Exhibit 99.1
Unaudited Pro Forma Condensed Consolidated Financial Information
Pro forma financial information
The following pro forma information should be read in conjunction with the historical consolidated financial statements and the notes thereto of Oaktree Capital Group, LLC (“OCG”) as filed in OCG’s Annual Report on Form 10-K for the year ended December 31, 2021, which was filed with the U.S. Securities and Exchange Commission (the “SEC”) on March 14, 2022, and OCG’s Quarterly Report on Form 10-Q for the nine months ended September 30, 2022, which was filed with the SEC on November 10, 2022.
The following unaudited pro forma condensed consolidated statement of financial condition as of September 30, 2022, has been prepared to give effect to the Restructuring as described in note 1 below, as if it had occurred on September 30, 2022.
The following unaudited pro forma condensed consolidated statements of operations for the nine months ended September 30, 2022, and for the year ended December 31, 2021, have been prepared to give effect to the Restructuring as if it had occurred on January 1, 2021.
These unaudited pro forma condensed consolidated financial statements are prepared for informational purposes only and are not necessarily indicative of future results or of actual results that would have been achieved had the Restructuring been consummated on January 1, 2021.
Please see accompanying notes to pro forma condensed consolidated financial statements
Oaktree Capital Group, LLC
Unaudited Pro Forma Condensed Consolidated Statement of Financial Condition
As of September 30, 2022
(in thousands)
| Oaktree Capital Group, LLC Historical (a) | Pro Forma Adjustments (b) | Pro Forma Total | ||||||||||||||
Assets | ||||||||||||||||
Cash and cash-equivalents | $ | 120,544 | $ | (87,692 | ) | $ | 32,852 | |||||||||
U.S. Treasury and other securities | 6,033 | (6,033 | ) | — | ||||||||||||
Corporate investments | 1,289,818 | (183,149 | ) | 1,106,669 | ||||||||||||
Due from affiliates | 104,537 | (102,381 | ) | 2,156 | ||||||||||||
Deferred tax assets | 3,489 | (3,489 | ) | — | ||||||||||||
Right-of-use assets | 27,148 | (27,148 | ) | — | ||||||||||||
Other assets | 52,816 | (15,285 | ) | 37,531 | ||||||||||||
Assets of consolidated funds: | ||||||||||||||||
Cash and cash-equivalents | 655,187 | (478,602 | ) | (c) | 176,585 | |||||||||||
Investments, at fair value | 11,945,770 | (8,197,645 | ) | (c) | 3,748,125 | |||||||||||
Dividends and interest receivable | 65,762 | (41,864 | ) | (c) | 23,898 | |||||||||||
Due from brokers | 60,418 | — | 60,418 | |||||||||||||
Receivable for securities sold | 88,191 | (74,499 | ) | (c) | 13,692 | |||||||||||
Derivative assets, at fair value | 37,839 | — | 37,839 | |||||||||||||
Other assets, net | 23,703 | — | 23,703 | |||||||||||||
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Total assets | $ | 14,481,255 | $ | (9,217,787 | ) | $ | 5,263,468 | |||||||||
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Liabilities and Unitholders’ Capital | ||||||||||||||||
Liabilities: | ||||||||||||||||
Accrued compensation expense | $ | 150,891 | $ | (104,160 | ) | $ | 46,731 | |||||||||
Accounts payable, accrued expenses and other liabilities | 35,757 | (32,529 | ) | 3,228 | ||||||||||||
Due to affiliates | 18,535 | (15,510 | ) | 3,025 | ||||||||||||
Debt obligations | 198,245 | — | 198,245 | |||||||||||||
Operating lease liabilities | 31,908 | (31,908 | ) | — | ||||||||||||
Liabilities of consolidated funds: | ||||||||||||||||
Accounts payable, accrued expenses and other liabilities | 144,356 | (65,809 | ) | (c) | 78,547 | |||||||||||
Payables for securities purchased | 586,140 | (517,331 | ) | (c) | 68,809 | |||||||||||
Derivative liabilities, at fair value | 36,669 | — | 36,669 | |||||||||||||
Distributions payable | 1,201 | — | 1,201 | |||||||||||||
Borrowings under credit facilities | 975,705 | — | 975,705 | |||||||||||||
Debt obligations of CLOs | 7,987,368 | (7,987,368 | ) | (c) | — | |||||||||||
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Total liabilities | 10,166,775 | (8,754,615 | ) | 1,412,160 | ||||||||||||
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Non-controlling redeemable interests in consolidated funds | 2,131,598 | (6,999 | ) | (c) | 2,124,599 | |||||||||||
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Capital attributable to preferred unitholders | 400,584 | — | 400,584 | |||||||||||||
Non-controlling interest in consolidated subsidiaries | 465,414 | (167,748 | ) | 297,666 | ||||||||||||
Capital attributable to Brookfield units | 1,316,884 | (288,424 | ) | 1,028,460 | ||||||||||||
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Total unitholders’ capital | 2,182,882 | (456,172 | ) | 1,726,710 | ||||||||||||
