This brochure is provided for information purposes only and does not constitute, and should not be construed

as, an offer to sell, or a solicitation of

an offer to buy, interests in Oaktree European Principal Fund III, L.P. (the Fund) or its related feeder fund(s) and parallel fund(s). Any such offer
may only be made pursuant to the Funds confidential private placement memorandum and related supplements (the PPM), subscription
documents and constituent documents in their final form.
This brochure does not constitute and should not be construed as investment, legal, or tax advice, or a recommendation or opinion regarding the
merits of investing in the Fund or its related feeder fund(s) and parallel fund(s). Each potential investor should consult its own counsel, accountant,
and/or investment adviser as to the legal, tax, and related matters concerning its investment. A potential investor considering an investment in the
Fund or its related feeder fund(s) and parallel fund(s) should read this brochure in conjunction with the PPM. The PPM contains a more complete
description of the Funds investment practices, terms and conditions, restrictions, and other factors relevant to a decision to invest, and also contains
tax information and risk disclosures that are important to any investment decision. All information herein is subject to and qualified in its entirety by
the PPM. No person has been authorized to make any statement concerning the Fund or its related feeder fund(s) and parallel fund(s) other than as
set forth in the PPM and any such statements, if made, may not be relied upon. Terms used but not defined herein shall have the meanings set forth
in the PPM.
Responses to any inquiry that may involve the rendering of personalized investment advice or effecting or attempting to effect transactions in
securities will not be made absent compliance with applicable laws or regulations (including broker dealer, investment adviser, or applicable agent or
representative registration requirements), or applicable exemptions or exclusions therefrom.
See the Appendix on page 37 for relevant marketing disclosures.
The term Oaktree used herein refers to Oaktree Capital Management, L.P. and, where applicable, its affiliates.
None of the information contained herein has been filed with the U.S. Securities and Exchange Commission, any securities administrator under any
state securities laws,, or any
y other U.S. or non-U.S. g
governmental or self-regulatory
g y authority.
y No ggovernmental authority
y has ppassed on the merits of
this offering or the adequacy of the information contained herein. Any representation to the contrary is unlawful.
This brochure is being provided on a confidential basis solely for the information of those persons to whom it is given. The materials, including the
information contained herein, may not be copied, reproduced, republished, posted, transmitted, distributed, disseminated, or disclosed, in whole or in
part, to any other person in any way without our prior written consent. By accepting this brochure, you agree that you will comply with these
confidentiality restrictions and acknowledge that your compliance is a material inducement to our providing this brochure to you.

oaktree european principal fund iii, l.p.

Delivered solely to San Diego County Employees Retirement Association; Presentation of February 17, 2011
OAKTREE EUROPEAN
U.S. HIGH YIELD
PRINCIPAL
BONDFUND
MANAGEMENT
III, L.P.

Table of Contents

Tab Section Title Page

1 | Overview of Oaktree and the Principal Group 1

2 | The European Opportunity 6

3 | European Investment Approach 13

4 | In estment Performance History

Investment Histor 23

5 | Case Study: Countrywide 24

6 | Information, Disclosures and Disclaimers 31

Delivered solely to San Diego County Employees Retirement Association; Presentation of February 17, 2011
OAKTREE EUROPEAN
U.S. HIGH YIELD
PRINCIPAL
BONDFUND
MANAGEMENT
III, L.P.

Overview of Oaktree Profile

Founded April
p 1995

Invests in less efficient and alternative markets

Over $82 billion of assets under management across highly synergistic investment platforms

Eight Principals and over 605 staff members, of which approximately 145 are equity owners

Offices in 13 cities in 10 countries:

US
U.S.: L Angeles
Los A l (headquarters),
(h d ) New
N York
Y k and
dSStamford
f d (C
(Connecticut)
i )

Europe: Amsterdam*, Frankfurt, London, Luxembourg* and Paris

Asia: Beijing,
j g, Hongg Kong,
g, Seoul,, Singapore
g p and Tokyo
y

* Office of affiliates of Oaktree-managed funds

As of December 31, 2010

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OAKTREE EUROPEAN
U.S. HIGH YIELD
PRINCIPAL
BONDFUND
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III, L.P.

Overview of Oaktree Mission

Operate
p according
g to a strong,
g, unifying
y g investment and business philosophy
p p y

Provide investment management within a limited number of specialized niche markets

Generate
G t superior
i andd consistent
i t t performance
f while
hil bearing
b i less-than-commensurate
l th t risk
ik

Build long-term relationships with satisfied clients

Maintain a harmonious workplace and avoid personnel turnover

Delivered solely to San Diego County Employees Retirement Association; Presentation of February 17, 2011
OAKTREE EUROPEAN
U.S. HIGH YIELD
PRINCIPAL
BONDFUND
MANAGEMENT
III, L.P.

Overview of Oaktree Asset Breakdown

investment areas
Assets (($ millions)*
)

HIGH YIELD DEBT CONTROL INVESTING clients

U.S. High Yield Bonds $13,805 Principal Investments $8,563 Assets (millions)* % of Assets
European High Yield Bonds 1,939 European Principal 3,796 Public funds $31,959 39%
Corporate 24 007
24,007 29
U.S. Senior Loans 1,828 Asia Principal 537
Endowments and foundations 6,183 8
European Senior Loans 1,173 Power Opportunities 1,286
Private clients 5,987 7
Mezzanine Finance 2,612 Subtotal $14,182
Insurance companies 5,822 7
High Yield Plus 144 Mutual funds 2,421 3
Subtotal ,
$21,501 Taft-Hartley
Taft Hartley 866 1
REAL ESTATE
Other 5,204 6
Real Estate
$3,957 Total Assets $82,449 100%
CONVERTIBLE SECURITIES Opportunities
Subtotal $3,957
U.S. Convertibles $5,140
Non-U.S. Convertibles 2,392 investment structure
High Income Convertibles 1,318
Assets ($ millions)*
Subtotal $8,850 LISTED EQUITIES
Marketable Securities $27,596
Emerging Markets Closed-end Private Partnerships 52,137
$712
Absolute Return
DISTRESSED DEBT Evergreen 2,716
Japan Opportunities 144
Distressed Opportunities $31,386 Subtotal $82,449
Subtotal $856
Value Opportunities 1,717
Subtotal $33,103
Total $82,449

* As of December 31, 2010

3

Delivered solely to San Diego County Employees Retirement Association; Presentation of February 17, 2011
 OAKTREE EUROPEAN
U.S. HIGH YIELD
PRINCIPAL
BONDFUND
MANAGEMENT
III, L.P.

The U.S. Principal Group Overview

U.S. strategy founded in 1994 to focus on control investing

$10.3 billion of committed capital raised and $9.1 billion invested via 7 funds/accounts

Investments in approximately 172 companies worldwide

Established
bli h d trackk recordd investing
i i through
h h multiple
l i l economic
i cycles
l

Integrated international presence and cross-border capabilities

Focused on middle market

Cohesive, talented and experienced team

28 investment professionals, including 8 managing directors, and over a dozen industry partners or groups

The two senior managers have approximately 30 years of combined tenure in the Principal Group

Minimal turnover since inception

As of September 30, 2010

4

Delivered solely to San Diego County Employees Retirement Association; Presentation of February 17, 2011
OAKTREE EUROPEAN
U.S. HIGH YIELD
PRINCIPAL
BONDFUND
MANAGEMENT
III, L.P.

