amortization

Depreciation and amortization expense increased $0.9 million, or 42.9%, to $3.0 million for the second quarter of 2016, from $2.1 million for the second quarter of 2015, primarily reflecting amortization of leasehold improvements associated with office space expansion.

Adjusted Net Income

ANI increased $57.3 million, or 67.2%, to $142.6 million for the second quarter of 2016, from $85.3 million for the second quarter of 2015, reflecting increases of $24.3 million in investment income, $20.6 million in incentive income, net of incentive income compensation expense (“net incentive income”), and $11.6 million in fee-related earnings. The portion of ANI attributable to our Class A units was $49.7 million, or $0.79 per unit, and $21.4 million, or $0.44 per unit, for the second quarters of 2016 and 2015, respectively.

The effective tax rate applied to ANI for the second quarters of 2016 and 2015 was 13% and 18%, respectively, resulting from estimated full-year effective rates of 19% and 17%, respectively. The effective tax rate applied to ANI for the second quarter of 2016 was 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 expect variability in tax rates between quarters and full years, 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 $16.4 million, or 14.8%, to $127.5 million for the second quarter of 2016, from $111.1 million for the second quarter of 2015, reflecting increases of $20.6 million in net incentive income and $11.6 million in fee-related earnings, partially offset by a $16.8 million decline in investment income proceeds. For the second quarter of 2016, investment income proceeds totaled $21.6 million, including $10.7 million from fund distributions and $10.9 million from DoubleLine, as compared with total investment income proceeds in the prior-year quarter of $38.4 million, of which $30.2 million and $8.2 million was attributable to fund distributions and DoubleLine, respectively. The portion of distributable earnings attributable to our Class A units was $0.72 and $0.59 per unit for the second quarters of 2016 and 2015, respectively, reflecting distributable earnings per Operating Group unit of $0.82 and $0.72, 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 grew $11.6 million, or 21.9%, to $64.6 million for the second quarter of 2016, from $53.0 million for the second quarter of 2015. The increase reflected $7.3 million of higher management fees and $5.6 million of lower compensation and benefits. The portion of fee-related earnings attributable to our Class A units was $0.38 and $0.34 per unit for the second quarters of 2016 and 2015, respectively.

The effective tax rate applicable to fee-related earnings for the second quarters of 2016 and 2015 was 8% and -1%, respectively, resulting from estimated full-year effective rates of 8% and 4%, respectively. The rate used for interim fiscal periods is based on the estimated full-year effective tax rate, which is subject to change as the year progresses. In general, the annual effective tax rate increases as annual fee-related earnings increase, and vice versa.

Capital and Liquidity

As of June 30, 2016, Oaktree had $1.1 billion of cash and U.S. Treasury securities and $796 million of outstanding debt, net of debt issuance costs. As previously announced, on July 12, 2016, Oaktree issued and sold to certain accredited investors $100 million in aggregate principal amount of 3.69% senior notes due July 12, 2031. Oaktree used the proceeds from the sale of the notes to repay $100 million of its $250 million term loan due March 31, 2021. Oaktree neither had as of June 30, 2016, nor currently has any borrowings outstanding against its $500 million revolving credit facility. As of June 30, 2016, Oaktree’s investments in funds and companies had a carrying value of $1.4 billion, with the 20% investment in DoubleLine carried at $16 million based on cost, as adjusted under the equity method of accounting. Accrued incentives (fund level), net of associated compensation expense, represented an additional $771 million as of that date.

Distribution

Oaktree Capital Group, LLC has declared a distribution attributable to the second quarter of 2016 of $0.58 per Class A unit. This distribution will be paid on August 12, 2016 to Class A unitholders of record at the close of business on August 8, 2016.

Conference Call

Oaktree will host a conference call to discuss its second quarter 2016 results today at 11:00 a.m. Eastern Time / 8:00 a.m. Pacific Time. The conference call may be accessed by dialing [phone] (U.S. callers) or [phone] (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 [phone] (U.S. callers) or [phone] (non-U.S. callers), access code 10089075, beginning approximately one hour after the broadcast.

About Oaktree

Oaktree is a leader among global investment managers specializing in alternative investments, with $98 billion in assets under management as of June 30, 2016. The firm emphasizes an opportunistic, value-oriented and risk-controlled approach to investments in distressed debt, corporate debt (including high yield debt and senior loans), control investing, convertible securities, real estate and listed equities. Headquartered in Los Angeles, the firm has over 900 employees and offices in 18 cities worldwide. For additional information, please visit Oaktree’s website at www.oaktreecapital.com.

Investor Relations Website

Investors and others should note that Oaktree uses the Unitholders – Investor Relations section of its corporate website to announce material information to investors and the marketplace. While not all of the information that Oaktree posts on its corporate website is of a material nature, some information could be deemed to be material. Accordingly, Oaktree encourages investors, the media and others interested in Oaktree to review the information that it shares on its corporate website at the Unitholders – Investor Relations section of the Oaktree website, http://ir.oaktreecapital.com/. Information contained on, or available through, our website is not incorporated by reference into this document.

Forward-Looking Statements

This release contains forward-looking statements within the meaning of Section 27A of the U.S. Securities Act of 1933, as amended, and Section 21E of the U.S. Securities Exchange Act of 1934, as amended, which reflect the current views of Oaktree Capital Group, LLC (“OCG”) with respect to, among other things, our future results of operations and financial performance. In some cases, you can identify forward-looking statements by words such as “anticipate,” “approximately,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “outlook,” “plan,” “potential,” “predict,” “seek,” “should,” “will” and “would” or the negative version of these words or other comparable or similar words. These statements identify prospective information. Important factors could cause actual results to differ, possibly materially, from those indicated in these statements. Forward-looking statements are based on our beliefs, assumptions and expectations of our future performance, taking into account all information currently available to us. Such forward-looking statements are subject to risks and uncertainties and assumptions relating to our operations, financial results, financial condition, business prospects, growth strategy and liquidity, including, but not limited to, changes in our anticipated revenue and income, which are inherently volatile; changes in the value of our investments; the pace of our raising of new funds; changes in assets under management; the timing and receipt of, and impact of taxes on, carried interest; distributions from and liquidation of our existing funds; the amount and timing of distributions on our Class A units; changes in our operating or other expenses; the degree to which we encounter competition; and general 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, 2015 filed with the SEC on February 26, 2016, which is accessible on the SEC’s website at www.sec.gov, provide examples of risks, uncertainties and events that may cause our actual results to differ materially from the expectations described in our forward-looking statements.

Forward-looking statements speak only as of the date the statements are made. Except as required by law, we do not undertake any obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise.

This release and its contents do not constitute and should not be construed as (a) a recommendation to buy, (b) an offer to buy or solicitation of an offer to buy, (c) an offer to sell or (d) advice in relation to, any securities of OCG or securities of any Oaktree investment fund.

Consolidated Statements of Operations Data (GAAP basis) (1)
				Three Months Ended June 30,												Six Months Ended June 30,
				2016						2015						2016						2015
				(in thousands, except per unit data)
Revenues:
Management fees				$	195,015					$	50,923					$	393,568					$	101,742
Incentive income				87,701						564						143,638						564
Total revenues				282,716						51,487						537,206						102,306
Expenses:
Compensation and benefits				(103,002		)				(107,750		)				(211,407		)				(217,893		)
Equity-based compensation				(14,726		)				(16,083		)				(28,622		)				(27,789		)
Incentive income compensation				(35,461		)				(35,211		)				(45,268		)				(102,103		)
Total compensation and benefits expense				(153,189		)				(159,044		)				(285,297		)				(347,785		)
General and administrative				(32,949		)				(33,488		)				(80,780		)				(40,068		)
Depreciation and amortization				(4,048		)				(3,107		)				(8,209		)				(5,999		)
Consolidated fund expenses				(1,462		)				(50,290		)				(2,546		)				(88,051		)
Total expenses				(191,648		)				(245,929		)				(376,832		)				(481,903		)
Other income (loss):
Interest expense				(26,730		)				(52,742		)				(54,435		)				(99,311		)
Interest and dividend income				37,138						478,311						73,408						1,001,240
Net realized gain on consolidated funds’ investments				6,682						857,548						10,083						1,332,378
Net change in unrealized appreciation (depreciation) on consolidated funds’ investments				(5,301		)				(1,418,385		)				(25,973		)				(910,902		)
Investment income				41,000						15,694						70,447						28,376
Other income (expense), net				5,548						2,863						11,349						7,557
Total other income (loss)				58,337						(116,711		)				84,879						1,359,338
Income (loss) before income taxes				149,405						(311,153		)				245,253						979,741
Income taxes				(8,571		)				(5,485		)				(21,251		)				(13,360		)
Net income (loss)				140,834						(316,638		)				224,002						966,381
Less:
Net (income) loss attributable to non-controlling interests in consolidated funds				(7,319		)				391,961						(2,375		)				(744,704		)
Net income attributable to non-controlling interests in consolidated subsidiaries				(84,468		)				(55,509		)				(144,502		)				(163,610		)
Net income attributable to Oaktree Capital Group, LLC				$	49,047					$	19,814					$	77,125					$	58,067
Distributions declared per Class A unit				$	0.55					$	0.64					$	1.02					$	1.20
Net income per unit (basic and diluted):
Net income per Class A unit				$	0.78					$	0.41					$	1.24					$	1.24
Weighted average number of Class A units outstanding				62,617						48,372						62,256						46,727

(1)			In the first quarter of 2016, Oaktree adopted the new consolidation and collateralized financing entity guidance under the modified retrospective approach. The modified retrospective approach did not require prior periods to be recast. The adoption resulted in the deconsolidation of substantially all of Oaktree’s investment funds.

