Oaktree Capital Group, LLC 6.625% PFD UT A (OAK-PA) 10-Q 2016 Q1 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

________________

FORM 10-Q

________________

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the quarterly period ended March 31, 2016

or

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the transition period from                      to                     .

Commission File Number 001-35500

________________

Oaktree Capital Group, LLC

(Exact name of registrant as specified in its charter)

________________

Delaware	26-0174894
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)

333 South Grand Avenue, 28th Floor

Los Angeles, CA 90071

Telephone: (213) 830-6300

(Address, zip code, and telephone number, including

area code, of registrant’s principal executive offices)

________________

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 and 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter periods that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes  x    No  o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes  x    No  o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act:

	Large accelerated filer   x	Accelerated filer   o
	Non-accelerated filer   o	Smaller reporting company   o
(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes  o    No  x

As of May 5, 2016, there were 62,619,464 Class A units and 92,440,656 Class B units of the registrant outstanding.

TABLE OF CONTENTS

		Page
PART I – FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)	1
	Condensed Consolidated Statements of Financial Condition	1
	Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2016 and 2015	2
	Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three Months Ended March 31, 2016 and 2015	3
	Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2016 and 2015	4
	Condensed Consolidated Statements of Changes in Unitholders’ Capital for the Three Months Ended March 31, 2016 and 2015	6
	Notes to Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	49
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	83
Item 4.	Controls and Procedures	85
PART II – OTHER INFORMATION
Item 1.	Legal Proceedings	86
Item 1A.	Risk Factors	86
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	86
Item 3.	Defaults Upon Senior Securities	86
Item 4.	Mine Safety Disclosures	86
Item 5.	Other Information	86
Item 6.	Exhibits	91
Signature

FORWARD-LOOKING STATEMENTS

This quarterly report contains forward-looking statements within the meaning of Section27A of the U.S. Securities Act of 1933, as amended (the “Securities Act”), and Section21E of the U.S. Securities Exchange Act of 1934, as amended (the “Exchange Act”), which reflect our current views 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 Securities and Exchange Commission (“SEC”) on February 26, 2016 (“annual report”), 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 of this quarterly report. 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.

In this quarterly report, unless the context otherwise requires:

“Oaktree,” “OCG,” “we,” “us,” “our” or “our company” refers to Oaktree Capital Group, LLC and, where applicable, its subsidiaries and affiliates.

“Oaktree Operating Group,” or “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.

“OCGH” refers to Oaktree Capital Group Holdings, L.P., a Delaware limited partnership, which holds an interest in the Oaktree Operating Group and all of our Class B units.

“OCGH unitholders” refers collectively to our senior executives, current and former employees and certain other investors who hold interests in the Oaktree Operating Group through OCGH.

“2007 Private Offering” refers to the sale completed on May 25, 2007 of 23,000,000 of our Class A units to qualified institutional buyers (as defined in the Securities Act) in a transaction exempt from the registration requirements of the Securities Act. Prior to our initial public offering, these Class A units traded on a private over-the-counter market developed by Goldman, Sachs & Co. for tradable unregistered equity securities.

“assets under management,” or “AUM,” generally refers to the assets we manage and equals the NAV (as defined below) 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 collateralized loan obligation vehicles (“CLOs”). Our AUM amounts include AUM for which we charge no fees. Our definition of AUM is not based on any definition contained in our operating agreement or the agreements governing the funds that we manage. Our calculation of AUM and the two AUM-related metrics described below may not be directly comparable to the AUM metrics of other investment managers.

• “management fee-generating assets under management,” or “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, as more fully described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Segment and Operating Metrics—Assets Under Management—Management Fee-generating Assets Under Management.”

• “incentive-creating assets under management,” or “incentive-creating AUM,” refers to the AUM that may eventually produce incentive income, as more fully described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Segment and Operating Metrics—Assets Under Management—Incentive-creating Assets Under Management.”

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

“funds” refers to investment funds and, where applicable, CLOs and separate accounts that are managed by us or our subsidiaries.

“initial public offering” refers to the listing of our Class A units on the New York Stock Exchange on April 12, 2012 whereby Oaktree sold 7,888,864 Class A units and selling unitholders sold 954,159 Class A units.

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

“net asset value,” or “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.

“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).

“senior executives” refers collectively to Howard S. Marks, Bruce A. Karsh, Jay S. Wintrob, John B. Frank, Stephen A. Kaplan, David M. Kirchheimer and Sheldon M. Stone.

“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.

This quarterly report and its contents do not constitute and should not be construed as an offer of securities of any Oaktree funds.

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Oaktree Capital Group, LLC

Condensed Consolidated Statements of Financial Condition (Unaudited)

($ in thousands)

	As of
	March 31, 2016			December 31, 2015
Assets
Cash and cash-equivalents	$	342,079		$	480,590
U.S. Treasury securities	618,899			661,116
Corporate investments (includes $90,552 and $67,626 measured at fair value as of March 31, 2016 and December 31,2015, respectively)	1,045,577			213,988
Due from affiliates	211,840			35,899
Deferred tax assets	425,904			425,798
Other assets	217,183			254,267
Assets of consolidated funds:
Cash and cash-equivalents	259,965			2,850,512
Investments, at fair value	3,033,059			45,179,906
Dividends and interest receivable	14,051			189,693
Due from brokers	148,806			706,708
Receivable for securities sold	40,906			163,799
Derivative assets, at fair value	416			198,351
Other assets	129			402,104
Total assets	$	6,358,814		$	51,762,731
Liabilities and Unitholders’ Capital
Liabilities:
Accrued compensation expense	$	129,442		$	319,834
Accounts payable, accrued expenses and other liabilities	152,744			121,934
Due to affiliates	357,460			356,851
Debt obligations	845,736			846,354
Liabilities of consolidated funds:
Accounts payable, accrued expenses and other liabilities	17,282			128,774
Payables for securities purchased	187,629			478,437
Securities sold short, at fair value	73,008			91,246
Derivative liabilities, at fair value	1,896			300,208
Distributions payable	3,662			364,773
Borrowings under credit facilities	—			6,442,742
Debt obligations of CLOs	2,694,005			2,330,359
Total liabilities	4,462,864			11,781,512
Commitments and contingencies (Note 15)
Non-controlling redeemable interests in consolidated funds	201,690			38,173,125
Unitholders’ capital:
Class A units, no par value, unlimited units authorized, 62,594,580 and 61,969,860 units issued and outstanding as of March 31, 2016 and December 31, 2015, respectively	—			—
Class B units, no par value, unlimited units authorized, 92,437,787 and 91,937,873 units issued and outstanding as of March 31, 2016 and December 31, 2015, respectively	—			—
Paid-in capital	724,172			735,166
Retained earnings	—			—
Accumulated other comprehensive loss	(782		)	(1,216		)
Class A unitholders’ capital	723,390			733,950
Non-controlling interests in consolidated subsidiaries	942,202			1,043,930
Non-controlling interests in consolidated funds	28,668			30,214
Total unitholders’ capital	1,694,260			1,808,094
Total liabilities and unitholders’ capital	$	6,358,814		$	51,762,731

Please see accompanying notes to condensed consolidated financial statements.

1

Oaktree Capital Group, LLC

Condensed Consolidated Statements of Operations (Unaudited)

(in thousands, except per unit amounts)

	Three Months Ended March 31,
	2016			2015
Revenues:
Management fees	$	198,553		$	50,819
Incentive income	55,937			—
Total revenues	254,490			50,819
Expenses:
Compensation and benefits	(108,405		)	(110,143		)
Equity-based compensation	(13,896		)	(11,706		)
Incentive income compensation	(9,807		)	(66,892		)
Total compensation and benefits expense	(132,108		)	(188,741		)
General and administrative	(47,831		)	(6,580		)
Depreciation and amortization	(4,161		)	(2,892		)
Consolidated fund expenses	(1,084		)	(37,761		)
Total expenses	(185,184		)	(235,974		)
Other income (loss):
Interest expense	(27,705		)	(46,569		)
Interest and dividend income	36,270			522,929
Net realized gain on consolidated funds’ investments	3,401			474,830
Net change in unrealized appreciation (depreciation) on consolidated funds’ investments	(20,672		)	507,483
Investment income	29,447			12,682
Other income (expense), net	5,801			4,694
Total other income	26,542			1,476,049
Income before income taxes	95,848			1,290,894
Income taxes	(12,680		)	(7,875		)
Net income	83,168			1,283,019
Less:
Net (income) loss attributable to non-controlling interests in consolidated funds	4,944			(1,136,665		)
Net income attributable to non-controlling interests in consolidated subsidiaries	(60,034		)	(108,101		)
Net income attributable to Oaktree Capital Group, LLC	$	28,078		$	38,253
Distributions declared per Class A unit	$	0.47		$	0.56
Net income per unit (basic and diluted):
Net income per Class A unit	$	0.45		$	0.85
Weighted average number of Class A units outstanding	61,894			45,063

Please see accompanying notes to condensed consolidated financial statements.

2

Oaktree Capital Group, LLC

Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited)

(in thousands)

Three Months Ended March 31, 2016	Oaktree Capital Group, LLC			Non-controlling Interests in Consolidated Subsidiaries			Non-controlling Interests in Consolidated Funds			Total
Net income (loss)	$	28,078		$	60,034		$	(4,944	)	$	83,168
Other comprehensive income, net of tax:
Foreign currency translation adjustments	442			651			—			1,093
Unrealized loss on interest-rate swap designated as cash-flow hedge	(8		)	(12		)	—			(20		)
Other comprehensive income, net of tax	434			639			—			1,073
Total comprehensive income (loss)	28,512			60,673			(4,944		)	84,241
Less: Comprehensive (income) loss attributable to non-controlling interests	—			(60,673		)	4,944			(55,729		)
Comprehensive income attributable to Oaktree Capital        Group, LLC	$	28,512		$	—		$	—		$	28,512
Three Months Ended March 31, 2015
Net income	$	38,253		$	108,101		$	1,136,665		$	1,283,019
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments	(897		)	(2,150		)	—			(3,047		)
Unrealized loss on interest-rate swap designated as cash-flow hedge	(39		)	(92		)	—			(131		)
Other comprehensive loss, net of tax	(936		)	(2,242		)	—			(3,178		)
Total comprehensive income	37,317			105,859			1,136,665			1,279,841
Less: Comprehensive income attributable to non-controlling interests	—			(105,859		)	(1,136,665		)	(1,242,524		)
Comprehensive income attributable to Oaktree Capital        Group, LLC	$	37,317		$	—		$	—		$	37,317

Please see accompanying notes to condensed consolidated financial statements.

3

Oaktree Capital Group, LLC

Condensed Consolidated Statements of Cash Flows (Unaudited)

(in thousands)

	Three Months Ended March 31,
	2016			2015
Cash flows from operating activities:
Net income	$	83,168		$	1,283,019
Adjustments to reconcile net income to net cash used in operating activities:
Investment income	(29,447		)	(12,682		)
Depreciation and amortization	4,161			2,892
Equity-based compensation	13,896			11,706
Net realized and unrealized (gain) loss from consolidated funds’ investments	17,271			(982,313		)
Amortization (accretion) of original issue and market discount of consolidated funds’ investments, net	(2,900		)	(4,932		)
Income distributions from corporate investments in funds and companies	34,024			16,144
Amortization or write-down of debt issuance costs	405			3,257
Cash flows due to changes in operating assets and liabilities:
Decrease in other assets	17,765			7,517
Increase (decrease) in net due to affiliates	(94,558		)	4,250
Decrease in accrued compensation expense	(190,392		)	(147,152		)
Increase (decrease) in accounts payable, accrued expenses and other liabilities	28,918			(7,824		)
Cash flows due to changes in operating assets and liabilities of consolidated funds:
Increase in dividends and interest receivable	(1,934		)	(143,918		)
(Increase) decrease in due from brokers	6,654			(145,125		)
Increase in receivables for securities sold	(26,736		)	(78,288		)
(Increase) decrease in other assets	135			(8,817		)
Increase in accounts payable, accrued expenses and other liabilities	2,524			57,025
Increase in payables for securities purchased	37,337			116,949
Purchases of securities	(684,154		)	(4,527,455		)
Proceeds from maturities and sales of securities	455,042			2,657,889
Net cash used in operating activities	(328,821		)	(1,897,858		)
Cash flows from investing activities:
Purchases of U.S. Treasury securities	(72,783		)	(155,274		)
Proceeds from maturities and sales of U.S. Treasury securities	115,000			240,054
Corporate investments in funds and companies	(19,537		)	(13,932		)
Distributions and proceeds from corporate investments in funds and companies	62,811			30,434
Purchases of fixed assets	(1,615		)	(12,461		)
Net cash provided by investing activities	83,876			88,821

(continued)

Please see accompanying notes to condensed consolidated financial statements.

4

Oaktree Capital Group, LLC

Condensed Consolidated Statements of Cash Flows (Unaudited) — (Continued)

(in thousands)

	Three Months Ended March 31,
	2016			2015
Cash flows from financing activities:
Payment of debt issuance costs	$	(801	)	$	—
Proceeds from issuance of Class A units	—			237,820
Purchase of OCGH units	—			(237,820		)
Repurchase and cancellation of units	(9,732		)	(4,290		)
Distributions to Class A unitholders	(29,428		)	(24,508		)
Distributions to OCGH unitholders	(51,485		)	(74,181		)
Distributions to non-controlling interests	(1,755		)	(1,356		)
Cash flows from financing activities of consolidated funds:
Contributions from non-controlling interests	11,277			1,840,538
Distributions to non-controlling interests	(15,920		)	(1,710,583		)
Proceeds from debt obligations issued by CLOs	426,292			394,295
Payment of debt issuance costs	(7,974		)	(9,108		)
Borrowings on credit facilities	64,185			1,904,082
Repayments on credit facilities	(163,012		)	(1,413,812		)
Net cash provided by financing activities	221,647			901,077
Effect of exchange rate changes on cash	6,430			(22,770		)
Net decrease in cash and cash-equivalents	(16,868		)	(930,730		)
Cash and cash-equivalents, beginning balance	3,331,102			3,348,494
Change in cash and cash-equivalents from adoption of accounting guidance	(2,712,190		)	—
Cash and cash-equivalents, ending balance	$	602,044		$	2,417,764

Please see accompanying notes to condensed consolidated financial statements.

5

Oaktree Capital Group, LLC

Condensed Consolidated Statements of Changes in Unitholders’ Capital (Unaudited)

(in thousands)

	Oaktree Capital Group, LLC													Non-controlling Interests in Consolidated Subsidiaries			Non-controlling Interests in Consolidated Funds			Total Unitholders’ Capital
	Class A Units		Class B Units		Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive Income (Loss)
Unitholders’ capital as of December 31, 2015	61,970		91,938		$	735,166		$	—		$	(1,216	)	$	1,043,930		$	30,214		$	1,808,094
Activity for the three months ended March 31, 2016:
Cumulative-effect adjustment from adoption of accounting guidance	—		—		(12,912		)	—			—			(109,709		)	—			(122,621		)
Issuance of Class A units	868		—		—			—			—			—			—			—
Issuance of Class B units	—		623		—			—			—			—			—			—
Cancellation of units associated with forfeitures	(23	)	(11	)	—			—			—			—			—			—
Cancellation of units	(220	)	(112	)	—			—			—			—			—			—
Repurchase and cancellation of units	—		—		(9,665		)	—			—			(67		)	—			(9,732		)
Equity reallocation between controlling and non-controlling interests	—		—		7,481			—			—			(7,481		)	—			—
Capital increase related to equity-based compensation	—		—		5,452			—			—			8,096			—			13,548
Distributions declared	—		—		(1,350		)	(28,078		)	—			(53,240		)	(884		)	(83,552		)
Net income	—		—		—			28,078			—			60,034			(662		)	87,450
Foreign currency translation adjustment, net of tax	—		—		—			—			442			651			—			1,093
Unrealized loss on interest-rate swap designated as cash-flow hedge, net of tax	—		—		—			—			(8		)	(12		)	—			(20		)
Unitholders’ capital as of March 31, 2016	62,595		92,438		$	724,172		$	—		$	(782	)	$	942,202		$	28,668		$	1,694,260
Unitholders’ capital as of December 31, 2014	43,764		109,089		$	536,431		$	11,378		$	(1,070	)	$	1,265,961		$	27,430		$	1,840,130
Activity for the three months ended March 31, 2015:
Issuance of Class A units	4,608		—		237,820			—			—			—			—			237,820
Issuance of Class B units	—		927		—			—			—			—			—			—
Cancellation of units associated with forfeitures	—		(15	)	—			—			—			—			—			—
Cancellation of units	—		(4,702	)	—			—			—			—			—			—
Purchase of OCGH units from OCGH unitholders	—		—		(237,820		)	—			—			—			—			(237,820		)
Deferred tax effect resulting from the purchase of OCGH units	—		—		11,025			—			—			—			—			11,025
Repurchase and cancellation of units	—		—		—			—			—			(4,290		)	—			(4,290		)
Capital contributions	—		—		—			—			—			—			2,880			2,880
Equity reallocation between controlling and non-controlling interests	—		—		45,761			—			—			(45,761		)	—			—
Capital increase related to equity-based compensation	—		—		3,279			—			—			7,872			—			11,151
Distributions declared	—		—		—			(24,508		)	—			(75,537		)	(549		)	(100,594		)
Net income	—		—		—			38,253			—			108,101			1,067			147,421
Foreign currency translation adjustment, net of tax	—		—		—			—			(897		)	(2,150		)	—			(3,047		)
Unrealized loss on interest-rate swap designated as cash-flow hedge, net of tax	—		—		—			—			(39		)	(92		)	—			(131		)
Unitholders’ capital as of March 31, 2015	48,372		105,299		$	596,496		$	25,123		$	(2,006	)	$	1,254,104		$	30,828		$	1,904,545

Please see accompanying notes to condensed consolidated financial statements.

6

Oaktree Capital Group, LLC

Notes to Condensed Consolidated Financial Statements (Unaudited)

March 31, 2016

($ in thousands, except where noted)

1. ORGANIZATION AND BASIS OF PRESENTATION

Oaktree Capital Group, LLC (together with its subsidiaries, “Oaktree” or the “Company”) is a leader among global investment managers specializing in alternative investments. Oaktree 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. Funds managed by Oaktree (the “Oaktree funds”) include commingled funds, separate accounts and collateralized loan obligation vehicles (“CLOs”). Commingled funds include open-end and closed-end limited partnerships in which the Company makes an investment and for which it serves as the general partner. CLOs are structured finance vehicles in which the Company 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 is owned by its Class A and Class B unitholders. Oaktree Capital Group Holdings GP, LLC acts as the Company’s manager and is the general partner of Oaktree Capital Group Holdings, L.P. (“OCGH”), which owns 100% of the Company’s outstanding Class B units. OCGH is owned by the Company’s senior executives, current and former employees and certain other investors (collectively, the “OCGH unitholders”). The Company’s operations are conducted through a group of operating entities collectively referred to as the Oaktree Operating Group. OCGH has a direct economic interest in the Oaktree Operating Group and the Company has an indirect economic interest in 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. Class A units are entitled to one vote per unit. Class B units are entitled to ten votes per unit and do not represent an economic interest in the Company. The number of Class B units held by OCGH increases or decreases in response to corresponding changes in OCGH’s economic interest in the Oaktree Operating Group; consequently, the OCGH unitholders’ economic interest in the Oaktree Operating Group is reflected within non-controlling interests in consolidated subsidiaries in the accompanying condensed consolidated financial statements.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information. The condensed consolidated financial statements, including these notes, are unaudited and exclude some of the disclosures required in annual financial statements. Management believes it has made all necessary adjustments (consisting of only normal recurring items) such that the condensed consolidated financial statements are presented fairly and that estimates made in preparing its condensed consolidated financial statements are reasonable and prudent. The operating results presented for interim periods are not necessarily indicative of the results that may be expected for any other interim period or for the entire year. The condensed consolidated financial statements include the accounts of the Company, its wholly-owned or majority-owned subsidiaries and entities in which the Company is deemed to have a direct or indirect controlling financial interest based on either a variable interest model or voting interest model. Certain of the Oaktree funds consolidated by the Company are investment companies that follow a specialized basis of accounting established by GAAP. All intercompany transactions and balances have been eliminated in consolidation. These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements of the Company for the year ended December 31, 2015 included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on February 26, 2016.

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Oaktree Capital Group, LLC

Notes to Condensed Consolidated Financial Statements (Unaudited) — (Continued)

March 31, 2016

($ in thousands, except where noted)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Accounting Policies of the Company

Consolidation

In February 2015, the Financial Accounting Standards Board (“FASB”) amended its consolidation guidance which changed the way a reporting entity should evaluate limited partnerships and similar entities for consolidation, how a decision maker’s fees affect the consolidation analysis, and how interests held by related parties affect the consolidation analysis. The Company adopted this guidance as of January 1, 2016 under the modified retrospective approach, which did not require prior periods to be recast. In connection with the adoption, the Company reevaluated all of its investment vehicles and other legal entities for consolidation. As of January 1, 2016, the Company deconsolidated substantially all of its previously consolidated closed-end and commingled open-end and evergreen funds because those funds, which had previously been evaluated as voting interest entities, became variable interest entities (“VIEs”) under the new consolidation guidance, and the Company was not the primary beneficiary because its fee arrangements were no longer deemed to be variable interests and it did not hold any other interests in those funds that were considered to be more than insignificant. The adoption resulted in a reduction to total consolidated assets, liabilities, non-controlling redeemable interests in consolidated funds and unitholders' capital as of January 1, 2016 of $45.7 billion, $7.6 billion, $38.0 billion and $90.6 million, respectively. There was no impact on retained earnings or net income attributable to the Company.

The Company consolidates entities in which it has a direct or indirect controlling financial interest based on either a variable interest model or voting interest model. A limited partnership or similar entity is a VIE if the unaffiliated limited partners do not have substantive kick-out or participating rights. Most of the Oaktree funds are VIEs because they have not granted unaffiliated limited partners substantive kick-out or participating rights. The Company consolidates all VIEs in which it is the primary beneficiary. An entity is deemed to be the primary beneficiary if it holds a controlling financial interest. A controlling financial interest is defined as (a) the power to direct the activities of a VIE that most significantly impact the entity’s economic performance and (b) the obligation to absorb losses of the entity or the right to receive benefits from the entity that could potentially be significant to the VIE. The consolidation guidance requires an analysis to determine (a) whether an entity in which the Company holds a variable interest is a VIE and (b) whether the Company’s involvement, through holding interests directly or indirectly in the entity or contractually through other variable interests (e.g., management and performance-related fees), would give it a controlling financial interest. A decision maker’s fee arrangement is not considered a variable interest if it is compensation for services provided, commensurate with the level of effort required to provide those services and part of a compensation arrangement that includes only terms, conditions or amounts that are customarily present in arrangements for similar services negotiated at arm’s length (“at-market”), and the decision maker does not hold any other variable interests that absorb more than an insignificant amount of the potential VIE’s expected residual returns.

The Company determines whether it is the primary beneficiary of a VIE at the time it becomes involved with a VIE and reconsiders that conclusion at each reporting date. In evaluating whether the Company is the primary beneficiary, the Company evaluates its economic interests in the entity held either directly by the Company or indirectly through related parties. The consolidation analysis can generally be performed qualitatively; however, if it is not readily apparent that the Company is not the primary beneficiary, a quantitative analysis may also be performed. Investments and redemptions (either by the Company, affiliates of the Company or third parties) or amendments to the governing documents of the respective Oaktree funds could affect an entity’s status as a VIE or the determination of the primary beneficiary. Please see note 3 for more information regarding VIEs. For entities that are not VIEs, the Company evaluates those entities that it controls through a majority voting interest model.

“Consolidated funds” refers to Oaktree-managed funds and CLOs that Oaktree is required to consolidate. When funds or CLOs are consolidated, the Company reflects the assets, liabilities, revenues, expenses and cash flows of the funds or CLOs on a gross basis, and the majority of the economic interests in those funds or CLOs, which are held by third-party investors, are reflected as non-controlling interests in consolidated funds or debt obligations of CLOs in the condensed consolidated financial statements. All of the revenues earned by the Company as investment manager of the consolidated funds are eliminated in consolidation. However, because the

8

Oaktree Capital Group, LLC

Notes to Condensed Consolidated Financial Statements (Unaudited) — (Continued)

March 31, 2016

($ in thousands, except where noted)

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 the Company.

Certain entities in which the Company has the ability to exert significant influence, including unconsolidated Oaktree funds for which the Company acts as general partner, are accounted for under the equity method of accounting.

Non-controlling Redeemable Interests in Consolidated Funds

The Company records non-controlling interests to reflect the economic interests of the unaffiliated limited partners. These interests are presented as non-controlling redeemable interests in consolidated funds within the condensed consolidated statements of financial condition, outside of the permanent capital section. Limited partners in open-end and evergreen funds generally have the right to withdraw their capital, subject to the terms of the respective limited partnership agreements, over periods ranging from one month to three years. While limited partners in consolidated closed-end funds generally have not been granted redemption rights, these limited partners do have withdrawal or redemption rights in certain limited circumstances that are beyond the control of the Company, such as instances in which retaining the limited partnership interest could cause the limited partner to violate a law, regulation or rule.

The allocation of net income or loss to non-controlling redeemable interests in consolidated funds is based on the relative ownership interests of the unaffiliated limited partners after the consideration of contractual arrangements that govern allocations of income or loss. At the consolidated level, potential incentives are allocated to non-controlling redeemable interests in consolidated funds until such incentives become allocable to the Company under the substantive contractual terms of the limited partnership agreements of the funds.

Non-controlling Interests in Consolidated Funds

Non-controlling interests in consolidated funds represent the equity interests held by third-party investors in CLOs that had not yet priced as of the respective period end. All non-controlling interests in those CLOs are attributed a share of income or loss arising from the respective CLO based on the relative ownership interests of third-party investors after consideration of contractual arrangements that govern allocations of income or loss. Investors in those CLOs are generally unable to redeem their interests until the respective CLO liquidates, is called or otherwise terminates.

Non-controlling Interests in Consolidated Subsidiaries

Non-controlling interests in consolidated subsidiaries reflect the portion of unitholders’ capital attributable to OCGH unitholders (“OCGH non-controlling interest”) and third parties. All non-controlling interests in consolidated subsidiaries are attributed a share of income or loss in the respective consolidated subsidiary based on the relative economic interests of the OCGH unitholders or third parties after consideration of contractual arrangements that govern allocations of income or loss. Please see note 11 for more information.

Goodwill and Intangibles

Goodwill represents the excess of cost over the fair value of identifiable net assets of acquired businesses. Goodwill has an indefinite useful life and is not amortized, but instead is tested for impairment annually in the fourth quarter of each fiscal year, or more frequently when events or circumstances indicate that impairment may have occurred.

The Company's identifiable intangible assets acquired in business combinations primarily relate to contractual rights to earn future management fees and incentive income. Finite-lived intangible assets are amortized over their estimated useful lives, which range from three to seven years, and are reviewed for impairment whenever events or circumstances indicate that the carrying amount of the asset may not be recoverable.

Fair Value of Financial Instruments

GAAP establishes a hierarchical disclosure framework that prioritizes the inputs used in measuring financial instruments at fair value into three levels based on their market observability. Market price observability is affected

9

Oaktree Capital Group, LLC

Notes to Condensed Consolidated Financial Statements (Unaudited) — (Continued)

March 31, 2016

($ in thousands, except where noted)

by a number of factors, such as the type of instrument and the characteristics specific to the instrument. Financial instruments with readily available quoted prices from an active market or for which fair value can be measured based on actively quoted prices generally will have a higher degree of market price observability and a lesser degree of judgment inherent in measuring fair value.

Financial assets and liabilities measured and reported at fair value are classified as follows:

• Level I – Quoted unadjusted prices for identical instruments in active markets to which the Company has access at the date of measurement. The types of investments in Level I include exchange-traded equities, debt and derivatives with quoted prices.

• Level II – Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs are directly or indirectly observable. Level II inputs include interest rates, yield curves, volatilities, prepayment risks, loss severities, credit risks and default rates. The types of investments in Level II generally include corporate bonds and loans, government and agency securities, less liquid and restricted equity investments, over-the-counter traded derivatives, and other investments where the fair value is based on observable inputs.

• Level III – Valuations for which one or more significant inputs are unobservable. These inputs reflect the Company’s assessment of the assumptions that market participants use to value the investment based on the best available information. Level III inputs include prices of quoted securities in markets for which there are few transactions, less public information exists or prices vary among brokered market makers. The types of investments in Level III include non-publicly traded equity, debt, real estate and derivatives.

In some instances, the inputs used to value an instrument may fall into multiple levels of the fair-value hierarchy. In such instances, the instrument’s level within the fair-value hierarchy is based on the lowest of the three levels (with Level III being the lowest) that is significant to the fair-value measurement. The Company’s assessment of the significance of an input requires judgment and considers factors specific to the instrument. Transfers of assets into or out of each fair value hierarchy level as a result of changes in the observability of the inputs used in measuring fair value are accounted for as of the beginning of the reporting period. Transfers resulting from a specific event, such as a reorganization or restructuring, are accounted for as of the date of the event that caused the transfer.

In the absence of observable market prices, the Company values Level III investments using valuation methodologies applied on a consistent basis. The quarterly valuation process for Level III investments begins with each portfolio company, property or security being valued by the investment and/or valuation teams. With the exception of open-end funds, all unquoted Level III investment values are reviewed and approved by (i) the Company’s valuation officer, who is independent of the investment teams, (ii) a designated investment professional of each strategy and (iii) for a substantial majority of unquoted Level III holdings as measured by market value, a valuation committee of the respective strategy.  For open-end funds, unquoted Level III investment values are reviewed and approved by the Company’s valuation officer. For certain investments, the valuation process also includes a review by independent valuation parties, at least annually, to determine whether the fair values determined by management are reasonable. Results of the valuation process are evaluated each quarter, including an assessment of whether the underlying calculations should be adjusted or recalibrated. In connection with this process, the Company periodically evaluates changes in fair-value measurements for reasonableness, considering items such as industry trends, general economic and market conditions, and factors specific to the investment.

