EX-99.1 2 exhibit991q42013.htm EXHIBIT 99.1 Exhibit 99.1 (Q4 2013)

Oaktree Announces Fourth Quarter and Full-Year 2013 Financial Results

Adjusted net income per Class A unit grew 19% for the fourth quarter, to $1.62, and 57% for full-year 2013, to $6.38, as compared with the corresponding prior-year period, on higher incentive and investment income.
Distributable earnings per Class A unit decreased 3% for the fourth quarter, to $1.33, and grew 52% for full-year 2013, to $5.82, as compared with the corresponding prior-year period, on continued strong fund realizations.
Gross capital raised was $4.1 billion for the fourth quarter and $12.5 billion for full-year 2013, pushing AUM and management fee-generating AUM to $83.6 billion and a record $72.0 billion, respectively, despite strong fund realizations and distributions.
GAAP net income attributable to Oaktree Capital Group, LLC grew 65%, to $64.9 million, and 106%, to $222.0 million, for the fourth quarter and full-year 2013, respectively, as compared with the corresponding prior-year period.
Oaktree declares a distribution of $1.00 per Class A unit for the fourth quarter, bringing the full-year 2013 distribution to $4.66, up 59% over full-year 2012.
LOS ANGELES, CA. February 13, 2014 – Oaktree Capital Group, LLC (NYSE: OAK) today reported its financial results for the fourth quarter and year ended December 31, 2013.
Adjusted net income (“ANI”) grew $48.0 million, to $268.4 million in the fourth quarter of 2013 from $220.4 million in the fourth quarter of 2012, on an $81.6 million increase in segment revenues. Year-over-year increases of $36.5 million in investment income on corporate investments in funds and companies, and $32.2 million in incentive income from fund realizations, drove the $81.6 million gain in revenues, bringing total segment revenues to $528.6 million for the quarter. For full-year 2013, ANI increased $363.4 million, to $1.1 billion from $717.3 million in 2012, on a $627.9 million rise in total segment revenues, to $2.0 billion.
Distributable earnings decreased to $221.3 million in the fourth quarter of 2013 from $238.1 million in the fourth quarter of 2012, as investment income proceeds fell from the year-earlier's record level. For full-year 2013, distributable earnings grew to $1.0 billion from $672.2 million in the prior year, primarily from higher net incentive income.
Distributable earnings generated a distribution per Class A unit of $1.00 with respect to the fourth quarter of 2013, producing a total distribution of $4.66 for fiscal year 2013.
Howard Marks, Chairman, said, “2013 marks our strongest year of operating performance ever, as compelling investment returns across our many diversified asset classes drove the highest level of revenues, adjusted net income and distributable earnings in our history. Our disciplined approach to diversification, executed through adding carefully selected step-out strategies, resulted in $12.5 billion of gross capital raised, of which $5.1 billion was for strategies that didn't exist three years ago.”
In addition to ANI, Oaktree calculates economic net income (“ENI”) to facilitate comparability with other alternative asset managers that report a measure similar to ENI as a performance metric. Unlike ANI, ENI measures incentive income based on market values. ENI increased to $303.2 million in the fourth quarter of 2013 from $221.7 million in the fourth quarter of 2012, on substantial increases in both net incentives created (fund level)

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and investment income. Full-year ENI amounted to $1.0 billion in both 2013 and 2012. Per Class A unit, ENI was $1.92 and $6.07 for the fourth quarter and full-year 2013, respectively.
GAAP-basis results for the fourth quarter and full-year 2013 included net income attributable to Oaktree Capital Group, LLC of $64.9 million and $222.0 million, respectively.
As previously announced, assets under management (“AUM”) increased to $83.6 billion as of December 31, 2013, from $79.8 billion as of September 30, 2013 and $77.1 billion as of December 31, 2012, as new capital commitments and market-value gains more than offset distributions by closed-end funds. Management fee-generating assets under management (“management fee-generating AUM”) grew to a record $72.0 billion as of December 31, 2013, from $66.9 billion as of September 30, 2013 and $66.8 billion as of December 31, 2012, primarily reflecting the start of the investment period of Oaktree Opportunities Fund IX, L.P. (“Opps IX”) on January 1, 2014.
Gross capital raised of $12.5 billion in 2013 marked Oaktree’s seventh consecutive year of raising $10 billion or more. The fourth quarter's $4.1 billion of gross capital raised was across a number of funds and strategies. Following a final closing, total capital commitments to Oaktree Real Estate Opportunities Fund VI, L.P. (“ROF VI”) reached $2.7 billion. The Emerging Market Opportunities strategy, which invests in distressed emerging market corporate debt, reached $842 million. A closing in November 2013 brought capital commitments to the European Private Debt strategy to $912 million. Capital commitments to our Strategic Credit strategy, which seeks to achieve an attractive total return on an unlevered basis by investing in stressed credits, have reached $2.0 billion. AUM in our Emerging Markets Equity strategy reached $1.0 billion, with $0.9 billion of net inflows during the fourth quarter.
Additionally, Oaktree is currently marketing Oaktree Real Estate Debt Fund, L.P. and Oaktree Enhanced Income Fund II, L.P.




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The table below presents (a) segment revenues, distributable earnings revenues, fee-related earnings revenues and economic net income revenues, in each case for the Operating Group; (b) adjusted net income, distributable earnings, fee-related earnings and economic net income, in each case 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 December 31,
 
As of or for the Year
Ended December 31,
 
2013
 
2012
 
2013
 
2012
 
(in thousands, except per unit data or as otherwise indicated)
Segment Results:
 
 
 
 
 
 
 
Segment revenues
$
528,620

 
$
447,013

 
$
2,038,750

 
$
1,410,948

Adjusted net income
268,373

 
220,376

 
1,080,707

 
717,250

Distributable earnings revenues
482,213

 
465,186

 
1,944,656

 
1,372,015

Distributable earnings
221,255

 
238,134

 
984,266

 
672,181

Fee-related earnings revenues
197,620

 
184,748

 
749,901

 
747,440

Fee-related earnings (1)
73,333

 
71,950

 
260,115

 
307,617

Economic net income revenues
701,526

 
446,258

 
2,177,391

 
1,861,779

Economic net income
303,200

 
221,705

 
1,033,739

 
971,733

Per Class A unit:
 
 
 
 
 
 
 
Adjusted net income
$
1.62

 
$
1.36

 
$
6.38

 
$
4.06

Distributable earnings
1.33

 
1.37

 
5.82

 
3.82

Fee-related earnings (1)
0.40

 
0.40

 
1.43

 
1.62

Economic net income
1.92

 
1.47

 
6.07

 
5.75

Operating Metrics:
 
 
 
 
 
 
 
Assets under management (in millions):
 
 
 
 
 
 
 
Assets under management
$
83,605

 
$
77,051

 
$
83,605

 
$
77,051

Management fee-generating assets under management
71,950

 
66,784

 
71,950

 
66,784

Incentive-creating assets under management
32,379

 
33,989

 
32,379

 
33,989

Uncalled capital commitments
13,169

 
11,201

 
13,169

 
11,201

Accrued incentives (fund level):
 
 
 
 
 
 
 
Incentives created (fund level)
415,436

 
209,500

 
1,168,836

 
911,947

Incentives created (fund level), net of associated incentive income compensation expense
152,121

 
107,258

 
549,545

 
493,005

Accrued incentives (fund level)
2,276,439

 
2,137,798

 
2,276,439

 
2,137,798

Accrued incentives (fund level), net of associated incentive income compensation expense
1,235,226

 
1,282,194

 
1,235,226

 
1,282,194

 
 
 
 
 
(1)
Beginning with this reporting period, the definition of fee-related earnings has been modified to exclude non-cash equity-based compensation charges related to unit grants made after our initial public offering in April 2012. All prior periods have been recast to retroactively reflect this change. Those non-cash compensation charges amounted to $1.2 million and $3.8 million, or $0.01 and $0.03 per Class A unit, for the fourth quarter and full-year 2013, respectively, and $0.2 million and $0.3 million, or less than $0.01 per Class A unit, for the fourth quarter and full-year 2012, respectively.
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 the basis of methodologies other than in accordance with generally accepted accounting principles in the United States (“non-GAAP”). Reconciliations of these non-GAAP financial measures to the most directly comparable financial measures calculated and presented in accordance with GAAP are presented at Exhibit A. All non-GAAP measures and all interim results presented in this release are unaudited. GAAP-basis results, including adjusted net income, for the year ended December 31, 2013 are subject to the completion of Oaktree's annual audit.