The European Principal Group Overview

In 2005, Oaktree created a specialized team for the unique European opportunity

Control investments in twelve companies and debt investments in more than twenty others

From 2004 2007, unprecedented European debt issuance and financial complexity from a standing start

EPOF I $495 million fund raised in 2006 and invested pre-crisis (93% of fund invested in 2006/2007)

EPOF II 1.759 billion fund raised in 2007/2008 and invested during and after the crisis

Largest distress-focused
di f d team iin Europe, with
i h a market-leading
k l di position
ii

Completed deals in all major European countries

EPG track record has established that distressed private equity/distress-for-control is an attractive method of investing
in Europe

Investments have been made at all points in the cycle

Delivered solely to San Diego County Employees Retirement Association; Presentation of February 17, 2011
OAKTREE EUROPEAN
U.S. HIGH YIELD
PRINCIPAL
BONDFUND
MANAGEMENT
III, L.P.

The European Opportunity

We believe Europe will see a wave of restructurings in the next five years
Estimated 1 trillion of leveraged loans outstanding
Significant need for both debt-for-equity conversions and new money
The most attractive situations (at the biggest discounts) will require both operational and balance sheet restructuring

Restructurings expected to be driven by numerous factors working in concert, many of which have been building for a long
time
Low-cost Asian manufacturing sophistication and capacity is increasing
Changes in retail landscape (pre-crisis) and consumer behavior (post-crisis) is shifting retailers influence
Volatility of input prices and exchange rates
Global nature of markets and suppliers

As Europe is not cost-competitive on a global basis, significant business model changes are required to respond to
globalization

Delivered solely to San Diego County Employees Retirement Association; Presentation of February 17, 2011
OAKTREE EUROPEAN
U.S. HIGH YIELD
PRINCIPAL
BONDFUND
MANAGEMENT
III, L.P.

The European Opportunity (continued)

Company-level strategic and operational changes must be executed in the face of unprecedented levels of leverage and a
coming wave of amortization

Decade-long period of easy access to capital and low borrowing costs deferred the need to restructure

Companies currently unable to implement strategic decisions given leverage and high cost of restructuring in Europe

We believe the best opportunities for distress-for-control and new money restructurings are yet to come

In contrast to U.S.
U S banks,
banks European banks still hold the majority of leveraged loans as they lack selling mentality and
infrastructure

Banks often did not sell syndicated leveraged loans and cannot sell bilateral loan exposures

Leveraged capital structures used more senior debt than in U.S.

Delivered solely to San Diego County Employees Retirement Association; Presentation of February 17, 2011
 OAKTREE EUROPEAN
U.S. HIGH YIELD
PRINCIPAL
BONDFUND
MANAGEMENT
III, L.P.

The European Opportunity (continued)

800 billion - 1 trillion of senior leveraged loans

Bilateral Loans Syndicated Leveraged Loans

Traditional financing for middle-market
middle market companies 450 - 500 billion in total size
Direct relationship between borrower and lender Underwriting bank disintermediates relationship between borrower and
lender(s)
Documentation resembles a corporate loan
Developed in London from 2004 to 2008
yp ca y, banks
Typically, ba s cannot
ca ot sell
se without
w t out borrower
bo owe consent
co se t
Limited protection offered to unsecured creditors in Europe means there
Development of syndicated loan market pushed bilateral market to is significantly more senior debt in a typical capital structure compared
underwrite increased risk to U.S.
Traditional banks own 100% of the debt in the bilateral market Banks own 60% - 80% of syndicated leveraged loans

Limited selling by banks in fourth quarter 2008 and in 2009

cannot access european

cannot accessopportunity through
this opportunity settraditional u.s.
through u.s. distress-for-control
distress approach approach

Delivered solely to San Diego County Employees Retirement Association; Presentation of February 17, 2011
 OAKTREE EUROPEAN
U.S. HIGH YIELD
PRINCIPAL
BONDFUND
MANAGEMENT
III, L.P.

European Debt Maturities Syndicated Loans

maturities of western european leveraged loan maturity1

Unprecedented debt issuance fueled by aggressive ( in billions)
monetary policy and excess liquidity

Unprecedented issuance in syndicated loan 64.5

62.4
market

Leverage multiples reached unprecedented

levels in virtually every asset class

Proliferation of innovative debt structures

37 0
37.0
31.9

22.5

6.1 5.6
0.2 0.7

2010 2011 2012 2013 2014 2015 2016 2017 2018

1 Source: Credit Suisse (includes loans denominated in USD and Western European currencies)
9

Delivered solely to San Diego County Employees Retirement Association; Presentation of February 17, 2011
OAKTREE EUROPEAN
U.S. HIGH YIELD
PRINCIPAL
BONDFUND
MANAGEMENT
III, L.P.

Distressed Database Syndicated Leveraged Loans

European
p Principal
p Groupp (EPG)
( ) uses a database approach
pp to map
p the universe of distressed loans

Listed by company, with columns for quantitative and qualitative data fields

Includes ONLY syndicated leveraged loans

Tracks
T k approximately
i l 1,200
1 200 companies
i andd 450-500
450 500 billi
billion off leveraged
l d loans
l 1

leveraged loan database

leverage level
at syndication number of deals % of whole total debt ( in billions) avg debt ( in millions)

All 442 100% 279 632

5.0x EBITDA 291 66 212 728

6.0x 172 39 147 857

7.0x 60 14 60 999

8.0x 19 4 31 1,613

9.0x 5 1 10 1,903

1 Oaktree estimate

10

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 OAKTREE EUROPEAN
U.S. HIGH YIELD
PRINCIPAL
BONDFUND
MANAGEMENT
III, L.P.

Bilateral Loan Market

Bilateral leveraged loan market is likely to be similar in size to syndicated leveraged loan market
Traditional channel with very little transparency; cannot apply database approach
Dominated by family-controlled companies or subsidiaries of larger corporations
Difficult to access

As banks have the ability to defer losses on bilateral loans, situations only materialize after several years of under
performance
Catalyst is the need for liquidity or belief that there is permanent impairment

Frequently banks cannot sell loans without borrowers consent

Sourced
S d th
throughh our relationships
l ti hi withith banks
b k andd proprietary
i t transactions
t ti

11

Delivered solely to San Diego County Employees Retirement Association; Presentation of February 17, 2011
OAKTREE EUROPEAN
U.S. HIGH YIELD
PRINCIPAL
BONDFUND
MANAGEMENT
III, L.P.

European Banks

Pressure on banks to address troubled credits will continue to increase

Troubled leveraged loans and bilateral loans restrict banks ability to deploy new capital
Increasing regulation and requirement of transparency

Many
M bborrowers are not amortizing
i i debt
d b or improving
i i credit
di quality
li
Demand remains below 2007 peak levels
Interest costs were swapped at the time of borrowing
Capital expenditures and working capital need to be funded
Borrowers unable to restructure low-margin operations due to high cash cost and significant amount of leverage
End of government subsidy programs

Precedent suggests that banks will resist the need to restructure debt and to crystallize losses for as long as possible
Stress tests and Basel III have been watered down

p are liquidity
Banks in Europe q y constrained
A significant amount of debt issued by major European banks is due in the next three years

12

Delivered solely to San Diego County Employees Retirement Association; Presentation of February 17, 2011
OAKTREE EUROPEAN
U.S. HIGH YIELD
PRINCIPAL
BONDFUND
MANAGEMENT
III, L.P.

