SOURCE: Och-Ziff Capital Management Group LLC

Och-Ziff Capital Management Group LLC

May 02, 2014 07:30 ET

Och-Ziff Capital Management Group LLC Reports 2014 First Quarter Results

2014 First Quarter Dividend of $0.23 per Class A Share

NEW YORK, NY--(Marketwired - May 02, 2014) - Och-Ziff Capital Management Group LLC (NYSE: OZM) (the "Company" or "Och-Ziff") today reported GAAP Net Income(1) of $23.9 million, or $0.14 per basic and diluted Class A Share, for the first quarter ended March 31, 2014. The Company also declared a $0.23 per share cash dividend on its Class A Shares for the 2014 first quarter.

Summary Highlights

  • Distributable Earnings of $127.8 million, or $0.25 per Adjusted Class A Share, for the 2014 first quarter, 7% lower than $136.9 million, or $0.29 per Adjusted Class A Share, for the 2013 first quarter.
  • Estimated assets under management of $43.5 billion as of May 1, 2014, which reflected year-to-date capital net inflows of approximately $3.6 billion and performance-related depreciation of $290.5 million.
  • Estimated year-to-date net returns through April 30, 2014 of the OZ Master Fund of -0.93%, the OZ Europe Master Fund of -1.33% and the OZ Asia Master Fund of -9.18%.

"The first quarter of this year was marked by challenging equity market conditions and increased volatility globally, and these conditions persisted into April," said Daniel S. Och, Chairman and Chief Executive Officer of Och-Ziff. "As always, we actively managed our exposures as market conditions evolved. We have a twenty-year history of protecting capital and generating consistent, positive, absolute returns, and we believe that we are well positioned to create substantial, incremental value for our fund investors.

"We are pleased with the progress we have made towards our strategic objective of becoming a multi-product, alternative asset manager. Our year-to-date net inflows through May 1st are the highest for this period that we have had since going public in 2007, and are reflective of the growing diversification of our platforms. We experienced strong net inflows into our multi-strategy funds, as well as into our dedicated credit and long/short platforms. Additionally, we successfully completed the first two closings of our third real estate fund, raising $952.2 million through May 1st. We believe that demand will continue to grow for managers that have global reach, offer a diverse range of products, and can create customized solutions for their clients. We view this trend as a substantial growth opportunity for our business, and believe that it will result in meaningful new capital allocations to us over time from investors globally."

(1) References to the Company's GAAP Net Income throughout this press release refer to the Company's GAAP Net Income Allocated to Class A Shareholders.

GAAP NET INCOME ALLOCATED TO CLASS A SHAREHOLDERS

For the 2014 first quarter, Och-Ziff reported GAAP Net Income of $23.9 million, or $0.14 per basic and diluted Class A Share, compared to $30.0 million, or $0.20 per basic and diluted Class A Share, for the 2013 first quarter.

The year-over-year decline in the Company's GAAP results was primarily due to a combination of lower incentive income and higher compensation and benefits expenses, partially offset by an increase in management fees as discussed in the "Economic Income (Non-GAAP)" section of this press release.

The Company's GAAP results in the 2014 first quarter were impacted by non-cash expenses of $27.1 million for equity-based compensation. These expenses primarily relate to Och-Ziff Operating Group A Units ("Group A Units"), which represent equity interests in the Company's principal operating subsidiaries (the "Och-Ziff Operating Group"), granted to executive managing directors, as well as Class A Restricted Share Units ("RSUs") granted to employees and executive managing directors. Each RSU represents the right to receive one Class A Share upon vesting. Vested Group A Units may be exchanged on a one-to-one basis for Class A Shares, subject to transfer restrictions and minimum retained ownership requirements.

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 discussion of "Non-GAAP Financial Measures" at the end of this press release.

DISTRIBUTABLE EARNINGS (NON-GAAP)

The Company's Distributable Earnings for the 2014 first quarter were $127.8 million, or $0.25 per Adjusted Class A Share, 7% lower than $136.9 million, or $0.29 per Adjusted Class A Share, for the 2013 first quarter.