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Operating Metrics
Assets Under Management
AUM was $83.6 billion as of December 31, 2013, as compared with $79.8 billion as of September 30, 2013 and $77.1 billion as of December 31, 2012. The $3.8 billion increase since September 30, 2013 reflected $2.8 billion of aggregate market-value gains, $2.0 billion of new capital commitments and $1.0 billion of net inflows to open-end funds, partially offset by $2.2 billion of distributions to closed-end fund investors. The $2.0 billion of new capital commitments included $0.7 billion to the European Private Debt strategy, $0.5 billion to the Emerging Market Opportunities strategy, $0.3 billion to ROF VI and $0.2 billion to the Real Estate Debt strategy. The $2.2 billion of distributions to closed-end fund investors included $1.0 billion by Principal Investing funds and $1.0 billion by Distressed Debt funds, including $0.5 billion by OCM Opportunities Fund VIIb, L.P. (“Opps VIIb”).
The $6.5 billion increase in AUM for full-year 2013 reflected $8.9 billion of market-value gains, $8.5 billion of new capital commitments and fee-generating leverage, and $1.0 billion of net inflows to open-end funds, partially offset by $12.0 billion of distributions to closed-end fund investors. The $8.5 billion of new capital commitments and fee-generating leverage included $2.4 billion to ROF VI, $1.7 billion to Oaktree Enhanced Income Fund, L.P., $1.4 billion to the Strategic Credit strategy, $0.9 billion to the European Private Debt strategy and $0.8 billion to the Emerging Market Opportunities strategy. Of the $12.0 billion of distributions to closed-end fund investors, $3.2 billion was attributable to Opps VIIb, $3.8 billion to other Distressed Debt funds, $3.4 billion to Principal Investing funds and $1.2 billion to Real Estate funds.
Management Fee-generating Assets Under Management
Management fee-generating AUM was $72.0 billion as of December 31, 2013, up from $66.9 billion and $66.8 billion as of September 30, 2013 and December 31, 2012, respectively. The $5.1 billion increase for the fourth quarter of 2013 was primarily attributable to $4.2 billion from the start of Opps IX's investment period on January 1, 2014, $1.3 billion of market-value gains in funds for which management fees are based on NAV, and $1.0 billion of net inflows to open-end funds. Partially offsetting those and other increases was a $1.5 billion decline attributable to asset sales by closed-end funds in liquidation.
Full-year 2013 management fee-generating AUM increased $5.2 billion, reflecting an aggregate increase of $6.6 billion from the start of Opps IX's investment period on January 1, 2014 and new capital commitments to ROF VI, $3.1 billion from fee-generating leverage and drawdowns by closed-end funds for which management fees are based on drawn capital or NAV, $3.0 billion from market-value gains in funds for which management fees are based on NAV, and $1.0 billion from net inflows to open-end funds. Partially offsetting those increases was an $8.2 billion decline from asset sales by closed-end funds in liquidation, of which Opps VIIb accounted for $2.8 billion.
Incentive-creating Assets Under Management
Incentive-creating assets under management (“incentive-creating AUM”) amounted to $32.4 billion as of December 31, 2013, up from $32.3 billion as of September 30, 2013 and down from $34.0 billion as of December 31, 2012. The $0.1 billion increase since September 30, 2013 reflected the net effect of $1.6 billion in market-value and foreign currency gains in closed-end and evergreen funds, $1.5 billion in drawdowns by closed-end funds, and $2.6 billion in distributions by closed-end funds. The $1.6 billion decrease for full-year 2013 resulted from the net effect of $12.1 billion in distributions by closed-end funds, $5.9 billion in market-value gains in closed-end and evergreen funds, and $4.7 billion in drawdowns by closed-end funds. Of the $32.4 billion in incentive-creating AUM as of December 31, 2013, $29.6 billion, or 91.3%, was generating incentives at the fund level.
Accrued Incentives (Fund Level) and Incentives Created (Fund Level)
Accrued incentives (fund level) amounted to $2.3 billion as of December 31, 2013, as compared to $2.1 billion as of both September 30, 2013 and December 31, 2012. The fourth quarter of 2013 reflected $415.4 million of incentives created (fund level), less $242.5 million of segment incentive income recognized. Full-year 2013 reflected $1.2 billion of incentives created (fund level), less $1.0 billion of segment incentive income recognized.

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Net of incentive income compensation expense, accrued incentives (fund level) amounted to $1.2 billion as of December 31, 2013 and September 30, 2013, and $1.3 billion as of December 31, 2012.
Uncalled Capital Commitments
Uncalled capital commitments amounted to $13.2 billion as of December 31, 2013, as compared with $12.3 billion as of September 30, 2013 and $11.2 billion as of December 31, 2012.

Segment Results
Revenues
Segment revenues increased $81.6 million, or 18.3%, to $528.6 million for the fourth quarter of 2013, from $447.0 million for the fourth quarter of 2012, reflecting increases of $36.5 million in investment income, $32.2 million in incentive income and $12.9 million in management fees.
Segment revenues increased $627.9 million, or 44.5%, to $2.0 billion for full-year 2013, from $1.4 billion for full-year 2012, as a result of increases of $569.1 million in incentive income, $56.3 million in investment income and $2.5 million in management fees.
Management Fees
Management fees increased $12.9 million, or 7.0%, to $197.6 million for the fourth quarter of 2013, from $184.7 million for the fourth quarter of 2012. The increase reflected $13.7 million from new capital commitments to ROF VI, $13.3 million from Oaktree Mezzanine Fund III, L.P. (“Mezz III”), $8.2 million from closed-end funds for which management fees are based on drawn capital or NAV, $6.0 million from the Strategic Credit strategy and $3.6 million from open-end funds. Partially offsetting those increases was a $30.7 million decline in fees from closed-end funds in liquidation, of which Opps VIIb accounted for $12.5 million. Of the $13.7 million increase from new capital commitments to ROF VI, $5.3 million represented additional management fees that were earned retroactive to the start of the fund's investment period in August 2012 (“retroactive management fees”). No retroactive management fees fell in the prior-year's fourth quarter. The increase in fees from Mezz III resulted from the fact that a portion of its management fees is contingent on the fund achieving certain cash-flow levels. For the fourth quarter of 2013, closed-end funds represented $144.9 million, or 73.3%, of total management fees.
Management fees increased $2.5 million, or 0.3%, to $749.9 million for full-year 2013, from $747.4 million for full-year 2012. The increase reflected $45.9 million from new capital commitments to ROF VI, $23.4 million from Mezz III, $18.4 million from closed-end funds for which management fees are based on drawn capital or NAV, $17.8 million from open-end funds and $9.0 million from the Strategic Credit strategy. Largely offsetting those increases was $107.2 million in lower fees from closed-end funds in liquidation, of which $49.3 million was attributable to Opps VIIb. Retroactive management fees from closed-end funds amounted to $9.5 million in 2013, as compared with $3.2 million in 2012.
Incentive Income
Incentive income increased $32.2 million, or 15.3%, to $242.5 million for the fourth quarter of 2013, from $210.3 million for the fourth quarter of 2012. The fourth quarter of 2013 included incentive distributions of $97.3 million from Opps VIIb, $83.9 million from OCM Principal Opportunities Fund III, L.P. and $50.8 million from Oaktree Value Opportunities Fund, L.P. (“VOF”). The fourth quarter of 2012 included $103.8 million of tax-related incentive distributions from Opps VIIb and an aggregate $106.5 million of incentive distributions from Global Principal Investing, Real Estate and evergreen funds.
Incentive income increased $569.1 million, or 123.4%, to $1.0 billion for full-year 2013, from $461.1 million for full-year 2012. Full-year 2013 included incentive distributions of $662.3 million from Opps VIIb, $141.9 million from Principal Investing and Real Estate funds, $52.8 million from VOF, and $44.1 million from other Distressed Debt funds, as well as $122.7 million of tax-related incentive distributions. Full-year 2012 included $200.7 million

