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| Och-Ziff Capital Management Group LLC Reports 2010 Second Quarter Results |
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NEW YORK, Aug 03, 2010 /PRNewswire via COMTEX/ -- Och-Ziff Capital Management Group LLC (NYSE: OZM) (the "Company" or "Och-Ziff") today reported a GAAP Net Loss(1) of $89.4 million, or $1.05 per basic and diluted Class A Share, for the second quarter ended June 30, 2010. The Company also declared a $0.11 per share 2010 second quarter cash dividend on its Class A Shares. Summary Highlights
"The value of our investment process, our multi-strategy model and our international capabilities was again readily apparent as we generated strong risk-adjusted returns for our fund investors during the second quarter and in July," said Daniel Och, Chairman and Chief Executive Officer of Och-Ziff. "Our performance demonstrates the benefits of our active risk management process, investment portfolio diversity and consistently low use of leverage. "We remain confident that the long-term, secular growth drivers of assets under management remain intact for the hedge fund industry. Despite recent market volatility, we believe the capital allocation cycle is underway and confidence among institutional investors in this sector remains strong. We believe that our investment track record and the institutional structure of our business continue to differentiate us in the marketplace, increasing our ability to gain market share and grow assets under management over time." (1) References to the Company's GAAP Net Loss throughout this press release refer to the Company's GAAP net loss allocated to Class A shareholders. GAAP NET LOSS ALLOCATED TO CLASS A SHAREHOLDERS For the 2010 second quarter, Och-Ziff reported a GAAP Net Loss of $89.4 million, or $1.05 per basic and diluted Class A Share, compared to a GAAP Net Loss of $88.3 million, or $1.15 per basic and diluted Class A Share, for the 2009 second quarter. For the 2010 first half, Och-Ziff reported a GAAP Net Loss of $178.1million, or $2.12 per basic and diluted Class A Share, compared to a GAAP Net Loss of $170.2 million, or $2.22 per basic and diluted Class A Share, for the 2009 first half. The increase in the GAAP Net Loss for both periods was primarily driven by an increase in the Company's interest in its principal operating subsidiaries (the "Och-Ziff Operating Group") due to the vesting of Class A Restricted Share Units ("RSUs") and the exchange of Och-Ziff Operating Group A Units ("Group A Units") for Class A Shares. As a result, a larger share of the losses of the Och-Ziff Operating Group was allocated to the Company. Offsetting these increases in the GAAP Net Loss was an increase in management fees as a result of higher assets under management and lower compensation and benefits expenses, as the accrual for estimated discretionary cash bonuses taken in the 2009 second quarter did not recur in the 2010 second quarter. The GAAP Net Loss in the 2010 second quarter and first half primarily resulted from non-cash expenses of $411.8 million and $836.6 million, respectively, associated with the Company's reorganization in connection with its initial public offering ("IPO") in November 2007. These expenses are related to the amortization of Group A Units, which represent equity interests in the Och-Ziff Operating Group that were issued to the Company's pre-IPO owners in exchange for their pre-IPO interests in those subsidiaries. The Group A Units generally vest annually over five years until November 2012. Accordingly, the amortization of these expenses is expected to result in a GAAP Net Loss on an annual basis through 2012. Once vested, the Group A Units may be exchanged on a one-to-one basis for Class A Shares. Additionally, the GAAP Net Loss in the 2010 second quarter and first half were driven by non-cash expenses of $28.5 million and $59.4 million, respectively, for the amortization of equity-based compensation. This expense relates primarily to RSUs awarded to all of the Company's employees in connection with the IPO, which vest annually over four years until November 2011, and subsequent compensation-related grants. Each RSU represents the right to receive one Class A Share upon vesting. 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 "Non-GAAP and Segment Financial Measures" at the end of this press release. DISTRIBUTABLE EARNINGS (NON-GAAP) The Company's Distributable Earnings for the 2010 second quarter were $57.0 million, or $0.14 per Adjusted Class A Share, compared to $12.6 million, or $0.03 per Adjusted Class A Share, in the 2009 second quarter. Distributable Earnings for the 2010 first half were $106.2 million, or $0.26 per Adjusted Class A Share, compared to $39.8 million, or $0.10 per Adjusted Class A Share, in the 2009 first half. The year-over-year increase in both periods was primarily attributable to higher management fees as a result of higher assets under management and lower compensation and benefits expenses, as the accrual for estimated discretionary cash bonuses taken in the 2009 second quarter did not recur in the 2010 second quarter. Distributable Earnings is a non-GAAP measure. For reconciliations of Distributable Earnings to the respective GAAP Net Losses for the periods described above, please see Exhibits 3 through 6 that accompany this press release. Additionally, please see the discussion of "Non-GAAP and Segment Financial Measures" at the end of this press release. ASSETS UNDER MANAGEMENT Och-Ziff's assets under management were $25.5 billion as of June 30, 2010, 3% higher than the $24.8 billion in assets under management as of March 31, 2010 and 16% higher than the $21.9 billion in assets under management as of June 30, 2009. The $3.6 billion year-over-year increase was driven by performance-related appreciation of $2.4 billion and capital net inflows of $1.2 billion during the period. During the 2010 second quarter, the $647.2 million increase in assets under management was driven by capital net inflows of $1.0 billion, partially offset by performance-related depreciation of $388.2 million.
Assets under management by fund:
% Change (1)
------------
(dollars in Jun. 2010 Jun. 2010
billions) June 30, March 31, June 30, vs. vs.
2010 2010 2009 Mar. 2010 Jun. 2009
---- ---- ---- --------- ---------
OZ Master Fund 18.4 18.1 14.4 2% 27%
OZ Europe Master
Fund 2.9 3.0 3.0 -2% -2%
OZ Asia Master Fund 1.3 1.3 1.4 0% -4%
OZ Global Special
Investments 1.2 1.2 1.9 -5% -39%
Master Fund
Other (1) (2) 1.7 1.2 1.2 36% 47%
(1) Rounding differences may occur.
(2) Includes real estate funds, managed accounts and other funds not
significant to the Company's assets under management.
Estimated assets under management as of August 1, 2010 were $25.9 billion, which reflected August 1, 2010 capital net inflows of approximately $300 million and performance-related appreciation of approximately $300 million. For the year-to-date period from December 31, 2009 through August 1, 2010, estimated capital net inflows totaled approximately $2.2 billion and estimated performance-related appreciation totaled approximately $600 million. INVESTMENT PERFORMANCE For the first half of 2010, performance-related appreciation was principally driven by credit related strategies, convertible arbitrage and private investments.
Performance by fund(1):
2010
----
April May June 2Q 1H -2010
----- --- ---- --- --------
OZ Master Fund 0.88% -1.71% -0.53% -1.37% 1.31%
OZ Europe Master Fund 0.64% -2.50% -0.90% -2.76% 1.52%
OZ Asia Master Fund 1.15% -3.11% 0.03% -1.97% 2.95%
OZ Global Special
Investments 1.11% -1.39% 0.09% -0.21% 3.60%
Master Fund
(1) Please see important disclosures on Exhibit 10 of the financial
supplement accompanying this press release.
