Second Quarter 2008 Dividend of $0.11 per Class A Share
NEW YORK, Aug. 6 /PRNewswire-FirstCall/ -- Och-Ziff Capital Management
Group LLC (NYSE: OZM) (the "Company" or "Och-Ziff") today reported its
results and the declaration of a cash dividend on its Class A Shares for
the second quarter ended June 30, 2008.
Second Quarter Highlights
-- Distributable Earnings for the Och-Ziff Funds segment of $53.8
million, or $0.13 per Adjusted Class A Share
-- Dividend of $0.11 per Class A Share to be paid on August 12, 2008 to
holders of record as of the close of business on July 1, 2008
-- Assets under management of $33.6 billion as of June 30, 2008,
essentially unchanged from March 31, 2008, and 16% higher than June 30,
2007
-- Economic Income Revenues for the Och-Ziff Funds segment of $147.1
million, 23% higher than the 2007 second quarter
For the second quarter and first half ended June 30, 2008, Och-Ziff
reported a GAAP net loss of $60.8 million or $0.82 per basic and $1.05 per
diluted Class A Share, and $328.9 million or $4.44 per basic and diluted
Class A Share, respectively. The GAAP net loss in both periods resulted
primarily from second quarter and first half non-cash expenses of $425.6
million and $851.2 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 Och-Ziff
Operating Group A Units ("Group A Units"), which represent equity interests
in the Company's principal operating subsidiaries that were awarded to the
Company's pre-IPO owners in exchange for their pre-IPO interests in those
subsidiaries. The Group A Units vest annually over five years from the date
of the IPO. Accordingly, amortization of these expenses is expected to
result in a GAAP net loss each quarter through 2012. Once vested, the Group
A Units may be exchanged on a one-to-one basis for Class A Shares.
Also contributing to the GAAP net loss in the second quarter and first
half of 2008 were non-cash expenses of $24.2 million and $50.2 million,
respectively, for the amortization of equity-based compensation, primarily
related to Class A restricted share units ("RSUs") awarded to all of the
Company's employees in connection with the IPO. These RSUs vest annually
over four years from the date of the IPO. Once vested, Class A Shares will
be issued on a one-to-one basis.
Distributable Earnings for the Och-Ziff Funds segment for the second
quarter and first half ended June 30, 2008 was $53.8 million or $0.13 per
Adjusted Class A Share, and $104.9 million or $0.26 per Adjusted Class A
Share, respectively. Distributable Earnings is a supplemental non-GAAP
financial measure that management believes provides a meaningful basis for
comparison of the after-tax operating performance of the Och-Ziff Funds
segment, which includes substantially all of the Company's business.
Additionally, 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
Ziff Brothers Investments (the "Ziffs") with respect to their Group A
Units.
Distributable Earnings is equal to the Economic Income of the Och-Ziff
Funds segment less adjusted income taxes. These adjusted income taxes are
estimated assuming all Group A Units and RSUs were converted on a
one-to-one basis into Class A Shares ("Adjusted Class A Shares").
Distributable Earnings per Share is equal to Distributable Earnings divided
by the number of Adjusted Class A Shares. Distributable Earnings should not
be considered as an alternative to GAAP net income or cash flow, and is not
necessarily indicative of liquidity or the cash available to fund
operations. For a reconciliation of the Company's second quarter and first
half 2008 Economic Income to Distributable Earnings, please see Exhibit 8
of the financial tables that accompany this press release.
Och-Ziff's assets under management were $33.6 billion as of June 30,
2008, $357 million higher than the $33.3 billion in assets under management
as of March 31, 2008, and up 16% from $29.1 billion in assets under
management as of June 30, 2007. The $4.5 billion year-over-year increase
was driven by net inflows and appreciation, primarily in each of the
Company's most significant master funds. The increase also included the
fourth-quarter 2007 reinvestment by the Company's partners and the Ziffs of
approximately $1.6 billion in after-tax proceeds from the Company's IPO and
concurrent Class A Share sale to Dubai International Capital. These
proceeds were principally invested in the OZ Global Special Investments
Master Fund. During the 2008 second quarter, performance-related
appreciation of $389 million was partially offset by net outflows of $32
million. During the first half of 2008, net inflows were approximately $232
million while the performance-related change to assets under management was
not significant.
Assets under management by fund were as follows:
% Change (4)
Jun.2008 Jun.2008
June 30, March 31, June 30, vs. vs.
(dollars in billions) 2008 2008 2007 Mar.2008 Jun.2007
OZ Master Fund 20.0 19.9 18.6 0% 7%
OZ Europe Master Fund 6.4 6.2 5.5 3% 16%
OZ Asia Master Fund (1) 3.8 3.8 3.1 0% 21%
OZ Global Special
Investments Master
Fund (2) 2.1 2.1 0.4 -1% 460%
Other (3)(4) 1.3 1.3 1.5 NM NM
(1) Includes investment of $0.1 billion in after-tax proceeds from the
Company's Class A Share sales.
(2) Includes investment of $1.5 billion in after-tax proceeds from the
Company's Class A Share sales.
(3) Includes Real Estate Funds, managed accounts and other funds not
significant to the Company's results.
(4) Rounding differences may occur.