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of tax-related incentive distributions, mostly attributable to Opps VIIb, and incentive distributions of $198.5 million from Principal Investing and Real Estate funds, and $40.5 million from VOF.
Investment Income
Investment income increased $36.5 million, or 70.2%, to $88.5 million for the fourth quarter of 2013, from $52.0 million for the fourth quarter of 2012. Investments in companies accounted for $22.7 million of the increase, with the remainder arising from higher average returns on our Oaktree fund investments. Of the $22.7 million, market-value gains on our recent minority equity investment in China Cinda Asset Management Co., Ltd. (“Cinda”) contributed $17.1 million, with an additional $5.1 million reflecting higher income from our one-fifth ownership stake in DoubleLine Capital LP and its affiliates (collectively, “DoubleLine”).
Investment income increased $56.3 million, or 27.8%, to $258.7 million for full-year 2013 from $202.4 million in 2012. Higher average returns across our Oaktree fund investments accounted for $32.5 million of the increase, with the remaining $23.8 million reflecting $17.1 million of market-value gains on our recent equity investment in Cinda and $8.5 million of higher income from DoubleLine, which increased to $31.4 million in 2013.
Expenses
Compensation and Benefits
Compensation and benefits increased $4.0 million, or 4.9%, to $86.0 million for the fourth quarter of 2013, from $82.0 million in the fourth quarter of 2012. For full-year 2013, compensation and benefits rose $35.6 million, or 10.8%, to $365.3 million from $329.7 million in 2012. Both increases reflected growth in headcount of 11% between December 31, 2012 and December 31, 2013.
Equity-based Compensation
Equity-based compensation increased to $1.2 million for the fourth quarter of 2013, from $0.2 million in the fourth quarter of 2012. For full-year 2013, equity-based compensation increased to $3.8 million from $0.3 million in 2012. The increases reflected non-cash amortization expense associated with vesting of restricted unit grants made to employees and directors subsequent to our initial public offering in April 2012.
Incentive Income Compensation
Incentive income compensation expense rose $23.5 million, or 22.5%, to $127.8 million for the fourth quarter of 2013, from $104.3 million for the fourth quarter of 2012, primarily reflecting the 15.3% increase in incentive income. For full-year 2013, incentive income compensation expense increased $213.6 million, or 96.0%, to $436.2 million from $222.6 million in 2012. The percentage increase was smaller than the 123.4% increase in incentive income, principally because in 2011 we acquired and expensed a small portion of certain investment professionals' carried interest in Opps VIIb. If that transaction had not occurred, total incentive income compensation expense would have been higher by an estimated $50.1 million for full-year 2013 and unchanged for 2012.
General and Administrative
General and administrative expenses increased $7.4 million, or 25.4%, to $36.5 million for the fourth quarter of 2013, from $29.1 million in the fourth quarter of 2012. Excluding the impact of foreign currency-related items, general and administrative expenses increased $9.0 million, or 32.5%, to $36.7 million from $27.7 million for the respective fourth-quarter periods. For full-year 2013, general and administrative expenses increased $14.7 million, or 14.3%, to $117.4 million from $102.7 million in 2012. Excluding the impact of foreign currency-related items, as well as $2.1 million in nonrecurring costs associated with our initial public offering that were incurred in 2012, general and administrative expenses increased $20.8 million, or 21.3%, to $118.3 million in 2013 from $97.5 million in 2012. For both the quarterly and annual periods, the increase reflected $1.8 million of placement fees incurred in the fourth quarter of 2013 for ROF VI, as compared with none in the prior-year period, as well as higher professional fees and other costs associated with corporate growth, enhancements to our operational infrastructure and being a public company.

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Adjusted Net Income
ANI rose $48.0 million, or 21.8%, to $268.4 million for the fourth quarter of 2013, from $220.4 million in the fourth quarter of 2012, reflecting increases of $36.5 million in investment income, $8.8 million in incentive income, net of incentive income compensation expense, and $1.3 million in fee-related earnings. The portion of ANI attributable to our Class A units was $61.9 million and $41.0 million for the fourth quarter of 2013 and 2012, respectively. Per Class A unit, adjusted net income-OCG amounted to $1.62 and $1.36 for the fourth quarter of 2013 and 2012, respectively.
ANI grew $363.4 million, or 50.7%, to $1.1 billion for full-year 2013, from $717.3 million for full-year 2012, as a result of increases of $355.5 million in net incentive income and $56.3 million in investment income, partially offset by a $47.5 million decline in fee-related earnings. The portion of ANI attributable to our Class A units was $223.1 million and $114.4 million for 2013 and 2012, respectively. Per Class A unit, adjusted net income-OCG amounted to $6.38 and $4.06 for 2013 and 2012, respectively.
The effective tax rate applied to ANI for the fourth quarter of 2013 and 2012 was 9% and 7%, respectively, resulting from estimated full-year effective tax rates of 9% and 14%, respectively. The full-year 2012 effective tax rate of 14% excluded a nonrecurring adjustment to deferred tax assets. Including this adjustment, the effective tax rate for 2012 was 18%. The effective tax rate is a function of the mix of income and other factors that often vary significantly within or between years, each of which can have a material impact on the particular year’s income tax expense. The rate used for the fourth quarter is based on the full-year effective tax rate.
Distributable Earnings
Distributable earnings decreased $16.8 million, or 7.1%, to $221.3 million for the fourth quarter of 2013, from $238.1 million for the fourth quarter of 2012, reflecting $28.1 million in lower investment income proceeds, $8.8 million in higher incentive income, net of incentive income compensation expense, and a $1.3 million increase in fee-related earnings. For the fourth quarter of 2013, receipts of investment income totaled $42.1 million, including $26.6 million from fund distributions and $15.4 million from DoubleLine, as compared with total receipts in the prior year’s fourth quarter of $70.2 million, of which $50.0 million and $20.8 million was attributable to fund distributions and DoubleLine, respectively.
Distributable earnings increased $312.1 million, or 46.4%, to $1.0 billion for full-year 2013, from $672.2 million for full-year 2012, on $355.5 million of higher net incentive income, partially offset by a $47.5 million decline in fee-related earnings. For 2013, receipts of investment income totaled $164.6 million, including $128.9 million from fund distributions and $35.7 million from DoubleLine, as compared with total receipts in the prior year of $163.5 million, of which $129.6 million and $33.8 million was attributable to fund distributions and DoubleLine, respectively.
The portion of distributable earnings attributable to our Class A units was $1.33 and $1.37 per unit for the fourth quarter of 2013 and 2012, respectively, reflecting distributable earnings per Operating Group unit of $1.46 and $1.58, 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 increased $1.3 million, or 1.8%, to $73.3 million for the fourth quarter of 2013, from $72.0 million for the fourth quarter of 2012. The increase reflected $12.9 million in higher management fees, partially offset by increases of $4.0 million in compensation and benefits and $7.4 million in general and administrative expenses. The portion of fee-related earnings attributable to our Class A units was $0.40 per unit for both the fourth quarter of 2013 and 2012.
Fee-related earnings decreased $47.5 million, or 15.4%, to $260.1 million for full-year 2013, from $307.6 million for full-year 2012, reflecting $35.6 million in higher compensation and benefits and $14.7 million in increased general and administrative expenses, partially offset by $2.5 million in higher management fees. The portion of fee-related earnings attributable to our Class A units was $1.43 and $1.62 per unit for 2013 and 2012, respectively.