ECONOMIC INCOME FOR THE OCH-ZIFF FUNDS SEGMENT The Company conducts substantially all of its business through the Och-Ziff Funds segment, which is currently the Company's only reportable segment under GAAP. This segment provides investment management and advisory services to the Company's hedge funds and separately managed accounts. The measures discussed below are presented on an Economic Income basis. For reconciliations of these segment measures to the respective GAAP measures, please see Exhibits 3through 6 that accompany this press release. Additionally, please see the discussion of "Non-GAAP and Segment Financial Measures" at the end of this press release. Total Revenues - Segment Total revenues for the 2010 second quarter were $113.0 million, a 33% increase from total revenues for the 2009 second quarter of $85.0 million. Management fees were $107.0 million, 27% higher than management fees in the prior year period of $84.5 million. Total revenues for the 2010 first half were $213.1 million, a 20% increase from total revenues of $177.7 million in the 2009 first half. Management fees were $206.6 million, 17% higher than management fees of $176.9 million in the 2009 first half. Total revenues increased year-over-year in both periods due primarily to higher management fees resulting from the growth in assets under management. This growth was driven by performance-related appreciation and capital net inflows. Compensation and Benefits - Segment Compensation and benefits for the 2010 second quarter totaled $16.7 million, 61% lower than compensation and benefits of $42.6 million for the 2009 second quarter. Compensation and benefits for the 2010 first half totaled $34.8 million, 45% lower than compensation and benefits of $63.0 million for the 2009 first half. The year-over-year decrease in both periods was principally attributable to the accrual for estimated discretionary cash bonuses taken in the 2009 second quarter which did not recur in the 2010 second quarter. Non-Compensation Expenses - Segment Non-compensation expenses for the 2010 second quarter were $21.7 million, a slight decline from non-compensation expenses of $21.8 million for the 2009 second quarter. Non-compensation expenses in the 2010 first half were $41.3 million, a 10% decrease from non-compensation expenses of $45.9 million in the 2009 first half. In both periods, an increase in professional services fees was more than offset by lower interest expense on the Company's variable rate borrowings resulting from the decline in LIBOR rates and the early retirement of an aggregate of $105 million of the Company's term loan in 2009. Lower insurance costs also contributed to the decline. Economic Income - Segment Economic Income for the Och-Ziff Funds segment for the 2010 second quarter was $74.6 million, compared to $20.6 million for the 2009 second quarter. Economic Income for the 2010 first half was $136.7 million, compared to $68.8 million for the 2009 first half. The increase in both periods was driven primarily by a combination of higher management fees and lower compensation and benefits expenses. ECONOMIC INCOME FOR THE COMPANY'S OTHER OPERATIONS (NON-GAAP) The Company's Other Operations are comprised of its real estate business, which manages and provides advisory services to its real estate funds, and investments in new businesses established to expand certain of the Company's private investment platforms. The businesses within the Company's Other Operations are currently in their early development stages and are not included in the results of the Och-Ziff Funds segment. Economic Income for the Company's Other Operations for the 2010 second quarter was a net loss of $2.9 million, compared to a net loss of $4.8 million for the 2009 second quarter. Economic Income for the Company's Other Operations for the 2010 first half was a net loss of $7.2 million, compared to a net loss of $8.5 million for the 2009 first half. The decrease in the net loss in both periods was principally the result of lower non-compensation expenses due to the reimbursement of organization expenses related to the Company's new real estate fund. Economic Income for the Company's Other Operations is a non-GAAP measure. For reconciliations of Economic Income for the Company's Other Operations to the respective GAAP Net Losses for the periods described above, please see Exhibits 3 through 6 that accompany this press release. Additionally, please see the discussion of "Non-GAAP and Segment Financial Measures" at the end of this press release. ECONOMIC INCOME FOR THE COMPANY (NON-GAAP) Economic Income for the Company for the 2010 second quarter was $71.6 million, compared to $15.8 million for the 2009 second quarter. Economic Income for the Company for the 2010 first half was $129.5 million, compared to $60.3 million for the 2009 first half. The increase for both periods was primarily attributable to higher management fees and lower compensation and benefits expenses in the Och-Ziff Funds segment. Economic Income for the Company is a non-GAAP measure. For reconciliations of Economic Income for the Company to the respective GAAP Net Losses for the periods described above, please see Exhibits 3 through 6 that accompany this press release. Additionally, please see the discussion of "Non-GAAP and Segment Financial Measures" at the end of this press release. CAPITAL As of June 30, 2010, the number of Class A Shares outstanding was 87,973,809. For purposes of calculating Distributable Earnings per Share, the Company assumes that all partner interests in the Och-Ziff Operating Group ("Partner Units") and RSUs outstanding during the period have been converted on a one-to-one basis into Class A Shares. For the second quarter and first half ended June 30, 2010, the total weighted-average Adjusted Class A Shares outstanding were 409,073,936 and 408,607,532, respectively. DIVIDEND The Board of Directors of Och-Ziff authorized a 2010 second quarter dividend of $0.11 per Class A Share. The dividend is payable on August 19, 2010 to holders of record as of the close of business on August 12, 2010. The ex-dividend date will be August 10, 2010. 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, the entire amount of the 2010 second quarter dividend will be treated as U.S. source dividend 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.
* * * *
Och-Ziff will host a conference call today, August 3, 2010, at 8:30 a.m. Eastern Time to discuss the Company's 2010 second quarter results. The call will be open to the public and can be accessed by dialing (888) 713-4211 (callers inside the U.S.) or (617) 213-4864 (callers outside the U.S.). The number should be dialed at least ten minutes prior to the start of the call. The passcode for the call will be 74499372. A simultaneous webcast of the call will be available to the public on a listen-only basis on the For Shareholders page of the Company's website at www.ozcap.com. For those unable to listen to the live broadcast, a replay will be available by dialing (888) 286-8010 (callers inside the U.S.) or (617) 801-6888 (callers outside the U.S.), passcode 56717130, beginning approximately two hours after the event for two weeks. A webcast replay of the event will also be available on the For Shareholders page of the Company's website.
* * * *
Non-GAAP and Segment Financial Measures In addition to analyzing the Company's results on a GAAP basis, Och-Ziff's management also reviews the Company's results on an "Economic Income basis." Economic Income for the Company, the Och-Ziff Funds segment and Other Operations 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 performance of the Company's business and makes resource allocation and other operating decisions. In addition, management believes that Economic Income provides a more comparable view of the Company's operating performance from period to period. 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:
In addition, deferred cash compensation expense is recognized in full in the period in which it is awarded, as management determines the total amount of compensation based on the Company's performance in the year of the award. 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 Other Operations is a non-GAAP measure that is calculated on the same basis as the methodology that is used to calculate Economic Income for the Och-Ziff Funds segment. Management also evaluates Economic Income for the Company, which is a non-GAAP measure that equals the sum of Economic Income for the Och-Ziff Funds segment and for the Company's Other Operations. As a result of the adjustments described above, management fees, compensation and benefits, non-compensation expenses and net loss (income) allocated to partners' and others' interests in consolidated subsidiaries are presented on an Economic Income basis for the Company's Other Operations and the Company, and are also non-GAAP measures. No adjustments to the GAAP basis have been made for incentive income, other revenues and net earnings (losses) on joint ventures. For reconciliations of these non-GAAP measures to the respective GAAP measures, please see Exhibits 3 through 6 that accompany this press release. Distributable Earnings is a non-GAAP measure of after-tax operating performance and equals Economic Income for the Company 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. Therefore, all income (loss) of the Och-Ziff Operating Group allocated to the partners 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 partners and the Ziffs, including the Group A Units and other non-equity profit interests in the Och-Ziff Operating Group that automatically convert into Group A Units upon the occurrence of certain events. Distributable Earnings per Share is equal to Distributable Earnings divided by the weighted-average number of Adjusted Class A Shares. Adjusted Class A Shares are determined assuming all Partner Units and RSUs are converted on a one-to-one basis into Class A Shares. Management uses Distributable Earnings, among other financial data, to determine the earnings available to distribute as dividends to holders of the Company's Class A Shares and to the Company's partners and the Ziffs with respect to their Partner Units. The Company's non-GAAP measures should not be considered as alternatives to the Company's GAAP Net 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. Reconciliations of these non-GAAP measures to the most directly comparable financial measures calculated and presented in accordance with GAAP are included in Exhibits 3 through 6 attached to this press release.
* * * *
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, strategies and expectations, including but not limited to statements regarding the Company's financial performance and results, including its ability to increase assets under management, generate positive returns, preserve capital and identify investment opportunities and enhance the Company's investment platforms. 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," "pipeline," "comfortable," "assume," "remain," "maintain," "sustain," "achieve" 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 any 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. Such forward-looking statements are subject to various risks and uncertainties and assumptions, including but not limited to global economic, business and market conditions, the conditions impacting the hedge fund industry, the Company's ability to successfully compete for fund investors, professional investment talent and investment opportunity, its successful formulation and execution of business and growth strategies and its ability to appropriately manage conflicts of interest and tax and other regulatory factors relevant to the Company's business, as well as assumptions relating to the Company's operations, 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 underlying assumptions prove to be incorrect, the Company's actual results may vary materially from those indicated in these statements. These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included in the Company's filings with the Securities and Exchange Commission, including but not limited to the Company's Annual Report on Form 10-K for the year ended December 31, 2009 filed on March 4, 2010. There may be additional risks, uncertainties and factors that the Company does not currently view as material or that are not known. The forward-looking statements included in this document are made only as of the date of this document and the Company does not undertake any obligation to publicly update or review any forward-looking statement, whether as a result 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 world's largest institutional alternative asset managers with offices in New York, London, Hong Kong, Mumbai and Beijing. Och-Ziff's funds seek to deliver consistent, positive, risk-adjusted returns throughout market cycles, with a strong focus on capital preservation. Och-Ziff's multi-strategy approach combines global investment strategies, including long/short equity special situations, convertible and derivative arbitrage, structured credit, other credit, private investments and merger arbitrage. As of August 1, 2010, Och-Ziff had approximately $25.9 billion in assets under management with approximately 600 investor relationships. For more information, please visit Och-Ziff's website at www.ozcap.com.
