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Form 8-K Och-Ziff Capital Managem For: Aug 02

August 2, 2016 7:29 AM EDT


 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
FORM 8-K
 
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): August 2, 2016
 
OCH-ZIFF CAPITAL MANAGEMENT GROUP LLC
(Exact Name of Registrant as Specified in Its Charter)
 
 
 
DELAWARE
 
001-33805
 
26-0354783
(State or Other Jurisdiction
of Incorporation)
 
(Commission File Number)
 
(IRS Employer Identification No.)
 
9 West 57th Street, New York, New York
 
10019
(Address of Principal Executive Offices)
 
(Zip Code)
212-790-0000
(Registrant’s Telephone Number, Including Area Code)
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)
 
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
¨
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
¨
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
¨
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
¨
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 
 







Item 2.02. Results of Operations and Financial Condition.
On August 2, 2016, Och-Ziff Capital Management Group LLC (the “Company”) issued a summary press release and a detailed earnings press release reporting of its financial results for the quarter ended June 30, 2016. A copy of the Company’s summary press release is attached as Exhibit 99.1 and the detail earnings press release is attached as Exhibit 99.2, and each is incorporated by reference.
The Company is making references to non-GAAP financial information in the detailed earnings press release and the conference call the Company is hosting on August 2, 2016, to discuss its 2016 second quarter results. Reconciliations of these non-GAAP financial measures to the most comparable GAAP financial measures are contained in the detailed earnings press release. These non-GAAP financial measures should be considered in addition to and not as a substitute for, or superior to, financial measures presented in accordance with GAAP.
The information in this Current Report on Form 8-K, including the exhibits attached hereto, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section. The information in this Current Report on Form 8-K shall not be incorporated by reference into any filing or other document pursuant to the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing or document.
Item 5.02. Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
On August 2, 2016, the Company announced that on August 1, 2016 its Board of Directors (the “Board”) increased the size of the Board from seven to eight directors and appointed William P. Barr to the Board, effective as of August 9, 2016. Mr. Barr will serve as a Class I director for a term that coincides with the remainder of the three-year term of the existing Class I directors, ending at the 2017 annual meeting of shareholders and until his successor is duly elected and qualified. The Board also appointed Mr. Barr to serve as a member of the Audit Committee and the Compensation Committee.
Mr. Barr, age 66, served as Attorney General of the United States from 1991 to 1993 under President George H.W. Bush and, prior to that, as the Deputy Attorney General and as Assistant Attorney General in charge of the Office of Legal Counsel. Mr. Barr has held numerous other government positions, including on President Reagan’s White House Domestic Policy Staff and at the U.S. Central Intelligence Agency. Prior to his service at the U.S. Department of Justice, Mr. Barr was a partner at the law firm of Shaw, Pittman, Potts & Trowbridge where he primarily handled complex regulatory litigation. Following his service as Attorney General, Mr. Barr served as Executive Vice President and General Counsel of GTE Corporation from 1994 until that company merged with Bell Atlantic to become Verizon in 2000. He continued at Verizon as Executive Vice President and General Counsel, overseeing the legal, regulatory and government affairs activities of the company, until his retirement in 2008. Mr. Barr currently serves as a director of Time Warner Inc., where he is Chair of the Compensation and Human Development Committee and sits on the Nominating and Governance Committee, and Dominion Resources Corporation, where he sits on the Compensation, Governance and Nominating Committee. Mr. Barr has also served as a director of Selected Funds and a trustee of The Clipper Fund. Mr. Barr received a B.A. in government and an M.A. in government and Chinese studies from Columbia University and earned his law degree from George Washington University.
Upon his appointment to the Board, Mr. Barr received a grant of Class A Restricted Share Units with a value of $300,000, which grant will vest in equal annual installments on each of the first, second and third anniversaries of the date of his appointment to the Board, subject to his continued service on the Board. In addition, Mr. Barr’s first year of service is anticipated to involve additional responsibilities related to his service on the Board. In consideration for such responsibilities, Mr. Barr received a grant of Class A Restricted Share Units with a value of $75,000, which grant will vest on the first anniversary of his appointment, subject to his continued service on the Board.
Mr. Barr will receive annual equity grants and annual cash retainers on the same terms as other independent directors who serve on the Board. As of January 1, 2016, at the beginning of each year, each independent director receives a grant of Class A Restricted Share Units with a value of $125,000, which vest on the first anniversary of the date of grant and are settled in Class A Shares on or before the third business day following the independent director’s





departure from the Board. In addition, as of January 1, 2016, an annual cash retainer of $95,000 is paid to each incumbent independent director.
A copy of the Company’s press release announcing Mr. Barr's appointment to the Board is attached as Exhibit 99.3.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits
Exhibit 
No.
  
Description
99.1
 
Summary earnings press release of the Company, dated August 2, 2016, reporting financial results for the quarter ended June 30, 2016.
99.2
  
Detailed earnings press release of the Company, dated August 2, 2016, reporting financial results for the quarter ended June 30, 2016.
99.3
 
Press Release of the Company, dated August 2, 2016, announcing the appointment of William P. Barr to Board of Directors






SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
OCH-ZIFF CAPITAL MANAGEMENT GROUP LLC
 
(Registrant)
 
 
 
 
By:
 
/s/ Joel M. Frank
 
 
 
Joel M. Frank
 
 
 
Chief Financial Officer and
Executive Managing Director
August 2, 2016





Exhibit Index
Exhibit 
No.
  
Description
99.1
 
Summary earnings press release of the Company, dated August 2, 2016, reporting financial results for the quarter ended June 30, 2016.
99.2
  
Detailed earnings press release of the Company, dated August 2, 2016, reporting financial results for the quarter ended June 30, 2016.
99.3
 
Press Release of the Company, dated August 2, 2016, announcing the appointment of William P. Barr to Board of Directors





Och-Ziff Reports 2016 Second Quarter Results
NEW YORK, August 2, 2016 - Och-Ziff Capital Management Group LLC (NYSE: OZM) announced its 2016 second quarter results today. To view the detailed earnings press release, please visit the Public Investors page of Och-Ziff's website (www.ozcap.com).
Dan Och, Chairman and Chief Executive Officer of Och-Ziff, and Joel Frank, Chief Financial Officer, will host a conference call today, August 2, 2016, at 8:30 a.m. Eastern Time to discuss the Och-Ziff's 2016 second quarter results. The call can be accessed by dialing +1-888-679-8035 (in the U.S.) or +1-617-213-4848 (international), passcode 30502473. A simultaneous webcast of the call will be available on the Public Investors page of Och-Ziff’s website (www.ozcap.com).
For those unable to listen to the live broadcast, a replay will be available shortly after the call by dialing +1-888-286-8010 (in the U.S.) or +1-617-801-6888 (international), passcode 18407426. A webcast replay will also be available on the Och-Ziff's website as noted above.
* * * *
About Och-Ziff
Och-Ziff is one of the largest institutional alternative asset managers in the world, with offices in New York, London, Hong Kong, Mumbai, Beijing, Dubai, Shanghai and Houston. Och-Ziff provides asset management services to investors globally through its multi-strategy funds, dedicated credit funds, including opportunistic credit funds and Institutional Credit Strategies products, real estate funds and other alternative investment vehicles. Och-Ziff seeks to generate consistent, positive, absolute returns across market cycles, with low volatility compared to the broader markets, and with an emphasis on preservation of capital. Och-Ziff’s funds invest across multiple strategies and geographies, consistent with the investment objectives of each fund. The global investment strategies Och-Ziff employs include convertible and derivative arbitrage, corporate credit, long/short equity special situations, merger arbitrage, private investments, real estate and structured credit. As of August 1, 2016, Och-Ziff had approximately $39.1 billion in assets under management. For more information, please visit Och-Ziff’s website (www.ozcap.com).
Investor Relations Contact
 
Media Relations Contact
Tina Madon
 
Joe Snodgrass
+1-212-719-7381
 
+1-212-887-4821
 



Och-Ziff Capital Management Group LLC Reports
2016 Second Quarter Results
NEW YORK, August 2, 2016 – Och-Ziff Capital Management Group LLC (NYSE: OZM) (the “Company” or “Och-Ziff”) today reported GAAP net loss allocated to Class A Shareholders (“GAAP Net Loss”) of $78.6 million, or $0.43 per basic and $0.44 per diluted Class A Share, for the 2016 second quarter and a GAAP Net Loss of $147.9 million, or $0.81 per basic and diluted Class A Share, for the 2016 first half.
Summary
Och-Ziff recorded an additional $214.3 million reserve accrual in the 2016 second quarter in connection with its ongoing FCPA investigation, bringing the total reserve to $414.3 million.
Certain of Och-Ziff’s executive managing directors are in discussions to commit up to $500 million to the Company through the purchase of perpetual preferred units. The proceeds of the potential financing transaction would be used to fund the investigation-related monetary settlement and for general corporate purposes. The units are expected to have a dividend rate of 0% initially for three years, which would increase over time, and are not convertible into Class A Shares.
William Barr, the 77th Attorney General of the United States and former General Counsel of Verizon Communications, has been elected to the Company’s Board of Directors.
Distributable Earnings in the 2016 second quarter were a loss of $184.3 million, or $0.35 per Adjusted Class A Share, which includes the investigation-related reserve of $214.3 million, or $0.41 per Adjusted Class A Share.
Distributable Earnings in the 2016 first half were a loss of $326.8 million, or $0.63 per Adjusted Class A Share, which includes investigation related reserve of $414.3 million, or $0.80 per Adjusted Class A Share.
Assets under management totaled $42.0 billion as of June 30, 2016, declining 12% year-over-year, primarily due to net outflows from the Company’s multi-strategy funds.
Assets under management in the Company’s dedicated credit, real estate and other single-strategy funds were $15.9 billion, comprising 38% of assets under management as of June 30, 2016, increasing 6% year-over-year.
Estimated assets under management totaled $39.1 billion as of August 1, 2016.
“Our multi-strategy performance improved during the second quarter and into July,” said Dan Och, Chairman and Chief Executive Officer of Och-Ziff. “Credit remains a bright spot for us, with distinctive performance on both an absolute and relative basis. We also continue to take advantage of the strong capital flows into real estate by actively monetizing investments from our earlier funds at attractive valuations.”