Certain assets are valued using prices obtained from brokers or pricing vendors. The Company obtains an average of one to two broker quotes. The Company seeks to obtain at least one quote directly from a broker making a market for the asset and one price from a pricing vendor for the specific or similar securities. These investments may be classified as Level III because the quoted prices may be indicative in nature for securities that are in an inactive market, may be for similar securities, or may require adjustment for investment-specific factors or restrictions. The Company evaluates the prices obtained from brokers or pricing vendors based on available market information, including trading activity of the subject or similar securities, or by performing a comparable security analysis to ensure that fair values are reasonably estimated. The Company also performs back-testing of valuation

10

Oaktree Capital Group, LLC

Notes to Condensed Consolidated Financial Statements (Unaudited) — (Continued)

March 31, 2016

($ in thousands, except where noted)

information obtained from brokers and pricing vendors against actual prices received in transactions. In addition to ongoing monitoring and back-testing, the Company performs due diligence procedures surrounding pricing vendors to understand their methodology and controls to support their use in the valuation process.

The Company adopted the measurement alternative guidance for collateralized financing entities on a modified retrospective approach as of January 1, 2016. Upon adoption, the Company elected the fair value option for the financial liabilities of the consolidated CLOs and determined that the fair value of the CLO assets was more observable than the fair value of the CLO liabilities. Accordingly, the fair value of the CLO liabilities was measured as the fair value of CLO assets less the sum of (a) the fair value of any beneficial interests held by the Company and (b) the carrying value of any beneficial interests that represent compensation for services.

Fair Value Option

The Company has elected the fair value option for certain corporate investments that otherwise would not have reflected unrealized gains and losses in current-period earnings. Such election is irrevocable and is applied on an investment-by-investment basis at initial recognition. Unrealized gains and losses resulting from changes in fair value are reflected as a component of investment income in the condensed consolidated statements of operations. The Company’s accounting for those investments is similar to its accounting for investments held by the consolidated funds at fair value and the valuation methods used to determine the fair value of those investments.

The Company has elected the fair value option for the financial assets and financial liabilities of its consolidated CLOs. The assets and liabilities of CLOs are primarily reflected within the investments, at fair value and within debt obligations of CLOs line items in the condensed consolidated statements of financial condition. The Company’s accounting for CLO assets is similar to its accounting for its funds with respect to both carrying investments held by CLOs at fair value and the valuation methods used to determine the fair value of those investments. CLO liabilities are measured based on the more observable fair value of CLO assets under the new CLO measurement alternative guidance, as discussed under “—Fair Value of Financial Instruments” above. Realized gains or losses and changes in the fair value of CLO assets, respectively, are included in net realized gain on consolidated funds’ investments and net change in unrealized appreciation (depreciation) on consolidated funds’ investments in the condensed consolidated statements of operations. Interest income of CLOs is included in interest and dividend income, and interest expense and other expenses, respectively, are included in interest expense and consolidated fund expenses in the condensed consolidated statements of operations. Changes in the fair value of a CLO’s financial liabilities resulting from the measurement alternative guidance for collateralized financing entities are included in net change in unrealized appreciation (depreciation) on consolidated funds’ investments in the condensed consolidated statements of operations. Please see notes 5 and 9 for more information.

Accounting Policies of Consolidated Funds

Investments, at Fair Value

The consolidated funds include investment limited partnerships and CLOs that reflect their investments, including majority-owned and controlled investments, at fair value. The Company has retained the specialized investment company accounting guidance under GAAP for investment limited partnerships with respect to consolidated investments and has elected the fair value option for the financial assets of CLOs. Thus, the consolidated investments are reflected in the condensed consolidated statements of financial condition at fair value, with unrealized gains and losses resulting from changes in fair value reflected as a component of net change in unrealized appreciation (depreciation) on consolidated funds’ investments in the condensed consolidated statements of operations. Fair value is the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (i.e., the exit price).

Non-publicly traded debt and equity securities and other securities or instruments for which reliable market quotations are not available are valued by management using valuation methodologies applied on a consistent basis. These securities may initially be valued at the acquisition price as the best indicator of fair value. The Company reviews the significant unobservable inputs, valuations of comparable investments and other similar transactions for investments valued at acquisition price to determine whether another valuation methodology should be utilized. Subsequent valuations will depend on the facts and circumstances known as of the valuation date and

11

Oaktree Capital Group, LLC

Notes to Condensed Consolidated Financial Statements (Unaudited) — (Continued)

March 31, 2016

($ in thousands, except where noted)

the application of valuation methodologies as further described below under “—Non-publicly Traded Equity and Real Estate Investments.” The fair value may also be based on a pending transaction expected to close after the valuation date.

Exchange-traded Investments

Securities listed on one or more national securities exchanges are valued at their last reported sales price on the date of valuation. If no sale occurred on the valuation date, the security is valued at the mean of the last “bid” and “ask” prices on the valuation date. Securities that are not readily marketable due to legal restrictions that may limit or restrict transferability are generally valued at a discount from quoted market prices. The discount would reflect the amount market participants would require due to the risk relating to the inability to access a public market for the security for the specified period and would vary depending on the nature and duration of the restriction and the perceived risk and volatility of the underlying securities. Securities with longer duration restrictions or higher volatility are generally valued at a higher discount. Such discounts are generally estimated based on put option models or an analysis of market studies. Instances where the Company has applied discounts to quoted prices of restricted listed securities have been infrequent. The impact of such discounts is not material to the Company’s condensed consolidated statements of financial condition and results of operations for all periods presented.

Credit-oriented Investments (including Real Estate Loan Portfolios)

Investments in corporate and government debt which are not listed or admitted to trading on any securities exchange are valued at the mean of the last bid and ask prices on the valuation date based on quotations supplied by recognized quotation services or by reputable broker-dealers.

The market-yield approach is considered in the valuation of non-publicly traded debt securities, utilizing expected future cash flows and discounted using estimated current market rates. Discounted cash-flow calculations may be adjusted to reflect current market conditions and/or the perceived credit risk of the borrower. Consideration is also given to a borrower’s ability to meet principal and interest obligations; this may include an evaluation of collateral and/or the underlying value of the borrower utilizing techniques described below under “—Non-publicly Traded Equity and Real Estate Investments.”

Non-publicly Traded Equity and Real Estate Investments

The fair value of equity and real estate investments is determined using a cost, market or income approach. The cost approach is based on the current cost of reproducing a real estate investment less deterioration and functional and economic obsolescence. The market approach utilizes valuations of comparable public companies and transactions, and generally seeks to establish the enterprise value of the portfolio company or investment property using a market-multiple methodology. This approach takes into account the financial measure (such as EBITDA, adjusted EBITDA, free cash flow, net operating income, net income, book value or net asset value) believed to be most relevant for the given company or investment property. Consideration also may be given to factors such as acquisition price of the security or investment property, historical and projected operational and financial results for the portfolio company, the strengths and weaknesses of the portfolio company or investment property relative to its comparable companies or properties, industry trends, general economic and market conditions, and others deemed relevant. The income approach is typically a discounted cash-flow method that incorporates expected timing and level of cash flows. It incorporates assumptions in determining growth rates, income and expense projections, discount and capitalization rates, capital structure, terminal values, and other factors. The applicability and weight assigned to market and income approaches are determined based on the availability of reliable projections and comparable companies and transactions.

The valuation of securities may be impacted by expectations of investors’ receptiveness to a public offering of the securities, the size of the holding of the securities and any associated control, information with respect to transactions or offers for the securities (including the transaction pursuant to which the investment was made and the elapsed time from the date of the investment to the valuation date), and applicable restrictions on the transferability of the securities.

These valuation methodologies involve a significant degree of management judgment. Accordingly, valuations by the Company do not necessarily represent the amounts that eventually may be realized from sales or other dispositions of investments. Fair values may differ from the values that would have been used had a ready

12

Oaktree Capital Group, LLC

Notes to Condensed Consolidated Financial Statements (Unaudited) — (Continued)

March 31, 2016

($ in thousands, except where noted)

market for the investment existed, and the differences could be material to the condensed consolidated financial statements.

Recent Accounting Developments

In March 2016, the FASB issued guidance that changes several aspects of accounting for employee share-based payment awards. The amendments impact the accounting for income taxes, forfeitures and statutory tax withholding requirements, as well as classification in the statement of cash flows. The guidance is effective for the Company in the first quarter of 2017, with early adoption permitted. The Company is currently evaluating the effect that adoption will have on its consolidated financial statements.

In March 2016, the FASB issued guidance eliminating the requirement to retroactively apply the equity method of accounting when a reporting entity obtains significant influence over an investment (e.g., due to an increase in ownership) that had been previously accounted for under the cost basis or at fair value. Instead, the reporting entity would be required to apply the equity method of accounting prospectively from the date significant influence was obtained. The cost of the additional interest in the investee, if any, should be added to the current basis of the investment. The amendment also provides guidance for available-for-sale investments that become eligible for the equity method of accounting. In those cases, any unrealized gain or loss recorded within accumulated other comprehensive income should be recognized in earnings at the date the investment initially qualifies for the use of the equity method. The guidance is effective for the Company in the first quarter of 2017, with early adoption permitted. The Company is currently evaluating the effect that adoption will have on its consolidated financial statements.

In February 2016, the FASB issued guidance that will require a lessee to recognize a lease asset and a lease liability for most of its operating leases. Under current GAAP, operating leases are not recognized by a lessee in its statements of financial position. Each of the asset and liability generally will be equal to the present value of lease payments. The guidance does not significantly change the recognition, measurement and presentation of expenses and cash flows arising from a lease by a lessee. The guidance is effective for the Company in the first quarter of 2019 using a modified retrospective transition approach, which requires application of the new guidance at the beginning of the earliest comparative period presented. Early adoption is permitted. The Company is currently evaluating the effect that adoption will have on its consolidated financial statements.

In January 2016, the FASB issued guidance that changes the classification and measurement of financial instruments and amends certain disclosure requirements associated with the fair value of financial instruments. The amendments revise the accounting related to (a) the classification and measurement of investments in equity investments and (b) the presentation of certain fair value changes for financial liabilities measured at fair value. Specifically, the guidance generally requires equity investments to be carried at fair value with changes flowing through net income. This requirement does not apply to equity-method investments. For financial liabilities measured at fair value, the guidance requires fair value changes attributable to instrument-specific credit risk to be presented separately in other comprehensive income, as opposed to reflecting the entire change in fair value in net income. The guidance is effective for the Company in the first quarter of 2019, with early adoption permitted. The Company is currently evaluating the effect that adoption will have on its consolidated financial statements.

In April 2015, the FASB issued guidance that changes the presentation of debt issuance costs in the statements of financial position. Previously, such costs were reflected in the statements of financial position as a deferred asset. The new guidance requires these costs to be presented as a direct deduction from the related debt liability and to be amortized as interest expense. The amendment does not affect the current guidance on the recognition and measurement of debt issuance costs. The Company adopted the guidance in the first quarter of 2016 on a retrospective basis. The adoption resulted in the reclassification of deferred debt issuance costs related to the Company and the consolidated funds, respectively, of $4.3 million and $31.9 million as of March 31, 2016, and $3.6 million and $44.7 million as of December 31, 2015, from other assets to debt obligations in the condensed consolidated statements of financial condition.

In February 2015, the FASB amended its consolidation guidance to end the deferral granted to investment companies with respect to applying VIE guidance. The new guidance does not affect the five characteristics that determine if an entity is a VIE; rather, it focuses on the consolidation criteria used to evaluate whether certain legal

13

Oaktree Capital Group, LLC

Notes to Condensed Consolidated Financial Statements (Unaudited) — (Continued)

March 31, 2016

($ in thousands, except where noted)

entities should be consolidated. Additionally, the new guidance eliminates the presumption that a general partner should consolidate a limited partnership under the voting model. The amendment is intended to simplify the consolidation guidance by placing more emphasis on risk of loss when determining a controlling financial interest, reducing the frequency of the application of related-party guidance when determining a controlling financial interest in a VIE and providing more clarity for reporting entities that typically make use of limited partnerships or VIEs. The Company adopted the guidance in the first quarter of 2016 on a modified retrospective basis as of January 1, 2016. As a result, prior periods were not recast; instead, a cumulative-effect adjustment to equity as of January 1, 2016 was recorded. The adoption resulted in a reduction to total consolidated assets, liabilities, non-controlling redeemable interests in consolidated funds and unitholders' capital as of January 1, 2016 of $45.7 billion, $7.6 billion, $38.0 billion and $90.6 million, respectively. There was no impact on retained earnings or net income attributable to the Company.

In August 2014, the FASB issued guidance on determining when and how reporting entities must disclose going-concern uncertainties in their financial statements. The guidance requires management to perform interim and annual assessments of an entity’s ability to continue as a going concern within one year of the date of issuance of the entity’s financial statements. Additionally, an entity must provide certain disclosures if there is substantial doubt about the entity’s ability to continue as a going concern. The guidance is effective for the Company in the fourth quarter of 2016, with early adoption permitted. The Company does not expect that adoption of this guidance will have a material impact on its consolidated financial statements.

In August 2014, the FASB issued guidance on measuring the financial assets and financial liabilities of a consolidated collateralized financing entity, such as a CLO. The guidance applies to reporting entities that are required to consolidate a collateralized financing entity under the VIE guidance when (a) the reporting entity measures all of the financial assets and financial liabilities of that consolidated financing entity at fair value in the consolidated financial statements and (b) the changes in the fair values of those financial assets and financial liabilities are reflected in earnings. The guidance provides an alternative for measuring the financial assets and financial liabilities of a consolidated collateralized financing entity to eliminate differences in the fair value of those financial assets and financial liabilities as determined under GAAP. The Company adopted the guidance in the first quarter of 2016 on a modified retrospective basis as of January 1, 2016. As a result, prior periods were not recast; instead, a cumulative-effect adjustment to equity as of January 1, 2016 was recorded. The adoption resulted in a reduction to unitholders' capital as of January 1, 2016 of $32.1 million.

In May 2014, the FASB and International Accounting Standards Board issued converged guidance on revenue recognition, which outlined a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and superseded most current revenue recognition guidance, including industry-specific guidance. The guidance provides a largely principles-based framework for addressing revenue recognition issues on a comprehensive basis, eliminates an entity’s ability to recognize revenue if there is risk of significant reversal, and requires enhanced disclosures to provide greater insight into both revenue that has been recognized and revenue that is expected to be recognized in the future from existing contracts, including quantitative and qualitative information about significant judgments and changes in those judgments made by management in recognizing revenue. In July 2015, the FASB delayed the effective date of the guidance by one year, to 2018. The guidance will be effective for the Company in the first quarter of 2018 on either a full or modified retrospective basis, with early adoption permitted. The Company is currently evaluating the effect that adoption will have on its consolidated financial statements.

3. VARIABLE INTEREST ENTITIES

The Company consolidates VIEs for which it is the primary beneficiary. VIEs include funds managed by Oaktree and CLOs for which Oaktree acts as collateral manager. The purpose of these VIEs is to provide investment opportunities for investors in exchange for management fees and, in certain cases, performance-based fees. While the investment strategies of the funds and CLOs differ by product, the fundamental risks of the funds and CLOs have similar characteristics, including loss of invested capital and reduction or absence of management and performance-based fees. As general partner or collateral manager, respectively, Oaktree generally considers itself the sponsor of the applicable fund or CLO. The Company does not provide performance guarantees and, other than capital commitments, has no financial obligation to provide funding to VIEs.

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Oaktree Capital Group, LLC

Notes to Condensed Consolidated Financial Statements (Unaudited) — (Continued)

March 31, 2016

($ in thousands, except where noted)

As discussed in note 2, the Company adopted the new consolidation guidance in the first quarter of 2016 under the modified retrospective approach as of January 1, 2016. As a result, prior periods were not recast. The adoption resulted in the deconsolidation of substantially all of Oaktree’s closed-end and commingled open-end and evergreen funds as of January 1, 2016.

Consolidated VIEs

The Company consolidated 15 VIEs as of March 31, 2016 for which it was the primary beneficiary, including Oaktree AIF Holdings, Inc., which was formed to hold certain assets for regulatory and other purposes. The 14 remaining VIEs included seven funds managed by Oaktree and seven CLOs for which Oaktree acts as collateral manager. One of the CLOs had not priced as of March 31, 2016. As of December 31, 2015, the Company consolidated eight VIEs pursuant to the consolidation rules then in effect.

As of March 31, 2016, the assets and liabilities of the 14 consolidated VIEs representing funds and CLOs amounted to $3.4 billion and $3.0 billion, respectively. The assets of these consolidated VIEs primarily consisted of investments in debt and equity securities, and liabilities primarily represented debt obligations issued by CLOs. The assets of these VIEs may only be used to settle obligations of the same VIE. In addition, there is no recourse to the Company for the VIEs’ liabilities. In exchange for managing the funds or collateral of the CLOs, the Company typically earns management fees and may earn performance fees, both of which are eliminated in consolidation. As of March 31, 2016, the Company’s investments in consolidated VIEs had a carrying value of $289.2 million, which represented its maximum risk of loss as of that date. The Company’s investments in CLOs are generally subordinated to other interests in the CLOs and entitle the Company to receive a pro-rata portion of the residual cash flows, if any, from the CLOs. Please see note 9 for more information on CLO debt obligations.

VIEs Not Consolidated

The Company holds variable interests in certain VIEs that are not consolidated because it is not the primary beneficiary. The Company's involvement with those entities is in the form of direct equity interests and fee arrangements with the funds that it manages. The Company is not the primary beneficiary because its fee arrangements are considered at-market and it does not hold other interests in those entities that are considered more than insignificant.

As of March 31, 2016, the assets and liabilities of VIEs that were not consolidated, and the Company’s investments in those VIEs are shown below. As of December 31, 2015, there were no VIEs for which the Company was not the primary beneficiary pursuant to the consolidation rules then in effect.

As of March 31, 2016	Carrying Value
Assets of VIEs	$	50,445,368
Liabilities of VIEs	9,841,424
Corporate investments	$	1,011,934
Due from affiliates	178,365
Maximum exposure to loss	$	1,190,299

4. INVESTMENTS

Corporate Investments

Corporate investments consist of investments in funds and companies in which the Company does not have a controlling financial interest. Investments where the Company is deemed to exert significant influence are accounted for using the equity method of accounting and reflect Oaktree’s ownership interest in each fund or company. In the case of investments where the Company is not deemed to exert significant influence or control, the fair value option of accounting has been elected. Investment income represents the Company’s pro-rata share of

15

Oaktree Capital Group, LLC

Notes to Condensed Consolidated Financial Statements (Unaudited) — (Continued)

March 31, 2016

($ in thousands, except where noted)

income or loss from these funds or companies, or the change in fair value of the investment, as applicable. Oaktree’s general partnership interests are substantially illiquid. While investments in funds reflect each respective fund’s holdings at fair value, equity-method investments in DoubleLine Capital LP and its affiliates (collectively, “DoubleLine”) and other companies are not adjusted to reflect the fair value of the underlying company. The fair value of the underlying investments in Oaktree funds is based on the Company’s assessment, which takes into account expected cash flows, earnings multiples and/or comparisons to similar market transactions, among other factors. Valuation adjustments reflecting consideration of credit quality, concentration risk, sales restrictions and other liquidity factors are integral to valuing these instruments.

The Company adopted the new consolidation guidance effective the first quarter of 2016, resulting in the deconsolidation of substantially all of Oaktree’s investment funds. Corporate investments consisted of the following:

	As of
Corporate Investments:	March 31, 2016		December 31, 2015
Equity-method Investments:
Oaktree funds	$	889,723	$	51,899
Non-Oaktree funds	39,472		65,901
Companies	25,830		28,562
Other investments, at fair value	90,552		67,626
Total corporate investments	$	1,045,577	$	213,988

The components of investment income (loss) are set forth below:

	Three Months Ended March 31,
Investment Income (Loss):	2016			2015
Equity-method Investments:
Oaktree funds	$	18,656		$	(748	)
Non-Oaktree funds	304			2,593
Companies	15,107			9,964
Other investments, at fair value	(4,620		)	873
Total investment income	$	29,447		$	12,682

Equity-method Investments

The Company's equity-method investments include its investments in Oaktree funds for which it serves as general partner, and other third-party funds and companies that are not consolidated for which the Company is deemed to exert significant influence. The Company's share of income or loss generated by these investments is recorded within investment income in the condensed consolidated statements of operations. The Company's equity-method investments in Oaktree funds principally reflect the Company’s general partner interests in those funds, which typically does not exceed 2.5% in each fund. The Oaktree funds are investment companies that follow a specialized basis of accounting established by GAAP. Equity-method investments in companies include the Company’s one-fifth equity stake in DoubleLine.

The Company evaluates each of its equity-method investments to determine if any are considered significant, as defined by the SEC, each reporting period. As of or for the year ended December 31, 2015, no individual equity-method investment met the significance criteria. As a result, separate financial statements were not required for any of the Company’s equity-method investments.

16

Oaktree Capital Group, LLC

Notes to Condensed Consolidated Financial Statements (Unaudited) — (Continued)

March 31, 2016

($ in thousands, except where noted)

Summarized financial information of the Company’s equity-method investments is set forth below as of or for the three months ended March 31, 2016. Equity-method investments were not material for periods prior to adoption of the deconsolidation guidance in the first quarter of 2016 pursuant to the consolidation rules then in effect.

Statement of Financial Condition:	As of or For the Three Months Ended March 31, 2016
Assets:
Cash and cash-equivalents	$	2,730,094
Investments, at fair value	41,935,099
Other assets	4,420,747
Total assets	$	49,085,940
Liabilities and Capital:
Debt obligations	$	6,916,097
Other liabilities	3,369,219
Total liabilities	10,285,316
Total capital	38,800,624
Total liabilities and capital	$	49,085,940
Statement of Operations:
Revenues / investment income	$	542,834
Interest expense	(38,529		)
Other expenses	(220,436		)
Net realized and unrealized gain on investments	288,067
Net income	$	571,936

Other Investments, at Fair Value

Other investments, at fair value primarily consist of investments in certain Oaktree and non-Oaktree funds for which the fair value option of accounting has been elected, as well as derivatives utilized to hedge the Company’s exposure to investment income earned from unconsolidated funds. The following table summarizes net gains (losses) attributable to the Company's other investments:

	Three Months Ended March 31,
	2016			2015
Realized gain (loss)	$	(2,494	)	$	—
Net change in unrealized gain (loss)	(2,126		)	873
Total	$	(4,620	)	$	873

17

Oaktree Capital Group, LLC

Notes to Condensed Consolidated Financial Statements (Unaudited) — (Continued)

March 31, 2016

($ in thousands, except where noted)

Investments of Consolidated Funds

Investments, at Fair Value

Investments held and securities sold short by the consolidated funds are summarized below:

	Fair Value as of				Fair Value as a Percentage of Investments of Consolidated Funds as of
Investments	March 31, 2016		December 31, 2015		March 31, 2016		December 31, 2015
United States:
Debt securities:
Consumer discretionary	$	495,154	$	3,387,072	16.3	%	7.5	%
Consumer staples	140,076		686,071		4.6		1.5
Energy	58,167		854,220		1.9		1.9
Financials	100,494		1,293,508		3.3		2.9
Government	—		95,508		—		0.2
Health care	223,806		1,135,799		7.4		2.5
Industrials	304,452		1,710,706		10.0		3.8
Information technology	221,921		1,293,815		7.3		2.9
Materials	202,358		1,393,521		6.7		3.1
Telecommunication services	63,678		471,711		2.1		1.0
Utilities	30,201		686,126		1.0		1.5
Total debt securities (cost: $1,919,101 and $15,304,870 as of March 31, 2016 and December 31, 2015, respectively)	1,840,307		13,008,057		60.6		28.8
Equity securities:
Consumer discretionary	617		1,813,832		0.0		4.0
Consumer staples	—		872,472		—		1.9
Energy	—		1,810,290		—		4.0
Financials	3,174		7,639,790		0.1		16.9
Health care	465		92,866		0.0		0.2
Industrials	—		1,728,086		—		3.8
Information technology	—		67,253		—		0.2
Materials	—		882,366		—		2.0
Telecommunication services	—		16,471		—		0.0
Utilities	—		156,865		—		0.3
Total equity securities (cost: $5,218 and $13,290,699 as of March 31, 2016 and December 31, 2015, respectively)	4,256		15,080,291		0.1		33.3

18

Oaktree Capital Group, LLC

Notes to Condensed Consolidated Financial Statements (Unaudited) — (Continued)

March 31, 2016

($ in thousands, except where noted)

	Fair Value as of				Fair Value as a Percentage of Investments of Consolidated Funds as of
Investments	March 31, 2016		December 31, 2015		March 31, 2016		December 31, 2015
Europe:
Debt securities:
Consumer discretionary	$	323,579	$	1,329,387	10.7	%	2.9	%
Consumer staples	76,659		222,789		2.5		0.5
Energy	5,653		144,742		0.2		0.3
Financials	16,202		808,568		0.5		1.8
Government	—		46,946		—		0.1
Health care	126,193		197,569		4.2		0.5
Industrials	67,844		291,950		2.2		0.7
Information technology	31,706		71,168		1.0		0.2
Materials	204,265		377,460		6.8		0.8
Telecommunication services	109,305		200,610		3.6		0.4
Utilities	123		18,028		0.0		0.0
Total debt securities (cost: $967,748 and $4,207,531 as of March 31, 2016 and December 31, 2015, respectively)	961,529		3,709,217		31.7		8.2
Equity securities:
Consumer discretionary	4,085		270,370		0.1		0.6
Consumer staples	323		145,108		0.0		0.3
Energy	674		21,791		0.0		0.0
Financials	5,637		6,239,424		0.2		13.8
Government	—		40,290		—		0.1
Health care	—		79,582		—		0.2
Industrials	221		1,499,142		0.0		3.3
Information technology	—		1,646		—		0.0
Materials	590		475,306		0.1		1.1
Telecommunication services	—		4,834		—		0.0
Utilities	—		344,736		—		0.8
Total equity securities (cost: $11,871 and $7,627,245 as of March 31, 2016 and December 31, 2015, respectively)	11,530		9,122,229		0.4		20.2
Asia and other:
Debt securities:
Consumer discretionary	12,067		102,531		0.4		0.2
Consumer staples	—		33,061		—		0.1
Energy	17,466		193,645		0.6		0.4
Financials	1,068		27,413		0.1		0.1
Government	3,418		6,974		0.1		0.0
Health care	10,281		47,010		0.3		0.1
Industrials	3,334		268,710		0.1		0.6
Information technology	123		31,983		0.0		0.1
Materials	10,433		248,830		0.3		0.6
Utilities	—		2,713		—		0.0
Total debt securities (cost: $62,697 and $1,090,867 as of March 31, 2016 and December 31, 2015, respectively)	58,190		962,870		1.9		2.2

19

Oaktree Capital Group, LLC

Notes to Condensed Consolidated Financial Statements (Unaudited) — (Continued)

March 31, 2016

($ in thousands, except where noted)

	Fair Value as of						Fair Value as a Percentage of Investments of Consolidated Funds as of
Investments	March 31, 2016			December 31, 2015			March 31, 2016		December 31, 2015
Asia and other:
Equity securities:
Consumer discretionary	$	22,928		$	506,761		0.8	%	1.1	%
Consumer staples	16,104			29,863			0.5		0.1
Energy	8,588			192,844			0.3		0.4
Financials	39,923			986,753			1.3		2.2
Health care	3,110			18,535			0.1		0.1
Industrials	23,633			1,032,225			0.8		2.3
Information technology	20,360			244,433			0.7		0.5
Materials	18,416			96,326			0.6		0.2
Telecommunication services	2,138			34,678			0.1		0.1
Utilities	2,047			154,824			0.1		0.3
Total equity securities (cost: $216,029 and $3,370,406 as of March 31, 2016 and December 31, 2015, respectively)	157,247			3,297,242			5.3		7.3
Total debt securities	2,860,026			17,680,144			94.2		39.2
Total equity securities	173,033			27,499,762			5.8		60.8
Total investments, at fair value	$	3,033,059		$	45,179,906		100.0	%	100.0	%
Securities Sold Short
Equity securities (proceeds: $79,088 and $102,236 as of March 31, 2016 and December 31, 2015, respectively)	$	(73,008	)	$	(91,246	)

As of March 31, 2016 and December 31, 2015, no single issuer or investment had a fair value that exceeded 5% of Oaktree’s total consolidated net assets.

20

Oaktree Capital Group, LLC

Notes to Condensed Consolidated Financial Statements (Unaudited) — (Continued)

March 31, 2016

($ in thousands, except where noted)

Net Gains (Losses) From Investment Activities of Consolidated Funds

Net gains (losses) from investment activities in the condensed consolidated statements of operations consist primarily of realized and unrealized gains and losses on the consolidated funds’ investments (including foreign exchange gains and losses attributable to foreign-denominated investments and related activities) and other financial instruments. Unrealized gains or losses result from changes in the fair value of these investments and other financial instruments. Upon disposition of an investment, unrealized gains or losses are reversed and an offsetting realized gain or loss is recognized in the current period.

