Oz Management Reports Fourth Quarter and Full Year 2018 Results

Dividend of  $0.23  per Class A Share

NEW YORK , March 7, 2019 – Och-Ziff Capital Management Group LLC (NYSE: OZM) (the “Company” or “Oz Management”) today reported a GAAP net loss attributable to Class A Shareholders (“GAAP Net Loss ”) of $1.0 million , or $0.05 per basic and diluted Class A Share, for the fourth quarter of 2018 , and a GAAP net loss $24.3 million , or $1.26 per basic and diluted Class A Share, for the full year 2018 .

Summary

Rob Shafir, CEO of Oz Management, said, “The strategic and comprehensive steps we have taken to restructure the firm has set us up for the future. The further alignment of senior management with our clients and shareholders, combined with the material steps to facilitate and accelerate the strengthening of our balance sheet positions us to serve our clients and grow our assets under management. While the fourth quarter of 2018 experienced significant declines and increased volatility globally, all of our funds performed well on a relative basis, with our multi-strategy fund protecting capital on the downside and providing upside capture during strong markets as we have witnessed so far in 2019.”

RECENT DEVELOPMENTS

Recapitalization

In February 2019, the Company completed a recapitalization of its business (the “Recapitalization”). As part of the Recapitalization, a portion of the interests held by its former executive managing directors in the Company’s principal operating subsidiaries (the “Oz Operating Group”) were reallocated to current members of senior management. In addition, the Company restructured the previously outstanding $400.0 million of Existing Preferred into $200.0 million of New Preferred Securities and $200.0 million of New Debt Securities. Additionally, the Company repaid $100.0 million of the debt outstanding under its senior term loan facility and terminated the $100.0 million of undrawn commitments under its revolving credit facility. The Company is paying down an additional $20.0 million on March 7, 2019.

As part of the Recapitalization, the Company initiated a “Distribution Holiday” with respect to the interests in the Oz Operating Group held by current and former executive managing directors, whereby holders of such interests will not receive distributions until certain balance sheet strengthening targets are met. Holders of Class A Shares may continue to receive dividends during the Distribution Holiday.

For the definition of capitalized terms not defined herein, as well as for additional details regarding the Recapitalization, please see the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on February 11, 2019.

Reverse Share Split

In January 2019, the Company completed a 1-for-10 reverse share split. The reverse share split did not affect any shareholder’s ownership percentage of shares in the Company or the relative interests in the Oz Operating Group held by the Company or the Company’s executive managing directors. All prior period share, unit and per share amounts have been restated to give retroactive effect to the reverse share split.

Expected Change of Tax Status Election to Corporation

Following the Recapitalization, the Company intends to (i) change its tax classification from a partnership to a corporation effective April 1, 2019 and (ii) subsequently convert from a limited liability company into a corporation.

GAAP NET (LOSS) INCOME ATTRIBUTABLE TO CLASS A SHAREHOLDERS

For the fourth quarter of 2018 , Oz Management reported a GAAP Net Loss of $1.0 million , or $0.05 per basic and diluted Class A Share, compared to GAAP Net Income of $6.6 million , or $0.35 per basic and diluted Class A Share, for the fourth quarter of 2017 . For the full year 2018 , Oz Management reported a GAAP Net Loss of $24.3 million , or $1.26 per basic and diluted Class A Share, compared to GAAP Net Income of $18.2 million , or $0.98 per basic and $0.97 per diluted Class A Share, for the full year 2017 .

The decline in earnings for the fourth quarter of 2018 compared to the fourth quarter of 2017 was primarily due to lower incentive income and management fees, as well as costs related to the Recapitalization that were incurred in 2018, partially offset by lower bonus expenses. In addition, during 2017, a reduction in deferred income tax assets due to the decrease in the U.S. federal corporate income tax rate pursuant to the Tax Cuts and Jobs Act (“TCJA”) resulted in a substantial charge to 2017 income tax expense, which was partially offset by a reduction in the tax receivable agreement liability.