Segment Financial Data
				As of or for the Three Months Ended June 30,												As of or for the Six Months Ended June 30,
				2016						2015						2016						2015
Segment Statements of Operations Data: (1)				(in thousands, except per unit data or as otherwise indicated)
Revenues:
Management fees				$	197,450					$	190,197					$	398,720					$	380,292
Incentive income				87,647						61,148						184,235						214,027
Investment income				47,725						23,365						62,802						76,823
Total revenues				332,822						274,710						645,757						671,142
Expenses:
Compensation and benefits				(99,173		)				(104,767		)				(203,443		)				(213,648		)
Equity-based compensation				(12,445		)				(11,901		)				(23,148		)				(18,924		)
Incentive income compensation				(35,407		)				(29,554		)				(85,156		)				(119,656		)
General and administrative				(30,600		)				(30,335		)				(62,081		)				(59,902		)
Depreciation and amortization				(3,048		)				(2,105		)				(6,208		)				(3,996		)
Total expenses				(180,673		)				(178,662		)				(380,036		)				(416,126		)
Adjusted net income before interest and other income (expense)				152,149						96,048						265,721						255,016
Interest expense, net of interest income (2).				(7,977		)				(8,782		)				(16,659		)				(17,715		)
Other income (expense), net				(1,527		)				(1,987		)				(1,392		)				(1,996		)
Adjusted net income				$	142,645					$	85,279					$	247,670					$	235,305
Adjusted net income-OCG				$	49,682					$	21,422					$	79,842					$	58,145
Adjusted net income per Class A unit				0.79						0.44						1.28						1.24
Distributable earnings				127,506						111,140						253,231						246,336
Distributable earnings-OCG				44,882						28,635						86,725						63,368
Distributable earnings per Class A unit				0.72						0.59						1.39						1.36
Fee-related earnings				64,629						52,990						126,988						102,746
Fee-related earnings-OCG				23,817						16,221						46,876						28,954
Fee-related earnings per Class A unit				0.38						0.34						0.75						0.62
Economic net income				166,187						17,619						207,383						241,167
Economic net income (loss)-OCG				59,880						(978		)				67,683						54,939
Economic net income (loss) per Class A unit				0.96						(0.02		)				1.09						1.18
Weighted average number of Operating Group units outstanding				155,057						153,839						154,433						153,540
Weighted average number of Class A units outstanding				62,617						48,372						62,256						46,727
Operating Metrics:
Assets under management (in millions):
Assets under management				$	98,124					$	103,060					$	98,124					$	103,060
Management fee-generating assets under management				79,516						78,596						79,516						78,596
Incentive-creating assets under management				30,372						33,860						30,372						33,860
Uncalled capital commitments (3)				22,817						20,141						22,817						20,141
Accrued incentives (fund level): (4)
Incentives created (fund level)				171,142						(64,055		)				124,872						201,407
Incentives created (fund level), net of associated incentive income compensation expense				75,783						(36,066		)				58,792						100,233
Accrued incentives (fund level)				1,525,854						1,936,787						1,525,854						1,936,787
Accrued incentives (fund level), net of associated incentive income compensation expense				771,253						1,005,785						771,253						1,005,785

(1)			Our business is comprised of one segment, our investment management segment, which consists of the investment management services that we provide to our clients. The components of revenues and expenses used in determining adjusted net income do not give effect to the consolidation of the funds that we manage. Segment revenues include investment income (loss) that is classified in other income (loss) in the GAAP-basis statements of operations. Segment revenues and expenses also reflect Oaktree's proportionate economic interest in Highstar, whereby amounts received for contractually reimbursable costs are classified for segment reporting as expenses and under GAAP as other income. In addition, adjusted net income excludes the effect of (a) non-cash equity-based compensation expense related to unit grants made before our initial public offering, (b) acquisition-related items, including amortization of intangibles and changes in the contingent consideration liability, (c) differences arising from equity value units (“EVUs”) that are classified as liability awards under GAAP but as equity awards for segment reporting, (d) income taxes, (e) other income or expenses applicable to OCG or its Intermediate Holding Companies, and (f) the adjustment for non-controlling interests. In the fourth quarter of 2015, the definition of adjusted net income was modified to reflect differences with respect to (a) third-party placement costs associated with closed-end funds, which under GAAP are expensed as incurred, but for adjusted net income are capitalized and amortized as general and administrative expense in proportion to the associated management fee stream, and (b) gains and losses resulting from foreign-currency transactions and hedging activities, which under GAAP are recognized as general and administrative expense whether realized or unrealized in the current period, but for adjusted net income 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. Foreign-currency transaction gains and losses are included in other income (expense), net. Prior periods have not been recast for the change related to third-party placement costs, but have been recast to retroactively reflect the change related to foreign-currency hedging. Incentive income and incentive income compensation expense are included in adjusted net income when the underlying fund distributions are known or knowable as of the respective quarter end, which may be later than the time at which the same revenue or expense is included in the GAAP-basis statements of operations, for which the revenue standard is fixed or determinable and the expense standard is probable and reasonably estimable. CLO investments are carried at fair value for GAAP reporting, whereas for segment reporting they are carried at amortized cost, subject to any impairment charges. Investment income on CLO investments is recognized in adjusted net income when cash distributions are received. Cash distributions are allocated between income and return of capital based on the effective yield method. Adjusted net income is calculated at the Operating Group level. For additional information regarding the reconciling adjustments discussed above, please see Exhibit A.
(2)			Interest income was $1.6 million and $1.2 million for the three months ended June 30, 2016 and 2015, respectively, and $2.9 million and $2.2 million for the six months ended June 30, 2016 and 2015, respectively.
(3)			Uncalled capital commitments represent undrawn capital commitments by partners (including Oaktree as general partner) of our closed-end funds through their investment periods and certain evergreen funds. If a fund distributes capital during its investment period, that capital is typically subject to possible recall, in which case it is included in uncalled capital commitments.
(4)			Our funds record as accrued incentives the incentive income that would be paid to us if the funds were liquidated at their reported values as of the date of the financial statements. Incentives created (fund level) refers to the gross amount of potential incentives generated by the funds during the period. We refer to the amount of incentive income recognized as revenue by us as segment incentive income. Amounts recognized by us as incentive income are no longer included in accrued incentives (fund level), the term we use for remaining fund-level accruals. Incentives created (fund level), incentive income and accrued incentives (fund level) are presented gross, without deduction for direct compensation expense that is owed to our investment professionals associated with the particular fund when we earn the incentive income. We call that charge “incentive income compensation expense.” Incentive income compensation expense varies by the investment strategy and vintage of the particular fund, among many factors.

Operating Metrics

We monitor certain operating metrics that are either common to the alternative asset management industry or that we believe provide important data regarding our business. As described below, these operating metrics include AUM, management fee-generating AUM, incentive-creating AUM, incentives created (fund level), accrued incentives (fund level) and uncalled capital commitments.

Assets Under Management										As of
										June 30, 2016						March 31, 2016						June 30, 2015
										(in millions)
Assets Under Management:
Closed-end funds										$	59,576					$	59,081					$	59,014
Open-end funds										33,667						33,008						38,813
Evergreen funds										4,881						4,785						5,233
Total										$	98,124					$	96,874					$	103,060
				Three Months Ended June 30,												Twelve Months Ended June 30,
				2016						2015						2016						2015
				(in millions)
Change in Assets Under Management:
Beginning balance				$	96,874					$	99,903					$	103,060					$	91,089
Closed-end funds:
Capital commitments/other (1)				1,889						4,741						6,442						16,110
Acquisition (Highstar)				—						—						—						2,349
Distributions for a realization event/other (2)				(1,220		)				(1,405		)				(5,117		)				(7,101		)
Change in uncalled capital commitments for funds entering or in liquidation (3)				13						(632		)				118						(1,041		)
Foreign-currency translation				(188		)				249						(26		)				(1,350		)
Change in market value (4)				350						(209		)				(795		)				760
Change in applicable leverage				(349		)				11						(60		)				1,125
Open-end funds:
Contributions				1,002						1,501						3,445						7,021
Redemptions				(1,225		)				(1,189		)				(7,638		)				(5,163		)
Foreign-currency translation				(126		)				134						(16		)				(825		)
Change in market value (4)				1,008						27						(937		)				(200		)
Evergreen funds:
Contributions or new capital commitments				82						27						266						866
Redemptions or distributions/other				(204		)				(115		)				(442		)				(281		)
Distributions from restructured funds				(4		)				—						(55		)				(44		)
Foreign-currency translation				(5		)				2						(9		)				9
Change in market value (4)				227						15						(112		)				(264		)
Ending balance				$	98,124					$	103,060					$	98,124					$	103,060

(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, 2016						March 31, 2016						June 30, 2015
Management Fee-generating Assets Under Management:										(in millions)
Closed-end funds:
Senior Loans										$	6,909					$	7,184					$	6,108
Other closed-end funds										35,096						35,956						30,108
Open-end funds										33,597						32,939						38,731
Evergreen funds										3,914						3,829						3,649
Total										$	79,516					$	79,908					$	78,596
				Three Months Ended June 30,												Twelve Months Ended June 30,
				2016						2015						2016						2015
Change in Management Fee-generating Assets Under Management:				(in millions)
Beginning balance				$	79,908					$	78,497					$	78,596					$	77,781
Closed-end funds:
Capital commitments to funds that pay fees based on committed capital/other (1)				326						114						7,645						1,287
Acquisition (Highstar)				—						—						—						1,882
Capital drawn by funds that pay fees based on drawn capital, NAV or cost basis				380						203						1,289						1,002
Change attributable to funds in liquidation (2)				(1,462		)				(754		)				(3,040		)				(3,417		)
Change in uncalled capital commitments for funds entering or in liquidation that pay fees based on committed capital (3)				13						(36		)				75						(640		)
Distributions by funds that pay fees based on NAV/other (4)				(101		)				(136		)				(350		)				(440		)
Foreign-currency translation				(181		)				138						(66		)				(964		)
Change in market value (5)				122						(22		)				(82		)				(142		)
Change in applicable leverage				(232		)				63						318						1,135
Open-end funds:
Contributions				1,005						1,501						3,446						6,976
Redemptions				(1,231		)				(1,189		)				(7,644		)				(5,147		)
Foreign-currency translation				(126		)				135						(16		)				(823		)
Change in market value				1,010						27						(920		)				(215		)
Evergreen funds:
Contributions or capital drawn by funds that pay fees based on drawn capital or NAV				90						168						786						833
Redemptions or distributions				(209		)				(114		)				(404		)				(261		)
Change in market value				204						1						(117		)				(251		)
Ending balance				$	79,516					$	78,596					$	79,516					$	78,596

(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, 2016								March 31, 2016								June 30, 2015
Reconciliation of Assets Under Management to Management Fee-generating Assets Under Management:				(in millions)
Assets under management				$	98,124							$	96,874							$	103,060
Difference between assets under management and committed capital or cost basis for applicable closed-end funds (1)				(2,392		)						(1,829		)						(4,595		)
Undrawn capital commitments to funds that have not yet commenced their investment periods				(9,278		)						(8,143		)						(13,184		)
Undrawn capital commitments to funds for which management fees are based on drawn capital, NAV or cost basis				(3,828		)						(4,095		)						(4,237		)
Oaktree’s general partner investments in management fee-generating funds				(1,745		)						(1,727		)						(1,200		)
Funds that are no longer paying management fees and co-investments that pay no management fees				(1,365		)						(1,172		)						(1,248		)
Management fee-generating assets under management				$	79,516							$	79,908							$	78,596

(1)			This difference is not applicable to closed-end funds that pay management fees based on NAV or leverage.

The period-end weighted average annual management fee rates applicable to the respective management fee-generating AUM balances above are set forth below.