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“Our partners are in discussions to commit up to $500 million to the firm,” added Mr. Och. “Over the last 22 years, we have built an enduring, institutional business with a leading market position in an industry which has experienced extraordinary growth and evolution. It is for these reasons that my partners and I continue to have such deep conviction about the future of this firm.”
RECENT DEVELOPMENTS
The Company has recorded a year-to-date reserve accrual of $414.3 million in anticipation of a monetary settlement associated with an ongoing investigation of the Company by the U.S. Securities and Exchange Commission (“SEC”) and the U.S. Department of Justice (“the DOJ”) concerning possible violations of the FCPA and other laws.
Certain of Och-Ziff’s executive managing directors are in discussions with a Special Committee of the Company’s Board of Directors, composed entirely of independent directors, regarding a potential financing transaction of up to $500 million of perpetual preferred units. The dividend rate on the units is expected to be 0% initially for three years, after which it will increase over time and upon the occurrence of certain events to be agreed. The units would not be convertible into Class A Shares. The proceeds would be used to fund the monetary settlement related to resolution of the investigation and for general corporate purposes. This transaction would be expected to be subject to customary conditions, including, among others, the Company’s entry into settlement agreements to resolve the SEC and DOJ investigations satisfactory to the executive managing directors involved in the discussions.
The Company’s Board of Directors has elected William Barr to the board, effective August 9, 2016. Mr. Barr served as the 77th Attorney General of the United States and was most recently General Counsel of Verizon Communications.
GAAP NET INCOME (LOSS) ALLOCATED TO CLASS A SHAREHOLDERS
On January 1, 2016, the Company adopted new consolidation accounting guidance that resulted in the deconsolidation of the majority of previously consolidated funds, including all CLOs. The deconsolidation resulted in a significant decrease in the amount of income of consolidated Och-Ziff funds, expenses of consolidated Och-Ziff funds, and net gains of consolidated Och-Ziff funds in our GAAP consolidated statement of comprehensive income (loss). Management fees and incentive income from the previously consolidated funds are also no longer eliminated in consolidation.
For the 2016 second quarter, Och-Ziff reported GAAP Net Loss of $78.6 million, or $0.43 per basic and $0.44 per diluted Class A Share, compared to GAAP net income allocated to Class A Shareholders (“GAAP Net Income”) of $4.8 million, or $0.03 per basic and diluted Class A Share, for the 2015 second quarter. The year-over-year decrease was primarily driven by an additional $214.3 million reserve accrual in connection with the Company’s FCPA investigation taken in the second quarter of 2016. In addition, lower incentive income and management fees and higher non-compensation and compensation and benefits expenses, partially offset by lower income taxes also contributed to the decrease.
For the 2016 first half, Och-Ziff reported GAAP Net Loss of $147.9 million, or $0.81 per basic and diluted Class A Share, compared to GAAP Net Income of $30.6 million, or $0.17 per basic and diluted Class A Share, for the 2015 first half. The year-over-year decrease was primarily driven by the $414.3 million FCPA investigation reserve accrual taken in the first half of 2016. In addition, lower incentive income and management fees and higher non-compensation expenses, partially offset by lower income taxes and lower compensation and benefits, also contributed to the year-over-year decrease.


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Throughout this press release, the Company presents financial measures that are not prepared in accordance with GAAP. For a discussion of these non-GAAP measures, please see the section titled “Non-GAAP Financial Measures” at the end of this press release.
DISTRIBUTABLE EARNINGS (NON-GAAP)
For the 2016 second quarter, Och-Ziff reported Distributable Earnings loss of $184.3 million, or $0.35 per Adjusted Class A Share. Excluding the additional $214.3 million FCPA investigation reserve accrual recorded in the quarter, Distributable Earnings were $30.0 million, or $0.06 per Adjusted Class A Share, compared to $95.2 million, or $0.18 per Adjusted Class A Share, for the 2015 second quarter.
For the 2016 first half, Och-Ziff reported Distributable Earnings loss of $326.8 million, or $0.63 per Adjusted Class A Share. Excluding the $414.3 million FCPA investigation reserve accrual taken in the first half of 2016, Distributable Earnings were $87.5 million, or $0.17 per Adjusted Class A Share, compared to Distributable Earnings of $221.9 million, or $0.43 per Adjusted Class A Share, for the 2015 first half.
Excluding the FCPA reserve accrual, the year-over-year decreases were due to lower incentive income and management fees, as well as higher operating expenses. Please see the “Economic Income (Non-GAAP)” section of this press release for a discussion of the drivers affecting the Company’s Economic Income. The adoption of the new consolidation guidance referenced above had no impact on Economic Income or Distributable Earnings.
Distributable Earnings is a non-GAAP measure. For reconciliations of Distributable Earnings to the respective GAAP Net Income for the periods discussed above, please see Exhibits 2 and 3 that accompany this press release. Additionally, please see the section titled “Non-GAAP Financial Measures” at the end of this press release, including the definitions of Distributable Earnings, Adjusted Income Taxes and Adjusted Class A Shares.
ASSETS UNDER MANAGEMENT
 
 
 
 
 
Year-Over-Year Change
(dollars in billions)
June 30, 2016
 
June 30, 2015
 
Inflows / (Outflows)
 
Distributions / Other Reductions
 
Appreciation / (Depreciation)
 
Total
 
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Multi-strategy funds
$
26.1

 
$
33.0

 
$
(4.9
)
 
$

 
$
(2.0
)
 
$
(6.9
)
 
-21%
Credit
 
 
 
 
 
 
 
 
 
 
 
 
 
Opportunistic credit funds
5.2

 
5.1

 
0.7

 
(0.5
)
 
(0.1
)
 
0.1

 
2%
Institutional Credit Strategies
7.2

 
6.6

 
0.7

 

 

 
0.7

 
10%
Real estate funds
2.2

 
2.0

 
0.4

 
(0.1
)
 

 
0.2

 
10%
Other
1.2

 
1.3

 

 

 
(0.1
)
 
(0.1
)
 
-7%
Total
$
42.0

 
$
48.0

 
$
(3.1
)
 
$
(0.6
)
 
$
(2.2
)
 
$
(6.0
)
 
-12%
Totals may not sum due to rounding. Please see Exhibit 6 for detailed information.


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As of June 30, 2016, assets under management totaled $42.0 billion, a decrease of $6.0 billion, or 12%, from June 30, 2015, which was driven by capital net outflows of $3.1 billion and $637.5 million of distributions to investors and other reductions in the Company's closed-end opportunistic credit and real estate funds. Also contributing to the decline was performance-related depreciation of $2.2 billion. During the month of June, the Company had approximately $127.0 million of intra-month capital net outflows, which are included in the $42.0 billion of assets under management as of June 30, 2016.
Assets under management decreased to an estimated $39.1 billion as of August 1, 2016. This decrease reflected estimated performance-related appreciation of approximately $214.0 million in July and capital net outflows of approximately $3.0 billion, which was comprised of approximately $2.8 billion of capital net outflows on July 1, 2016 and approximately $277.0 million of capital net outflows from July 2, 2016 to August 1, 2016.
Please see detailed assets under management and fund information on Exhibits 6 through 8 that accompany this press release.
Multi-strategy funds
Assets under management in Och-Ziff’s multi-strategy funds totaled $26.1 billion as of June 30, 2016, decreasing 21%, or $6.9 billion, year-over-year. This change was driven by net capital outflows of $4.9 billion, primarily in the OZ Master Fund, the Company’s largest multi-strategy fund, as well as performance-related depreciation of $2.0 billion.
For the first half of 2016, the OZ Master Fund, the Company's largest multi-strategy fund, generated a gross return of -1.2% and a net return of -2.1%. On a gross basis, U.S. long/short equity special situations was the largest contributor to the performance-related depreciation, partially offset by positive performance in merger arbitrage, credit-related strategies and convertible and derivative arbitrage.
Credit
Assets under management in Och-Ziff’s dedicated credit products totaled $12.4 billion as of June 30, 2016, increasing $0.8 billion, or 7%, year-over-year. This change was driven by capital net inflows of $1.4 billion, partially offset by $478.4 million of distributions and other reductions in the Company's closed-end opportunistic credit funds and $93.7 million of performance-related depreciation.
Opportunistic credit
Och-Ziff’s opportunistic credit funds seek to generate risk-adjusted returns by capturing value in mispriced investments across disrupted, dislocated and distressed corporate, structured and private credit markets globally.
Assets under management in the Company’s opportunistic credit funds totaled $5.2 billion as of June 30, 2016, essentially unchanged year-over-year. This was due to $661.3 million of capital net inflows, primarily into the Customized Credit Focused Platform, partially offset by $478.4 million of distributions and other reductions related to the Company’s closed-end opportunistic credit funds. Also contributing to the decrease was $74.8 million of performance-related depreciation.
For the first half of 2016, the OZ Credit Opportunities Master Fund, the Company’s global opportunistic credit fund, generated a gross return of 5.1% and a net return of 4.4%. On a gross basis, performance was driven by the fund’s U.S. portfolio.


4


Institutional Credit Strategies
Institutional Credit Strategies (“ICS”) is the Company’s asset management platform that invests in performing credits, including leveraged loans, high-yield bonds, private credit/bespoke financing and investment grade credit via CLOs and other customized solutions for clients.
Assets under management in ICS totaled $7.2 billion as of June 30, 2016, increasing $0.7 billion, or 10%, year-over-year. The increase was primarily driven by three CLOs that closed in the year-over-year period. ICS managed 13 CLOs as of June 30, 2016.
Real estate funds
Assets under management in Och-Ziff’s real estate funds totaled $2.2 billion as of June 30, 2016, increasing $210.3 million year-over-year. The increase was driven by Och-Ziff Real Estate Credit Fund I, partially offset by distributions and other reductions from Och-Ziff Real Estate Fund II. Since inception, the net IRR for Och-Ziff Real Estate Fund II (for which the investment period ended in 2014) was 21.9% through June 30, 2016. Since inception, the net IRR for Och-Ziff Real Estate Fund I (for which the investment period ended in 2010) was 15.7% through June 30, 2016.
ECONOMIC INCOME (NON-GAAP)
In addition to analyzing the Company’s results on a GAAP basis, management also reviews the Company’s results on an “Economic Income” basis. Economic Income excludes certain adjustments that are required for presentation of the Company’s results on a GAAP basis, but that management does not consider when evaluating operating performance in any given period. The adoption of the new consolidation guidance referenced above had no impact on Economic Income.
For reconciliations of Economic Income and its components to the respective GAAP measures, please see Exhibits 2 through 5 that accompany this press release. Additionally, please see the discussion of “Non-GAAP Financial Measures” at the end of this press release.
Economic Income Revenues (Non-GAAP)
Economic Income revenues for the 2016 second quarter were $142.1 million, a 29% decrease from $199.1 million for the 2015 second quarter. Management fees were $133.4 million, 20% lower than $167.0 million for the prior-year period. Incentive income was $8.1 million, 74% lower than the $31.5 million for the prior-year period.
Economic Income revenues for the 2016 first half were $317.6 million, a 26% decrease from $428.6 million for the 2015 first half. Management fees were $277.8 million, a 16% decrease from $330.9 million for the prior-year period. Incentive income was $38.7 million, 60% lower than the $96.8 million for the prior-year period.
The year-over-year decrease in management fees was driven primarily by lower assets under management in the Company’s multi-strategy funds, partially offset by higher assets under management in the Company’s ICS products. This change in mix also resulted in a lower year-over-year average management fee rate.
The year-over-year decrease in incentive income was driven primarily by lower incentive income from fund investor redemptions, as well as lower tax distributions taken to cover tax liabilities on incentive income that