The decline in earnings for the full year 2018 compared to the full year 2017 was primarily due to lower incentive income and management fees, as well as settlements expenses related to previously disclosed

matters, and costs related to the Recapitalization that were incurred in 2018. Also contributing to the year-over-year decline were net losses incurred on early retirement of debt in 2018 and net losses on investments in CLOs. These decreases in earnings were partially offset by lower bonus expenses and higher interest income. Additionally, during 2017, a reduction in deferred income tax assets due to the decrease in the U.S. federal corporate income tax rate pursuant to the TCJA resulted in a substantial charge to 2017 income tax expense, which was partially offset by a reduction in the tax receivable agreement liability.

DISTRIBUTABLE EARNINGS (NON-GAAP)

For the fourth quarter of 2018 , Oz Management reported Distributable Earnings of $16.9 million , or $0.31 per Adjusted Class A Share, compared to Distributable Earnings of $149.4 million , or $2.70 per Adjusted Class A Share, for the fourth quarter of 2017 . For the full year 2018 , Distributable Earnings were $64.1 million , or $1.17 per Adjusted Class A Share, compared to $278.3 million , or $5.06 per Adjusted Class A Share, for the full year 2017 .

Distributable Earnings, excluding the settlements expense recorded during the second and third quarters of 2018, were $91.3 million , or $1.67 per Adjusted Class A Share, for the full year 2018 .

The decline in earnings for the fourth quarter of 2018 compared to the fourth quarter of 2017 was primarily due to lower incentive income and management fees, as well as costs related to the Recapitalization that were incurred in 2018, partially offset by lower bonus expenses and lower amount accrued for the tax receivable agreement and other payables.

The decline in earnings for the full year 2018 compared to the full year 2017 was primarily due to lower incentive income and management fees, as well as settlements expenses related to previously disclosed matters, and costs related to the Recapitalization that were incurred in 2018. These decreases in earnings were partially offset by lower bonus expenses, lower amount accrued for the tax receivable agreement and other payables and higher interest income.

Distributable Earnings and Distributable Earnings per Adjusted Class A Share are non-GAAP measures. For information on and reconciliations of the Company’s non-GAAP measures to the respective GAAP measures, please see Exhibits 2 through 4 that accompany this press release.

Totals may not sum due to rounding.

The year-over-year increase in assets under management was driven primarily by the closing of additional CLOs and an aircraft securitization within Institutional Credit Strategies. These increases were partially offset by net outflows in the Company’s multi-strategy funds, as well as distributions in certain multi-strategy funds that the Company decided to close.

Since December 31, 2018, estimated assets under management decreased to $32.3 billion as of March 1, 2019 , which includes approximately  $578.6 million of redemptions by related parties, the majority of which relate to the anticipated redemptions disclosed in the Company’s Form 8-K filed on December 6, 2018.

Please see the detailed assets under management and fund information on Exhibits 5 through 7 that accompany this press release.

CONFERENCE CALL

Robert Shafir, Chief Executive Officer, and Thomas Sipp, Chief Financial Officer, will host a conference call today, March 7, 2019 , 8:30 a.m. Eastern Time to discuss the Company’s fourth quarter and full year 2018 results. The call can be accessed by dialing 1-833-224-0545 (in the U.S.) or 1-647-689-4061 (international), passcode 2677927 . A simultaneous webcast of the call will be available on the Public Investors page of the Company’s website ( www.ozm.com ). For those unable to listen to the live broadcast, a webcast replay will also be available on the Company’s website as noted above.

About Oz Management

Oz Management is one of the largest institutional alternative asset managers in the world, with offices in New York, London, Hong Kong, Mumbai and Shanghai. The Company provides asset management services to investors globally through its multi-strategy funds, dedicated credit funds, including opportunistic credit funds and Institutional Credit Strategies products, real estate funds and other alternative investment vehicles. Oz Management seeks to generate consistent, positive, absolute returns across market cycles, with low volatility compared to the broader markets, and with an emphasis on preservation of capital. The Company’s funds invest across multiple strategies and geographies, consistent with the investment objectives of each fund. The global investment strategies employed include convertible and derivative arbitrage, corporate credit, global equities, merger arbitrage, private investments, real estate and structured credit. As of March 1, 2019 , Oz Management had approximately $32.3 billion in assets under management. For more information, please visit the Company’s website ( www.ozm.com ).