The year-over-year decrease in Distributable Earnings was primarily due to lower incentive income and an increase in compensation and benefits expenses, partially offset by an increase in management fees and lower non-compensation expenses. See the "Economic Income (Non-GAAP)" section of this press release for a discussion of the drivers impacting the Company's revenues and operating expenses.

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 Exhibit 2 that accompanies this press release. Additionally, please see the discussion of "Non-GAAP Financial Measures" at the end of this press release, including the definitions of Distributable Earnings and Adjusted Class A Shares.

ASSETS UNDER MANAGEMENT

   
Assets under management by fund:  
         % Change(1)  
(dollars in billions)  March 31, 2014  March 31, 2013  Mar. 2014 vs.
Mar. 2013
 
              
Multi-strategy funds             
  OZ Master Fund  $25.8  $22.2  16 %
  OZ Europe Master Fund   1.3   1.9  -29 %
  OZ Asia Master Fund   1.4   1.2  18 %
  Other multi-strategy funds   4.0   3.1  32 %
Multi-strategy funds   32.5   28.4     
Credit funds   4.8   3.7  32 %
CLOs   2.6   1.6  67 %
Real estate funds   1.6   0.9  84 %
Other   1.1   0.4  69 %
Total  $42.6  $35.0  22 %
 
(1) Rounding differences may occur.
 

As of March 31, 2014, assets under management totaled $42.6 billion, an increase of $7.6 billion, or 22%, from March 31, 2013, which was driven by capital net inflows of $4.2 billion and performance-related appreciation of $3.4 billion. These capital net inflows included $1.0 billion related to two CLOs that the Company closed in the year-over-year period, as well as $763.5 million related to the first close of the Company's third real estate fund, which occurred in the first quarter of 2014.

During the month of March, the Company had approximately $901.7 million of intra-month capital net inflows, primarily related to the first close of the Company's third real estate fund discussed above, which are included in the $42.6 billion of assets under management as of March 31, 2014. Assets under management increased to an estimated $43.5 billion as of May 1, 2014. This increase reflected estimated performance-related depreciation of approximately $467.3 million in April and capital net inflows of approximately $1.4 billion, which was comprised of approximately $194.3 million of net inflows on April 1, 2014 and approximately $1.2 billion of net inflows from April 2, 2014 to May 1, 2014.

INVESTMENT PERFORMANCE

For the 2014 first quarter, performance was driven primarily by the funds' credit-related strategies, which were partially offset by the underperformance of the funds' long/short equity special situations strategy globally.

   
Net returns by fund (1) :  
   2014  
   January   February   March   1Q  
                  
OZ Master Fund  -0.16 % 2.51 % -1.87 % 0.43 %
OZ Europe Master Fund  -0.03 % 1.29 % -1.28 % -0.04 %
OZ Asia Master Fund  -3.20 % 0.51 % -4.09 % -6.69 %
                         
(1) Please see important disclosures on Exhibit 5 that accompanies this press release.
 

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.

For reconciliations of Economic Income and its components to the respective GAAP measures, please see Exhibits 2 and 3 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 2014 first quarter were $214.0 million, down 6% from $228.6 million for the 2013 first quarter. Management fees were $154.6 million, 22% higher than management fees of $126.4 million for the prior-year period. Incentive income was $59.0 million, compared to $101.3 million for the prior-year period.

The year-over-year decrease in Economic Income revenues was driven by lower incentive income. The primary driver of the year-over-year decline related to $69.6 million of incentive income crystallized in the first quarter of 2013 on certain credit assets that was not repeated in the first quarter of 2014, partially offset by tax distributions taken on the Company's longer-term assets. The year-over-year decline in incentive income was partially offset by an increase in management fees primarily due to the year-over-year growth in assets under management, which was driven by a combination of performance-related appreciation and capital net inflows.