5


has been accrued on certain longer-term assets under management, but that will not be realized until the end of the relevant commitment period.
The average management fee rate was 1.28%for the 2016 second quarter and 1.30% for the 2016 first half. The Company’s average management fee will vary from quarter to quarter based on the mix of products that comprise its assets under management.
Compensation and Benefits (Non-GAAP)
Compensation and benefits for the 2016 second quarter totaled $36.0 million, up 9% from $33.1 million for the 2015 second quarter. Salaries and benefits were $29.0 million, 4% higher than $27.7 million in the prior-year period due to a higher average number of employees in the current year period. Bonus expense for the 2016 second quarter totaled $7.0 million, compared to $5.3 million for the prior-year period.
Compensation and benefits for the 2016 first half totaled $69.8 million, a 4% increase from $66.4 million for the 2015 first half. Salaries and benefits were $58.9 million, 6% higher than $55.6 million in the prior-year period due to a higher average number of employees in the current year period. Bonus expense for the 2016 first half totaled $10.8 million, essentially flat compared to the prior-year period.
The ratio of salaries and benefits to management fees was 22% and 21% for 2016 second quarter and first half, respectively, compared to 17% for both of the comparative periods in 2015.
Non-Compensation Expenses (Non-GAAP)
Non-compensation expenses for the 2016 second quarter totaled $264.9 million, including the $214.3 million FCPA investigation reserve accrual taken during the quarter. Excluding the reserve accrual, non-compensation expenses were $50.6 million, essentially unchanged from the $50.7 million in the prior-year period.
Non-compensation expenses for the 2016 first half totaled $522.0 million including the $414.3 million FCPA investigation reserve accrual taken during this period. Excluding the reserve accrual, non-compensation expenses were $107.7 million compared to $91.0 million in the prior-year period. The $16.7 million year-over-year increase was primarily due to increased legal expenses relating to the investigation.
Excluding the FCPA reserve accrual, the ratio of non-compensation expenses to management fees was 38% and 39% for the 2016 second quarter and first half, respectively, compared to 30% and 28% for 2015 second quarter and first half, respectively.
Economic Income (Non-GAAP)
Economic Income for the 2016 second quarter was a net loss of $158.8 million, including the $214.3 million FCPA investigation reserve accrual taken during the quarter. Excluding the reserve accrual, Economic Income was $55.5 million, compared to $115.3 million for the second quarter of 2015.
Economic Income for the first half of 2016 was a net loss of $274.1 million, including the $414.3 million FCPA investigation reserve accrual. Excluding the reserve accrual taken during the period, Economic Income was $140.2 million, compared to $271.2 million for the first half of 2015.
Excluding the reserve, the year-over-year decrease in Economic Income was primarily driven by lower incentive income and management fees, as well as higher operating expenses.


6


CAPITAL
As of June 30, 2016, the number of Class A Shares outstanding was 181,449,985. For purposes of calculating Distributable Earnings per Share, the Company assumes that all the interests held by its executive managing directors in the Company’s principal operating subsidiaries (the “Och-Ziff Operating Group”) (collectively, “Partner Units”), as well as Class A Restricted Share Units (“RSUs”) outstanding during the applicable period, have been converted on a one-to-one basis into Class A Shares (“Adjusted Class A Shares”). For the quarter and first half ended June 30, 2016, the total weighted-average Adjusted Class A Shares outstanding was 519,899,005 and 519,108,816, respectively.
DIVIDEND
The Board of Directors of Och-Ziff did not declare a 2016 second-quarter dividend.
*            *            *             *
Dan Och, Chairman and Chief Executive Officer of Och-Ziff, and Joel Frank, Chief Financial Officer, will host a conference call today, August 2, 2016, 8:30 a.m. Eastern Time to discuss the Company’s 2016 second quarter results. The call can be accessed by dialing +1-888-679-8035 (in the U.S.) or +1-617-213-4848 (international), passcode 30502473. A simultaneous webcast of the call will be available on the Public Investors page of the Company’s website (www.ozcap.com).
For those unable to listen to the live broadcast, a replay will be available shortly after the call by dialing +1-888-286-8010 (in the U.S.) or +1-617-801-6888 (international), passcode 18407426. A webcast replay will also be available on the Company’s website as noted above.
*            *            *             *
Non-GAAP Financial Measures
Management evaluates Economic Income for the Och-Ziff Funds segment, the Company’s only reportable operating segment under GAAP, and for the Company’s Other Operations. Economic Income for the Company equals the sum of Economic Income for the Och-Ziff Funds segment and the Company’s Other Operations.
Additionally, throughout this press release management has presented certain non-GAAP measures that exclude the effect of the FCPA investigation reserve accrual taken during the first quarter of 2016. These measures are presented to provide a more comparable view of the Company’s core operating results year-over-year.
The Company conducts substantially all of its business through the Och-Ziff Funds segment, which provides asset management services to its multi-strategy, opportunistic credit and equity funds, Institutional Credit Strategies and other alternative investment vehicles. The Company’s Other Operations are primarily comprised of its real estate business, which provides asset management services to its real estate funds.
The Company’s non-GAAP measures should not be considered as alternatives to the Company’s GAAP Net Income or cash flow from operations, or as indicative of liquidity or the cash available to fund operations. The Company’s non-GAAP measures may not be comparable to similarly titled measures used by other companies.


7


For reconciliations of the Company’s non-GAAP measures to the most directly comparable GAAP measures, please see Exhibits 2 through 5 that accompany this press release.
Economic Income
In addition to analyzing the Company’s results on a GAAP basis, management also reviews the Company’s results on an “Economic Income” basis. Economic Income excludes the adjustments described below that are required for presentation of the Company’s results on a GAAP basis, but that management does not consider when evaluating the operating performance of the Company in any given period. Management uses Economic Income as the basis on which it evaluates the financial performance of the Company and makes resource allocation and other operating decisions. Management considers it important that investors review the same operating information that it uses.
Economic Income is a measure of pre-tax operating performance that excludes the following from the Company’s results on a GAAP basis:
Income allocations to the Company’s executive managing directors on their direct interests in the Och-Ziff Operating Group. Management reviews operating performance at the Och-Ziff Operating Group level, where substantially all of the Company’s operations are performed, prior to making any income allocations.
Reorganization expenses related to the Company’s IPO, equity-based compensation expenses and depreciation and amortization expenses, as management does not consider these non-cash expenses to be reflective of operating performance. However, the fair value of RSUs that are settled in cash to employees or executive managing directors is included as an expense at the time of settlement.
Changes in the tax receivable agreement liability and net gains (losses) on investments in Och-Ziff funds, as management does not consider these items to be reflective of operating performance.
Amounts related to the consolidated Och-Ziff funds, including the related eliminations of management fees and incentive income, as management reviews the total amount of management fees and incentive income earned in relation to total assets under management and fund performance. The Company also defers the recognition of incentive income allocations from the consolidated Och-Ziff funds until all clawback contingencies are resolved, consistent with the revenue recognition policy for the funds the Company does not consolidate.
In addition, expenses related to compensation and profit-sharing arrangements based on fund investment performance are recognized at the end of the relevant commitment period, as management reviews the total compensation expense related to these arrangements in relation to any incentive income earned by the relevant fund.
As a result of the adjustments described above, as well as an adjustment to present management fees net of recurring placement and related service fees (rather than considering these fees an expense), management fees, incentive income, compensation and benefits, non-compensation expenses and net income allocated to noncontrolling interests as presented on an Economic Income basis are also non-GAAP measures.
Distributable Earnings
Distributable Earnings is a non-GAAP measure of after-tax operating performance and equals Economic Income less Adjusted Income Taxes. Adjusted Income Taxes are estimated assuming the conversion of all outstanding Partner Units into Class A Shares, on a one-to-one basis, and include the impact of payments under the tax receivable agreement. Therefore, all income (loss) of the Och-Ziff Operating Group allocated


8


to the Partner Units is treated as if it were allocated to Och-Ziff Capital Management Group LLC. Partner Units represent interests in the Och-Ziff Operating Group held by the Company’s executive managing directors, including the Och-Ziff Operating Group A Units and Och-Ziff Operating Group D Units. Distributable Earnings per Share is equal to Distributable Earnings divided by the weighted-average number of Adjusted Class A Shares.
Management believes Distributable Earnings provides useful information to investors because it uses Distributable Earnings, among other financial information, to determine the earnings available to distribute as dividends to holders of the Company’s Class A Shares and to the Company’s executive managing directors with respect to their Partner Units.
*            *            *            *
Forward-Looking Statements
This press release may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, that reflect the Company’s current views with respect to, among other things, future events and financial performance. The Company generally identifies forward-looking statements by terminology such as “outlook,” “believe,” “expect,” “potential,” “continue,” “may,” “will,” “should,” “could,” “seek,” “approximately,” “predict,” “intend,” “plan,” “estimate,” “anticipate,” “opportunity,” “comfortable,” “assume,” “remain,” “maintain,” “sustain,” “achieve,” “see,” “think,” “position” or the negative version of those words or other comparable words.
Any forward-looking statements contained in this press release are based upon historical information and on the Company’s current plans, estimates and expectations. The inclusion of this or other forward-looking information should not be regarded as a representation by the Company or any other person that the future plans, estimates or expectations contemplated by the Company will be achieved. We caution that forward-looking statements are subject to numerous assumptions, estimates, risks and uncertainties, including but not limited to the following: global economic, business, market and geopolitical conditions; U.S. and foreign regulatory developments relating to, among other things, financial institutions and markets, government oversight, fiscal and tax policy; the outcome of third-party litigation and government investigations involving the Company, including the resolution of the FCPA investigation by the U.S. Securities and Exchange Commission (“SEC”) and the U.S. Department of Justice (the “DOJ”); conditions impacting the alternative asset management industry; the Company’s ability to retain existing investor capital; the Company’s ability to successfully compete for fund investors, assets, professional talent and investment opportunities; the Company’s ability to retain its active executive managing directors, managing directors and other investment professionals; the Company’s successful formulation and execution of its business and growth strategies; the Company’s ability to appropriately manage conflicts of interest and tax and other regulatory factors relevant to its business; and assumptions relating to the Company’s operations, investment performance, financial results, financial condition, business prospects, growth strategy and liquidity.
If one or more of these or other risks or uncertainties materialize, or if the Company’s assumptions or estimates prove to be incorrect, its actual results may vary materially from those indicated in these statements. These factors are not and should not be construed as exhaustive and should be read in conjunction with the other cautionary statements and risks that are included in the Company’s filings with the SEC, including but not limited to the Company’s annual report on Form 10-K for the year ended December 31, 2015, dated February 11, 2016, as well as may be updated from time to time in the Company’s other SEC filings. There may be additional risks, uncertainties and factors that the Company does not currently view as material or that