Exhibit 1
OCH-ZIFF CAPITAL MANAGEMENT GROUP LLC
Consolidated Statements of Operations (Unaudited)
(dollars in thousands, except per share amounts)
Three Months Ended
June 30,
------------------
2010 2009
---- ----
Revenues
Management fees $110,214 $86,166
Incentive income 5,536 265
Other revenues 720 285
Income of consolidated Och-Ziff
funds 7,454 8,887
Total Revenues 123,924 95,603
------- ------
Expenses
Compensation and benefits 51,729 76,025
Allocations to non-equity
partner interests - 4,915
Reorganization expenses 411,789 424,736
Profit sharing - 308
Interest expense 1,936 4,060
General, administrative and other 23,538 21,132
Expenses of consolidated Och-
Ziff funds 4,297 1,142
Total Expenses 493,289 532,318
------- -------
Other Income
Net earnings on deferred balances - 14,723
Net gains (losses) on investments
in (602) 560
Och-Ziff funds and joint
ventures
Net gain on early retirement of
debt - 2,013
Net gains (losses) of
consolidated Och-Ziff funds 16,151 (375)
Total Other Income 15,549 16,921
------ ------
Loss before Income Taxes (353,816) (419,794)
Income taxes 7,744 449
----- ---
Consolidated Net Loss $(361,560) $(420,243)
========= =========
Net Loss Allocated to Partners'
and Others' $(272,139) $(331,930)
Interests in Consolidated
Subsidiaries ========= =========
Net Loss Allocated to Class A
Shareholders $(89,421) $(88,313)
======== ========
Net Loss per Class A Share
Basic and Diluted $(1.05) $(1.15)
====== ======
Weighted-Average Class A Shares
Outstanding
Basic and Diluted (1) 85,432,135 76,804,771
========== ==========
Six Months Ended June
30,
----------------------
2010 2009
---- ----
Revenues
Management fees $211,956 $180,471
Incentive income 5,722 265
Other revenues 1,111 553
Income of consolidated Och-Ziff
funds 14,570 11,502
Total Revenues 233,359 192,791
------- -------
Expenses
Compensation and benefits 104,921 127,901
Allocations to non-equity
partner interests - 4,575
Reorganization expenses 836,595 844,685
Profit sharing - 291
Interest expense 3,893 8,655
General, administrative and other 46,130 43,382
Expenses of consolidated Och-
Ziff funds 5,379 1,896
Total Expenses 996,918 1,031,385
------- ---------
Other Income
Net earnings on deferred balances - 3,430
Net gains (losses) on investments
in (549) 306
Och-Ziff funds and joint
ventures
Net gain on early retirement of
debt - 2,013
Net gains (losses) of
consolidated Och-Ziff funds 22,342 (98)
Total Other Income 21,793 5,651
------ -----
Loss before Income Taxes (741,766) (832,943)
Income taxes 16,543 3,278
------ -----
Consolidated Net Loss $(758,309) $(836,221)
========= =========
Net Loss Allocated to Partners'
and Others' $(580,249) $(666,054)
Interests in Consolidated
Subsidiaries ========= =========
Net Loss Allocated to Class A
Shareholders $(178,060) $(170,167)
========= =========
Net Loss per Class A Share
Basic and Diluted $(2.12) $(2.22)
====== ======
Weighted-Average Class A Shares
Outstanding
Basic and Diluted (1) 84,078,032 76,676,699
========== ==========
(1) Includes fully vested RSUs that have not been exchanged into
Class A Shares as of the end of the period.
Exhibit 2
OCH-ZIFF CAPITAL MANAGEMENT GROUP LLC
Economic Income Summary (Unaudited)
(dollars in thousands)
Three Months Ended June 30, 2010
--------------------------------
Economic Income
Basis Och-Ziff Other Total
Funds Segment
--------------- (1) Operations Company
(Non-GAAP) (Non-GAAP)
-------------- (2) (2)
----------- -----------
Management fees $107,035 $999 $108,034
Incentive income 5,536 - 5,536
Other revenues 448 272 720
Total Economic
Income revenues 113,019 1,271 114,290
Compensation and
benefits 16,739 4,583 21,322
Non-compensation
expenses 21,704 (875) 20,829
Total Economic
Income expenses 38,443 3,708 42,151
Net earnings
(losses) on joint
ventures (3) - 9 9
Net loss (income)
allocated to
partners' and
others' - (508) (508)
interests in
consolidated
subsidiaries (4)
Economic Income 74,576 (2,936) 71,640
Three Months Ended June 30, 2009
--------------------------------
Economic Income
Basis Och-Ziff Other Total
Funds Segment
--------------- (1) Operations Company
(Non-GAAP) (Non-GAAP)
-------------- (2) (2)
----------- -----------
Management fees $84,523 $1,311 $85,834
Incentive income 265 - 265
Other revenues 231 54 285
Total Economic
Income revenues 85,019 1,365 86,384
Compensation and
benefits 42,587 4,990 47,577
Non-compensation
expenses 21,801 886 22,687
Total Economic
Income expenses 64,388 5,876 70,264
Net earnings
(losses) on joint
ventures (3) - (444) (444)
Net loss (income)
allocated to
partners' and
others' - 122 122
interests in
consolidated
subsidiaries (4)
Economic Income 20,631 (4,833) 15,798
Six Months Ended June 30, 2010
------------------------------
Economic Income
Basis Och-Ziff Other Total
Funds Segment
--------------- (1) Operations Company
(Non-GAAP) (Non-GAAP)
-------------- (2) (2)
----------- -----------
Management fees $206,609 $1,876 $208,485
Incentive income 5,722 - 5,722
Other revenues 732 379 1,111
Total Economic
Income revenues 213,063 2,255 215,318
Compensation and
benefits 34,770 8,383 43,153
Non-compensation
expenses 41,335 671 42,006
Total Economic
Income expenses 76,105 9,054 85,159
Net losses on
joint ventures
(3) (235) (81) (316)
Net loss (income)
allocated to
partners' and
others' - (321) (321)
interests in
consolidated
subsidiaries (4)
Economic Income 136,723 (7,201) 129,522
Six Months Ended June 30, 2009
------------------------------
Economic Income
Basis Och-Ziff Other Total
Funds Segment
--------------- (1) Operations Company
(Non-GAAP) (Non-GAAP)
-------------- (2) (2)
----------- -----------
Management fees $176,947 $2,641 $179,588
Incentive income 265 - 265
Other revenues 445 108 553
Total Economic
Income revenues 177,657 2,749 180,406
Compensation and
benefits 62,963 8,417 71,380
Non-compensation
expenses 45,894 1,906 47,800
Total Economic
Income expenses 108,857 10,323 119,180
Net losses on
joint ventures
(3) - (992) (992)
Net loss (income)
allocated to
partners' and
others' - 75 75
interests in
consolidated
subsidiaries (4)
Economic Income 68,800 (8,491) 60,309
(1) The Och-Ziff Funds segment is the Company's only reportable
segment under U.S. GAAP. Management uses Economic Income to
evaluate the financial performance of and to make operating decisions
for the segment. For reconciliations of these segment measures
to the nearest U.S. GAAP measures, see Exhibits 3 through 6.
(2) Each of the measures presented is a non-GAAP measure, with the
exception of incentive income, other revenues and net
earnings (losses) on joint ventures, for which no adjustments to the
U.S. GAAP basis have been made. Management calculates
non-GAAP measures on an Economic Income basis for the Company's
Other Operations and for the Company as a whole to
assess the financial performance of the Company's entire business.
For reconciliations of these non-GAAP measures to the nearest U.S.
GAAP measures, see Exhibits 3 through 6.
(3) Represents the Company's earnings (losses) in joint ventures
established to expand certain of the Company's private investments
platforms.
