Barclays Global Financial Services Conference
Daniel S. Och Chairman and Chief Executive Officer
September 10, 2013
Forward Looking Statements
1
This presentation 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 these words or other comparable words. Any forward-looking statements contained in this presentation 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. 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, including Euro-zone sovereign debt issues; U.S. and foreign regulatory developments relating to, among other things, financial institutions and markets, government oversight, fiscal and tax policy; the conditions impacting the alternative asset management industry; the Company’s ability to successfully compete for fund investors, assets, professional talent and investment opportunities; the Company’s ability to retain its 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 the Company’s 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, the Company’s 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 Securities and Exchange Commission (“SEC”), including but not limited to the Company’s Annual Report on Form 10-K for the year ended December 31, 2012 filed with the SEC on February 28, 2013. There may be additional risks, uncertainties and factors that the Company does not currently view as material or that are not known. The Company does not undertake to update any forward-looking statement, because of new information, future developments or otherwise. This presentation does not constitute an offer of any Och-Ziff fund.
2
We are a leading, global alternative asset manager
$37 billion in assets under management1
Leading manager for multi-strategy, absolute return hedge funds;
expanding platforms in credit, real estate and long/short equity
Competitive differentiation through opportunistic approach to capital allocation, global presence and deep investment expertise
Seek to generate consistent, positive, absolute returns across market
cycles, which drives stability and growth in asset base, and in turn earnings growth
Historically high dividend payout ratio driven by embedded operating
leverage and scalability of our business
1 Estimate as of September 1, 2013.
32%
15%
13%
12%
12%
9%
7%
3
We have a diverse mix of institutional investors, which drives the stability of our asset base
Pensions
Fund-of-Funds
Private Banks
Foundations and Endowments
Corporate, Institutional and Other
Related Parties1
Family Offices and
Individuals
As of July 1, 2013
Approximately 1,200 relationships globally Solutions-based approach a key
competitive differentiator Pension funds largest source of new
capital as shift to direct investing continues Growing assets under management
through private bank platforms from high net worth retail investors Newly established Dubai office to
expand investor coverage in the region
1 Represents investments by the Company, its executive managing directors, employees and certain other related parties.
4
We invest based on deep fundamental analysis and with a value orientation
Invest across strategies, asset classes, capital structures and geographies
Seek to invest in situations that are mispriced, complex or less understood
Identify event-driven opportunities and catalysts that drive changes in value
Manage portfolios with no predetermined capital allocations and pursue active strategies to maximize value
5
Our multi-strategy investment process enables dynamic capital allocation
OZ Master Fund Historical Allocations by Strategy
Long/Short Equity Special Situations
Credit-Related Strategies
Convertible/Derivative Arbitrage
Private Investments Cash
Merger Arbitrage
7/1/13 4/1/13 1/1/13 10/1/12 7/1/12
4/1/12 1/1/12 10/1/11 7/1/11 4/1/11
1 1 0 3 26
23
69
52
24
5 20
20
40
60
80
-6.5% -5.5% -4.5% -3.5% -2.5% -1.5% -0.5% 0.5% 1.5% 2.5% 3.5% 4.5%
Capital preservation through consistent, disciplined asset allocation and exposure management
Limited use of leverage
Significant emphasis on portfolio diversification
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The consistency of our historical returns is central to the value we create for our fund investors...
Freq
uenc
y of
Mon
thly
Ret
urn
Distribution of OZ Master Fund Composite Net Monthly Returns Since Inception
OZ Master Fund Composite Net Returns1
Past performance is no guarantee of future results. 1 Returns for August 2013 are preliminary month-end calculations and are subject to revision. The returns shown represent the composite performance of all feeder funds that comprise OZ Master Fund, Ltd. (“OZ Master Fund”) since the inception of OZ Master Fund on January 1, 1998 (collectively, the “Master Fund Composite”). The Master Fund Composite is calculated using the total return of all feeder funds net of all fees and expenses (except incentive income on unrealized gains attributable to investments that the Company, as investment manager, determines the lack of a readily ascertainable fair value, are illiquid or otherwise should be held until the resolution of a special event or circumstance (“Special Investments”) that could reduce returns on these investments at the time of realization), and includes the reinvestment of all dividends and other income. The Master Fund Composite also includes realized and unrealized gains and losses attributable to Special Investments and initial public offering investments that are not allocated to all investors in the feeder funds. Investors that were not allocated Special Investments and initial public offering investments may experience materially different returns, in which case the Master Fund Composite may be of limited value for such investors. The Master Fund Composite is not available for direct investment.