9


are not known. The forward-looking statements contained in this press release are made only as of the date of this press release. The Company does not undertake to update any forward-looking statement because of new information, future developments or otherwise.
This press release does not constitute an offer of any Och-Ziff fund.
*            *            *            *
About Och-Ziff
Och-Ziff is one of the largest institutional alternative asset managers in the world, with offices in New York, London, Hong Kong, Mumbai, Beijing, Dubai, Shanghai and Houston. Och-Ziff provides asset management services to investors globally through its multi-strategy funds, dedicated credit funds, including opportunistic credit funds and Institutional Credit Strategies products, real estate funds and other alternative investment vehicles. Och-Ziff seeks to generate consistent, positive, absolute returns across market cycles, with low volatility compared to the broader markets, and with an emphasis on preservation of capital. Och-Ziff’s funds invest across multiple strategies and geographies, consistent with the investment objectives of each fund. The global investment strategies Och-Ziff employs include convertible and derivative arbitrage, corporate credit, long/short equity special situations, merger arbitrage, private investments, real estate and structured credit. As of August 1, 2016, Och-Ziff had approximately $39.1 billion in assets under management. For more information, please visit Och-Ziff’s website (www.ozcap.com).
Investor Relations Contact:
Tina Madon
Head of Public Markets Investor Relations
+1-212-719-7381
Media Relations Contact:
Joe Snodgrass
Head of Corporate Communications
+1-212-887-4821


10




EXHIBIT 1
OCH-ZIFF CAPITAL MANAGEMENT GROUP LLC
Consolidated Statements of Comprehensive (Loss) Income (Unaudited)
(dollars in thousands, except per share amounts)
 
 
 
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2016
 
2015
 
2016
 
2015
Revenues
 
 
 
 
 
 
 
Management fees
$
143,399

 
$
167,486

 
$
300,309

 
$
333,429

Incentive income
8,136

 
28,537

 
38,723

 
85,647

Other revenues
585

 
508

 
1,164

 
969

Income of consolidated Och-Ziff funds
438

 
124,868

 
804

 
234,205

Total Revenues
152,558

 
321,399

 
341,000

 
654,250

 
 
 
 
 
 
 
 
Expenses
 
 
 
 
 
 
 
Compensation and benefits
57,743

 
71,375

 
112,004

 
141,293

Reorganization expenses

 
4,017

 

 
8,034

Interest expense
5,937

 
5,405

 
11,323

 
10,650

General, administrative and other
272,501

 
12,013

 
540,025

 
61,848

Expenses of consolidated Och-Ziff funds
33

 
78,383

 
299

 
138,271

Total Expenses
336,214

 
171,193

 
663,651

 
360,096

 
 
 
 
 
 
 
 
Other Income (Loss)
 
 
 
 
 
 
 
Net gains on investments in Och-Ziff funds and joint ventures
250

 
72

 
499

 
189

Net gains (losses) of consolidated Och-Ziff funds
816

 
(3,399
)
 
1,361

 
42,486

Total Other Income (Loss)
1,066

 
(3,327
)
 
1,860

 
42,675

 
 
 
 
 
 
 
 
(Loss) Income Before Income Taxes
(182,590
)
 
146,879

 
(320,791
)
 
336,829

Income taxes
10,911

 
82,025

 
29,450

 
107,185

Consolidated and Comprehensive Net (Loss) Income
$
(193,501
)
 
$
64,854

 
$
(350,241
)
 
$
229,644

 
 
 
 
 
 
 
 
Allocation of Consolidated and Comprehensive Net (Loss) Income
 
 
 
 
 
 
 
Class A Shareholders
$
(78,571
)
 
$
4,760

 
$
(147,927
)
 
$
30,631

Noncontrolling interests
(115,592
)
 
58,022

 
(203,437
)
 
191,375

Redeemable noncontrolling interests
662

 
2,072

 
1,123

 
7,638

 
$
(193,501
)
 
$
64,854

 
$
(350,241
)
 
$
229,644

 
 
 
 
 
 
 
 
(Loss) Earnings Per Class A Share
 
 
 
 
 
 
 
Basic
$
(0.43
)
 
$
0.03

 
$
(0.81
)
 
$
0.17

Diluted
$
(0.44
)
 
$
0.03

 
$
(0.81
)
 
$
0.17

 
 
 
 
 
 
 
 
Weighted-Average Class A Shares Outstanding
 
 
 
 
 
 
 
Basic
182,454,677

 
177,693,164

 
182,501,762

 
177,664,174

Diluted
479,771,696

 
182,095,697

 
182,501,762

 
181,126,383







EXHIBIT 2
OCH-ZIFF CAPITAL MANAGEMENT GROUP LLC
Reconciliation of Non-GAAP Measures to the Respective GAAP Measures (Unaudited)
(dollars in thousands, except per share amounts)
 
 
 
 
 
 
 
Three Months Ended June 30, 2016
 
Three Months Ended June 30, 2015
 
 
Och-Ziff
Funds Segment
 
Other Operations
 
Total
Company
 
Och-Ziff
Funds Segment
 
Other Operations
 
Total
Company
Net (loss) income allocated to Class A Shareholders—GAAP
 
$
(80,087
)
 
$
1,516

 
$
(78,571
)
 
$
(12,328
)
 
$
17,088

 
$
4,760

Net (loss) income allocated to the Och-Ziff Operating Group A Units
 
(115,632
)
 

 
(115,632
)
 
50,802

 

 
50,802

Equity-based compensation, net of RSUs settled in cash
 
18,687

 
784

 
19,471

 
29,269

 
978

 
30,247

Income taxes
 
10,911

 

 
10,911

 
82,025

 

 
82,025

Adjustment for incentive income allocations from consolidated funds subject to clawback
 

 

 

 
(3,066
)
 
(15,739
)
 
(18,805
)
Allocations to Och-Ziff Operating Group D Units
 
1,025

 

 
1,025

 
5,189

 
225

 
5,414

Adjustment for expenses related to compensation and profit-sharing arrangements based on fund investment performance
 

 
1,425

 
1,425

 

 
2,175

 
2,175

Reorganization expenses
 

 

 

 
4,017

 

 
4,017

Changes in tax receivable agreement liability
 
(26
)
 

 
(26
)
 
(48,401
)
 

 
(48,401
)
Depreciation and amortization
 
3,394

 
186

 
3,580

 
2,814

 
186

 
3,000

Other adjustments
 
(858
)
 
(84
)
 
(942
)
 
190

 
(147
)
 
43

Economic Income—Non-GAAP
 
$
(162,586
)
 
$
3,827

 
(158,759
)
 
$
110,511

 
$
4,766

 
115,277

Adjusted Income Taxes—Non-GAAP(1)
 
 
 
(25,544
)
 
 
 
 
 
(20,068
)
Distributable Earnings—Non-GAAP
 
 
 
$
(184,303
)
 
 
 
 
 
$
95,209

 
 
 
 
 
 
 
 
 
 
 
Weighted-Average Class A Shares Outstanding
 
 
 
182,454,677

 
 
 
 
 
177,693,164

Weighted-Average Partner Units
 
 
 
322,767,349

 
 
 
 
 
324,501,026

Weighted-Average Class A Restricted Share Units (RSUs)
 
 
 
14,676,979

 
 
 
 
 
14,558,456

Weighted-Average Adjusted Class A Shares
 
 
 
519,899,005

 
 
 
 
 
516,752,646

 
 
 
 
 
 
 
 
 
 
 
Distributable Earnings Per Adjusted Class A Share—Non-GAAP
 
 
 
$
(0.35
)
 
 
 
 
 
$
0.18

 
 
 
 
 
 
 
 
 
 
 
 
 
Economic Income—Non-GAAP
 
 
 
 
 
$
(158,759
)
 
 
 
 
 
 
FCPA investigation reserve accrual
 
 
 
 
 
214,285

 
 
 
 
 
 
Economic Income Excluding Reserve—Non-GAAP
 
 
 
 
 
55,526

 
 
 
 
 
 
Adjusted Income Taxes—Non-GAAP(1)
 
 
 
(25,544
)
 
 
 
 
 
 
Distributable Earnings Excluding Reserve—Non-GAAP
 
 
 
$
29,982

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Distributable Earnings Per Adjusted Class A Share Excluding Reserve—Non-GAAP
 
 
 
$
0.06

 
 
 
 
 
 

(1) Presents an estimate of income tax expense by assuming the conversion of all Partner Units into Class A Shares, on a one-to-one basis, as well as the impact of payments under the tax receivable agreement. Therefore, all income of the Och-Ziff Operating Group allocated to the Partner Units is treated as if it were allocated to Och-Ziff Capital Management Group LLC.





