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Actionable news in OZM: OCH-ZIFF CAPITAL MANAGEMENT GROUP LLC,

Och-Ziff Capital Management Group Llc Reports Quarter Results

The following excerpt is from the company's SEC filing.

Quarter Dividend of

per Class A Share

NEW YORK

November 3, 2015

– Och-Ziff Capital Management Group LLC (NYSE: OZM) (the “Company” or “Och-Ziff”) today reported GAAP net income allocated to Class A Shareholders

“GAAP Net Income”) of

$17.4 million

per basic and

per diluted Class A Share, for the

quarter ended

September 30, 2015

Summary Highlights

Reported Distributable Earnings of

$66.1 million

per Adjusted Class A Share, for the

quarter,

than

$116.7 million

per Adjusted C lass A Share, for the

quarter.

Declared a cash dividend of

per Class A Share for the

Repurchased approximately

4.6 million

vested Och-Ziff Operating Group A Units from former executive managing directors of the Company, utilizing

$22.8 million

of 2015 third quarter Distributable Earnings.

Assets under management totaled

$44.6 billion

as of

decreasing

year-over-year.

Longer-dated assets under management, which are those subject to initial commitment periods of three years or longer, were

$16.4 billion

of the Company’s total assets under management as of

increasing

Assets under management in the Company’s dedicated credit, real estate and other single-strategy funds were

$15.1 billion

, comprising

of assets under management as of

Estimated assets under management totaled

$44.4 billion

November 1, 2015

“While challenging market conditions adversely affected the performance of the OZ Master Fund during the third quarter, we are confident in our investment process and optimistic about the prospects of our current portfolio,” said Dan Och, Chairman and Chief Executive Officer of Och-Ziff. “We believe the current environment plays to our strengths as fundamental, bottoms-up investors, and will enable us to generate positive, absolute returns for our LPs.

“Our multi-strategy, credit and real estate funds are important sources of our future asset and earnings growth. We have a leading presence in the markets for each, building on our 21-year track record of

_______________

Please see Exhibit 7 that accompanies this press release for additional information regarding the returns of the OZ Master Fund.

delivering value to the investors in our funds. We are also pursuing a number of new business initiatives that represent significant opportunities for us to grow longer-term, high-margin assets and expand our distribution. We are focused on substantial markets where we can leverage the competitive edge that comes from our ability to invest across multiple asset classes and geographies.”

GAAP NET INCOME ALLOCATED TO CLASS A SHAREHOLDERS

For the

quarter, Och-Ziff reported GAAP Net Income of

per diluted Class A Share, compared to

$23.2 million

quarter. For the

first nine months

$48.0 million

per diluted Class A Share, compared to

$57.8 million

per diluted Class A Share, for the

The year-over-year

decrease

quarter GAAP results was primarily driven by higher operating expenses and lower management fees, partially offset by lower income taxes (net of a corresponding increase in expense related to our tax receivable agreement liability) and higher incentive income. The year-over-year

GAAP results was primarily driven by higher income taxes (net of a corresponding reduction in our tax receivable agreement liability) and higher operating expenses, partially offset by higher incentive income. Also contributing to the

was a gain on the sale of an investment held by a joint venture in the first quarter of 2014 that did not reoccur in 2015.

Throughout this press release, the Company presents financial measures that are not prepared in accordance with GAAP. For a discussion of these non-GAAP measures, please see the section titled “Non-GAAP Financial Measures” at the end of this press release.

DISTRIBUTABLE EARNINGS (NON-GAAP)

The Company’s Distributable Earnings for the

quarter were

quarter. Distributable Earnings for the

$288.0 million

$334.9 million

The year-over-year decrease in Distributable Earnings for the 2015 third quarter were primarily due to lower incentive income and management fees, as well as higher Adjusted Income Taxes and operating expenses. The year-over-year decrease in Distributable Earnings for the first nine months of 2015 were primarily due to higher operating expenses and a gain on the sale of an investment held by a joint venture in 2014 that did not reoccur in 2015, partially offset by higher management fees. Please see the “Economic Income (Non-GAAP)” section of this press release for a discussion of the drivers affecting the Company’s Economic Income.