The 2008 second quarter and first-half net returns of the Company's
most significant master funds are detailed in the table below. These
returns were generated with less than half the volatility of the S&P 500
and essentially no leverage.
Summary Performance Statistics (1)
2008
April May June 2Q 1H
OZ Master Fund 0.96% 1.11% -0.45% 1.62% 0.77%
OZ Europe Master Fund 0.31% 1.69% 0.20% 2.21% 0.43%
OZ Asia Master Fund -0.18% -0.16% -2.19% -2.52% -5.07%
OZ Global Special Investments
Master Fund 0.64% 0.43% -0.34% 0.73% 0.12%
(1) Please see important disclosures on Exhibit 9 of the Financial
Supplement accompanying this press release.
"Against the backdrop of very challenging market conditions, the value
of our investment process was again readily apparent," said Daniel Och,
Chairman and Chief Executive Officer of Och-Ziff. "Our absolute returns
were strong and stable, and we successfully preserved fund investors'
capital. Our performance reflects a model that demonstrates the benefits of
an active risk management process and a diversified product offering. The
current environment is also creating investment opportunities globally that
we are taking advantage of in our core business, and we continue to be
focused on generating positive investment returns. We remain confident that
we are well positioned to grow assets under management as we extend our
performance track record and make consistent progress in building our
private investment platforms."
SUMMARY RESULTS OF 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
operating segment. This segment provides management and advisory services
to the Company's hedge funds and separately managed accounts, excluding
substantially all of its real estate funds.
The Company's other operations are currently comprised of its real
estate business, which manages and provides advisory services to
substantially all of its real estate funds, and investments in new
businesses established to expand certain of the Company's private
investment platforms. These other operations, which currently are in early
growth stages and are not material to the overall financial performance of
the Company, are not included in the Och-Ziff Funds segment and therefore
not included in the calculations of Economic Income, Distributable Earnings
and Distributable Earnings per Share.
The performance measure for the Och-Ziff Funds segment is Economic
Income, which management uses to evaluate the financial performance of and
make operating decisions for the segment. Management believes that
investors should review the same performance measure that it uses to
analyze the Company's core business performance. Economic Income is a
pre-tax measure that does not include allocations to the Company's partners
and the Ziffs which solely relate to their pre-IPO interests,
reorganization expenses related to the Company's IPO, equity-based
compensation expenses, taxes, or partners' and others' interests in the
Company's consolidated subsidiaries, among other adjustments. For further
information regarding these adjustments, please see Exhibit 7 of the
financial tables that accompany this press release.
Prior to the 2008 second quarter, for those awards of RSUs made to
employees after the IPO, the grant-date fair value of the RSUs awarded was
recognized in full as bonus expense on the grant date in Economic Income.
In the same period, the corresponding number of RSUs awarded was excluded
from the calculation of Adjusted Class A Shares. This reduced Economic
Income by including the grant-date fair value of these RSUs as an operating
expense. Beginning in the second quarter, this expense is no longer
included in Economic Income; instead, the corresponding number of RSUs is
included in Adjusted Class A Shares in the period awarded for purposes of
calculating Distributable Earnings per Share. By capturing RSUs in Adjusted
Class A Shares, the dilutive effect of the RSU awards is fully reflected in
the calculation of Distributable Earnings per Share.
For reconciliations of Economic Income to total Company GAAP net income
(loss) for the periods discussed below, please see Exhibits 3 through 6 of
the financial tables that accompany this press release.
Economic Income
Economic Income Revenues
Second-quarter 2008 Economic Income Revenues were $147.1 million, up
23% compared to second-quarter 2007 Economic Income Revenues of $119.5
million. Management Fees were $145.3 million, up 28% from second-quarter
2007 management fees of $113.8 million.
First-half 2008 Economic Income Revenues were $293.6 million, up 34%
compared to first-half 2007 Economic Income Revenues of $219.4 million.
Management Fees were $290.3 million, up 37% from first-half 2007 management
fees of $211.8 million.
The increase in Management Fees in both periods was driven by the
year-over-year increase in assets under management.
Economic Income Expenses
Compensation and Benefits
Second-quarter 2008 Compensation and Benefit expenses were $24.5
million, up 55% from second-quarter 2007 Compensation and Benefit expenses
of $15.8 million. Second-quarter 2008 Compensation and Benefits also
included $7.4 million of bonus expense, primarily related to accruals for
guarantees to new employees hired in the first half of 2008, which will be
paid at year end.
First-half 2008 Compensation and Benefit expenses were $48.2 million,
up 61% from first-half 2007 Compensation and Benefit expenses of $30.0
million. First-half 2008 Compensation and Benefits also included $15.4
million of bonus expense, primarily related to accruals for guarantees to
new employees hired in the first half of 2008, which will be paid at year
end, and to non-recurring payments to certain existing personnel and new
employees. As a result of the adjustment made to the calculation of
Economic Income in the second quarter, bonus expense of $1.8 million
related to the fair value of RSUs awarded in the 2008 first quarter has
been excluded from first-half 2008 Compensation and Benefits expense.
The increase in Compensation and Benefits in both periods was driven by
increased headcount, primarily during the second half of 2007, related to
the infrastructure needed to become a public company and to support the
growth in the Company's business.