The average management fee rate was 1.51% for the 2014 first quarter, compared to 1.56% for the 2013 first quarter. This decline was due primarily to an increase in assets under management in the Company's dedicated credit platforms and CLOs, which earn lower management fees as is reflective of the market for these products.

Compensation and Benefits (Non-GAAP)

Compensation and benefits for the 2014 first quarter totaled $29.2 million, up 24% from compensation and benefits of $23.5 million for the 2013 first quarter. Salaries and benefits totaled $25.6 million, 20% higher than salaries and benefits of $21.4 million in the prior-year period.

The year-over-year increase in compensation and benefits was primarily driven by higher salaries and benefits due to the Company's hiring activities globally.

The ratio of salaries and benefits to management fees was 17% for the first quarters of 2014 and 2013, respectively.

Non-Compensation Expenses (Non-GAAP)

Non-compensation expenses for the 2014 first quarter totaled $28.8 million, down 6% from non-compensation expenses of $30.7 million for the 2013 first quarter. The decrease was driven primarily by lower professional services fees, partially offset by higher insurance costs.

The ratio of non-compensation expenses to management fees was 19% for the 2014 first quarter, compared to 24% for the 2013 first quarter.

Economic Income (Non-GAAP)

Economic Income for the 2014 first quarter was $160.8 million, down 8% from Economic Income of $174.2 million for the 2013 first quarter.

The decrease in Economic Income was primarily due to a decrease in incentive income and an increase in compensation and benefits expenses, partially offset by an increase in management fees and lower non-compensation expenses.

CAPITAL

As of March 31, 2014, the number of Class A Shares outstanding was 170,684,241. For purposes of calculating Distributable Earnings per Share, the Company assumes that all the interests held by its executive managing directors and Ziff Investors Partnership, L.P. II and certain of its affiliates and control persons (the "Ziffs") in the Och-Ziff Operating Group (collectively, "Partner Units"), as well as 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 first quarter ended March 31, 2014, the total weighted-average Adjusted Class A Shares outstanding were 505,341,354.

DIVIDEND

The Board of Directors of Och-Ziff declared a 2014 first-quarter dividend of $0.23 per Class A Share. The dividend is payable on May 19, 2014 to holders of record as of the close of business on May 12, 2014.

For U.S. federal income tax purposes, the dividend will be treated as a partnership distribution. Based on the best information currently available, the Company estimates that when calculating withholding taxes, $0.2025 of the 2014 first-quarter dividend will be treated as U.S. source dividend income and $0.0037 will be treated as U.S. source interest income.

Non-U.S. holders of Class A Shares are generally subject to U.S. federal withholding tax at a rate of 30% (subject to reduction by applicable treaty or other exception) on their share of U.S. source dividends and certain other types of U.S. source income realized by the Company. With respect to interest, however, no withholding is generally required if proper certification (on an IRS Form W-8) of a beneficial owner's foreign status has been filed with the withholding agent. Non-U.S. holders must generally provide the withholding agent with a properly completed IRS Form W-8 to obtain any reduction in withholding.

The Company will host a conference call today, May 2, 2014, at 8:30 a.m. Eastern Time to discuss its 2014 first-quarter results. The call will be open to the public and can be accessed by dialing +1-888-679-8034 (callers inside the U.S.) or +1-617-213-4847 (callers outside the U.S.). The number should be dialed at least ten minutes prior to the start of the call and the passcode will be 96514800. A simultaneous webcast of the call will be available to the public on a listen-only basis through the Class A Shareholders section of the Company's website (www.ozcap.com).

For those unable to listen to the live broadcast, a replay will be available by dialing +1-888-286-8010 (callers inside the U.S.) or +1-617-801-6888 (callers outside the U.S.), passcode 96547678, beginning approximately two hours after the event for two weeks. A webcast replay of the event 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 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.