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…and is supported by an institutionally-oriented risk management process
Risk is overseen by the Risk Committee Measured and managed using a combination of qualitative and quantitative analysis and inputs
Risk Committee is comprised of regional investing heads, senior portfolio managers, and
senior members of operations and infrastructure Advises on resizing/adjusting positions and implementing hedges Provides guidance to help determine asset allocation across portfolios Focuses on various components of portfolio risk, including market, liquidity and counterparty
Risk mindset is deeply embedded in Och-Ziff’s corporate culture
Dedicated risk analytics group
Regular analysis of risk reports
Routine scenario analysis and stress testing
Exposure monitoring, including industry, market and geographic
Specified assignment of responsibility for all positions and exposures
Management of risk, down to the analyst level, is an integral part of the research and investment process
Formal weekly meetings of Risk Committee, combined with informal daily discussions within and across portfolios and geographies
Focus on preservation of capital and portfolio diversification
Communication between portfolio managers and Risk Committee
Over 100 years of collective experience managing risk
Quantitative Analysis/Inputs Qualitative Analysis/Inputs
We are expanding our platforms to diversify our business and grow our asset base
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Creating solutions to meet fund investor requirements Multi-strategy funds offer significant growth potential
Active investor interest
No immediate capacity constraints
Strategy for additional growth is centered on three investment strategies
Credit
Real estate
Long/short equity
Growth initiatives are a natural extension of our existing expertise and business
6.0 5.8
11.3
15.6
22.6
33.4
27.0
23.1
27.9 28.8
32.6
37.0
0.0
10.0
20.0
30.0
40.0
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 9/1/2013
Past performance is no guarantee of future results. 1Assets under management includes assets attributable to the Company’s hedge funds, real estate funds, credit funds, collateralized loan obligations (CLOs) and other alternative investment vehicles it manages. Management fees and incentive income earned on the Company’s assets under management may vary depending on the asset class, performance measurement period, amount of capital committed by investors, and other factors related to a particular investment vehicle. Includes amounts invested by the Company, its executive managing directors and certain other related parties for which the Company charged no management fees and received no incentive income for the periods presented. Amounts presented in this graph are not the amounts used to calculate management fees and incentive income for the respective periods. For the period from 2001 through 2004, total assets under management does not include assets externally managed by an affiliated investment adviser pursuant to a joint venture arrangement. 2Estimate as of September 1, 2013.
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These elements have all contributed to the growth in our asset base
($ B
illio
ns)
Och-Ziff Historical Assets Under Management1
2
2002 – Sept 1, 2013 CAGR: 19%
Our objective is to become a leading credit manager
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Senior secured loans Traditional distressed
credits Special situation credit Long/short credit Capital structure arbitrage Corporate mezzanine
loans Distressed for control
strategies Private loans Hybrid capital securities
of banks and insurers
RMBS CMBS, CRE and other
commercial real estate debt CDOs, CLOs, CBOs, CSOs
and ABS Whole loans and related
structured transactions Real estate finance,
including mortgages, mezzanine loans and B-notes
Portfolio sales of complex credit assets and NPLs
Tailored capital solutions
Primarily senior secured first lien loans
Limited baskets of second lien loans and unsecured bonds and loans
More than 15% of total assets under management in dedicated credit platforms1 Opportunistic capital rotation across credit markets, instruments and
geographies rather than simply trying to capture yield Building on investment expertise of dedicated global credit team