Non-Compensation Expenses
Second-quarter 2008 non-compensation expenses were $29.4 million, a 29%
increase from second-quarter 2007 non-compensation expenses of $22.7
million. The increase was driven primarily by interest expense on the
Company's $750 million term loan, which was entered into during the third
quarter of 2007. The remainder of the increase was primarily driven by
higher insurance, business development and occupancy costs related to the
infrastructure needed to become a public company and to support the growth
in the Company's business. These increases were partially offset by a
reduction in professional services which were higher in the 2007 second
quarter due to audit and consulting costs in connection with the Company's
IPO. On a comparative basis, the 2007 annual audit and consulting costs
were primarily incurred in the first quarter of this year.
First-half 2008 non-compensation expenses were $64.5 million, a 91%
increase from first-half 2007 non-compensation expenses of $33.7 million.
The increase was driven primarily by interest expense on the Company's $750
million term loan. The remainder of the increase was primarily driven by
higher professional services incurred in the first quarter of 2008,
insurance, business development and technology costs related to the
infrastructure needed to become a public company and to support the growth
in the Company's business.
Economic Income
Second-quarter 2008 Economic Income totaled $93.3 million, a 15%
increase from second-quarter 2007 Economic Income of $80.9 million.
First-half 2008 Economic Income totaled $180.9 million, a 16% increase from
first-half 2007 Economic Income of $155.7 million.
The Economic Income margin is Economic Income divided by Economic
Income Revenues for the relevant period. The second-quarter 2008 margin was
63%, which was five percentage points lower than the second-quarter 2007
margin of 68%. The first-half 2008 margin was 62%, which was nine
percentage points lower than the first-half 2007 margin of 71%.
The margin decrease in both periods was attributable to interest
expense on the Company's $750 million term loan, higher compensation
expenses due to significant year-over-year headcount growth related to the
infrastructure needed to become a public company and to support the growth
in the Company's business, higher insurance costs, and for the first-half
2008, higher professional services fees. These increases were partially
offset by the increase in Management Fees in both periods.
CAPITAL
As of June 30, 2008, Class A Shares outstanding totaled 74,138,572. For
purposes of calculating Distributable Earnings per Share, the Company
assumes that all Group A Units and RSUs have been converted on a one-to-one
basis into Class A Shares. For the second quarter and first half ended June
30, 2008, the total weighted-average Adjusted Class A Shares outstanding
were 399,983,913 and 399,852,742 respectively.
The increase in Adjusted Class A Shares during the 2008 second quarter
was driven by two factors. The first factor, and the most significant
component of the change, relates to dividend equivalents which were awarded
to employees in the form of RSUs for the dividends paid on the Company's
Class A shares in the first half of 2008. These dividend equivalents
related to the RSUs awarded to employees at the time of the Company's IPO.
The second factor relates to the change in how RSUs are treated for
purposes of calculating Economic Income, Distributable Earnings, Adjusted
Class A Shares and Distributable Earnings per Share, as discussed above.
Beginning in the second quarter, the number of RSUs was included in
Adjusted Class A Shares in the period awarded for purposes of determining
the number of Adjusted Class A Shares.
DIVIDEND
The Board of Directors of Och-Ziff declared a second-quarter 2008
dividend of $0.11 per Class A Share, to be paid on August 12, 2008 to
holders of record at the close of business on July 1, 2008.
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 second-quarter 2008 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. In
addition, 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 6, 2008, at 10:00
a.m. Eastern Time to discuss the Company's second-quarter 2008 results. The
call will be open to the public and can be accessed by dialing 888-713-4216
(callers inside the U.S.) or 617-213-4868 (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 97905169. 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 http://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 12211369, 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.
* * * *
Forward-Looking Statements
The information contained in this press release may contain
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995 that reflect the current views of the Company
with respect to, among other things, its future financial or business
performance, events, strategies or expectations, including but not limited
to its ability to generate returns and preserve capital and its ability to
expand its investment platforms. Such forward-looking statements are
generally identified by the use of words such as "outlook," "believe,"
"expect," "potential," "continue," "may," "will," "should," "could,"
"seeks," "approximately," "predicts," "intends," "plans," "estimates,"
"anticipates," "opportunity," "assume," "remain," "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 performance of the Company and its subsidiaries and
on current plans, estimates and expectations of the Company and its
subsidiaries. The inclusion of this 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, including but not limited to global and domestic market and
business conditions, the Company's ability to successfully compete for fund
investors, talent and investment opportunities, successful formulation and
execution of its business and growth strategies, the Company's ability to
appropriately manage conflicts of interest, and tax and other regulatory
factors relevant to the Company's structure and status as a public company,
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 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 and risks 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, 2007. Any forward-looking
statements contained in this press release are made only as of the date
hereof. 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, Tokyo, Bangalore 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 merger arbitrage,
convertible and derivative arbitrage, equity restructuring, credit and
distressed investments, private investments and real estate. As of August
1, 2008, Och-Ziff had approximately $33.3 billion in estimated assets under
management with over 700 investor relationships. For more information,
please visit http://www.ozcap.com.