				As of
Weighted Average Annual Management Fee Rates:				June 30, 2016							March 31, 2016							June 30, 2015
Closed-end funds:
Senior Loans				0.50	%						0.50	%						0.50	%
Other closed-end funds				1.51							1.52							1.54
Open-end funds				0.46							0.47							0.48
Evergreen funds				1.22							1.33							1.49
Overall				0.97							0.98							0.93

Incentive-creating AUM
			As of
			June 30, 2016							March 31, 2016							June 30, 2015
Incentive-creating Assets Under Management:			(in millions)
Closed-end funds			$	28,462						$	29,251						$	31,811
Evergreen funds			1,910							1,954							2,049
Total			$	30,372						$	31,205						$	33,860

Accrued Incentives (Fund Level) and Incentives Created (Fund Level)
				As of or for the Three Months Ended June 30,												As of or for the Six Months Ended June 30,
				2016						2015						2016						2015
Accrued Incentives (Fund Level):				(in thousands)
Beginning balance				$	1,442,359					$	2,061,990					$	1,585,217					$	1,949,407
Incentives created (fund level):
Closed-end funds				166,850						(64,685		)				120,005						200,772
Evergreen funds				4,292						630						4,867						635
Total incentives created (fund level)				171,142						(64,055		)				124,872						201,407
Less: segment incentive income recognized by us				(87,647		)				(61,148		)				(184,235		)				(214,027		)
Ending balance				$	1,525,854					$	1,936,787					$	1,525,854					$	1,936,787
Accrued incentives (fund level), net of associated incentive income compensation expense				$	771,253					$	1,005,785					$	771,253					$	1,005,785

Uncalled Capital Commitments

Uncalled capital commitments were $22.8 billion as of June 30, 2016, $21.4 billion as of March 31, 2016 and $20.1 billion as of June 30, 2015.

Segment Results

Our business is comprised of one segment, our investment management segment, which consists of the investment management services that we provide to our clients.

Adjusted Net Income ⁽¹⁾

Adjusted net income and adjusted net income-OCG, as well as per unit data, are set forth below:

				Three Months Ended June 30,												Six Months Ended June 30,
				2016						2015						2016						2015
				(in thousands, except per unit data)
Revenues:
Management fees				$	197,450					$	190,197					$	398,720					$	380,292
Incentive income				87,647						61,148						184,235						214,027
Investment income				47,725						23,365						62,802						76,823
Total revenues				332,822						274,710						645,757						671,142
Expenses:
Compensation and benefits				(99,173		)				(104,767		)				(203,443		)				(213,648		)
Equity-based compensation				(12,445		)				(11,901		)				(23,148		)				(18,924		)
Incentive income compensation				(35,407		)				(29,554		)				(85,156		)				(119,656		)
General and administrative				(30,600		)				(30,335		)				(62,081		)				(59,902		)
Depreciation and amortization				(3,048		)				(2,105		)				(6,208		)				(3,996		)
Total expenses				(180,673		)				(178,662		)				(380,036		)				(416,126		)
Adjusted net income before interest and other income (expense)				152,149						96,048						265,721						255,016
Interest expense, net of interest income				(7,977		)				(8,782		)				(16,659		)				(17,715		)
Other income (expense), net				(1,527		)				(1,987		)				(1,392		)				(1,996		)
Adjusted net income				142,645						85,279						247,670						235,305
Adjusted net income attributable to OCGH non-controlling interest				(85,039		)				(58,464		)				(147,801		)				(164,371		)
Non-Operating Group expenses				(201		)				(626		)				(465		)				(960		)
Adjusted net income-OCG before income taxes				57,405						26,189						99,404						69,974
Income taxes-OCG				(7,723		)				(4,767		)				(19,562		)				(11,829		)
Adjusted net income-OCG				$	49,682					$	21,422					$	79,842					$	58,145
Adjusted net income per Class A unit				$	0.79					$	0.44					$	1.28					$	1.24
Weighted average number of Class A units outstanding				62,617						48,372						62,256						46,727

(1)			In the fourth quarter of 2015, the definition of adjusted net income was modified to reflect differences with respect to (a) third-party placement costs associated with closed-end funds, which under GAAP are expensed as incurred, but for adjusted net income are capitalized and amortized as general and administrative expense in proportion to the associated management fee stream, and (b) gains and losses resulting from foreign-currency transactions and hedging activities, which under GAAP are recognized as general and administrative expense whether realized or unrealized in the current period, whereas for adjusted net income 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. Foreign-currency transaction gains and losses are included in other income (expense), net. Prior periods have not been recast for the change related to third-party placement costs, but have been recast to retroactively reflect the change related to foreign-currency hedging. Placement costs associated with closed-end funds amounted to $2.8 million and $3.7 million, respectively, for the second quarter and first six months of 2015, and remain expensed as incurred in those periods for both GAAP and ANI purposes.

Investment Income
				Three Months Ended June 30,												Six Months Ended June 30,
				2016						2015						2016						2015
Income (loss) from investments in funds:				(in thousands)
Oaktree funds:
Corporate Debt				$	12,637					$	4,662					$	(906	)				$	16,013
Convertible Securities				48						63						(896		)				1,011
Distressed Debt				10,276						(6,648		)				19,167						(4,712		)
Control Investing				1,280						1,526						(167		)				19,283
Real Estate				1,457						3,254						4,562						9,023
Listed Equities				2,270						6,010						5,758						9,150
Non-Oaktree funds				3,075						2,140						3,495						4,733
Income from investments in companies				16,682						12,358						31,789						22,322
Total investment income				$	47,725					$	23,365					$	62,802					$	76,823

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,
				2016						2015						2016						2015
Distributable Earnings:				(in thousands, except per unit data)
Revenues:
Management fees				$	197,450					$	190,197					$	398,720					$	380,292
Incentive income				87,647						61,148						184,235						214,027
Receipts of investment income from funds (1)				10,694						30,197						23,617						54,158
Receipts of investment income from companies				10,869						8,175						24,427						16,971
Total distributable earnings revenues				306,660						289,717						630,999						665,448
Expenses:
Compensation and benefits				(99,173		)				(104,767		)				(203,443		)				(213,648		)
Incentive income compensation				(35,407		)				(29,554		)				(85,156		)				(119,656		)
General and administrative				(30,600		)				(30,335		)				(62,081		)				(59,902		)
Depreciation and amortization				(3,048		)				(2,105		)				(6,208		)				(3,996		)
Total expenses				(168,228		)				(166,761		)				(356,888		)				(397,202		)
Other income (expense):
Interest expense, net of interest income				(7,977		)				(8,782		)				(16,659		)				(17,715		)
Operating Group income taxes				(1,422		)				(1,047		)				(2,829		)				(2,199		)
Other income (expense), net				(1,527		)				(1,987		)				(1,392		)				(1,996		)
Distributable earnings				$	127,506					$	111,140					$	253,231					$	246,336
Distribution Calculation:
Operating Group distribution with respect to the period				$	108,460					$	93,940					$	217,005					$	212,398
Distribution per Operating Group unit				$	0.70					$	0.61					$	1.40					$	1.38
Adjustments per Class A unit:
Distributable earnings-OCG income tax expense				(0.03		)				—						(0.09		)				(0.02		)
Tax receivable agreement				(0.08		)				(0.10		)				(0.16		)				(0.20		)
Non-Operating Group expenses				(0.01		)				(0.01		)				(0.02		)				(0.02		)
Distribution per Class A unit (2)				$	0.58					$	0.50					$	1.13					$	1.14

(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 adjusted net income 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.
(2)			With respect to the quarter ended June 30, 2016, the distribution was announced on July 28, 2016 and is payable on August 12, 2016.

Units Outstanding
				Three Months Ended June 30,								Six Months Ended June 30,
				2016				2015				2016				2015
				(in thousands)
Weighted Average Units:
OCGH				92,440				105,467				92,177				106,813
Class A				62,617				48,372				62,256				46,727
Total				155,057				153,839				154,433				153,540
Units Eligible for Fiscal Period Distribution:
OCGH				92,340				105,628
Class A				62,603				48,372
Total				154,943				154,000

Fee-related Earnings

Fee-related earnings and fee-related earnings-OCG, as well as per unit data, are set forth below:

				Three Months Ended June 30,												Six Months Ended June 30,
				2016						2015						2016						2015
				(in thousands, except per unit data)
Management fees:
Closed-end funds				$	145,953					$	129,147					$	294,204					$	260,794
Open-end funds				38,776						46,577						77,189						91,018
Evergreen funds				12,721						14,473						27,327						28,480
Total management fees				197,450						190,197						398,720						380,292
Expenses:
Compensation and benefits				(99,173		)				(104,767		)				(203,443		)				(213,648		)
General and administrative				(30,600		)				(30,335		)				(62,081		)				(59,902		)
Depreciation and amortization				(3,048		)				(2,105		)				(6,208		)				(3,996		)
Total expenses				(132,821		)				(137,207		)				(271,732		)				(277,546		)
Fee-related earnings				64,629						52,990						126,988						102,746
Fee-related earnings attributable to OCGH non-controlling interest				(38,531		)				(36,329		)				(75,795		)				(71,453		)
Non-Operating Group expenses				(241		)				(652		)				(536		)				(987		)
Fee-related earnings-OCG before income taxes				25,857						16,009						50,657						30,306
Fee-related earnings-OCG income taxes				(2,040		)				212						(3,781		)				(1,352		)
Fee-related earnings-OCG				$	23,817					$	16,221					$	46,876					$	28,954
Fee-related earnings per Class A unit				$	0.38					$	0.34					$	0.75					$	0.62
Weighted average number of Class A units outstanding				62,617						48,372						62,256						46,727

Segment Statements of Financial Condition
				As of
				June 30, 2016								March 31, 2016								June 30, 2015
				(in thousands)
Assets:
Cash and cash-equivalents				$	403,417							$	342,079							$	308,192
U.S. Treasury securities				684,224								618,899								681,197
Corporate investments				1,371,978								1,352,362								1,560,235
Deferred tax assets				426,119								425,904								430,756
Receivables and other assets				274,635								397,416								265,080
Total assets				$	3,160,373							$	3,136,660							$	3,245,460
Liabilities and Capital:
Liabilities:
Accounts payable and accrued expenses				$	262,392							$	253,305							$	267,925
Due to affiliates				358,716								356,851								371,276
Debt obligations (1)				795,958								845,736								845,968
Total liabilities				1,417,066								1,455,892								1,485,169
Capital:
OCGH non-controlling interest in consolidated subsidiaries				982,684								945,519								1,146,303
Unitholders’ capital attributable to Oaktree Capital Group, LLC				760,623								735,249								613,988
Total capital				1,743,307								1,680,768								1,760,291
Total liabilities and capital				$	3,160,373							$	3,136,660							$	3,245,460

(1)			In the first quarter of 2016, Oaktree adopted accounting guidance that requires debt issuance costs, which were previously included in receivables and other assets, to be netted with the associated outstanding borrowings. Prior periods have been recast for this change.