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The effective tax rate applied to fee-related earnings was 17% and 16% for the fourth quarter of 2013 and 2012, respectively, resulting from full-year effective tax rates of 15% and 18% for 2013 and 2012, respectively. The full-year 2012 effective tax rate of 18% for fee-related earnings-OCG excluded a nonrecurring adjustment to deferred tax assets. Including this adjustment, the effective tax rate for 2012 was 28%. The effective tax rate used for the fourth quarter is based on the full-year income tax rate, which is a function of various factors.
Beginning with this reporting period, the definition of fee-related earnings has been modified to exclude non-cash equity-based compensation charges related to unit grants made after our initial public offering in April 2012. All prior periods have been recast to retroactively reflect this change. Those non-cash compensation charges amounted to $1.2 million and $3.8 million, or $0.01 and $0.03 per Class A unit, for the fourth quarter and full-year 2013, respectively, and $0.2 million and $0.3 million, or less than $0.01 per Class A unit, for the fourth quarter and full-year 2012, respectively.
GAAP-basis Results
Net income attributable to Oaktree Capital Group, LLC was $64.9 million for the fourth quarter of 2013, as compared to $39.3 million for the fourth quarter of 2012. For full-year 2013, net income attributable to Oaktree Capital Group, LLC was $222.0 million, up from $107.8 million for full-year 2012.
Capital and Liquidity
As of December 31, 2013, Oaktree had cash and investments in U.S. Treasury and government agency securities of $1.1 billion, and outstanding debt of $579.5 million. Oaktree had then, and currently has, no borrowings outstanding against its $500 million revolving credit facility. As of December 31, 2013, Oaktree’s investments in funds and companies had a carrying value of $1.2 billion, with our 20% investment in DoubleLine carried at $19.3 million under the equity method of accounting. Accrued incentives (fund level), net of associated compensation expense, amounted to an additional $1.2 billion as of that date.
Distribution
Oaktree Capital Group, LLC has declared a distribution attributable to the fourth quarter of 2013 of $1.00 per Class A unit. This distribution will be paid on February 27, 2014 to Class A unitholders of record at the close of business on February 24, 2014.
Conference Call
Oaktree will host a conference call to discuss fourth quarter and full-year 2013 results today at 11:00 a.m. Eastern Time / 8:00 a.m. Pacific Time. The conference call may be accessed by dialing (888) 769-9724 (U.S. callers) or +1 (415) 228-4639 (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 (800) 627-0199 (U.S. callers) or +1 (203) 369-3299 (non-U.S. callers), beginning approximately one hour after the broadcast.
About Oaktree
Oaktree is a leader among global investment managers specializing in alternative investments, with $83.6 billion in assets under management as of December 31, 2013. 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 800 employees and offices in 16 cities worldwide. For additional information, please visit Oaktree’s website at www.oaktreecapital.com.


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Contacts: 
Investor Relations:
    
Oaktree Capital Group, LLC
 
    
Andrea D. Williams
 
    
(213) 830-6483
 
    
investorrelations@oaktreecapital.com
 
 
Press Relations:
    
Sard Verbinnen & Co
 
    
John Christiansen
 
    
(415) 618-8750
 
    
jchristiansen@sardverb.com 
 
 
 
    
Carissa Felger
 
    
(312) 895-4701
 
    
cfelger@sardverb.com

Forward-Looking Statements
This release contains forward-looking statements within the meaning of Section 27A of the U.S. Securities Act of 1933 (the “Securities Act”) and Section 21E of the U.S. Securities Exchange Act of 1934, each as amended, which reflect the current views of Oaktree Capital Group, LLC (“OCG”), with respect to, among other things, its 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 OCG’s beliefs, assumptions and expectations of its future performance, taking into account all information currently available to OCG. Such forward-looking statements are subject to risks and uncertainties and assumptions relating to OCG’s 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; the timing and receipt of, and impact of taxes on, carried interest; distributions from and liquidation of our existing funds; 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 OCG’s Annual Report on Form 10-K for the year ended December 31, 2012 filed with the SEC on March 14, 2013 (“Annual Report”) and in the item captioned “Risk Factors” in our Quarterly Report on Form 10-Q for the quarter ended September 30, 2013 filed with the SEC on November 7, 2013, which are accessible on the SEC’s website at www.sec.gov, provide examples of risks, uncertainties and events that may cause OCG’s actual results to differ materially from the expectations described in its forward-looking statements.
Forward-looking statements speak only as of the date the statements are made. Except as required by law, OCG does 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.

9



Consolidated Statements of Operations Data (GAAP basis) 
 
Three Months Ended
December 31,
 
Year Ended December 31,
 
2013
 
2012
 
2013
 
2012
 
(in thousands, except per unit data)
Revenues:
 
 
 
 
 
 
 
Management fees
$
43,183

 
$
42,755

 
$
192,605

 
$
134,568

Incentive income

 
4,047

 
2,317

 
10,415

Total revenues
43,183

 
46,802

 
194,922

 
144,983

Expenses:
 
 
 
 
 
 
 
Compensation and benefits
(86,058
)
 
(82,111
)
 
(365,696
)
 
(330,018
)
Equity-based compensation
(7,564
)
 
(8,860
)
 
(28,441
)
 
(36,342
)
Incentive income compensation
(174,105
)
 
(104,326
)
 
(482,551
)
 
(222,594
)
Total compensation and benefits expense
(267,727
)
 
(195,297
)
 
(876,688
)
 
(588,954
)
General and administrative
(34,177
)
 
(29,067
)
 
(114,404
)
 
(101,417
)
Depreciation and amortization
(1,853
)
 
(1,780
)
 
(7,119
)
 
(7,397
)
Consolidated fund expenses
(28,102
)
 
(21,864
)
 
(108,851
)
 
(92,835
)
Total expenses
(331,859
)
 
(248,008
)
 
(1,107,062
)
 
(790,603
)
Other income (loss):
 
 
 
 
 
 
 
Interest expense
(18,229
)
 
(12,134
)
 
(61,160
)
 
(45,773
)
Interest and dividend income
430,438

 
510,353

 
1,806,361

 
1,966,317

Net realized gain on consolidated funds' investments
707,550

 
1,655,818

 
3,503,998

 
4,560,782

Net change in unrealized appreciation (depreciation) on consolidated funds' investments
835,974

 
(599,436
)
 