Exhibit 1
OCH-ZIFF CAPITAL MANAGEMENT GROUP LLC
Consolidated and Combined Statements of Operations (Unaudited)
(dollars in thousands, except per share amounts)
Three Months Ended June 30, Six Months Ended June 30,
2008 2007 2008 2007
Revenues
Management fees $146,519 $26,564 $292,794 $50,014
Incentive income 1,078 1,320 1,110 1,387
Other revenues 735 908 2,254 1,830
Income of consolidated
Och-Ziff funds 4,885 271,660 4,886 531,587
Total Revenues 153,217 300,452 301,044 584,818
Expenses
Compensation and benefits 52,056 16,746 105,011 37,987
Allocations to non-equity
partner interests 4,024 78,763 2,174 145,323
Reorganization expenses 425,584 - 851,168 -
Profit sharing (597) 10,830 (1,431) 24,374
Interest expense 6,856 296 17,673 625
General, administrative
and other 33,264 23,618 59,039 35,412
Expenses of consolidated
Och-Ziff funds 997 190,919 1,357 340,979
Total Expenses 522,184 321,172 1,034,991 584,700
Other Income (Loss)
Net earnings (losses) on
investments in and deferred
income receivable from
Och-Ziff funds and other
entities 994 21,763 (4,170) 41,646
Net gains (losses) of
consolidated Och-Ziff funds 410 1,327,985 (503) 2,338,269
Total Other Income (Loss) 1,404 1,349,748 (4,673) 2,379,915
Income (Loss) before Income
Taxes and Partners' and Others'
Interests in Income of
Consolidated Subsidiaries (367,563) 1,329,028 (738,620) 2,380,033
Income taxes 4,735 3,643 7,961 7,283
Income (Loss) before Partners'
and Others' Interests in
Income of Consolidated
Subsidiaries (372,298) 1,325,385 (746,581) 2,372,750
Partners' and others' interests
in income of consolidated
subsidiaries 311,497 (1,211,133) 417,662 (2,173,310)
Net Income (Loss) $(60,801) $114,252 $(328,919) $199,440
Net Loss per Class A Share
Basic $(0.82) $(4.44)
Diluted $(1.05) $(4.44)
Weighted Average Class A
Shares Outstanding
Basic 74,138,572 74,138,572
Diluted 385,238,096 74,138,572
Exhibit 2
OCH-ZIFF CAPITAL MANAGEMENT GROUP LLC
Och-Ziff Funds Economic Income (Unaudited)
(dollars in thousands)
Three Months Ended June 30,
2008 2007 % Change
Economic Income Revenues
Management fees $ 145,323 $ 113,823 28%
Incentive income 1,078 4,859 -78%
Other revenues 727 796 -9%
Total Economic Income Revenues 147,128 119,478 23%
Economic Income Expenses
Compensation and benefits 24,481 15,838 55%
Non-compensation expenses 29,397 22,728 29%
Total Economic Income Expenses 53,878 38,566 40%
Och-Ziff Funds Economic Income $ 93,250 $ 80,912 15%
Six Months Ended June 30,
2008 2007 % Change
Economic Income Revenues
Management fees $ 290,287 $ 211,788 37%
Incentive income 1,110 5,940 -81%
Other revenues 2,230 1,700 31%
Total Economic Income Revenues 293,627 219,428 34%
Economic Income Expenses
Compensation and benefits 48,176 29,961 61%
Non-compensation expenses 64,504 33,739 91%
Total Economic Income Expenses 112,680 63,700 77%
Och-Ziff Funds Economic Income $ 180,947 $ 155,728 16%
See Exhibits 3 - 6 for reconciliations of Och-Ziff Funds Economic Income
to total Company GAAP Net Income (Loss).
Exhibit 3
OCH-ZIFF CAPITAL MANAGEMENT GROUP LLC
Reconciliation of Och-Ziff Funds Economic Income to GAAP Net Income (Loss)
(Unaudited)
(dollars in thousands)
Three Months Ended June 30, 2008
Och-Ziff Funds
Economic Other
Income Operations
Revenues
Management fees $145,323 $1,311
Incentive income 1,078 -
Other revenues 727 8
Income of consolidated Och-Ziff funds - 4,852
Total Revenues 147,128 6,171
Expenses
Compensation and benefits 24,481 752
Allocations to non-equity partner interests - -
Reorganization expenses - -
Profit sharing - -
Interest expense 6,856 -
General, administrative and other 22,541 388
Expenses of consolidated Och-Ziff funds - 634
Total Expenses 53,878 1,774
Other Income (Loss)
Net earnings (losses) investments in
and deferred income receivable from
Och-Ziff funds and other entities - (531)
Net gains (losses) of consolidated
Och-Ziff funds - 1,808
Total Other Income (Loss) - 1,277
Income (Loss) Before Income Taxes
and Partners' and Others' Interests in
Income of Consolidated Subsidiaries 93,250 5,674
Income taxes - 74
Income (Loss) Before Partners' and
Others' Interests in Income of
Consolidated Subsidiaries 93,250 5,600
Partners' and others' interests in
income of consolidated subsidiaries - (6,583)
Net Income (Loss) $93,250 $(983)
Three Months Ended June 30, 2008
Reconciling Adjustments (1)
Funds Other Total
Consolidation Adjustments Company
Revenues
Management fees $(115) $- $146,519
Incentive income - - 1,078
Other revenues - - 735
Income of consolidated
Och-Ziff funds 33 - 4,885
Total Revenues (82) - 153,217
Expenses
Compensation and benefits - 26,823 (a) (b) 52,056
Allocations to non-equity partner
interests - 4,024 (c) 4,024
Reorganization expenses - 425,584 (d) 425,584
Profit sharing - (597) (e) (597)
Interest expense - - 6,856
General, administrative and other - 10,335 (f) 33,264
Expenses of consolidated
Och-Ziff funds 363 - 997
Total Expenses 363 466,169 522,184
Other Income (Loss)
Net earnings (losses) investments
in and deferred income receivable
from Och-Ziff funds and other
entities - 1,525 (g) 994
Net gains (losses) of consolidated
Och-Ziff funds (1,398) - 410
Total Other Income (Loss) (1,398) 1,525 1,404
Income (Loss) Before Income Taxes
and Partners' and Others'
Interests in Income of
Consolidated Subsidiaries (1,843) (464,644) (367,563)
Income taxes - 4,661 (f) 4,735
Income (Loss) Before Partners' and
Others' Interests in Income of
Consolidated Subsidiaries (1,843) (469,305) (372,298)
Partners' and others' interests in
income of consolidated subsidiaries 1,843 316,237 (f) 311,497
Net Income (Loss) $- $(153,068) $(60,801)
(1) See Exhibit 7 for a description of the adjustments made to arrive at
total Company GAAP Net Income (Loss).