The Company conducts substantially all of its business through the Och-Ziff Funds segment, which provides asset management services to its multi-strategy funds, credit funds, CLOs 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 (Loss) 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.

For reconciliations of the Company's non-GAAP measures to the most directly comparable GAAP measures, please see Exhibits 2 and 3 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, therefore, 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 and the Ziffs 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 performance measurement 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 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 and the Ziffs, including the Group A Units and 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 and the Ziffs 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 herein are based upon historical information and on our current plans, estimates and expectations. The inclusion of this or other forward-looking information should not be regarded as a representation by us or any other person that the future plans, estimates or expectations contemplated by us 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, including Euro-zone sovereign debt issues; U.S. and foreign regulatory developments relating to, among other things, financial institutions and markets, government oversight, fiscal and tax policy; conditions impacting the alternative asset management industry; our ability to successfully compete for fund investors, assets, professional talent and investment opportunities; our ability to retain our active executive managing directors, managing directors and other investment professionals; our successful formulation and execution of our business and growth strategies; our ability to appropriately manage conflicts of interest and tax and other regulatory factors relevant to our business; and assumptions relating to our 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 our assumptions or estimates prove to be incorrect, our 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 our filings with the Securities and Exchange Commission ("SEC"), including but not limited to our annual report on Form 10-K for the year ended December 31, 2013, filed on March 18, 2014, which we refer to as our "Annual Report." There may be additional risks, uncertainties and factors that we do not currently view as material or that are not known. The forward-looking statements contained in this press release are made only as of the date of this press release. We do 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 Capital Management Group LLC

Och-Ziff Capital Management Group LLC is one of the largest institutional alternative asset managers in the world with offices in New York, London, Hong Kong, Mumbai, Beijing and Dubai. Och-Ziff provides asset management services to institutional investors globally through its multi-strategy funds, credit funds, CLOs, real estate funds, equity 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 for 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 and structured credit. As of May 1, 2014, Och-Ziff had approximately $43.5 billion in assets under management. For more information, please visit Och-Ziff's website (www.ozcap.com).

 
 
EXHIBIT 1
OCH-ZIFF CAPITAL MANAGEMENT GROUP LLC
Consolidated Statements of Comprehensive Income (Unaudited)
(dollars in thousands, except per share amounts)
 
   
   Three Months Ended March 31,
   2014  2013
         
Revenues        
  Management fees  $158,770  $128,798
  Incentive income   52,093   100,160
  Other revenues   446   961
  Income of consolidated Och-Ziff funds   74,171   56,292
  Total Revenues   285,480   286,211
         
Expenses        
  Compensation and benefits   65,855   51,415
  Reorganization expenses   4,021   4,021
  Interest expense   1,666   1,730
  General, administrative and other   35,912   37,873
  Expenses of consolidated Och-Ziff funds   38,677   15,326
  Total Expenses   146,131   110,365
         
Other Income        
  Net gains on investments in Och-Ziff funds and joint ventures   5,483   305
  Net gains of consolidated Och-Ziff funds   54,499   107,250
  Total Other Income   59,982   107,555
         
Income before Income Taxes   199,331   283,401
  Income taxes   33,591   25,295
Consolidated Net Income  $165,740  $258,106
         
Allocation of Consolidated Net Income        
  Class A Shareholders  $23,852  $30,035
  Noncontrolling interests   132,065   225,792
  Redeemable noncontrolling interests   9,823   2,279
   $165,740  $258,106
         
Earnings Per Class A Share        
  Basic  $0.14  $0.20
  Diluted  $0.14  $0.20
         
Weighted-Average Class A Shares Outstanding        
  Basic   171,920,763   150,646,754
  Diluted   175,925,367   151,625,895
 
 
 
 
 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 March 31, 2014   Three Months Ended March 31, 2013  
   Och-Ziff
Funds Segment
  Other Operations   Total
Company
  Och-Ziff
Funds Segment
  Other Operations   Total
Company
 