EXHIBIT 3
OCH-ZIFF CAPITAL MANAGEMENT GROUP LLC
Reconciliation of Non-GAAP Measures to the Respective GAAP Measures (Unaudited)
(dollars in thousands, except per share amounts)
 
 
 
 
 
 
 
Six Months Ended June 30, 2016
 
Six Months Ended June 30, 2015
 
 
Och-Ziff
Funds Segment
 
Other Operations
 
Total
Company
 
Och-Ziff
Funds Segment
 
Other Operations
 
Total
Company
Net income (loss) allocated to Class A Shareholders—GAAP
 
$
(151,809
)
 
$
3,882

 
$
(147,927
)
 
$
(7,866
)
 
$
38,497

 
$
30,631

Net income allocated to the Och-Ziff Operating Group A Units
 
(203,651
)
 

 
(203,651
)
 
131,734

 

 
131,734

Equity-based compensation, net of RSUs settled in cash
 
36,655

 
1,358

 
38,013

 
57,274

 
1,769

 
59,043

Income taxes
 
29,450

 

 
29,450

 
107,185

 

 
107,185

Adjustment for incentive income allocations from consolidated funds subject to clawback
 

 

 

 
(826
)
 
(36,452
)
 
(37,278
)
Allocations to Och-Ziff Operating Group D Units
 
1,900

 

 
1,900

 
10,886

 
563

 
11,449

Adjustment for expenses related to compensation and profit-sharing arrangements based on fund investment performance
 

 
2,689

 
2,689

 

 
3,594

 
3,594

Reorganization expenses
 

 

 

 
8,034

 

 
8,034

Changes in tax receivable agreement liability
 
(171
)
 

 
(171
)
 
(48,426
)
 

 
(48,426
)
Depreciation and amortization
 
6,609

 
373

 
6,982

 
4,778

 
371

 
5,149

Other adjustments
 
(1,508
)
 
135

 
(1,373
)
 
401

 
(291
)
 
110

Economic Income—Non-GAAP
 
$
(282,525
)
 
$
8,437

 
(274,088
)
 
$
263,174

 
$
8,051

 
271,225

Adjusted Income Taxes—Non-GAAP(1)
 
 
 
(52,733
)
 
 
 
 
 
(49,318
)
Distributable Earnings—Non-GAAP
 
 
 
$
(326,821
)
 
 
 
 
 
$
221,907

 
 
 
 
 
 
 
 
 
 
 
Weighted-Average Class A Shares Outstanding
 
 
 
182,501,762

 
 
 
 
 
177,664,174

Weighted-Average Partner Units
 
 
 
322,705,784

 
 
 
 
 
324,495,004

Weighted-Average Class A Restricted Share Units (RSUs)
 
 
 
13,901,270

 
 
 
 
 
13,579,640

Weighted-Average Adjusted Class A Shares
 
 
 
519,108,816

 
 
 
 
 
515,738,818

 
 
 
 
 
 
 
 
 
 
 
Distributable Earnings Per Adjusted Class A Share—Non-GAAP
 
 
 
$
(0.63
)
 
 
 
 
 
$
0.43

 
 
 
 
 
 
 
 
 
 
 
 
 
Economic Income—Non-GAAP
 
 
 
 
 
$
(274,088
)
 
 
 
 
 
 
FCPA investigation reserve accrual
 
 
 
 
 
414,285

 
 
 
 
 
 
Economic Income Excluding Reserve—Non-GAAP
 
 
 
 
 
140,197

 
 
 
 
 
 
Adjusted Income Taxes—Non-GAAP(1)
 
 
 
(52,733
)
 
 
 
 
 
 
Distributable Earnings Excluding Reserve—Non-GAAP
 
 
 
$
87,464

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Distributable Earnings Per Adjusted Class A Share Excluding Reserve—Non-GAAP
 
 
 
$
0.17

 
 
 
 
 
 

(1) Presents an estimate of income tax expense by assuming the conversion of all Partner Units into Class A Shares, on a one-to-one basis, as well as the impact of payments under the tax receivable agreement. Therefore, all income of the Och-Ziff Operating Group allocated to the Partner Units is treated as if it were allocated to Och-Ziff Capital Management Group LLC.





EXHIBIT 4
OCH-ZIFF CAPITAL MANAGEMENT GROUP LLC
Components of Economic Income and Reconciliation of These Non-GAAP Measures to the Respective GAAP Measures (Unaudited)
(dollars in thousands)
 
 
 
 
 
 
 
Three Months Ended June 30, 2016
 
Three Months Ended June 30, 2015
 
 
Och-Ziff
Funds Segment
 
Other Operations
 
Total
Company
 
Och-Ziff
Funds Segment
 
Other Operations
 
Total
Company
Management fees—GAAP
 
$
138,162

 
$
5,237

 
$
143,399

 
$
162,660

 
$
4,826

 
$
167,486

Adjustment to management fees(1)
 
(10,023
)
 

 
(10,023
)
 
(477
)
 

 
(477
)
Management Fees—Economic Income Basis—Non-GAAP
 
128,139

 
5,237

 
133,376

 
162,183

 
4,826

 
167,009

 
 
 
 
 
 
 
 
 
 
 
 
 
Incentive income—GAAP
 
6,950

 
1,186

 
8,136

 
28,537

 

 
28,537

Adjustment to incentive income(2)
 

 

 

 
758

 
2,242

 
3,000

Incentive Income—Economic Income Basis—Non-GAAP
 
6,950

 
1,186

 
8,136

 
29,295

 
2,242

 
31,537

Other revenues
 
583

 
2

 
585

 
499

 
9

 
508

Total Revenues—Economic Income Basis—Non-GAAP
 
$
135,672

 
$
6,425

 
$
142,097

 
$
191,977

 
$
7,077

 
$
199,054

 
 
 
 
 
 
 
 
 
 
 
 
 
Compensation and benefits—GAAP
 
$
53,577

 
$
4,166

 
$
57,743

 
$
66,209

 
$
5,166

 
$
71,375

Adjustment to compensation and benefits(3)
 
(19,538
)
 
(2,209
)
 
(21,747
)
 
(34,920
)
 
(3,378
)
 
(38,298
)
Compensation and Benefits—Economic Income Basis—Non-GAAP
 
$
34,039

 
$
1,957

 
$
35,996

 
$
31,289

 
$
1,788

 
$
33,077

 
 
 
 
 
 
 
 
 
 
 
 
 
Interest expense and general, administrative and other expenses—GAAP
 
$
277,611

 
$
827

 
$
278,438

 
$
16,712

 
$
706

 
$
17,418

Adjustment to interest expense and general, administrative and other expenses(4)
 
(13,389
)
 
(186
)
 
(13,575
)
 
33,464

 
(183
)
 
33,281

Non-Compensation Expenses—Economic Income Basis—Non-GAAP
 
264,222

 
641

 
264,863

 
50,176

 
523

 
50,699

FCPA investigation reserve accrual
 
(214,285
)
 

 
(214,285
)
 

 

 

Non-Compensation Expenses Excl. Reserve—Economic Income Basis—Non-GAAP
 
$
49,937

 
$
641

 
$
50,578

 
$
50,176

 
$
523

 
$
50,699

 
 
 
 
 
 
 
 
 
 
 
 
 
Net (loss) income allocated to noncontrolling interests—GAAP
 
$
(115,646
)
 
$
54

 
$
(115,592
)
 
$
22,112

 
$
35,910

 
$
58,022

Adjustment to net income allocated to noncontrolling interests(6)
 
115,643

 
(54
)
 
115,589

 
(22,111
)
 
(35,910
)
 
(58,021
)
Net Loss Allocated to Noncontrolling Interests—Economic Income Basis—Non-GAAP
 
$
(3
)
 
$

 
$
(3
)
 
$
1

 
$

 
$
1

(1)
Adjustment to present management fees net of recurring placement and related service fees, as management considers these fees a reduction in management fees, not an expense. The impact of eliminations related to the consolidated Och-Ziff funds is also removed.
(2)
Adjustment to exclude the impact of eliminations related to the consolidated Och-Ziff funds.
(3)
Adjustment to exclude equity-based compensation, as management does not consider these non-cash expenses to be reflective of the operating performance of the Company. However, the fair value of RSUs that are settled in cash to employees or executive managing directors is included as an expense at the time of settlement. Further, expenses related to compensation and profit-sharing arrangements based on fund investment performance are recognized at the end of the relevant commitment period, as management reviews the total compensation expense related to these arrangements in relation to any incentive income earned by the relevant fund. Distributions to the Och-Ziff Operating Group D Units are also excluded, as management reviews operating performance at the Och-Ziff Operating Group level, where substantially all of the Company’s operations are performed, prior to making any income allocations.
(4)
Adjustment to exclude depreciation, amortization and changes in the tax receivable agreement liability, as management does not consider these items to be reflective of the operating performance of the Company. Additionally, recurring placement and related service fees are excluded, as management considers these fees a reduction in management fees, not an expense.
(5)
Adjustment to exclude net gains on investments in Och-Ziff funds, as management does not consider these gains to be reflective of the operating performance of the Company.
(6)
Adjustment to exclude amounts allocated to the executive managing directors on their interests in the Och-Ziff Operating Group, as management reviews the operating performance of the Company at the Och-Ziff Operating Group level. The Company conducts substantially all of its activities through the Och-Ziff Operating Group. Additionally, the impact of the consolidated Och-Ziff funds, including the allocation of earnings to investors in those funds, is also removed.