Exhibit 4
OCH-ZIFF CAPITAL MANAGEMENT GROUP LLC
Reconciliation of Och-Ziff Funds Economic Income to GAAP Net Income (Loss)
(Unaudited)
(dollars in thousands)
Three Months Ended June 30, 2007
Och-Ziff Funds
Economic Other
Income Operations
Revenues
Management fees $113,823 $1,311
Incentive income 4,859 -
Other revenues 796 112
Income of consolidated Och-Ziff funds - 3,318
Total Revenues 119,478 4,741
Expenses
Compensation and benefits 15,838 304
Allocations to non-equity partner interests - 391
Profit sharing - 127
Interest expense 296 -
General, administrative and other 22,432 169
Expenses of consolidated Och-Ziff funds - 407
Total Expenses 38,566 1,398
Other Income
Net earnings (losses) on investments
in and deferred income receivable from
Och-Ziff funds and other entities - -
Net gains of consolidated Och-Ziff funds - 600
Total Other Income - 600
Income Before Income Taxes and
Partners' and Others' Interests in
Income of Consolidated Subsidiaries 80,912 3,943
Income taxes - -
Income Before Partners' and Others'
Interests in Income of
Consolidated Subsidiaries 80,912 3,943
Partners' and others' interests in
income of consolidated subsidiaries - (3,537)
Net Income $80,912 $406
Three Months Ended June 30, 2007
Reconciling Adjustments (1)
Funds Other Total
Consolidation Adjustments Company
Revenues
Management fees $(88,570) $- $26,564
Incentive income (3,539) - 1,320
Other revenues - - 908
Income of consolidated
Och-Ziff funds 268,342 - 271,660
Total Revenues 176,233 - 300,452
Expenses
Compensation and benefits - 604 (a) (b) 16,746
Allocations to non-equity partner
interests - 78,372 (c) 78,763
Profit sharing - 10,703 (e) 10,830
Interest expense - - 296
General, administrative and other - 1,017 (f) 23,618
Expenses of consolidated
Och-Ziff funds 190,512 - 190,919
Total Expenses 190,512 90,696 321,172
Other Income
Net earnings (losses) on
investments in and deferred
income receivable from
Och-Ziff funds and
other entities (105,510) 127,273 (g) 21,763
Net gains of consolidated
Och-Ziff funds 1,327,385 - 1,327,985
Total Other Income 1,221,875 127,273 1,349,748
Income Before Income Taxes and
Partners' and Others' Interests
in Income of Consolidated
Subsidiaries 1,207,596 36,577 1,329,028
Income taxes - 3,643 (f) 3,643
Income Before Partners' and Others'
Interests in Income of
Consolidated Subsidiaries 1,207,596 32,934 1,325,385
Partners' and others' interests in
income of consolidated
subsidiaries (1,207,596) - (1,211,133)
Net Income $- $32,934 $114,252
(1) See Exhibit 7 for a description of the adjustments made to arrive at
total Company GAAP Net Income (Loss).