The following table summarizes net gains (losses) from investment activities:

	Three Months Ended March 31,
	2016						2015
	Net Realized Gain (Loss) on Investments			Net Change in Unrealized Appreciation (Depreciation) on Investments			Net Realized Gain (Loss) on Investments			Net Change in Unrealized Appreciation (Depreciation) on Investments
Investments and other financial instruments	$	3,671		$	9,683		$	167,799		$	557,315
Measurement alternative guidance for CLO liabilities (1)	—			(28,202		)	—			—
Foreign-currency forward contracts (2)	(202		)	(392		)	295,976			20,384
Total-return and interest-rate swaps (2)	17			(1,618		)	(4,926		)	(60,218		)
Options and futures (2)	(85		)	(143		)	17,801			(11,149		)
Swaptions (2)(3)	—			—			(1,820		)	1,151
Total	$	3,401		$	(20,672	)	$	474,830		$	507,483

(1) Represents the net change in the fair value of CLO liabilities based on the more observable fair value of CLO assets, as measured under the measurement alternative guidance for CLOs. Please see note 2 for more information.

(2) Please see note 6 for additional information.

(3) A swaption is an option granting the buyer the right but not the obligation to enter into a swap agreement on a specified future date.

21

Oaktree Capital Group, LLC

Notes to Condensed Consolidated Financial Statements (Unaudited) — (Continued)

March 31, 2016

($ in thousands, except where noted)

5. FAIR VALUE

Fair Value of Financial Assets and Liabilities

The short-term nature of cash and cash-equivalents, receivables and accounts payable causes each of their carrying values to approximate fair value. The fair value of short-term investments included in cash and cash-equivalents is a Level I valuation. The Company’s other financial assets and financial liabilities by fair-value hierarchy level are set forth below. Please see notes 9 and 16 for the fair value of the Company’s outstanding debt obligations and amounts due from/to affiliates, respectively.

	As of March 31, 2016											As of December 31, 2015
	Level I		Level II			Level III			Total			Level I		Level II			Level III			Total
Assets
U.S. Treasury securities (1)	$	618,899	$	—		$	—		$	618,899		$	661,116	$	—		$	—		$	661,116
Corporate investments	—		64,928			25,624			90,552			—		41,876			25,750			67,626
Foreign-currency forward contracts (2)	—		1,638			—			1,638			—		5,875			—			5,875
Total assets	$	618,899	$	66,566		$	25,624		$	711,089		$	661,116	$	47,751		$	25,750		$	734,617
Liabilities
Contingent consideration (3)	$	—	$	—		$	(27,884	)	$	(27,884	)	$	—	$	—		$	(28,494	)	$	(28,494	)
Foreign-currency forward contracts (3)	—		(14,404		)	—			(14,404		)	—		(3,286		)	—			(3,286		)
Interest-rate swaps (3)	—		(927		)	—			(927		)	—		(943		)	—			(943		)
Total liabilities	$	—	$	(15,331	)	$	(27,884	)	$	(43,215	)	$	—	$	(4,229	)	$	(28,494	)	$	(32,723	)

(1) Carrying value approximates fair value due to the short-term nature.

(2) Amounts are included in other assets in the condensed consolidated statements of financial condition.

(3) Amounts are included in accounts payable, accrued expenses and other liabilities in the condensed consolidated statements of financial condition.

There were no transfers between Level I and Level II positions for the three months ended March 31, 2016 and 2015.

22

Oaktree Capital Group, LLC

Notes to Condensed Consolidated Financial Statements (Unaudited) — (Continued)

March 31, 2016

($ in thousands, except where noted)

The table below sets forth a summary of changes in the fair value of Level III financial instruments:

	Three Months Ended March 31,
	2016						2015
	Corporate Investments			Contingent Consideration Liability			Corporate Investments		Contingent Consideration Liability
Beginning balance	$	25,750		$	(28,494	)	$	—	$	(27,245	)
Net gain (loss) included in earnings	(126		)	610			—		(807		)
Ending balance	$	25,624		$	(27,884	)	$	—	$	(28,052	)
Net change in unrealized gains (losses) attributable to financial instruments still held at end of period	$	(126	)	$	610		$	—	$	(807	)

The table below sets forth a summary of the valuation techniques and quantitative information utilized in determining the fair value of the Company’s Level III financial instruments:

	Fair Value as of							Significant Unobservable Input
Financial Instrument	March 31, 2016			December 31, 2015			Valuation Technique		Range	Weighted Average
Corporate investment – Limited partnership interests	$	25,624		$	25,750		Market approach (value of underlying assets)	Not applicable	Not applicable	Not applicable
Contingent consideration liability	(27,884		)	(28,494		)	Discounted cash flow	Assumed % of total potential contingent payments	0% – 100%	52%

23

Oaktree Capital Group, LLC

Notes to Condensed Consolidated Financial Statements (Unaudited) — (Continued)

March 31, 2016

($ in thousands, except where noted)

Fair Value of Financial Instruments Held By Consolidated Funds

The short-term nature of cash and cash-equivalents held at the consolidated funds causes their carrying value to approximate fair value. The fair value of cash-equivalents is a Level I valuation. Derivatives may relate to a mix of Level I, II or III investments, and therefore their fair-value hierarchy level may not correspond to the fair-value hierarchy level of the economically hedged investment. The table below summarizes the investments and other financial instruments of the consolidated funds by fair-value hierarchy level:

	As of March 31, 2016											As of December 31, 2015
	Level I			Level II			Level III		Total			Level I			Level II			Level III			Total
Assets
Investments:
Corporate debt – bank debt	$	—		$	2,303,198		$	200,811	$	2,504,009		$	—		$	7,891,929		$	1,871,375		$	9,763,304
Corporate debt – all other	—			354,164			1,853		356,017			5,450			4,902,226			3,009,164			7,916,840
Equities – common stock	149,924			17,311			4,326		171,561			4,836,422			256,604			8,729,202			13,822,228
Equities – preferred stock	1,472			—			—		1,472			—			—			1,363,542			1,363,542
Real estate	—			—			—		—			61,317			—			9,655,270			9,716,587
Real estate loan portfolios	—			—			—		—			—			—			2,597,405			2,597,405
Total investments	151,396			2,674,673			206,990		3,033,059			4,903,189			13,050,759			27,225,958			45,179,906
Derivatives:
Foreign-currency forward contracts	—			11			—		11			—			156,234			—			156,234
Swaps	—			296			—		296			—			16,544			—			16,544
Options and futures	109			—			—		109			—			25,559			—			25,559
Swaptions	—			—			—		—			—			14			—			14
Total derivatives	109			307			—		416			—			198,351			—			198,351
Total assets	$	151,505		$	2,674,980		$	206,990	$	3,033,475		$	4,903,189		$	13,249,110		$	27,225,958		$	45,378,257
Liabilities
CLO debt obligations:
Senior secured notes (1)	$	—		$	(2,611,901	)	$	—	$	(2,611,901	)	$	—		$	—		$	—		$	—
Subordinated notes (1)	—			(82,104		)	—		(82,104		)	—			—			—			—
Total CLO debt obligations	—			(2,694,005		)	—		(2,694,005		)	—			—			—			—
Securities sold short:
Equity securities	(73,008		)	—			—		(73,008		)	(91,246		)	—			—			(91,246		)
Derivatives:
Foreign-currency forward contracts	—			(204		)	—		(204		)	—			(64,364		)	—			(64,364		)
Swaps	—			(1,440		)	—		(1,440		)	—			(223,359		)	(8,251		)	(231,610		)
Options and futures	—			(252		)	—		(252		)	(88		)	(4,146		)	—			(4,234		)
Total derivatives	—			(1,896		)	—		(1,896		)	(88		)	(291,869		)	(8,251		)	(300,208		)
Total liabilities	$	(73,008	)	$	(2,695,901	)	$	—	$	(2,768,909	)	$	(91,334	)	$	(291,869	)	$	(8,251	)	$	(391,454	)

(1) The fair value of CLO liabilities is classified based on the more observable fair value of CLO assets. Please see notes 2 and 9 for more information.

24

Oaktree Capital Group, LLC

Notes to Condensed Consolidated Financial Statements (Unaudited) — (Continued)

March 31, 2016

($ in thousands, except where noted)

The following tables set forth a summary of changes in the fair value of Level III investments:

	Corporate Debt – Bank Debt			Corporate Debt – All Other			Equities – Common Stock			Equities – Preferred Stock			Real Estate			Real Estate Loan Portfolios			Swaps			Other		Total
Three Months Ended March 31, 2016
Beginning balance	$	1,871,375		$	3,009,164		$	8,729,202		$	1,363,542		$	9,655,270		$	2,597,405		$	(8,251	)	$	—	$	27,217,707
Cumulative-effect adjustment from adoption of accounting guidance	(1,672,305		)	(3,007,287		)	(8,725,026		)	(1,363,542		)	(9,655,270		)	(2,597,405		)	8,251			—		(27,012,584		)
Transfers into Level III	37,535			—			398			—			—			—			—			—		37,933
Transfers out of Level III	(40,708		)	—			—			—			—			—			—			—		(40,708		)
Purchases	7,139			1			—			—			—			—			—			—		7,140
Sales	(1,986		)	—			(296		)	—			—			—			—			—		(2,282		)
Realized gains (losses), net	26			—			—			—			—			—			—			—		26
Unrealized appreciation (depreciation), net	(265		)	(25		)	48			—			—			—			—			—		(242		)
Ending balance	$	200,811		$	1,853		$	4,326		$	—		$	—		$	—		$	—		$	—	$	206,990
Net change in unrealized appreciation (depreciation) attributable to assets still held at end of period	$	1,456		$	(25	)	$	48		$	—		$	—		$	—		$	—		$	—	$	1,479
Three Months Ended March 31, 2015
Beginning balance	$	1,555,656		$	2,750,661		$	9,056,579		$	1,320,752		$	9,216,056		$	2,399,105		$	(10,687	)	$	3,576	$	26,291,698
Transfers into Level III	106,935			—			326,587			4,636			—			—			—			—		438,158
Transfers out of Level III	(103,602		)	(31,834		)	(16		)	(12,201		)	—			—			—			—		(147,653		)
Purchases	182,030			251,565			852,436			57,732			291,518			129,278			—			—		1,764,559
Sales	(155,360		)	(78,944		)	(92,721		)	(52,187		)	(94,937		)	(89,892		)	—			—		(564,041		)
Realized gains (losses), net	14,803			3,274			(139,337		)	38,537			46,399			30,811			—			—		(5,513		)
Unrealized appreciation (depreciation), net	(26,954		)	(121,863		)	152,866			23,866			269,931			(63,050		)	3,699			—		238,495
Ending balance	$	1,573,508		$	2,772,859		$	10,156,394		$	1,381,135		$	9,728,967		$	2,406,252		$	(6,988	)	$	3,576	$	28,015,703
Net change in unrealized appreciation (depreciation) attributable to assets still held at end of period	$	(5,384	)	$	32,951		$	205,341		$	108,209		$	428,121		$	(63,050	)	$	2,268		$	—	$	708,456

Total realized and unrealized gains and losses recorded for Level III investments are included in net realized gain on consolidated funds’ investments or net change in unrealized appreciation (depreciation) on consolidated funds’ investments in the condensed consolidated statements of operations.

There were no transfers between Level I and Level II positions for the three months ended March 31, 2016 and 2015.

25

Oaktree Capital Group, LLC

Notes to Condensed Consolidated Financial Statements (Unaudited) — (Continued)

March 31, 2016

($ in thousands, except where noted)

Transfers out of Level III are generally attributable to certain investments that experienced a more significant level of market trading activity or completed an initial public offering during the respective period and thus were valued using observable inputs. Transfers into Level III typically reflect either investments that experienced a less significant level of market trading activity during the period or portfolio companies that undertook restructurings or bankruptcy proceedings and thus were valued in the absence of observable inputs.

The following table sets forth a summary of the valuation techniques and quantitative information utilized in determining the fair value of the consolidated funds’ Level III investments as of March 31, 2016:

Investment Type	Fair Value		Valuation Technique	Significant Unobservable Inputs (9)(10)(11)	Range	Weighted Average (12)
Credit-oriented investments:
Consumer    discretionary:	$	2,524	Discounted cash flow (1)	Discount rate	12% – 15%	13%
	36,438		Recent market information (6)	Quoted prices / discount (discount not applicable)	Not applicable	Not applicable
Financials:	1,879		Discounted cash flow (1)	Discount rate	15% - 17%	16%
	21,049		Recent market information (6)	Quoted prices / discount (discount not applicable)	Not applicable	Not applicable
Industrials:	30,706		Discounted cash flow (1)	Discount rate	5% – 15%	7%
	41,796		Recent market information (6)	Quoted prices / discount (discount not applicable)	Not applicable	Not applicable
Consumer Staples:	15,396		Discounted cash flow (1)	Discount rate	5% – 6%	5%
	17,579		Recent market information (6)	Quoted prices / discount (discount not applicable)	Not applicable	Not applicable
Other:	11,958		Discounted cash flow (1)	Discount rate	10% – 20%	13%
	2,758		Market approach (comparable companies) (2)	Earnings multiple (3)	7x - 9x	8x
	20,581		Recent market information (6)	Quoted prices / discount (discount not applicable)	Not applicable	Not applicable
Equity investments:
	601		Market approach (comparable companies) (2)	Earnings multiple (3)	4x – 10x	6x
	3,725		Recent market information (6)	Quoted prices / discount (discount not applicable)	Not applicable	Not applicable
Total Level III investments	$	206,990

26

Oaktree Capital Group, LLC

Notes to Condensed Consolidated Financial Statements (Unaudited) — (Continued)

March 31, 2016

($ in thousands, except where noted)

The following table sets forth a summary of the valuation techniques and quantitative information utilized in determining the fair value of the consolidated funds’ Level III investments as of December 31, 2015:

Investment Type	Fair Value		Valuation Technique	Significant Unobservable Inputs (9)(10)(11)	Range	Weighted Average (12)
Credit-oriented investments:
Consumer discretionary:	$	289,107	Discounted cash flow (1)	Discount rate	5% – 15%	12%
	451,584		Market approach (comparable companies) (2)	Earnings multiple (3)	3x – 10x	6x
	232,995		Recent transaction price (5)	Not applicable	Not applicable	Not applicable
	156,160		Recent market information (6)	Quoted prices / discount (discount not applicable)	Not applicable	Not applicable
Financials:	595,066		Discounted cash flow (1)	Discount rate	6% – 14%	11%
	259,669		Market approach (value of underlying assets) (2)(4)	Underlying asset multiple	1.1x – 1.5x	1.2x
	232,958		Recent transaction price (5)	Not applicable	Not applicable	Not applicable
	241,667		Recent market information (6)	Quoted prices / discount (discount not applicable)	Not applicable	Not applicable
Industrials:	135,808		Discounted cash flow (1)	Discount rate	5% – 15%	13%
	55,310		Discounted cash flow (1) / Sales approach (8)	Discount rate / Market transactions	9% – 11%	10%
	7,549		Market approach (comparable companies) (2)	Earnings multiple (3)	5x – 9x	7x
	219,121		Market approach (value of underlying assets) (2)(4)	Underlying asset multiple	0.7x – 1.0x	0.9x
	45,647		Recent transaction price (5)	Not applicable	Not applicable	Not applicable
	24,247		Recent market information (6)	Quoted prices / discount (discount not applicable)	Not applicable	Not applicable
Materials:	417,749		Discounted cash flow (1)	Discount rate	11% – 14%	14%
	128,230		Market approach (comparable companies) (2)	Earnings multiple (3)	7x – 9x	8x
	3,938		Recent transaction price (5)	Not applicable	Not applicable	Not applicable
	71,174		Recent market information (6)	Quoted prices / discount (discount not applicable)	Not applicable	Not applicable
Information technology:	199,841		Discounted cash flow (1)	Discount rate	6% – 13%	12%
	143,596		Market approach (comparable companies) (2)	Earnings multiple (3)	6x – 8x	7x
	63,594		Recent transaction price (5)	Not applicable	Not applicable	Not applicable
	62,353		Recent market information (6)	Quoted prices / discount (discount not applicable)	Not applicable	Not applicable
Other:	442,797		Discounted cash flow (1)	Discount rate	5% – 20%	12%
	60,643		Recent transaction price (5)	Not applicable	Not applicable	Not applicable
	331,485		Recent market information (6)	Quoted prices / discount (discount not applicable)	Not applicable	Not applicable

27

Oaktree Capital Group, LLC

Notes to Condensed Consolidated Financial Statements (Unaudited) — (Continued)

March 31, 2016

($ in thousands, except where noted)

Investment Type	Fair Value		Valuation Technique	Significant Unobservable Inputs (9)(10)(11)	Range	Weighted Average (12)
Equity investments:
Financials:	58,352		Discounted cash flow (1)	Discount rate	14% – 16%	15%
	1,029,904		Market approach (value of underlying assets) (2)(4)	Underlying asset multiple	1.0x – 1.5x	1.4x
	189,714		Recent transaction price (5)	Not applicable	Not applicable	Not applicable
Industrials:	37,130		Discounted cash flow (1)	Discount rate	10% – 12%	11%
	2,385,995		Market approach (comparable companies) (2)	Earnings multiple (3)	5x – 18x	9x
	1,287,791		Market approach (value of underlying assets) (2)(4)	Underlying asset multiple	0.9x – 1.0x	1.0x
	248,894		Recent transaction price (5)	Not applicable	Not applicable	Not applicable
	53,005		Recent market information (6)	Quoted prices / discount (discount not applicable)	Not applicable	Not applicable
Materials:	1,238,760		Market approach (comparable companies) (2)	Earnings multiple (3)	7x – 9x	8x
	25,133		Recent transaction price (5)	Not applicable	Not applicable	Not applicable
Utilities	616,596		Market approach (comparable companies) (2)	Earnings multiple (3)	8x – 11x	9x
	266,185		Other	Not applicable	Not applicable	Not applicable
	200,112		Recent transaction price (5)	Not applicable	Not applicable	Not applicable
Other:	1,898,334		Market approach (comparable companies) (2)	Earnings multiple (3)	6x – 18x	10x
	164,026		Market approach (value of underlying assets) (2)(4)	Underlying asset multiple	1.1x – 1.3x	1.2x
	221,350		Recent transaction price (5)	Not applicable	Not applicable	Not applicable
	171,463		Recent market information (6)	Quoted prices / discount (discount not applicable)	Not applicable	Not applicable
Real estate-oriented investments:
	3,863,639		Discounted cash flow (1)(7)	Discount rate	6% – 44%	13%
				Terminal capitalization rate	5% – 10%	7%
				Direct capitalization rate	5% – 10%	7%
				Net operating income growth rate	0% – 38%	10%
				Absorption rate	25% – 44%	30%
	132,640		Discounted cash flow (1) / Sales approach (8)	Discount rate / Market transactions	6% – 8%	7%
	218,817		Market approach (comparable companies) (2)	Earnings multiple (3)	9x – 11x	11x
	992,695		Market approach (value of underlying assets) (2)(4)	Underlying asset multiple	1x – 1.8x	1.6x
	512,120		Recent transaction price (5)	Not applicable	Not applicable	Not applicable
	2,385,895		Recent market information (6)	Quoted prices / discount	0% – 5%	3%
	1,385,418		Sales approach (8)	Market transactions	Not applicable	Not applicable
	164,046		Other	Not applicable	Not applicable	Not applicable
Real estate loan portfolios:
	2,101,463		Discounted cash flow (1)(7)	Discount rate	7% – 23%	13%
	495,942		Recent transaction price (5)	Not applicable	Not applicable	Not applicable
Total Level III investments	$	27,217,707

28

Oaktree Capital Group, LLC

Notes to Condensed Consolidated Financial Statements (Unaudited) — (Continued)

March 31, 2016

($ in thousands, except where noted)

(1) A discounted cash-flow method is generally used to value performing credit-oriented investments in which the consolidated funds do not have a controlling interest in the underlying issuer, as well as certain equity investments, real estate-oriented investments and real estate loan portfolios.

(2) A market approach is generally used to value distressed investments and investments in which the consolidated funds have a controlling interest in the underlying issuer.

(3) Earnings multiples are based on comparable public companies and transactions with comparable companies. The Company typically utilizes multiples of EBITDA; however, in certain cases the Company may use other earnings multiples believed to be most relevant to the investment. The Company typically applies the multiple to trailing twelve-months’ EBITDA. However, in certain cases other earnings measures, such as pro forma EBITDA, may be utilized if deemed to be more relevant.

(4) A market approach using the value of underlying assets utilizes a multiple, based on comparable companies, of underlying assets or the net book value of the portfolio company. The Company typically obtains the value of underlying assets from the underlying portfolio company’s financial statements or from pricing vendors. The Company may value the underlying assets by using prices and other relevant information from market transactions involving comparable assets.

(5) Certain investments are valued based on recent transactions, generally defined as investments purchased or sold within six months of the valuation date. The fair value may also be based on a pending transaction expected to close after the valuation date.

(6) Certain investments are valued using quoted prices for the subject or similar securities.  Generally, investments valued in this manner are classified as Level III because the quoted prices may be indicative in nature for securities that are in an inactive market, may be for similar securities, or may require adjustment for investment-specific factors or restrictions.

(7) The discounted cash flow model for certain real estate-oriented investments and certain real estate loan portfolios contains a sell-out analysis. In these cases, the discounted cash flow is based on the expected timing and prices of sales of the underlying properties. The Company’s determination of the sales prices of these properties typically includes consideration of prices and other relevant information from market transactions involving comparable properties.

(8) The sales approach uses prices and other relevant information generated by market transactions involving comparable assets. The significant unobservable inputs used in the sales approach generally include adjustments to transactions involving comparable assets or properties, adjustments to external or internal appraised values, and the Company’s assumptions regarding market trends or other relevant factors.

(9) The discount rate is the significant unobservable input used in the fair-value measurement of performing credit-oriented investments in which the consolidated funds do not have a controlling interest in the underlying issuer, as well as certain equity investments and real estate loan portfolios. An increase (decrease) in the discount rate would result in a lower (higher) fair-value measurement.

(10) Multiple of either earnings or underlying assets is the significant unobservable input used in the market approach for the fair-value measurement of distressed credit-oriented investments, credit-oriented investments in which the consolidated funds have a controlling interest in the underlying issuer, equity investments and certain real estate-oriented investments. An increase (decrease) in the multiple would result in a higher (lower) fair-value measurement.

(11) The significant unobservable inputs used in the fair-value measurement of real estate investments utilizing a discounted cash flow analysis can include one or more of the following: discount rate, terminal capitalization rate, direct capitalization rate, net operating income growth rate or absorption rate. An increase (decrease) in a discount rate, terminal capitalization rate or direct capitalization rate would result in a lower (higher) fair-value measurement. An increase (decrease) in a net operating income growth rate or absorption rate would result in a higher (lower) fair-value measurement. Generally, a change in a net operating income growth rate or absorption rate would be accompanied by a directionally similar change in the discount rate.

(12) The weighted average is based on the fair value of the investments included in the range.

A significant amount of judgment may be required when using unobservable inputs, including assessing the accuracy of source data and the results of pricing models. The Company assesses the accuracy and reliability of the sources it uses to develop unobservable inputs. These sources may include third-party vendors that the Company believes are reliable and commonly utilized by other marketplace participants. As described in note 2, other factors beyond the unobservable inputs described above may have a significant impact on investment valuations.

During the three months ended March 31, 2016, the valuation technique for one Level III credit-oriented investment changed from a discounted cash flow to a market approach based on comparable companies due to the anticipated restructuring of the portfolio company.

During the three months ended March 31, 2015, the valuation technique for six Level III investments changed, as follows: (a) three credit-oriented investments and one equity investment changed from a market approach based on comparable companies to a market approach based on the value of underlying assets as a result of an increased focus on the value of the company’s physical assets, (b) one real estate-oriented investment changed from a valuation based on a market approach to a discounted cash flow as a result of the stabilization of the underlying property and (c) one real estate-oriented investment changed from a valuation based on a discounted cash flow to a sales approach as a result of receiving offers from potential buyers.

29

Oaktree Capital Group, LLC

Notes to Condensed Consolidated Financial Statements (Unaudited) — (Continued)

March 31, 2016

($ in thousands, except where noted)

6. DERIVATIVES AND HEDGING

The Company enters into derivatives as part of its overall risk management strategy or to facilitate its investment management activities. Risks associated with fluctuations in interest rates and foreign-currency exchange rates in the normal course of business are addressed as part of the Company’s overall risk management strategy that may include the use of derivatives to economically hedge or reduce these exposures. From time to time, the Company may enter into (a) foreign-currency option and forward contracts to reduce earnings and cash-flow volatility associated with changes in foreign-currency exchange rates, and (b) interest-rate swaps to manage all or a portion of the interest-rate risk associated with its variable-rate borrowings. As a result of the use of these or other derivative contracts, the Company is exposed to the risk that counterparties will fail to fulfill their contractual obligations. The Company attempts to mitigate this counterparty risk by entering into derivative contracts only with major financial institutions that have investment-grade credit ratings. Counterparty credit risk is evaluated in determining the fair value of derivatives.

As of March 31, 2016, the Company had one interest-rate swap outstanding, expiring in January 2017, that was designated to hedge the interest-rate risk covering up to $168.8 million of the $250.0 million variable-rate bank term loan.  As of March 31, 2016, the hedge continued to be effective. As of December 31, 2015, the Company had an additional interest-rate swap that expired in January 2016 and was designated to hedge the interest-rate risk covering up to $150.0 million of the same bank term loan.

Freestanding derivatives are financial instruments that the Company enters into as part of its overall risk management strategy but does not designate as hedging instruments for accounting purposes. These financial instruments may include foreign-currency exchange contracts, interest-rate swaps and other derivative contracts.

The fair value of foreign-currency forward sell contracts consisted of the following:

As of March 31, 2016	Contract  Amount in Local Currency	Contract  Amount in U.S. Dollars		Market  Value in U.S. Dollars		Net Unrealized Appreciation (Depreciation)
Euro, expiring 4/8/16-6/30/17	253,550	$	283,608	$	290,829	$	(7,221	)
GBP, expiring 4/1/16-4/15/16	58,000	83,504		83,360		144
USD (buy GBP), expiring 4/29/16-1/31/17	81,460	81,460		84,798		(3,338		)
Japanese Yen, expiring 6/30/16-9/30/16	5,981,400	51,006		53,357		(2,351		)
Total		$	499,578	$	512,344	$	(12,766	)
As of December 31, 2015
Euro, expiring 1/8/16-12/30/16	246,850	$	274,135	$	269,603	$	4,532
USD (buy GBP), expiring 1/8/16-10/31/16	70,594	70,594		72,476		(1,882		)
Japanese Yen, expiring 1/29/16-9/30/16	5,840,300	48,631		48,692		(61		)
Total		$	393,360	$	390,771	$	2,589

30

Oaktree Capital Group, LLC

Notes to Condensed Consolidated Financial Statements (Unaudited) — (Continued)

March 31, 2016

($ in thousands, except where noted)

Realized and unrealized gains and losses arising from freestanding derivative instruments were recorded in the condensed consolidated statements of operations as follows:

	Three Months Ended March 31,
Foreign-currency Forward Contracts	2016			2015
Investment income	$	(8,901	)	$	—
General and administrative expense (1)	(9,891		)	23,955
Total	$	(18,792	)	$	23,955

(1) To the extent that the Company’s freestanding derivatives are utilized to hedge its foreign-currency exposure to investment income and management fees earned from consolidated funds, the related hedged items are eliminated in consolidation, with the derivative impact (a positive number reflects a reduction in expenses) reflected in consolidated general and administrative expense.

As of March 31, 2016 and December 31, 2015, the Company had not designated any derivatives as fair-value hedges or hedges of net investments in foreign operations.

Derivatives Held By Consolidated Funds

Certain consolidated funds utilize derivatives in their ongoing investment operations. These derivatives primarily consist of foreign-currency forward contracts and options utilized to manage currency risk, interest-rate swaps to hedge interest-rate risk, options and futures used to hedge certain exposures for specific securities, and total-return swaps utilized mainly to obtain exposure to leveraged loans or to participate in foreign markets not readily accessible. The primary risk exposure for options and futures is price, while the primary risk exposure for total-return swaps is credit. None of the derivative instruments is accounted for as a hedging instrument utilizing hedge accounting.

The impact of derivatives held by the consolidated funds in the condensed consolidated statements of operations was as follows:

	Three Months Ended March 31,
	2016						2015
	Net Realized Gain (Loss) on Investments			Net Change in Unrealized Appreciation (Depreciation) on Investments			Net Realized Gain (Loss) on Investments			Net Change in Unrealized Appreciation (Depreciation) on Investments
Foreign-currency forward contracts	$	(202	)	$	(392	)	$	295,976		$	20,384
Total-return and interest-rate swaps	17			(1,618		)	(4,926		)	(60,218		)
Options and futures	(85		)	(143		)	17,801			(11,149		)
Swaptions	—			—			(1,820		)	1,151
Total	$	(270	)	$	(2,153	)	$	307,031		$	(49,832	)

31

Oaktree Capital Group, LLC

Notes to Condensed Consolidated Financial Statements (Unaudited) — (Continued)

March 31, 2016

($ in thousands, except where noted)

Balance Sheet Offsetting

The Company recognizes all derivatives as assets or liabilities at fair value in its condensed consolidated statements of financial condition. In connection with its derivative activities, the Company generally enters into agreements subject to enforceable master netting arrangements that allow the Company to offset derivative assets and liabilities in the same currency by specific derivative type or, in the event of default by the counterparty, to offset derivative assets and liabilities with the same counterparty. While these derivatives are eligible to be offset in accordance with applicable accounting guidance, the Company has elected to present derivative assets and liabilities based on gross fair value in its condensed consolidated statements of financial condition. The table below sets forth the setoff rights and related arrangements associated with derivatives held by the Company. The “gross amounts not offset in statements of financial condition” columns represent derivatives that management has elected not to offset in the consolidated statements of financial condition even though they are eligible to be offset in accordance with applicable accounting guidance.