European Investment Approach

EPG pursues several types of control investing

Distress-for-control
New-money restructurings
Hybrid transactions
Special situation private equity

For most transactions, the unifying theme is a significant element of distress and/or industry dislocation
Forced sellers of debt or equity; distressed process; liquidity crisis; covenant or payment default; bankruptcy or
insolvency; failed capital raising or failed sale
Private equity in industries where longer-term trends have structurally altered profitability

y significantly
Cause of distress can vary g y
Capital markets- or liquidity-driven
Cyclical industry or an industry subject to raw material price fluctuations
Structural industry-level trends
Company-specific underperformance
Instability among equity or debt holders

13

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OAKTREE EUROPEAN
U.S. HIGH YIELD
PRINCIPAL
BONDFUND
MANAGEMENT
III, L.P.

Flexible Approach

EPG strategy iis not dependent

d d on banks
b k selling
lli their
h i debt
d b at large
l discounts
di
Positioned to take advantage of inevitable de-leveraging in response to either broad-based capital
market pressure or a more gradual company-by-company approach
New moneyy offers a lower creation value ((versus debt ppurchases))

Focus on situations in which restructuring is driven by the need for liquidity/new money
Liquidity is the primary catalyst for stakeholders to pursue a permanent solution
Gi
Given
en recent press
pressures,
res banks generall
generally do not ha
havee the abilit
ability to contribute
contrib te new
ne money
mone (especially
(especiall equity)
eq it ) to
finance operational restructurings
Banks do not have the resources required to manage restructurings or to own businesses

Other
Oth catalysts
t l t for
f restructuring
t t i include:
i l d
Distrust or disinterest from existing owner
Managements frustration with excessive leverage and inability to influence restructuring process
CLOs own a significant portion of syndicated leveraged loans and are leveraged on average at over 10x1
50% of CLOs show little or no commitment to the business1

1 Source: Fitch European CLO Management Update (June 10, 2010 )

14

Delivered solely to San Diego County Employees Retirement Association; Presentation of February 17, 2011
OAKTREE EUROPEAN
U.S. HIGH YIELD
PRINCIPAL
BONDFUND
MANAGEMENT
III, L.P.

Flexible Approach (continued)

EPG positioned as the complete solution provider with the ability to:
Buy debt from banks that want to sell AND/OR to invest new money (as debt or equity) to support banks that
remain in the credit
Develop
D l a strategic/operational
i / i l solution
l i supportedd by
b a balance
b l sheet/structural
h / l solution
l i
Augment/replace the management team and/or equity owner (frequently the parties responsible for the distress)

p
First companies within an industry
y to de-leverage
g have significant
g advantages
g
Liquidity needed to implement strategic decisions
Complexity of European restructurings becomes an advantage for companies which are first to restructure

15

Delivered solely to San Diego County Employees Retirement Association; Presentation of February 17, 2011
OAKTREE EUROPEAN
U.S. HIGH YIELD
PRINCIPAL
BONDFUND
MANAGEMENT
III, L.P.

European Principal Group Advantages

EPG positioned
i i d to provide
id the
h broadest
b d set off solutions
l i to distressed
di d related
l d situations
i i

Positioned as new money provider and sponsor of the restructuring

Existing stakeholders do not have the resources to provide both new funds for balance sheet restructuring and to
l d the
lead th operational/strategic
ti l/ t t i restructuring
t t i for f the
th underlying
d l i business
b i

Negotiations must involve multiple stakeholders including many who are not invested in the capital structure

Industrial plan, which optimizes value of company, is often the key to achieve credibility with all parties

From banks perspective, proposed transaction should (i) minimize write-down, (ii) preserve upside and (iii)
protect reputation

EPG will often invest in multiple parts of the capital structure

16

Delivered solely to San Diego County Employees Retirement Association; Presentation of February 17, 2011
OAKTREE EUROPEAN
U.S. HIGH YIELD
PRINCIPAL
BONDFUND
MANAGEMENT
III, L.P.

Six Pillars of EPG Strategy

Local-country deal teams supported by strong senior advisor(s)

Unique distress-focused sourcing model

Expertise in buying debt and structuring a solution; capable of investing in multiple debt and equity instruments

Focus
F on hi
high-quality,
h lit market-leading
k t l di companies
i ini industries
i d t i with
ith favorable
f bl long-term
l t trends
t d

Portfolio Enhancement Team assists in both diligence and the operational restructuring of distressed companies

In-house legal team to lead restructurings

limited competition due to the resource-intensive nature of the

strategy

17

Delivered solely to San Diego County Employees Retirement Association; Presentation of February 17, 2011
 OAKTREE EUROPEAN
U.S. HIGH YIELD
PRINCIPAL
BONDFUND
MANAGEMENT
III, L.P.

European Investment Team

Caleb Kramer
Managing Director and Portfolio Manager

london paris milan1

Mathieu Guillemin Giovanni Volonte Francesco Mancini

deal execution team portfolio enhancement team Managing Director Managing Partner Managing Partner

Karim Khairallah Oren Peleg Nicolas Mout Roberto Quagliuolo

Managing Director Managing Director Senior Vice President Associate

Nael Khatoun Jim Van Steenkiste Roger Iliffe Rick Krens Baptiste Vaissi
Senior Vice President Senior Vice President Senior Vice President Senior Vice President Vice President madrid
Mario Adario Stefano Mazzoli Augusto Lippi Jean Rollier Nicolas Ducarre
Vice President Assistant Vice President Senior Vice President Senior Vice President Assistant Vice President Carlos Gila
Senior Advisor
Marc Schmid Guillaume Bayol Constantin von Blow Donald Bryden
Assistant
A i Vice
Vi President
P id A
Associate
i S i Vice
Senior Vi President
P id S i Advisor
Senior Ad i
luxembourg2
Samuele Cappelletti Carl Johan Kask Eyal Malinger
Associate Associate Associate frankfurt
pf sarls
Jack Keenan Dan MacFarlan Laurence Cooklin Gina McDonald
Senior Advisor Senior Advisor Senior Advisor Senior Advisor Hermann Dambach
Szymon Dec
Managing Director
Brian Eastwood Muriel Zingraff
g Rob Davison Director
Advisor Senior Advisor Program Manager Andreas Krmer Jean-Pierre Baccus
Vice President CFO, Luxembourg
Dedicated Legal Team
Sebastian Eiseler Krisztina Bolla Jil Kelhetter
Justin Bickle
Assistant Vice President Senior Accountant Senior Accountant
Managing Director
Heiko Keppler Jabir Chakib
Martin Graham
Assistant Vice President General Accountant
Vice President

Tom Jaggers Uwe Flach Figen Eren

Assistant Vice President Senior Advisor Staff Attorney

Stephanie Celi
warsaw Trade Specialist

Wojciech Janczyk
Senior Advisor
1 Office of R72, the Principal Groups exclusive advisor for the Italian market.
2 Office of affiliates of Oaktree-managed funds.
18

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 OAKTREE EUROPEAN
U.S. HIGH YIELD
PRINCIPAL
BONDFUND
MANAGEMENT
III, L.P.