Corporate Investments
				As of
				June 30, 2016								March 31, 2016								June 30, 2015
Investments in funds:				(in thousands)
Oaktree funds:
Corporate Debt				$	417,883							$	381,456							$	491,685
Convertible Securities				1,627								1,579								19,709
Distressed Debt				380,324								379,507								416,532
Control Investing				251,612								258,753								256,963
Real Estate				113,406								127,731								142,513
Listed Equities				116,954								111,185								152,914
Non-Oaktree funds				70,551								66,321								65,351
Investments in companies				19,621								25,830								14,568
Total corporate investments				$	1,371,978							$	1,352,362							$	1,560,235

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, 2016
			Investment Period						Total Committed Capital					Drawn Capital(1)					Fund Net Income Since Inception					Distri- butions Since Inception					Net Asset Value					Manage- ment Fee- gener- ating AUM					Oaktree Segment Incentive Income Recog- nized					Accrued Incentives (Fund Level)(2)					Unreturned Drawn Capital Plus Accrued Preferred Return(3)					IRR Since Inception(4)							Multiple of Drawn Capital(5)
			Start Date			End Date																																																Gross			Net
			(in millions)
Distressed Debt
Oaktree Opportunities Fund Xb			TBD			—			$	7,985				$	—				$	—				$	—				$	—				$	—				$	—				$	—				$	—				n/a			n/a				n/a
Oaktree Opportunities Fund X (6)			Jan. 2016			Jan. 2019			3,241					486					119					1					604					3,160					—					23					516					nm			nm				1.3x
Oaktree Opportunities Fund IX			Jan. 2014			Jan. 2017			5,066					5,066					(215		)			4					4,847					4,966					—					—					5,988					1.1%			(2.1)%				1.0
Oaktree Opportunities Fund VIIIb			Aug. 2011			Aug. 2014			2,692					2,692					374					1,133					1,933					2,140					52					—					2,469					6.4			3.1				1.2
Special Account B			Nov. 2009			Nov. 2012			1,031					1,100					454					1,120					434					423					15					—					433					12.5			9.9				1.5
Oaktree Opportunities Fund VIII			Oct. 2009			Oct. 2012			4,507					4,507					1,871					4,544					1,834					1,867					144					112					1,668					11.7			8.3				1.5
Special Account A			Nov. 2008			Oct. 2012			253					253					280					463					70					75					42					14					—					27.8			22.5				2.1
OCM Opportunities Fund VIIb			May 2008			May 2011			10,940					9,844					8,781					17,329					1,296					1,266					1,453					253					—					22.0			16.7				2.0
OCM Opportunities Fund VII			Mar. 2007			Mar. 2010			3,598					3,598					1,461					4,647					412					689					81					—					532					10.3			7.5				1.5
OCM Opportunities Fund VI			Jul. 2005			Jul. 2008			1,773					1,773					1,295					2,913					155					64					197					56					—					11.9			8.8				1.8
OCM Opportunities Fund V			Jun. 2004			Jun. 2007			1,179					1,179					964					2,097					46					—					179					10					—					18.5			14.2				1.9
Legacy funds (7)			Various			Various			9,543					9,543					8,205					17,695					53					—					1,113					11					—					24.2			19.3				1.9
																																																						22.1%			16.2%
Real Estate Opportunities
Oaktree Real Estate Opportunities Fund VII (8)			Jan. 2016			Jan. 2020			$	2,395				$	—				$	(9	)			$	6				$	(15	)			$	1,936				$	—				$	—				$	—				n/a			n/a				n/a
Oaktree Real Estate Opportunities Fund VI			Aug. 2012			Aug. 2016			2,677					2,677					1,039					678					3,038					2,454					10					191					2,522					19.1%			12.8%				1.5x
Oaktree Real Estate Opportunities Fund V			Mar. 2011			Mar. 2015			1,283					1,283					885					1,410					758					446					56					113					335					17.7			13.0				1.8
Special Account D			Nov. 2009			Nov. 2012			256					264					165					305					124					73					3					13					78					14.2			12.1				1.7
Oaktree Real Estate Opportunities Fund IV			Dec. 2007			Dec. 2011			450					450					388					696					142					110					36					38					—					16.2			11.1				2.0
OCM Real Estate Opportunities Fund III			Sep. 2002			Sep. 2005			707					707					622					1,300					29					—					117					6					—					15.3			11.4				1.9
Legacy funds (7)			Various			Various			1,634					1,610					1,399					3,009					—					—					112					—					—					15.2			12.0				1.9
																																																						15.6%			12.0%
Real Estate Debt
Oaktree Real Estate Debt Fund (9)			Sep. 2013			Oct. 2016			$	1,112				$	506				$	66				$	405				$	167				$	492				$	—				$	10				$	118				25.1%			18.1%				1.2x
Oaktree PPIP Fund (10)			Dec. 2009			Dec. 2012			2,322					1,113					457					1,570					—					—					47					—					—					28.2			n/a				1.4
European Principal Investments (11)
Oaktree European Principal Fund IV			TBD			—			€	840				€	—				€	—				€	—				€	—				€	8				€	—				€	—				€	—				n/a			n/a				n/a
Oaktree European Principal Fund III			Nov. 2011			Nov. 2016			€	3,164				€	2,750				€	1,270				€	417				€	3,603				€	3,227				€	—				€	246				€	2,957				19.5%			12.4%				1.6x
OCM European Principal Opportunities Fund II			Dec. 2007			Dec. 2012			€	1,759				€	1,731				€	435				€	1,476				€	690				€	1,045				€	29				€	—				€	1,028				8.9			4.9				1.4
OCM European Principal Opportunities Fund			Mar. 2006			Mar. 2009			$	495				$	473				$	454				$	857				$	70				$	—				$	57				$	30				$	—				11.7			8.9				2.1
																																																						13.0%			8.4%
European Private Debt
Oaktree European Capital Solutions Fund (6)(9)			Dec. 2015			Dec. 2018			€	287				€	74				€	—				€	—				€	74				€	87				€	—				€	—				€	75				nm			nm				1.0x
Oaktree European Dislocation Fund (9)			Oct. 2013			Oct. 2016			€	294				€	182				€	29				€	140				€	71				€	178				€	—				€	4				€	54				23.1%			16.5%				1.2
Special Account E			Oct. 2013			Apr. 2015			€	379				€	261				€	50				€	167				€	144				€	161				€	—				€	7				€	124				14.4			11.1				1.2
																																																						16.6%			12.3%

									As of June 30, 2016
			Investment Period						Total Committed Capital					Drawn Capital(1)					Fund Net Income Since Inception					Distri- butions Since Inception					Net Asset Value					Manage- ment Fee- gener- ating AUM					Oaktree Segment Incentive Income Recog- nized					Accrued Incentives (Fund Level)(2)					Unreturned Drawn Capital Plus Accrued Preferred Return(3)					IRR Since Inception(4)						Multiple of Drawn Capital(5)
			Start Date			End Date																																																Gross			Net
			(in millions)
Global Principal Investments
Oaktree Principal Fund VI			Nov. 2015			Nov. 2018			$	1,223				$	208				$	24				$	32				$	200				$	1,167				$	—				$	5				$	187				40.3%			14.8%			1.2x
Oaktree Principal Fund V			Feb. 2009			Feb. 2015			2,827					2,586					381					1,367					1,600					1,839					50					—					2,175					7.8			3.2			1.3
Special Account C			Dec. 2008			Feb. 2014			505					460					190					362					288					354					21					—					288					11.3			8.0			1.5
OCM Principal Opportunities Fund IV			Oct. 2006			Oct. 2011			3,328					3,328					2,233					3,811					1,750					854					22					234					1,455					11.1			8.2			1.8
OCM Principal Opportunities Fund III			Nov. 2003			Nov. 2008			1,400					1,400					890					2,174					116					—					151					22					—					13.9			9.6			1.8
Legacy funds (7)			Various			Various			2,301					2,301					1,839					4,138					2					—					236					—					—					14.5			11.6			1.8
																																																						12.8%			9.2%
Power Opportunities
Oaktree Power Opportunities Fund IV (6)			Nov. 2015			Nov. 2020			$	1,106				$	107				$	(12	)			$	—				$	95				$	1,078				$	—				$	—				$	109				nm			nm			1.0x
Oaktree Power Opportunities Fund III			Apr. 2010			Apr. 2015			1,062					698					347					575					470					407					14					52					293					22.6%			13.5%			1.6
OCM/GFI Power Opportunities Fund II			Nov. 2004			Nov. 2009			1,021					541					1,450					1,982					9					—					100					1					—					76.1			58.8			3.9
OCM/GFI Power Opportunities Fund			Nov. 1999			Nov. 2004			449					383					251					634					—					—					23					—					—					20.1			13.1			1.8
																																																						34.7%			26.6%
Infrastructure Investing
Highstar Capital IV (12)			Nov. 2010			Nov. 2016			$	2,585				$	2,453				$	490				$	411				$	2,532				$	1,882				$	—				$	6				$	1,948				16.7%			9.1%			1.4x
Mezzanine Finance
Oaktree Mezzanine Fund IV (9)			Oct. 2014			Oct. 2019			$	852				$	248				$	17				$	13				$	252				$	243				$	—				$	1				$	251				11.5%			8.3%			1.1x
Oaktree Mezzanine Fund III (13).			Dec. 2009			Dec. 2014			1,592					1,423					371					1,330					464					431					10					20					439					15.1	10.4/8.2					1.4
OCM Mezzanine Fund II			Jun. 2005			Jun. 2010			1,251					1,107					528					1,489					146					—					—					—					162					11.3			7.8			1.6
OCM Mezzanine Fund (14)			Oct. 2001			Oct. 2006			808					773					302					1,073					2					—					38					—					—					15.4			10.8/10.5			1.5
																																																						13.2%			8.9%
Emerging Markets Opportunities
Oaktree Emerging Market Opportunities Fund			Sep. 2013			Sep. 2016			$	384				$	220				$	13				$	1				$	232				$	364				$	—				$	—				$	250				7.1%			3.4%			1.1x
Special Account F			Jan. 2014			Jan. 2017			253					157					10					—					167					165					—					—					177					6.1			3.9			1.1
														73,069			(11)																	34,174			(11)							1,506			(11)							6.7%			3.6%
						Other (15)								12,328																				7,887										16
						Total (16)								$	85,397		(17)																	$	42,061									$	1,522