	Gross and Net Amounts of Assets (Liabilities) Presented			Gross Amounts Not Offset in Statements of Financial Condition						Net Amount
As of March 31, 2016				Derivative Assets (Liabilities)			Cash Collateral Received (Pledged)
Derivative Assets:
Foreign-currency forward contracts	$	1,638		$	1,638		$	—		$	—
Derivative assets of consolidated funds:
Foreign-currency forward contracts	11			11			—			—
Total-return and interest-rate swaps	296			296			—			—
Options and futures	109			—			—			109
Subtotal	416			307			—			109
Total	$	2,054		$	1,945		$	—		$	109
Derivative Liabilities:
Foreign-currency forward contracts	$	(14,404	)	$	(1,638	)	$	—		$	(12,766	)
Interest-rate swaps	(927		)	—			—			(927		)
Subtotal	(15,331		)	(1,638		)	—			(13,693		)
Derivative liabilities of consolidated funds:
Foreign-currency forward contracts	(204		)	(11		)	—			(193		)
Total-return and interest-rate swaps	(1,440		)	(296		)	(1,144		)	—
Options and futures	(252		)	—			—			(252		)
Subtotal	(1,896		)	(307		)	(1,144		)	(445		)
Total	$	(17,227	)	$	(1,945	)	$	(1,144	)	$	(14,138	)

32

Oaktree Capital Group, LLC

Notes to Condensed Consolidated Financial Statements (Unaudited) — (Continued)

March 31, 2016

($ in thousands, except where noted)

	Gross and Net Amounts of Assets (Liabilities) Presented			Gross Amounts Not Offset in Statements of Financial Condition						Net Amount
As of December 31, 2015				Derivative Assets (Liabilities)			Cash Collateral Received (Pledged)
Derivative Assets:
Foreign-currency forward contracts	$	5,875		$	2,047		$	—		$	3,828
Derivative assets of consolidated funds:
Foreign-currency forward contracts	156,234			38,033			—			118,201
Total-return and interest-rate swaps	16,544			4,526			—			12,018
Options and futures	25,559			5,665			—			19,894
Swaptions	14			14			—			—
Subtotal	198,351			48,238			—			150,113
Total	$	204,226		$	50,285		$	—		$	153,941
Derivative Liabilities:
Foreign-currency forward contracts	$	(3,286	)	$	(2,047	)	$	—		$	(1,239	)
Interest-rate swaps	(943		)	—			—			(943		)
Subtotal	(4,229		)	(2,047		)	—			(2,182		)
Derivative liabilities of consolidated funds:
Foreign-currency forward contracts	(64,364		)	(38,788		)	—			(25,576		)
Total-return and interest-rate swaps	(231,610		)	(5,304		)	(202,677		)	(23,629		)
Options and futures	(4,234		)	(4,146		)	(88		)	—
Subtotal	(300,208		)	(48,238		)	(202,765		)	(49,205		)
Total	$	(304,437	)	$	(50,285	)	$	(202,765	)	$	(51,387	)

33

Oaktree Capital Group, LLC

Notes to Condensed Consolidated Financial Statements (Unaudited) — (Continued)

March 31, 2016

($ in thousands, except where noted)

7. FIXED ASSETS

Fixed assets include furniture and equipment, capitalized software, office leasehold improvements, a company-owned airplane and acquired intangibles, and are included within other assets in the condensed consolidated statements of financial position. The following table sets forth the Company’s gross and net fixed assets:

	As of
	March 31, 2016			December 31, 2015
Furniture, equipment and capitalized software	$	17,690		$	16,820
Leasehold improvements	43,878			43,107
Corporate airplane	12,439			12,439
Other	3,292			3,295
Fixed assets, gross	77,299			75,661
Accumulated depreciation	(39,577		)	(36,394		)
Fixed assets, net	$	37,722		$	39,267

8. GOODWILL AND INTANGIBLES

Goodwill represents the excess of cost over the fair value of identifiable net assets of acquired businesses. Goodwill has an indefinite useful life and is not amortized, but instead tested for impairment annually in the fourth quarter of each fiscal year or more frequently when events and circumstances indicate that impairment may have occurred. As of both March 31, 2016 and December 31, 2015, the Company had $69.3 million of goodwill.

The following table summarizes the carrying amount of intangible assets:

	As of
	March 31, 2016			December 31, 2015
Contractual rights	$	28,017		$	28,017
Accumulated amortization	(6,672		)	(5,671		)
Intangible assets, net	$	21,345		$	22,346

Amortization expense associated with the Company's intangible assets was $1.0 million for both the three months ended March 31, 2016 and 2015. Amortization expense for the remaining nine months of 2016 and each of the years ended December 31, 2017–2020, is estimated to be $3.0 million and $4.0 million per annum, respectively.

Goodwill and intangible assets are included within other assets in the condensed consolidated statements of financial position.

34

Oaktree Capital Group, LLC

Notes to Condensed Consolidated Financial Statements (Unaudited) — (Continued)

March 31, 2016

($ in thousands, except where noted)

9. DEBT OBLIGATIONS AND CREDIT FACILITIES

The Company’s debt obligations are set forth below:

	As of
	March 31, 2016			December 31, 2015
$50,000, 6.09%, issued in June 2006, payable on June 6, 2016	$	50,000		$	50,000
$50,000, 5.82%, issued in November 2006, payable on November 8, 2016	50,000			50,000
$250,000, 6.75%, issued in November 2009, payable on December 2, 2019	250,000			250,000
$250,000, rate as described below, term loan issued in March 2014, payable on March 31, 2021	250,000			250,000
$50,000, 3.91%, issued in September 2014, payable on September 3, 2024	50,000			50,000
$100,000, 4.01%, issued in September 2014, payable on September 3, 2026	100,000			100,000
$100,000, 4.21%, issued in September 2014, payable on September 3, 2029	100,000			100,000
Total remaining principal	850,000			850,000
Less: Debt issuance costs	(4,264		)	(3,646		)
Debt obligations	$	845,736		$	846,354

Future scheduled principal payments of debt obligations as of March 31, 2016 are as follows:

Remainder of 2016	$	100,000
2017	—
2018	—
2019	250,000
2020	—
Thereafter	500,000
Total	$	850,000

The Company was in compliance with all financial maintenance covenants associated with its senior notes and bank credit facility as of March 31, 2016 and December 31, 2015.

The fair value of the Company’s debt obligations, which are carried at amortized cost, is a Level III valuation that is estimated based on a discounted cash-flow calculation using estimated rates that would be offered to Oaktree for debt of similar terms and maturities. The fair value of these debt obligations, gross of debt issuance costs, was $854.8 million and $855.3 million as of March 31, 2016 and December 31, 2015, respectively, utilizing an average borrowing rate of 4.1% and 3.7%, respectively. As of March 31, 2016, a 10% increase in the assumed average borrowing rate would lower the estimated fair value to $839.6 million, whereas a 10% decrease would increase the estimated fair value to $870.7 million.

In March 2016, Oaktree Capital Management, L.P., Oaktree Capital II, L.P., Oaktree AIF Investments, L.P., and Oaktree Capital I, L.P. (collectively, the “Borrowers”) entered into the Second Amendment to Credit Agreement (the “Second Amendment”), which amended the credit agreement dated as of March 31, 2014 (as amended through and including the Second Amendment, the “Credit Agreement”). The Credit Agreement consists of a $250 million fully-funded term loan (the “Term Loan”) and a $500 million revolving credit facility (the “Revolver”). The Second Amendment extends the maturity date of the Credit Agreement from March 31, 2019 to March 31, 2021, at which time the entire principal amount of $250 million is due, and provides the Borrowers with the option to extend the new maturity date by one year if the lenders holding at least 50% of the aggregate amount of the term loan and the revolving loan commitment thereunder on the date of the Borrowers’ extension request consent to such extension. Borrowings under the Credit Agreement generally bear interest at a spread to either LIBOR or an alternative base rate. Based on the current credit ratings of Oaktree Capital Management, L.P., the interest rate on borrowings is LIBOR plus 1.00% per annum and the commitment fee on the unused portions of the Revolver is 0.125% per annum. Utilizing interest-rate swaps, the majority of the Term Loan’s annual interest rate is fixed at 2.22% through January 2017, based on our current credit ratings. The Credit Agreement contains customary financial covenants

35

Oaktree Capital Group, LLC

Notes to Condensed Consolidated Financial Statements (Unaudited) — (Continued)

March 31, 2016

($ in thousands, except where noted)

and restrictions, including ones regarding a maximum leverage ratio of 3.0-to-1.0 and a minimum required level of assets under management (as defined in the credit agreement). The Second Amendment increases the minimum level of assets under management to $60 billion and makes certain other amendments to the provisions of the Credit Agreement. As of March 31, 2016, the Company had no outstanding borrowings under its $500 million revolving credit facility and was able to draw the full amount available without violating any financial maintenance covenants.

Credit Facilities of the Consolidated Funds

The Company adopted the new consolidation guidance as of January 1, 2016, resulting in the deconsolidation of substantially all of Oaktree’s closed-end and commingled open-end and evergreen funds as of that date. As of March 31, 2016, there were no outstanding credit facilities associated with the funds that were consolidated under the new consolidation guidance. Prior to adoption, certain consolidated funds maintained revolving credit facilities to fund investments between, or in advance of, capital drawdowns. These facilities generally (a) were collateralized by the unfunded capital commitments of the consolidated funds’ limited partners, (b) were subject to an annual commitment fee based on unfunded commitments, and (c) contained various affirmative and negative covenants and reporting obligations, including restrictions on additional indebtedness, liens, margin stock, affiliate transactions, dividends and distributions, release of capital commitments, and portfolio asset dispositions. Additionally, certain consolidated funds had issued senior variable rate notes to fund investments on a longer term basis, generally up to ten years. The obligations of the consolidated funds were nonrecourse to the Company.

Debt Obligations of CLOs

Debt obligations of CLOs represent amounts due to holders of debt securities issued by the CLOs, including term loans that had not priced as of period end. The table below sets forth the outstanding debt obligations of CLOs as of the date indicated.

	As of March 31, 2016				As of December 31, 2015
	Carrying Value (1)		Weighted Average Interest Rate	Weighted Average Remaining Maturity (years)	Carrying Value			Fair Value (2)		Weighted Average Interest Rate	Weighted Average Remaining Maturity (years)
Senior secured notes (3)	$	450,253	2.62%	9.0	$	457,196		$	447,460	2.37%	9.3
Senior secured notes (4)	452,129		2.80%	10.7	454,423			446,558		2.52%	11.0
Senior secured notes (5)	76,671		2.96%	2.8	79,914			78,632		2.96%	3.0
Senior secured notes (6)	381,169		2.26%	11.5	363,709			357,626		2.26%	11.7
Senior secured notes (7)	454,537		2.71%	11.7	455,295			448,933		2.54%	12.0
Senior secured notes (8)	382,361		2.29%	12.1	361,142			359,914		2.29%	12.3
Senior secured notes (9)	414,781		2.28%	13.1	—			—		—	—
Subordinated note (10)	9,896		N/A	10.7	25,500			16,400		N/A	11.0
Subordinated note (10)	18,298		N/A	11.5	21,183			15,876		N/A	11.7
Subordinated note (10)	17,763		N/A	11.7	25,500			18,337		N/A	12.0
Subordinated note (10)	14,843		N/A	12.1	17,924			11,928		N/A	12.3
Subordinated note (10)	21,304		N/A	13.1	12,036			12,036		N/A	1.6
Term loan	—		—	—	81,238			81,238		1.20%	1.6
Subtotal	2,694,005				2,355,060			$	2,294,938
Less: Debt issuance costs	—				(24,701		)
CLO debt obligations	$	2,694,005			$	2,330,359

(1) The Company adopted the measurement alternative guidance for collateralized financing entities on a modified retrospective approach as of January 1, 2016. Upon adoption, the Company elected the fair value option for the financial liabilities of the consolidated CLOs and determined that the fair value of the CLO assets was more observable than the fair value of the CLO liabilities. Accordingly, the fair value of CLO liabilities was measured as the fair value of CLO assets less the sum of (a) the fair value of any beneficial interests held by the

36

Oaktree Capital Group, LLC

Notes to Condensed Consolidated Financial Statements (Unaudited) — (Continued)

March 31, 2016

($ in thousands, except where noted)

Company and (b) the carrying value of any beneficial interests that represent compensation for services. Please see notes 2 and 5 for more information.

(2) The debt obligations of the CLOs are Level III valuations and were valued using prices obtained from pricing vendors or recent transactions. Financial instruments that are valued using quoted prices for the subject or similar securities are generally classified as Level III because the quoted prices may be indicative in nature for securities that are in an inactive market, may be for similar securities, or may require adjustment for investment-specific factors or restrictions. Financial instruments that are valued based on recent transactions are generally defined as securities purchased or sold within six months of the valuation date.  The fair value may also be based on a pending transaction expected to close after the valuation date. For certain recently issued debt obligations, the carrying value approximates fair value.

(3) The weighted average interest rate is based on LIBOR plus 2.01%.

(4) The weighted average interest rate is based on LIBOR plus 2.17%.

(5) The interest rate was LIBOR plus a margin determined based on a formula as defined in the respective borrowing agreements, which incorporate different borrowing values based on the characteristics of collateral investments purchased.  The weighted average unused commitment fee rate ranged from 0% to 2.0%.

(6) The weighted average interest rate is based on EURIBOR (subject to a zero floor) plus 2.26%.

(7) The weighted average interest rate is based on LIBOR plus 2.09%.

(8) The weighted average interest rate is based on EURIBOR (subject to a zero floor) plus 2.29%.

(9) The weighted average interest rate is based on EURIBOR (subject to a zero floor) plus 2.28%.

(10) The subordinated notes do not have a contractual interest rate; instead, they receive distributions from the excess cash flows generated by the CLO.

The debt obligations of CLOs are nonrecourse to the Company and are backed by the investments held by the respective CLO. Assets of one CLO may not be used to satisfy the liabilities of another. As of March 31, 2016 and December 31, 2015, the fair value of CLO assets was $3.0 billion and $2.6 billion, respectively, and consisted of cash, corporate loans, corporate bonds and other securities.

Future scheduled principal payments with respect to the debt obligations of CLOs as of March 31, 2016 are as follows:

Remainder of 2016	$	—
2017	—
2018	76,671
2019	—
2020	—
Thereafter	2,683,914
Total	$	2,760,585

10. NON-CONTROLLING REDEEMABLE INTERESTS IN CONSOLIDATED FUNDS

The following table sets forth a summary of changes in the non-controlling redeemable interests in the consolidated funds. Dividends reinvested and in-kind contributions or distributions are non-cash in nature and have been presented on a gross basis in the table below.

	Three Months Ended March 31,
	2016			2015
Beginning balance	$	38,173,125		$	41,681,155
Cumulative-effect adjustment from adoption of accounting guidance	(37,969,042		)	—
Contributions	11,277			2,073,402
Distributions	(15,036		)	(1,945,778		)
Net income (loss)	(4,282		)	1,135,598
Change in distributions payable	1,318			418,943
Change in accrued or deferred contributions	—			(59,583		)
Foreign currency translation and other	4,330			(552,223		)
Ending balance	$	201,690		$	42,751,514

37

Oaktree Capital Group, LLC

Notes to Condensed Consolidated Financial Statements (Unaudited) — (Continued)

March 31, 2016

($ in thousands, except where noted)

11. UNITHOLDERS’ CAPITAL

Unitholders’ capital reflects the economic interests attributable to Class A unitholders, non-controlling interests in consolidated subsidiaries and non-controlling interests in consolidated funds. Non-controlling interests in consolidated subsidiaries represent the portion of unitholders’ capital attributable to the OCGH non-controlling interest and third parties. The OCGH non-controlling interest is determined at the Oaktree Operating Group level based on the proportionate share of Oaktree Operating Group units held by the OCGH unitholders. Certain expenses, such as income tax and related administrative expenses of Oaktree Capital Group, LLC and its Intermediate Holding Companies, are solely attributable to the Class A unitholders. As of March 31, 2016 and December 31, 2015, respectively, OCGH units represented 92,437,787 of the total 155,032,367 Oaktree Operating Group units and 91,937,873 of the total 153,907,733 Oaktree Operating Group units. Based on total allocable Oaktree Operating Group capital of $1,560,615 and $1,575,504 as of March 31, 2016 and December 31, 2015, respectively, the OCGH non-controlling interest was $930,514 and $941,141. As of March 31, 2016 and December 31, 2015, non-controlling interests attributable to related parties and third parties was $11,688 and $102,789, respectively.

The following table sets forth a summary of net income attributable to the OCGH unitholders' non-controlling interest and to Class A unitholders:

	Three Months Ended March 31,
	2016			2015
Weighted average Oaktree Operating Group units outstanding (in thousands):
OCGH non-controlling interest	91,914			108,174
Class A unitholders	61,894			45,063
Total weighted average units outstanding	153,808			153,237
Oaktree Operating Group net income:
Net income attributable to OCGH non-controlling interest	$	58,826		$	108,766
Net income attributable to Class A unitholders	39,615			45,310
Oaktree Operating Group net income (1)	$	98,441		$	154,076
Net income attributable to Oaktree Capital Group, LLC:
Oaktree Operating Group net income attributable to Class A unitholders	$	39,615		$	45,310
Non-Operating Group expenses	(264		)	(334		)
Income tax expense of Intermediate Holding Companies	(11,273		)	(6,723		)
Net income attributable to Oaktree Capital Group, LLC	$	28,078		$	38,253

(1) Oaktree Operating Group net income does not include amounts attributable to other non-controlling interests, which amounted to $1,207 of income and $665 of losses for the three months ended March 31, 2016 and 2015, respectively.

The change in the Company’s ownership interest in the Oaktree Operating Group is set forth below:

	Three Months Ended March 31,
	2016		2015
Net income attributable to Oaktree Capital Group, LLC	$	28,078	$	38,253
Equity reallocation between controlling and non-controlling interests	7,481		45,761
Change from net income attributable to Oaktree Capital Group, LLC and transfers from non-controlling interests	$	35,559	$	84,014

Please see notes 12, 13 and 14 for additional information regarding transactions that impacted unitholders’ capital.

38

Oaktree Capital Group, LLC

Notes to Condensed Consolidated Financial Statements (Unaudited) — (Continued)

March 31, 2016

($ in thousands, except where noted)

12. EARNINGS PER UNIT

The computation of net income per Class A unit is set forth below:

	Three Months Ended March 31,
	2016		2015
Net income per Class A unit (basic and diluted):	(in thousands, except per unit amounts)
Net income attributable to Oaktree Capital Group, LLC	$	28,078	$	38,253
Weighted average number of Class A units outstanding (basic and diluted)	61,894		45,063
Basic and diluted net income per Class A unit	$	0.45	$	0.85

OCGH units may be exchanged on a one-for-one basis into Class A units, subject to certain restrictions. As of March 31, 2016, there were 92,437,787 OCGH units outstanding, which are vested or will vest through March 1, 2026, that may ultimately be exchanged into 92,437,787 Class A units. The exchange of these units would proportionally increase the Company’s interest in the Oaktree Operating Group. However, as the restrictions set forth in the exchange agreement were in place at the end of each respective reporting period, those units were not included in the computation of diluted earnings per unit for the three months ended March 31, 2016 and 2015.

In connection with the 2014 Highstar acquisition, the Company has a contingent consideration liability that is payable in a combination of cash and fully-vested OCGH units. The amount of contingent consideration, if any, is based on the achievement of certain performance targets over a period of up to seven years from the acquisition date. As of March 31, 2016, no OCGH units were considered issuable under the terms of the contingent consideration arrangement; consequently, no contingently issuable units were included in the computation of diluted earnings per unit for the three months ended March 31, 2016 and 2015. Please see note 15 for more information.

13. EQUITY-BASED COMPENSATION

Class A and OCGH Unit Awards

During the three months ended March 31, 2016, the Company granted 787,103 Class A units and 622,676 restricted OCGH units to its employees and directors, subject to annual vesting over a weighted average period of approximately 4.2 years. The grant date fair value of OCGH units awarded during the three months ended March 31, 2016 was determined by applying a 20% discount to the ClassA unit trading price on the New York Stock Exchange as of the grant date. The calculation of compensation expense for all OCGH units awarded in 2016 assumed a forfeiture rate, based on expected employee turnover, of up to 3.0% annually.

As of March 31, 2016, the Company expected to recognize compensation expense on its unvested Class A and OCGH unit awards of $181.4 million over a weighted average period of 4.4 years.

A summary of the status of the Company’s unvested Class A and OCGH unit awards and a summary of changes for the period presented are set forth below (actual dollars per unit):

	Class A Units				OCGH Units
	Number of Units		Weighted Average Grant Date Fair Value		Number of Units		Weighted Average Grant Date Fair Value
Balance, December 31, 2015	2,376,340		$	38.18	2,265,967		$	40.70
Granted	787,103		46.93		622,676		37.54
Vested	(916,656	)	37.42		(302,663	)	39.39
Forfeited	(23,242	)	32.44		(10,932	)	30.44
Balance, March 31, 2016	2,223,545		$	41.65	2,575,048		$	40.13

39

Oaktree Capital Group, LLC

Notes to Condensed Consolidated Financial Statements (Unaudited) — (Continued)

March 31, 2016

($ in thousands, except where noted)

Equity Value Units

OCGH equity value units (“EVUs”) represent special limited partnership units in 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 interim periods 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.

Certain EVUs provide the holder with certain liquidity rights in respect of the one-time special distribution that will be settled in OCGH units. The Company accounts for those EVUs subject to such liquidity rights as liability-classified awards. As of March 31, 2016, there were 1,000,000 equity-classified EVUs and 1,000,000 liability-classified EVUs outstanding. As of March 31, 2016, the Company expected to recognize $9.4 million of compensation expense on its unvested EVUs over the next 3.8 years. Equity-classified EVUs that require future service are expensed on a straight-line basis over the requisite service period. Liability-classified EVUs are remeasured at the end of each quarter.

The fair value of EVUs was determined using a Monte Carlo simulation model at the grant date for equity-classified EVUs and as of the period end date for liability-classified EVUs. The fair value is affected by the Class A unit trading price and assumptions regarding certain complex and subjective variables, including the expected Class A unit trading price volatility, distributions and exercise timing, and the risk-free interest rate. The fair value of equity-classified EVUs reflected a 20% lack of marketability discount for the OCGH units that will be issued upon vesting, and an assumed forfeiture rate of zero.

14. INCOME TAXES AND RELATED PAYMENTS

Oaktree is a publicly traded partnership and Oaktree Holdings, Inc. and Oaktree AIF Holdings, Inc., two of its Intermediate Holding Companies, are wholly-owned corporate subsidiaries. Income earned by these corporate subsidiaries is subject to U.S. federal and state income taxation and taxed at prevailing rates. Income earned by non-corporate subsidiaries is not subject to U.S. federal corporate income tax and is allocated to the Oaktree Operating Group’s unitholders.  The Company’s effective tax rate is dependent on many factors, including the estimated nature of many amounts and the mix of revenues and expenses between the two corporate subsidiaries that are subject to income tax and the three other subsidiaries that are not; consequently, the effective tax rate is subject to significant variation from period to period. The Company’s effective tax rate used for interim periods is based on the estimated full-year income tax rate. Certain items that cannot be reliably estimated, such as incentive income, are excluded from the estimated annual effective tax rate. The tax expense or benefit stemming from these items is recognized in the same period as the underlying income or expense.

Taxing authorities are currently examining certain income tax returns of Oaktree, with certain of these examinations at an advanced stage. The Company believes that it is reasonably possible that one outcome of these current examinations and expiring statutes of limitation on other items may be the release of up to approximately $3.8 million of previously accrued Operating Group income taxes during the four quarters ending March 31, 2017. The Company believes that it has adequately provided for any reasonably foreseeable outcomes related to its tax examinations and that any settlements related thereto will not have a material adverse effect on the Company’s consolidated financial statements; however, there can be no assurances as to the ultimate outcomes.

Tax Receivable Agreement

Oaktree Holdings, Inc. and Oaktree AIF Holdings, Inc. have entered into a tax receivable agreement with OCGH unitholders that, as amended, provides for the payment to an exchanging or selling OCGH unitholder of 85% of the amount of cash savings, if any, in U.S. federal, state, local and foreign income taxes that they actually realize (or are deemed to realize in the case of an early termination payment by Oaktree Holdings, Inc. or Oaktree AIF Holdings, Inc., or a change of control) as a result of an increase in the tax basis of the assets owned by the Oaktree Operating Group. When an exchange of OCGH units results in an increase to the tax basis of the assets owned by the Oaktree Operating Group, a deferred tax asset and an associated liability for payments to OCGH unitholders

40

Oaktree Capital Group, LLC

Notes to Condensed Consolidated Financial Statements (Unaudited) — (Continued)

March 31, 2016

($ in thousands, except where noted)

under the tax receivable agreement are recorded. The establishment of a deferred tax asset increases additional paid-in capital because the transactions are between Oaktree and its unitholders.

No amounts were paid under the tax receivable agreement during the three months ended March 31, 2016.

15. COMMITMENTS AND CONTINGENCIES

In the normal course of business, Oaktree enters into contracts that contain certain representations, warranties and indemnifications. The Company’s exposure under these arrangements would involve future claims that have not yet been asserted. Inasmuch as no such claims currently exist or are expected to arise, the Company has not accrued any liability in connection with these indemnifications.

Legal Actions

Periodically, the Company is a party to legal actions arising in the ordinary course of business. The Company is currently not subject to any pending actions that either individually or in the aggregate are expected to have a material impact on its consolidated financial statements.

Incentive Income

In addition to the incentive income recognized by the Company, certain of its funds have amounts recorded as potentially allocable to the Company as its share of potential future incentive income, based on each fund’s net asset value. Inasmuch as this incentive income is contingent upon future investment activity and other factors, it is not recognized by the Company until it is fixed or determinable. As of March 31, 2016 and December 31, 2015, the aggregate of such amounts recorded at the fund level in excess of incentive income recognized by the Company was $1,437,553 and $1,540,469, respectively, for which related direct incentive income compensation expense was estimated to be $691,975 and $750,077, respectively.

Contingent Consideration

The Company has a contingent consideration obligation of up to $60.0 million related to the 2014 Highstar acquisition, payable in cash and fully-vested OCGH units. The amount of contingent consideration is based on the achievement of certain performance targets over a period of up to seven years from the acquisition date. As of March 31, 2016 and December 31, 2015, respectively, the fair value of the contingent consideration liability was $27.9 million and $28.5 million. For the three months ended March 31, 2016 and 2015, respectively, the Company recognized income of $0.6 million and expense of $0.8 million associated with changes in the contingent consideration liability. The fair value of the contingent consideration liability is a Level III valuation and was valued using a discounted cash-flow analysis, based on a probability-weighted average estimate of achieving certain performance targets, including fundraising and revenue levels. The assumptions used in the discounted cash-flow analysis were based on a number of factors that require significant judgment. As a result, the ultimate amount of the contingent consideration liability may differ materially. The contingent consideration liability is included in accounts payable, accrued expenses and other liabilities in the condensed consolidated statements of financial condition. Changes in the liability are recorded in general and administrative expense in the condensed consolidated statements of operations.

Commitments to Funds

As of March 31, 2016 and December 31, 2015, the Company, generally in its capacity as general partner, had undrawn capital commitments of $469.1 million and $469.4 million, respectively, including commitments to both non-consolidated and consolidated funds.

Investment Commitments of Consolidated Funds

The consolidated funds may be party to certain credit arrangements that provide for the issuance of letters of credit and/or revolving loans, which may require the consolidated funds to extend additional loans to investee companies. The consolidated funds use the same investment criteria in making these unrecorded commitments as they do for investments that are included in the condensed consolidated statements of financial condition. The unfunded liability associated with these credit arrangements is equal to the amount by which the contractual loan

41

Oaktree Capital Group, LLC

Notes to Condensed Consolidated Financial Statements (Unaudited) — (Continued)

March 31, 2016

($ in thousands, except where noted)

commitment exceeds the sum of the amount of funded debt and cash held in escrow, if any. As of March 31, 2016 and December 31, 2015, the consolidated funds had aggregate potential credit and investment commitments of $5.5 million and $1.3 billion, respectively. These commitments will be funded by the funds’ cash balances, proceeds from asset sales or drawdowns against existing capital commitments.

A consolidated fund may agree to guarantee the repayment obligations of certain investee companies. As of March 31, 2016 and December 31, 2015, the aggregate amounts guaranteed were zero and $142.4 million, respectively.

Certain consolidated funds are investment companies that are required to disclose financial support provided or contractually required to be provided to any of their portfolio companies. During the three months ended March 31, 2016, the consolidated funds did not provide any financial support to portfolio companies.

16. RELATED-PARTY TRANSACTIONS

The Company considers its senior executives, employees and non-consolidated Oaktree funds to be affiliates (as defined in the FASB ASC Master Glossary). Amounts due from and to affiliates are set forth below. The fair value of amounts due from and to affiliates is a Level III valuation and was valued based on a discounted cash-flow analysis. The carrying value of amounts due from affiliates approximated fair value due to their short-term nature or because their average interest rate, which ranged from 2.0% to 3.0%, approximated the Company’s cost of debt. The fair value of amounts due to affiliates approximated $165,431 and $160,952 as of March 31, 2016 and December 31, 2015, respectively, based on a discount rate of 10.0%.