Portfolio Enhancement Team Resources

I N - H O U S E T E A M

Portfolio Enhancement Executives Finance Director Operating Partners Functional Experts

profile and team

Consulting and operational background CFO with extensive governance Ex-senior executives with Experts in functional areas that
REQUIRED and operational
p experience
p significant
g experience
p in business are keyy in executingg business
Must have completed significant business Team: Rick Krens, supported by transformation improvement
transformation Jean Pierre Baccus and Jabir Team: Laurence Cooklin, Jack Team: Gina McDonald (HR) and
Chakib Keenan, Dan MacFarlan, and Rob Davison (Programme
Muriel Zingraff Management)

role
Due diligence Establishing and monitoring Providing leverage to team by Providing leverage and improved
Taking control financial/key performance taking over leadership of execution in key process areas
First 200 days indicators transformation post taking control Task oriented
Governance Capital expenditure tracking Governance leadership
Taking
T ki controlt l Due
D diligence
dili supportt
Governance Interim management

E X T E R N A L P A R T N E R S

Analytical Support Primary Data Gathering Industry Expertise Human Capital

Offshore dedicated resource (~ FTE 20)
providing analytical support
Supports due diligence and portfolio
company strategy work
Offshore and onshore partners to
support intense interviews in
multiple languages to gather
primary information during due
diligence
Three partners facilitating access
to industry subject matter experts
Industry specialist consulting
firms which evaluate industry
dynamics
Two leading executive search
firms which assist in the delivery
of an integrated end-to-end HR
process, including; early
management evaluation, search,
assessment recruitment
assessment, recruitment,
development, and succession

19

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OAKTREE EUROPEAN
U.S. HIGH YIELD
PRINCIPAL
BONDFUND
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III, L.P.

Legal Resources and Strategy

Internal legal
g team leads restructuringg process
p in p
partnership
p with deal team
Supports EPGs flexible mandate in terms of structure and types of securities (e.g., investment can be in the form of
super senior debt, convertible debt/equity, etc.)
Strategic/operational plan provides blue print for financial restructuring
Supplemented
S l t d by
b strong
t regional
i l law
l firms
fi

After closing, legal team provides portfolio companies with support for strategic legal and tax projects, acquisitions,
divestures, refinancings and exits as appropriate

Advantages of in-house legal team

Crafts consensual legal solutions/processes to avoid use of court or bankruptcy processes where possible
Leverages network of preferred external legal service providers across Europe and holds them accountable
Utilizes support/leverage provided by Luxembourg team

The only dedicated in-house legal team in European distressed debt or distress-for-control investing

20

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OAKTREE EUROPEAN
U.S. HIGH YIELD
PRINCIPAL
BONDFUND
MANAGEMENT
III, L.P.

Targeted Companies

Market
Market-leading
leading companies in terms of share, product offering and/or innovation
Companies large enough to access multiple exits (e.g., sale, IPO or refinancing)
Potential to capture strategic premiums

Cyclical
C li l industries
i d i with
i h favorable
f bl long-term
l growth,
h economics
i andd demographics
d hi

Changing industry dynamics capable of creating strong organic and external growth

Low-cost
Low cost and flexible production footprints (existing or potential)

Products with global/pan-European appeal and manufacturing/design expertise that can be leveraged across regions

Strongg conversion of EBITDA to cash flow (due

( to low capital
p expenditure
p and working
g capital
p requirements)
q )

Platforms capable of being used for consolidation

Post-restructuring balance sheet that permits the company to maximize its strategic value
Ability to finance both organic and external growth

21

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 OAKTREE EUROPEAN
U.S. HIGH YIELD
PRINCIPAL
BONDFUND
MANAGEMENT
III, L.P.

Discounts Versus Private Equity

selected equity/and blocking positions obtained
($// in millions)
in order for equity
owners to recover a original buyout european principal group transaction
single dollar, we Discount
must receive private Net Net to
equity-type
equity type returns TEV at Leverage TEV at Leverage Sponsor
Company Year Creation Multiple1 Creation2 Multiple3 TEV
(17 30%) from debt
holdings Countrywide 2007 914 5.4x 184 0.0x (80)%

Bavaria Yachts 2007 1,056 9.5 291 0.0 (72)

if equity owners do
not recover SGD 2007 697 5.1 202 0.0 (71)
anything, we expect
Panrico 2005 880 7.1 344 0.4 (61)
to own the businesses
at a reduced cost, Building Products Company 2007 238 7.9 46 0.0 (81)
creating upside
Almatis 2007 $1,278 6.4 $401 0.0 (69)
potential
P k i Company
Packaging C I 2007 866 60
6.0 310 00
0.0 (64)

Niche UK Homebuilder 2006 1,168 6.1 350 0.0 (66)

Packaging Company II 2007 1,324 6.9 403 0.0 (70)

Note: Includes only those companies that completed a sponsor-backed LBO or IPO prior to the incidence of financial distress. EPOF II investment position information is the latest available as of July 16, 2010.
Balance sheet information is as of May 31, 2010 unless otherwise indicated.
1 Net leverage that sits ahead of the sponsors equity investment.
2 For investments that have not undergone restructuring, the analysis excludes any interest and principal payments that have subsequently reduced EPOF II's
II s basis and, thus, total enterprise value.
3 Net leverage that sits ahead of Oaktrees senior-most investment.

22

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OAKTREE EUROPEAN
U.S. HIGH YIELD
PRINCIPAL
BONDFUND
MANAGEMENT
III, L.P.

European Principal Funds Investment Performance Summary

($/ in illi )1
i millions)

Weighted Internal Total Value

Average Value Rate of Return5 as Multiple
Committed Period of Holdingg Invested of Invested
Fund Capital Investment3 Period4 Capital Realized Unrealized Total Profit/Loss Gross Net Capital6

EPOF I $ 495.0 2006-2010 3.7 $ 461.9 $115.8 $ 730.2 $ 846.0 $384.1 18.0% 13.0% 1.8x
EPOF II 1,759.02 2007-Present 1.2 1,236.3 549.7 1,111.7 1,661.4 425.1 29.0% 15.0% 1.3x

1 Because EPOF I and EPOF II are denominated in different currencies, totals have been excluded.
2 Based on the euro/U.S. dollar exchange rate at the final closing.
3 Includes the period in which follow-on investments are made.
4 The weighted average holding period is defined as the number of years required to equate the gross IRR of the investment cash flows to the multiple of invested capital.
5 The internal rate of return (IRR) represents the since inception annualized implied discount rate calculated from a series of investment cash flows. The investment-level IRR 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.
Gross investment-level IRRs reflect returns on an investment-by-investment basis before allocation of the management fee, fee general fund expenses
expenses, income earned on cash and cash equivalents,
equivalents and
any carried interest to the general partners, but after any direct investment expenses and profit allocations to third parties. Because the carried interest allocated to the general partners is not
calculated on an investment-by-investment basis, but on an aggregate fund-by-fund basis only, comparable after-fee IRRs on an investment-by-investment basis are not available. The net IRR is
presented on a fund-level basis and reflects the actual timing of cash contributions from and distributions to the limited partners and the net asset value of the limited partners capital accounts,
derived using a valuation methodology at the end of the period, after allocation of management fees, general fund expenses and any carried interest to the general partners.
6 Total Value as Multiple of Invested Capital represents total profit generated at the investment level as a multiple of invested capital. While this metric is similar to Total Value as Multiple of Cost,
it is based on investment-level performance (as opposed to fund-level performance), is calculated before fees, expenses and any incentive allocation or carried interest and includes recycled
capital. It is typically used for private equity funds that have a smaller number of core investments, which is why it is being provided for the European Principal Funds.

As of September 30, 2010.

Refer to additional performance disclosures beginning on page 31.
23

Delivered solely to San Diego County Employees Retirement Association; Presentation of February 17, 2011
OAKTREE EUROPEAN
U.S. HIGH YIELD
PRINCIPAL
BONDFUND
MANAGEMENT
III, L.P.

Case Study: Countrywide

24
Delivered solely to San Diego County Employees Retirement Association; Presentation of February 17, 2011
OAKTREE EUROPEAN
U.S. HIGH YIELD
PRINCIPAL
BONDFUND
MANAGEMENT
III, L.P.