1,843,469

 
835,160

Investment income
33,427

 
7,699

 
56,027

 
25,382

Other income (expense), net
(3
)
 
(1,507
)
 
409

 
7,027

Total other income
1,989,157

 
1,560,793

 
7,149,104

 
7,348,895

Income before income taxes
1,700,481

 
1,359,587

 
6,236,964

 
6,703,275

Income taxes
(7,358
)
 
(3,365
)
 
(26,232
)
 
(30,858
)
Net income
1,693,123

 
1,356,222

 
6,210,732

 
6,672,417

Less:
 
 
 
 
 
 
 
Net income attributable to non-controlling redeemable interests in consolidated funds
(1,420,612
)
 
(1,148,042
)
 
(5,163,939
)
 
(6,016,342
)
Net income attributable to OCGH non-controlling interest
(207,604
)
 
(168,909
)
 
(824,795
)
 
(548,265
)
Net income attributable to Oaktree Capital Group, LLC
$
64,907

 
$
39,271

 
$
221,998

 
$
107,810

Distributions declared per Class A unit
$
0.74

 
$
0.55

 
$
4.71

 
$
2.31

Net income per unit (basic and diluted):
 
 
 
 
 
 
 
Net income per Class A unit
$
1.69

 
$
1.30

 
$
6.35

 
$
3.83

Weighted average number of Class A units outstanding
38,343

 
30,181

 
34,979

 
28,170




10



Segment Financial Data
 
As of or for the Three Months
Ended December 31,
 
As of or for the Year
Ended December 31,
 
2013
 
2012
 
2013
 
2012
 
(in thousands, except per unit data or as otherwise indicated)
Segment Statements of Operations Data: (1)
 
 
 
 
 
 
 
Revenues:
 
 
 
 
 
 
 
Management fees
$
197,620

 
$
184,748

 
$
749,901

 
$
747,440

Incentive income
242,530

 
210,255

 
1,030,195

 
461,116

Investment income
88,470

 
52,010

 
258,654

 
202,392

Total revenues
528,620

 
447,013

 
2,038,750

 
1,410,948

Expenses:
 
 
 
 
 
 
 
Compensation and benefits
(85,962
)
 
(81,954
)
 
(365,306
)
 
(329,741
)
Equity-based compensation
(1,182
)
 
(190
)
 
(3,828
)
 
(318
)
Incentive income compensation
(127,771
)
 
(104,326
)
 
(436,217
)
 
(222,594
)
General and administrative
(36,472
)
 
(29,064
)
 
(117,361
)
 
(102,685
)
Depreciation and amortization
(1,853
)
 
(1,780
)
 
(7,119
)
 
(7,397
)
Total expenses
(253,240
)
 
(217,314
)
 
(929,831
)
 
(662,735
)
Adjusted net income before interest and other income (expense)
275,380

 
229,699

 
1,108,919

 
748,213

Interest expense, net of interest income (2)
(7,004
)
 
(7,816
)
 
(28,621
)
 
(31,730
)
Other income (expense), net
(3
)
 
(1,507
)
 
409

 
767

Adjusted net income
$
268,373

 
$
220,376

 
$
1,080,707

 
$
717,250

Adjusted net income-OCG
$
61,928

 
$
41,011

 
$
223,113

 
$
114,395

Adjusted net income per Class A unit
1.62

 
1.36

 
6.38

 
4.06

Distributable earnings
221,255

 
238,134

 
984,266

 
672,181

Distributable earnings-OCG
50,914

 
41,252

 
203,595

 
107,678

Distributable earnings per Class A unit
1.33

 
1.37

 
5.82

 
3.82

Fee-related earnings
73,333

 
71,950

 
260,115

 
307,617

Fee-related earnings-OCG
15,166

 
12,024

 
50,122

 
45,646

Fee-related earnings per Class A unit
0.40

 
0.40

 
1.43

 
1.62

Economic net income
303,200

 
221,705

 
1,033,739

 
971,733

Economic net income-OCG
73,513

 
44,385

 
212,283

 
161,980

Economic net income per Class A unit
1.92

 
1.47

 
6.07

 
5.75

Weighted average number of Operating Group units outstanding
151,061

 
150,463

 
150,971

 
150,539

Weighted average number of Class A units outstanding
38,343

 
30,181

 
34,979

 
28,170

Operating Metrics:
 
 
 
 
 
 
 
Assets under management (in millions):
 
 
 
 
 
 
 
Assets under management
$
83,605

 
$
77,051

 
$
83,605

 
$
77,051

Management fee-generating assets under management
71,950

 
66,784

 
71,950

 
66,784

Incentive-creating assets under management
32,379

 
33,989

 
32,379

 
33,989

Uncalled capital commitments (3)
13,169

 
11,201

 
13,169

 
11,201

Accrued incentives (fund level): (4)
 
 
 
 
 
 
 
Incentives created (fund level)
415,436

 
209,500

 
1,168,836

 
911,947

Incentives created (fund level), net of associated incentive income compensation expense
152,121

 
107,258

 
549,545

 
493,005

Accrued incentives (fund level)
2,276,439

 
2,137,798

 
2,276,439

 
2,137,798

Accrued incentives (fund level), net of associated incentive income compensation expense
1,235,226

 
1,282,194

 
1,235,226

 
1,282,194


11



 
 
 
 
 
(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. In addition, adjusted net income excludes the effect of (a) non-cash equity-based compensation charges related to unit grants made before our initial public offering, (b) income taxes, (c) other income or expenses applicable to OCG or its Intermediate Holding Companies and (d) the adjustment for the OCGH non-controlling interest. 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. 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 $0.8 million and $0.7 million for the three months ended December 31, 2013 and 2012, respectively, and $3.2 million and $2.6 million for the years ended December 31, 2013 and 2012, respectively.
(3)
Uncalled capital commitments represent undrawn capital commitments by partners (including Oaktree as general partner) of our closed-end funds in 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 no longer are 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 other factors.



12



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
 
 
 
December 31,
2013
 
September 30,
2013
 
December 31,
2012
 
 
 
(in millions)
Assets Under Management:
 
 
 
 
 
 
 
Closed-end funds
$
46,685

 
$
45,357

 
$
45,700

Open-end funds
32,868

 
30,669

 
29,092

Evergreen funds
4,052

 
3,792

 
2,259

Total
$
83,605

 
$
79,818

 
$
77,051

 
 
 
 
 
 
 
Three Months Ended
December 31,
 
Year Ended December 31,
 
2013
 
2012
 
2013
 
2012
 
(in millions)
Change in Assets Under Management:
 
 
 
 
 
 
 
Beginning balance
$
79,818

 
$
80,967

 
$
77,051

 
$
74,857

Closed-end funds:
 
 
 
 
 
 
 
New capital commitments
1,834

 
599

 
5,496

 
6,456

Distributions for a realization event/other
(2,240
)
 
(5,716
)
 
(12,029
)
 
(12,663
)
Uncalled capital commitments at end of investment period

 
(1,634
)
 

 
(1,634
)
Foreign currency translation
111

 
142

 
269

 
99

Change in market value (1)
1,535

 
1,216

 
5,837

 
5,810

Change in applicable leverage
88

 
127

 
1,412

 
207

Open-end funds:
 
 
 
 
 
 
 
Contributions
2,021

 
1,607

 
5,276

 
4,394

Redemptions
(992
)
 
(967
)
 
(4,292
)
 
(3,869
)
Foreign currency translation
52

 
81

 
108

 
65

Change in market value (1)
1,118

 
782

 
2,684

 
3,460

Evergreen funds:
 
 
 
 
 
 
 
Contributions or new capital commitments
231

 
71

 
1,739

 
140

Redemptions
(92
)
 
(282
)
 
(272
)
 
(548
)
Distributions from restructured funds
(1
)
 
(23
)
 
(49
)
 
(57
)
Foreign currency translation
4

 
1

 
4

 
1

Change in market value (1)
118

 
80

 
371

 
333

Ending balance
$
83,605

 
$
77,051

 
$
83,605

 
$
77,051

 
 
 
 
 
(1)
Change in market value represents the change in NAV of our funds resulting from current income and realized and unrealized gains/losses on investments, less management fees and other fund expenses.