Exhibit 5
OCH-ZIFF CAPITAL MANAGEMENT GROUP LLC
Reconciliation of Och-Ziff Funds Economic Income to GAAP Net Income (Loss)
(Unaudited)
(dollars in thousands)
Six Months Ended June 30, 2008
Och-Ziff Funds
Economic Other
Income Operations
Revenues
Management fees $290,287 $2,622
Incentive income 1,110 -
Other revenues 2,230 24
Income of consolidated Och-Ziff funds - 4,852
Total Revenues 293,627 7,498
Expenses
Compensation and benefits 48,176 1,091
Allocations to non-equity partner
interests - -
Reorganization expenses - -
Profit sharing - -
Interest expense 17,673 -
General, administrative and other 46,831 722
Expenses of consolidated Och-Ziff funds - 994
Total Expenses 112,680 2,807
Other Income (Loss)
Net earnings (losses) on investments
in and deferred income receivable from
Och-Ziff funds and other entities - (4,600)
Net gains (losses) of consolidated
Och-Ziff funds - 902
Total Other Income (Loss) - (3,698)
Income (Loss) Before Income Taxes
and Partners' and Others' Interests
in Income of Consolidated Subsidiaries 180,947 993
Income taxes - 207
Income (Loss) Before Partners' and
Others' Interests in Income of
Consolidated Subsidiaries 180,947 786
Partners' and others' interests in
income of consolidated subsidiaries - (5,579)
Net Income (Loss) $180,947 $(4,793)
Six Months Ended June 30, 2008
Reconciling Adjustments (1)
Funds Other Total
Consolidation Adjustments Company
Revenues
Management fees $(115) $- $292,794
Incentive income - - 1,110
Other revenues - - 2,254
Income of consolidated
Och-Ziff funds 34 - 4,886
Total Revenues (81) - 301,044
Expenses
Compensation and benefits - 55,744 (a) (b) 105,011
Allocations to non-equity partner
interests - 2,174 (c) 2,174
Reorganization expenses - 851,168 (d) 851,168
Profit sharing - (1,431) (e) (1,431)
Interest expense - - 17,673
General, administrative and other - 11,486 (f) 59,039
Expenses of consolidated
Och-Ziff funds 363 - 1,357
Total Expenses 363 919,141 1,034,991
Other Income (Loss)
Net earnings (losses) on
investments in and deferred
income receivable from
Och-Ziff funds and other
entities - 430 (g) (4,170)
Net gains (losses) of consolidated
Och-Ziff funds (1,405) - (503)
Total Other Income (Loss) (1,405) 430 (4,673)
Income (Loss) Before Income
Taxes and Partners' and
Others' Interests in Income
of Consolidated Subsidiaries (1,849) (918,711) (738,620)
Income taxes - 7,754 (f) 7,961
Income (Loss) Before Partners'
and Others' Interests in
Income of Consolidated
Subsidiaries (1,849) (926,465) (746,581)
Partners' and others' interests
in income of consolidated
subsidiaries 1,849 421,392 (f) 417,662
Net Income (Loss) $- $(505,073) $(328,919)
(1) See Exhibit 7 for a description of the adjustments made to arrive at
total Company GAAP Net Income (Loss).
Exhibit 6
OCH-ZIFF CAPITAL MANAGEMENT GROUP LLC
Reconciliation of Och-Ziff Funds Economic Income to GAAP Net Income (Loss)
(Unaudited)
(dollars in thousands)
Six Months Ended June 30, 2007
Och-Ziff Funds
Economic Other
Income Operations
Revenues
Management fees $211,788 $2,622
Incentive income 5,940 -
Other revenues 1,700 130
Income of consolidated Och-Ziff funds - 3,318
Total Revenues 219,428 6,070
Expenses
Compensation and benefits 29,961 1,625
Allocations to non-equity partner interests - 361
Profit sharing - 117
Interest expense 625 -
General, administrative and other 33,114 310
Expenses of consolidated Och-Ziff funds - 631
Total Expenses 63,700 3,044
Other Income
Net earnings (losses) on investments
in and deferred income receivable from
Och-Ziff funds and other entities - -
Net gains of consolidated Och-Ziff funds - 600
Total Other Income - 600
Income Before Income Taxes and
Partners' and Others' Interests in
Income of Consolidated Subsidiaries 155,728 3,626
Income taxes - 35
Income Before Partners' and Others'
Interests in Income of
Consolidated Subsidiaries 155,728 3,591
Partners' and others' interests in
income of consolidated subsidiaries - (3,225)
Net Income $155,728 $366
Six Months Ended June 30, 2007
Reconciling Adjustments (1)
Funds Other Total
Consolidation Adjustments Company
Revenues
Management fees $(164,396) $- $50,014
Incentive income (4,553) - 1,387
Other revenues - - 1,830
Income of consolidated
Och-Ziff funds 528,269 - 531,587
Total Revenues 359,320 - 584,818
Expenses
Compensation and benefits - 6,401 (a) (b) 37,987
Allocations to non-equity partner
interests - 144,962 (c) 145,323
Profit sharing - 24,257 (e) 24,374
Interest expense - - 625
General, administrative and other - 1,988 (f) 35,412
Expenses of consolidated
Och-Ziff funds 340,348 - 340,979
Total Expenses 340,348 177,608 584,700
Other Income
Net earnings (losses) on
investments in and deferred
income receivable from
Och-Ziff funds
and other entities (186,556) 228,202 (g) 41,646
Net gains of consolidated
Och-Ziff funds 2,337,669 - 2,338,269
Total Other Income 2,151,113 228,202 2,379,915
Income Before Income Taxes
and Partners' and Others'
Interests in Income of
Consolidated Subsidiaries 2,170,085 50,594 2,380,033
Income taxes - 7,248 (f) 7,283
Income Before Partners' and
Others' Interests in Income
of Consolidated Subsidiaries 2,170,085 43,346 2,372,750
Partners' and others' interests
in income of consolidated
subsidiaries (2,170,085) - (2,173,310)
Net Income $- $43,346 $199,440
(1) See Exhibit 7 for a description of the adjustments made to arrive at
total Company GAAP Net Income (Loss).