Company Overview

through acquisitions,
q , countrywide has become the u.k.s largest 2008 sales by division
Conveyancing
residential real estate agency, with approximately 10% market share 3%
Lettings
13%
Only nationwide realtor network, with circa 1,000 owned and 100
franchised branches and over 7,500 employees
Financial
Portfolio of 35 brands including John D. Wood, Mann, Taylors, Bairstow Services
15% Estate
Eves, Gascoigne-Pees, Dixons and Slater Hogg & Howison Agency
49%

Five complementary businesses:

Estate Agency (residential property sales) Surveying and Valuation
20%

Surveying and Valuation (services for mortgage lenders and

prospective homebuyers)
Financial Services (mortgages,
(mortgages insurance and related financial
products for residential property transactions)
Lettings (residential property renting and management)
Conveyancing (residential property title transfer)
Acquired in May 2007 via sponsor-led public tender offer for 914 million,
or 8.1 times LTM EBITDA

25
Delivered solely to San Diego County Employees Retirement Association; Presentation of February 17, 2011
OAKTREE EUROPEAN
U.S. HIGH YIELD
PRINCIPAL
BONDFUND
MANAGEMENT
III, L.P.

Transaction Overview

In early 2008, the collapse of Northern Rock adversely impacted the U.K. mortgage market and, consequently, the
number and value of housing transactions, resulting in a precipitous decline in Countrywides earnings
From August 2007 to August 2008, transaction volume fell by 72% and average prices fell by 13%
Countrywides run-rate EBITDA was negative by year-end

Beginning in 3Q08
3Q08, EPOF II began accumulating a significant position in the companys
company s super
super-senior
senior revolver and
secured floating rate notes (FRNs) at discounted prices, ultimately becoming the largest debt holder

Subsequently, we negotiated a restructuring with the sponsor in which EPOF II would become Countrywides largest
shareholder, and the companys debt would be reduced significantly

Simultaneous with the closing of the restructuring, the company completed an equity offering at the same valuation,
87.5% of which was offered to FRN holders with the remainder offered to unsecured note holders

As a result of the foregoing, EPOF II became the companys largest shareholder, with a 32% equity stake, and remained
the largest debt holder,
holder with 31% of the new notes

based on this ownership, creation value (i.e. the enterprise value required in
order for epof ii to recover its invested cost) is only one-fifth of the
former sponsor
sponsorss purchase price,
price and 1.6
1 6 times countrywide
countrywidess peak ebitda
26

Delivered solely to San Diego County Employees Retirement Association; Presentation of February 17, 2011
OAKTREE EUROPEAN
U.S. HIGH YIELD
PRINCIPAL
BONDFUND
MANAGEMENT
III, L.P.

Investment Thesis

strengths risks
Leading share and brands offer attractive cyclical Longer-than-expected downturn in the U.K.
play on the recovery of the U.K.s residential housing market (mitigated by post-restructuring
property market capital structure)

Broad and synergistic services capture multiple Potential loss of material contracts in the
revenue streams conveyancing division

Lettings
g division under-managed
g historically,
y with Highly
g y competitive
p market with low barriers to
opportunity for growth and operational improvement entry

Expectation of taking share during downturn and Evolution toward internet-based, virtual-agent
recovery due to quality of management and scale model

Significant cost savings from integrating prior

acquisitions

Meaningful potential for further consolidation

Historically high cash flow conversion due to low

capex and working capital requirements

27

Delivered solely to San Diego County Employees Retirement Association; Presentation of February 17, 2011
 OAKTREE EUROPEAN
U.S. HIGH YIELD
PRINCIPAL
BONDFUND
MANAGEMENT
III, L.P.

Historical Financial Results

( in millions)
sales1 adjusted ebitda and margin
800 120 30%

700 100 25

600 80 20

500 60 15

400 40 10

300 20 5 5

200 0 0 0

100 (20
-20) -5(5)

0 -40
(40) (10)
-10
2004 2005 2006 2007 2008 2004 2005 2006 2007 2008

Estate Agency Lettings Adjusted EBITDA Margin

Fi
Financial
i l Services
S i S
Surveying
i andd Valuation
V l ti
Conveyancing

Source: Company financials

1 Sum of the sales of all divisions without accounting for eliminations due to intra-divisional sales. 28

Delivered solely to San Diego County Employees Retirement Association; Presentation of February 17, 2011
OAKTREE EUROPEAN
U.S. HIGH YIELD
PRINCIPAL
BONDFUND
MANAGEMENT
III, L.P.

Capital Structure Comparison

( in millions)
sponsor-led oaktree-led
buyout restructuring

914

1
439

170
255
2
93
305
162

S i Secured
Senior S dDDebt
bt ((nett off cash)
h) U
Unsecured
dDDebt
bt E it
Equity

restructuring reduced net debt by 885%,

% leaving countrywide with a strong balance sheet
1
29
Consists of 27 million of drawn revolving credit facility and 470 million of floating rate notes (FRNs), net of 58 million of cash.
2 Consists of 175 million of new notes, net of 82 million of cash.
Delivered solely to San Diego County Employees Retirement Association; Presentation of February 17, 2011
OAKTREE EUROPEAN
U.S. HIGH YIELD
PRINCIPAL
BONDFUND
MANAGEMENT
III, L.P.

Action Plan and Outlook

Detailed action plan includes:

Optimize branch network
Rationalize inefficient and redundant back-office infrastructure
Develop lettings division
Streamline organizational structure
Enhance IT and web-based offering
Exit small but distracting non-core activities

We believe we have acquired, on a low-cost, limited-risk basis, an excellent platform to benefit from any eventual
improvement in the U.K. residential real estate market
Countrywides capital structure is significantly deleveraged, providing the company with meaningful staying
power in thee eve
powe event thee housing
ous g markets
e s recovery
ecove y iss drawn
d w out
ou
The company has the ability to pay interest on its debt in kind, and EPOF II is the largest holder of this debt,
creating significant flexibility
The 300,000 annualized housing transactions at the end of February 2009 are just one-fourth of the lowest
number
b off annuall housing
h i transactions
t ti in
i the
th last
l t 25 years
At their current depressed level, any surprises with respect to the number of housing transactions are likely to
be to the upside
If home sales recover even moderately,
y we manage
g Countrywide
y skillfully,
y and the companys
p y value returns
to even half the old buyout price, our profits should be substantial
30

Delivered solely to San Diego County Employees Retirement Association; Presentation of February 17, 2011
OAKTREE EUROPEAN
U.S. HIGH YIELD
PRINCIPAL
BONDFUND
MANAGEMENT
III, L.P.