(4) Represents the residual interests in the domestic real estate
management business not owned by the Company.
Exhibit 3
OCH-ZIFF CAPITAL MANAGEMENT GROUP LLC
Reconciliation of Non-GAAP and Segment Financial Measures to U.S.
GAAP Measures
(dollars in thousands, except per share amount)
OCH-ZIFF FUNDS SEGMENT
----------------------
Reconciling Adjustments
(1)
------------------------
Three Months Ended June 30, 2010 Economic Funds
-------------------------------- Income Consolidation
Basis (2) -------------
---------
Management fees $107,035 $(60)
Incentive income 5,536 -
Other revenues 448 -
Income of consolidated Och-Ziff
funds - -
Total revenues 113,019 (60)
Compensation and benefits 16,739 -
Allocations to non-equity partner
interests - -
Reorganization expenses - -
Profit sharing - -
Interest expense 1,936 -
General, administrative and other 19,768 -
Expenses of consolidated Och-Ziff
funds - 25
Total expenses 38,443 25
Net earnings on deferred balances - -
Net gains (losses) on investments in - -
Och-Ziff funds and joint ventures
Net gain on early retirement of debt - -
Net gains (losses) of consolidated
Och-Ziff funds - (544)
Income taxes - -
Net loss (income) allocated to
partners' and - 629
others' interests in consolidated
subsidiaries
Net income (loss) allocated to 74,576 -
Class A shareholders
OCH-ZIFF FUNDS SEGMENT
----------------------
Reconciling Adjustments
(1)
------------------------
Three Months Ended June
30, 2010 Other U.S. GAAP
----------------------- Adjustments Basis
----------- -----
Management fees $2,240 (a) $109,215
Incentive income - 5,536
Other revenues - 448
Income of consolidated
Och-Ziff funds - -
Total revenues 2,240 115,199
(b)
Compensation and benefits 26,579 (c) 43,318
Allocations to non-
equity partner interests - -
Reorganization expenses 411,789 (e) 411,789
Profit sharing - -
Interest expense - 1,936
General, administrative (a)
and other 4,459 (g) 24,227
Expenses of consolidated
Och-Ziff funds - 25
Total expenses 442,827 481,295
Net earnings on deferred
balances - -
Net gains (losses) on
investments in (611) (h) (611)
Och-Ziff funds and joint
ventures
Net gain on early
retirement of debt - -
Net gains (losses) of
consolidated Och-Ziff
funds - (544)
Income taxes 6,574 (g) 6,574
Net loss (income)
allocated to partners'
and 291,728 (i) 292,357
others' interests in
consolidated
subsidiaries
Net income (loss)
allocated to (156,044) (81,468)
Class A shareholders
OTHER OPERATIONS
----------------
Reconciling Adjustments
(1)
------------------------
Three Months Ended June 30,
2010 Economic Funds
--------------------------- Income Consolidation
Basis -------------
(Non-GAAP)
(3)
-----------
Management fees $999 $-
Incentive income - -
Other revenues 272 -
Income of consolidated Och-
Ziff funds - 7,454
Total revenues 1,271 7,454
Compensation and benefits 4,583 -
Allocations to non-equity
partner interests - -
Reorganization expenses - -
Profit sharing - -
Interest expense - -
General, administrative and
other (875) -
Expenses of consolidated Och-
Ziff funds - 4,272
Total expenses 3,708 4,272
Net earnings on deferred
balances - -
Net gains (losses) on
investments in 9 (195)
Och-Ziff funds and joint
ventures
Net gain on early retirement
of debt - -
Net gains (losses) of
consolidated Och-Ziff funds - 16,695
Income taxes - -
Net loss (income) allocated to
partners' and (508) (19,682)
others' interests in
consolidated subsidiaries
Net income (loss) allocated to (2,936) -
Class A shareholders
OTHER OPERATIONS
----------------
Reconciling Adjustments
(1)
------------------------
Three Months Ended June 30,
2010 Other U.S. GAAP
--------------------------- Adjustments Basis
----------- -----
Management fees $- $999
Incentive income - -
Other revenues - 272
Income of consolidated Och-
Ziff funds - 7,454
Total revenues - 8,725
Compensation and benefits 3,828 (c) 8,411
Allocations to non-equity
partner interests - -
Reorganization expenses - -
Profit sharing - -
Interest expense - -
General, administrative and
other 186 (g) (689)
Expenses of consolidated
Och-Ziff funds - 4,272
Total expenses 4,014 11,994
Net earnings on deferred
balances - -
Net gains (losses) on
investments in 195 (h) 9
Och-Ziff funds and joint
ventures
Net gain on early
retirement of debt - -
Net gains (losses) of
consolidated Och-Ziff
funds - 16,695
Income taxes 1,170 (g) 1,170
Net loss (income) allocated
to partners' and (28) (i) (20,218)
others' interests in
consolidated subsidiaries
Net income (loss) allocated
to (5,017) (7,953)
Class A shareholders
TOTAL COMPANY
-------------
Three Months Ended June 30, 2010 Economic U.S. GAAP
-------------------------------- Income Basis
Basis -----
(Non-GAAP)
(3)
-----------
Management fees $108,034 $110,214
Incentive income 5,536 5,536
Other revenues 720 720
Income of consolidated Och-Ziff funds - 7,454
Total revenues 114,290 123,924
Compensation and benefits 21,322 51,729
Allocations to non-equity partner
interests - -
Reorganization expenses - 411,789
Profit sharing - -
Interest expense 1,936 1,936
General, administrative and other 18,893 23,538
Expenses of consolidated Och-Ziff funds - 4,297
Total expenses 42,151 493,289
Net earnings on deferred balances - -
Net gains (losses) on investments in 9 (602)
Och-Ziff funds and joint ventures
Net gain on early retirement of debt - -
Net gains (losses) of consolidated Och-
Ziff funds - 16,151
Income taxes - 7,744
Net loss (income) allocated to
partners' and (508) 272,139
others' interests in consolidated
subsidiaries
Net income (loss) allocated to 71,640 (89,421)
Class A shareholders
Adjusted Income Taxes - Non-GAAP (4) (14,596)
Distributable Earnings - Non-GAAP $57,044
=======
Weighted-Average Class A Shares
Outstanding 85,432,135
Weighted-Average Partner Units 309,641,157
Weighted-Average Class A Restricted
Share Units (RSUs) 14,000,644
Weighted-Average Adjusted Class A
Shares 409,073,936
===========
Distributable Earnings Per Adjusted $0.14
Class A Share - Non-GAAP =====
(1) See Exhibit 7 for a description of the adjustments made to arrive
at the Company's results on a U.S. GAAP basis.
(2) The Och-Ziff Funds segment is the Company's only reportable
segment under U.S. GAAP. Management uses Economic
Income to evaluate the financial performance of and to make operating
decisions for the segment.
(3) Each of the measures presented is a non-GAAP measure, with the
exception of incentive income, other
revenues and net earnings (losses) on joint ventures, for which no
adjustments to the U.S. GAAP basis have been made.
Management calculates non-GAAP measures on an Economic Income basis
for the Company's Other Operations
and for the Company as a whole to assess the financial performance of
the Company's entire business.
(4) 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. 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 4
OCH-ZIFF CAPITAL MANAGEMENT GROUP LLC
Reconciliation of Non-GAAP and Segment Financial Measures to U.S.