Exhibit 7
OCH-ZIFF CAPITAL MANAGEMENT GROUP LLC
Description of Adjustments Made to Reconcile Och-Ziff Funds Economic Income to
GAAP Net Income (Loss) Funds Consolidation
Economic Income reflects Management Fees and Incentive Income earned
from each of the Och-Ziff funds and managed accounts, excluding
substantially all of the real estate funds and investments in new
businesses, which are included within the Company's other operations. The
impacts of consolidation and the related eliminations of the Och-Ziff funds
are not included in Economic Income. Management Fees and Incentive Income
earned by the Och-Ziff Funds segment not eliminated in consolidation prior
to June 30, 2007, are related to the domestic Och-Ziff funds and separately
managed accounts. The Company deconsolidated all of the offshore Och-Ziff
funds on June 30, 2007.
Other Adjustments
(a) Economic Income recognizes deferred cash compensation expense 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. Under GAAP, deferred cash compensation expense is recognized
over the vesting period.
(b) Economic Income excludes non-cash equity compensation expense, as
management does not consider this expense when evaluating the performance
of the Och-Ziff Funds segment. Prior to the second quarter of 2008, the
grant- date fair value of restricted share units awarded to employees,
excluding awards made at the time of the Company's IPO, was recognized as
an expense in full on the date of the award within Economic Income. Prior
period amounts have been recalculated to conform to the new methodology.
(c) Economic Income excludes allocations to non-equity partner
interests. Management reviewed the performance of the Och-Ziff Funds
segment 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 GAAP
purposes. Following the Reorganization, only allocations related to
earnings on previously deferred incentive income allocations to non-equity
partner interests are incurred and these allocations are excluded from
Economic Income.
(d) 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
into Group A Units.
(e) Economic Income excludes the profit sharing expense related to the
Ziffs' interest in the Company. Management reviewed the performance of the
Och-Ziff Funds segment before it made any allocations to the Ziffs for
periods prior to the Reorganization. Following the Reorganization, only
profit sharing expense related to the allocation of earnings on previously
deferred incentive income allocations to the Ziffs are incurred and these
allocations are excluded from Economic Income.
(f) Economic Income excludes depreciation, changes in the tax
receivable agreement liability, income taxes and partners' and others'
interests in income of consolidated subsidiaries, as management does not
consider these items when evaluating the performance of the Och-Ziff Funds
segment.
(g) Economic Income excludes the net earnings (losses) on the deferred
income receivable from Och-Ziff funds and net earnings (losses) on
investments in Och-Ziff funds and other entities, as these amounts relate
to earnings (losses) on amounts due to affiliates for deferred or
reinvested incentive income previously allocated to the partners and the
Ziffs, and earnings (losses) on amounts due to employees under deferred
cash compensation arrangements.
Exhibit 8
OCH-ZIFF CAPITAL MANAGEMENT GROUP LLC
Reconciliation of Och-Ziff Funds Economic Income to Och-Ziff Funds
Distributable Earnings (Unaudited)
(dollars in thousands, except per share amounts)
Three Months Ended Six Months Ended
June 30, 2008 June 30, 2008
Och-Ziff Funds Economic Income $93,250 $180,947
Adjusted income taxes (1) (39,441) (76,082)
Distributable Earnings $53,809 $104,865
Distributable earnings $53,809 $104,865
Weighted-Average Adjusted
Class A Shares (1) (2) 399,983,913 399,852,742
Distributable Earnings Per Share $0.13 $0.26
(1) Assumes (a) the conversion of 311,099,524 Group A Units held by the
Company's partners and the Ziffs for the second quarter and first half
ended June 30, 2008, and (b) the vesting of the weighted average of
14,745,817 and 14,614,646 RSUs for the second quarter and first half
ended June 30, 2008, respectively, into Class A Shares on a one-to-one
basis.
(2) Prior to the second quarter of 2008, the grant-date fair value of
RSUs awarded to employees, excluding awards made at the time of the
Company's IPO, was recognized as an expense in full on the date of the
award within Economic Income and Distributable Earnings; therefore,
RSUs awarded in the period were excluded from Adjusted Class A shares.
Management no longer includes this expense when calculating Economic
Income, Distributable Earnings and Distributable Earnings per Share.
Therefore, RSUs awarded during the period are now included in Adjusted
Class A Shares. The first-quarter 2008 amounts included within the six
months ended June 30, 2008, have been recalculated to conform to the
new methodology.