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Total liabilities and unitholders’ capital | $ | 14,481,255 | $ | (9,217,786 | ) | $ | 5,263,469 | |||||||||
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Please see accompanying notes to pro forma condensed consolidated financial statements
Oaktree Capital Group, LLC
Unaudited Pro Forma Condensed Consolidated Statements of Operations
For the Nine Months Ended September 30, 2022
(in thousands)
| Oaktree Capital Group, LLC Historical (a) | Pro Forma Adjustments (b) | Pro Forma Total | ||||||||||||||
Revenues: | ||||||||||||||||
Management fees | $ | 183,370 | $ | (183,370 | ) | (c) | $ | — | ||||||||
Incentive income | 56,070 | — | 56,070 | |||||||||||||
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Total revenue | 239,440 | (183,370 | ) | 56,070 | ||||||||||||
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Expenses: | ||||||||||||||||
Compensation and benefits | (118,371 | ) | 118,371 | — | ||||||||||||
Equity-based compensation | (5,461 | ) | 5,461 | — | ||||||||||||
Incentive income compensation | (17,141 | ) | 3,135 | (14,006 | ) | |||||||||||
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Total compensation and benefits expense | (140,973 | ) | 126,967 | (14,006 | ) | |||||||||||
General and administrative | (17,548 | ) | 15,714 | (1,834 | ) | |||||||||||
Depreciation and amortization | (1,349 | ) | 1,349 | — | ||||||||||||
Consolidated fund expenses | (61,312 | ) | 26,072 | (d) | (35,240 | ) | ||||||||||
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Total expenses | (221,182 | ) | 170,102 | (51,080 | ) | |||||||||||
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Other income: | ||||||||||||||||
Interest expense | (171,032 | ) | 146,374 | (e) | (24,658 | ) | ||||||||||
Interest and dividend income | 408,396 | (273,579 | ) | (e) | 134,817 | |||||||||||
Net realized loss on consolidated funds’ investments | (68,885 | ) | 23,072 | (d) | (45,813 | ) | ||||||||||
Net change in unrealized appreciation (depreciation) on consolidated funds’ investments | (13,971 | ) | 92,030 | (d) | 78,059 | |||||||||||
Investment income | (20,004 | ) | 5,203 | (14,801 | ) | |||||||||||
Other income, net | — | 210 | 210 | |||||||||||||
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Total other income | 134,504 | (6,690 | ) | 127,814 | ||||||||||||
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Income before income taxes | 152,762 | (19,958 | ) | 132,804 | ||||||||||||
Income taxes | (12,347 | ) | 12,347 | — | ||||||||||||
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Net income | 140,415 | (7,611 | ) | 132,804 | ||||||||||||
Less: | ||||||||||||||||
Net income attributable to non-controlling interests in consolidated funds | (123,124 | ) | (18 | ) | (d) | (123,142 | ) | |||||||||
Net income attributable to non-controlling interests in consolidated subsidiaries | 11,406 | 1,959 | 13,365 | |||||||||||||
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Net income attributable to Oaktree Capital Group, LLC | 28,697 | (5,670 | ) | 23,027 | ||||||||||||
Net income attributable to preferred unitholders | (20,487 | ) | — | (20,487 | ) | |||||||||||
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Net income attributable to Oaktree Capital Group, LLC Class A unitholders | $ | 8,210 | $ | (5,670 | ) | $ | 2,540 | |||||||||
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Please see accompanying notes to pro forma condensed consolidated financial statements
Oaktree Capital Group, LLC
Unaudited Pro Forma Condensed Consolidated Statements of Operations
For the Year Ended December 31, 2021
(in thousands)
| Oaktree Capital Group, LLC Historical (a) | Pro Forma Adjustments (b) | Pro Forma Total | ||||||||||||||
Revenues: | ||||||||||||||||
Management fees | $ | 234,786 | $ | (234,786 | ) | (c) | $ | — | ||||||||
Incentive income | 1,219,624 | — | 1,219,624 | |||||||||||||
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Total revenue | 1,454,410 | (234,786 | ) | 1,219,624 | ||||||||||||
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Expenses: | ||||||||||||||||
Compensation and benefits | (162,260 | ) | 161,054 | (1,206 | ) | |||||||||||
Equity-based compensation | (10,521 | ) | 10,521 | — | ||||||||||||
Incentive income compensation | (594,300 | ) | 21,770 | (572,530 | ) | |||||||||||
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Total compensation and benefits expense | (767,081 | ) | 193,345 | (573,736 | ) | |||||||||||
General and administrative | (21,694 | ) | 21,682 | (12 | ) | |||||||||||
Depreciation and amortization | (2,332 | ) | 2,332 | — | ||||||||||||
Consolidated fund expenses | (75,338 | ) | 27,735 | (d) | (47,603 | ) | ||||||||||