Forward-Looking Statements

This press release may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, that reflect the Company’s current views with respect to, among other things, future events and financial performance. The Company generally identifies forward-looking statements by terminology such as “outlook,” “believe,” “expect,” “potential,” “continue,” “may,” “will,” “should,” “could,” “seek,” “approximately,” “predict,” “intend,” “plan,” “estimate,” “anticipate,” “opportunity,” “comfortable,” “assume,” “remain,” “maintain,” “sustain,” “achieve,” “see,” “think,” “position” or the negative version of those words or other comparable words.

Any forward-looking statements contained in this press release are based upon historical information and on the Company’s current plans, estimates and expectations. The inclusion of this or other forward-looking information should not be regarded as a representation by the Company or any other person that the future plans, estimates or expectations contemplated by the Company will be achieved. The Company cautions that forward-looking statements are subject to numerous assumptions, estimates, risks and uncertainties, including but not limited to the following: global economic, business, market and geopolitical conditions; U.S. and foreign regulatory developments relating to, among other things, financial institutions and markets, government oversight, fiscal and tax policy; the outcome of third-party litigation involving the Company; the consequences of the settlements with the SEC and the DOJ; whether the Company realizes all or any of the anticipated benefits from the Recapitalization and other related transactions; whether the Recapitalization and other related transactions result in any increased or unforeseen costs, indemnification obligations or have an impact on the Company’s ability to retain or compete for professional talent or investor capital; conditions impacting the alternative asset management industry; the Company’s ability to retain existing investor capital; the Company’s ability to successfully compete for fund investors, assets, professional talent and investment opportunities; the Company’s ability to retain its active executive managing directors, managing directors and other investment professionals; the Company’s successful formulation and execution of its business and growth strategies; the Company’s ability to appropriately manage conflicts of interest and tax and other regulatory factors relevant to its business; and assumptions relating to the Company’s operations, investment performance, financial results, financial condition, business prospects, growth strategy and liquidity.

If one or more of these or other risks or uncertainties materialize, or if the Company’s assumptions or estimates prove to be incorrect, its actual results may vary materially from those indicated in these statements. These factors are not and should not be construed as exhaustive and should be read in conjunction with the other cautionary statements and risks that are included in the Company’s filings with the SEC, including but not limited to the Company’s annual report on Form 10-K for the year ended December 31, 2017 , dated February 23, 2018 , as well as may be updated from time to time in the Company’s other SEC filings. There may be additional risks, uncertainties and factors that the Company does not currently view as material or that are not known. The forward-looking statements contained in this press release are made only as of the date of this press release. The Company does not undertake to update any forward-looking statement because of new information, future developments or otherwise. This press release does not constitute an offer of any Oz Management fund.

The Company files annual, quarterly and current reports, proxy statements and other information required by the Exchange Act of 1934, as amended, with the SEC. The Company makes available free of charge on its website ( www.ozm.com ) its annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy statements and any amendments to those filings as soon as reasonably practicable after such material is electronically filed with or furnished to the SEC. The Company also uses its website to distribute company information, and such information may be deemed material. Accordingly, investors should monitor the Company’s website, in addition to its press releases, SEC filings and public conference calls and webcast.