	As of
	March 31, 2016		December 31, 2015
Due from affiliates:
Loans	$	28,184	$	29,718
Amounts due from non-consolidated funds	116,704		777
Management fees and incentive income due from non-consolidated funds	62,277		—
Payments made on behalf of non-consolidated entities	3,493		3,788
Non-interest bearing advances made to certain non-controlling interest holders and employees	1,182		1,616
Total due from affiliates	$	211,840	$	35,899
Due to affiliates:
Due to OCGH unitholders in connection with the tax receivable agreement (please see note 14)	$	356,851	$	356,851
Amounts due to senior executives, certain non-controlling interest holders and employees	609		—
Total due to affiliates	$	357,460	$	356,851

Loans

Loans primarily consist of interest-bearing advances made to certain non-controlling interest holders, primarily the Company’s employees, to meet tax obligations related to vesting of equity awards. The notes, which are generally recourse to the borrower or secured by vested equity and other collateral, typically bear interest at the Company’s cost of debt and generated interest income of $204 and $370 for the three months ended March 31, 2016 and 2015, respectively.

42

Oaktree Capital Group, LLC

Notes to Condensed Consolidated Financial Statements (Unaudited) — (Continued)

March 31, 2016

($ in thousands, except where noted)

Due From Oaktree Funds and Portfolio Companies

In the normal course of business, the Company advances certain expenses on behalf of Oaktree funds. Amounts advanced on behalf of consolidated funds are eliminated in consolidation. Certain expenses initially paid by the Company, primarily employee travel and other costs associated with particular portfolio company holdings, are reimbursed by the portfolio companies.

In January 2016, the Company extended a short-term loan to one of the investment funds that it manages. As of March 31, 2016, the outstanding principal balance was $83.5 million, which was repaid as of May 3, 2016.

Revenues Earned From Oaktree Funds

Management fee and incentive income earned from non-consolidated Oaktree funds totaled $227.0 million and $19.2 million for the three months ended March 31, 2016 and 2015, respectively.

Other Investment Transactions

The Company’s senior executives, directors and senior professionals are permitted to invest their own capital (or the capital of family trusts or other estate planning vehicles they control) in Oaktree funds, for which they pay the particular fund’s full management fee but not its incentive allocation. To facilitate the funding of capital calls by funds in which employees are invested, the Company periodically advances on a short-term basis the capital calls on certain employees’ behalf. These advances are generally reimbursed toward the end of the calendar quarter in which the capital calls occurred. Amounts temporarily advanced by the Company are included in non-interest bearing advances made to certain non-controlling interest holders and employees.

Aircraft Services

In March 2015, the Company exercised a purchase option on an airplane lease for $12.5 million. Howard Marks, the Company’s co-chairman, may use this aircraft for personal travel and, pursuant to a policy adopted by the Company relating to such personal use, the Company is reimbursed by Mr. Marks for the costs of using the aircraft for personal travel.  Additionally, the Company occasionally makes use of an airplane owned by one of its senior executives for business purposes at a price to the Company that is based on market rates.

Special Allocations

Certain senior executives receive special allocations based on a percentage of profits of the Oaktree Operating Group. These special allocations, which are recorded as compensation expense, are made on a current basis for so long as they remain senior executives of the Company, with limited exceptions.

17. SEGMENT REPORTING

The Company’s business is comprised of one segment, the investment management segment. As a global investment manager, the Company provides investment management services through funds and separate accounts. Management makes operating decisions and assesses business performance based on financial and operating metrics and data that are presented without the consolidation of any funds.

The Company conducts its investment management business primarily in the United States, where substantially all of its revenues are generated.

Adjusted Net Income

The Company’s chief operating decision maker uses adjusted net income (“ANI”) as a tool to help evaluate the financial performance of, and make resource allocations and other operating decisions for, the investment management segment. The components of revenues and expenses used in the determination of ANI do not give effect to the consolidation of the funds that the Company manages. 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

43

Oaktree Capital Group, LLC

Notes to Condensed Consolidated Financial Statements (Unaudited) — (Continued)

March 31, 2016

($ in thousands, except where noted)

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 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. Beginning with 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 adjusted net income 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.

ANI ⁽¹⁾ was as follows:

	Three Months Ended March 31,
	2016			2015
Revenues:
Management fees	$	201,270		$	190,095
Incentive income	96,588			152,879
Investment income	15,077			53,458
Total revenues	312,935			396,432
Expenses:
Compensation and benefits	(104,270		)	(108,881		)
Equity-based compensation	(10,703		)	(7,023		)
Incentive income compensation	(49,749		)	(90,102		)
General and administrative	(31,481		)	(29,567		)
Depreciation and amortization	(3,160		)	(1,891		)
Total expenses	(199,363		)	(237,464		)
Adjusted net income before interest and other income (expense)	113,572			158,968
Interest expense, net of interest income(2)	(8,682		)	(8,933		)
Other income (expense), net	135			(9		)
Adjusted net income	$	105,025		$	150,026

(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) unrealized gains and losses resulting from foreign-currency hedging activities, which under GAAP are recognized as general and administrative expense in the current period, whereas for adjusted net income are deferred until realized at which time they are included in the same revenue or expense line item as the underlying

44

Oaktree Capital Group, LLC

Notes to Condensed Consolidated Financial Statements (Unaudited) — (Continued)

March 31, 2016

($ in thousands, except where noted)

exposure that was hedged. 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 $1.0 million for the first quarter of 2015.

(2) Interest income was $1.3 million and $1.0 million for the three months ended March 31, 2016 and 2015, respectively.

A reconciliation of net income attributable to Oaktree Capital Group, LLC to adjusted net income of the investment management segment is presented below.

	Three Months Ended March 31,
	2016			2015
Net income attributable to Oaktree Capital Group, LLC	$	28,078		$	38,253
Incentive income (1)	39,942			17,378
Incentive income compensation (1)	(39,942		)	(23,210		)
Investment income (2)	(10,429		)	—
Equity-based compensation (3)	3,192			4,683
Placement costs (4)	6,704			—
Foreign-currency hedging (5)	5,866			(5,312		)
Acquisition-related items (6)	391			1,807
Income taxes (7)	12,680			7,875
Non-Operating Group expenses (8)	264			334
Non-controlling interests (8)	58,279			108,218
Adjusted net income	$	105,025		$	150,026

(1) This adjustment adds back the effect of timing differences associated with the recognition of incentive income and incentive income compensation expense between adjusted net income and net income attributable to OCG.

(2) This adjustment adds back the effect of differences in the recognition of investment income related to corporate investments in CLOs which under GAAP are marked-to-market but for segment reporting are accounted for at amortized cost, subject to impairment between adjusted net income and net income attributable to OCG.

(3) This adjustment adds back the effect of (a) equity-based compensation expense related to unit grants made before the Company’s initial public offering, which is excluded from adjusted net income because it is a non-cash charge that does not affect the Company’s financial position, and (b) differences arising from EVUs that are classified as liability awards under GAAP but as equity awards for segment reporting.

(4) This adjustment adds back the effect of timing differences with respect to the recognition of third-party placement costs associated with closed-end funds between adjusted net income and net income attributable to OCG.

(5) This adjustment adds back the effect of timing differences associated with the recognition of unrealized gains and losses related to foreign-currency hedging between adjusted net income and net income attributable to OCG.

(6) This adjustment adds back the effect of acquisition-related items associated with the amortization of intangibles and changes in the contingent consideration liability.

(7) Because adjusted net income is a pre-tax measure, this adjustment adds back the effect of income tax expense.

(8) Because adjusted net income is 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.

45

Oaktree Capital Group, LLC

Notes to Condensed Consolidated Financial Statements (Unaudited) — (Continued)

March 31, 2016

($ in thousands, except where noted)

The following tables reconcile the Company’s segment information to the condensed consolidated financial statements:

	As of or for the Three Months Ended March 31, 2016
	Segment			Adjustments			Consolidated
Management fees (1)	$	201,270		$	(2,717	)	$	198,553
Incentive income (1)	96,588			(40,651		)	55,937
Investment income (1)	15,077			14,370			29,447
Total expenses (2)	(199,363		)	14,179			(185,184		)
Interest expense, net (3)	(8,682		)	(19,023		)	(27,705		)
Other income (expense), net (4)	135			5,666			5,801
Other income of consolidated funds (5)	—			18,999			18,999
Income taxes	—			(12,680		)	(12,680		)
Net loss attributable to non-controlling interests in consolidated funds	—			4,944			4,944
Net income attributable to non-controlling interests in consolidated subsidiaries	—			(60,034		)	(60,034		)
Adjusted net income/net income attributable to Oaktree Capital Group, LLC	$	105,025		$	(76,947	)	$	28,078
Corporate investments (6)	$	1,352,362		$	(306,785	)	$	1,045,577
Total assets (7)	$	3,136,660		$	3,222,154		$	6,358,814

(1) The adjustment represents (a) the elimination of amounts earned from the consolidated funds, (b) for management fees, the reclassification of $662 of net gains related to foreign-currency hedging activities to general and administrative expense, and (c) for investment income, differences of $10,429 related to corporate investments in CLOs which under GAAP are marked-to-market but for segment reporting are accounted for at amortized cost, subject to impairment.

(2) The expense adjustment consists of (a) equity-based compensation expense of $3,245 related to unit grants made before the Company’s initial public offering, (b) consolidated fund expenses of $4,311, (c) expenses incurred by the Intermediate Holding Companies of $295, (d) the effect of timing differences in the recognition of incentive income compensation expense between adjusted net income and net income attributable to OCG of $39,942, (e) acquisition-related items of $391, (f) adjustments of $5,801 related to amounts received for contractually reimbursable costs that are classified as expenses for segment reporting and as other income under GAAP, (g) differences of $53 arising from EVUs that are classified as liability awards under GAAP but as equity awards for segment reporting, (h) $6,704 related to third-party placement costs, and (i) $5,069 of net losses related to foreign-currency hedging activities.

(3) The interest expense adjustment represents the inclusion of interest expense attributable to third-party investors in 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 $5,801 that are classified as expenses for segment reporting and as other income under GAAP, and (b) the reclassification of $135 in net gains related to foreign-currency hedging activities to general and administrative expense.

(5) The adjustment to other income of consolidated funds primarily represents the inclusion of interest, dividend and other investment income attributable to third-party investors in CLOs and non-controlling interests of the consolidated funds.

(6) The adjustment to corporate investments is to remove from segment assets the Company’s investments in the consolidated funds, including investments in its CLOs, that are treated as equity- or cost-method investments for segment reporting. The $1.4 billion of corporate investments included $1.2 billion of equity-method investments.

(7) The total assets adjustment represents the inclusion of investments and other assets of the consolidated funds, net of segment assets eliminated in consolidation, which are primarily corporate investments in funds and incentive income receivable.

46

Oaktree Capital Group, LLC

Notes to Condensed Consolidated Financial Statements (Unaudited) — (Continued)

March 31, 2016

($ in thousands, except where noted)

	As of or for the Three Months Ended March 31, 2015
	Segment			Adjustments			Consolidated
Management fees (1)	$	190,095		$	(139,276	)	$	50,819
Incentive income (1)	152,879			(152,879		)	—
Investment income (1)	53,458			(40,776		)	12,682
Total expenses (2)	(237,464		)	1,490			(235,974		)
Interest expense, net (3)	(8,933		)	(37,636		)	(46,569		)
Other income (expense), net (4)	(9		)	4,703			4,694
Other income of consolidated funds (5)	—			1,505,242			1,505,242
Income taxes	—			(7,875		)	(7,875		)
Net income attributable to non-controlling interests in consolidated funds	—			(1,136,665		)	(1,136,665		)
Net income attributable to non-controlling interests in consolidated subsidiaries	—			(108,101		)	(108,101		)
Adjusted net income/net income attributable to Oaktree Capital Group, LLC	$	150,026		$	(111,773	)	$	38,253
Corporate investments (6)	$	1,503,621		$	(1,335,622	)	$	167,999
Total assets (7)	$	3,248,850		$	51,784,503		$	55,033,353

(1) The adjustment represents (a) the elimination of amounts attributable to the consolidated funds and (b) for management fees, the reclassification of $2,045 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 $4,595 related to unit grants made before the Company’s initial public offering, (b) consolidated fund expenses of $17,511, (c) expenses incurred by the Intermediate Holding Companies of $334, (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 $23,210, (e) acquisition-related items of $1,807, (f) adjustments of $5,590 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 $88 arising from EVUs that are classified as liability awards under GAAP but as equity awards for segment reporting, (h) $8,244 of net gains related to foreign-currency hedging activities and (i) other expenses of $39.

(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 $5,590 that are classified as expenses for segment reporting and as other income under GAAP, and (b) the reclassification of $887 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 attributable to non-controlling interests of the consolidated funds.

(6) The adjustment to corporate investments is to remove from segment assets the consolidated funds, including investments in its CLOs, that are treated as equity- or cost-method investments for segment reporting. The $1.5 billion of corporate investments included $1.3 billion of equity-method investments.

(7) The total assets adjustment represents the inclusion of investments and other assets of the consolidated funds, net of segment assets eliminated in consolidation, which are primarily corporate investments in funds and incentive income receivable.

47

Oaktree Capital Group, LLC

Notes to Condensed Consolidated Financial Statements (Unaudited) — (Continued)

March 31, 2016

($ in thousands, except where noted)

18. SUBSEQUENT EVENTS

On April 13, 2016, the Company received commitments from certain accredited investors (collectively, the “Investors”) to purchase $100 million of 3.69% senior notes (the “Notes”) to be issued by its indirect subsidiary, Oaktree Capital Management, L.P. (the “Issuer”), and guaranteed by its indirect subsidiaries, Oaktree Capital I, L.P., Oaktree Capital II, L.P. and Oaktree AIF Investments, L.P. (the “Guarantors”). These commitments are subject to the execution of a purchase agreement and standard contingencies prior to closing. The Notes will be senior unsecured obligations of the Issuer, jointly and severally guaranteed by the Guarantors, with a maturity of 15 years. The Company intends to use the entire proceeds from the sale of the Notes to pay down a portion of its $250 million term loan due March 31, 2021. The Notes offering is expected to close on July 12, 2016.

On April 28, 2016, the Company declared a distribution of $0.55 per Class A unit. This distribution, which is related to the first quarter of 2016, will be paid on May 13, 2016 to Class A unitholders of record as of the close of business on May 9, 2016.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis should be read in conjunction with the unaudited condensed consolidated financial statements of Oaktree Capital Group, LLC and the related notes included within this quarterly report. This discussion contains forward-looking statements that are subject to risks and uncertainties and assumptions relating to our operations, financial results, financial condition, business prospects, growth strategy and liquidity. The factors listed under “Risk Factors” and “Forward-Looking Statements” in this quarterly report and under “Risk Factors” in our annual report provide examples of risks, uncertainties and events that may cause our actual results to differ materially from the expectations described in any forward-looking statements.

Business Overview

Oaktree is a leader among global investment managers specializing in alternative investments, with $97 billion in AUM as of March 31, 2016. Our mission is to deliver superior investment results with risk under control and to conduct our business with the highest integrity. We emphasize 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. Over three decades, we have developed a large and growing client base through our ability to identify and capitalize on opportunities for attractive investment returns in less efficient markets.

We manage assets on behalf of many of the most significant institutional investors in the world. Our clientele includes 74 of the 100 largest U.S. pension plans, 39 states in the United States, over 400 corporations and/or their pension funds, over 350 university, charitable and other endowments and foundations, 16 sovereign wealth funds and over 300 other non-U.S. institutional investors. As measured by AUM, over 40% of our clients are invested in two or three different investment strategies, and approximately 35% are invested in four or more. Headquartered in Los Angeles, we serve these clients with over 900 employees and offices in 18 cities worldwide.

Our business is comprised of one segment, our investment management segment, which consists of the investment management services that we provide to our clients. Our segment revenue flows from the management fees and incentive income generated by the funds that we manage, as well as the investment income earned from the investments we make in our funds, third-party funds and other companies. The management fees that we receive are based on the contractual terms of the relevant fund and are typically calculated as a fixed percentage of the capital commitments (as adjusted for distributions during a fund’s liquidation period), drawn capital or NAV of the particular fund. Incentive income represents our share (typically 20%) of the investors’ profits in most of the closed-end and certain evergreen funds. Investment income refers to the investment return on a mark-to-market basis and our equity participation on the amounts that we invest in Oaktree and third-party funds, as well as in CLOs and other companies.

Business Environment and Developments

As a global investment manager, we are affected by myriad factors, including the condition of the global economy and financial markets; the relative attractiveness of our investment strategies and investors’ demand for them; and regulatory or other governmental policies or actions. Global economic conditions can significantly affect the values of our funds’ investments and our ability to make new investments or sell existing investments for our funds. Historically, however, the diversified nature of both our array of investment strategies and our revenue mix has generally allowed us to benefit from both strong and weak economic environments. Weak economies and the declining financial markets that typically accompany them tend to dampen our revenues from asset-based management fees, investment realizations or price appreciation, but their prospect can present us with opportunities to raise relatively larger amounts of capital for certain strategies, especially Distressed Debt. Additionally, weak financial markets may also present us with more opportunities to make investments for our funds at reduced prices. Conversely, strong financial markets generally increase the value of our funds’ investments, which positions us for growth in management fees that are based on asset value, and typically create favorable exit opportunities that enhance the prospect for incentive income and fund-related investment income proceeds.

Global financial markets generally were mixed in the first quarter of 2016. The S&P 500 Index had a positive return of 1.3%, the Russell 2000 Index lost 1.5% and non-U.S. equities, as measured by the MSCI ACWI ex-USA Index, ended the quarter down 0.3%. Emerging market equities rose 5.8%, as measured by the MSCI Emerging Markets Index. The 10-year U.S. Treasury yield fell to 1.8% from 2.3% at the beginning of the year. High yield bonds generated a total return in the quarter of 3.2%, as measured by the Citigroup U.S. High Yield Cash-Pay Capped Index. The long slide in oil and certain other energy and commodity prices ended, at least temporarily, though at price levels still disadvantageous for many companies in those industry sectors.

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Against this backdrop, our closed-end fund strategies delivered an overall blended gross return for the quarter of 2.0%. Our investment income was impacted by an impairment charge stemming from energy-related holdings in our CLOs. Company-wide total gross capital raised was $1.7 billion for the first quarter of 2016 and $13.4 billion for the last twelve months, and uncalled capital commitments as of March 31, 2016 were a near-record high of $21.4 billion. As of March 31, 2016, AUM was $96.9 billion and management fee-generating AUM reached $79.9 billion. Closed-end funds we are currently marketing include Oaktree Real Estate Opportunities Fund VII (“ROF VII”), Oaktree Opportunities Fund Xb (“Opps Xb”), Oaktree Infrastructure Fund, Oaktree European Capital Solutions Fund, Oaktree European Principal Fund IV and Oaktree Real Estate Debt Fund II.

Understanding Our Results—Consolidation of Oaktree Funds

In February 2015, the Financial Accounting Standards Board (“FASB”) revised its consolidation guidance regarding the analysis that a reporting entity must perform to determine whether it should consolidate a legal entity. The revisions provided guidance for, among various items, evaluating limited partnerships and similar entities for consolidation, how a decision maker’s fees affect the consolidation analysis and how interests held by related parties affect the consolidation analysis. We adopted this guidance as of January 1, 2016 under the modified retrospective approach, which did not require prior periods to be recast. Following our reevaluation of our investment vehicles and other legal entities, as of January 1, 2016, we deconsolidated substantially all of our previously consolidated closed-end and commingled open-end and evergreen funds. The change stemmed from the fact that under the new consolidation guidance, these funds are considered to be variable interest entities (“VIEs”), instead of their prior status as voting interest entities. We are not the primary beneficiary of these VIEs because our fee arrangements are deemed to not be variable interests and we do not hold any other interests in those funds that are considered to be significant. The effect of this deconsolidation was a reduction in total consolidated assets, liabilities, non-controlling redeemable interests in consolidated funds and unitholders' capital as of January 1, 2016 of $45.7 billion, $7.6 billion, $38.0 billion and $90.6 million, respectively. There was no impact on retained earnings or net income attributable to us. Please see note 2 to our condensed consolidated financial statements for more information.

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, we reflect the assets, liabilities, revenues, expenses and cash flows of the consolidated funds on a gross basis, and the majority of the economic interests in those consolidated funds, which are held by third-party investors, are reflected as debt obligations of CLOs or non-controlling interests in consolidated funds in the condensed consolidated financial statements. 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 us.

Management makes operating decisions and assesses business performance based on financial and operating metrics and data that are presented without the consolidation of any funds. Note 17 to our condensed consolidated financial statements included elsewhere in this quarterly report includes information regarding our segment on a stand-alone basis. For a more detailed discussion of the factors that affect the results of operations of our segment, please see “—Segment Analysis” below.

Revenues

Our business generates three types of segment revenue: management fees, incentive income and investment income. Management fees are billed monthly or quarterly based on annual rates and are typically earned for each of the funds that we manage. The contractual terms of management fees generally vary by fund structure. Management fees also may include performance-based fees earned from certain open-end and evergreen fund accounts. We also have the opportunity to earn incentive income from most of our closed-end funds and certain evergreen funds. Our closed-end funds generally provide that we receive incentive income only after our investors receive the return of all of their contributed capital plus an annual preferred return, typically 8%. Once this occurs, we generally receive as incentive income 80% of all distributions otherwise attributable to our investors, and those investors receive the remaining 20% until we have received, as incentive income, 20% of all such distributions in excess of the contributed capital from the inception of the fund. Thereafter, provided the preferred return continues to be met, all such future distributions attributable to our investors are distributed 80% to those investors and 20% to us as incentive income. Our third segment revenue source, investment income, represents our pro-rata share of income or loss from our investments, generally in our capacity as general partner in our funds and as an investor in our CLOs and third-party managed funds and companies.

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Our consolidated revenues reflect the elimination of all management fees, incentive income and investment income earned by us from our consolidated funds. Investment income is presented within the other income (loss) section of our condensed consolidated statements of operations. Please see “Business—Structure and Operation of Our Business—Structure of Funds” in our annual report for a detailed discussion of the structure of our funds.

Expenses

Compensation and Benefits

Compensation and benefits expense reflects all compensation-related items not directly related to incentive income, investment income or the vesting of OCGH and Class A units, and includes salaries, bonuses, compensation based on management fees or a definition of profits, employee benefits, and phantom equity awards. Phantom equity awards represent liability-classified awards subject to vesting and remeasurement at the end of each reporting period. Phantom equity award expense reflects the vesting of those liability-classified awards, the equity distribution declared in the period and changes in the Class A unit trading price.

Equity-based Compensation

Equity-based compensation expense reflects the non-cash charge associated with grants of Class A units, OCGH units and OCGH equity value units (“EVUs”). Our GAAP-basis statements of operations include equity-based compensation expense for units granted both before and after our initial public offering. Our segment measure of adjusted net income differs from GAAP because it (a) excludes equity-based compensation expense for units granted before our initial public offering and (b) reflects EVUs that are classified as liability awards in our GAAP-basis statements of operations as equity-classified awards (please see “—Segment and Operating Metrics—Adjusted Net Income” below). 

As of March 31, 2016, there was $190.8 million of unrecognized compensation expense for GAAP purposes, which is expected to be recognized as expense in our GAAP consolidated financial statements over a weighted average vesting period of 4.2 years. As of March 31, 2016, there was $157.2 million of unrecognized compensation expense for segment reporting purposes, with the difference versus the GAAP-basis figure primarily representing unit grants made before our initial public offering.  The $157.2 million is expected to be recognized as expense in adjusted net income over a weighted average vesting period of approximately 4.1 years, as shown in the table below. These amounts are subject to change as a result of future unit grants and possible modifications to award terms or changes in estimated forfeiture rates.

The following table summarizes the estimated amount of equity-based compensation expense to be included in adjusted net income:

Equity-based Compensation Expense Included in ANI	Last Nine Months of 2016		2017		2018		2019		2020		Thereafter		Total
	(in millions)
Estimated expense from equity grants awarded through March 2016	$	37.9	$	44.1	$	31.9	$	22.9	$	6.6	$	13.8	$	157.2

Incentive Income Compensation

Incentive income compensation expense includes (a) primarily, compensation directly related to segment incentive income, which generally consists of percentage interests (sometimes referred to as “points”) that we grant to our investment professionals associated with the particular fund that generated the segment incentive income, and (b) secondarily, compensation directly related to investment income. There is no fixed percentage for the incentive income-related portion of this compensation, either by fund or strategy. In general, within a particular strategy more recent funds have a higher percentage of aggregate incentive income compensation expense than do older funds. The percentage that consolidated incentive income compensation expense represents of the particular period’s consolidated incentive income may not be meaningful because (a) the criteria for recognizing income and expense differ under GAAP and thus may result in timing differences, and (b) for periods prior to the adoption of the deconsolidation guidance in the first quarter of 2016, most segment incentive income was eliminated in consolidation, whereas no incentive income compensation expense is eliminated in consolidation. For the most meaningful percentage relationship, please see “—Segment Analysis” below.

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General and Administrative

General and administrative expense includes costs related to occupancy, outside auditors, tax professionals, legal advisers, research, consultants, travel and entertainment, communications and information services, foreign-exchange activity, insurance, changes in the contingent consideration liability, and other general items related directly to the Company’s operations. These expenses are net of amounts borne by fund investors and are not offset by credits attributable to fund investors’ non-controlling interests in consolidated funds.

Depreciation and Amortization

Depreciation and amortization expense includes costs associated with the purchase of furniture and equipment, capitalized software, office leasehold improvements, a corporate-owned airplane and acquired intangibles. Furniture and equipment and capitalized software costs are depreciated using the straight-line method over the estimated useful life of the asset, which is generally three to five years. Leasehold improvements are amortized using the straight-line method over the shorter of the respective estimated useful life or the lease term. The company-owned airplane is depreciated using the straight-line method over its estimated useful life. Acquired intangibles primarily relate to contractual rights and are amortized over their estimated useful lives, which range from three to seven years.

Consolidated Fund Expenses

Consolidated fund expenses consist primarily of costs, expenses and fees that are incurred by, or arise out of the operation and activities of or otherwise are related to, our consolidated funds, including, without limitation, travel expenses, professional fees, research and software expenses, insurance, and other costs associated with administering and supporting those funds. Inasmuch as most of these fund expenses are borne by third-party investors, they reduce the investors’ interests in the consolidated funds and have no impact on net income or loss attributable to the Company.

Other Income (Loss)

Interest Expense

Interest expense primarily reflects the interest expense of the consolidated funds, as well as the interest expense of Oaktree and its operating subsidiaries.

Interest and Dividend Income

Interest and dividend income consists of interest and dividend income earned on the investments held by our consolidated funds, interest income earned by Oaktree and its operating subsidiaries, and for periods prior to the adoption of the deconsolidation guidance in the first quarter of 2016, the consolidated funds’ net operating income from real estate-related activities.

Net Realized Gain on Consolidated Funds’ Investments

Net realized gain on consolidated funds’ investments consists of realized gains and losses arising from dispositions of investments held by our consolidated funds.

Net Change in Unrealized Appreciation (Depreciation) on Consolidated Funds’ Investments

Net change in unrealized appreciation (depreciation) on consolidated funds’ investments reflects both unrealized gains and losses on investments held by our consolidated funds and the reversal upon disposition of investments of unrealized gains and losses previously recognized for those investments.

Investment Income

Investment income represents our pro-rata share of income or loss from our investments, generally in our capacity as general partner in our funds and as an investor in our CLOs and third-party managed funds and companies. Investment income, as reflected in our condensed consolidated statements of operations, excludes investment income earned by us from our consolidated funds.

Other Income (Expense), Net

Other income (expense), net represents non-operating income or expense, including income related to amounts received for contractually reimbursable costs associated with certain arrangements made in connection with the Highstar acquisition.

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Income Taxes

Oaktree is a publicly traded partnership. Because it satisfies the qualifying income test, it is not required to be treated as a corporation for U.S. federal and state income tax purposes; rather, it is taxed as a partnership. Oaktree Holdings, Inc. and Oaktree AIF Holdings, Inc., which are two of our five Intermediate Holding Companies and wholly-owned subsidiaries, are subject to U.S. federal and state income taxes. The remainder of Oaktree’s income is generally not subject to corporate-level taxation.

Oaktree’s effective tax rate is dependent on many factors, including the mix of revenues and expenses between our two corporate Intermediate Holding Companies that are subject to income tax and our three other Intermediate Holding Companies that are not; consequently, the effective tax rate is subject to significant variation from period to period. Oaktree’s effective tax rate used for interim periods is based on the estimated full year income tax rate. Certain items that cannot be reliably estimated, such as incentive income, are excluded from the estimated annual effective tax rate. The tax expense or benefit stemming from these items is recognized in the same period as the underlying income or expense.

Oaktree’s non-U.S. income or loss before taxes is generally not significant in relation to total pre-tax income or loss, and is generally more predictable because, unlike U.S. pre-tax income, it is not significantly impacted by unrealized gains or losses. Non-U.S. tax expense typically represents a disproportionately large percentage of total income tax expense because nearly all of our non-U.S. income or loss is subject to corporate-level income tax, whereas a substantial portion of our U.S.-based income or loss is not subject to corporate-level taxes. In addition, changes in the proportion of non-U.S. pre-tax income to total pre-tax income impact Oaktree’s effective tax rate to the extent non-U.S. rates differ from the combined U.S. federal and state tax rate.

Income taxes are accounted for using the liability method of accounting. Under this method, deferred tax assets and liabilities are recognized for the expected future tax consequences of differences between the carrying amounts of assets and liabilities and their respective tax bases using currently enacted tax rates. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period when the change is enacted. Deferred tax assets would be reduced by a valuation allowance if it becomes more likely than not that some portion or all of the deferred tax assets will not be realized.