Distributable Earnings is a non-GAAP measure. For reconciliations of Distributable Earnings to the respective GAAP Net Income for the periods discussed above, please see

Exhibits 2 and 3

that accompanies this press release. Additionally, please see the section titled “Non-GAAP Financial Measures” at the end of this press release, including the definitions of Distributable Earnings, Adjusted Income Taxes and Adjusted Class A Shares.

ASSETS UNDER MANAGEMENT

Rounding differences may occur.

Year-Over-Year Change

(dollars in billions)

September 30, 2014

Inflows / (Outflows)

Distributions / Other Reductions

Appreciation / (Depreciation)

Multi-strategy funds

Credit

Opportunistic credit funds

Institutional Credit Strategies

Real estate funds

As of

, assets under management totaled

$2.2 billion

, from

, which was driven by capital net

outflows

$1.7 billion

$1.1 billion

of distributions to investors in the Company's closed-end opportunistic credit and real estate funds, and other reductions. These amounts were partially offset by performance-related

appreciation

$540.4 million

. During the month of

, the Company had approximately

$181.2 million

of intra-month capital net

, which are included in the

of assets under management as of

decreased

to an estimated

. This

reflected estimated performance-related

of approximately

$537.6 million

October

and capital net

$690.8 million

, which was comprised of approximately

$509.0 million

of capital net

October 1, 2015

and approximately

$181.8 million

October 2, 2015

Please see detailed assets under management and fund information on Exhibits 6 and 7 that accompany this press release.

Assets under management in the Company’s multi-strategy funds totaled

$29.5 billion

$4.4 billion

, year-over-year. This change was driven by net capital

$4.8 billion

, partially offset by performance-related

$0.4 billion

Assets under management in the Company’s dedicated credit products totaled

$11.9 billion

, increasing

$2.1 billion

, year-over-year. This change was driven by capital net

inflows

$2.9 billion

, and performance-related

$62.7 million

$839.0 million

of distributions and other reductions in the Company's closed-end opportunistic credit funds.

The Company’s opportunistic credit funds seek to generate risk-adjusted returns by capturing value in mispriced investments across disrupted, dislocated and distressed corporate, structured and private credit markets globally.

Assets under management in the Company’s opportunistic credit funds totaled

$4.9 billion

, decreasing

year-over-year. This decrease was primarily due to

$839.0 million

of distributions and other reductions related to the Company’s closed-end opportunistic credit funds, offset by

$572.7 million

of capital net inflows, primarily into the OZ Credit Opportunities Master Fund, the Company’s global opportunistic credit fund. Also offsetting the decrease was

$49.8 million

of performance-related

, driven by positive investment performance across the Company's closed-end opportunistic credit funds.

Institutional Credit Strategies (“ICS”) is the Company’s asset management platform that invests in performing credits, including leveraged loans, high-yield bonds, private credit/bespoke financing and investment grade credit via CLOs and other customized solutions for clients.

Assets under management in ICS totaled

$7.1 billion

$2.4 billion

, year-over-year. The increase was primarily driven by four CLOs that closed in the year-over-year period. ICS managed 12 CLOs as of

Assets under management in the Company’s real estate funds totaled

$1.9 billion

$127.9 million

was driven by distributions and other reductions from Och-Ziff Real Estate Funds I and II, partially offset by additional commitments to Och-Ziff Real Estate Fund III. Since inception, the net IRR for Och-Ziff Real Estate Fund II (for which the investment period ended in 2014) was

through

. Since inception, the net IRR for Och-Ziff Real Estate Fund I (for which the investment period ended in 2010) was

ECONOMIC INCOME (NON-GAAP)

In addition to analyzing the Company’s results on a GAAP basis, management also reviews the Company’s results on an “Economic Income” basis. Economic Income excludes certain adjustments that are required for presentation of the Company’s results on a GAAP basis, but that management does not consider when evaluating operating performance in any given period.

For reconciliations of Economic Income and its components to the respective GAAP measures, please see Exhibits 2 through 5 that accompany this press release. Additionally, please see the discussion of “Non-GAAP Financial Measures” at the end of this press release.