13



Management Fee-generating AUM 
 
 
 
As of
 
 
 
December 31,
2013
 
September 30,
2013
 
December 31,
2012
 
 
 
(in millions)
Management Fee-generating Assets Under Management:
 
 
 
 
 
 
Closed-end funds
$
36,422

 
$
33,833

 
$
35,750

Open-end funds
32,830

 
30,632

 
29,056

Evergreen funds
2,698

 
2,482

 
1,978

Total
$
71,950

 
$
66,947

 
$
66,784

 
 
 
 
 
 
 
Three Months Ended
December 31,
 
Year Ended December 31,
 
2013
 
2012
 
2013
 
2012
 
(in millions)
Change in Management Fee-generating Assets Under Management:
 
 
 
 
 
 
 
Beginning balance
$
66,947

 
$
66,171

 
$
66,784

 
$
66,964

Closed-end funds:
 
 
 
 
 
 
 
New capital commitments to funds that pay fees based on committed capital
4,562

 

 
6,597

 
486

Capital drawn by funds that pay fees based on drawn capital or NAV
142

 
222

 
1,835

 
968

Change for funds that pay fees based on the lesser of funded capital or cost basis during liquidation (1)
(1,527
)
 
(1,071
)
 
(8,222
)
 
(5,457
)
Uncalled capital commitments at end of investment period for funds that pay fees based on committed capital
(664
)
 
(57
)
 
(664
)
 
(57
)
Distributions by funds that pay fees based on NAV
(106
)
 
(141
)
 
(325
)
 
(512
)
Foreign currency translation
63

 
143

 
196

 
148

Change in market value (2)
84

 
19

 
(1
)
 
125

Change in applicable leverage
35

 
126

 
1,256

 
182

Open-end funds:
 
 
 
 
 
 
 
Contributions
2,022

 
1,608

 
5,276

 
4,380

Redemptions
(992
)
 
(967
)
 
(4,292
)
 
(3,869
)
Foreign currency translation
52

 
81

 
108

 
65

Change in market value
1,116

 
781

 
2,682

 
3,455

Evergreen funds:
 
 
 
 
 
 
 
Contributions or capital drawn by funds that pay fees based on drawn capital or NAV
192

 
71

 
660

 
140

Redemptions
(92
)
 
(282
)
 
(272
)
 
(548
)
Change in market value
116

 
80

 
332

 
314

Ending balance
$
71,950

 
$
66,784

 
$
71,950

 
$
66,784

 
 
 
 
 
(1)
For most closed-end funds, management fees are charged during the liquidation period on the lesser of (a) total funded capital and (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 generally declines as the fund sells assets.
(2)
The change in market value reflects certain funds that pay management fees based on NAV and leverage, as applicable.

14



 
As of
 
December 31,
2013
 
September 30,
2013
 
December 31,
2012
 
(in millions)
Reconciliation of Assets Under Management to Management Fee-generating Assets Under Management:
 
 
 
 
 
Assets under management
$
83,605

 
$
79,818

 
$
77,051

Difference between assets under management and committed capital or cost basis for most closed-end funds (1)
(6,311
)
 
(5,002
)
 
(3,164
)
Undrawn capital commitments to funds that have not yet commenced their investment periods
(693
)
 
(5,179
)
 
(5,016
)
Undrawn capital commitments to funds for which management fees are based on drawn capital or NAV
(2,625
)
 
(1,032
)
 
(584
)
Oaktree’s general partner investments in management fee-generating
    funds
(1,371
)
 
(1,273
)
 
(1,041
)
Closed-end funds that are no longer paying management fees
(461
)
 
(181
)
 
(231
)
Funds for which management fees were permanently waived
(194
)
 
(204
)
 
(231
)
Management fee-generating assets under management
$
71,950

 
$
66,947

 
$
66,784

 
 
 
 
 
(1)
Not applicable to closed-end funds that pay management fees based on NAV or leverage, as applicable.
The period-end weighted average annual management fee rates applicable to the respective management fee-generating AUM balances are set forth below: 
 
As of
 
December 31,
2013
 
September 30,
2013
 
December 31,
2012
Weighted Average Annual Management Fee Rates:
 
 
 
 
 
Closed-end funds
1.48
%
 
1.47
%
 
1.51
%
Open-end funds
0.47

 
0.48

 
0.49

Evergreen funds
1.63

 
1.69

 
1.82

Overall
1.02

 
1.03

 
1.07



15



Incentive-creating AUM 
 
As of
 
December 31,
2013
 
September 30,
2013
 
December 31,
2012
 
(in millions)
Incentive-creating Assets Under Management:
 
 
 
 
 
Closed-end funds
$
30,362

 
$
29,915

 
$
32,058

Evergreen funds
2,017

 
2,386

 
1,931

Total
$
32,379

 
$
32,301

 
$
33,989

Accrued Incentives (Fund Level) and Incentives Created (Fund Level)
 
As of or for the Three Months
Ended December 31,
 
As of or for the Year
Ended December 31,
 
2013
 
2012
 
2013
 
2012
 
(in thousands)
Accrued Incentives (Fund Level):
 
 
 
 
 
 
 
Beginning balance
$
2,103,533

 
$
2,138,553

 
$
2,137,798

 
$
1,686,967

Incentives created (fund level):
 
 
 
 
 
 
 
Closed-end funds
399,189

 
196,273

 
1,114,088

 
869,557

Evergreen funds
16,247

 
13,227

 
54,748

 
42,390

Total incentives created (fund level)
415,436

 
209,500

 
1,168,836

 
911,947

Less: segment incentive income recognized by us
(242,530
)
 
(210,255
)
 
(1,030,195
)
 
(461,116
)
Ending balance
$
2,276,439

 
$
2,137,798

 
$
2,276,439

 
$
2,137,798

Accrued incentives (fund level), net of associated incentive income compensation expense
$
1,235,226

 
$
1,282,194

 
$
1,235,226

 
$
1,282,194

Uncalled Capital Commitments
Uncalled capital commitments amounted to $13.2 billion as of December 31, 2013, as compared with $12.3 billion as of September 30, 2013 and $11.2 billion as of December 31, 2012.