Performance Information and Disclosures

Prospective investors and their representatives may contact representatives of the Fund to Corporate and government bonds and other marketable securities that are not listed or admitted
ask qquestions about the procedures
p and methodologies
g used to calculate the investment to trading on any securities exchange are valued at the average mean of the last bid and ask
returns and other information provided herein and to discuss any other questions they may prices on the valuation date based on quotations supplied by recognized quotation services or
have. The information set forth herein is intended solely to provide potential investors by reputable broker dealers.
with information about prior transactions consummated by similar funds and entities
Non-publicly traded securities, other securities or instruments for which reliable market
managed by Oaktree or its principals. Neither the investment performance summary quotations are not available, securities or instruments for which the General Partner determines
information contained herein nor information otherwise provided to potential in its discretion that the foregoing valuation methods do not represent the fair value of such
investors in the Fund should be construed or relied upon as indications of the future securities or instruments and other private investments may be initially valued at the
performance of the Fund. Past p
p performance is not indicative of future results. acquisition price as the best indicator of fair value. Valuations will depend on facts and
There can be no assurance that investment returns similar to any Oaktree fund, or circumstances known as of the valuation date and the application of certain valuation
any combination of Oaktree funds, will be achieved. Moreover, wherever there is methodologies, pursuant to which the General Partner will generally seek to establish the
the potential for profit, there is also the possibility of loss. market value of the portfolio investment using one or a combination of income capitalization
and sales comparison approaches. These approaches take into account specific financial
measures (such as EBITDA, adjusted EBITDA, free cash flow, net income, book value or net
In reviewing the performance tables included herein, please note the following:
asset value) believed to be most relevant for the given investment. Consideration may also be
valuation methodology given to such factors as the acquisition price of the security, discounted cash flow valuations,
historical and projected operational and financial results for the portfolio company
company, the
For purposes of all performance data set forth in this presentation, securities or strengths and weaknesses of the portfolio company relative to market comparables, valuations
instruments for which reliable market quotations were not available (including securities of comparable companies, industry trends, general economic and market conditions and other
or instruments having a public market price that Oaktree determined did not fairly factors deemed relevant.
represent the fair value of such securities or instruments), were valued at their fair value
as determined in the sole discretion of Oaktree, taking into account all factors, The valuation of a portfolio companys securities may be impacted by expectations of
information, and data deemed to be pertinent, in accordance with U.S. GAAP. GAAP investors receptiveness to a public offering of the portfolio companys securities, the size of
requires that a fair
fair value
value be assigned to all assets and establishes a single authoritative the holding of the portfolio companys securities and any associated control, information with
definition of fair value that includes a framework for measuring fair value and enhanced respect to transactions or offers for the portfolio companys securities (including the
disclosures about fair value that includes measurements. The hierarchal disclosure transaction pursuant to which the investment was made and the period of time elapsed from
framework prioritizes the inputs used in measuring investments at fair value into three the date of the investment to the valuation date) and applicable restrictions on the
levels based on their market price observability. Market price observability is affected by transferability of the portfolio companys securities.
a number of factors, including the type of investment and the characteristics specific to
These valuation methodologies involve a significant degree of management judgment.
the investment. Investments with readily available quoted prices from an active market or
Accordingly, valuations by the General Partner do not necessarily represent the amounts which
for which fair value can be measured based on actively quoted prices generally will have
mayy eventuallyy be realized from sales or other dispositions
p of investments. Estimated fair
a higher
hi h degree
d off market
k t price
i observability
b bilit andd a lesser
l degree
d off judgment
j d t inherent
i h t in
i
values may differ from the values that would have been used had a ready market for the
measuring fair value.
investment existed, and the differences could be material to the financial statements.
Securities listed on one or more national securities exchanges are valued at their last
Investments measured and reported at fair value are classified and disclosed in one of the
reported sales price on the date of valuation. If no sale occurred on the valuation date, the
following categories:
security is valued at the mean of the last bid and ask prices on the valuation date.
Securities that are not listed on a national securities exchange are valued at a price equal Level I Quoted unadjusted prices for identical instruments in active markets to which
to either (a) in the case of any security designated as a National Market System Security the General Partner has access at the date of measurement.
and traded on NASDAQ, its last sales price on the date of determination on NASDAQ or
(b) in the case of other securities, the mean of the last bid and ask prices on the valuation
date as reported by NASDAQ. Securities that are not marketable due to legal restrictions
that may limit or restrict transferability are generally valued at a discount from quoted
market prices, as determined by the General Partner. 31

Delivered solely to San Diego County Employees Retirement Association; Presentation of February 17, 2011
OAKTREE EUROPEAN
U.S. HIGH YIELD
PRINCIPAL
BONDFUND
MANAGEMENT
III, L.P.

Performance Information and Disclosures (continued)

Level II Quoted prices for similar instruments in active markets; quoted prices for no benchmark
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 No benchmarks are presented in this presentation, as Oaktree is not aware of any benchmarks
II inputs include prices in markets for which there are few transactions, the prices are that, in Oaktrees opinion, provide a basis for measuring the performance of the relevant funds,
not current, little public information exists or instances where prices vary particularly in light of the managers investment philosophy, strategy and implementation.
substantially over time or among brokered market makers, as well as interest rates,
yield curves, volatilities, prepayment speeds, loss severities, credit risks and default
rates.

Level III Model derived valuations in which one or more significant inputs or
significant value drivers are unobservable. Unobservable inputs are those inputs that
reflect the General Partners own assumptions about the assumptions market
participants would use to price the investment based on the best available
information.

In some instances, inputs used to measure fair value may fall into different levels of the
fair value hierarchy.
y In such instances,, the investments level within the fair value
hierarchy is based on the lowest level of input that is significant to the value
measurement. The General Partners assessment of the significance of an input requires
judgment and considers factors specific to the investment.

past performance is not indicative of future results

There can be no assurance that the Fund will be able to earn the rates of return indicated
in this presentation. Moreover, wherever there is the potential for profit, there is also the
possibility of loss. Prospective investors should note that the internal rates of return
(IRRs) set forth in this presentation are based on valuations of investments in
companies that have not been fully realized as of September 30, 2010. There can be no
assurance that any of these valuations will be attained as actual realized returns will
depend upon, among other factors, future operating results, the value of the assets and
market conditions at the time of disposition, any related transaction costs and the timing
and manner of sale, all of which may differ from the assumptions upon which the
valuations contained herein are based.
based Consequently,
Consequently the actual realized returns may
differ materially from the current returns indicated in this presentation. Nothing
contained herein should be deemed to be a prediction or projection of future performance
of the Fund.

32

Delivered solely to San Diego County Employees Retirement Association; Presentation of February 17, 2011
OAKTREE EUROPEAN
U.S. HIGH YIELD
PRINCIPAL
BONDFUND
MANAGEMENT
III, L.P.

Performance Information and Disclosures (continued)

use of case studies

The case study presented in this brochure relates to an investment made by OCM
European Principal Opportunities Fund II, L.P. (EPOF II). The EPOF II investment
that is the subject of the case study was selected because it is an illustrative example of a
recent restructuring transaction in one of the core markets for the strategy. In addition,
this particular investment is one which illustrates the full range of capabilities of the
European Principal Group and how it approaches a complex opportunity. The
investment presented in the case study, however, may be more favorable than other
investments made by EPOF II and OCM European Principal Opportunities Fund, L.P.
(together the European Principal Funds). Additionally, the investment presented in the
case study may be more favorable than, and not representative of, all the investments that
may be made by the Fund. If you would like additional information regarding any other
investment of the European Principal Funds not presented here, please contact Oaktree.
The purpose of the case study is intended to give the recipient of this brochure a general
understanding of the range of Oaktrees European Principal Group strategy, as well as an
understanding of the amounts invested in the selected investment. As a result, the case
study is not intended to be, and should not be read as, a full and complete description of
the investment transaction underlying the case study. If the recipient would like
additional details regarding the case study, please contact Oaktree. Further, for a listing
of all control investments made by the European Principal Funds and the related returns
as of September 30, 2010, see page 20 of this brochure.

The case study is provided for informational purposes only. Neither Oaktree nor its
affiliates make any representation
representation, and it should not be assumed
assumed, that past investment
performance is an indication of future returns, and there can be no assurance that the
Fund will be able to earn the rates of return indicated in the case study. Wherever there
is the potential for profit there is also the possibility of loss.

33

Delivered solely to San Diego County Employees Retirement Association; Presentation of February 17, 2011
OAKTREE EUROPEAN
U.S. HIGH YIELD
PRINCIPAL
BONDFUND
MANAGEMENT
III, L.P.