GAAP Measures
(dollars in thousands, except per share amount)
OCH-ZIFF FUNDS SEGMENT
----------------------
Reconciling Adjustments
(1)
------------------------
Three Months Ended June
30, 2009 Economic Funds
----------------------- Income Consolidation
Basis (2) -------------
---------
Management fees $84,523 $(55)
Incentive income 265 -
Other revenues 231 -
Income of consolidated
Och-Ziff funds - -
Total revenues 85,019 (55)
Compensation and
benefits 42,587 -
Allocations to non-
equity partner
interests - -
Reorganization expenses - -
Profit sharing - -
Interest expense 4,060 -
General, administrative
and other 17,741 -
Expenses of consolidated
Och-Ziff funds - 8
Total expenses 64,388 8
Net earnings on deferred
balances - -
Net gains (losses) on
investments in - -
Och-Ziff funds and
joint ventures
Net gain on early
retirement of debt - -
Net gains (losses) of
consolidated Och-Ziff
funds - (395)
Income taxes - -
Net loss (income)
allocated to partners'
and - 458
others' interests in
consolidated
subsidiaries
Net income (loss)
allocated to 20,631 -
Class A shareholders
OCH-ZIFF FUNDS SEGMENT
----------------------
Reconciling Adjustments
(1)
------------------------
Three Months Ended
June 30, 2009 Other U.S. GAAP
------------------ Adjustments Basis
----------- -----
Management fees $387 (a) $84,855
Incentive income - 265
Other revenues - 231
Income of consolidated
Och-Ziff funds - -
Total revenues 387 85,351
Compensation and (b)
benefits 22,654 (c) 65,241
Allocations to non-
equity partner
interests 4,915 (d) 4,915
Reorganization
expenses 424,736 (e) 424,736
Profit sharing 308 (f) 308
Interest expense - 4,060
General,
administrative and (a)
other 2,319 (g) 20,060
Expenses of
consolidated Och-
Ziff funds - 8
Total expenses 454,932 519,328
Net earnings on
deferred balances 14,723 (h) 14,723
Net gains (losses) on
investments in 1,004 (h) 1,004
Och-Ziff funds and
joint ventures
Net gain on early
retirement of debt 2,013 (g) 2,013
Net gains (losses) of
consolidated Och-
Ziff funds - (395)
Income taxes 387 (g) 387
Net loss (income)
allocated to
partners' and 339,275 (i) 339,733
others' interests in
consolidated
subsidiaries
Net income (loss)
allocated to (97,917) (77,286)
Class A shareholders
OTHER OPERATIONS
----------------
Reconciling
Adjustments (1)
----------------
Three Months Ended June 30,
2009 Economic Funds
--------------------------- Income Consolidation
Basis -------------
(Non-GAAP)
(3)
-----------
Management fees $1,311 $-
Incentive income - -
Other revenues 54 -
Income of consolidated Och-
Ziff funds - 8,887
Total revenues 1,365 8,887
Compensation and benefits 4,990 -
Allocations to non-equity
partner interests - -
Reorganization expenses - -
Profit sharing - -
Interest expense - -
General, administrative and
other 886 -
Expenses of consolidated Och-
Ziff funds - 1,134
Total expenses 5,876 1,134
Net earnings on deferred
balances - -
Net gains (losses) on
investments in (444) (83)
Och-Ziff funds and joint
ventures
Net gain on early retirement of
debt - -
Net gains (losses) of
consolidated Och-Ziff funds - 20
Income taxes - -
Net loss (income) allocated to
partners' and 122 (7,690)
others' interests in
consolidated subsidiaries
Net income (loss) allocated to (4,833) -
Class A shareholders
OTHER OPERATIONS
----------------
Reconciling
Adjustments (1)
----------------
Three Months Ended June 30,
2009 Other U.S. GAAP
--------------------------- Adjustments Basis
----------- -----
Management fees $- $1,311
Incentive income - -
Other revenues - 54
Income of consolidated Och-
Ziff funds - 8,887
Total revenues - 10,252
Compensation and benefits 5,794 (c) 10,784
Allocations to non-equity
partner interests - -
Reorganization expenses - -
Profit sharing - -
Interest expense - -
General, administrative and
other 186 (g) 1,072
Expenses of consolidated Och-
Ziff funds - 1,134
Total expenses 5,980 12,990
Net earnings on deferred
balances - -
Net gains (losses) on
investments in 83 (h) (444)
Och-Ziff funds and joint
ventures
Net gain on early retirement of
debt - -
Net gains (losses) of
consolidated Och-Ziff funds - 20
Income taxes 62 (g) 62
Net loss (income) allocated to
partners' and (235) (i) (7,803)
others' interests in
consolidated subsidiaries
Net income (loss) allocated to (6,194) (11,027)
Class A shareholders
TOTAL COMPANY
-------------
Three Months Ended June 30, 2009 Economic U.S. GAAP
-------------------------------- Income Basis
Basis -----
(Non-GAAP)
(3)
-----------
Management fees $85,834 $86,166
Incentive income 265 265
Other revenues 285 285
Income of consolidated Och-Ziff funds - 8,887
Total revenues 86,384 95,603
Compensation and benefits 47,577 76,025
Allocations to non-equity partner
interests - 4,915
Reorganization expenses - 424,736
Profit sharing - 308
Interest expense 4,060 4,060
General, administrative and other 18,627 21,132
Expenses of consolidated Och-Ziff
funds - 1,142
Total expenses 70,264 532,318
Net earnings on deferred balances - 14,723
Net gains (losses) on investments in (444) 560
Och-Ziff funds and joint ventures
Net gain on early retirement of debt - 2,013
Net gains (losses) of consolidated
Och-Ziff funds - (375)
Income taxes - 449
Net loss (income) allocated to
partners' and 122 331,930
others' interests in consolidated
subsidiaries
Net income (loss) allocated to 15,798 (88,313)
Class A shareholders
Adjusted Income Taxes - Non-GAAP (4) (3,216)
Distributable Earnings - Non-GAAP $12,582
=======
Weighted-Average Class A Shares
Outstanding 76,804,771
Weighted-Average Partner Units 310,830,111
Weighted-Average Class A Restricted
Share Units (RSUs) 15,362,190
----------
Weighted-Average Adjusted Class A
Shares 402,997,072
===========
Distributable Earnings Per Adjusted $0.03
Class A Share - Non-GAAP =====
(1) See Exhibit 7 for a description of the adjustments made to arrive
at the Company's results on a U.S. GAAP
basis.
(2) The Och-Ziff Funds segment is the Company's only reportable
segment under U.S. GAAP. Management
uses Economic Income to evaluate the financial performance of and to
make operating decisions for the segment.
(3) Each of the measures presented is a non-GAAP measure, with the
exception of incentive income,
other revenues and net earnings (losses) on joint ventures, for which
no adjustments to the U.S. GAAP basis
have been made. Management calculates non-GAAP measures on an
Economic Income basis for the
Company's Other Operations and for the Company as a whole to assess
the financial performance of the
Company's entire business.
(4) 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. 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 5
OCH-ZIFF CAPITAL MANAGEMENT GROUP LLC
Reconciliation of Non-GAAP and Segment Financial Measures to U.S.