Net Income Attributable to Non-controlling Interests

Net income attributable to non-controlling interests represents the ownership interests that third parties hold in entities that are consolidated in our financial statements. These interests fall into two categories:

• Net Income Attributable to Non-controlling Interests in Consolidated Funds. This represents the economic interests of the unaffiliated investors in the consolidated funds, as well as the equity interests held by third-party investors in CLOs that had not yet priced as of the respective period end. Those interests are primarily driven by the investment performance of the consolidated funds. In comparison to net income, this measure excludes segment results and other items solely attributable to the Company; and

• Net Income Attributable to Non-controlling Interests in Consolidated Subsidiaries. This primarily represents the economic interest in the Oaktree Operating Group owned by OCGH (“OCGH non-controlling interest”), as well as the economic interest in certain consolidated subsidiaries held by third parties. The OCGH non-controlling interest is determined at the Oaktree Operating Group level based on the weighted average proportionate share of Oaktree Operating Group units held by the OCGH unitholders. Inasmuch as the number of outstanding Oaktree Operating Group units corresponds with the total number of outstanding OCGH units and Class A units, changes in the economic interest held by the OCGH unitholders are driven by our additional issuances of Class A and OCGH units, as well as repurchases and forfeitures of, and exchanges between, Class A and OCGH units. Certain of our expenses, such as income tax and related administrative expenses of Oaktree Capital Group, LLC and its Intermediate Holding Companies, are solely attributable to the Class A unitholders. Please see note 11 to our condensed consolidated financial statements included elsewhere in this quarterly report for additional information on the economic interest in the Oaktree Operating Group owned by OCGH.

Segment and Operating Metrics

Our business is comprised of one segment, our investment management segment, which consists of the investment management services that we provide to our clients. Management makes operating decisions and assesses the performance of our business based on financial and operating metrics and data that are presented

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without the consolidation of any funds. For a detailed reconciliation of the segment results of operations to our condensed consolidated statements of operations, please see “—Segment Analysis” below and the “Segment Reporting” note to our condensed consolidated financial statements included elsewhere in this quarterly report. The data most important to our chief operating decision maker in assessing our performance are adjusted net income, adjusted net income-OCG, distributable earnings, distributable earnings-OCG, fee-related earnings and fee-related earnings-OCG.

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 assets under management, management fee-generating assets under management, incentive-creating assets under management, accrued incentives (fund level), incentives created (fund level) and uncalled capital commitments.

Adjusted Net Income

Our chief operating decision maker uses adjusted net income (“ANI”) as a tool to help evaluate the financial performance of, and make resource allocations and other operating decisions for, our investment management segment. The components of 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 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 adjusted net income 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.

Among other factors, our accounting policy for recognizing incentive income and the inclusion of non-cash equity-based compensation expense related to unit grants made after our initial public offering likely make our calculation of ANI not directly comparable to economic net income (“ENI”) or other similarly named measures utilized by certain other asset managers.

We calculate adjusted net income-OCG, or adjusted net income per Class A unit, a non-GAAP measure, 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 Capital LP and its affiliates (collectively, “DoubleLine”) generally have been subject to corporate-level taxation, and most of our incentive income and other investment

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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.

Distributable Earnings

Our chief operating decision maker uses distributable earnings as a tool to help evaluate the financial performance of, and make resource allocations and other operating decisions for, our segment. 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 differs from ANI in that it excludes segment investment income or loss and includes 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 related to unit grants made after our initial public offering.

Segment investment income or loss, which for equity-method investments represents our pro-rata share of income or loss, generally in our capacity as general partner in our funds and as an investor in our CLOs and third-party managed funds and companies, is largely non-cash in nature. By excluding segment investment income or loss, which is not directly available to fund our operations or make equity distributions, and including the portion of distributions from Oaktree and non-Oaktree funds to us that represents the income or loss component of the distributions and not a return of our capital contributions, as well as distributions from our investments in companies, distributable earnings aids us in measuring amounts that are actually available to meet our obligations under the tax receivable agreement and our liabilities for expenses incurred at OCG and the Intermediate Holding Companies, as well as for distributions to Class A and OCGH unitholders.

Distributable earnings-OCG, or distributable earnings per Class A unit, is a non-GAAP measure 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 the 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.

Fee-related Earnings

Fee-related earnings is a non-GAAP measure that we use to monitor the baseline earnings of our business. Fee-related earnings 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. Fee-related earnings 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, and because it excludes all non-management fee revenue sources (such as earnings from our minority equity interest in DoubleLine). Fee-related earnings 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 fee-related earnings attributable to their ownership. Fee-related earnings-OCG represents fee-related earnings 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 are calculated excluding any segment incentive income or investment income (loss).

Among other factors, the exclusion of non-cash equity-based compensation expense related to unit grants made after our initial public offering may make our calculations of fee-related earnings and fee-related earnings-OCG not directly comparable to similarly named measures of other asset managers.

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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. Our definition of AUM is not based on any definition contained in our operating agreement or the agreements governing the funds that we manage. Our calculation of AUM and the two AUM-related metrics below may not be directly comparable to the AUM metrics of other asset managers.

• 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 or drawn capital 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.

• 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.

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

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. The amount of incentives created may fluctuate substantially as a result of changes in the fair value of the underlying investments of the fund, as well as incentives created in excess of our typical 20% share due to catch-up allocations for applicable closed-end funds. Generally speaking, while in the catch-up layer, approximately 80% of any increase or decrease, respectively, in the fund’s NAV results in a commensurate amount of positive or negative incentives created (fund level).

The same performance and market risks inherent in incentives created (fund level) affect the ability to ultimately realize accrued incentives (fund level). One consequence of the accounting method we follow for incentives created (fund level) is that accrued incentives (fund level) is an off-balance sheet metric, rather than being an on-balance sheet receivable that could require reduction if fund performance suffers. We track accrued incentives (fund level) because it provides an indication of potential future value, though the timing and ultimate realization of that value are uncertain.

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 other factors. In addition to incentive income compensation expense, the magnitude of the annual cash bonus pool is indirectly affected by the level of incentive income, net of its associated incentive income compensation expense. The total charge related to the annual cash bonus pool, including the portion attributable to our incentive income, is reflected in the financial statement line item “compensation and benefits.”

Incentives created (fund level) often reflects investments measured at fair value and therefore is subject to risk of substantial fluctuation by the time the underlying investments are liquidated. We earn the incentive income, if any, that the fund is then obligated to pay us with respect to our incentive interest (generally 20%) in the profits of our unaffiliated investors, subject to an annual preferred return of typically 8%. Although GAAP currently allows the

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equivalent of incentives created (fund level) to be recognized as revenue by us under Method 2, we follow the Method 1 approach offered by GAAP. Our use of Method 1 reduces by a substantial degree the possibility that revenue recognized by us would be reversed in a subsequent period. For purposes of adjusted net income and distributable earnings, we recognize incentive income 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. We track incentives created (fund level) because it provides an indication of the value for us currently being created by our investment activities and facilitates comparability with those companies in our industry that utilize the alternative accrual-based Method 2 for recognizing incentive income in their financial statements.

Uncalled Capital Commitments

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 closed-end 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.

Consolidated Results of Operations

The following table sets forth our unaudited condensed consolidated statements of operations:

Condensed Consolidated Statements of Operations	Three Months Ended March 31,
	2016			2015
	(in thousands)
Revenues:
Management fees	$	198,553		$	50,819
Incentive income	55,937			—
Total revenues	254,490			50,819
Expenses:
Compensation and benefits	(108,405		)	(110,143		)
Equity-based compensation	(13,896		)	(11,706		)
Incentive income compensation	(9,807		)	(66,892		)
Total compensation and benefits expense	(132,108		)	(188,741		)
General and administrative	(47,831		)	(6,580		)
Depreciation and amortization	(4,161		)	(2,892		)
Consolidated fund expenses	(1,084		)	(37,761		)
Total expenses	(185,184		)	(235,974		)
Other income (loss):
Interest expense	(27,705		)	(46,569		)
Interest and dividend income	36,270			522,929
Net realized gain on consolidated funds’ investments	3,401			474,830
Net change in unrealized appreciation (depreciation) on consolidated funds’ investments	(20,672		)	507,483
Investment income	29,447			12,682
Other income (expense), net	5,801			4,694
Total other income	26,542			1,476,049
Income before income taxes	95,848			1,290,894
Income taxes	(12,680		)	(7,875		)
Net income	83,168			1,283,019
Less:
Net (income) loss attributable to non-controlling interests in consolidated funds	4,944			(1,136,665		)
Net income attributable to non-controlling interests in consolidated subsidiaries	(60,034		)	(108,101		)
Net income attributable to Oaktree Capital Group, LLC	$	28,078		$	38,253

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Three Months Ended March 31, 2016 Compared to the Three Months Ended March 31, 2015

Revenues

Management Fees

Management fees increased $147.8 million, or 290.9%, to $198.6 million for the three months ended March 31, 2016, from $50.8 million for the three months ended March 31, 2015. The increase reflected the deconsolidation of substantially all of Oaktree’s investment funds effective the first quarter of 2016, inasmuch as management fees earned from the deconsolidated funds are no longer eliminated in consolidation.

Incentive Income

Incentive income increased to $55.9 million for the three months ended March 31, 2016, from zero for the three months ended March 31, 2015. The increase reflected the deconsolidation of substantially all of Oaktree’s investment funds effective the first quarter of 2016, inasmuch as incentive income earned from the deconsolidated funds is no longer eliminated in consolidation.

Expenses

Compensation and Benefits

Compensation and benefits decreased $1.7 million, or 1.5%, to $108.4 million for the three months ended March 31, 2016, from $110.1 million for the three months ended March 31, 2015, in part reflecting variations in annual bonus accruals.

Equity-based Compensation

Equity-based compensation expense increased $2.2 million, or 18.8%, to $13.9 million for the three months ended March 31, 2016, from $11.7 million for the three months ended March 31, 2015, primarily reflecting 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 decreased $57.1 million, or 85.4%, to $9.8 million for the three months ended March 31, 2016, from $66.9 million for the three months ended March 31, 2015. The percentage decrease was larger than the corresponding decline of 36.8% in segment incentive income, primarily due to timing differences associated with the recognition of segment incentive income and incentive income compensation expense, as well as catch-up tax distributions related to incentive interests previously awarded to certain investment professionals.

General and Administrative

General and administrative expense increased $41.2 million, or 624.2%, to $47.8 million for the three months ended March 31, 2016, from $6.6 million for the three months ended March 31, 2015. Excluding the impact of foreign currency-related items, which stemmed primarily from foreign-currency hedges used to economically hedge our non-U.S. dollar denominated revenues and expenses, general and administrative expense increased $7.5 million, or 23.9%, to $38.9 million from $31.4 million, primarily reflecting higher placement costs associated with closed-end funds.

Depreciation and Amortization

Depreciation and amortization expense increased $1.3 million, or 44.8%, to $4.2 million for the three months ended March 31, 2016, from $2.9 million for the three months ended March 31, 2015. The increase in part reflected amortization of leasehold improvements associated with office space expansion.

Consolidated Fund Expenses

Consolidated fund expenses decreased $36.7 million, or 97.1%, to $1.1 million for the three months ended March 31, 2016, from $37.8 million for the three months ended March 31, 2015. The decrease reflected the deconsolidation of substantially all of Oaktree’s investment funds effective the first quarter of 2016.

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Other Income (Loss)

Interest Expense

Interest expense decreased $18.9 million, or 40.6%, to $27.7 million for the three months ended March 31, 2016, from $46.6 million for the three months ended March 31, 2015. The decrease reflected the deconsolidation of substantially all of Oaktree’s investment funds effective the first quarter of 2016.

Interest and Dividend Income

Interest and dividend income decreased $486.6 million, or 93.1%, to $36.3 million for the three months ended March 31, 2016, from $522.9 million for the three months ended March 31, 2015. The decrease reflected the deconsolidation of substantially all of Oaktree’s investment funds effective the first quarter of 2016.

Net Realized Gain on Consolidated Funds’ Investments

Net realized gain on consolidated funds’ investments decreased $471.4 million, or 99.3%, to $3.4 million for the three months ended March 31, 2016, from $474.8 million for the three months ended March 31, 2015. The decrease primarily reflected the deconsolidation of substantially all of Oaktree’s investment funds effective the first quarter of 2016.

Net Change in Unrealized Appreciation (Depreciation) on Consolidated Funds’ Investments

The net change in unrealized appreciation (depreciation) on consolidated funds’ investments was a loss of $20.7 million for the three months ended March 31, 2016 and a gain of $507.5 million for the three months ended March 31, 2015. Excluding the $471.4 million decrease in net realized gain on consolidated funds’ investments, the net change in unrealized appreciation (depreciation) on consolidated funds’ investments was a net loss of $17.3 million for the three months ended March 31, 2016, as compared to a net gain of $982.3 million for the three months ended March 31, 2015. The decrease primarily reflected the deconsolidation of substantially all of Oaktree’s investment funds effective the first quarter of 2016.

Investment Income

Investment income increased $16.7 million, or 131.5%, to $29.4 million for the three months ended March 31, 2016, from $12.7 million for the three months ended March 31, 2015. The increase primarily reflected the deconsolidation of substantially all of Oaktree’s investment funds effective the first quarter of 2016, inasmuch as investment income earned from the deconsolidated funds is no longer eliminated in consolidation. Our one-fifth ownership stake in DoubleLine accounted for investment income of $15.1 million and $14.6 million in the current and prior-year periods, respectively, of which performance fees accounted for $0.6 million and $2.0 million, respectively.

Other Income (Expense), Net

Other income (expense), net increased $1.1 million, or 23.4%, to income of $5.8 million for the three months ended March 31, 2016, from income of $4.7 million for the three months ended March 31, 2015, reflecting a $0.9 million loss in the prior-year period associated with certain non-operating corporate activities.

Income Taxes

Income taxes increased $4.8 million, or 60.8%, to $12.7 million for the three months ended March 31, 2016, from $7.9 million for the three months ended March 31, 2015.  The increase was primarily attributable to a higher effective tax rate. The effective tax rates applicable to Class A unitholders for the three months ended March 31, 2016 and 2015 were 29% and 15%, respectively, resulting from estimated full-year effective rates of 26% and 19%, respectively.  The 29% effective tax rate applicable to Class A unitholders for the three months ended March 31, 2016 was based on an estimated full-year effective tax rate on income that can be reliably forecasted, combined with the tax expense in the current period on incentive income and any other income that cannot be reliably estimated. We would 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 may vary significantly within or between years.  Please see “—Understanding Our Results—Consolidation of Oaktree Funds.”

Net (Income) Loss Attributable to Non-controlling Interests in Consolidated Funds

Net (income) loss attributable to non-controlling interests in consolidated funds decreased $1,141.6 million, to a loss of $4.9 million for the three months ended March 31, 2016, as compared to income of $1,136.7 million for

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the three months ended March 31, 2015. The decrease primarily reflected the deconsolidation of substantially all of Oaktree’s investment funds effective the first quarter of 2016. These effects are described in more detail under “—Other Income (Loss)” above.

Net Income Attributable to Oaktree Capital Group, LLC

Net income attributable to Oaktree Capital Group, LLC decreased $10.2 million, or 26.6%, to $28.1 million for the three months ended March 31, 2016, from $38.3 million for the three months ended March 31, 2015. The decrease was primarily attributable to lower segment profits, partially offset by a larger allocation of income to OCG as a result of an increase in the average number of Class A units outstanding during each period.

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Segment Financial Data

The following table presents segment financial data:

Segment Statements of Operations Data: (1)	Three Months Ended March 31,
	2016			2015
	(in thousands, except per unit data or as otherwise indicated)
Revenues:
Management fees	$	201,270		$	190,095
Incentive income	96,588			152,879
Investment income	15,077			53,458
Total revenues	312,935			396,432
Expenses:
Compensation and benefits	(104,270		)	(108,881		)
Equity-based compensation	(10,703		)	(7,023		)
Incentive income compensation	(49,749		)	(90,102		)
General and administrative	(31,481		)	(29,567		)
Depreciation and amortization	(3,160		)	(1,891		)
Total expenses	(199,363		)	(237,464		)
Adjusted net income before interest and other income (expense)	113,572			158,968
Interest expense, net of interest income (2)	(8,682		)	(8,933		)
Other income (expense), net	135			(9		)
Adjusted net income	$	105,025		$	150,026
Adjusted net income-OCG	$	30,160		$	36,723
Adjusted net income per Class A unit	0.49			0.81
Distributable earnings	125,725			135,196
Distributable earnings-OCG	41,843			34,733
Distributable earnings per Class A unit	0.68			0.77
Fee-related earnings	62,359			49,756
Fee-related earnings-OCG	23,059			12,733
Fee-related earnings per Class A unit	0.37			0.28
Weighted average number of Operating Group units outstanding	153,808			153,237
Weighted average number of Class A units outstanding	61,894			45,063
Operating Metrics:
Assets under management (in millions):
Assets under management	$	96,874		$	99,903
Management fee-generating assets under management	79,908			78,497
Incentive-creating assets under management	31,205			34,458
Uncalled capital commitments	21,400			17,196
Accrued incentives (fund level):
Incentives created (fund level)	(46,270		)	265,462
Incentives created (fund level), net of associated incentive income compensation expense	(16,991		)	136,299
Accrued incentives (fund level)	1,442,359			2,061,990
Accrued incentives (fund level), net of associated incentive income compensation expense	747,711			1,073,445

(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

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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 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 a detailed description of our segment and operating metrics, please see “—Segment and Operating Metrics” above.

(2) Interest income was $1.3 million and $1.0 million for the three months ended March 31, 2016 and 2015, respectively.

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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. These operating metrics include AUM, management fee-generating AUM, incentive-creating AUM, incentives created (fund level), accrued incentives (fund level) and uncalled capital commitments.

Assets Under Management

	As of
	March 31, 2016		December 31, 2015		March 31, 2015
Assets Under Management:	(in millions)
Closed-end funds	$	59,081	$	59,430	$	56,259
Open-end funds	33,008		33,202		38,340
Evergreen funds	4,785		4,727		5,304
Total	$	96,874	$	97,359	$	99,903

	Three Months Ended March 31,
	2016			2015
Change in Assets Under Management:	(in millions)
Beginning balance	$	97,359		$	90,831
Closed-end funds:
Capital commitments/other (1)	866			9,440
Distributions for a realization event/other (2)	(2,014		)	(1,937		)
Change in uncalled capital commitments for funds entering or in liquidation (3)	—			(240		)
Foreign-currency translation	341			(776		)
Change in market value (4)	365			1,197
Change in applicable leverage	93			372
Open-end funds:
Contributions	735			1,710
Redemptions	(1,771		)	(1,429		)
Foreign-currency translation	222			(444		)
Change in market value (4)	620			1,051
Evergreen funds:
Contributions or new capital commitments	66			204
Redemptions or distributions/other	(50		)	(56		)
Distributions from restructured funds	(9		)	(5		)
Foreign-currency translation	(3		)	(1		)
Change in market value (4)	54			(14		)
Ending balance	$	96,874		$	99,903

(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.

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Management Fee-generating Assets Under Management

	As of
	March 31, 2016		December 31, 2015		March 31, 2015
Management Fee-generating Assets Under Management:	(in millions)
Closed-end funds:
Senior Loans	$	7,184	$	6,580	$	6,032
Other closed-end funds	35,956		35,709		30,614
Open-end funds	32,939		33,135		38,257
Evergreen funds	3,829		3,473		3,594
Total	$	79,908	$	78,897	$	78,497

	Three Months Ended March 31,
Change in Management Fee-generating Assets Under Management:	2016			2015
	(in millions)
Beginning balance	$	78,897		$	78,079
Closed-end funds:
Capital commitments to funds that pay fees based on committed capital/other (1)	686			607
Capital drawn by funds that pay fees based on drawn capital, NAV or cost basis	201			264
Change attributable to funds in liquidation (2)	(381		)	(861		)
Change in uncalled capital commitments for funds entering or in liquidation that pay fees based on committed capital (3)	—			(435		)
Distributions by funds that pay fees based on NAV/other (4)	(113		)	(109		)
Foreign-currency translation	229			(467		)
Change in market value (5)	85			17
Change in applicable leverage	144			358
Open-end funds:
Contributions	735			1,696
Redemptions	(1,772		)	(1,413		)
Foreign-currency translation	222			(444		)
Change in market value	619			1,035
Evergreen funds:
Contributions or capital drawn by funds that pay fees based on drawn capital or NAV	337			233
Redemptions or distributions	(28		)	(41		)
Change in market value	47			(22		)
Ending balance	$	79,908		$	78,497

(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.

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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.

A reconciliation of AUM to management fee-generating AUM is set forth below:

	As of
Reconciliation of Assets Under Management to Management Fee-generating Assets Under Management:	March 31, 2016			December 31, 2015			March 31, 2015
	(in millions)
Assets under management	$	96,874		$	97,359		$	99,903
Difference between assets under management and committed capital or cost basis for applicable closed-end funds (1)	(1,829		)	(2,958		)	(5,620		)
Undrawn capital commitments to funds that have not yet commenced their investment periods	(8,143		)	(8,215		)	(9,190		)
Undrawn capital commitments to funds for which management fees are based on drawn capital or NAV	(4,095		)	(4,754		)	(4,238		)
Oaktree’s general partner investments in management fee-generating funds	(1,727		)	(1,357		)	(1,200		)
Funds that are no longer paying management fees and co-investments that pay no management fees	(1,172		)	(1,178		)	(1,158		)
Management fee-generating assets under management	$	79,908		$	78,897		$	78,497

(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
	March 31, 2016		December 31, 2015		March 31, 2015
Weighted Average Annual Management Fee Rates:
Closed-end funds:
Senior Loans	0.50	%	0.50	%	0.50	%
Other closed-end funds	1.52		1.52		1.54
Open-end funds	0.47		0.48		0.47
Evergreen funds	1.33		1.43		1.50
Overall	0.98		0.99		0.94

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Incentive-creating Assets Under Management

Incentive-creating AUM is set forth below. As of March 31, 2016, December 31, 2015 and March 31, 2015, the portion of incentive-creating AUM generating incentives at the fund level was $16.5 billion, $17.5 billion and $25.4 billion, respectively. Incentive-creating AUM does not include undrawn capital commitments.

	As of
	March 31, 2016		December 31, 2015		March 31, 2015
Incentive-creating Assets Under Management:	(in millions)
Closed-end funds	$	29,251	$	30,100	$	32,374
Evergreen funds	1,954		1,823		2,084
Total	$	31,205	$	31,923	$	34,458

Three Months Ended March 31, 2016

AUM decreased $0.5 billion, or 0.5%, to $96.9 billion as of March 31, 2016, from $97.4 billion as of December 31, 2015. The decrease reflected $2.0 billion of distributions to closed-end fund investors and $1.0 billion of net outflows from open-end funds, partially offset by $1.0 billion in aggregate market-value gains, $0.9 billion of aggregate capital inflows for closed-end funds and $0.6 billion of favorable foreign-currency translation.

Management fee-generating AUM, a forward-looking metric, increased $1.0 billion, or 1.3%, to $79.9 billion as of March 31, 2016, from $78.9 billion as of December 31, 2015. The increase reflected an aggregate $0.9 billion increase from capital drawn by funds that pay fees based on drawn capital, NAV or cost basis and additional capital commitments for Oaktree Opportunities Fund X (“Opps X”), as well as $0.8 billion of aggregate market-value gains and $0.5 billion of favorable foreign-currency translation. The increase was partially offset by $1.0 billion of net outflows from open-end funds and a $0.4 billion decline attributable to closed-end funds in liquidation.

Incentive-creating AUM decreased $0.7 billion, or 2.2%, to $31.2 billion as of March 31, 2016, from $31.9 billion as of December 31, 2015. The decrease reflected the net effect of $0.7 billion in drawdowns by closed-end funds, $2.0 billion in distributions from closed-end funds, $0.3 billion in aggregate market-value gains and $0.2 billion of favorable foreign-currency translation.

Three Months Ended March 31, 2015

AUM grew $9.1 billion, or 10.0%, to $99.9 billion as of March 31, 2015, from $90.8 billion as of December 31, 2014. The increase reflected $9.4 billion in capital inflows for closed-end funds and $2.2 billion of market-value gains, partially offset by $1.9 billion of distributions to closed-end fund investors and a $1.2 billion negative impact from foreign-currency translation.

Management fee-generating AUM increased $0.4 billion, or 0.5%, to $78.5 billion as of March 31, 2015, from $78.1 billion as of December 31, 2014. The increase reflected $1.0 billion in market-value gains in funds for which management fees are based on NAV, $0.9 billion in fee-generating leverage and drawdowns or contributions by closed-end and evergreen funds for which management fees are based on drawn capital or NAV, and $0.6 billion attributable to CLOs and capital commitments to closed-end funds, partially offset by a $0.9 billion decline attributable to closed-end funds in liquidation, a $0.9 billion negative impact from foreign-currency translation and $0.4 billion in uncalled capital commitments for closed-end funds entering or in liquidation.

Incentive-creating AUM grew $0.6 billion, or 1.8%, to $34.5 billion as of March 31, 2015, from $33.9 billion as of December 31, 2014. The increase reflected the net effect of $1.2 billion in drawdowns by closed-end funds, $1.0 billion in market-value gains, $1.2 billion in distributions by closed-end funds and a $0.5 billion negative impact from foreign-currency translation.

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

Accrued incentives (fund level), gross and net of incentive income compensation expense, as well as changes in accrued incentives (fund level), are set forth below.

	As of or for the Three Months Ended March 31,
	2016			2015
Accrued Incentives (Fund Level):	(in thousands)
Beginning balance	$	1,585,217		$	1,949,407
Incentives created (fund level):
Closed-end funds	(46,845		)	265,457
Evergreen funds	575			5
Total incentives created (fund level)	(46,270		)	265,462
Less: segment incentive income recognized by us	(96,588		)	(152,879		)
Ending balance	$	1,442,359		$	2,061,990
Accrued incentives (fund level), net of associated incentive income compensation expense	$	747,711		$	1,073,445

As of March 31, 2016 and 2015, the portion of net accrued incentives (fund level) represented by funds that was currently paying incentives was $294.1 million and $419.8 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.

As of March 31, 2016, $497.7 million, or 67%, of the net accrued incentives (fund level) was in funds in their liquidation period, and approximately 35% of the assets underlying total net accrued incentives (fund level) were Level I or Level II securities. Please see “—Critical Accounting Policies—Investments, at Fair Value—Non-publicly Traded Equity and Real Estate Investments” for a discussion of the fair-value hierarchy level established by GAAP.

Three Months Ended March 31, 2016 and 2015

Incentives created (fund level) was negative $46.3 million for the three months ended March 31, 2016, reflecting $66.5 million of net negative incentives created (fund level) from Distressed Debt funds, partially offset by $19.7 million of positive incentives created (fund level) from Real Estate funds.

Incentives created (fund level) was $265.5 million for the three months ended March 31, 2015, reflecting $261.8 million from Control Investing funds and $49.1 million from Real Estate funds, partially offset by $60.4 million of net negative incentives created (fund level) from Distressed Debt funds.

Uncalled Capital Commitments

As of March 31, 2016, December 31, 2015, and March 31, 2015, uncalled capital commitments were $21.4 billion, $21.7 billion and $17.2 billion, respectively. Capital drawn by closed-end funds during the three months ended March 31, 2016 aggregated $0.8 billion, as compared with $1.6 billion for the three months ended March 31, 2015.

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Segment Analysis

Our business is comprised of one segment, our investment management segment, which consists of the investment management services that we provide to our clients. Management makes operating decisions and assesses the performance of our business based on financial and operating metrics and data that are presented without the consolidation of any funds. For a detailed reconciliation of the segment results of operations to our condensed consolidated statements of operations, please see “—Distributable Earnings” and “—Fee-related Earnings” below and the “Segment Reporting” note to our condensed consolidated financial statements included elsewhere in this quarterly report. The data most important to our chief operating decision maker in assessing our performance are adjusted net income, adjusted net income-OCG, distributable earnings, distributable earnings-OCG, fee-related earnings and fee-related earnings-OCG.

Adjusted Net Income ⁽¹⁾ 

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

	Three Months Ended March 31,
	2016			2015
	(in thousands, except per unit data)
Revenues:
Management fees	$	201,270		$	190,095
Incentive income	96,588			152,879
Investment income	15,077			53,458
Total revenues	312,935			396,432
Expenses:
Compensation and benefits	(104,270		)	(108,881		)
Equity-based compensation	(10,703		)	(7,023		)
Incentive income compensation	(49,749		)	(90,102		)
General and administrative	(31,481		)	(29,567		)
Depreciation and amortization	(3,160		)	(1,891		)
Total expenses	(199,363		)	(237,464		)
Adjusted net income before interest and other income (expense)	113,572			158,968
Interest expense, net of interest income	(8,682		)	(8,933		)
Other income (expense), net	135			(9		)
Adjusted net income	105,025			150,026
Adjusted net income attributable to OCGH non-controlling interest	(62,762		)	(105,907		)
Non-Operating Group expenses	(264		)	(334		)
Adjusted net income-OCG before income taxes	41,999			43,785
Income taxes-OCG	(11,839		)	(7,062		)
Adjusted net income-OCG	$	30,160		$	36,723
Adjusted net income per Class A unit	$	0.49		$	0.81
Weighted average number of Class A units outstanding	61,894			45,063

(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) unrealized gains and losses resulting from foreign-currency hedging activities, which under GAAP are recognized as general and administrative expense in the current period, whereas for adjusted net income 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. 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 $1.0 million for the first quarter of 2015.