                                
Net income allocated to Class A Shareholders-GAAP  $24,445   $(593 ) $23,852   $20,348   $9,687   $30,035  
Net income allocated to the Och-Ziff Operating Group A Units   73,581    -    73,581    105,879    -    105,879  
Income taxes   33,591    -    33,591    25,295    -    25,295  
Equity-based compensation   27,130    -    27,130    22,718    -    22,718  
Incentive income allocations from consolidated funds subject to clawback   (7,644 )  (673 )  (8,317 )  (12,293 )  (11,153 )  (23,446 )
Allocations to Och-Ziff Operating Group D Units   5,157    -    5,157    4,200    -    4,200  
Adjustment for expenses related to compensation arrangements based on fund investment performance   1,101    3,265    4,366    1,003    -    1,003  
Reorganization expenses   4,021    -    4,021    4,021    -    4,021  
Changes in tax receivable agreement liability   (3,815 )  -    (3,815 )  19    -    19  
Depreciation and amortization   1,643    185    1,828    2,135    185    2,320  
Other   (612 )  58    (554 )  (90 )  2,261    2,171  
Economic Income-Non-GAAP  $158,598   $2,242    160,840   $173,235   $980    174,215  
Adjusted Income Taxes-Non-GAAP(1)            (33,039 )            (37,295 )
Distributable Earnings-Non-GAAP           $127,801             $136,920  
                                
Weighted-Average Class A Shares Outstanding            171,920,763              150,646,754  
Weighted-Average Partner Units            320,836,835              313,117,025  
Weighted-Average Class A Restricted Share Units (RSUs)            12,583,756              10,772,238  
Weighted-Average Adjusted Class A Shares            505,341,354              474,536,017  
                                
Distributable Earnings Per Adjusted Class A Share-Non-GAAP           $0.25             $0.29  
(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 (loss) 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
Components of Economic Income and Reconciliation of These Non-GAAP Measures to the Respective GAAP Measures (Unaudited)
(dollars in thousands)
 
                          
   Three Months Ended March 31, 2014   Three Months Ended March 31, 2013  
   Och-Ziff
Funds Segment
  Other Operations   Total
Company
  Och-Ziff
Funds Segment
  Other Operations   Total
Company
 
                                
Management fees-GAAP  $156,096   $2,674   $158,770   $125,921   $2,877   $128,798  
Adjustment to management fees(1)   (4,210 )  -    (4,210 )  (2,406 )  -    (2,406 )
Management Fees-Economic Income Basis-Non-GAAP   151,886    2,674    154,560    123,515    2,877    126,392  
                                
Incentive income-GAAP   52,093    -    52,093    100,160    -    100,160  
Adjustment to incentive income(2)   6,915    -    6,915    1,114    -    1,114  
Incentive Income-Economic Income Basis-Non-GAAP   59,008    -    59,008    101,274    -    101,274  
Other revenues(3)   439    7    446    957    4    961  
Total Revenues-Economic Income Basis-Non-GAAP  $211,333   $2,681   $214,014   $225,746   $2,881   $228,627  
                                
Compensation and benefits-GAAP  $61,513   $4,342   $65,855   $50,353   $1,062   $51,415  
Adjustment to compensation and benefits(4)   (33,389 )  (3,265 )  (36,654 )  (27,920 )  -    (27,920 )
Compensation and Benefits-Economic Income Basis-Non-GAAP  $28,124   $1,077   $29,201   $22,433   $1,062   $23,495  
                                
Interest expense and general, administrative and other expenses-GAAP  $38,031   $(453 ) $37,578   $39,007   $596   $39,603  
Adjustment to interest expense and general, administrative and other expenses(5)   (8,545 )  (185 )  (8,730 )  (8,687 )  (185 )  (8,872 )
Non-Compensation Expenses-Economic Income Basis-Non-GAAP  $29,486   $(638 ) $28,848   $30,320   $411   $30,731  
                                