Legal Information and Disclosures

An investment in the Fund is speculative and involves a high degree of risk. An investment environment
i
investment
t t should
h ld only
l be
b maded after
ft consultation
lt ti withith independent
i d d t qualified
lifi d Many factors affect the appeal and availability of investments in companies that are the focus
sources of investment and tax advice. Such risks include, but are not limited to, of the Fund. Although Oaktree sees changes in these factors indicating a trend towards
the following: increased opportunities and value creation, there can be no assurance that such changes will
continue. In addition, legal and regulatory changes could occur during the term of the Fund
that may adversely affect the Fund.
investments
The Fund will invest in securities and obligations that entail substantial risk, including
investments in private or public equity interests and debt securities, options, short sales, risks in effecting operating improvements
high yield and preferred securities, and other obligations such as bank loans and In some cases, the success of the Funds investment strategy will depend, in part, on the ability
participations. There can be no assurance that the Funds investments will increase in of the Fund to restructure and effect improvements in the operations of a portfolio company.
value, that the Fund will not incur significant losses or that the objectives of the Fund will The activity of identifying and implementing restructuring programs and operating
be achieved. In addition, the Funds investments may result in the Fund incurring improvements at portfolio companies entails a high degree of uncertainty. There can be no
significant costs, fees and expenses, including legal, advisory and consulting fees and assurance that the Fund will be able to successfully identify and implement such restructuring
expenses, costs of regulatory compliance and costs of defending third-party litigation. programs and improvements.

unspecified use
u u of proceeds
Investors in the Fund will not have an opportunity to evaluate for themselves the relevant
economic, financial and other information regarding the investments by the Fund. No
assurance can be given that the Fund will be successful in obtaining suitable investments
or that, if the investments are made, the objectives of the Fund will be achieved.
lack of diversification
The Fund
F nd may
ma invest
in est upp to the greater of 600 million or 20% of Capital Commitments
based on cost in any one portfolio company and will be under no other obligation to
further diversify its investments. Accordingly, the investment portfolio of the Fund may
be subject to more rapid changes in value than would be the case if the Fund were
required to maintain a wide diversification among companies, industries, and types of
securities.
foreign investments
illiquidity
Participation in the Fund will generally be an illiquid investment. Investors will not be
permitted to withdraw from the Fund and may only in limited circumstances transfer their
interests in the Fund. Furthermore, a significant portion of the Funds assets may consist of
illiquid securities or securities which are restricted as to their transferability. This factor may
limit the ability of the Fund to sell such securities at their fair market value.
options and short sales
The Fund may purchase and sell covered and uncovered put and call options. There can be no
assurance that the price movements of the securities underlying such options will not result in
significant losses to the Fund. Further, the Fund may sell securities short for the purpose of
hedging an existing investment of the Fund. A short sale involves the risk of a theoretically
unlimited loss from a theoretically unlimited gain in the market price of the security sold short.
Furthermore, there can be no assurance that the Fund will be able to purchase the securities
necessary to cover a short position.

The Fund may invest in entities operating and/or organized in a variety of countries. Such
investments will involve special risks including the risk of nationalization of assets, no right to control the funds operations
currency exchange rate fluctuations, higher rates of inflation, controls on foreign Limited Partners will have no opportunity to control the day-to-day operations of the Fund,
investment, limitations on repatriation of capital, differences in auditing and financial including investment and disposition decisions. In order to safeguard their limited liability for
reporting standards and limited due diligence review. Additionally, there may be the liabilities and obligations of the Fund, Limited Partners must rely entirely on the General
economic risks associated with such investments as well as the risk of potential political, Partner to conduct and manage the affairs of the Fund.
social and diplomatic changes within such countries. These risks may increase expenses
of the Fund,, adverselyy affect the value of the Funds investments and adverselyy impact
p the
Funds investment program and strategy.

34

Delivered solely to San Diego County Employees Retirement Association; Presentation of February 17, 2011
OAKTREE EUROPEAN
U.S. HIGH YIELD
PRINCIPAL
BONDFUND
MANAGEMENT
III, L.P.

Legal Information and Disclosures (continued)

currency and foreign exchange through foreign or domestic corporations subject to corporate income tax or otherwise utilize
structures that are less efficient than structures that would have been used in the absence of the
Distributions byy the Fund will ggenerally
y be made in euros. However, Oaktree anticipates
p need to comply with the qualifying income requirement.
requirement Oaktree also has long
long-term
term
that some of the Funds investments will be denominated in currencies other than the relationships with companies, individuals and investors that may influence the decisions made
Euro. Changes in the rates of exchange between the Euro and other currencies may have by it on behalf of the Fund.
an adverse effect on the performance of the Fund.
additional capital
tax matters Certain of the Funds investments may require additional financing to satisfy working capital
Some countries in which the Fund may invest impose taxes on certain types of income, needs or acquisition strategies and may have to raise capital at a price unfavorable to the Fund.
such as dividends, interest and in some instances capital
p ggains. Although
g such taxes mayy
be subject to reduction to the extent that Limited Partners are entitled to the benefits of an bridge financing
income tax treaty between their home jurisdiction and the other jurisdictions in which the
Fund invests, there can be no assurance that treaty benefits will be available in any The Fund may provide bridge financing in connection with one or more of its equity
particular case, as this will be dependent on the terms of the treaty and the timely investments. The Fund will bear the risk of any changes in capital markets, which may
provision of certifications and other documentation. Furthermore, even if Limited adversely affect the ability of a portfolio company to refinance any bridge investments. If the
Partners are entitled to treaty benefits, withholding taxes may still be deducted by the portfolio company were unable to complete a refinancing, the Fund could have a long-term
payers of income, with a material time delay before refunds of such withholding taxes can investment in a junior security or that junior security might be converted to equity.
be obtained from the relevant taxing authority. In addition, changes in the tax laws or tax
t ti (or
treaties ( their
th i interpretation)
i t t ti ) off the
th countries
t i ini which
hi h the
th Fund
F d invests
i t may severely
l
and adversely affect the Funds ability to efficiently realize income or capital gains and strategic and other investors
may subject the Fund and/or the Limited Partners to tax and return filing obligations in The General Partner may in its sole discretion offer strategic and other investors (including one
such countries. Also, there can be no assurance that the Funds distributions will be or more Limited Partners) the opportunity to participate in one or more Fund investments.
sufficient to satisfy any U.S. federal, state, local or foreign income taxes imposed on the
Limited Partners in respect of their distributive shares of the Funds taxable income.
material, non-public information
nature of bankruptcy proceedings In connection with the operation of the Fund or other activities, personnel of Oaktree may
acquire
i material,
t i l non-public
bli information
i f ti or be
b restricted
t i t d from
f initiating
i iti ti transactions
t ti in
i certain
t i
The Fund may make investments that could require substantial workout negotiations or securities. The Fund will not be free to act upon any such information and may not be able to
restructuring in the event of a default or bankruptcy, which could entail significant risks, initiate transactions that it otherwise might have initiated.
time commitments and costs.
control person liability
leverage
The Funds exercise of control of, or significant influence in, a company in which it invests
The Funds investments are expected to include companies whose capital structures may may impose additional risks of liability, such as liability for environmental damage or product
have significant leverage.
leverage Such investments are inherently more sensitive than others to d f t or other
defects th types
t off liability
li bilit in
i which
hi h the
th limited
li it d liability
li bilit generally
ll characteristic
h t i ti off
declines in revenues and to increases in expenses and interest rates. business ownership may be ignored.

potential conflicts of interest contingent liabilities on disposition of investments

Oaktree and its affiliates manage other investments, funds, and accounts which present the The Fund may be required to indemnify the purchasers of the investments it sells. In that
possibility of overlapping investments, and thus the potential for conflicts of interest with regard, Limited Partners may be required to return amounts distributed to them to fund the
the Fund. In addition, in May 2007, the indirect parent of the General Partner, Oaktree Funds indemnity obligations.
Capital Group, LLC ((OCG),
OCG ), became a publicly
publicly traded partnership
partnership within the meaning
of section 7704(b) of the Code. As a result, at least 90% of OCGs gross income for every
taxable year must consist of qualifying income as defined in section 7704 of the Code in
order for OCG to avoid being treated as a corporation for U.S. federal income tax
purposes. It is possible that the General Partner may cause the Fund to make investments
35

Delivered solely to San Diego County Employees Retirement Association; Presentation of February 17, 2011
OAKTREE EUROPEAN
U.S. HIGH YIELD
PRINCIPAL
BONDFUND
MANAGEMENT
III, L.P.