(1)			Drawn capital reflects the capital contributions of investors in the fund, net of any distributions to such investors of uninvested capital.
(2)			Accrued incentives (fund level) exclude Oaktree segment incentive income previously recognized.
(3)			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.
(4)			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.
(5)			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.
(6)			The IRR is not considered meaningful (“nm”) as the period from the initial capital contribution through June 30, 2016 was less than 18 months.
(7)			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.
(8)			A portion of this fund pays management fees based on drawn, rather than committed, capital.
(9)			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, 2016 management fee-generating AUM included only that portion of committed capital that had been drawn.
(10)			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.
(11)			Aggregate IRRs or totals are based on the conversion of cash flows or amounts, respectively, from euros to USD using the June 30, 2016 spot rate of $1.11.
(12)			The fund includes co-investments of $555 million in AUM, most of which do not pay management fees or an incentive allocation. These co-investments have been excluded from the calculation of gross and net IRR, as well as the unreturned drawn capital plus accrued preferred return amount and multiple of drawn capital. 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, 2016, 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.
(13)			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 8.2%. The combined net IRR for Class A and Class B interests was 9.4%.
(14)			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%.
(15)			This includes our closed-end Senior Loan funds, Oaktree Asia Special Situations Fund, OCM Asia Principal Opportunities Fund, CLOs, a non-Oaktree fund, certain separate accounts, co-investments and certain evergreen separate accounts in our Real Estate Debt, Emerging Markets Opportunities and Emerging Markets Total Return strategies.
(16)			This excludes two closed-end funds with management fee-generating AUM aggregating $550 million as of June 30, 2016, which has been included as part of the Strategic Credit strategy within the evergreen funds table, and includes certain evergreen separate accounts in our Real Estate Debt, Emerging Markets Opportunities and Emerging Markets Total Return strategies with an aggregate $606 million of management fee-generating AUM.
(17)			The aggregate change in drawn capital for the three months ended June 30, 2016 was $1.0 billion.

Open-end Funds
						Manage- ment Fee- gener- ating AUM as of June 30, 2016					Twelve Months Ended June 30, 2016												Since Inception through June 30, 2016
			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			Jan. 1986			$	15,871				1.0	%			0.5	%			0.9	%			9.3	%			8.8	%			8.3	%			0.78			0.54
Global High Yield Bonds			Nov. 2010			4,349					1.9				1.4				2.2				6.9				6.3				6.2				1.01			0.94
European High Yield Bonds			May 1999			1,370					5.4				4.8				4.5				8.0				7.5				6.1				0.68			0.41
U.S. Convertibles			Apr. 1987			3,554					(8.0	)			(8.5	)			(4.5	)			9.3				8.7				7.9				0.47			0.34
Non-U.S. Convertibles			Oct. 1994			1,566					(2.0	)			(2.5	)			(3.4	)			8.3				7.8				5.6				0.75			0.38
High Income Convertibles			Aug. 1989			798					3.9				3.1				0.9				11.4				10.5				8.1				1.04			0.57
U.S. Senior Loans			Sept. 2008			1,588					(0.6	)			(1.1	)			0.9				5.8				5.3				5.0				1.00			0.59
European Senior Loans			May 2009			1,550					3.5				3.0				2.0				8.5				8.0				9.2				1.67			1.67
Emerging Markets Equities			Jul. 2011			2,951					(15.2	)			(15.8	)			(12.1	)			(3.7	)			(4.4	)			(3.8	)			(0.19)			(0.21)
Total						$	33,597

(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, 2016															Twelve Months Ended June 30, 2016								Since Inception through June 30, 2016
						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)			Jul. 2012			$	3,105				$	2,386				n/a					(1.8	)%			(3.4	)%			7.3	%			5.0	%
Value Opportunities			Sept. 2007			1,170					1,112					—			(3)		(6.4	)			(8.4	)			8.8				4.7
Value Equities (4)			May 2012			307					242					—			(3)		(10.0	)			(11.5	)			15.1				9.9
Emerging Markets Absolute Return			Apr. 1997			138					118					—			(3)		(4.6	)			(5.8	)			13.0				8.7
											3,858					—
Restructured funds											—					4
Total (2)(5)											$	3,858				$	4

(1)			Returns represent time-weighted rates of return.
(2)			Includes two closed-end funds with an aggregate $765 million and $550 million of AUM and management fee-generating AUM, respectively.
(3)			As of June 30, 2016, the aggregate depreciation below high-water marks previously established for individual investors in the fund totaled approximately $254 million for Value Opportunities, $22 million for Value Equities and $9 million for Emerging Markets Absolute Return.
(4)			Includes performance results of a proprietary fund with an initial capital commitment of $25 million since its inception on May 1, 2012.
(5)			Total excludes certain evergreen separate accounts in our Real Estate Debt, Emerging Markets Opportunities and Emerging Markets Total Return strategies with an aggregate $606 million of management fee-generating AUM as of June 30, 2016.

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 incentive income recognized as revenue by us as segment incentive income. Amounts recognized by us as incentive income are no longer included in accrued incentives (fund level), the term we use for remaining fund-level accruals.

Adjusted net income (“ANI”) is a measure of profitability for our investment management segment. The components of revenues (“segment revenues”) and expenses used in the determination of ANI do not give effect to the consolidation of the funds that we manage. Segment revenues include investment income (loss) that is classified in other income (loss) in the GAAP-basis statements of operations. Segment revenues and expenses also reflect Oaktree's proportionate economic interest in Highstar, whereby amounts received for contractually reimbursable costs are classified for segment reporting as expenses and under GAAP as other income. In addition, ANI excludes the effect of (a) non-cash equity-based compensation expense related to unit grants made before our initial public offering, (b) acquisition-related items, including amortization of intangibles and changes in the contingent consideration liability, (c) differences arising from equity value units (“EVUs”) that are classified as liability awards under GAAP but as equity awards for segment reporting, (d) income taxes, (e) other income or expenses applicable to OCG or its Intermediate Holding Companies, and (f) the adjustment for non-controlling interests. In the fourth quarter of 2015, the definition of ANI was modified to reflect differences with respect to (a) third-party placement costs associated with closed-end funds, which under GAAP are expensed as incurred, but for ANI are capitalized and amortized as general and administrative expense in proportion to the associated management fee stream, and (b) gains and losses resulting from foreign-currency transactions and hedging activities, which 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. Foreign-currency transaction gains and losses are included in other income (expense), net. Prior periods have not been recast for the change related to third-party placement costs, but have been recast to retroactively reflect the change related to foreign-currency hedging. Incentive income and incentive income compensation expense are included in ANI when the underlying fund distributions are known or knowable as of the respective quarter end, which may be later than the time at which the same revenue or expense is included in the GAAP-basis statements of operations, for which the revenue standard is fixed or determinable and the expense standard is probable and reasonably estimable. CLO investments are carried at fair value for GAAP reporting, whereas for segment reporting they are carried at amortized cost, subject to any impairment charges. Investment income on CLO investments is recognized in ANI when cash distributions are received. Cash distributions are allocated between income and return of capital based on the effective yield method. ANI is calculated at the Operating Group level.

Adjusted net income–OCG, or adjusted net income per Class A unit, a non-GAAP 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 fund-level 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 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 or NAV;
  • The investments we make in our funds as general partner;
  • Closed-end funds that are beyond the term during which they pay management fees and co-investments that pay no management fees; and
  • AUM in restructured and liquidating evergreen funds for which management fees were waived.
• Incentive-creating assets under management (“incentive-creating AUM”) refers to the AUM that may eventually produce incentive income. It represents the NAV of our funds for which we are entitled to receive an incentive allocation, excluding CLOs and investments made by us and our employees and directors (which are not subject to an incentive allocation). All funds for which we are entitled to receive an incentive allocation are included in incentive-creating AUM, regardless of whether or not they are currently generating incentives. Incentive-creating AUM does not include undrawn capital commitments.

Consolidated funds refers to the funds and CLOs that Oaktree is required to consolidate as of the respective reporting date.

Distributable earnings is a non-GAAP performance measure derived from our segment results that we use to measure our earnings at the Operating Group level without the effects of the consolidated funds for the purpose of, among other things, assisting in the determination of equity distributions from the Operating Group. However, the declaration, payment and determination of the amount of equity distributions, if any, is at the sole discretion of our board of directors, which may change our distribution policy at any time.

Distributable earnings and distributable earnings revenues differ from ANI in that they exclude segment investment income or loss and include the receipt of investment income or loss from distributions by our investments in funds and companies. Additionally, any impairment charges on our CLO investments included in ANI are, for distributable earnings purposes, amortized over the remaining investment period of the respective CLO, in order to align with the timing of expected cash flows. In addition, distributable earnings differs from ANI in that it is net of Operating Group income taxes and excludes non-cash equity-based compensation expense.

Distributable earnings–OCG, or distributable earnings per Class A unit, a non-GAAP 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 measure that we use to evaluate the financial performance of our segment by applying the “Method 2,” instead of the “Method 1,” revenue recognition approach to accounting for incentive income. ANI follows Method 1, except incentive income is recognized when the underlying fund distributions are known or knowable as of the respective quarter end, as opposed to the fixed or determinable standard of Method 1. The Method 2 approach followed by ENI recognizes incentive income as if the funds were liquidated at their reported values as of the date of the financial statements. ENI is computed by adjusting ANI for the change in accrued incentives (fund level), net of associated incentive income compensation expense, during the period.

Economic net income revenues is a non-GAAP measure applying the Method 2, instead of the Method 1, approach to accounting for segment incentive income, and reflects the adjustments described above and under the definition of ANI.

Economic net income–OCG, or economic net income per Class A unit, a non-GAAP measure, is calculated to provide Class A unitholders with a measure that shows the portion of ENI attributable to their ownership. Economic net income-OCG represents ENI, including the effect of (a) the OCGH non-controlling interest, (b) other income or expenses, such as income tax expense, applicable to OCG or its Intermediate Holding Companies and (c) any Operating Group income taxes attributable to OCG. The income tax expense included in economic net income-OCG represents the implied provision for income taxes calculated using an approach similar to that which is used in calculating the income tax provision for adjusted net income-OCG.

Equity value units (“EVUs”) represent special limited partnership units in Oaktree Capital Group Holdings, L.P. (“OCGH”) that entitle the holder the right to receive a one-time special distribution that will be settled in OCGH units, based on value created during a specified period (“Term”) in excess of a fixed “Base Value.” The value created will be measured on a per unit basis, based on Class A unit trading prices and certain components of quarterly distributions with respect to the period during the Term. EVUs also give the holder the right, subject to service vesting and Oaktree performance relative to the accreting Base Value, to receive certain quarterly distributions from OCGH. EVUs do not entitle the holder to any voting rights.