Exhibit 9
OCH-ZIFF CAPITAL MANAGEMENT GROUP LLC
Financial Supplement (Unaudited)
(dollars in millions)
Three Months Ended Six Months Ended
June 30, June 30,
2008 2008
Total Assets Under Management (1)
Beginning of Period Balance $33,261 $33,387
Net Flows (32) 232
Appreciation (Depreciation) (2) 389 (1)
End of Period Balance $33,618 $33,618
Total Assets Under Management by Fund
OZ Master Fund $19,987
OZ Europe Master Fund 6,403
OZ Asia Master Fund 3,789
OZ Global Special Investments Master Fund 2,067
Och-Ziff Funds - Net Returns (3)
OZ Master Fund 1.6% 0.8%
OZ Europe Master Fund 2.2% 0.4%
OZ Asia Master Fund -2.5% -5.1%
OZ Global Special Investments Master Fund 0.7% 0.1%
Year Ended December 31,
2007 2006 2005
Total Assets Under Management (1)
Beginning of Period Balance $22,621 $15,627 $11,251
Net Flows 7,591 4,135 3,117
Appreciation (Depreciation) (2) 3,175 2,859 1,259
End of Period Balance $33,387 $22,621 $15,627
Total Assets Under Management by Fund
OZ Master Fund $19,771 $15,449 $12,001
OZ Europe Master Fund 6,416 3,481 1,887
OZ Asia Master Fund 3,852 2,332 605
OZ Global Special Investments Master
Fund 2,082 195 43
Och-Ziff Funds - Net Returns (3)
OZ Master Fund 11.5% 14.8% 8.8%
OZ Europe Master Fund 14.8% 22.3% 15.7%
OZ Asia Master Fund 12.2% 14.0% 14.2%
OZ Global Special Investments Master
Fund 17.2% 13.9% 0.2%
(1) Includes 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 reflects the aggregate net capital appreciation 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) Fund performance reflects a composite of the monthly 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 special 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 10
OCH-ZIFF CAPITAL MANAGEMENT GROUP LLC
Returns of OZ Master Fund During Negative
Return Months of S&P 500 Index
(Unaudited)
Total Return
of OZ Master
Number of Total Return Fund
Months of of S&P 500 During
Negative During Negative
Returns Negative Return Months
Year of S&P 500 Return Months of S&P 500
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 -41.9% -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%
1Q08 3 -9.7% -0.8%
2Q08 1 -8.4% -0.5%
Distribution of Net Monthly Returns since April 1, 1994
Net Monthly Return Number of
of OZ Master Fund Months
less than -3% 3
-2% to -3% 0
-1% to -2% 3
0% to -1% 15
0% to 1% 59
1% to 2% 44
2% to 3% 29
3% to 4% 10
4% to 5% 5
greater than 5% 3
Total net return for the OZ Master Fund, Ltd. (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 S. 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-cap
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 performance has frequently trailed that of
the S&P 500 Index in periods of positive performance.
Exhibit 11
OCH-ZIFF CAPITAL MANAGEMENT GROUP LLC
Fund Performance (Unaudited)
2007
January February March April May
Och-Ziff Funds - Net Returns
OZ Master Fund 1.97% 1.31% 1.38% 1.81% 2.40%
OZ Europe Master Fund 1.57% 1.35% 1.84% 2.70% 2.85%
OZ Asia Master Fund 2.69% 0.48% 0.37% 2.96% 2.67%
OZ Global Special Investments
Master Fund 1.89% 1.42% 1.06% 2.93% 1.44%
S&P 500 Index - Total Return 1.51% -1.96% 1.12% 4.43% 3.49%
2007
June July August September October
Och-Ziff Funds - Net Returns
OZ Master Fund 0.19% -0.49% -0.96% 0.95% 2.07%
OZ Europe Master Fund 0.83% 0.22% -0.64% 1.25% 1.25%
OZ Asia Master Fund 0.09% -1.00% -2.08% 0.43% 2.84%
OZ Global Special Investments
Master Fund 0.83% -0.40% -0.54% 1.72% 3.11%
S&P 500 Index - Total Return -1.66% -3.10% 1.50% 3.74% 1.59%
2007
November December FY2007
Och-Ziff Funds - Net Returns
OZ Master Fund -0.32% 0.67% 11.48%
OZ Europe Master Fund -0.58% 1.32% 14.81%
OZ Asia Master Fund 0.12% 2.12% 12.17%
OZ Global Special Investments
Master Fund 1.97% 0.61% 17.19%
S&P 500 Index - Total Return -4.18% -0.69% 5.49%
2008
January February March 1Q08
Och-Ziff Funds - Net Returns
OZ Master Fund -1.12% 1.02% -0.73% -0.84%
OZ Europe Master Fund -2.00% 0.81% -0.54% -1.74%
OZ Asia Master Fund -1.95% 1.78% -2.41% -2.61%
OZ Global Special Investments
Master Fund -0.72% 0.57% -0.45% -0.60%
S&P 500 Index - Total Return -6.00% -3.25% -0.43% -9.45%
2008
April May June 2Q08 1H
Och-Ziff Funds - Net Returns
OZ Master Fund 0.96% 1.11% -0.45% 1.62% 0.77%
OZ Europe Master Fund 0.31% 1.69% 0.20% 2.21% 0.43%
OZ Asia Master Fund -0.18% -0.16% -2.19% -2.52% -5.07%
OZ Global Special Investments
Master Fund 0.64% 0.43% -0.34% 0.73% 0.12%
S&P 500 Index - Total Return 4.87% 1.30% -8.43% -2.73% -11.91%
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.
Readers should not assume that there is any material overlap between
those securities in the portfolio 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-cap
corporations listed on the NYSE and Nasdaq. The comparison of S&P 500
performance relative to the funds' performance should not be considered an
indication of how the fund will perform relative to the S&P 500 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
 back to top
Related links:
http://www.ozcap.com
CONTACT:
Investor Relations: Tina Madon, Managing
Director, Head of Investor Relations, Och-Ziff Capital Management
Group LLC, +1-212-719-7381, tina.madon@ozcap.com; Media
Relations: Steve Bruce or Chuck Dohrenwend, +1-212-371-5999, both
of The Abernathy MacGregor Group, for Och-Ziff Capital Management
Group LLC
|