Economic Income Revenues (Non-GAAP)

Economic Income revenues for the

$202.2 million

$229.1 million

quarter. Management fees were

$162.7 million

$168.3 million

for the prior-year period. Incentive income was

$39.0 million

than the

$60.5 million

$630.9 million

$617.3 million

$493.6 million

$482.6 million

$135.8 million

$133.9 million

The year-over-year decrease in management fees for the quarter-to-date period was driven primarily by lower assets under management in the Company’s multi-strategy funds, partially offset by higher assets under management in the Company’s ICS products. The year-over-year decrease in incentive income was driven by lower incentive income from the Company’s opportunistic credit and real estate funds, partially offset by higher incentive income from the Company’s multi-strategy funds.

The year-over-year increase in management fees for the year-to-date period was driven by higher average assets under management in the Company’s ICS products, partially offset by lower average assets under management in the Company’s multi-strategy funds. Higher management fees related to the launch of Och-Ziff Real Estate Fund III during 2014 also contributed to the year-over-year increase. The year-over-year increase in incentive income for the year-to-date period was driven by higher incentive income from the Company’s multi-strategy funds, partially offset by lower incentive income from the Company’s opportunistic credit and real estate funds.

The average management fee rate was

quarter and

. The Company’s average management fee will vary from quarter to quarter based on the mix of products that comprise its assets under management.

Compensation and Benefits (Non-GAAP)

Compensation and benefits for the

quarter totaled

$35.9 million

$42.4 million

quarter. Salaries and benefits were

$28.7 million

$26.1 million

in the prior-year period due to an increase in the Company’s headcount globally. Bonus expense for the

$7.2 million

$16.3 million

for the prior-year period. The reduction in bonus expense was driven by lower incentive income from the Company’s first domestic real estate fund.

$102.3 million

$101.3 million

$84.3 million

$76.8 million

$18.0 million

$24.5 million

for the prior-year period mainly due to lower incentive income from the Company’s first domestic real estate fund.

The ratio of salaries and benefits to management fees was

for the

Non-Compensation Expenses (Non-GAAP)

Non-compensation expenses for the

$54.8 million

$31.1 million

in the prior-year period. Non-compensation expenses for the

$145.8 million

$91.1 million

in the prior-year period. The year-over-year increases were driven by higher professional fees due to increased legal expenses relating to certain regulatory and legal matters, as well as

higher interest expense primarily due to the issuance of the Company’s Senior Notes in the 2014 fourth quarter.

The ratio of non-compensation expenses to management fees was

, respectively, compared to

Economic Income for the

quarter was

$111.5 million

$155.6 million

quarter. Economic Income for the

$382.8 million

$429.8 million

The year-over-year decrease in Economic Income for the quarter-to-date period was primarily due to lower incentive income and management fees, as well as higher operating expenses. The year-over-year decrease in Economic Income for the year-to-date period was due to higher operating expenses and a gain on the sale of an investment held by a joint venture in the 2014 first quarter that did not reoccur in 2015, partially offset by higher management fees.

CAPITAL

, the number of Class A Shares outstanding was

177,310,768

. For purposes of calculating Distributable Earnings per Share, the Company assumes that all the interests held by its executive managing directors and Ziff Investors Partnership, L.P. II and certain of its affiliates and control persons (the “Ziffs”) (until the Ziffs exchanged their remaining interests during the 2014 second quarter) in the Company’s principal operating subsidiaries (the “Och-Ziff Operating Group”) (collectively, “Partner Units”), as well as Class A Restricted Share Units (“RSUs”) outstanding during the applicable period, have been converted on a one-to-one basis into Class A Shares (“Adjusted Class A Shares”). For the

quarter and the

, the total weighted-average Adjusted Class A Shares outstanding were

516,825,427

516,104,997

, respectively.

DIVIDEND

The Board of Directors of Och-Ziff declared a

-quarter dividend of

per Class A Share. The dividend is payable on

November 20, 2015

to holders of record as of the close of business on

November 13, 2015

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

-quarter dividend will be treated as return of capital.

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

The Company will host a conference call today,

, at 8:30 a.m. Eastern Time to discuss its

quarter results. The call will be open to the public and can be accessed by dialing +1-888-713-4214 (callers inside the U.S.) or +1-617-213-4866 (callers outside the U.S.). The number should be dialed at...


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