EXHIBIT 5
OCH-ZIFF CAPITAL MANAGEMENT GROUP LLC
Components of Economic Income and Reconciliation of These Non-GAAP Measures to the Respective GAAP Measures (Unaudited)
(dollars in thousands)
 
 
 
 
 
 
 
Six Months Ended June 30, 2016
 
Six Months Ended June 30, 2015
 
 
Och-Ziff
Funds Segment
 
Other Operations
 
Total
Company
 
Och-Ziff
Funds Segment
 
Other Operations
 
Total
Company
Management fees—GAAP
 
$
289,937

 
$
10,372

 
$
300,309

 
$
323,828

 
$
9,601

 
$
333,429

Adjustment to management fees(1)
 
(22,554
)
 

 
(22,554
)
 
(2,577
)
 

 
(2,577
)
Management Fees—Economic Income Basis—Non-GAAP
 
267,383

 
10,372

 
277,755

 
321,251

 
9,601

 
330,852

 
 
 
 
 
 
 
 
 
 
 
 
 
Incentive income—GAAP
 
33,903

 
4,820

 
38,723

 
85,647

 

 
85,647

Adjustment to incentive income(2)
 

 

 

 
7,418

 
3,755

 
11,173

Incentive Income—Economic Income Basis—Non-GAAP
 
33,903

 
4,820

 
38,723

 
93,065

 
3,755

 
96,820

Other revenues
 
1,155

 
9

 
1,164

 
951

 
18

 
969

Total Revenues—Economic Income Basis—Non-GAAP
 
$
302,441

 
$
15,201

 
$
317,642

 
$
415,267

 
$
13,374

 
$
428,641

 
 
 
 
 
 
 
 
 
 
 
 
 
Compensation and benefits—GAAP
 
$
103,303

 
$
8,701

 
$
112,004

 
$
131,019

 
$
10,274

 
$
141,293

Adjustment to compensation and benefits(3)
 
(38,205
)
 
(4,047
)
 
(42,252
)
 
(68,948
)
 
(5,926
)
 
(74,874
)
Compensation and Benefits—Economic Income Basis—Non-GAAP
 
$
65,098

 
$
4,654

 
$
69,752

 
$
62,071

 
$
4,348

 
$
66,419

 
 
 
 
 
 
 
 
 
 
 
 
 
Interest expense and general, administrative and other expenses—GAAP
 
$
548,865

 
$
2,483

 
$
551,348

 
$
71,151

 
$
1,347

 
$
72,498

Adjustment to interest expense and general, administrative and other expenses(4)
 
(28,992
)
 
(373
)
 
(29,365
)
 
18,878

 
(372
)
 
18,506

Non-Compensation Expenses—Economic Income Basis—Non-GAAP
 
519,873

 
2,110

 
521,983

 
90,029

 
975

 
91,004

FCPA investigation reserve accrual
 
(414,285
)
 

 
(414,285
)
 

 

 

Non-Compensation Expenses Excl. Reserve—Economic Income Basis—Non-GAAP
 
$
105,588

 
$
2,110

 
$
107,698

 
$
90,029

 
$
975

 
$
91,004

 
 
 
 
 
 
 
 
 
 
 
 
 
Net (loss) income allocated to noncontrolling interests—GAAP
 
$
(203,667
)
 
$
230

 
$
(203,437
)
 
$
148,601

 
$
42,774

 
$
191,375

Adjustment to net income allocated to noncontrolling interests(6)
 
203,662

 
(230
)
 
203,432

 
(148,608
)
 
(42,774
)
 
(191,382
)
Net Loss Allocated to Noncontrolling Interests—Economic Income Basis—Non-GAAP
 
$
(5
)
 
$

 
$
(5
)
 
$
(7
)
 
$

 
$
(7
)
(1)
Adjustment to present management fees net of recurring placement and related service fees, as management considers these fees a reduction in management fees, not an expense. The impact of eliminations related to the consolidated Och-Ziff funds is also removed.
(2)
Adjustment to exclude the impact of eliminations related to the consolidated Och-Ziff funds.
(3)
Adjustment to exclude equity-based compensation, as management does not consider these non-cash expenses to be reflective of the operating performance of the Company. However, the fair value of RSUs that are settled in cash to employees or executive managing directors is included as an expense at the time of settlement. Further, expenses related to compensation and profit-sharing arrangements based on fund investment performance are recognized at the end of the relevant commitment period, as management reviews the total compensation expense related to these arrangements in relation to any incentive income earned by the relevant fund. Distributions to the Och-Ziff Operating Group D Units are also excluded, as management reviews operating performance at the Och-Ziff Operating Group level, where substantially all of the Company’s operations are performed, prior to making any income allocations.
(4)
Adjustment to exclude depreciation, amortization and changes in the tax receivable agreement liability, as management does not consider these items to be reflective of the operating performance of the Company. Additionally, recurring placement and related service fees are excluded, as management considers these fees a reduction in management fees, not an expense.
(5)
Adjustment to exclude net gains on investments in Och-Ziff funds, as management does not consider these gains to be reflective of the operating performance of the Company.
(6)
Adjustment to exclude amounts allocated to the executive managing directors and the Ziffs (until they exchanged their remaining interests during the 2014 second quarter) on their interests in the Och-Ziff Operating Group, as management reviews the operating performance of the Company at the Och-Ziff Operating Group level. The Company conducts substantially all of its activities through the Och-Ziff Operating Group. Additionally, the impact of the consolidated Och-Ziff funds, including the allocation of earnings to investors in those funds, is also removed.





EXHIBIT 6
OCH-ZIFF CAPITAL MANAGEMENT GROUP LLC
Summary Of Changes In Assets Under Management(1) (Unaudited)
(dollars in thousands)
 
Three Months Ended June 30, 2016
 
March 31, 2016
 
Inflows / (Outflows)
 
Distributions / Other Reductions
 
Appreciation / (Depreciation)(2)
 
June 30, 2016
 
 
 
 
 
 
 
 
 
 
Multi-strategy funds
$
27,511,130

 
$
(1,706,955
)
 
$

 
$
290,219

 
$
26,094,394

Credit
 
 
 
 
 
 
 
 
 
Opportunistic credit funds
5,178,528

 
16,964

 
(147,400
)
 
144,664

 
5,192,756

Institutional Credit Strategies
7,242,804

 
8,797

 

 
(6,093
)
 
7,245,508

Real estate funds
2,067,870

 
155,956

 
(7,072
)
 
(2,933
)
 
2,213,821

Other
1,211,726

 
21,924

 

 
309

 
1,233,959

Total
$
43,212,058

 
$
(1,503,314
)
 
$
(154,472
)
 
$
426,166

 
$
41,980,438

 
Three Months Ended June 30, 2015
 
March 31, 2015
 
Inflows / (Outflows)
 
Distributions / Other Reductions
 
Appreciation / (Depreciation)(2)
 
June 30, 2015
 
 
 
 
 
 
 
 
 
 
Multi-strategy funds
$
33,872,642

 
$
(1,139,366
)
 
$

 
$
257,182

 
$
32,990,458

Credit
 
 
 
 
 
 
 
 
 
Opportunistic credit funds
5,191,989

 
18,201

 
(174,260
)
 
48,681

 
5,084,611

Institutional Credit Strategies
5,857,399

 
707,095

 

 
3,486

 
6,567,980

Real estate funds
2,058,366

 
9,488

 
(68,649
)
 
4,347

 
2,003,552

Other
1,329,831

 
(22,800
)
 

 
16,282

 
1,323,313

Total
$
48,310,227

 
$
(427,382
)
 
$
(242,909
)
 
$
329,978

 
$
47,969,914

 
Six Months Ended June 30, 2016
 
December 31, 2015
 
Inflows / (Outflows)
 
Distributions / Other Reductions
 
Appreciation / (Depreciation)(2)
 
June 30, 2016
 
 
 
 
 
 
 
 
 
 
Multi-strategy funds
$
29,510,248

 
$
(2,761,207
)
 
$

 
$
(654,647
)
 
$
26,094,394

Credit
 
 
 
 
 
 
 
 
 
Opportunistic credit funds
5,383,629

 
(43,352
)
 
(288,400
)
 
140,879

 
5,192,756

Institutional Credit Strategies
7,241,680

 
14,176

 

 
(10,348
)
 
7,245,508

Real estate funds
2,048,559

 
230,995

 
(61,365
)
 
(4,368
)
 
2,213,821

Other
1,310,745

 
(21,448
)
 

 
(55,338
)
 
1,233,959

Total
$
45,494,861

 
$
(2,580,836
)
 
$
(349,765
)
 
$
(583,822
)
 
$
41,980,438

 
Six Months Ended June 30, 2015
 
December 31, 2014
 
Inflows / (Outflows)
 
Distributions / Other Reductions
 
Appreciation / (Depreciation)(2)
 
June 30, 2015
 
 
 
 
 
 
 
 
 
 
Multi-strategy funds
$
34,100,390

 
$
(2,600,685
)
 
$

 
$
1,490,753

 
$
32,990,458

Credit
 
 
 
 
 
 
 
 
 
Opportunistic credit funds
5,098,600

 
416,454

 
(537,190
)
 
106,747

 
5,084,611

Institutional Credit Strategies
5,166,734

 
1,395,147

 

 
6,099

 
6,567,980

Real estate funds
2,022,399

 
64,001

 
(82,941
)
 
93

 
2,003,552

Other
1,146,292

 
91,132

 
(1
)
 
85,890

 
1,323,313

Total
$
47,534,415

 
$
(633,951
)
 
$
(620,132
)
 
$
1,689,582

 
$
47,969,914


(1)
Includes amounts invested by the Company, its executive managing directors, employees and certain other related parties for which the Company charged no management fees and received no incentive income for the periods presented. Amounts presented in this table are not the amounts used to calculate management fees and incentive income for the respective periods.
(2)
Appreciation (depreciation) reflects the aggregate net capital appreciation (depreciation) for the entire period and is presented on a total return basis, net of all fees and expenses (except incentive income on unrealized gains attributable to investments in certain funds that the Company, as investment manager, determines lack a readily ascertainable fair value, are illiquid or otherwise should be held until the resolution of a special event or circumstance that could reduce returns on these investments at the time of realization), and includes the reinvestment of all dividends and other income. Management fees and incentive income vary by product.





EXHIBIT 7
OCH-ZIFF CAPITAL MANAGEMENT GROUP LLC
Fund Information(1) (Unaudited)
(dollars in thousands)
 
Assets Under Management as of June 30,
 
Returns for the Six Months Ended June 30,
Annualized Returns Since Inception Through June 30, 2016
 
 
 
 
 
 
2016
 
2015
 
 
 
2016
 
2015
 
Gross

Net
 
Gross
 
Net
 
Gross
 
Net
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Multi-strategy funds
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
OZ Master Fund(2)
$
21,448,827

 
$
27,046,091

 
-1.2
 %
 
-2.1
 %
 
6.1
%
 
4.1
%
 
16.9
%
(2) 
11.8
%
(2) 
OZ Asia Master Fund
1,102,792

 
1,272,444

 
-2.9
 %
 
-3.8
 %
 
15.7
%
 
12.0
%
 
9.4
%
 
5.4
%
 
OZ Europe Master Fund
845,900

 
918,757

 
-0.9
 %
 
-1.7
 %
 
7.3
%
 
5.2
%
 
11.6
%
 
7.6
%
 
OZ Enhanced Master Fund
1,003,949

 
1,262,828

 
-3.3
 %
 
-4.2
 %
 
9.8
%
 
7.0
%
 
9.2
%
 
5.3
%
 
Och-Ziff European Multi-Strategy UCITS Fund
172,092

 
302,105

 
-4.7
 %
 
-5.7
 %
 
8.0
%
 
5.9
%
 
4.3
%
 
1.5
%
 
Other funds
1,520,834

 
2,188,233

 
n/m

 
n/m

 
n/m

 
n/m

 
n/m

 
n/m

 
 
26,094,394

 
32,990,458

 
 
 
 
 
 
 
 
 
 
 
 
 
Credit
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Opportunistic credit funds:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
OZ Credit Opportunities Master Fund
1,621,130

 
1,573,470

 
5.1
 %
 
4.4
 %
 
1.5
%
 
1.1
%
 
16.0
%
 
11.6
%
 
Customized Credit Focused Platform
2,519,090

 
1,814,973

 
5.6
 %
 
4.2
 %
 
3.7
%
 
2.7
%
 
18.5
%
 
14.0
%
 
Closed-end opportunistic credit funds
625,634

 
1,130,221

 
See the following page for information on the Company’s closed-end opportunistic credit funds.
Other funds
426,902

 
565,947

 
n/m

 
n/m

 
n/m

 
n/m

 
n/m

 
n/m

 
 
5,192,756

 
5,084,611

 
 
 
 
 
 
 
 
 
 
 
 
 
Institutional Credit Strategies
7,245,508

 
6,567,980

 
See the following page for information on the Company’s institutional credit strategies.
 