EXHIBIT 2
OCH-ZIFF CAPITAL MANAGEMENT GROUP LLC
Reconciliation of Non-GAAP Measures to the Respective GAAP Measures (Unaudited)
(dollars in thousands, except per share amounts)
		Three Months Ended December 31,								Year Ended December 31,
		2018				2017				2018				2017
Net (Loss) Income Attributable to Class A Shareholders		$	(981	)		$	6,562			$	(24,284	)		$	18,222
Change in redemption value of Preferred Units		—				—				—				2,853
Net (Loss) Income Attributable to Och-Ziff Capital Management Group LLC		(981		)		6,562				(24,284		)		21,075
Net income (loss) attributable to Group A Units		9,627				89,585				(25,716		)		130,730
Equity-based compensation, net of RSUs settled in cash		15,696				20,473				83,268				84,039
Adjustment to recognize deferred cash compensation in the period of grant		(5,103		)		(28,227		)		10,445				(28,893		)
Income taxes		12,872				300,317				12,500				317,559
Net losses on early retirement of debt		—				—				14,303				—
Allocations to Group D Units		—				1,760				3,060				6,674
Adjustment for expenses related to compensation and profit-sharing arrangements based on fund investment performance		(7,716		)		9,725				(3,094		)		22,967
Changes in tax receivable agreement liability		(2,218		)		(222,859		)		(2,218		)		(222,859		)
Depreciation, amortization and net gains and losses on fixed assets		2,599				2,641				10,308				10,334
Other adjustments		5,912				(2,380		)		7,295				(3,891		)
Economic Income—Non-GAAP		30,688				177,597				85,867				337,735
Tax receivable agreement and other payables—Non-GAAP (1)		(13,823		)		(28,169		)		(21,785		)		(59,480		)
Distributable Earnings—Non-GAAP		$	16,865			$	149,428			$	64,082			$	278,255
Weighted-Average Class A Shares Outstanding		19,337,402				18,708,375				19,270,929				18,642,379
Weighted-Average Partner Units		29,706,825				34,522,269				30,463,932				34,153,046
Weighted-Average Class A Restricted Share Units (RSUs)		5,437,581				2,093,125				4,826,130				2,153,146
Weighted-Average Adjusted Class A Shares		54,481,808				55,323,769				54,560,991				54,948,571
Distributable Earnings Per Adjusted Class A Share—Non-GAAP		$	0.31			$	2.70			$	1.17			$	5.06
Distributable Earnings—Non-GAAP										$	64,082
Settlements expense										31,750
Effect of settlements expense on tax receivable agreement and other payables										(4,529		)
Distributable Earnings Excluding Settlements Expense—Non-GAAP										$	91,303
Distributable Earnings Per Adjusted Class A Share Excluding Settlements Expense—Non-GAAP										$	1.67

^{(1) Presents an estimate of payments under the tax receivable agreement and income taxes related to the earnings for the periods presented. These amounts are grossed-up for Och - Ziff Capital Management Group LLC’s ownership percentage in the Oz Operating Group, assuming the conversion of all outstanding Partner Units into Class A Shares, on a one-to-one basis.}  

See Exhibit 4 for footnote references.

Footnotes to Reconciliations

Non-GAAP Financial Measures

Distributable Earnings is a measure of operating performance that equals Economic Income less amounts related to the tax receivable agreement and other payables. Economic Income excludes the adjustments described above that are required for presentation of the Company’s results on a GAAP basis . These measures are non-GAAP measures and should not be considered as alternatives to the Company’s GAAP Net Income or cash flow from operations, or as indicative of liquidity or the cash available to fund operations. The Company’s non-GAAP measures may not be comparable to similarly titled measures used by other companies. Additionally, throughout this press release management has presented certain non-GAAP measures that exclude the effect of the settlements expense. These measures are presented to provide a more comparable view of the Company’s core operating results year-over-year.

For purposes of calculating Distributable Earnings per Share, the Company assumes that all the interests held by its current or former executive managing directors in the Oz Operating Group (collectively, “Partner Units”), as well as Class A Restricted Share Units (“RSUs”), have been converted on a one-to-one basis into Class A Shares (“Adjusted Class A Shares”). As of December 31, 2018 , there were 3,660,000 Group P Units outstanding and 1,000,000 performance-based restricted share units (“PSUs”). Group P Units and PSUs do not participate in the economics of the Company until certain service and market-performance conditions are met; therefore, the Company will not include the Group P Units or PSUs in Adjusted Class A Shares until such conditions are met. As of December 31, 2018 , the service and market-performance conditions had not yet been met.

Management uses Distributable Earnings and Economic Income, among other financial information, as the basis on which it evaluates the financial performance of the Company and makes resource allocation and other operating decisions, as well as to determine the earnings available to distribute as dividends to holders of the Company’s Class A Shares and to the Company’s executive managing directors. Management considers it important that investors review the same operating information that it uses.