GAAP Measures
(dollars in thousands, except per share amount)
OCH-ZIFF FUNDS SEGMENT
----------------------
Reconciling Adjustments
(1)
------------------------
Six Months Ended June 30, 2010 Economic Funds
------------------------------ Income Consolidation
Basis (2) -------------
---------
Management fees $206,609 $(120)
Incentive income 5,722 -
Other revenues 732 -
Income of consolidated Och-
Ziff funds - -
Total revenues 213,063 (120)
Compensation and benefits 34,770 -
Allocations to non-equity
partner interests - -
Reorganization expenses - -
Profit sharing - -
Interest expense 3,893 -
General, administrative and
other 37,442 -
Expenses of consolidated Och-
Ziff funds - 31
Total expenses 76,105 31
Net earnings on deferred
balances - -
Net gains (losses) on
investments in (235) -
Och-Ziff funds and joint
ventures
Net gain on early retirement of
debt - -
Net gains of consolidated Och-
Ziff funds - 159
Income taxes - -
Net loss (income) allocated to
partners' and - (8)
others' interests in
consolidated subsidiaries
Net income (loss) allocated to 136,723 -
Class A shareholders
OCH-ZIFF FUNDS SEGMENT
----------------------
Reconciling Adjustments
(1)
------------------------
Six Months Ended June 30,
2010 Other U.S. GAAP
------------------------- Adjustments Basis
----------- -----
Management fees $3,591 (a) $210,080
Incentive income - 5,722
Other revenues - 732
Income of consolidated
Och-Ziff funds - -
Total revenues 3,591 216,534
(b)
Compensation and benefits 54,153 (c) 88,923
Allocations to non-
equity partner interests - -
Reorganization expenses 836,595 (e) 836,595
Profit sharing - -
Interest expense - 3,893
General, administrative (a)
and other 7,646 (g) 45,088
Expenses of consolidated
Och-Ziff funds - 31
Total expenses 898,394 974,530
Net earnings on deferred
balances - -
Net gains (losses) on
investments in (233) (h) (468)
Och-Ziff funds and joint
ventures
Net gain on early
retirement of debt - -
Net gains of consolidated
Och-Ziff funds - 159
Income taxes 14,126 (g) 14,126
Net loss (income)
allocated to partners'
and 611,729 (i) 611,721
others' interests in
consolidated
subsidiaries
Net income (loss)
allocated to (297,433) (160,710)
Class A shareholders
OTHER OPERATIONS
----------------
Reconciling Adjustments
(1)
------------------------
Six Months Ended June 30, 2010 Economic Funds
------------------------------ Income Consolidation
Basis -------------
(Non-GAAP)
(3)
-----------
Management fees $1,876 $-
Incentive income - -
Other revenues 379 -
Income of consolidated Och-
Ziff funds - 14,570
Total revenues 2,255 14,570
Compensation and benefits 8,383 -
Allocations to non-equity
partner interests - -
Reorganization expenses - -
Profit sharing - -
Interest expense - -
General, administrative and
other 671 -
Expenses of consolidated Och-
Ziff funds - 5,348
Total expenses 9,054 5,348
Net earnings on deferred
balances - -
Net gains (losses) on
investments in (81) (315)
Och-Ziff funds and joint
ventures
Net gain on early retirement of
debt - -
Net gains of consolidated Och-
Ziff funds - 22,183
Income taxes - -
Net loss (income) allocated to
partners' and (321) (31,090)
others' interests in
consolidated subsidiaries
Net income (loss) allocated to (7,201) -
Class A shareholders
OTHER OPERATIONS
----------------
Reconciling Adjustments
(1)
------------------------
Six Months Ended June 30, 2010 Other U.S. GAAP
------------------------------ Adjustments Basis
----------- -----
Management fees $- $1,876
Incentive income - -
Other revenues - 379
Income of consolidated Och-
Ziff funds - 14,570
Total revenues - 16,825
Compensation and benefits 7,615 (c) 15,998
Allocations to non-equity
partner interests - -
Reorganization expenses - -
Profit sharing - -
Interest expense - -
General, administrative and
other 371 (g) 1,042
Expenses of consolidated Och-
Ziff funds - 5,348
Total expenses 7,986 22,388
Net earnings on deferred
balances - -
Net gains (losses) on
investments in 315 (h) (81)
Och-Ziff funds and joint
ventures
Net gain on early retirement of
debt - -
Net gains of consolidated Och-
Ziff funds - 22,183
Income taxes 2,417 (g) 2,417
Net loss (income) allocated to
partners' and (61) (i) (31,472)
others' interests in
consolidated subsidiaries
Net income (loss) allocated to (10,149) (17,350)
Class A shareholders
TOTAL COMPANY
-------------
Six Months Ended June 30, 2010 Economic U.S. GAAP
------------------------------ Income Basis
Basis -----
(Non-GAAP)
(3)
-----------
Management fees $208,485 $211,956
Incentive income 5,722 5,722
Other revenues 1,111 1,111
Income of consolidated Och-Ziff
funds - 14,570
Total revenues 215,318 233,359
Compensation and benefits 43,153 104,921
Allocations to non-equity partner
interests - -
Reorganization expenses - 836,595
Profit sharing - -
Interest expense 3,893 3,893
General, administrative and other 38,113 46,130
Expenses of consolidated Och-Ziff
funds - 5,379
Total expenses 85,159 996,918
Net earnings on deferred balances - -
Net gains (losses) on investments in (316) (549)
Och-Ziff funds and joint ventures
Net gain on early retirement of debt - -
Net gains of consolidated Och-Ziff
funds - 22,342
Income taxes - 16,543
Net loss (income) allocated to
partners' and (321) 580,249
others' interests in consolidated
subsidiaries
Net income (loss) allocated to 129,522 (178,060)
Class A shareholders
Adjusted Income Taxes - Non-GAAP (4) (23,294)
Distributable Earnings - Non-GAAP $106,228
========
Weighted-Average Class A Shares
Outstanding 84,078,032
Weighted-Average Partner Units 310,194,307
Weighted-Average Class A Restricted
Share Units (RSUs) 14,335,193
----------
Weighted-Average Adjusted Class A
Shares 408,607,532
===========
Distributable Earnings Per Adjusted $0.26
Class A Share - Non-GAAP =====
(1) See Exhibit 7 for a description of the adjustments made to arrive
at the Company's results on a U.S. GAAP basis.
(2) The Och-Ziff Funds segment is the Company's only reportable
segment under U.S. GAAP. Management uses
Economic Income to evaluate the financial performance of and to make
operating decisions for the segment.
(3) Each of the measures presented is a non-GAAP measure, with the
exception of incentive income, other
revenues and net earnings (losses) on joint ventures, for which no
adjustments to the U.S. GAAP basis have been
made. Management calculates non-GAAP measures on an Economic Income
basis for the Company's Other
Operations and for the Company as a whole to assess the financial
performance of the Company's entire business.
(4) 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. 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 6
OCH-ZIFF CAPITAL MANAGEMENT GROUP LLC
Reconciliation of Non-GAAP and Segment Financial Measures to U.S.
GAAP Measures
(dollars in thousands, except per share amount)
OCH-ZIFF FUNDS SEGMENT
----------------------
Reconciling Adjustments
(1)
------------------------
Six Months Ended June 30, 2009 Economic Funds
------------------------------ Income Consolidation
Basis (2) -------------
---------
Management fees $176,947 $(111)
Incentive income 265 -
Other revenues 445 -
Income of consolidated Och-Ziff
funds - -
Total revenues 177,657 (111)
Compensation and benefits 62,963 -
Allocations to non-equity
partner interests - -
Reorganization expenses - -
Profit sharing - -
Interest expense 8,655 -
General, administrative and
other 37,239 -
Expenses of consolidated Och-
Ziff funds - 8
Total expenses 108,857 8
Net earnings on deferred
balances - -
Net gains (losses) on
investments in - -
Och-Ziff funds and joint
ventures
Net gain on early retirement of
debt - -
Net gains (losses) of
consolidated Och-Ziff funds - (1,687)
Income taxes - -
Net loss (income) allocated to
partners' and - 1,806
others' interests in
consolidated subsidiaries
Net income (loss) allocated to 68,800 -
Class A shareholders
OCH-ZIFF FUNDS SEGMENT
----------------------
Reconciling Adjustments
(1)
------------------------
Six Months Ended June 30,
2009 Other U.S. GAAP
------------------------- Adjustments Basis
----------- -----
Management fees $1,013 (a) $177,849
Incentive income - 265
Other revenues - 445
Income of consolidated
Och-Ziff funds - -
Total revenues 1,013 178,559
(b)
Compensation and benefits 45,468 (c) 108,431
Allocations to non-equity
partner interests 4,575 (d) 4,575
Reorganization expenses 844,685 (e) 844,685
Profit sharing 291 (f) 291
Interest expense - 8,655
General, administrative (a)
and other 3,866 (g) 41,105
Expenses of consolidated
Och-Ziff funds - 8
Total expenses 898,885 1,007,750
Net earnings on deferred
balances 3,430 (h) 3,430
Net gains (losses) on
investments in 1,298 (h) 1,298
Och-Ziff funds and joint
ventures
Net gain on early
retirement of debt 2,013 (g) 2,013
Net gains (losses) of
consolidated Och-Ziff
funds - (1,687)
Income taxes 3,175 (g) 3,175
Net loss (income)
allocated to partners'
and 675,484 (i) 677,290
others' interests in
consolidated subsidiaries
Net income (loss)
allocated to (218,822) (150,022)
Class A shareholders
OTHER OPERATIONS
----------------
Reconciling Adjustments
(1)
------------------------
Six Months Ended June 30,
2009 Economic Funds
------------------------- Income Consolidation
Basis -------------
(Non-GAAP)
(3)
-----------
Management fees $2,641 $(19)
Incentive income - -
Other revenues 108 -
Income of consolidated Och-
Ziff funds - 11,502