12,438,264

 
11,652,591

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Real estate funds
2,213,821

 
2,003,552

 
See the second following page for information on the Company’s real estate funds.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Other
1,233,959

 
1,323,313

 
n/m

 
n/m

 
n/m

 
n/m

 
n/m

 
n/m

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total
$
41,980,438

 
$
47,969,914

 
 
 
 
 
 
 
 
 
 
 
 
 
n/m not meaningful
Please see the last page of this Exhibit 7 (“Fund Information—Footnotes”) for important disclosures related to the footnotes referenced herein.





EXHIBIT 7
OCH-ZIFF CAPITAL MANAGEMENT GROUP LLC
Fund Information — continued (Unaudited)
(dollars in thousands)
 
Assets Under Management as of June 30,
 
Inception to Date as of June 30, 2016
 
 
 
 
 
 
 
 
 
IRR
 
 
 
2016
 
2015
 
Total Commitments
 
Total Invested Capital(3)
 
Gross(4)
 
Net(5)
 
Gross
MOIC(6)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Closed-end Opportunistic Credit Funds (Investment Period)
 
 
 
 
 
 
 
 
 
 
 
 
 
OZ European Credit Opportunities Fund (2012-2015)(7)
$
151,043

 
$
312,700

 
$
459,600

 
$
305,487

 
16.6
%
 
12.5
%
 
1.5 x
OZ Structured Products Domestic Fund II (2011-2014)(7)
207,405

 
349,142

 
326,850

 
326,850

 
18.2
%
 
13.9
%
 
1.8 x
OZ Structured Products Offshore Fund II (2011-2014)(7)
212,937

 
301,982

 
304,531

 
304,531

 
14.8
%
 
11.0
%
 
1.6 x
OZ Structured Products Offshore Fund I (2010-2013)(7)
16,497

 
25,089

 
155,098

 
155,098

 
23.9
%
 
19.1
%
 
2.1 x
OZ Structured Products Domestic Fund I (2010-2013)(7)
10,504

 
15,425

 
99,986

 
99,986

 
22.8
%
 
18.2
%
 
2.0 x
Other funds
27,248

 
125,883

 
298,250

 
268,250

 
n/m

 
n/m

 
n/m
 
$
625,634

 
$
1,130,221

 
$
1,644,315

 
$
1,460,202

 
 
 
 
 
 
n/m not meaningful
Please see the last page of this Exhibit 7 (“Fund Information—Footnotes”) for important disclosures related to the footnotes referenced herein.
 
 
 
 
 
Assets Under Management as of June 30,
 
Closing Date
 
Initial Deal Size
 
2016
 
2015
 
 
 
 
 
 
 
 
Institutional Credit Strategies
 
 
 
 
 
 
 
CLOs:
 
 
 
 
 
 
 
OZLM I
July 19, 2012
 
$
510,700

 
$
497,636

 
$
505,682

OZLM II
November 1, 2012
 
560,100

 
513,276

 
518,066

OZLM III
February 20, 2013
 
653,250

 
612,123

 
614,041

OZLM IV
June 27, 2013
 
600,000

 
541,114

 
543,525

OZLM V
December 17, 2013
 
501,250

 
468,683

 
471,074

OZLM VI
April 16, 2014
 
621,250

 
597,488

 
593,269

OZLM VII
June 26, 2014
 
824,750

 
796,223

 
796,434

OZLM VIII
September 9, 2014
 
622,250

 
596,574

 
596,239

OZLM IX
December 22, 2014
 
510,208

 
495,016

 
495,667

OZLM XI
March 12, 2015
 
510,500

 
491,377

 
490,977

OZLM XII
May 28, 2015
 
565,650

 
547,916

 
546,435

OZLM XIII
August 6, 2015
 
511,600

 
496,217

 

OZLM XIV
December 21, 2015
 
507,420

 
495,798

 

 
 
 
7,498,928

 
7,149,441

 
6,171,409

Other funds
n/a
 
n/a

 
96,067

 
396,571

 
 
 
$
7,498,928

 
$
7,245,508

 
$
6,567,980






EXHIBIT 7
OCH-ZIFF CAPITAL MANAGEMENT GROUP LLC
Fund Information — continued (Unaudited)
(dollars in thousands)
 
Assets Under Management as of June 30,
 
Inception to Date as of June 30, 2016
 
 
 
 
 
 
 
Total Investments
 
Realized/Partially Realized Investments(8)
 
2016
 
2015
 
Total Commitments
 
Invested Capital(9)
 
Total
Value(10)
 
Gross IRR(11)
 
Net IRR(5)
 
Gross
MOIC(12)
 
Invested Capital
 
Total
Value
 
Gross IRR(11)
 
Gross
MOIC(12)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Real Estate Funds (Investment Period)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Och-Ziff Real Estate Fund I (2005-2010)(7)
$
32,005

 
$
39,368

 
$
408,081

 
$
385,228

 
$
794,334

 
25.2
%
 
15.7
%
 
2.1x
 
$
359,360

 
$
786,167

 
28.1
%
 
2.2x
Och-Ziff Real Estate Fund II (2011-2014)(7)
345,174

 
393,876

 
839,508

 
735,700

 
1,306,483

 
34.0
%
 
21.9
%
 
1.8x
 
552,240

 
1,085,390

 
39.5
%
 
2.0x
Och-Ziff Real Estate Fund III (2014-2019)(13)
1,451,538

 
1,445,391

 
1,500,000

 
330,189

 
380,382

 
n/m

 
n/m

 
n/m
 

 

 
n/m

 
n/m
Och-Ziff Real Estate Credit Fund I (2015-2019)(13)
280,925

 
34,414

 
323,225

 
22,419

 
26,483

 
n/m

 
n/m

 
n/m
 
22,419

 
26,483

 
n/m

 
n/m
Other funds
104,179

 
90,503

 
216,172

 
65,920

 
96,835

 
n/m

 
n/m

 
n/m
 

 

 
n/m

 
n/m
 
$
2,213,821

 
$
2,003,552

 
$
3,286,986

 
$
1,539,456

 
$
2,604,517

 
 
 
 
 
 
 
$
934,019

 
$
1,898,040

 
 
 
 
 
Unrealized Investments as of June 30, 2016
 
Invested Capital
 
Total
Value
 
Gross
MOIC(12)
 
 
 
 
 
 
Real Estate Funds (Investment Period)
 
 
 
 
 
Och-Ziff Real Estate Fund I (2005-2010)(7)
$
25,868

 
$
8,167

 
0.3x
Och-Ziff Real Estate Fund II (2011-2014)(7)
183,460

 
221,093

 
1.2x
Och-Ziff Real Estate Fund III (2014-2019)(13)
330,189

 
380,382

 
n/m
Och-Ziff Real Estate Credit Fund I (2015-2019)(13)

 

 
n/m
Other funds
65,920

 
96,835

 
n/m
 
$
605,437

 
$
706,477

 
 
n/m not meaningful
Please see the last page of this Exhibit 7 (“Fund Information—Footnotes”) for important disclosures related to the footnotes referenced herein.