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Total expenses | (866,445 | ) | 245,094 | (621,351 | ) | |||||||||||
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Other income: | ||||||||||||||||
Interest expense | (155,265 | ) | 150,977 | (e) | (4,288 | ) | ||||||||||
Interest and dividend income | 389,251 | (294,306 | ) | (e) | 94,945 | |||||||||||
Net realized loss on consolidated funds’ investments | 22,238 | 6,951 | (d) | 29,189 | ||||||||||||
Net change in unrealized appreciation (depreciation) on consolidated funds’ investments | 122,517 | 14,370 | (d) | 136,887 | ||||||||||||
Investment income | 203,041 | (304 | ) | (d) | 202,737 | |||||||||||
Other income, net | 19 | 162 | 181 | |||||||||||||
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Total other income | 581,801 | (122,150 | ) | 459,651 | ||||||||||||
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Income before income taxes | 1,169,766 | (111,842 | ) | 1,057,924 | ||||||||||||
Income taxes | (12,387 | ) | 12,387 | — | ||||||||||||
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Net income | 1,157,379 | (99,455 | ) | 1,057,924 | ||||||||||||
Less: | ||||||||||||||||
Net loss attributable to non-controlling interests in consolidated funds | (186,515 | ) | 15,295 | (d) | (171,220 | ) | ||||||||||
Net loss attributable to non-controlling interests in consolidated subsidiaries | (339,204 | ) | 35,676 | (303,528 | ) | |||||||||||
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Net income attributable to Oaktree Capital Group, LLC | 631,660 | (48,484 | ) | 583,176 | ||||||||||||
Net income attributable to preferred unitholders | (27,316 | ) | — | (27,316 | ) | |||||||||||
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Net income attributable to Oaktree Capital Group, LLC Class A unitholders | $ | 604,344 | $ | (48,484 | ) | $ | 555,860 | |||||||||
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Please see accompanying notes to pro forma condensed consolidated financial statements
Oaktree Capital Group, LLC
Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements
($ in thousands, except where noted)
1. PRO FORMA TRANSACTION
Historical Background
As used in these unaudited pro forma condensed consolidated financial statements:
“Oaktree” refers to (i) Oaktree Capital Group, LLC and, where applicable, its subsidiaries and affiliates prior to October 1, 2019 and (ii) the Oaktree Operating Group and, where applicable, their respective subsidiaries and affiliates after September 30, 2019; and
the “Company” refers to Oaktree Capital Group, LLC and, where applicable, its subsidiaries and affiliates, including, as the context requires, affiliated Oaktree Operating Group members after September 30, 2019.
Oaktree is a leader among global investment managers specializing in alternative investments. Oaktree emphasizes an opportunistic, value-oriented and risk-controlled approach to investments in credit, private equity, real assets and listed equities. Funds managed by Oaktree (the “Oaktree funds”) include commingled funds, separate accounts, collateralized loan obligation vehicles (“CLOs”) and business development companies (“BDCs”). Commingled funds include open-end and closed-end limited partnerships in which Oaktree makes an investment and for which it serves as the general partner. CLOs are structured finance vehicles in which Oaktree typically makes an investment and for which it serves as collateral manager.
Oaktree Capital Group, LLC is a Delaware limited liability company that was formed on April 13, 2007. The Company’s issued and outstanding member interests are divided into certain classes and series of units. The Company’s outstanding units are held by (i) an affiliate of Brookfield Asset Management, Inc. (to be renamed Brookfield Corporation in connection with the Restructuring, as defined below) (“Brookfield”) as the sole holder of the Company’s Class A common units, (ii) preferred unitholders as the holders of Series A and Series B preferred units listed on the NYSE, which represent only the right to receive certain distributions from the Company and such other rights as are specified in the relevant preferred unit designations, and (iii) Oaktree Capital Group Holdings, L.P. (“OCGH”) as the sole holder of the Company’s Class B common units, which units do not represent an economic interest in the Company. OCGH is owned by Oaktree’s senior executives, current and former employees, and certain other investors (collectively, the “OCGH unitholders”). Subject to the operating agreement of the Company, to the extent the approval of any matter requires the vote of the Company’s unitholders, the Class A units are entitled to one vote per unit and the Class B units are entitled to ten votes per unit, voting together as a single class.