16



Segment Results
Our business is comprised of one segment, our investment management segment, which consists of the investment management services that we provide to our clients.
Adjusted Net Income
Adjusted net income and adjusted net income-OCG, as well as per unit data, are set forth below: 
 
Three Months Ended
December 31,
 
Year Ended December 31,
 
 
2013
 
2012
 
2013
 
2012
 
 
(in thousands, except per unit data)
 
Revenues:
 
 
 
 
 
 
 
 
Management fees
$
197,620

 
$
184,748

 
$
749,901

 
$
747,440

 
Incentive income
242,530

 
210,255

 
1,030,195

 
461,116

 
Investment income
88,470

 
52,010

 
258,654

 
202,392

 
Total revenues
528,620

 
447,013

 
2,038,750

 
1,410,948

 
Expenses:
 
 
 
 
 
 
 
 
Compensation and benefits
(85,962
)
 
(81,954
)
 
(365,306
)
 
(329,741
)
 
Equity-based compensation
(1,182
)
 
(190
)
 
(3,828
)
 
(318
)
 
Incentive income compensation
(127,771
)
 
(104,326
)
 
(436,217
)
 
(222,594
)
 
General and administrative
(36,472
)
 
(29,064
)
 
(117,361
)
 
(102,685
)
 
Depreciation and amortization
(1,853
)
 
(1,780
)
 
(7,119
)
 
(7,397
)
 
Total expenses
(253,240
)
 
(217,314
)
 
(929,831
)
 
(662,735
)
 
Adjusted net income before interest and other income (expense)
275,380

 
229,699

 
1,108,919

 
748,213

 
Interest expense, net of interest income
(7,004
)
 
(7,816
)
 
(28,621
)
 
(31,730
)
 
Other income (expense), net
(3
)
 
(1,507
)
 
409

 
767

 
Adjusted net income
268,373

 
220,376

 
1,080,707

 
717,250

 
Adjusted net income attributable to OCGH non-controlling interest
(200,252
)
 
(176,171
)
 
(834,966
)
 
(582,746
)
 
Non-Operating Group other income

 

 

 
6,260

(1) 
Non-Operating Group expenses
(248
)
 
(160
)
 
(1,195
)
 
(553
)
 
Adjusted net income-OCG before income taxes
67,873

 
44,045

 
244,546

 
140,211

 
Income taxes-OCG
(5,945
)
 
(3,034
)
 
(21,433
)
 
(25,816
)
(1) 
Adjusted net income-OCG
$
61,928

 
$
41,011

 
$
223,113

 
$
114,395

 
Adjusted net income per Class A unit
$
1.62

 
$
1.36

 
$
6.38

 
$
4.06

 
Weighted average number of Class A units outstanding
38,343

 
30,181

 
34,979

 
28,170

 
 
 
 
 
 
(1)
A nonrecurring adjustment in the second quarter of 2012 had the effect of increasing income taxes-OCG by $(7,134) and increasing non-Operating Group other income by $6,260, for a net effect of additional after-tax OCG expense of $(874). This adjustment stemmed from reductions in deferred tax assets and the liability for amounts due to affiliates. The effective income tax rate applicable to adjusted net income-OCG before income taxes for the year ended December 31, 2012 was 14% without the $(7,134) nonrecurring expense and 18% with it.



17



Investment Income  
 
Three Months Ended
December 31,
 
Year Ended December 31,
 
2013
 
2012
 
2013
 
2012
 
(in thousands)
Income (loss) from investments in funds:
 
 
 
 
 
 
 
Oaktree funds:
 
 
 
 
 
 
 
Distressed Debt
$
21,255

 
$
21,157

 
$
91,793

 
$
106,810

Control Investing
16,801

 
7,271

 
48,003

 
28,322

Real Estate
(486
)
 
6,726

 
14,199

 
19,927

Corporate Debt
10,154

 
4,461

 
19,928

 
14,670

Listed Equities
13,245

 
6,178

 
36,615

 
8,307

Convertible Securities
43

 
27

 
163

 
141

Non-Oaktree funds
(1,609
)
 
(186
)
 
(369
)
 
1,526

Income from investments in companies
29,067

 
6,376

 
48,322

 
22,689

Total investment income
$
88,470

 
$
52,010

 
$
258,654

 
$
202,392



18



Distributable Earnings and Distribution Calculation
Distributable earnings and the calculation of distributions are set forth below: 
 
Three Months Ended
December 31,
 
Year Ended December 31,
 
2013
 
2012
 
2013
 
2012
Distributable Earnings: (1)
(in thousands, except per unit data)
Revenues:
 
 
 
 
 
 
 
Management fees
$
197,620

 
$
184,748

 
$
749,901

 
$
747,440

Incentive income
242,530

 
210,255

 
1,030,195

 
461,116

Receipts of investment income from funds (2)
26,615

 
50,013

 
128,896

 
129,621

Receipts of investment income from companies
15,448

 
20,170

 
35,664

 
33,838

Total distributable earnings revenues
482,213

 
465,186

 
1,944,656

 
1,372,015

Expenses:
 
 
 
 
 
 
 
Compensation and benefits
(85,962
)
 
(82,144
)
 
(365,306
)
 
(330,059
)
Incentive income compensation
(127,771
)
 
(104,326
)
 
(436,217
)
 
(222,594
)
General and administrative
(36,472
)
 
(29,064
)
 
(117,361
)
 
(102,685
)
Depreciation and amortization
(1,853
)
 
(1,780
)
 
(7,119
)
 
(7,397
)
Total expenses
(252,058
)
 
(217,314
)
 
(926,003
)
 
(662,735
)
Other income (expense):
 
 
 
 
 
 
 
Interest expense, net of interest income
(7,004
)
 
(7,816
)
 
(28,621
)
 
(31,730
)
Operating Group income taxes
(1,893
)
 
(415
)
 
(6,175
)
 
(6,136
)
Other income (expense), net
(3
)
 
(1,507
)
 
409

 
767

Distributable earnings
$
221,255

 
$
238,134

 
$
984,266

 
$
672,181

Distribution Calculation:
 
 
 
 
 
 
 
Operating Group distribution with respect to the period
$
178,247

 
$
191,070

 
$
791,314

 
$
540,419

Distribution per Operating Group unit
$
1.18

 
$
1.27

 
$
5.24

 
$
3.59

Adjustments per Class A unit:
 
 
 
 
 
 
 
Distributable earnings-OCG income taxes
(0.09
)
 
(0.16
)
 
(0.26
)
 
(0.40
)
Tax receivable agreement
(0.08
)
 
(0.05
)
 
(0.28
)
 
(0.21
)
Non-Operating Group expenses
(0.01
)
 
(0.01
)
 
(0.04
)
 
(0.04
)
Distribution per Class A unit (3)
$
1.00

 
$
1.05

 
$
4.66

 
$
2.94

 
 
 
 
 
(1)
Beginning in 2013, distributable earnings excludes non-cash equity-based compensation charges related to unit grants made after our initial public offering in April 2012. These non-cash compensation charges amounted to $0.2 million and $0.3 million for the three months and year ended December 31, 2012, respectively, and thus were considered immaterial for purposes of recasting those periods' results.
(2)
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.
(3)
With respect to the quarter ended December 31, 2013, the distribution was announced on February 13, 2014 and is payable on February 27, 2014.

19



Units Outstanding 
 
Three Months Ended
December 31,
 
Year Ended December 31,
 
2013
 
2012
 
2013
 
2012
 
(in thousands)
Weighted Average Units:
 
 
 
 
 
 
 
OCGH
112,718

 
120,282

 
115,992

 
122,369

Class A
38,343

 
30,181

 
34,979

 
28,170

Total
151,061

 
150,463

 
150,971

 
150,539

Units Eligible for Fiscal Period Distribution:
 
 
 
 
 
 
 
OCGH
112,584

 
120,268

 
 
 
 
Class A
38,473

 
30,181

 
 
 
 
Total
151,057

 
150,449

 
 
 
 

In January 2014, Oaktree issued 1,667,300 restricted OCGH units and 7,164 Class A units to its employees and directors. These issuances are subject to annual vesting over a weighted average period of approximately five years and are not eligible to participate in the distribution payable on February 27, 2014, which is related to the fourth quarter of 2013.
Fee-related Earnings (1) 
Fee-related earnings and fee-related earnings-OCG, as well as per unit data, are set forth below: 
 