Corporate Credit Structured Credit CLO Management
1 As of June 30, 2013. Includes CLO assets.
Our real estate capability offers significant growth potential
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Investment strategy focused on middle-market assets Proven ability to identify investment opportunities with non-correlated
returns to traditional real estate Distressed situations Value enhancement opportunities Bespoke capital needs Pricing arbitrage opportunities Absentee owners Niche properties
Value creation through
Intensive asset management Emphasis on increasing property cash flows through improvements and
expense controls Aggressive monetization
Our dedicated long/short equity platform builds on our long-standing expertise
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Firm began business as a long/short equity investor Nearly two decades of investment experience, supported by long-tenured
investment team Substantial component of multi-strategy funds Focus on alpha generation, with active risk management through the use of
hedges
Stand-alone platform managed by the same team of professionals who are responsible for the equity investments in our multi-strategy funds
Our approach to equity investing in our multi-strategy funds has created
significant value for our fund investors Enhances the yield of their portfolios Long/short platform established at the request of existing fund investors
We believe we are well positioned to increase our market share of capital allocated to alternative managers
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Investment performance track record based on a clearly articulated investment philosophy
Investment team background and expertise
Institutionally-oriented infrastructure
Alignment of interests
Proven willingness to meet fund investor requirements through new platform development
1Adjusted Income Taxes and Distributable Earnings are non-GAAP financial measures that supplement and should not be considered to be alternatives to Och-Ziff's income taxes, net income or cash flow from operations prepared in accordance with GAAP, and are not necessarily indicative of liquidity or the cash available to fund operations. Please see pages 17 and 18 of this presentation for important disclosures about Adjusted Income Taxes and Distributable Earnings.
The growth of our assets under management drives the embedded operating leverage of our business
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Management Fees
Incentive Income
Operating Expenses
Adjusted Income Taxes
Distributable Earnings1
Simple and scalable financial model
Dividend
Management fees more than offset fixed expenses (salaries and benefits + non-compensation expenses) Structured to earn incentive income annually in cash on the majority of our assets under
management, which has been valuable to our shareholders As our assets under management grow, compounding effect on our management fees and
incentive income is significant Stability of our asset base is a powerful driver of future earnings
$0.46
$0.88
$1.13
$0.48
$1.18
$0.00
$0.20
$0.40
$0.60
$0.80
$1.00
$1.20
$1.40
2008 2009 2010 2011 2012
58%
82%
89%
83%
94%
We have paid out substantially all of our Distributable Earnings each quarter1
15
1The declaration and payment of future dividends will be at the sole discretion of the Company’s Board of Directors, which may change the Company’s dividend policy at any time. 2Dividend payout ratio = full-year dividend per Class A Share/ full-year Distributable Earnings per Share. Distributable Earnings, Distributable Earnings per Share and dividend payout ratio are non-GAAP financial measures that supplement and should not be considered as alternatives to Och-Ziff's net income or cash flow from operations prepared in accordance with GAAP, and are not necessarily indicative of liquidity or the cash available to fund operations. Please see pages 17 – 19 of this presentation for important disclosures about, and for reconciliations of, these non-GAAP financial measures to the respective GAAP measures for the periods shown above.
Distributable Earnings Per Share Dividend Payout Ratio2
Addendum
16
17
Non-GAAP Financial Measures The Company’s non-GAAP measures should not be considered as alternatives to the Company’s GAAP Net Income (Loss) or cash flow from operations, or as indicative of liquidity or the cash available to fund operations. The Company’s non-GAAP measures may not be comparable to similarly titled measures used by other companies. For reconciliations of the Company’s non-GAAP measures to the most directly comparable financial measures calculated in accordance with GAAP, please see page 19 of this presentation. In addition to analyzing the Company’s results on a GAAP basis, management also reviews the Company’s results on an “Economic Income” basis. Economic Income excludes the adjustments described below that are required for presentation of the Company’s results on a GAAP basis, but that management does not consider when evaluating the operating performance of the Company in any given period. Management, therefore, uses Economic Income as the basis on which it evaluates the financial performance of the Company and makes resource allocation and other operating decisions. Management considers it important that investors review the same operating information that it uses. Economic Income is a measure of pre-tax operating performance that excludes the following from the Company’s results on a GAAP basis: Income allocations to the Company’s executive managing directors and the Ziffs on their direct interests in the Och-Ziff Operating Group.