EXHIBIT 7
OCH-ZIFF CAPITAL MANAGEMENT GROUP LLC
Fund Information — Footnotes
 
(1)
The return information reflected in these tables represents, where applicable, the composite performance of all feeder funds that comprise each of the master funds presented. Gross return information is generally calculated using the total return of all feeder funds, net of all fees and expenses except management fees and incentive income of such feeder funds and master funds and the returns of each feeder fund include the reinvestment of all dividends and other income. Net return information is generally calculated as the gross returns less management fees and incentive income (except incentive income on unrealized gains attributable to investments in certain funds that the Company, as investment manager, determines lack a readily ascertainable fair value, are illiquid or otherwise should be held until the resolution of a special event or circumstance (“Special Investments”) that could reduce returns on these investments at the time of realization). Return information also includes realized and unrealized gains and losses attributable to Special Investments and initial public offering investments that are not allocated to all investors in the feeder funds. Investors that were not allocated Special Investments and/or initial public offering investments may experience materially different returns. The performance calculation for the OZ Master Fund excludes realized and unrealized gains and losses attributable to currency hedging specific to certain investors investing in OZ Master Fund in currencies other than the U.S. Dollar.
(2)
The annualized returns since inception are those of the Och-Ziff Multi-Strategy Composite, which represents the composite performance of all accounts that were managed in accordance with the Company’s broad multi-strategy mandate that were not subject to portfolio investment restrictions or other factors that limited the Company’s investment discretion since inception on April 1, 1994. Performance is calculated using the total return of all such accounts net of all investment fees and expenses of such accounts, except incentive income on unrealized gains attributable to Special Investments that could reduce returns in these investments at the time of realization, and the returns include the reinvestment of all dividends and other income. For the period from April 1, 1994 through December 31, 1997, the returns are gross of certain overhead expenses that were reimbursed by the accounts. Such reimbursement arrangements were terminated at the inception of the OZ Master Fund on January 1, 1998. The size of the accounts comprising the composite during the time period shown vary materially. Such differences impacted the Company’s investment decisions and the diversity of the investment strategies followed. Furthermore, the composition of the investment strategies the Company follows is subject to its discretion, has varied materially since inception and is expected to vary materially in the future. As of June 30, 2016, the gross and net annualized returns since the OZ Master Fund’s inception on January 1, 1998 were 12.9% and 8.7%, respectively.
(3)
Represents funded capital commitments net of recallable distributions to investors.
(4)
Gross internal rate of return (“IRR”) for the Company’s closed-end opportunistic credit funds represents the estimated, unaudited, annualized return based on the timing of cash inflows and outflows for the fund as of June 30, 2016, including the fair value of unrealized investments as of such date, together with any appreciation or depreciation from related hedging activity. Gross IRR does not include the effects of management fees or incentive income, which would reduce the return, and includes the reinvestment of all fund income.
(5)
Net IRR is calculated as described in footnotes (4) and (11), but is reduced by all management fees and for the real estate funds other fund-level fees and expenses not adjusted for in the calculation of gross IRR. Net IRR is further reduced by accrued and paid incentive income, which will be payable upon the distribution of each fund’s capital in accordance with the terms of the relevant fund. Accrued incentive income may be higher or lower at such time. The net IRR represents a composite rate of return for a fund and does not reflect the net IRR specific to any individual investor.
(6)
Gross multiple of invested capital (“MOIC”) for the Company’s closed-end opportunistic credit funds is calculated by dividing the sum of the net asset value of the fund, accrued incentive income, life-to-date incentive income and management fees paid and any non-recallable distributions made from the fund by the invested capital.
(7)
These funds have concluded their investment periods, and therefore the Company expects assets under management for these funds to decrease as investments are sold and the related proceeds are distributed to the investors in these funds.
(8)
An investment is considered partially realized when the total amount of proceeds received, including dividends, interest or other distributions of income and return of capital, represents at least 50% of invested capital.
(9)
Invested capital represents total aggregate contributions made for investments by the fund.
(10)
Total value represents the sum of realized distributions and the fair value of unrealized and partially realized investments as of June 30, 2016. Total value will be impacted (either positively or negatively) by future economic and other factors. Accordingly, the total value ultimately realized will likely be higher or lower than the amounts presented as of June 30, 2016.
(11)
Gross IRR for the Company’s real estate funds represents the estimated, unaudited, annualized return based on the timing of cash inflows and outflows for the aggregated investments as of June 30, 2016, including the fair value of unrealized and partially realized investments as of such date, together with any unrealized appreciation or depreciation from related hedging activity. Gross IRR is not adjusted for estimated management fees, incentive income or other fees or expenses to be paid by the fund, which would reduce the return.
(12)
Gross MOIC for the Company’s real estate funds is calculated by dividing the value of a fund’s investments by the invested capital, prior to adjustments for incentive income, management fees or other expenses to be paid by the fund.
(13)
This fund recently launched and has only invested a small portion of its committed capital; therefore, IRR and MOIC information is not presented, as it is not meaningful.





EXHIBIT 8
OCH-ZIFF CAPITAL MANAGEMENT GROUP LLC
Longer-Term Assets Under Management (Unaudited)
(dollars in thousands)

As of June 30, 2016, approximately 39% of the Company’s assets under management were subject to initial commitment periods of three years or longer. The Company earns incentive income on these assets based on the cumulative investment performance generated over this commitment period. The table below presents the amount of these assets under management, as well as the amount of incentive income accrued at the fund level but for which the commitment period has not concluded. These amounts have not yet been recognized in our revenues, as the Company recognizes incentive income at the end of the commitment period when amounts are no longer subject to clawback. Further, these amounts may ultimately not be recognized as revenue by the Company in the event of future losses in the respective funds.
 
June 30, 2016
 
Longer-Term Assets Under Management
 
Accrued Unrecognized Incentive
 
 
 
 
Multi-strategy funds
$
2,673,158

 
$
9,154

Credit
 
 
 
Opportunistic credit funds
4,125,164

 
116,090

Institutional Credit Strategies
7,204,357

 

Real estate funds
2,213,821

 
123,935

Other
309,640

 

 
$
16,526,140

 
$
249,179

The Company recognizes incentive income on its longer-term assets under management in multi-strategy funds and open-end opportunistic credit funds at the end of their respective commitment periods, which are generally three to five years. The Company expects the commitment period with respect to approximately 6% and 12% of the longer-term assets under management in the multi-strategy funds to mature during the third quarter of 2016 and the remainder of 2016, respectively. The Company does not expect the commitment period for a significant amount of longer-term assets under management in its open-end opportunistic credit funds to expire during the third quarter of 2016; however, the Company does expect the commitment period with respect to approximately 10% of the longer-term assets under management to mature during the remainder of 2016. Incentive income related to assets under management in the Company’s closed-end opportunistic credit funds and its real estate funds is generally recognized at or near the end of the life of each fund. These funds generally begin to make distributions after the conclusion of their respective investment period, as presented in the tables in Exhibit 7. However, these investment periods may generally be extended for an additional one to two years.






EXHIBIT 9
OCH-ZIFF CAPITAL MANAGEMENT GROUP LLC
Financial Supplement (Unaudited)
As of July 1, 2016
 
 
 
 
 
OZ Master Fund by Investment Strategy
 
 
Investors by Type(1)
 
Long/Short Equity Special Situations
62
%
 
Pensions
37
%
Structured Credit
11
%
 
Private Banks
15
%
Convertible and Derivative Arbitrage
11
%
 
Corporate, Institutional and Other
13
%
Corporate Credit
8
%
 
Fund-of-Funds
9
%
Merger Arbitrage
6
%
 
Foundations and Endowments
12
%
Private Investments
2
%
 
Related Parties
8
%
 
 
 
Family Offices and Individuals
6
%
 
 
 
 
 
Assets Under Management by Geography(2)
 
 
Investors by Geography(1)
 
North America
73
%
 
North America
75
%
Europe
16
%
 
Europe
13
%
Asia
11
%
 
Asia and Other
12
%
(1)
Presents the composition of the Company’s fund investor base across its funds excluding investors in its CLOs.
(2)
The North American exposure includes the United States, Canada, Central America and South America. The European exposure includes Africa and the Middle East. The Asian exposure includes Australia and New Zealand.






EXHIBIT 10
OCH-ZIFF CAPITAL MANAGEMENT GROUP LLC
Assets Under Management Trends (Unaudited)
(dollars in thousands)
 
Assets Under Management as of
 
June 30, 2016
 
December 31, 2015
 
December 31, 2014
 
December 31, 2013
 
December 31, 2012
 
 
 
 
 
 
 
 
 
 
Total Assets Under Management
$
41,980,438

 
$
45,494,861

 
$
47,534,415

 
$
40,238,812

 
$
32,603,930

Year-over-Year Change
-12
 %
 
-4
 %
 
18
%
 
23
%
 
13
%
 
 
 
 
 
 
 
 
 
 
Longer-Term Assets Under Management(1)
$
16,526,140

 
$
16,842,321

 
$
15,150,049

 
$
10,640,836

 
$
6,947,746

% of Total Assets Under Management
39
 %
 
37
 %
 
32
%
 
26
%
 
21
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Assets Under Management by Product
 
 
 
 
 
 
 
 
 
Multi-strategy funds
62
 %
 
65
 %
 
72
%
 
79
%
 
85
%
Credit
 
 
 
 
 
 
 
 
 
Opportunistic credit funds
12
 %
 
12
 %
 
11
%
 
11
%
 
7
%
Institutional Credit Strategies
17
 %
 
16
 %
 
11
%
 
6
%
 
3
%
Real estate funds
5
 %
 
5
 %
 
4
%
 
2
%
 
3
%
Other
4
 %
 
2
 %
 
2
%
 
2
%
 
2
%
Total assets under management in credit, real estate and other funds
38
 %
 
35
 %
 
28
%
 
21
%
 
15
%
(1)
Longer-term assets under management are those subject to initial commitment periods of three years or longer. Please see Exhibit 8 for additional information.




Och-Ziff Appoints William P. Barr to Board of Directors
NEW YORK, August 2, 2016 - Och-Ziff Capital Management Group LLC (NYSE: OZM) today announced that it has appointed William P. Barr to its Board of Directors. The addition of Mr. Barr expands Och-Ziff’s Board to eight directors.
Mr. Barr served as the 77th Attorney General of the United States and prior to that as Deputy Attorney General under President George H.W. Bush. After working at the Justice Department, Mr. Barr served as General Counsel at Verizon Communications, Inc. from 2000 until his retirement in 2008, and held the same role at GTE Corporation from 1994 to 2000, when it merged with Bell Atlantic Corporation to form Verizon. While at Verizon, Mr. Barr oversaw all legal, regulatory and government affairs. Mr. Barr also worked as White House Domestic Policy Staff under President Ronald Reagan and at the Central Intelligence Agency. He is currently on the Boards of Dominion Resources, Inc. and Time Warner Inc. Mr. Barr has also previously served as a Director of Selected Funds and as a Trustee of The Clipper Fund.
“Bill is one of the most respected attorneys in the country and brings outstanding leadership and experience to our Board of Directors,” said Dan Och, Chairman and Chief Executive Officer of Och-Ziff. “We look forward to his insight and guidance.”
“I am proud to join an organization of such professionalism and integrity,” added Barr. “The management, Board and employees of Och-Ziff have built an exceptional company, and I look forward to working with them.”
Mr. Barr will serve on Och-Ziff’s Compensation and Audit committees.
* * * *
About Och-Ziff
Och-Ziff is one of the largest institutional alternative asset managers in the world, with offices in New York, London, Hong Kong, Mumbai, Beijing, Dubai, Shanghai and Houston. Och-Ziff provides asset management services to investors globally through its multi-strategy funds, dedicated credit funds, including opportunistic credit funds and Institutional Credit Strategies products, real estate funds and other alternative investment vehicles. Och-Ziff seeks to generate consistent, positive, absolute returns across market cycles, with low volatility compared to the broader markets, and with an emphasis on preservation of capital. Och-Ziff’s funds invest across multiple strategies and geographies, consistent with the investment objectives of each fund. The global investment strategies Och-Ziff employs include convertible and derivative arbitrage, corporate credit, long/short equity special situations, merger arbitrage, private investments, real estate and structured credit. As of August 1, 2016, Och-Ziff had approximately $39.1 billion in assets under management. For more information, please visit Och-Ziff’s website (www.ozcap.com).
Investor Relations Contact
 
Media Relations Contact
Tina Madon
 
Joe Snodgrass
+1-212-719-7381
 
+1-212-887-4821
 





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