Fee-related earnings (“FRE”) is a non-GAAP measure that we use to monitor the baseline earnings of our business. FRE is comprised of segment management fees (“fee-related earnings revenues”) less segment operating expenses other than incentive income compensation expense and non-cash equity-based compensation expense related to unit grants made after our initial public offering. FRE is considered baseline because it applies all cash compensation and benefits other than incentive income compensation expense, as well as all general and administrative expenses, to management fees, even though a significant portion of those expenses is attributable to incentive and investment income. FRE is presented before income taxes.

Fee-related earnings–OCG, or fee-related earnings per Class A unit, is a non-GAAP measure calculated to provide Class A unitholders with a measure that shows the portion of FRE attributable to their ownership. Fee-related earnings–OCG represents FRE including the effect of (a) the OCGH non-controlling interest, (b) other income or expenses, such as income tax expense, applicable to OCG or its Intermediate Holding Companies and (c) any Operating Group income taxes attributable to OCG. Fee-related earnings–OCG income taxes is calculated excluding any segment incentive income or investment income (loss).

Intermediate Holding Companies collectively refers to the subsidiaries wholly owned by us.

Invested capital reflects the aggregate gross capital invested by our incentive-creating closed-end and similar funds, including investments made using drawn capital, recycled capital and fund-level credit facilities.

Net asset value (“NAV”) refers to the value of all the assets of a fund (including cash and accrued interest and dividends) less all liabilities of the fund (including accrued expenses and any reserves established by us, in our discretion, for contingent liabilities) without reduction for accrued incentives (fund level) because they are reflected in the partners’ capital of the fund.

Oaktree, OCG, we, us, our or the Company refers to Oaktree Capital Group, LLC and, where applicable, its subsidiaries and affiliates.

Oaktree Operating Group (“Operating Group”) refers collectively to the entities in which we have a minority economic interest and indirect control that either (i) act as or control the general partners and investment advisers of our funds or (ii) hold interests in other entities or investments generating income for us.

Relevant Benchmark refers, with respect to:

• our U.S. High Yield Bond strategy, to the Citigroup U.S. High Yield Cash-Pay Capped Index;
• our Global High Yield Bond strategy, to an Oaktree custom global high yield index that represents 60% BofA Merrill Lynch High Yield Master II Constrained Index and 40% BofA Merrill Lynch Global Non-Financial High Yield European Issuers 3% Constrained, ex-Russia Index – USD Hedged from inception through December 31, 2012, and the BofA Merrill Lynch Non-Financial Developed Markets High Yield Constrained Index – USD Hedged thereafter;
• our European High Yield Bond strategy, to the BofA Merrill Lynch Global Non-Financial High Yield European Issuers excluding Russia 3% Constrained Index (USD Hedged);
• our U.S. Senior Loan strategy (with the exception of the closed-end funds), to the Credit Suisse Leveraged Loan Index;
• our European Senior Loan strategy, to the Credit Suisse Western European Leveraged Loan Index (EUR Hedged);
• our U.S. Convertible Securities strategy, to an Oaktree custom convertible index that represents the Credit Suisse Convertible Securities Index from inception through December 31, 1999, the Goldman Sachs/Bloomberg Convertible 100 Index from January 1, 2000 through June 30, 2004, and the BofA Merrill Lynch All U.S. Convertibles Index thereafter;
• our non-U.S. Convertible Securities strategy, to an Oaktree custom non-U.S. convertible index that represents the JACI Global ex-U.S. (Local) Index from inception through December 31, 2014 and the Thomson Reuters Global Focus ex-U.S. (USD hedged) Index thereafter;
• our High Income Convertible Securities strategy, to the Citigroup U.S. High Yield Market Index; and
• our Emerging Markets Equities strategy, to the Morgan Stanley Capital International Emerging Markets Index (Net).

Sharpe Ratio refers to a metric used to calculate risk-adjusted return. The Sharpe Ratio is the ratio of excess return to volatility, with excess return defined as the return above that of a riskless asset (based on the three-month U.S. Treasury bill, or for our European senior loan strategy, the Euro Overnight Index Average) divided by the standard deviation of such return. A higher Sharpe Ratio indicates a return that is higher than would be expected for the level of risk compared to the risk-free rate.

EXHIBIT A

Use of Non-GAAP Financial Information

Oaktree discloses certain non-GAAP financial measures in this earnings release. Reconciliations of these non-GAAP financial measures to the most directly comparable financial measures calculated and presented in accordance with GAAP are presented below. Management makes operating decisions and assesses the performance of Oaktree’s business based on these non-GAAP financial measures. These non-GAAP financial measures should be considered in addition to and not as a substitute for, or superior to, financial measures presented in accordance with GAAP.

Reconciliation of Segment Results to GAAP Net Income

The following table reconciles fee-related earnings and adjusted net income to net income attributable to Oaktree Capital Group, LLC.

				Three Months Ended June 30,												Six Months Ended June 30,
				2016						2015						2016						2015
				(in thousands)
Fee-related earnings (1)				$	64,629					$	52,990					$	126,988					$	102,746
Incentive income				87,647						61,148						184,235						214,027
Incentive income compensation				(35,407		)				(29,554		)				(85,156		)				(119,656		)
Investment income				47,725						23,365						62,802						76,823
Equity-based compensation (2)				(12,445		)				(11,901		)				(23,148		)				(18,924		)
Interest expense, net of interest income				(7,977		)				(8,782		)				(16,659		)				(17,715		)
Other income (expense), net				(1,527		)				(1,987		)				(1,392		)				(1,996		)
Adjusted net income				142,645						85,279						247,670						235,305
Incentive income (3)				54						5,805						(39,888		)				(11,573		)
Incentive income compensation (3)				(54		)				(5,657		)				39,888						17,553
Investment income (4)				3,149						—						13,578						—
Equity-based compensation (5)				(2,281		)				(4,182		)				(5,473		)				(8,865		)
Placement costs (6)				(1,210		)				—						(7,914		)				—
Foreign-currency hedging (7)				(3,665		)				67						(9,531		)				5,379
Acquisition-related items (8)				1,889						(1,695		)				1,498						(3,502		)
Income taxes (9)				(8,571		)				(5,485		)				(21,251		)				(13,360		)
Non-Operating Group expenses (10)				(201		)				(626		)				(465		)				(960		)
Non-controlling interests (10)				(82,708		)				(53,692		)				(140,987		)				(161,910		)
Net income attributable to Oaktree Capital Group, LLC				$	49,047					$	19,814					$	77,125					$	58,067

(1)			Fee-related earnings is a component of adjusted net income and is comprised of segment management fees less segment operating expenses other than incentive income compensation expense and non-cash equity-based compensation expense related to unit grants made after our initial public offering.
(2)			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 or make equity distributions.
(3)			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.
(4)			This adjustment adds back the effect of differences in the recognition of investment income related to corporate investments in CLOs which under GAAP are marked-to-market but for segment reporting are accounted for at amortized cost, subject to impairment between adjusted net income and net income attributable to OCG.
(5)			This adjustment adds back the effect of (a) equity-based compensation expense related to unit grants made before our initial public offering, which is excluded from adjusted net income and fee-related earnings because it is a non-cash charge that does not affect our financial position, and (b) differences arising from EVUs that are classified as liability awards under GAAP but as equity awards for segment reporting.
(6)			This adjustment adds back the effect of timing differences with respect to the recognition of third-party placement costs associated with closed-end funds between adjusted net income and net income attributable to OCG.
(7)			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.
(8)			This adjustment adds back the effect of acquisition-related items associated with the amortization of intangibles and changes in the contingent consideration liability.
(9)			Because adjusted net income and fee-related earnings are pre-tax measures, this adjustment adds back the effect of income tax expense.
(10)			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.

The following table reconciles fee-related earnings-OCG and adjusted net income-OCG to net income attributable to Oaktree Capital Group, LLC.

				Three Months Ended June 30,												Six Months Ended June 30,
				2016						2015						2016						2015
				(in thousands)
Fee-related earnings-OCG (1)				$	23,817					$	16,221					$	46,876					$	28,954
Incentive income attributable to OCG				35,395						19,227						74,263						64,185
Incentive income compensation attributable to OCG				(14,298		)				(9,292		)				(34,318		)				(35,789		)
Investment income attributable to OCG				19,274						7,346						25,341						23,067
Equity-based compensation attributable to OCG (2)				(5,026		)				(3,742		)				(9,333		)				(5,807		)
Interest expense, net of interest income attributable to OCG				(3,181		)				(2,735		)				(6,644		)				(5,361		)
Other income (expense) attributable to OCG				(616		)				(624		)				(562		)				(627		)
Non-fee-related earnings income taxes attributable to OCG (3)				(5,683		)				(4,979		)				(15,781		)				(10,477		)
Adjusted net income-OCG (1)				49,682						21,422						79,842						58,145
Incentive income attributable to OCG (4)				22						1,825						(16,051		)				(3,285		)
Incentive income compensation attributable to OCG (4)				(22		)				(1,778		)				16,051						5,047
Investment income attributable to OCG (5)				1,271						—						5,468						—
Equity-based compensation attributable to OCG (6)				(921		)				(1,315		)				(2,206		)				(2,692		)
Placement costs attributable to OCG (7)				(488		)				—						(3,186		)				—
Foreign-currency hedging attributable to OCG (8)				(1,481		)				21						(3,840		)				1,583
Acquisition-related items attributable to OCG (9)				763						(533		)				605						(1,064		)
Non-controlling interests attributable to OCG (9)				221						172						442						333
Net income attributable to Oaktree Capital Group, LLC				$	49,047					$	19,814					$	77,125					$	58,067

(1)			Fee-related earnings-OCG and adjusted net income-OCG are calculated to evaluate the portion of adjusted net income and fee-related earnings attributable to Class A unitholders. These measures are net of income taxes and other income or expenses applicable to OCG or its Intermediate Holding Companies.
(2)			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 or make equity distributions.
(3)			This adjustment adds back income taxes associated with segment incentive income, incentive income compensation expense or investment income or loss, which are not included in the calculation of fee-related earnings-OCG.
(4)			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.
(5)			This adjustment adds back the effect of differences in the recognition of investment income related to corporate investments in CLOs which under GAAP are marked-to-market but for segment reporting are accounted for at amortized cost, subject to impairment between adjusted net income-OCG and net income attributable to OCG.
(6)			This adjustment adds back the effect of (a) equity-based compensation expense attributable to OCG related to unit grants made before our initial public offering, which is excluded from adjusted net income-OCG and fee-related earnings-OCG because it is a non-cash charge that does not affect our financial position, and (b) differences arising from EVUs that are classified as liability awards under GAAP but as equity awards for segment reporting.
(7)			This adjustment adds back the effect of timing differences with respect to the recognition of third-party placement costs associated with closed-end funds between adjusted net income-OCG and net income attributable to OCG.
(8)			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.
(9)			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.

The following table reconciles fee-related earnings revenues and segment revenues to GAAP revenues.