Three Months Ended
December 31,
 
Year Ended December 31,
 
 
2013
 
2012
 
2013
 
2012
 
 
(in thousands, except per unit data)
 
Management fees:
 
 
 
 
 
 
 
 
Closed-end funds
$
144,897

 
$
140,800

 
$
559,426

 
$
580,636

 
Open-end funds
38,088

 
34,485

 
146,557

 
128,821

 
Evergreen funds
14,635

 
9,463

 
43,918

 
37,983

 
Total management fees
197,620

 
184,748

 
749,901

 
747,440

 
Expenses:
 
 
 
 
 
 
 
 
Compensation and benefits
(85,962
)
 
(81,954
)
 
(365,306
)
 
(329,741
)
 
General and administrative
(36,472
)
 
(29,064
)
 
(117,361
)
 
(102,685
)
 
Depreciation and amortization
(1,853
)
 
(1,780
)
 
(7,119
)
 
(7,397
)
 
Total expenses
(124,287
)
 
(112,798
)
 
(489,786
)
 
(439,823
)
 
Fee-related earnings
73,333

 
71,950

 
260,115

 
307,617

 
Fee-related earnings attributable to OCGH non-controlling interest
(54,720
)
 
(57,517
)
 
(199,758
)
 
(250,273
)
 
Non-Operating Group other income

 

 

 
6,260

(2) 
Non-Operating Group expenses
(247
)
 
(160
)
 
(1,196
)
 
(551
)
 
Fee-related earnings-OCG before income taxes
18,366

 
14,273

 
59,161

 
63,053

 
Fee-related earnings-OCG income taxes
(3,200
)
 
(2,249
)
 
(9,039
)
 
(17,407
)
(2) 
Fee-related earnings-OCG
$
15,166

 
$
12,024

 
$
50,122

 
$
45,646

 
Fee-related earnings per Class A unit
$
0.40

 
$
0.40

 
$
1.43

 
$
1.62

 
Weighted average number of Class A units outstanding
38,343

 
30,181

 
34,979

 
28,170

 
 
 
 
 
 
(1)
Beginning with this reporting period, the definition of fee-related earnings has been modified to exclude non-cash equity-based compensation charges related to unit grants made after our initial public offering in April 2012. All prior periods have been recast to reflect this change retroactively. Those non-cash compensation charges amounted to $1.2 million and $3.8 million, or

20



$0.01 and $0.03 per Class A unit, for the fourth quarter and full-year 2013, respectively, and $0.2 million and $0.3 million, or less than $0.01 per Class A unit in each case, for the fourth quarter and full-year 2012, respectively.
(2)
A nonrecurring adjustment in the second quarter of 2012 had the effect of increasing income taxes-OCG by $(7,134) and increasing non-Operating Group other income by $6,260, for a net effect of additional after-tax OCG expense of $(874). This adjustment stemmed from reductions in deferred tax assets and the liability for amounts due to affiliates. The effective income tax rate applicable to fee-related earnings-OCG before income taxes for the year ended December 31, 2012 was 18% without the $(7,134) nonrecurring expense and 28% with it.
Segment Statements of Financial Condition
 
As of December 31,
 
2013
 
2012
 
(in thousands)
Assets:
 
 
 
Cash and cash-equivalents
$
390,721

 
$
458,191

U.S. Treasury and government agency securities
676,600

 
370,614

Management fees receivable
38,940

 
27,351

Incentive income receivable
19,623

 
82,182

Corporate investments
1,197,173

 
1,115,952

Deferred tax assets
278,885

 
159,171

Other assets
215,185

 
146,087

Total assets
$
2,817,127

 
$
2,359,548

Liabilities and Capital:
 
 
 
Liabilities:
 
 
 
Accounts payable and accrued expenses
$
304,427

 
$
214,311

Due to affiliates
242,986

 
136,165

Debt obligations
579,464

 
615,179

Total liabilities
1,126,877

 
965,655

Capital:
 
 
 
OCGH non-controlling interest in consolidated subsidiaries 
1,220,647

 
1,087,491

Unitholders’ capital attributable to Oaktree Capital Group, LLC
469,603

 
306,402

Total capital
1,690,250

 
1,393,893

Total liabilities and capital
$
2,817,127

 
$
2,359,548

Corporate Investments
 
As of December 31,
 
2013
 
2012
Investments in funds:
(in thousands)
Oaktree funds:
 
 
 
Distressed Debt
$
438,144

 
$
475,476

Control Investing
246,058

 
264,186

Real Estate
112,981

 
107,408

Corporate Debt
125,560

 
115,250

Listed Equities
129,697

 
69,222

Convertible Securities
1,554

 
1,392

Non-Oaktree funds
51,580

 
53,591

Investments in companies
91,599

 
29,427

Total corporate investments
$
1,197,173

 
$
1,115,952



21



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 December 31, 2013
 
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 IX, L.P. (6)
Jan. 2014
 
Jan. 2017
 
$
5,066

 
$
1,773

 
$
112

 
$

 
$
1,885

 
$
4,966

 
$

 
$
22

 
$
1,819

 
nm
 
nm
 
1.1x
Oaktree Opportunities Fund VIIIb, L.P.
Aug. 2011
 
Aug. 2014
 
2,692

 
2,558

 
591

 
11

 
3,138

 
2,625

 
1

 
113

 
2,856

 
19.2
%
 
12.5
 %
 
1.3
Special Account B
Nov. 2009
 
Nov. 2012
 
1,031

 
1,073

 
533

 
620

 
986

 
967

 
3

 
62

 
757

 
18.7

 
15.0

 
1.5
Oaktree Opportunities Fund VIII, L.P.
Oct. 2009
 
Oct. 2012
 
4,507

 
4,507

 
2,186

 
2,365

 
4,328

 
3,196

 
66

 
360

 
3,307

 
17.4

 
12.4

 
1.5
Special Account A
Nov. 2008
 
Oct. 2012
 
253

 
253

 
320

 
455

 
118

 
75

 
40

 
23

 

 
32.1

 
26.2

 
2.3
OCM Opportunities Fund VIIb, L.P.
May 2008
 
May 2011
 
10,940

 
9,844

 
9,467

 
15,987

 
3,324

 
2,120

 
1,192

 
648

 

 
23.8

 
18.3

 
2.0
OCM Opportunities Fund VII, L.P.
Mar. 2007
 
Mar. 2010
 
3,598

 
3,598

 
1,642

 
4,162

 
1,078

 
991

 
25

 
191

 
841

 
11.5

 
8.3

 
1.6
OCM Opportunities Fund VI, L.P.
Jul. 2005
 
Jul. 2008
 
1,773

 
1,773

 
1,310

 
2,597

 
486

 
546

 
90

 
166

 
151

 
12.3

 
9.0

 
1.8
OCM Opportunities Fund V, L.P.
Jun. 2004
 
Jun. 2007
 
1,179

 
1,179

 
959

 
1,955

 
183

 
224

 
151

 
36

 

 
18.7

 
14.3

 
1.9
Legacy funds (7)
Various
 
Various
 
9,543

 
9,543

 
8,179

 
17,675

 
47

 

 
1,109

 
10

 

 
24.2

 
19.3

 
1.9
 
 
 
 
 
 
 
 
 
 
 
 

 
 

 
 
 
 
 
 
 
 
 
23.0
%
 
17.6
 %
 
 
Emerging Market Opportunities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Oaktree Emerging Market Opportunities Fund, L.P. (6)
Sep. 2013
 
Sep. 2017
 
$
355

 
$
20

 
$

 
$

 
$
20

 
$
19

 
$

 
$

 
$
21

 
nm

 
nm

 
1.0x