The Oaktree business is conducted through a group of six operating entities collectively referred to as the “Oaktree Operating Group.” The interests in the Oaktree Operating Group are referred to as the “Oaktree Operating Group units.” An Oaktree Operating Group unit is not a separate legal interest but represents one limited partnership interest in each of the Oaktree Operating Group entities. OCGH has a direct economic interest in all six of the Oaktree Operating Group members. The Company’s operations, however, are conducted through an indirect economic interest in only two (on a historical basis) or one (on a pro forma basis) of these six Oaktree Operating Group entities. References to “Oaktree” in these financial statements will generally refer to the collective business of the Oaktree Operating Group, of which consolidated subsidiaries of the Company are components.
The Company’s ownership and operational structure prior to December 1, 2022 were the results of a merger with Brookfield completed on September 30, 2019 (“Merger”) and a subsequent restructuring completed on October 1, 2019 in connection with the Merger. See audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 filed with the SEC for more information regarding the Merger and Restructuring.
Oaktree Capital Management, L.P. (“OCM”), an affiliate of the Company, provides certain administrative and other services relating to the operations of the Company’s business pursuant to a Services Agreement between the Company and OCM (as amended from time to time, the “Services Agreement”).
Oaktree Capital Group, LLC
Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements
($ in thousands, except where noted)
Restructuring Transaction
On November 30, 2022, the Company entered into the Globe Restructuring Agreement, by and among the Company, Brookfield US Holdings Inc., a corporation incorporated under the laws of the Province of Ontario (“BUSHI”), and certain other affiliates of the Company or BUSHI (the “Globe Restructuring Agreement”). Pursuant to the Globe Restructuring Agreement, on November 30, 2022, the parties thereto consummated certain transactions in connection with an internal reorganization (the “Restructuring”), whereby, among other things, the Company distributed all of its interest in the economic shares of Oaktree Holdings, Ltd., a Cayman Islands exempted company (“Oaktree Holdings, Ltd.”), to BUSHI, the sole holder of the Company’s Class A units. Concurrently, the Company transferred to Atlas OCM Holdings, LLC, a Delaware limited liability company and a non-subsidiary affiliate of the Company, the voting shares of Oaktree Holdings, Ltd. held by the Company.
The Oaktree Operating Group entities reflected in these condensed consolidated pro forma financial statements are (i) on a historical and pro forma basis, Oaktree Capital I, L.P., which acts as or controls the general partner of certain Oaktree funds and which holds a majority of Oaktree’s investments in its funds and (ii) on a historical basis only, Oaktree Capital Management (Cayman), L.P., which represents Oaktree’s non-U.S. fee business. The Adjustments to Historical Financial Information primarily reflect the assets, liabilities and financial results of the Oaktree Operating Group entity no longer controlled directly by OCG and deconsolidated as a result of the Restructuring: Oaktree Capital Management (Cayman), L.P., which is held by Oaktree Holdings, Ltd.
As described in notes 2 and 4 of the Company’s consolidated financial statements included in its Annual Report on Form 10-K for the year ended December 31, 2021, certain funds managed by Oaktree and CLOs for which Oaktree serves as collateral manager are variable interest entities (VIEs). As of September 30, 2022, the Company consolidated 26 VIEs for which it was the primary beneficiary, including 9 funds managed by Oaktree and 17 CLOs for which Oaktree serves as collateral manager. As a result of the Restructuring, which constitutes a reconsideration event, the Company re-assessed the primary beneficiary determination and concluded that it was no longer the primary beneficiary for CLOs where its direct ownership interests are held by operating group entities no longer controlled directly by the Company. The deconsolidation of these entities, has been reflected in the condensed consolidated pro forma financial statements as if it occurred on September 30, 2022 for the pro forma condensed consolidated statement of financial condition and on January 1, 2021 for the pro forma condensed consolidated statements of operations.
2. BASIS OF PRESENTATION
The accompanying unaudited pro forma condensed consolidated statement of financial condition as of September 30, 2022, has been prepared to give effect to the Restructuring described in note 1, which occurred on November 30, 2022, as if it had occurred on September 30, 2022.