				Three Months Ended June 30,												Six Months Ended June 30,
				2016						2015						2016						2015
				(in thousands)
Fee-related earnings revenues				$	197,450					$	190,197					$	398,720					$	380,292
Incentive income				87,647						61,148						184,235						214,027
Investment income				47,725						23,365						62,802						76,823
Segment revenues				332,822						274,710						645,757						671,142
Consolidated funds (1)				(9,106		)				(207,529		)				(38,104		)				(540,460		)
Investment income (2)				(41,000		)				(15,694		)				(70,447		)				(28,376		)
GAAP revenues				$	282,716					$	51,487					$	537,206					$	102,306

(1)			This adjustment reflects the elimination of amounts attributable to the consolidated funds, as well as the reclassification of gains and losses related to foreign-currency hedging activities to general and administrative expense.
(2)			This adjustment reclassifies consolidated investment income from revenues to other income (loss).

The following table reconciles distributable earnings and adjusted net income to net income attributable to Oaktree Capital Group, LLC.

				Three Months Ended June 30,												Six Months Ended June 30,
				2016						2015						2016						2015
				(in thousands)
Distributable earnings				$	127,506					$	111,140					$	253,231					$	246,336
Investment income (1)				47,725						23,365						62,802						76,823
Receipts of investment income from funds (2)				(10,694		)				(30,197		)				(23,617		)				(54,158		)
Receipts of investment income from companies				(10,869		)				(8,175		)				(24,427		)				(16,971		)
Equity-based compensation (3)				(12,445		)				(11,901		)				(23,148		)				(18,924		)
Operating Group income taxes				1,422						1,047						2,829						2,199
Adjusted net income				142,645						85,279						247,670						235,305
Reconciling adjustments (4)				(93,598		)				(65,465		)				(170,545		)				(177,238		)
Net income attributable to Oaktree Capital Group, LLC				$	49,047					$	19,814					$	77,125					$	58,067

(1)			This adjustment adds back segment investment income, which with respect to investments in funds is initially largely non-cash in nature and is thus not available to fund our operations or make equity distributions.
(2)			This adjustment eliminates 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.
(3)			This adjustment adds back the effect of equity-based compensation expense related to unit grants made after our initial public offering, which is excluded from distributable earnings because it is non-cash in nature and does not impact our ability to fund our operations or make equity distributions.
(4)			Please refer to the table on page 30 for a detailed reconciliation of adjusted net income to net income attributable to Oaktree Capital Group, LLC.

The following table reconciles distributable earnings-OCG and adjusted net income-OCG to net income attributable to Oaktree Capital Group, LLC.

				Three Months Ended June 30,												Six Months Ended June 30,
				2016						2015						2016						2015
				(in thousands)
Distributable earnings-OCG (1)				$	44,882					$	28,635					$	86,725					$	63,368
Investment income attributable to OCG				19,274						7,346						25,341						23,067
Receipts of investment income from funds attributable to OCG				(4,319		)				(9,495		)				(9,519		)				(16,541		)
Receipts of investment income from companies attributable to OCG				(4,389		)				(2,570		)				(9,845		)				(5,157		)
Equity-based compensation attributable to OCG (2)				(5,026		)				(3,742		)				(9,333		)				(5,807		)
Distributable earnings-OCG income taxes				1,303						806						4,683						1,086
Tax receivable agreement				5,106						4,880						10,212						9,290
Income taxes of Intermediate Holding Companies				(7,149		)				(4,438		)				(18,422		)				(11,161		)
Adjusted net income-OCG (1)				49,682						21,422						79,842						58,145
Reconciling adjustments (3)				(635		)				(1,608		)				(2,717		)				(78		)
Net income attributable to Oaktree Capital Group, LLC				$	49,047					$	19,814					$	77,125					$	58,067

(1)			Distributable earnings-OCG and adjusted net income-OCG are calculated to evaluate the portion of adjusted net income and distributable earnings attributable to Class A unitholders. These measures are net of income taxes and expenses applicable to OCG or its Intermediate Holding Companies. A reconciliation of distributable earnings to distributable earnings-OCG is presented below.

									Three Months Ended June 30,												Six Months Ended June 30,
									2016						2015						2016						2015
									(in thousands, except per unit data)
					Distributable earnings				$	127,506					$	111,140					$	253,231					$	246,336
					Distributable earnings attributable to OCGH non-controlling interest				(76,014		)				(76,193		)				(151,146		)				(171,632		)
					Non-Operating Group expenses				(201		)				(626		)				(465		)				(960		)
					Distributable earnings-OCG income taxes				(1,303		)				(806		)				(4,683		)				(1,086		)
					Tax receivable agreement				(5,106		)				(4,880		)				(10,212		)				(9,290		)
					Distributable earnings-OCG				$	44,882					$	28,635					$	86,725					$	63,368
					Distributable earnings-OCG per Class A unit				$	0.72					$	0.59					$	1.39					$	1.36

(2)			This adjustment adds back the effect of equity-based compensation expense attributable to OCG related to unit grants made after our initial public offering, which is excluded from distributable earnings because it is non-cash in nature and does not impact our ability to fund our operations or make equity distributions.
(3)			Please refer to the table on page 31 for a detailed reconciliation of adjusted net income-OCG to net income attributable to Oaktree Capital Group, LLC.

The following table reconciles distributable earnings revenues and segment revenues to GAAP revenues.

				Three Months Ended June 30,												Six Months Ended June 30,
				2016						2015						2016						2015
				(in thousands)
Distributable earnings revenues				$	306,660					$	289,717					$	630,999					$	665,448
Investment income				47,725						23,365						62,802						76,823
Receipts of investment income from funds				(10,694		)				(30,197		)				(23,617		)				(54,158		)
Receipts of investment income from companies				(10,869		)				(8,175		)				(24,427		)				(16,971		)
Segment revenues				332,822						274,710						645,757						671,142
Consolidated funds (1)				(9,106		)				(207,529		)				(38,104		)				(540,460		)
Investment income (2)				(41,000		)				(15,694		)				(70,447		)				(28,376		)
GAAP revenues				$	282,716					$	51,487					$	537,206					$	102,306

(1)			This adjustment reflects the elimination of amounts attributable to the consolidated funds, as well as the reclassification of gains and losses related to foreign-currency hedging activities to general and administrative expense.
(2)			This adjustment reclassifies consolidated investment income from revenues to other income (loss).

The following table reconciles economic net income and adjusted net income to net income attributable to Oaktree Capital Group, LLC.

				Three Months Ended June 30,												Six Months Ended June 30,
				2016						2015						2016						2015
				(in thousands)
Economic net income (1)				$	166,187					$	17,619					$	207,383					$	241,167
Change in accrued incentives (fund level), net of associated incentive income compensation (2)				(23,542		)				67,660						40,287						(5,862		)
Adjusted net income				142,645						85,279						247,670						235,305
Reconciling adjustments (3)				(93,598		)				(65,465		)				(170,545		)				(177,238		)
Net income attributable to Oaktree Capital Group, LLC				$	49,047					$	19,814					$	77,125					$	58,067

(1)			Please see Glossary for the definition of economic 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 refer to the table on page 30 for a detailed reconciliation of adjusted net income to net income attributable to Oaktree Capital Group, LLC.

The following table reconciles economic net income-OCG and adjusted net income-OCG to net income attributable to Oaktree Capital Group, LLC.

				Three Months Ended June 30,												Six Months Ended June 30,
				2016						2015						2016						2015
				(in thousands)
Economic net income (loss)-OCG (1)				$	59,880					$	(978	)				$	67,683					$	54,939
Change in accrued incentives (fund level), net of associated incentive income compensation attributable to OCG				(9,507		)				21,274						16,179						(348		)
Economic net income-OCG income taxes				7,032						5,893						15,542						15,383
Income taxes-OCG				(7,723		)				(4,767		)				(19,562		)				(11,829		)
Adjusted net income-OCG (1)				49,682						21,422						79,842						58,145
Reconciling adjustments (2)				(635		)				(1,608		)				(2,717		)				(78		)
Net income attributable to Oaktree Capital Group, LLC				$	49,047					$	19,814					$	77,125					$	58,067

(1)			Economic net income-OCG and adjusted 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,
									2016						2015						2016						2015
									(in thousands, except per unit data)
					Economic net income				$	166,187					$	17,619					$	207,383					$	241,167
					Economic net income attributable to OCGH non-controlling interest				(99,074		)				(12,078		)				(123,693		)				(169,885		)
					Non-Operating Group expenses				(201		)				(626		)				(465		)				(960		)
					Economic net income-OCG income taxes				(7,032		)				(5,893		)				(15,542		)				(15,383		)
					Economic net income (loss)-OCG				$	59,880					$	(978	)				$	67,683					$	54,939
					Economic net income (loss) per Class A unit				$	0.96					$	(0.02	)				$	1.09					$	1.18

(2)			Please refer to the table on page 31 for a detailed reconciliation of adjusted net income-OCG to net income attributable to Oaktree Capital Group, LLC.

The following table reconciles economic net income revenues and segment revenues to GAAP revenues.

				Three Months Ended June 30,												Six Months Ended June 30,
				2016						2015						2016						2015
				(in thousands)
Economic net income revenues				$	416,317					$	149,507					$	586,394					$	658,522
Incentives created				(171,142		)				64,055						(124,872		)				(201,407		)
Incentive income				87,647						61,148						184,235						214,027
Segment revenues				332,822						274,710						645,757						671,142
Consolidated funds (1)				(9,106		)				(207,529		)				(38,104		)				(540,460		)
Investment income (2)				(41,000		)				(15,694		)				(70,447		)				(28,376		)
GAAP revenues				$	282,716					$	51,487					$	537,206					$	102,306

(1)			This adjustment reflects the elimination of amounts attributable to the consolidated funds, as well as the reclassification of gains and losses related to foreign-currency hedging activities to general and administrative expense.
(2)			This adjustment reclassifies consolidated investment income from revenues to other income (loss).