Total revenues 2,749 11,483
Compensation and benefits 8,417 -
Allocations to non-equity
partner interests - -
Reorganization expenses - -
Profit sharing - -
Interest expense - -
General, administrative and
other 1,906 -
Expenses of consolidated
Och-Ziff funds - 1,888
Total expenses 10,323 1,888
Net earnings on deferred
balances - -
Net gains (losses) on
investments in (992) (117)
Och-Ziff funds and joint
ventures
Net gain on early
retirement of debt - -
Net gains (losses) of
consolidated Och-Ziff
funds - 1,589
Income taxes - -
Net loss (income) allocated
to partners' and 75 (11,067)
others' interests in
consolidated subsidiaries
Net income (loss) allocated
to (8,491) -
Class A shareholders
OTHER OPERATIONS
----------------
Reconciling Adjustments
(1)
------------------------
Six Months Ended June
30, 2009 Other U.S. GAAP
--------------------- Adjustments Basis
----------- -----
Management fees $- $2,622
Incentive income - -
Other revenues - 108
Income of consolidated
Och-Ziff funds - 11,502
Total revenues - 14,232
Compensation and
benefits 11,053 (c) 19,470
Allocations to non-
equity partner
interests - -
Reorganization expenses - -
Profit sharing - -
Interest expense - -
General, administrative
and other 371 (g) 2,277
Expenses of consolidated
Och-Ziff funds - 1,888
Total expenses 11,424 23,635
Net earnings on deferred
balances - -
Net gains (losses) on
investments in 117 (h) (992)
Och-Ziff funds and
joint ventures
Net gain on early
retirement of debt - -
Net gains (losses) of
consolidated Och-Ziff
funds - 1,589
Income taxes 103 (g) 103
Net loss (income)
allocated to partners'
and (244) (i) (11,236)
others' interests in
consolidated
subsidiaries
Net income (loss)
allocated to (11,654) (20,145)
Class A shareholders
TOTAL COMPANY
-------------
Six Months Ended June 30, 2009 Economic U.S. GAAP
------------------------------ Income Basis
Basis -----
(Non-GAAP)
(3)
-----------
Management fees $179,588 $180,471
Incentive income 265 265
Other revenues 553 553
Income of consolidated Och-Ziff funds - 11,502
Total revenues 180,406 192,791
Compensation and benefits 71,380 127,901
Allocations to non-equity partner
interests - 4,575
Reorganization expenses - 844,685
Profit sharing - 291
Interest expense 8,655 8,655
General, administrative and other 39,145 43,382
Expenses of consolidated Och-Ziff
funds - 1,896
Total expenses 119,180 1,031,385
Net earnings on deferred balances - 3,430
Net gains (losses) on investments in (992) 306
Och-Ziff funds and joint ventures
Net gain on early retirement of debt - 2,013
Net gains (losses) of consolidated
Och-Ziff funds - (98)
Income taxes - 3,278
Net loss (income) allocated to
partners' and 75 666,054
others' interests in consolidated
subsidiaries
Net income (loss) allocated to 60,309 (170,167)
Class A shareholders
Adjusted Income Taxes - Non-GAAP (4) (20,541)
Distributable Earnings - Non-GAAP $39,768
=======
Weighted-Average Class A Shares
Outstanding 76,676,699
Weighted-Average Partner Units 310,964,074
Weighted-Average Class A Restricted
Share Units (RSUs) 15,414,422
----------
Weighted-Average Adjusted Class A
Shares 403,055,195
===========
Distributable Earnings Per Adjusted $0.10
Class A Share - Non-GAAP =====
(1) See Exhibit 7 for a description of the adjustments made to arrive
at the Company's results on a U.S. GAAP basis.
(2) The Och-Ziff Funds segment is the Company's only reportable
segment under U.S. GAAP. Management uses Economic
Income to evaluate the financial performance of and to make operating
decisions for the segment.
(3) Each of the measures presented is a non-GAAP measure, with the
exception of incentive income,
other revenues and net earnings (losses) on joint ventures, for which
no adjustments to the U.S. GAAP basis have
been made. Management calculates non-GAAP measures on an Economic
Income basis for the Company's
Other Operations and for the Company as a whole to assess the
financial performance of the Company's entire business.
(4) 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. 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 7
OCH-ZIFF CAPITAL MANAGEMENT GROUP LLC
Description of Adjustments Made to Reconcile Economic Income to the
Company's Results on a U.S. GAAP Basis
Funds Consolidation Economic Income excludes the impacts of the consolidated Och-Ziff funds, including the related eliminations. Other Adjustments (a) Economic Income presents management fees net of recurring placement and related service fees on assets under management, as management considers these fees a reduction in management fees, not an expense. (b) Economic Income recognizes deferred cash compensation expense in full in the period in which it is awarded, as management determines the total amount of compensation based on the Company's performance in the year of the award. (c) Economic Income excludes equity-based compensation expenses, as management does not consider these non-cash expenses to be reflective of the operating performance of the Company. The Company includes the number of shares granted in its Adjusted Class A Share count when determining Distributable Earnings Per Share. (d) Economic Income excludes allocations to non-equity partner interests. Management reviewed the performance of the Company before it made any allocations to the Company's non-equity partners for periods prior to the Reorganization. For these periods, allocations to the partners, other than Mr. Och, were treated as expenses for U.S. GAAP purposes. Following the Reorganization, only allocations to the partners, other than Mr. Och, that are related to earnings on deferred balances are incurred and these allocations are excluded from Economic Income. (e) Economic Income excludes Reorganization expenses, which are non-cash expenses directly attributable to the reclassification of interests held by the partners and the Ziffs prior to the Reorganization as Och-Ziff Operating Group A Units. (f) Economic Income excludes the profit sharing expenses related to the Ziffs' interest in the Company. Management reviewed the performance of the Company before it made any allocations to the Ziffs for periods prior to the Reorganization. Following the Reorganization, only profit sharing expenses related to the allocations of earnings on deferred balances are incurred and these allocations are excluded from Economic Income. (g) Economic Income excludes depreciation and amortization, changes in the tax receivable agreement liability and net gain on early retirement of debt, as management does not consider these items to be reflective of the operating performance of the Company. Economic Income also excludes income taxes as it is a measure of pre-tax performance. (h) Economic Income excludes the net earnings on the deferred balances and net gains (losses) on investments in Och-Ziff funds, as these amounts primarily relate to amounts due to affiliates for deferred balances, and amounts due to employees under deferred cash compensation arrangements that are indexed to the returns of certain funds. (i) Economic Income excludes amounts allocated to the partners and the Ziffs on their interests in the Och-Ziff Operating Group, as management reviews the 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.
Exhibit 8
OCH-ZIFF CAPITAL MANAGEMENT GROUP LLC
Financial Supplement (Unaudited)
(dollars in millions)
Three Months Six Months
Ended June 30, Ended June 30,
-------------- --------------
2010 2010
---- ----
Total Assets Under Management (1)
Beginning of period balance $24,850 $23,080
Net flows 1,035 2,061
Appreciation (depreciation) (2) (388) 356
End of period balance $25,497 $25,497
======= =======
Total Assets Under Management by
Fund
OZ Master Fund $18,360
OZ Europe Master Fund 2,892
OZ Asia Master Fund 1,331
OZ Global Special Investments
Master Fund 1,184
Och-Ziff Funds - Net Returns (3)
OZ Master Fund -1.4% 1.3%
OZ Europe Master Fund -2.8% 1.5%
OZ Asia Master Fund -2.0% 3.0%
OZ Global Special Investments
Master Fund -0.2% 3.6%
Year Ended December 31,
-----------------------
2009 2008 2007 2006
---- ---- ---- ----
Total Assets Under Management
(1)
Beginning of period balance $26,955 $33,387 $22,621 $15,627
Net flows (8,053) (722) 7,591 4,135
Appreciation (depreciation) (2) 4,178 (5,710) 3,175 2,859
End of period balance $23,080 $26,955 $33,387 $22,621
======= ======= ======= =======
Total Assets Under Management
by Fund
OZ Master Fund $15,577 $16,396 $19,771 $15,449
OZ Europe Master Fund 2,957 5,084 6,416 3,481
OZ Asia Master Fund 1,246 2,439 3,852 2,332
OZ Global Special Investments
Master Fund 1,999 1,910 2,082 195
Och-Ziff Funds - Net Returns
(3)
OZ Master Fund 23.1% -15.9% 11.5% 14.8%
OZ Europe Master Fund 16.4% -17.4% 14.8% 22.3%
OZ Asia Master Fund 34.0% -30.9% 12.2% 14.0%
OZ Global Special Investments
Master Fund 8.4% -8.3% 17.2% 13.9%
(1) Includes the deferred incentive income receivable from the
offshore funds and amounts invested by the Company,
its partners and certain other affiliated 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 certain unrealized
private investments that could reduce returns on these investments at
the time of realization), and includes the
reinvestment of all dividends and income. Management fees and
incentive income vary by product. Past
performance is no guarantee of future results.