The accompanying unaudited pro forma condensed consolidated statements of operations for the nine months ended September 30, 2022, and for the year ended December 31, 2021 (each a “Pro Forma Period”), have been prepared to give effect to the Restructuring described in note 1, as if it had occurred on January 1, 2021.
The accompanying unaudited pro forma condensed consolidated financial statements have been prepared in accordance with Article 11 of Regulation S-X and do not include all of the information and note disclosures required by generally accepted accounting principles of the United States. Pro forma financial information is intended to provide information about the continuing impact of a transaction by showing how a specific transaction or group of transactions might have affected historical financial statements. Pro forma financial information
Oaktree Capital Group, LLC
Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements
($ in thousands, except where noted)
illustrates only the isolated and objectively measurable (based on historically determined amounts) effects of a particular transaction, and excludes effects based on judgmental estimates of how historical management practices and operating decisions may or may not have changed as a result of the transaction. Therefore, pro forma financial information does not include information about the possible or expected impact of current actions taken by management in response to the pro forma transaction, as if management’s actions were carried out in previous reporting periods.
This unaudited pro forma financial information is presented for informational purposes only and does not purport to be indicative of the Company’s financial results or financial position as if the transactions reflected herein had occurred, or been in effect during the applicable Pro Forma Period. In addition, this unaudited pro forma financial information should not be viewed as indicative of the Company’s expected financial results for future periods.
3. ADJUSTMENTS TO UNAUDITED PRO FORMA STATEMENT OF FINANCIAL CONDITION AS OF SEPTEMBER 30, 2022
| a. | Historical financial information as of September 30, 2022, derived from the Company’s Quarterly Report on Form 10-Q for the period ended September 30, 2022. |
| b. | Represents adjustments to the statement of financial position of the Company as of September 30, 2022, to give effect to the Restructuring and related transfer of interests as if it had occurred on September 30, 2022. |
| c. | Represents balances of certain funds deconsolidated by OCG in connection with the Restructuring. Refer to note 1 regarding the deconsolidation of funds. |
4. ADJUSTMENTS TO UNAUDITED PRO FORMA STATEMENT OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2022
| a. | Historical financial information for the nine months ended September 30, 2022, derived from the Company’s Quarterly Report on Form 10-Q for the nine months ended September 30, 2022. |
| b. | Represents adjustments to the statement of operations of the Company for the nine months ended September 30, 2022, to give effect to the Restructuring and related transfer of interests as if it had occurred on January 1, 2021. |
| c. | Net adjustment represents removal of management fees totaling $7.9 million and $175.5 million of sub-advisory fees earned by OCM Cayman from the Oaktree Operating Group entities no longer controlled directly by OCG. |
| d. | Represents results of certain funds deconsolidated by OCG in connection with the Restructuring. Refer to note 1 regarding the deconsolidation of funds. |
Oaktree Capital Group, LLC
Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements
($ in thousands, except where noted)
| e. | Interest expense pro forma adjustments include $2.4 million from the deconsolidation of Oaktree Operating Group entities no longer controlled directly by OCG and $144.0 million from the associated deconsolidation of funds. |
Interest and dividend income pro forma adjustments include $2.8 million from the deconsolidation of Oaktree Operating Group entities no longer controlled directly by OCG and $270.8 million from the associated deconsolidation of funds. Refer to note 1 regarding the deconsolidation of funds.
5. ADJUSTMENTS TO UNAUDITED PRO FORMA STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2021
| a. | Historical financial information for the year ended December 31, 2021, derived from the Company’s Annual Report on Form 10-K for the year ended December 31, 2021. |
| b. | Represents adjustments to the statement of operations of the Company for the year ended December 31, 2021, to give effect to the Restructuring and related transfer of interests as if it had occurred on January 1, 2021. |
| c. | Net adjustment represents removal of management fees totaling $10.7 million and $224.1 million sub-advisory fees earned by OCM Cayman from the Oaktree Operating Group entities no longer controlled directly by OCG. |
| d. | Represents results of certain funds deconsolidated by OCG in connection with the Restructuring. Refer to note 1 regarding the deconsolidation of funds. |
| e. | Interest expense pro forma adjustments include $4.3 million from the deconsolidation of Oaktree Operating Group entities no longer controlled directly by OCG and $146.7 million from the associated deconsolidation of funds. |
Interest and dividend income pro forma adjustments include $4.3 million from the deconsolidation of Oaktree Operating Group entities no longer controlled directly by OCG and $290.0 million from the associated deconsolidation of funds. Refer to note 1 regarding the deconsolidation of funds.