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Distributable Earnings

Distributable earnings and distributable earnings-OCG, as well as per unit data, are set forth below:

	Three Months Ended March 31,
	2016			2015
	(in thousands, except per unit data)
Revenues:
Management fees	$	201,270		$	190,095
Incentive income	96,588			152,879
Receipts of investment income from funds (1)	12,923			23,961
Receipts of investment income from companies	13,558			8,796
Total distributable earnings revenues	324,339			375,731
Expenses:
Compensation and benefits	(104,270		)	(108,881		)
Incentive income compensation	(49,749		)	(90,102		)
General and administrative	(31,481		)	(29,567		)
Depreciation and amortization	(3,160		)	(1,891		)
Total expenses	(188,660		)	(230,441		)
Other income (expense):
Interest expense, net of interest income	(8,682		)	(8,933		)
Operating Group income taxes	(1,407		)	(1,152		)
Other income (expense), net	135			(9		)
Distributable earnings	125,725			135,196
Distributable earnings attributable to OCGH non-controlling interest	(75,132		)	(95,439		)
Non-Operating Group expenses	(264		)	(334		)
Distributable earnings-OCG income taxes	(3,380		)	(280		)
Tax receivable agreement	(5,106		)	(4,410		)
Distributable earnings-OCG	$	41,843		$	34,733
Distributable earnings per Class A unit	$	0.68		$	0.77
Weighted average number of Class A units outstanding	61,894			45,063

(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 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.

Three Months Ended March 31, 2016 Compared to the Three Months Ended March 31, 2015

Distributable earnings declined $9.5 million, or 7.0%, to $125.7 million for the three months ended March 31, 2016, from $135.2 million for the three months ended March 31, 2015, reflecting decreases of $16.0 million in incentive income, net of incentive income compensation expense (“net incentive income”) and $6.3 million in investment income proceeds, partially offset by a $12.6 million increase in fee-related earnings. For the current-year period, investment income proceeds totaled $26.5 million, including $12.9 million from fund distributions and $13.6 million from DoubleLine, as compared with total investment income proceeds in the prior-year period of $32.8 million, of which $24.0 million and $12.4 million was attributable to fund distributions and DoubleLine, respectively.

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

	Three Months Ended March 31,
	2016			2015
	(in thousands)
Distributable earnings	$	125,725		$	135,196
Investment income (1)	15,077			53,458
Receipts of investment income from funds (2)	(12,923		)	(23,961		)
Receipts of investment income from companies	(13,558		)	(8,796		)
Equity-based compensation (3)	(10,703		)	(7,023		)
Operating Group income taxes	1,407			1,152
Adjusted net income	105,025			150,026
Incentive income (4)	(39,942		)	(17,378		)
Incentive income compensation (4)	39,942			23,210
Investment income (5)	10,429			—
Equity-based compensation (6)	(3,192		)	(4,683		)
Placement costs (7)	(6,704		)	—
Foreign-currency hedging (8)	(5,866		)	5,312
Acquisition-related items (9)	(391		)	(1,807		)
Income taxes (10)	(12,680		)	(7,875		)
Non-Operating Group expenses (11)	(264		)	(334		)
Non-controlling interests (11)	(58,279		)	(108,218		)
Net income attributable to Oaktree Capital Group, LLC	$	28,078		$	38,253

(1) This adjustment adds back our segment investment income, which with respect to investment 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) 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.

(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 and net income attributable to OCG.

(6) 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 because it does not affect our financial position and from distributable earnings because it is non-cash in nature and does not impact our ability to fund operations or make equity distributions, 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 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 and net income attributable to OCG.

(9) This adjustment adds back the effect of acquisition-related items associated with the amortization of intangibles and changes in the contingent consideration liability.

(10) Because adjusted net income and distributable earnings are pre-tax measures, this adjustment adds back the effect of income tax expense.

(11) Because adjusted net income and distributable 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.

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

	Three Months Ended March 31,
	2016			2015
	(in thousands)
Distributable earnings-OCG (1)	$	41,843		$	34,733
Investment income attributable to OCG	6,067			15,721
Receipts of investment income from funds attributable to OCG	(5,200		)	(7,046		)
Receipts of investment income from companies attributable to OCG	(5,456		)	(2,587		)
Equity-based compensation attributable to OCG (2)	(4,307		)	(2,065		)
Distributable earnings-OCG income taxes	3,380			280
Tax receivable agreement	5,106			4,410
Income taxes of Intermediate Holding Companies	(11,273		)	(6,723		)
Adjusted net income-OCG (1)	30,160			36,723
Incentive income attributable to OCG (3)	(16,073		)	(5,110		)
Incentive income compensation attributable to OCG (3)	16,073			6,825
Investment income attributable to OCG (4)	4,197			—
Equity-based compensation attributable to OCG (5)	(1,285		)	(1,377		)
Placement costs attributable to OCG (6)	(2,698		)	—
Foreign-currency hedging attributable to OCG (7)	(2,359		)	1,562
Acquisition-related items attributable to OCG (8)	(158		)	(531		)
Non-controlling interests attributable to OCG (8)	221			161
Net income attributable to Oaktree Capital Group, LLC	$	28,078		$	38,253

(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.

(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) 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.

(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-OCG and net income attributable to OCG.

(5) 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 because it does not affect our financial position and from distributable earnings because it is non-cash in nature and does not impact our ability to fund our operations or make equity distributions, 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-OCG 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-OCG and net income attributable to OCG.

(8) 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.

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Fee-related Earnings

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

	Three Months Ended March 31,
	2016			2015
	(in thousands, except per unit data)
Management fees:
Closed-end funds	$	148,251		$	131,647
Open-end funds	38,413			44,441
Evergreen funds	14,606			14,007
Total management fees	201,270			190,095
Expenses:
Compensation and benefits	(104,270		)	(108,881		)
General and administrative	(31,481		)	(29,567		)
Depreciation and amortization	(3,160		)	(1,891		)
Total expenses	(138,911		)	(140,339		)
Fee-related earnings	62,359			49,756
Fee-related earnings attributable to OCGH non-controlling interest	(37,264		)	(35,124		)
Non-Operating Group expenses	(295		)	(335		)
Fee-related earnings-OCG before income taxes	24,800			14,297
Fee-related earnings-OCG income taxes	(1,741		)	(1,564		)
Fee-related earnings-OCG	$	23,059		$	12,733
Fee-related earnings per Class A unit	$	0.37		$	0.28
Weighted average number of Class A units outstanding	61,894			45,063

Three Months Ended March 31, 2016 Compared to the Three Months Ended March 31, 2015

Fee-related earnings increased $12.6 million, or 25.3%, to $62.4 million for the three months ended March 31, 2016, from $49.8 million for the three months ended March 31, 2015. The increase reflected $11.2 million of higher management fees, $4.6 million of lower compensation and benefits, and $1.9 million of higher general and administrative expense. The portion of fee-related earnings attributable to our Class A units was $0.37 and $0.28 per unit for the three months ended March 31, 2016 and 2015, respectively.

The effective tax rate applicable to fee-related earnings for the three months ended March 31, 2016 and 2015 was 7% and 11%, respectively, resulting from estimated full-year effective rates of 7% and 10%, 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.

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

	Three Months Ended March 31,
	2016			2015
	(in thousands)
Fee-related earnings (1)	$	62,359		$	49,756
Incentive income	96,588			152,879
Incentive income compensation	(49,749		)	(90,102		)
Investment income	15,077			53,458
Equity-based compensation (2)	(10,703		)	(7,023		)
Interest expense, net of interest income	(8,682		)	(8,933		)
Other income (expense), net	135			(9		)
Adjusted net income	105,025			150,026
Reconciling adjustments (3)	(76,947		)	(111,773		)
Net income attributable to Oaktree Capital Group, LLC	$	28,078		$	38,253

(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) Please refer to the table on page 69 for a detailed reconciliation of adjusted net income to net income attributable to Oaktree Capital Group, LLC.

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 March 31,
	2016			2015
	(in thousands)
Fee-related earnings-OCG (1)	$	23,059		$	12,733
Incentive income attributable to OCG	38,868			44,958
Incentive income compensation attributable to OCG	(20,020		)	(26,497		)
Investment income attributable to OCG	6,067			15,721
Equity-based compensation attributable to OCG (2)	(4,307		)	(2,065		)
Interest expense, net of interest income attributable to OCG	(3,463		)	(2,626		)
Other income (expense) attributable to OCG	54			(3		)
Non-fee-related earnings income taxes attributable to OCG (3)	(10,098		)	(5,498		)
Adjusted net income-OCG (1)	30,160			36,723
Reconciling adjustments (4)	(2,082		)	1,530
Net income attributable to Oaktree Capital Group, LLC	$	28,078		$	38,253

(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) Please refer to the table on page 70 for a detailed reconciliation of adjusted net income-OCG to net income attributable to Oaktree Capital Group, LLC.

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Three Months Ended March 31, 2016 Compared to the Three Months Ended March 31, 2015

Segment Revenues

Management Fees

A summary of management fees is set forth below:

	Three Months Ended March 31,
	2016		2015
	(in thousands)
Management Fees:
Closed-end funds	$	148,251	$	131,647
Open-end funds	38,413		44,441
Evergreen funds	14,606		14,007
Total	$	201,270	$	190,095

Management fees increased $11.2 million, or 5.9%, to $201.3 million for the three months ended March 31, 2016, from $190.1 million for the three months ended March 31, 2015, for the reasons described below.

• Closed-end funds.    Management fees attributable to closed-end funds grew $16.7 million, or 12.7%, to $148.3 million for the three months ended March 31, 2016, from $131.6 million for the three months ended March 31, 2015. The growth reflected an aggregate increase of $29.7 million principally from the start of the investment periods for Oaktree Power Opportunities Fund IV, Oaktree Principal Fund VI, Opps X and ROF VII. The increase was partially offset by an aggregate decline of $13.0 million primarily attributable to closed-end funds in liquidation.

• Open-end funds.    Management fees attributable to open-end funds decreased $6.0 million, or 13.5%, to $38.4 million for the three months ended March 31, 2016, from $44.4 million for the three months ended March 31, 2015, primarily as a result of net outflows and market-value declines across our open-end strategies.

• Evergreen funds.    Management fees attributable to evergreen funds increased $0.6 million, or 4.3%, to $14.6 million for the three months ended March 31, 2016, from $14.0 million for the three months ended March 31, 2015, primarily reflecting drawdowns of capital commitments by Strategic Credit. The period-end weighted average annual management fee rate for evergreen funds decreased to 1.33% as of March 31, 2016, from 1.50% as of March 31, 2015, in part due to Strategic Credit, for which the average management fee rate is lower than 1.50%.

Incentive Income

A summary of incentive income is set forth below:

	Three Months Ended March 31,
	2016		2015
	(in thousands)
Incentive Income:
Closed-end funds	$	96,588	$	152,879

Incentive income decreased $56.3 million, or 36.8%, to $96.6 million for the three months ended March 31, 2016, from $152.9 million for the three months ended March 31, 2015. The current-year period included tax-related incentive distributions of $72.7 million and other incentive distributions of $23.9 million, as compared with $129.4 million and $23.5 million, respectively, in the prior-year period.

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Investment Income

A summary of investment income is set forth below:

	Three Months Ended March 31,
	2016			2015
Income (loss) from investments in funds:	(in thousands)
Oaktree funds:
Corporate Debt	$	(13,543	)	$	11,351
Convertible Securities	(944		)	948
Distressed Debt	8,891			1,936
Control Investing	(1,447		)	17,757
Real Estate	3,105			5,769
Listed Equities	3,488			3,140
Non-Oaktree funds	420			2,593
Income from investments in companies	15,107			9,964
Total investment income	$	15,077		$	53,458

Investment income decreased $38.4 million, or 71.8%, to $15.1 million for the three months ended March 31, 2016, from $53.5 million for the three months ended March 31, 2015. The decline reflected a $23 million impairment charge on our investments in certain of our CLOs, predominantly stemming from holdings in energy-related companies. After giving effect to the impairment charge, as of March 31, 2016 these CLOs represented $59.2 million of our total CLO carrying value of $144.0 million. Our one-fifth ownership stake in DoubleLine accounted for investment income of $15.1 million and $14.6 million for the first three months of 2016 and 2015, respectively, of which performance fees accounted for $0.6 million and $2.0 million, respectively.

Segment Expenses

Compensation and Benefits

Compensation and benefits decreased $4.6 million, or 4.2%, to $104.3 million for the three months ended March 31, 2016, from $108.9 million for the three months ended March 31, 2015, in part reflecting variations in annual bonus accruals.

Equity-based Compensation

Equity-based compensation increased $3.7 million, or 52.9%, to $10.7 million for the three months ended March 31, 2016, from $7.0 million for the three months ended March 31, 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 decreased $40.4 million, or 44.8%, to $49.7 million for the three months ended March 31, 2016, from $90.1 million for the three months ended March 31, 2015. The percentage decrease was larger than the corresponding decline of 36.8% in incentive income, primarily as a result of catch-up tax distributions related to incentive interests awarded to certain investment professionals.

General and Administrative

General and administrative expense increased $1.9 million, or 6.4%, to $31.5 million for the three months ended March 31, 2016, from $29.6 million for the three months ended March 31, 2015, reflecting higher general operating expenses.

Depreciation and Amortization

Depreciation and amortization expense increased $1.3 million, or 68.4%, to $3.2 million for the three months ended March 31, 2016, from $1.9 million for the three months ended March 31, 2015, in part reflecting amortization of leasehold improvements associated with office space expansion.

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Interest Expense, Net of Interest Income

Interest expense, net decreased $0.2 million, or 2.2%, to $8.7 million for the three months ended March 31, 2016, from $8.9 million for the three months ended March 31, 2015, reflecting higher interest income.

Other Income (Expense), Net

Other income (expense), net of $0.1 million in income for the three months ended March 31, 2016 reflected foreign-currency transaction gains. The prior-year period’s net expense of $9,000 reflected $0.9 million of losses associated with certain non-operating corporate activities, almost entirely offset by foreign-currency transaction gains.

Adjusted Net Income

ANI decreased $45.0 million, or 30.0%, to $105.0 million for the three months ended March 31, 2016, from $150.0 million for the three months ended March 31, 2015, reflecting declines of $16.0 million in net incentive income, and $38.4 million in investment income, partially offset by a $12.6 million increase in fee-related earnings.

Income Taxes-OCG

Income taxes increased $4.7 million, or 66.2%, to $11.8 million for the three months ended March 31, 2016, from $7.1 million for the three months ended March 31, 2015.  Income taxes increased while adjusted net income-OCG before income taxes declined primarily due to a higher effective tax rate for the three months ended March 31, 2016. The effective tax rates applied to ANI for the three months ended March 31, 2016 and 2015 were 28% and 16%, respectively, resulting from estimated full-year effective rates of 23% and 19%, respectively.  The 28% effective tax rate applied to ANI for the three months ended March 31, 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 would 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.

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Segment Statements of Financial Condition

Since our founding, we have managed our financial condition in a way that builds our capital base and maintains sufficient liquidity for known and anticipated uses of cash. We have issued debt largely to help fund our corporate investments in funds and companies, favoring longer terms to better match the multi-year nature of our typical investment. Our segment assets do not include accrued incentives (fund level), an off-balance sheet metric, nor do they reflect the fair-market value of our 20% interest in DoubleLine, which is carried at cost, as adjusted under the equity method of accounting. For a reconciliation of segment total assets to our consolidated total assets, please see the “Segment Reporting” note to our condensed consolidated financial statements included elsewhere in this quarterly report.

The following table presents our segment statements of financial condition:

	As of
	March 31, 2016		December 31, 2015		March 31, 2015
Assets:	(in thousands)
Cash and cash-equivalents	$	342,079	$	476,046	$	434,232
U.S. Treasury securities	618,899		661,116		570,749
Corporate investments	1,352,362		1,434,109		1,503,621
Deferred tax assets	425,904		425,798		430,873
Receivables and other assets	397,416		257,013		309,375
Total assets	$	3,136,660	$	3,254,082	$	3,248,850
Liabilities and Capital:
Liabilities:
Accounts payable and accrued expenses	$	253,305	$	368,980	$	252,006
Due to affiliates	356,851		356,851		371,988
Debt obligations	845,736		846,354		845,776
Total liabilities	1,455,892		1,572,185		1,469,770
Capital:
OCGH non-controlling interest in consolidated subsidiaries	945,519		944,882		1,159,339
Unitholders’ capital attributable to Oaktree Capital Group, LLC	735,249		737,015		619,741
Total capital	1,680,768		1,681,897		1,779,080
Total liabilities and capital	$	3,136,660	$	3,254,082	$	3,248,850

Corporate Investments

A summary of corporate investments is set forth below:

	As of
	March 31, 2016		December 31, 2015		March 31, 2015
Investments in funds:	(in thousands)
Oaktree funds:
Corporate Debt	$	381,456	$	432,228	$	426,543
Convertible Securities	1,579		18,497		19,647
Distressed Debt	379,507		379,676		429,173
Control Investing	258,753		267,692		262,492
Real Estate	127,731		135,922		145,330
Listed Equities	111,185		105,631		148,383
Non-Oaktree funds	66,321		65,901		49,706
Investments in companies	25,830		28,562		22,347
Total corporate investments	$	1,352,362	$	1,434,109	$	1,503,621

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Liquidity and Capital Resources

We manage our liquidity and capital requirements by focusing on our cash flows before the consolidation of our funds and the effect of normal changes in short-term assets and liabilities. Our primary cash flow activities on an unconsolidated basis involve (a) generating cash flow from operations, (b) generating income from investment activities, including strategic investments in certain third parties, (c) funding capital commitments that we have made to our funds, (d) funding our growth initiatives, (e) distributing cash flow to our owners and (f) borrowings, interest payments and repayments under credit agreements, our senior notes and other borrowing arrangements. As of March 31, 2016, we had $1.0 billion of cash and U.S. Treasury securities and $846 million in outstanding debt, net of debt issuance costs. Additionally, we have a $500 million revolving credit facility available to us, which was undrawn as of March 31, 2016 and the date of this report. Oaktree’s investments in funds and companies had a carrying value of $1.4 billion as of March 31, 2016.

Ongoing sources of cash, or distributable earnings, include (a) management fees, which are collected monthly or quarterly, (b) incentive income, which is volatile and largely unpredictable as to amount and timing, and (c) distributions stemming from our corporate investments in funds and companies. As of March 31, 2016, corporate investments of $1.4 billion included unrealized investment income proceeds of $232 million, of which $106 million was in closed-end funds in their liquidation period. We primarily use cash flow from operations and distributions from our corporate investments to pay compensation and related expenses, general and administrative expenses, income taxes, debt service, capital expenditures and distributions. This same cash flow, together with proceeds from equity and debt issuances, is also used to fund corporate investments, fixed assets and other capital items. If cash flow from operations was insufficient to fund distributions, we expect that we would suspend paying such distributions.

We use distributable earnings, which is derived from our segment results, to assess performance and assist in the determination of equity distributions from the Operating Group. Our quarterly distributable earnings may be affected by potential seasonal factors that may, in turn, affect the level of the cash distributions applicable to a particular quarter. For example, we generally receive tax-related incentive distributions from certain closed-end funds in the first quarter of the year, which if received generate distributable earnings in that period. Additionally, DoubleLine’s corporate distributions to us may vary in length of period covered.  For example, the quarterly distributions made in the second and fourth quarters typically have covered two and four months of activity, respectively. The distribution amount for any given period is likely to vary materially due to these and other factors.

Tax distributions are not required in respect of the Class A units and are only required from the Oaktree Operating Group entities if and to the extent that there is sufficient cash available for distribution. Accordingly, if there were insufficient cash flow from operations to fund quarterly or tax distributions by the Oaktree Operating Group entities, we expect that these distributions would not be made. We believe that we have sufficient access to cash from existing balances, our operations and the revolving credit facility described below to fund our operations and commitments.

Consolidated Cash Flows

The accompanying condensed consolidated statements of cash flows include our consolidated funds, despite the fact that we typically have only a minority economic interest in those funds. The assets of consolidated funds, on a gross basis, are substantially larger than the assets of our business and, accordingly, have a substantial effect on the cash flows reflected in our condensed consolidated statements of cash flows. The primary cash flow activities of our consolidated funds involve:

• raising capital from third-party investors;

• using the capital provided by us and third-party investors to fund investments and operating expenses;

• financing certain investments with indebtedness;

• generating cash flows through the realization of investments, as well as the collection of interest and dividend income; and

• distributing net cash flows to fund investors and to us.

Because most of our consolidated funds are treated as investment companies for accounting purposes, their investing cash flow amounts are included in our cash flows from operations. We believe that each of the consolidated funds and Oaktree has sufficient access to cash to fund their respective operations in the near term.

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Significant amounts from our condensed consolidated statements of cash flows for the three months ended March 31, 2016 and 2015 are discussed below.

Operating Activities

Net cash used in operating activities was $328.8 million and $1.9 billion in the first three months of 2016 and 2015, respectively. These amounts included, for the first three months of 2016 and 2015, respectively: (a) net purchases of securities of the consolidated funds of $229.1 million and $1.9 billion; (b) net realized gains on investments of the consolidated funds of $3.4 million and $474.8 million; and (c) changes in unrealized depreciation on investments of the consolidated funds of $20.7 million and unrealized appreciation of $507.5 million.

Investing Activities

Investing activities provided $83.9 million and $88.8 million of cash in the first three months of 2016 and 2015, respectively. Investing activities were primarily driven by net U.S. Treasury investment activities. Net activity from purchases, maturities and sales of U.S. Treasury securities included net proceeds of $42.2 million and $84.8 million for the first three months of 2016 and 2015, respectively. Corporate investments in funds and companies of $19.5 million and $13.9 million for the first three months of 2016 and 2015, respectively, consisted of the following:

	Three Months Ended March 31,
	2016			2015
	(in thousands)
Funds	$	48,002		$	57,576
Eliminated in consolidation	(28,465		)	(43,644		)
Total investments	$	19,537		$	13,932

Distributions and proceeds from corporate investments in funds and companies of $62.8 million and $30.4 million for the first three months of 2016 and 2015, respectively, consisted of the following:

	Three Months Ended March 31,
	2016			2015
	(in thousands)
Funds	$	92,005		$	78,570
Eliminated in consolidation	(29,194		)	(72,149		)
Unconsolidated companies	—			24,013
Total proceeds	$	62,811		$	30,434

Purchases of fixed assets were $1.6 million and $12.5 million for the first three months of 2016 and 2015, respectively.

Financing Activities

Financing activities provided $221.6 million and $901.1 million of cash in the first three months of 2016 and 2015, respectively. For the first three months of 2016 and 2015, respectively, financing activities included: (a) net distributions to non-controlling interests in consolidated funds of $4.6 million and net contributions from non-controlling interests in consolidated funds of $130.0 million; (b) net repayments on credit facilities of the consolidated funds of $98.8 million and net borrowings of $490.3 million; (c) distributions to unitholders of $80.9 million and $98.7 million; (d) proceeds from debt obligations issued by our CLOs of $426.3 million and $394.3 million; (e) payments for debt issuance costs of $8.8 million and $9.1 million; and (f) net unit purchases of $9.7 million and $4.3 million.

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Future Sources and Uses of Liquidity

We expect to continue to make distributions to our Class A unitholders pursuant to our distribution policy. In the future, we may also issue additional units or debt and other equity securities with the objective of increasing our available capital. In addition, we may, from time to time, repurchase our Class A units in open market or privately negotiated purchases or otherwise, redeem our Class A units pursuant to the terms of our operating agreement, or repurchase OCGH units.

In addition to our ongoing sources of cash that include management fees, incentive income and fund distributions related to our corporate investments in funds and companies, we also have access to liquidity through our debt financings and credit agreements. We believe that the sources of liquidity described below will be sufficient to fund our working capital requirements for at least the next twelve months.

In April 2016, we received commitments from certain accredited investors (collectively, the “Investors”) to purchase $100 million of 3.69% senior notes (the “Notes”) to be issued by our indirect subsidiary, Oaktree Capital Management, L.P. (the “Issuer”), and guaranteed by our indirect subsidiaries, Oaktree Capital I, L.P., Oaktree Capital II, L.P. and Oaktree AIF Investments, L.P. (the “Guarantors” and together with the Issuer, the “Obligors”). These commitments are subject to the execution of a purchase agreement and standard contingencies prior to closing. The Notes will be senior unsecured obligations of the Issuer, jointly and severally guaranteed by the Guarantors, with a maturity of 15 years. We intend to use the entire proceeds from the sale of the Notes to pay down a portion of our $250 million term loan due March 31, 2021. The Notes offering is expected to close on July 12, 2016.

In March 2016, Oaktree Capital Management, L.P., Oaktree Capital II, L.P., Oaktree AIF Investments, L.P., and Oaktree Capital I, L.P. (collectively, the “Borrowers”) entered into the Second Amendment to Credit Agreement (the “Second Amendment”), which amended the credit agreement dated as of March 31, 2014 (as amended through and including the Second Amendment, the “Credit Agreement”). The Credit Agreement consists of a $250 million fully-funded term loan (the “Term Loan”) and a $500 million revolving credit facility (the “Revolver”). The Second Amendment extends the maturity date of the Credit Agreement from March 31, 2019 to March 31, 2021, at which time the entire principal amount of $250 million is due, and provides the Borrowers with the option to extend the new maturity date by one year if the lenders holding at least 50% of the aggregate amount of the term loan and the revolving loan commitment thereunder on the date of the Borrowers’ extension request consent to such extension. Borrowings under the Credit Agreement generally bear interest at a spread to either LIBOR or an alternative base rate. Based on the current credit ratings of Oaktree Capital Management, L.P., the interest rate on borrowings is LIBOR plus 1.00% per annum and the commitment fee on the unused portions of the Revolver is 0.125% per annum. Utilizing interest-rate swaps, the majority of the Term Loan’s annual interest rate is fixed at 2.22% through January 2017, based on our current credit ratings. The Credit Agreement contains customary financial covenants and restrictions, including ones regarding a maximum leverage ratio of 3.0-to-1.0 and a minimum required level of assets under management (as defined in the credit agreement). The Second Amendment increases the minimum level of assets under management to $60 billion and makes certain other amendments to the provisions of the Credit Agreement. As of March 31, 2016, we had no outstanding borrowings under our $500 million revolving credit facility and were able to draw the full amount available without violating any financial maintenance covenants.

In September 2014, the Obligors issued and sold to certain accredited investors $50 million aggregate principal amount of our 3.91% Senior Notes, Series A, due September 3, 2024 (the “Series A Notes”), $100 million aggregate principal amount of our 4.01% Senior Notes, Series B, due September 3, 2026 (the “Series B Notes”) and $100 million aggregate principal amount of our 4.21% Senior Notes, Series C, due September 3, 2029 (the “Series C Notes” and together with the Series A Notes and the Series B Notes, the “2014 Notes”) pursuant to a note and guarantee agreement (the “Note Agreement”). The 2014 Notes are senior unsecured obligations of the Issuer, guaranteed by the Guarantors on a joint and several basis. Interest on the 2014 Notes is payable semi-annually.

The Note Agreement provides for certain affirmative and negative covenants, including financial covenants relating to the Obligors’ combined leverage ratio and minimum assets under management. In addition, the Note Agreement contains customary representations and warranties of the Obligors and customary events of default, in certain cases, subject to cure periods. The Issuer may prepay all, or from time to time any part of, the 2014 Notes at any time, subject to the Issuer’s payment of the applicable make-whole amount determined with respect to such principal amount prepaid. Upon the occurrence of a change of control, the Issuer will be required to make an offer to prepay the 2014 Notes together with the applicable make-whole amount determined with respect to such principal amount prepaid.

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In November 2009, our subsidiary Oaktree Capital Management, L.P. issued $250 million in aggregate principal amount of senior notes due December2, 2019 (the “2009 Notes”). The indenture governing the 2009 Notes contains customary financial covenants and restrictions that, among other things, limit Oaktree Capital Management, L.P. and the Guarantors’ ability, subject to certain exceptions, to incur indebtedness secured by liens on voting stock or profit-participating equity interests of their subsidiaries or merge, consolidate or sell, transfer or lease assets. The 2009 Notes do not contain financial maintenance covenants.

In addition to the 2009 Notes, as of March 31, 2016, we had two other series of senior notes outstanding, with an aggregate remaining principal balance of $100 million due in 2016. These senior notes contain customary financial covenants and restrictions that, among other things, restrict our subsidiaries from incurring additional indebtedness and our subsidiaries and us from merging, consolidating, transferring, leasing or selling assets, incurring certain liens and making restricted payments, subject to certain exceptions. In addition, the agreements contain the following financial covenants: (a) a maximum consolidated leverage ratio covenant that requires us and our subsidiaries to maintain a ratio, calculated by dividing consolidated total debt (for us and our subsidiaries) by Consolidated EBITDA (as defined in each agreement) for the last four fiscal quarters, below 3.0-to-1.0, (b) a maximum interest coverage ratio covenant that requires us and our subsidiaries to maintain a ratio, calculated by dividing Consolidated EBITDA for the last four fiscal quarters by consolidated interest expense (for us and our subsidiaries), below 4.0-to-1.0, and (c) an assets under management covenant that requires us to maintain assets under management above $20 billion.

We are required to maintain minimum net capital balances for regulatory purposes in the U.S. and certain non-U.S. jurisdictions in which we do business, which are met in part by retaining cash and cash-equivalents in those jurisdictions. As a result, we may be restricted in our ability to transfer cash between different jurisdictions. As of March 31, 2016, we were required to maintain approximately $76.2 million in net capital at these subsidiaries and were in compliance with all regulatory minimum net capital requirements as of such date.

Oaktree Holdings, Inc. and Oaktree AIF Holdings, Inc. have entered into a tax receivable agreement with OCGH unitholders that, as amended, provides for the payment to an exchanging or selling OCGH unitholder of 85% of the amount of cash savings, if any, in U.S. federal, state, local and foreign income taxes that they actually realize (or are deemed to realize in the case of an early termination payment by Oaktree Holdings, Inc. or Oaktree AIF Holdings, Inc., or a change of control) as a result of an increase in the tax basis of the assets owned by the Oaktree Operating Group. Assuming no material changes in the relevant tax law and that the Company earns sufficient taxable income to realize the full tax benefit of the increased amortization of the assets, as of March 31, 2016, future payments of this nature were estimated to aggregate $37.1 million over the period ending approximately in 2029 with respect to the 2007 Private Offering and $75.2 million over the period ending approximately in 2034 with respect to our initial public offering.