Net gains on investments in Och-Ziff funds and joint ventures-GAAP  $5,483   $-   $5,483   $305   $-   $305  
Adjustment to net gains on investments in Och-Ziff funds and joint ventures(6)   (609 )  -    (609 )  (70 )  -    (70 )
Net Gains on Joint Ventures-GAAP  $4,874   $-   $4,874   $235   $-   $235  
                                
Net income allocated to noncontrolling interests-GAAP  $96,229   $35,836   $132,065   $149,680   $76,112   $225,792  
Adjustment to net income allocated to noncontrolling interests(7)   (96,230 )  (35,836 )  (132,066 )  (149,687 )  (75,684 )  (225,371 )
Net Income (Loss) Allocated to Noncontrolling Interests-Economic Income Basis-Non-GAAP  $(1 ) $-   $(1 ) $(7 ) $428   $421  
     
(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)    These items are presented on a GAAP basis, accordingly no adjustment to or reconciliation of these items is presented.
(4)    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 performance measurement 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.
(5)    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.
(6)    Adjustment to exclude net gains (losses) on investments in Och-Ziff funds, as management does not consider these gains (losses) to be reflective of the operating performance of the Company.
(7)    Adjustment to exclude amounts allocated to the executive managing directors and the Ziffs 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 (losses) to investors in those funds, is also removed.
   
   
   
   
EXHIBIT 4  
OCH-ZIFF CAPITAL MANAGEMENT GROUP LLC  
Financial Supplement (Unaudited)  
(dollars in millions)  
   
       Year Ended December 31,  
   Three Months
Ended March 31, 2014
  2013   2012   2011  
                      
Total Assets Under Management(1)                     
  Beginning of period balance  $40,239   $32,604   $28,766   $27,935  
  Net flows   2,210    3,104    480    1,116  
  Appreciation (depreciation)(2)   177    4,531    3,358    (285 )
  End of Period Balance  $42,626   $40,239   $32,604   $28,766  
                      
Assets Under Management by Fund(1)                     
  OZ Master Fund  $25,815   $25,211   $21,780   $20,198  
  OZ Europe Master Fund   1,325    1,437    1,961    2,272  
  OZ Asia Master Fund   1,375    1,342    1,394    1,620  
                      
Net Returns(3)                     
  OZ Master Fund   0.4 %  13.9 %  11.6 %  -0.5 %
  OZ Europe Master Fund   0.0 %  12.4 %  8.6 %  -4.9 %
  OZ Asia Master Fund   -6.7 %  13.5 %  7.0 %  -3.8 %
                                   
                                   
Past performance is no indication or guarantee of future results.
 
(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 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), and includes the reinvestment of all dividends and other income. Management fees and incentive income vary by product.
(3)    Net return represents a composite of the average return of the feeder funds that comprise each of the master funds presented. Net return is presented on a total return basis, net of all fees and expenses (except incentive income on Special Investments that could reduce returns on these investments at the time of realization), and includes the reinvestment of all dividends and other income. Performance 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.
     
     
 
 
 EXHIBIT 5
OCH-ZIFF CAPITAL MANAGEMENT GROUP LLC
Fund Performance of Certain Och-Ziff Funds (Unaudited)
 
                            
   2014                                       
   January   February   March   1Q                                       
                                                       
Net Returns(1)                                                      
  OZ Master Fund  -0.16 % 2.51 % -1.87 % 0.43 %                                     
  OZ Europe Master Fund  -0.03 % 1.29 % -1.28 % -0.04 %                                     
  OZ Asia Master Fund  -3.20 % 0.51 % -4.09 % -6.69 %                                     
                                                         
  S&P 500 Index(2)  -3.46 % 4.57 % 0.84 % 1.81 %                                     
  MSCI World Index(2)  -3.22 % 4.26 % 0.24 % 1.15 %                                     
                                                       

 

                                                       
   2013  
   January   February   March   April   May   June   July   August   September   October   November   December    FY2013  
                                                       