Legal Information and Disclosures (continued)

investment company act

The Fund will not be registered
g under the Investment Company
p y Act, and therefore,
investors in the Fund will not be accorded the protections of the Investment Company
Act.
regulatory risks
In recent years, market disruptions and the dramatic increase in the capital allocated to
alternative investment strategies have led to increased governmental as well as self-
regulatory scrutiny of the alternative investment fund industry in general, and certain
l i l i proposing
legislation i greater regulation
l i off the
h industry
i d periodically
i di ll isi considered
id d byb the
h
U.S. Congress and the U.S. Securities and Exchange Commission, as well as the
governing bodies of non-U.S. jurisdictions. It is impossible to predict what, if any,
changes in the regulations applicable to the Fund, the general partner, Oaktree, the
markets in which they trade and invest or the counterparties with which they do business
may be instituted in the future. The effect of any future regulatory change could be
substantial and adverse.

institutional risk
The institutions, including brokerage firms and banks, with which the Fund directly or
indirectly will do business (including swap counterparties), or to which securities will be
entrusted for custodial and prime brokerage purposes, may encounter financial
difficulties, fail or otherwise become unable to meet their obligations. In light of recent
market turmoil and overall weakening of the financial services industry, the Fund, its
prime broker(s) and other financial institutions' financial condition may be adversely
affected and they may become subject to legal, regulatory, reputational or other
unforeseen risks that could have a material adverse effect on the business and operations
of the Fund.

Certain information contained herein concerning economic trends and

performance is based on or derived from information provided by independent
third-party sources. The Fund, Oaktree Capital Management, L.P. and their
affiliates believe that such information is accurate and that the sources from
which it has been obtained are reliable; however, they cannot guarantee the
accuracy of such information and have not independently verified the accuracy
or completeness of such information or the assumptions on which such
information is based. Moreover, independent third-party sources cited in this
brochure are not making any representations or warranties regarding any
information attributed to them and shall have no liability in connection with the
use of such information in this brochure.

36

Delivered solely to San Diego County Employees Retirement Association; Presentation of February 17, 2011
OAKTREE EUROPEAN
U.S. HIGH YIELD
PRINCIPAL
BONDFUND
MANAGEMENT
III, L.P.

Marketing Disclosures
AUSTRALIA, BERMUDA, CANADA, AND UNITED STATES JAPAN, SINGAPORE, AND SOUTH KOREA
This brochure is being provided to persons in these countries by OCM Investments, LLC This brochure is being provided to persons in these countries by Oaktree European Principal
(Member FINRA),
FINRA) a subsidiary of Oaktree.
Oaktree Persons in these countries should direct all Fund III GP,
GP L.P.,
L P the general partner of the Fund,
Fund with respect to information relating to the
inquiries regarding the Fund to a marketing representative of OCM Investments, LLC. Fund and its related feeder funds. Persons in these countries should direct all inquiries
regarding the Fund and its related feeder funds to a representative of Oaktree European
ocm investments, llc Principal Fund III GP, L.P.

333 S. Grand Avenue, 28th Floor 1301 Avenue of the Americas, 34th Floor oaktree european principal fund iii gp, l.p.
Los Angeles, CA 90071 New York, NY 10019
Tel: +1 213 830 6300 Tel: +1 212 284 1900 c/o Oaktree Capital Management, L.P.
333 S. Grand Avenue, 28th Floor
Los Angeles, CA 90071
Tel: +1 213 830 6300
AUSTRIA, BELGIUM, DENMARK, FINLAND, FRANCE, GERMANY, ICELAND,
IRELAND, ISRAEL, ITALY, KUWAIT, LIECHTENSTEIN, LUXEMBOURG,
NETHERLANDS, NORWAY, OMAN, QATAR, SPAIN, SWEDEN,
SWITZERLAND, UNITED ARAB EMIRATES, AND UNITED KINGDOM
BRUNEI DARUSSALAM, HONG KONG, NEW ZEALAND, PEOPLES REPUBLIC
This brochure is being provided to persons in these countries by Oaktree Capital OF CHINA,
CHINA TAIWAN
TAIWAN, AND THAILAND
Management Limited, an affiliate of Oaktree. Persons in these countries should direct all
This brochure is being provided to persons in these countries by Oaktree Capital (Hong
inquiries regarding the Fund to a marketing representative of Oaktree Capital Management Kong) Ltd., an affiliate of Oaktree. Persons in these countries should direct all inquiries
Limited. regarding the Fund to a marketing representative of Oaktree Capital (Hong Kong) Ltd.
Oaktree Capital Management Limited and other affiliated entities manage various funds that Oaktree Capital (Hong Kong) Ltd. is a corporation licensed by the Hong Kong Securities
are unregulated collective investment schemes and that cannot be promoted to the general and Futures Commission to conduct Type 1 (dealing in securities), Type 4 (advising on
public in the U.K.
U K or dealt in by any person in the U.K.
U K other than by persons authorised or securities) and Type 9 (asset management) regulated activities,
securities), activities on the basis that each
exempt under the Financial Services and Markets Act 2000 (FSMA). This presentation is recipient of this brochure in these countries is a Professional Investor as defined in the Hong
issued in the U.K. only to restricted categories of recipients, namely persons falling within Kong Securities and Futures Ordinance (the Ordinance). By accepting this brochure, each
article 14 (Investment Professionals) and article 22 (High Net Worth Companies etc.) of the recipient of this brochure in these countries acknowledges and agrees that this brochure is
Financial Services and Markets Act 2000 (Promotion of Collective Investment Schemes) provided for its use only and it will not distribute or otherwise make this brochure available
(Exemptions) Order 2001 and to other categories of investors to whom unregulated to a person who is not a Professional Investor as defined in the Ordinance.
collective investment schemes can be marketed without contravening Section 238 of the
FSMA. Transmission of this presentation to any other person in the U.K. is unauthorised oaktree capital ((hong kong)) ltd.
and may contravene the FSMA.
Suite 2001, AIA Central
Oaktree Capital Management Limited is authorised and regulated by the Financial Services 1 Connaught Road Central
Authority of the United Kingdom (the FSA). It is entered in the FSAs register with Hong Kong
register number 3592405. Its registered office is at 27 Knightsbridge London SW1X 7LY. Tel: +852 3655 6800

oaktree capital management limited

27 Knightsbridge, 4th Floor
London, SW1X 7LY, United Kingdom
Tel: +44 207 201 4600
37

Delivered solely to San Diego County Employees Retirement Association; Presentation of February 17, 2011