(3) Reflects a composite of the monthly return and year-to-date
return for the feeder funds comprising each of the
Company's most significant master funds and is presented on a total
return basis, net of all fees and expenses of
the relevant fund (except incentive income on certain unrealized
private investments that could reduce returns at
the time of realization), and includes the reinvestment of all
dividends and income. Performance includes realized
and unrealized gains and losses attributable to certain private and
initial public offering investments that are not
allocated to all investors in the funds. Investors that do not
participate in such investments, or that pay different
fees, may experience materially different returns. Past performance
is no guarantee of future results.
Exhibit 9
OCH-ZIFF CAPITAL MANAGEMENT GROUP LLC
(Unaudited)
Returns of OZ Master Fund During Negative
Return Months of S&P 500 Index
------------------------------
Total Return of Total Return of OZ Master
Number of S&P 500 Fund
Months of
Negative During Negative During Negative
Returns of S&P
500 Return Months Return Months of S&P 500
--------------- ------------- ------------------------
Year
----
1994 3 -8.5% 1.7%
1995 1 -0.4% 0.1%
1996 2 -6.4% 3.9%
1997 3 -13.1% 4.0%
1998 3 -17.2% -2.7%
1999 5 -11.8% 6.2%
2000 8 -27.1% 12.0%
2001 6 -33.2% 0.4%
2002 8 -41.8% -5.0%
2003 3 -5.2% 4.6%
2004 3 -6.4% 1.1%
2005 5 -8.7% 0.7%
2006 1 -2.9% 0.5%
2007 5 -11.6% 1.4%
2008 8 -51.8% -16.3%
2009 3 -20.9% 4.1%
1H -
2010 3 -16.8% -1.1%
Distribution of Net Monthly Returns since
April 1, 1994
Net Monthly
Return Number of
of OZ Master
Fund Months
------------ ------
less than -3% 5
-2% to -3% 2
-1% to -2% 4
0% to -1% 18
0% to 1% 65
1% to 2% 49
2% to 3% 31
3% to 4% 13
4% to 5% 5
greater than 5% 3
Total net return for the OZ Master Fund (the "Fund") represents a
composite of the average return of the feeder
funds that comprise the Fund. Returns are presented on a total
return basis, net of all fees and expenses (except
incentive income on certain unrealized private investments that could
reduce returns on these investments at the
time of realization), and include the reinvestment of all dividends
and income. Performance includes realized and
unrealized gains and losses attributable to certain private and
initial public offering investments that are not
allocated to all investors in the Fund. Investors that do not
participate in such investments or that pay different
fees may experience materially different returns. Past performance
is no guarantee of future results.
For the period from 1994 through 1997, performance represents the
performance of Och-Ziff Capital
Management, L.P., a Delaware limited partnership that was managed by
Daniel Och following an investment
strategy that is substantially similar to that of the Fund. In
addition, during this period, performance was
calculated by deducting management fees on a quarterly basis and
incentive income on a monthly basis.
Beginning January 1998, performance has been calculated by deducting
both management fees and incentive
income on a monthly basis from the composite returns of the Fund.
Readers should not assume that there is any material overlap between
those securities in the portfolio of the Fund
and those that comprise the S&P 500 Index. It is not possible to
invest directly in the S&P 500 Index. Returns of
the S&P 500 Index have not been reduced by fees and expenses
associated with investing in securities and
include the reinvestment of dividends. The S&P 500 Index is an
equity index owned and maintained by Standard
& Poor's, a division of McGraw-Hill, whose value is calculated as
the free float-weighted average of the share
prices of 500 large-capitalization corporations listed on the NYSE
and Nasdaq. The comparison of S&P 500
Index performance relative to the Fund's performance during months in
which the S&P 500 Index declined is for
the limited purpose of illustrating how the Fund has performed during
periods of declines in the broad equity
market. It should not be considered an indication of how the Fund
will perform relative to the S&P 500 Index in
the future.
Please note that the Fund's investment objective is not to beat the
S&P 500 Index. Furthermore, the Fund's
performance has frequently trailed that of the S&P 500 Index in
periods of positive performance.
Exhibit 10
OCH-ZIFF CAPITAL MANAGEMENT GROUP LLC
Fund Performance (Unaudited) (1)
2009
----
January February March April May
------- -------- ----- ----- ---
Och-Ziff Funds - Net Returns
OZ Master Fund 3.09% 0.35% 0.88% 1.86% 3.42%
OZ Europe Master Fund 0.98% -1.09% -0.04% 2.48% 3.32%
OZ Asia Master Fund 2.70% 1.22% 0.38% 3.09% 4.62%
OZ Global Special
Investments Master Fund 0.84% -0.49% 0.35% 0.00% 1.97%
S&P 500 Index -Total Return
(2) -8.43% -10.65% 8.76% 9.57% 5.59%
2009
----
June July August September October
---- ---- ------ --------- -------
Och-Ziff Funds - Net Returns
OZ Master Fund 2.14% 3.26% 1.37% 2.51% 0.68%
OZ Europe Master Fund 1.24% 2.36% 2.06% 3.28% 0.09%
OZ Asia Master Fund 0.58% 9.50% 0.24% 1.53% 1.16%
OZ Global Special
Investments Master Fund 0.88% 1.55% 0.33% 1.47% 0.02%
S&P 500 Index -Total Return
(2) 0.20% 7.56% 3.61% 3.73% -1.86%
2009
----
November December FY2009
-------- -------- ------
Och-Ziff Funds - Net Returns
OZ Master Fund 0.34% 1.14% 23.11%
OZ Europe Master Fund 0.31% 0.43% 16.43%
OZ Asia Master Fund 2.98% 1.94% 33.96%
OZ Global Special
Investments Master Fund 0.19% 1.03% 8.42%
S&P 500 Index -Total Return
(2) 6.00% 1.93% 26.46%
2010
----
January February March 1Q
------- -------- ----- ---
Och-Ziff Funds - Net Returns
OZ Master Fund 1.09% 0.40% 1.21% 2.72%
OZ Europe Master Fund 2.47% 0.95% 0.93% 4.41%
OZ Asia Master Fund 0.74% 0.43% 3.80% 5.02%
OZ Global Special
Investments Master Fund 1.61% 0.98% 1.18% 3.82%
S&P 500 Index -Total Return
(2) -3.60% 3.10% 6.03% 5.39%
2010
----
1H -
April May June 2Q 2010
----- --- ---- --- -----
Och-Ziff Funds - Net Returns
OZ Master Fund 0.88% -1.71% -0.53% -1.37% 1.31%
OZ Europe Master Fund 0.64% -2.50% -0.90% -2.76% 1.52%
OZ Asia Master Fund 1.15% -3.11% 0.03% -1.97% 2.95%
OZ Global Special
Investments Master Fund 1.11% -1.39% 0.09% -0.21% 3.60%
S&P 500 Index -Total Return
(2) 1.58% -7.99% -5.23% -11.43% -6.65%
(1) Fund performance reflects a composite of the return for the
feeder funds comprising each of the Company's most significant
master
funds and is presented on a total return basis, net of all fees and
expenses of the relevant fund (except incentive income on certain
unrealized private investments that could reduce returns on these
investments at the time of realization), and includes the
reinvestment
of all dividends and income. Performance includes realized and
unrealized gains and losses attributable to certain private and
initial
public offering investments that are not allocated to all investors
in the funds. Investors that do not participate in such investments
or
that pay different fees may experience materially different returns.
Past performance is no guarantee of future results.
(2) Readers should not assume that there is any material overlap
between those securities in the portfolios of the funds and those
that
comprise the S&P 500 Index. It is not possible to invest directly in
the S&P 500 Index. Returns of the S&P 500 Index have not been
reduced by fees and expenses associated with investing in securities
and include the reinvestment of dividends. The S&P 500 Index is
an equity index owned and maintained by Standard & Poor's, a division
of McGraw-Hill, whose value is calculated as the free float-
weighted average of the share prices of 500 large-capitalization
corporations listed on the NYSE and Nasdaq. The comparison of S&P
500 Index performance relative to the funds' performance should not
be considered an indication of how the fund will perform relative
to the S&P 500 Index in the future. Please note that the funds'
investment objective is not to beat the S&P 500 Index. Furthermore,
the
funds' performance has frequently trailed that of the S&P 500 Index
in periods of positive performance.
SOURCE Och-Ziff Capital Management Group LLC |
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