The following tables reconcile segment information to consolidated financial data:

				As of or for the Three Months Ended June 30, 2016
				Segment								Adjustments								Consolidated
				(in thousands)
Management fees (1)				$	197,450							$	(2,435	)						$	195,015
Incentive income (1)				87,647								54								87,701
Investment income (1)				47,725								(6,725		)						41,000
Total expenses (2)				(180,673		)						(10,975		)						(191,648		)
Interest expense, net (3)				(7,977		)						(18,753		)						(26,730		)
Other income (expense), net (4)				(1,527		)						7,075								5,548
Other income of consolidated funds (5)				—								38,519								38,519
Income taxes				—								(8,571		)						(8,571		)
Net loss 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		)
Adjusted net income/net income attributable to Oaktree Capital Group, LLC				$	142,645							$	(93,598	)						$	49,047
Corporate investments (6)				$	1,371,978							$	(335,740	)						$	1,036,238
Total assets (7)				$	3,160,373							$	3,464,502							$	6,624,875

(1)			The adjustment represents (a) the elimination of amounts earned from the consolidated funds, (b) for management fees, the reclassification of $27 of net gains related to foreign-currency hedging activities to general and administrative expense, and (c) for investment income, differences of $3,149 related to corporate investments in CLOs which under GAAP are marked-to-market but for segment reporting accounted for at amortized cost, subject to impairment.
(2)			The expense adjustment consists of (a) equity-based compensation expense of $2,821 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 adjusted net income and net income attributable to OCG 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 expenses for segment reporting and as other income under GAAP, (g) differences of $540 arising from EVUs that are classified as liability awards under GAAP but as equity awards for segment reporting, (h) $1,210 related to third-party placement costs, and (i) $5,168 of net losses related to foreign-currency hedging activities.
(3)			The interest expense adjustment represents the inclusion of interest expense attributable to third-party investors in our CLOs, non-controlling interests of the consolidated funds and the exclusion of segment interest income.
(4)			The adjustment to other income (expense), net represents adjustments related to (a) amounts received for contractually reimbursable costs of $5,545 that are classified as expenses for segment reporting and as other income under GAAP, and (b) the reclassification of $1,530 in net losses related to foreign-currency hedging activities to general and administrative expense.
(5)			The adjustment to other income of consolidated funds primarily represents the inclusion of interest, dividend and other investment income attributable to third-party investors in our CLOs and non-controlling interests of the consolidated funds.
(6)			The adjustment to corporate investments is to remove from segment assets our investments in the consolidated funds, including investments that are treated as equity- or cost-method investments for segment reporting. The $1.4 billion of corporate investments included $1.1 billion of equity-method investments.
(7)			The total assets adjustment represents the inclusion of investments and other assets of the consolidated funds, net of segment assets eliminated in consolidation, which are primarily corporate investments in funds and incentive income receivable.

				As of or for the Three Months Ended June 30, 2015
				Segment								Adjustments								Consolidated
				(in thousands)
Management fees (1)				$	190,197							$	(139,274	)						$	50,923
Incentive income (1)				61,148								(60,584		)						564
Investment income (1)				23,365								(7,671		)						15,694
Total expenses (2)				(178,662		)						(67,267		)						(245,929		)
Interest expense, net (3)				(8,782		)						(43,960		)						(52,742		)
Other income (expense), net (4)				(1,987		)						4,850								2,863
Other income (loss) of consolidated funds (5)				—								(82,526		)						(82,526		)
Income taxes				—								(5,485		)						(5,485		)
Net loss attributable to non-controlling interests in consolidated funds				—								391,961								391,961
Net income attributable to non-controlling interests in consolidated subsidiaries				—								(55,509		)						(55,509		)
Adjusted net income/net income attributable to Oaktree Capital Group, LLC				$	85,279							$	(65,465	)						$	19,814
Corporate investments (6)				$	1,560,235							$	(1,383,557	)						$	176,678
Total assets (7)				$	3,245,460							$	51,941,170							$	55,186,630

(1)			The adjustment represents (a) the elimination of amounts earned from the consolidated funds and (b) for management fees, the reclassification of $4,639 of net gains related to foreign-currency hedging activities to general and administrative expense.
(2)			The expense adjustment consists of (a) equity-based compensation expense of $4,010 related to unit grants made before our initial public offering, (b) consolidated fund expenses of $54,920, (c) expenses incurred by the Intermediate Holding Companies of $652, (d) the effect of timing differences in the recognition of incentive income compensation expense between adjusted net income and net income attributable to OCG of $5,657, (e) acquisition-related items of $1,695, (f) adjustments of $5,513 related to amounts received for contractually reimbursable costs that are classified as expenses for segment reporting and as other income under GAAP, (g) differences of $173 arising from EVUs that are classified as liability awards under GAAP but as equity awards for segment reporting, (h) $5,369 of net gains related to foreign-currency hedging activities, and (i) other expenses of $16.
(3)			The interest expense adjustment represents the inclusion of interest expense attributable to non-controlling interests of the consolidated funds and the exclusion of segment interest income.
(4)			The adjustment to other income (expense), net represents adjustments related to (a) amounts received for contractually reimbursable costs of $5,513 that are classified as expenses for segment reporting and as other income under GAAP, and (b) the reclassification of $663 of net gains related to foreign-currency hedging activities to general and administrative expense.
(5)			The adjustment to other income of consolidated funds primarily represents the inclusion of interest, dividend and other investment income (loss) attributable to non-controlling interests of the consolidated funds.
(6)			The adjustment to corporate investments is to remove from segment assets our investments in the consolidated funds, including investments that are treated as equity- or cost-method investments for segment reporting. The $1.6 billion of corporate investments included $1.3 billion of equity-method investments.
(7)			The total assets adjustment represents the inclusion of investments and other assets of the consolidated funds, net of segment assets eliminated in consolidation, which are primarily corporate investments in funds and incentive income receivable.

				As of or for the Six Months Ended June 30, 2016
				Segment								Adjustments								Consolidated
				(in thousands)
Management fees (1)				$	398,720							$	(5,152	)						$	393,568
Incentive income (1)				184,235								(40,597		)						143,638
Investment income (1)				62,802								7,645								70,447
Total expenses (2)				(380,036		)						3,204								(376,832		)
Interest expense, net (3)				(16,659		)						(37,776		)						(54,435		)
Other income (expense), net (4)				(1,392		)						12,741								11,349
Other income of consolidated funds (5)				—								57,518								57,518
Income taxes				—								(21,251		)						(21,251		)
Net loss 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		)
Adjusted net income/net income attributable to Oaktree Capital Group, LLC				$	247,670							$	(170,545	)						$	77,125
Corporate investments (6)				$	1,371,978							$	(335,740	)						$	1,036,238
Total assets (7)				$	3,160,373							$	3,464,502							$	6,624,875

(1)			The adjustment represents (a) the elimination of amounts earned from the consolidated funds, (b) for management fees, the reclassification of $689 of net gains related to foreign-currency hedging activities to general and administrative expense, and (c) for investment income, differences of $13,578 related to corporate investments in CLOs which under GAAP are marked-to-market but for segment reporting accounted for at amortized cost, subject to impairment.
(2)			The expense adjustment consists of (a) equity-based compensation expense of $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 adjusted net income and net income attributable to OCG 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 expenses for segment reporting and as other income under GAAP, (g) differences of $593 arising from EVUs that are classified as liability awards under GAAP but as equity awards for segment reporting, (h) $7,914 related to third-party placement costs, and (i) $10,237 of net losses related to foreign-currency hedging activities.
(3)			The interest expense adjustment represents the inclusion of interest expense attributable to third-party investors in our CLOs, non-controlling interests of the consolidated funds and the exclusion of segment interest income.
(4)			The adjustment to other income (expense), net represents adjustments related to (a) amounts received for contractually reimbursable costs of $11,346 that are classified as expenses for segment reporting and as other income under GAAP, and (b) the reclassification of $1,395 in net losses related to foreign-currency hedging activities to general and administrative expense.
(5)			The adjustment to other income of consolidated funds primarily represents the inclusion of interest, dividend and other investment income attributable to third-party investors in our CLOs and non-controlling interests of the consolidated funds.
(6)			The adjustment to corporate investments is to remove from segment assets our investments in the consolidated funds, including investments that are treated as equity- or cost-method investments for segment reporting. The $1.4 billion of corporate investments included $1.1 billion of equity-method investments.
(7)			The total assets adjustment represents the inclusion of investments and other assets of the consolidated funds, net of segment assets eliminated in consolidation, which are primarily corporate investments in funds and incentive income receivable.

				As of or for the Six Months Ended June 30, 2015
				Segment								Adjustments								Consolidated
				(in thousands)
Management fees (1)				$	380,292							$	(278,550	)						$	101,742
Incentive income (1)				214,027								(213,463		)						564
Investment income (1)				76,823								(48,447		)						28,376
Total expenses (2)				(416,126		)						(65,777		)						(481,903		)
Interest expense, net (3)				(17,715		)						(81,596		)						(99,311		)
Other income (expense), net (4)				(1,996		)						9,553								7,557
Other income of consolidated funds (5)				—								1,422,716								1,422,716
Income taxes				—								(13,360		)						(13,360		)
Net income attributable to non-controlling interests in consolidated funds				—								(744,704		)						(744,704		)
Net income attributable to non-controlling interests in consolidated subsidiaries				—								(163,610		)						(163,610		)
Adjusted net income/net income attributable to Oaktree Capital Group, LLC				$	235,305							$	(177,238	)						$	58,067
Corporate investments (6)				$	1,560,235							$	(1,383,557	)						$	176,678
Total assets (7)				$	3,245,460							$	51,941,170							$	55,186,630

(1)			The adjustment represents (a) the elimination of amounts earned from the consolidated funds and (b) for management fees, the reclassification of $6,684 of net gains related to foreign-currency hedging activities to general and administrative expense.
(2)			The expense adjustment consists of (a) equity-based compensation expense of $8,605 related to unit grants made before our initial public offering, (b) consolidated fund expenses of $72,430, (c) expenses incurred by the Intermediate Holding Companies of $987, (d) the effect of timing differences in the recognition of incentive income compensation expense between adjusted net income and net income attributable to OCG of $17,553, (e) acquisition-related items of $3,502, (f) adjustments of $11,103 related to amounts received for contractually reimbursable costs that are classified as expenses for segment reporting and as other income under GAAP, (g) differences of $261 arising from EVUs that are classified as liability awards under GAAP but as equity awards for segment reporting, (h) $13,613 of net gains related to foreign-currency hedging activities, and (i) other expenses of $55.
(3)			The interest expense adjustment represents the inclusion of interest expense attributable to non-controlling interests of the consolidated funds and the exclusion of segment interest income.
(4)			The adjustment to other income (expense), net represents adjustments related to (a) amounts received for contractually reimbursable costs of $11,103 that are classified as expenses for segment reporting and as other income under GAAP, and (b) the reclassification of $1,550 of net gains related to foreign-currency hedging activities to general and administrative expense.
(5)			The adjustment to other income of consolidated funds primarily represents the inclusion of interest, dividend and other investment income (loss) attributable to non-controlling interests of the consolidated funds.
(6)			The adjustment to corporate investments is to remove from segment assets our investments in the consolidated funds, including investments that are treated as equity- or cost-method investments for segment reporting. The $1.6 billion of corporate investments included $1.3 billion of equity-method investments.
(7)			The total assets adjustment represents the inclusion of investments and other assets of the consolidated funds, net of segment assets eliminated in consolidation, which are primarily corporate investments in funds and incentive income receivable.

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