In May 2013, we issued and sold 8,050,000 Class A units in a public offering (the “May 2013 Offering”), resulting in $419.9 million in net proceeds to us. We did not retain any proceeds from the sale of Class A units in the May 2013 Offering, and we used the net proceeds from the May 2013 Offering to acquire interests in our business from certain Oaktree directors, employees and other investors, including certain senior executives and other members of our senior management. The exchange of OCGH units in connection with the May 2013 Offering resulted in increases in the tax basis of the tangible and intangible assets of the Oaktree Operating Group. As a result, we recorded a deferred tax asset of $134.4 million and an associated liability of $114.2 million for payments to OCGH unitholders under the tax receivable agreement, which together increased capital by $20.2 million. As of March 31, 2016, future payments with respect to the May 2013 Offering were estimated to aggregate $104.0 million over the period ending approximately in 2035.

In March 2014, we issued and sold 5,000,000 Class A units in a public offering (the “March 2014 Offering”), resulting in $296.7 million in proceeds to us. We did not retain any proceeds from the sale of Class A units in the March 2014 Offering. The proceeds from the March 2014 Offering were used to acquire interests in our business from certain Oaktree directors, employees and other investors, including certain senior executives and other members of our senior management. The exchange of OCGH units in connection with the March 2014 Offering resulted in increases in the tax basis of the tangible and intangible assets of the Oaktree Operating Group. As a result, we recorded a deferred tax asset of $94.2 million and an associated liability of $80.0 million for payments to OCGH unitholders under the tax receivable agreement, which together increased capital by $14.1 million. As of March 31, 2016, future payments with respect to the March 2014 Offering were estimated to aggregate $78.1 million over the period ending approximately in 2036.

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In March 2015, we issued and sold 4,600,000 Class A units in a public offering (the “March 2015 Offering”), resulting in $237.8 million in proceeds to us. We did not retain any proceeds from the sale of Class A units in the March 2015 Offering. The proceeds from the March 2015 Offering were used to acquire interests in our business from certain Oaktree directors, employees and other investors, including certain senior executives and other members of the Company’s senior management. The exchange of OCGH units in connection with the March 2015 Offering resulted in increases in the tax basis of the tangible and intangible assets of the Oaktree Operating Group. As a result, we recorded a deferred tax asset of $73.5 million and an associated liability of $62.5 million for payments to OCGH unitholders under the tax receivable agreement, which together increased capital by $11.0 million. As of March 31, 2016, future payments with respect to the March 2015 Offering were estimated to aggregate $62.5 million over the period ending approximately in 2037.

No amounts were paid under the tax receivable agreement during the three months ended March 31, 2016.

Contractual Obligations, Commitments and Contingencies

In the ordinary course of business, Oaktree and our consolidated funds enter into contractual arrangements that may require future cash payments. The following table sets forth information related to anticipated future cash payments as of March 31, 2016:  

	Last Nine Months of 2016		2017-2018		2019-2020		Thereafter		Total
	(in thousands)
Oaktree and Operating Subsidiaries:
Operating lease obligations (1)	$	10,619	$	19,070	$	21,608	$	50,185	$	101,482
Debt obligations payable	100,000		—		250,000		500,000		850,000
Interest obligations on debt (2)	29,909		60,066		37,952		72,314		200,241
Tax receivable agreement	19,393		41,882		45,375		250,201		356,851
Contingent consideration (3)	27,884		—		—		—		27,884
Commitments to Oaktree and third-party funds (4)	469,091		—		—		—		469,091
Subtotal	656,896		121,018		354,935		872,700		2,005,549
Consolidated Funds:
Debt obligations of CLOs	—		76,671		—		2,683,914		2,760,585
Interest on debt obligations of CLOs (2)	50,042		133,389		128,912		417,248		729,591
Commitments to fund investments (5)	5,531		—		—		—		5,531
Total	$	712,469	$	331,078	$	483,847	$	3,973,862	$	5,501,256

(1) We lease our office space under agreements that expire periodically through 2030. The table includes only guaranteed minimum lease payments for these leases and does not project other lease-related payments. These leases are classified as operating leases for financial statement purposes and as such are not recorded as liabilities in our condensed consolidated financial statements.

(2) Interest obligations include accrued interest on outstanding indebtedness. Where applicable, current interest rates are applied to estimate future interest obligations on variable-rate debt.

(3) This represents the undiscounted contingent consideration obligation as of March 31, 2016 related to the 2014 Highstar acquisition, which is payable in a combination of cash and fully-vested OCGH units. The amount of the contingent consideration obligation is based on the achievement of certain performance targets over a period of up to seven years from the acquisition date. Due to uncertainty in the timing of payment, if any, the entire amount is presented in the 2016 column.

(4) These obligations represent commitments by us to provide general partner capital funding to our funds and limited partner capital funding to funds managed by unaffiliated third parties. These amounts are generally due on demand and are therefore presented in the 2016 column. Capital commitments are expected to be called over a period of several years.

(5) These obligations represent commitments by our funds to make investments or fund uncalled contingent commitments. These amounts are generally due either on demand or by various contractual dates that vary by investment and are therefore presented in the 2016 column. Capital commitments are expected to be called over a period of several years.

In some of our service contracts or management agreements, we have agreed to indemnify third-party service providers or separate account clients under certain circumstances. The terms of the indemnities vary from contract to contract and the amount of indemnification liability, if any, cannot be determined and has neither been included in the above table nor recorded in our condensed consolidated financial statements as of March 31, 2016.

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As of March 31, 2016, none of the incentive income we had recognized was subject to clawback by the funds.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements. Please see note 15 for information on our commitments and contingencies.

Critical Accounting Policies

We prepare our condensed consolidated financial statements in accordance with GAAP. In applying many of these accounting principles, we need to make assumptions, estimates or judgments that affect the reported amounts of assets, liabilities, revenues and expenses in our condensed consolidated financial statements. We base our estimates and judgments on historical experience and other assumptions that we believe are reasonable under the circumstances. These assumptions, estimates or judgments, however, are both subjective and subject to change, and actual results may differ from our assumptions and estimates. If actual amounts are ultimately different from our estimates, the revisions are included in our results of operations for the period in which the actual amounts become known. We believe our critical accounting policies could potentially produce materially different results if we were to change underlying assumptions, estimates or judgments. For a summary of our significant accounting policies, please see the notes to our condensed consolidated financial statements included elsewhere in this quarterly report and the notes to our consolidated financial statements in our annual report. For a summary of our critical accounting policies, please see “Management’s Discussion and Analysis of Financial Condition and Result of Operations—Critical Accounting Policies” in our annual report.

The table below summarizes the investments and other financial instruments, by fund structure and fair-value hierarchy levels, held by our consolidated funds for each period presented in our condensed consolidated statements of financial condition (in thousands):

As of March 31, 2016	Level I		Level II			Level III		Total
Closed-end funds	$	3,621	$	(59,892	)	$	203,282	$	147,011
Open-end funds	20,980		40,115			60		61,155
Evergreen funds	53,896		(1,144		)	3,648		56,400
Total	$	78,497	$	(20,921	)	$	206,990	$	264,566

As of December 31, 2015
Closed-end funds	$	3,435,823	$	8,557,125	$	26,508,067	$	38,501,015
Open-end funds	992,683		3,814,699		80,210		4,887,592
Evergreen funds	383,349		585,417		629,430		1,598,196
Total	$	4,811,855	$	12,957,241	$	27,217,707	$	44,986,803

Recent Accounting Developments

Please see note 2 to our condensed consolidated financial statements included elsewhere in this quarterly report for information regarding recent accounting developments.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

In the normal course of business, we are exposed to a broad range of risks inherent in the financial markets in which we participate, including price risk, interest-rate risk, access to and cost of financing risk, liquidity risk, counterparty risk and foreign exchange-rate risk. Potentially negative effects of these risks may be mitigated to a certain extent by those aspects of our investment approach, investment strategies, fundraising practices or other business activities that are designed to benefit, either in relative or absolute terms, from periods of economic weakness, tighter credit or financial market dislocations.

Our predominant exposure to market risk is related to our role as general partner or investment adviser to our funds and the sensitivities to movements in the fair value of their investments on management fees, incentive income and investment income. The fair value of the financial assets and liabilities of our funds may fluctuate in response to changes in, among many factors, the fair value of securities, foreign exchange rates, commodities prices and interest rates.

Price Risk

Impact on Net Change in Unrealized Appreciation (Depreciation) on Consolidated Funds’ Investments

As of March 31, 2016, we had investments, at fair value of $3.0 billion related to our consolidated funds, primarily consisting of investments held by our CLOs. We estimate that a 10% decline in market values would result in a decrease in unrealized appreciation (depreciation) on the consolidated funds’ investments of $303.3 million. Of this decline, approximately $143.5 million would impact net income attributable to Oaktree Capital Group, LLC, with the remainder attributable to non-controlling interests and third-party debt holders in our CLOs. The magnitude of the impact on net income attributable to Oaktree Capital Group, LLC is largely affected by the percentage of our equity ownership interest and levered nature of our CLO investments.

Impact on Segment Management Fees

Management fees are generally assessed in the case of (a) our open-end and evergreen funds, based on NAV, and (b) our closed-end funds, based on committed capital or drawn capital during the investment period and, during the liquidation period, based on the lesser of (i) the total funded committed capital or (ii) the cost basis of assets remaining in the fund. Management fees are affected by changes in market values to the extent they are based on NAV. For the three months ended March 31, 2016 and 2015, NAV-based management fees represented approximately 31% and 36%, respectively, of total management fees. Based on investments held as of March 31, 2016, we estimate that a 10% decline in market values of the investments held in our funds would result in an approximate $5.9 million decrease in the amount of quarterly management fees. These estimated effects are without regard to a number of factors that would be expected to increase or decrease the magnitude of the change to degrees that are not readily quantifiable, such as the use of leverage facilities in certain of our funds or the timing of fund flows.

Impact on Segment Incentive Income

Incentive income is recognized only when it is known or knowable, which in the case of (a) our closed-end funds, generally occurs only after all contributed capital and an annual preferred return on that capital (typically 8%) have been distributed to the fund’s investors and (b) our active evergreen funds, generally occurs as of December 31, based on the increase in the fund’s NAV during the year, subject to any high-water marks or hurdle rates. In the case of closed-end funds, the link between short-term fluctuations in market values and a particular period’s incentive income may in part be indirect. Thus the effect on incentive income of a 10% decline in market values is not readily quantifiable. A decline in market values would be expected to cause a decline in incentive income.

Impact on Segment Investment Income

Investment income or loss arises from our pro-rata share of income or loss from our investments, generally in our capacity as general partner in our funds and as an investor in our CLOs and third-party managed funds or companies. This income is directly affected by changes in market risk factors. Based on investments held as of March 31, 2016, a 10% decline in fair values of the investments held in our funds and other holdings would result in a $240.0 million decrease in the amount of investment income. The estimated decline of $240.0 million is greater than 10% of the March 31, 2016 corporate investments balance primarily due to the levered nature of our CLO investments, which have been a growing component of our corporate investments. These estimated effects are without regard to a number of factors that would be expected to increase or decrease the magnitude of the change to degrees that are not readily quantifiable, such as the use of leverage facilities in certain of our funds, the timing of fund flows or the timing of new investments or realizations.

Exchange-rate Risk

Our business is affected by movements in the rate of exchange between the U.S. dollar and non-U.S. dollar currencies in the case of (a) management fees that vary based on the NAV of our funds that hold investments denominated in non-U.S. dollar currencies, (b) management fees received in non-U.S. dollar currencies, (c) operating expenses for our foreign offices that are denominated in non-U.S. dollar currencies and (d) cash balances we hold in non-U.S. dollar currencies. We manage our exposure to exchange-rate risks through our regular operating activities and, when appropriate, through the use of derivative instruments.

We estimate that for the three months ended March 31, 2016, without considering the impact of derivative instruments, a 10% decline in the average exchange rate of the U.S. dollar would have resulted in the following approximate effects on our segment results:

• our management fees (relating to (a) and (b) above) would have increased by $2.7 million;

83

• our operating expenses would have increased by $3.0 million;

• OCGH interest in net income of consolidated subsidiaries would have decreased by $0.2 million; and

• our income tax expense would have decreased by $0.1 million.

These movements would not have materially affected net income attributable to OCG.

At any point in time, some of the investments held by our closed-end and evergreen funds may be denominated in non-U.S. dollar currencies on an unhedged basis. Changes in currency rates could affect incentive income, incentives created (fund level) and investment income with respect to such closed-end and evergreen funds; however, the degree of impact is not readily determinable because of the many indirect effects that currency movements may have on individual investments.

Credit Risk

We are party to agreements providing for various financial services and transactions that contain an element of risk in the event that the counterparties are unable to meet the terms of such agreements. In such agreements, we depend on the respective counterparty to make payment or otherwise perform. We generally endeavor to minimize our risk of exposure by limiting to reputable financial institutions the counterparties with which we enter into financial transactions. In other circumstances, availability of financing from financial institutions may be uncertain due to market events, and we may not be able to access these financing markets.

Interest-rate Risk

As of March 31, 2016, Oaktree and its operating subsidiaries had $846 million in debt obligations, net of debt issuance costs, consisting of four senior notes issuances and a funded term loan. Each senior notes issuance accrues interest at a fixed rate. The funded term loan accrues interest at a variable rate; however, we entered into interest-rate swaps that effectively converted the majority of the term loan’s floating interest rate to fixed through January 2017. As a result, for the three months ended March 31, 2016, there would not have been a material impact to interest expense attributable to Oaktree and its operating subsidiaries resulting from a 100-basis point increase in interest rates. Of the $1.0 billion of aggregate segment cash and U.S. Treasury securities as of March 31, 2016, we estimate that Oaktree and its operating subsidiaries would generate an additional $9.6 million in interest income on an annualized basis as a result of a 100-basis point increase in interest rates.

Our consolidated CLOs have debt obligations, most of which accrue interest at variable rates. Changes in these rates would affect the amount of interest payments that our CLOs would have to make, impacting future earnings and cash flows. As of March 31, 2016, $2.7 billion was outstanding under these debt obligations. We estimate that interest expense relating to variable-rate debt would increase on an annualized basis by $25.3 million in the event interest rates were to increase by 100 basis points.

As credit-oriented investors, we are also subject to interest-rate risk through the securities we hold in our consolidated funds. A 100-basis point increase in interest rates would be expected to negatively affect prices of securities that accrue interest income at fixed rates and therefore negatively impact the net change in unrealized appreciation (depreciation) on consolidated funds’ investments. The actual impact is dependent on the average duration of such holdings. Conversely, securities that accrue interest at variable rates would be expected to benefit from a 100-basis point increase in interest rates because these securities would generate higher levels of current income and therefore positively impact interest and dividend income. In cases where our funds pay management fees based on NAV, we would expect our segment management fees to experience a change in direction and magnitude corresponding to that experienced by the underlying portfolios.

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Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) that are designed to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing disclosure controls and procedures, our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures. The design of any disclosure controls and procedures also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired objectives.

Our management, including our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures pursuant to Rule 13a-15 under the Exchange Act as of the end of the period covered by this report. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of the period covered by this report, our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) are effective at the reasonable assurance level to accomplish their objectives of ensuring that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting

No changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during our most recent quarter, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

For a discussion of legal proceedings, please see the section entitled “Legal Actions” in note 15 to our condensed consolidated financial statements included elsewhere in this quarterly report, which section is incorporated herein by reference.

Item 1A. Risk Factors

For a discussion of our potential risks and uncertainties, please see the information under “Risk Factors” in our annual report. There have been no material changes to the risk factors disclosed in our annual report.

The risks described in our annual report are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition or results of operations.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

On March 31, 2016, we issued 13,646 Class A units to a departing employee in consideration of services rendered under our 2011 Equity Incentive Plan, which was exempt from registration under the Securities Act in reliance on Section 4(a)(2) of the Securities Act.

Under our operating agreement, we are required to issue one Class B unit for each OCGH unit issued. Accordingly, on March 31, 2016, we issued 622,676 Class B units to OCGH which corresponded to the number of OCGH units issued by OCGH pursuant to our 2011 Equity Incentive Plan, subject to time-based vesting.

No purchase price was paid by OCGH to the Company for the issuances of the Class B units to OCGH. These issuances, to the extent they constitute sales, were exempt from registration under the Securities Act in reliance on Section 4(a)(2) of the Securities Act, as transactions by an issuer not involving any public offering.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

None.

Item 5. Other Information

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.

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Closed-end Funds

			As of March 31, 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	—	$	7,743	$	—	$	—		$	—	$	—		$	—	$	—	$	—	$	—	n/a		n/a		n/a
Oaktree Opportunities Fund X (6)	Jan. 2016	Jan. 2019	3,205		481		37			1		517			3,125		—		7		502		nm		nm		1.1x
Oaktree Opportunities Fund IX	Jan. 2014	Jan. 2017	5,066		5,066		(218		)	4		4,844			4,966		—		—		5,873		0.9	%	(2.4	)%	1.0
Oaktree Opportunities Fund VIIIb	Aug. 2011	Aug. 2014	2,692		2,692		454			1,133		2,013			2,190		52		—		2,422		7.4		4.1		1.3
Special Account B	Nov. 2009	Nov. 2012	1,031		1,099		440			1,062		477			464		15		—		483		12.4		9.8		1.5
Oaktree Opportunities Fund VIII	Oct. 2009	Oct. 2012	4,507		4,507		1,816			4,327		1,996			2,040		144		94		1,852		11.7		8.3		1.5
Special Account A	Nov. 2008	Oct. 2012	253		253		276			463		66			75		42		13		—		27.8		22.4		2.1
OCM Opportunities Fund VIIb	May 2008	May 2011	10,940		9,844		8,726			17,329		1,241			1,378		1,453		243		—		22.0		16.7		2.0
OCM Opportunities Fund VII	Mar. 2007	Mar. 2010	3,598		3,598		1,454			4,597		455			769		81		—		572		10.3		7.6		1.5
OCM Opportunities Fund VI	Jul. 2005	Jul. 2008	1,773		1,773		1,301			2,833		241			391		134		120		—		12.0		8.8		1.8
OCM Opportunities Fund V	Jun. 2004	Jun. 2007	1,179		1,179		965			2,097		47			—		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	%	16.3	%
Real Estate Opportunities
Oaktree Real Estate Opportunities Fund VII (8)	Jan. 2016	Jan. 2020	$	2,104	$	—	$	(5	)	$	3	$	(8	)	$	1,542	$	—	$	—	$	—	n/a		n/a		n/a
Oaktree Real Estate Opportunities Fund VI	Aug. 2012	Aug. 2016	2,677		2,677		1,022			513		3,186			2,610		10		187		2,637		20.7	%	14.0	%	1.4x
Oaktree Real Estate Opportunities Fund V	Mar. 2011	Mar. 2015	1,283		1,283		888			1,202		969			538		56		113		528		18.2		13.3		1.8
Special Account D	Nov. 2009	Nov. 2012	256		264		163			285		142			88		3		13		96		14.3		12.2		1.7
Oaktree Real Estate Opportunities Fund IV	Dec. 2007	Dec. 2011	450		450		385			647		188			127		23		49		25		16.2		11.1		2.0
OCM Real Estate Opportunities Fund III	Sep. 2002	Sep. 2005	707		707		620			1,290		37			—		115		7		—		15.3		11.3		2.0
Legacy funds (7).	Various	Various	1,634		1,610		1,399			3,009		—			—		112		—		—		15.2		12.0		1.9
																							15.7	%	12.2	%
Real Estate Debt
Oaktree Real Estate Debt Fund (9).	Sep. 2013	Sep. 2016	$	1,112	$	415	$	48		$	276	$	187		$	404	$	—	$	7	$	155	21.5	%	15.1	%	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 III	Nov. 2011	Nov. 2016	€	3,164	€	2,750	€	1,373		€	285	€	3,838		€	3,240	€	—	€	267	€	3,031	22.1	%	14.5	%	1.6x
OCM European Principal Opportunities Fund II	Dec. 2007	Dec. 2012	€	1,759	€	1,731	€	495		€	1,476	€	750		€	1,079	€	29	€	—	€	1,008	9.6		5.6		1.4
OCM European Principal Opportunities Fund	Mar. 2006	Mar. 2009	$	495	$	473	$	458		$	846	$	85		$	—	$	48	$	39	$	—	11.8		9.0		2.1
																							14.0	%	9.3	%
European Private Debt
Oaktree European Capital Solutions Fund (6) (9)	Dec. 2015	Dec. 2018	€	140	€	11	€	(1	)	€	—	€	10		€	28	€	—	€	—	€	11	nm		nm		n/a
Oaktree European Dislocation Fund (9).	Oct. 2013	Oct. 2016	€	294	€	172	€	25		€	139	€	58		€	168	€	—	€	4	€	43	22.6	%	16.1	%	1.2x
Special Account E	Oct. 2013	Apr. 2015	€	379	€	261	€	44		€	167	€	138		€	158	€	—	€	7	€	122	14.0		10.7		1.2
																							16.3	%	12.0	%

87

			As of March 31, 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 (6)	Nov. 2015	Nov. 2018	$	1,223	$	177		$	24		$	31	$	170	$	1,167		$	—	$	5		$	153	nm			nm		1.2x
Oaktree Principal Fund V	Feb. 2009	Feb. 2015	2,827		2,586			387			1,277		1,696		1,839			50		—			2,222		8.1	%		3.3	%	1.3
Special Account C	Dec. 2008	Feb. 2014	505		460			185			352		293		354			21		—			292		11.4			8.0		1.5
OCM Principal Opportunities Fund IV	Oct. 2006	Oct. 2011	3,328		3,328			2,028			3,701		1,655		1,037			22		96			1,536		10.7			8.1		1.7
OCM Principal Opportunities Fund III	Nov. 2003	Nov. 2008	1,400		1,400			879			2,166		113		—			149		22			—		13.8			9.5		1.8
Legacy funds (7).	Various	Various	2,301		2,301			1,839			4,138		2		—			236		—			—		14.5			11.6		1.8
																									12.7	%		9.2	%
Power Opportunities
Oaktree Power Opportunities Fund IV (6)	Nov. 2015	Nov. 2020	$	1,106	$	75		$	(6	)	$	—	$	69	$	1,078		$	—	$	—		$	76	nm			nm		1.0x
Oaktree Power Opportunities Fund III	Apr. 2010	Apr. 2015	1,062		685			346			570		461		397			14		52			274		23.5	%		14.0	%	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
																									34.8	%		26.6	%
Infrastructure Investing
Highstar Capital IV (12).	Nov. 2010	Nov. 2016	$	2,484	$	1,977		$	499		$	409	$	2,067	$	1,882		$	—	$	7		$	1,568	18.0	%		9.8	%	1.4x
Mezzanine Finance
Oaktree Mezzanine Fund IV (6) (9)	Oct. 2014	Oct. 2019	$	852	$	186		$	11		$	9	$	188	$	182		$	—	$	—		$	189	nm			nm		1.1x
Oaktree Mezzanine Fund III (13).	Dec. 2009	Dec. 2014	1,592		1,423			356			1,318		461		431			10		16			443		15.1	%	10.3% / 8.1%			1.3
OCM Mezzanine Fund II	Jun. 2005	Jun. 2010	1,251		1,107			530			1,489		148		164			—		—			160		11.4			7.9		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		$	8		$	—	$	228	$	364		$	—	$	—		$	245	6.2	%		2.4	%	1.1x
Special Account F	Jan. 2014	Jan. 2017	253		142			6			—		148		146			—		—			159		5.1			2.9		1.1
					72,403		(11)								35,073		(11)			1,429		(11)			5.8	%		2.6	%
		Other (15)			12,107										8,080					9
		Total (16)			$	84,510	(17)								$	43,153				$	1,438

(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 March 31, 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 March 31, 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 March 31, 2016 spot rate of $1.14.

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(12) The fund includes co-investments of $482 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 March 31, 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 10.3% and Class B interests was 8.1%. The combined net IRR for Class A and Class B interests was 9.5%.

(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 $534 million as of March 31, 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 $547 million of management fee-generating AUM.

(17) The aggregate change in drawn capital for the three months ended March 31, 2016 was $0.8 billion.

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Open-end Funds

			Manage- ment Fee-gener- ating AUM as of March 31, 2016		Twelve Months Ended March 31, 2016						Since Inception through March 31, 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		$	15,029	(2.9	)%	(3.4	)%	(4.6	)%	9.2	%	8.7	%	8.2	%	0.77	0.52
Global High Yield Bonds	Nov. 2010		4,189		(2.4	)	(2.9	)	(3.3	)	6.4		5.9		5.5		0.93	0.83
European High Yield Bonds	May 1999		1,309		2.4		1.9		1.5		8.0		7.5		6.1		0.67	0.40
U.S. Convertibles	Apr. 1987		3,539		(9.7	)	(10.1	)	(7.3	)	9.2		8.7		7.9		0.46	0.33
Non-U.S. Convertibles	Oct. 1994		1,709		(2.3	)	(2.8	)	(2.2	)	8.4		7.9		5.7		0.76	0.39
High Income Convertibles	Aug. 1989		761		0.0		(0.7	)	(4.7	)	11.2		10.4		7.9		1.01	0.55
U.S. Senior Loans	Sept. 2008		1,607		(3.5	)	(4.0	)	(1.1	)	5.6		5.1		4.8		0.96	0.56
European Senior Loans	May 2009		1,643		2.9		2.4		1.7		8.6		8.1		9.3		1.67	1.67
Emerging Markets Equities	Jul. 2011		3,153		(15.6	)	(16.3	)	(12.0	)	(4.0	)	(4.8	)	(4.1	)	(0.20)	(0.22)
Total			$	32,939

(1) Returns represent time-weighted rates of return, including reinvestment of income, net of commissions and transaction costs. The returns for Relevant Benchmarks are presented on a gross basis.

Evergreen Funds

		As of March 31, 2016							Twelve Months Ended March 31, 2016				Since Inception through March 31, 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	$	2,975	$	2,247	$ n/a			(5.5	)%	(6.1	)%	6.2	%	4.2	%
Value Opportunities	Sept. 2007	1,265		1,210		—		(3)	(13.9	)	(15.8	)	8.1		4.0
Value Equities (4)	May 2012	299		234		—		(3)	(14.4	)	(15.7	)	15.0		9.6
Emerging Markets Absolute Return	Apr. 1997	145		125		—		(3)	(0.2	)	(1.7	)	13.2		8.9
				3,816		—
Restructured funds				—		4
Total (2) (5)				$	3,816	$	4

(1) Returns represent time-weighted rates of return.

(2) Includes two closed-end funds with an aggregate $738 million and $534 million of AUM and management fee-generating AUM, respectively.

(3) As of March 31, 2016, the aggregate depreciation below high-water marks previously established for individual investors in the fund totaled approximately $272 million for Value Opportunities, $28 million for Value Equities and $7 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 $547 million of management fee-generating AUM as of March 31, 2016.

90

Item 6. Exhibits

For a list of exhibits filed with this report, refer to the Exhibits Index on the page immediately preceding the exhibits, which Exhibit Index is incorporated herein by reference.

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: May 9, 2016

Oaktree Capital Group, LLC
By:	/s/    Susan Gentile
Name:	Susan Gentile
Title:	Chief Accounting Officer and Managing Director and Authorized Signatory

92

EXHIBITS INDEX

Exhibit No.	Description of Exhibit
3.1	Restated Certificate of Formation of the Registrant (incorporated by reference to Exhibit 3.1 to the Registrant’s Registration Statement on Form S-1, filed with the SEC on June 17, 2011).
3.2	Third Amended and Restated Operating Agreement of the Registrant dated as of August 31, 2011 (incorporated by reference to Exhibit 3.2 to the Registrant’s Registration Statement on Form S-1, filed with the SEC on September 2, 2011).
3.3	Amendment to Third Amended and Restated Operating Agreement of the Registrant dated as of March 29, 2012 (incorporated by reference to Exhibit 3.3 to the Registrant’s Registration Statement on Form S-1, filed with the SEC on March 30, 2012).
3.4	Unit Designation, effective November 16, 2015 (incorporated by reference to Exhibit 3 to the Registrant’s Current Report on Form 8-K, filed with the SEC on November 18, 2015).
10.1	Second Amendment to Credit Agreement, dated as of March 31, 2016, by and among Oaktree Capital Management, L.P., Oaktree Capital II, L.P., Oaktree AIF Investments, L.P., Oaktree Capital I, L.P., the Lenders party thereto, and Wells Fargo Bank, National Association, as administrative agent for the Lenders (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K, filed with the SEC on April 6, 2016).
10.2*	Form of Oaktree Capital Group, LLC Class A Restricted Unit Award Agreement.
10.3*	Form of Oaktree Capital Group Holdings, L.P. Restricted Unit Award Agreement.
10.4*	Form of Oaktree Capital Group, LLC Class A Restricted Unit Award Agreement for Outside Directors.
10.5*	Form of Profit Sharing Letter Agreement.
31.1	Certification of the Principal Executive Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the Exchange Act, as adopted, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of the Principal Financial Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the Exchange Act, as adopted, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of the Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith).
32.2	Certification of the Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith).
101.INS	XBRL Instance Document.
101.SCH	XBRL Taxonomy Extension Schema Document.
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document.
101.LAB	XBRL Taxonomy Extension Label Linkbase Document.
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document.
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document.

* Management contract or compensatory plan or arrangement.

93