Net Returns(1)                                                      
  OZ Master Fund  2.37 % 0.41 % 1.18 % 1.78 % 1.28 % -0.69 % 1.07 % 0.07 % 1.91 % 1.15 % 1.04 % 1.53 %  13.87 %
  OZ Europe Master Fund  3.41 % 0.29 % 0.14 % -0.45 % 1.51 % -0.01 % 1.67 % -0.45 % 1.53 % 2.05 % 1.49 % 0.60 %  12.36 %
  OZ Asia Master Fund  3.64 % 0.31 % 1.56 % 4.68 % -0.93 % -0.90 % -0.51 % 0.31 % 1.54 % 0.10 % 1.59 % 1.51 %  13.51 %
                                                         
  S&P 500 Index(2)  5.18 % 1.36 % 3.75 % 1.93 % 2.34 % -1.33 % 5.09 % -2.90 % 3.14 % 4.60 % 3.05 % 2.53 %  32.39 %
  MSCI World Index(2)  5.40 % 1.53 % 2.73 % 2.86 % 1.53 % -2.38 % 4.76 % -2.02 % 3.77 % 3.98 % 2.22 % 2.13 %  29.57 %
                                                                                   
Past performance is no indication or guarantee of future results.
 
(1)   Net return represents a composite of the average return of the feeder funds that comprise each of the master funds presented. Net return is presented on a total return basis, net of all fees and expenses (except incentive income on unrealized gains attributable to investments 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), and includes the reinvestment of all dividends and other income. Performance 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.
(2)   This comparison shows the returns of the S&P 500 Index (SPTR) and the MSCI World Index (GDDLWI) ("Broader Market Indices") against certain Och-Ziff funds (the "funds"). This comparison is intended solely for illustrative purposes to show a historical comparison of the funds to the broader equity markets, as represented by the Broader Market Indices, and should not be considered as an indication of how the funds will perform relative to the Broader Market Indices in the future. The Broader Market Indices are not performance benchmarks of the funds. The funds are not managed to correlate in any way with the returns or composition of the Broader Market Indices, which are unmanaged. It is not possible to invest in an unmanaged index. You should not assume that there is any material overlap between the securities in the funds and those that comprise the Broader Market Indices. The S&P 500 Index is an equity index whose value is calculated as the free-float weighted average of the share prices of the 500 large-cap companies listed on the NYSE and NASDAQ. The MSCI World Index is a free-float adjusted market capitalization weighted index that is designed to measure the equity market performance of developed markets. Returns of the Broader Market Indices have not been reduced by fees and expenses associated with investing in securities and include the reinvestment of dividends.
     
     
   
   
EXHIBIT 6  
OCH-ZIFF CAPITAL MANAGEMENT GROUP LLC  
Financial Supplement (Unaudited)  
As of April 1, 2014  
             
             
             
OZ Master Fund by Investment Strategy      Investors by Type(1)     
  Long/Short Equity Special Situations  67 %  Pensions  32 %
  Structured Credit  15 %  Private Banks  16 %
  Convertible and Derivative Arbitrage  8 %  Fund-of-Funds  14 %
  Corporate Credit  7 %  Corporate, Institutional and Other  14 %
  Merger Arbitrage  2 %  Foundations and Endowments  11 %
  Private Investments  1 %  Family Offices and Individuals  7 %
  Cash  0 %  Related Parties  6 %
             
Assets Under Management by Geography(2)      Investors by Geography(1)     
  North America  66 %  North America  73 %
  Europe  23 %  Europe  16 %
  Asia  11 %  Asia and Other  11 %
                     
(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.
     
     

Contact Information

  • Investor Relations Contact:
    Tina Madon
    Managing Director
    Head of Investor Relations
    Och-Ziff Capital Management Group LLC
    +1-212-719-7381
    tina.madon@ozcap.com


    Media Relations Contact:
    George Sard or Jonathan Gasthalter
    Sard Verbinnen & Co
    +1-212-687-8080