Management reviews operating performance at the Och-Ziff Operating Group level, where substantially all of the Company’s operations are performed, prior to making any income allocations.
Reorganization expenses related to the Company’s IPO, equity-based compensation expenses and depreciation and amortization expenses, as management does not consider these non-cash expenses to be reflective of operating performance.
Changes in the tax receivable agreement liability, net gains on early retirement of debt, net earnings (losses) on deferred balances, the allocation of these deferred balances and related taxes, and net gains (losses) on investments in Och-Ziff funds, as management does not consider these items to be reflective of operating performance.
Amounts related to the consolidated Och-Ziff funds, including the related eliminations of management fees and incentive income, as management reviews the total amount of management fees and incentive income earned in relation to total assets under management and fund performance.
Expenses related to compensation arrangements based on fund investment performance are recognized at the end of the relevant measurement period (generally in the fourth quarter of each year), as management determines the total amount of compensation under these arrangements once the investment performance of the relevant fund over the applicable performance measurement period is known. In addition, the full amount of deferred cash compensation is recognized on the date it is determined (generally in the fourth quarter of each year), as management determines the total amount of compensation based on the Company’s performance in the year of the award.
18
Non-GAAP Financial Measures - Continued Distributable Earnings is a non-GAAP measure of after-tax operating performance and equals Economic Income less Adjusted Income Taxes. Adjusted Income Taxes are estimated assuming the conversion of all outstanding Partner Units into Class A Shares, on a one-to-one basis, and include the impact of payments under the tax receivable agreement. Therefore, all income (loss) of the Och-Ziff Operating Group allocated to the Partner Units is treated as if it were allocated to Och-Ziff Capital Management Group LLC. Partner Units represent interests in the Och-Ziff Operating Group held by the Company's executive managing directors and the Ziffs, including the Group A Units and Group D Units. Distributable Earnings per Share is equal to Distributable Earnings divided by the weighted-average number of Adjusted Class A Shares. Adjusted Class A Shares are determined assuming all Partner Units and all Class A Restricted Share Units are converted on a one-to-one basis into Class A Shares. Management believes Distributable Earnings provides useful information to investors because it uses Distributable Earnings, among other financial information, to determine the earnings available to distribute a s dividends to holders of the Company’s Class A Shares and to the Company’s executive managing directors and the Ziffs with respect to their Partner Units.
19
Och-Ziff Capital Management Group LLC Reconciliation of Certain Non-GAAP Measures to GAAP Measures (Unaudited)
(dollars in thousands)
2012 2011 2010 2009 2008
Net loss allocated to Class A Shareholders—GAAP $ (315,826) $ (418,990) $ (294,413) $ (297 ,429) $ (510,596)Reorganization expenses 1 ,396,882 1 ,614,363 1 ,626,988 1 ,7 04,7 53 1 ,698,989 Net loss allocated to the Och-Ziff Operating Group A Units (556,500) (1 ,088,514) (950,209) (1 ,127 ,7 29) (1 ,048,929)Equity -based compensation 86,006 128,916 128,7 37 122,461 102,025 Income taxes 7 9,085 59,581 41 ,07 8 37 ,7 03 40,066 Change in tax receivable agreement liability (13,421) (21 ,7 68) (1 ,368) (19,7 49) (1 ,67 6)Depreciation and amortization 9,362 9,67 6 9,07 8 8,541 6,640 Allocations to Och-Ziff Operating Group D Units 9,296 2,433 5,7 18 1 ,188 - Net gains on early retirement of debt - (12,494) - (21 ,7 97 ) - Net (earnings) losses on deferred balances - - - (54,138) 141 ,900 Allocation of deferred balances and related taxes to Mr. Och - - - 27 ,589 (96,334)Allocation of deferred balances and related taxes to non-equity interests - (66) (27 ) 19,57 5 (43,07 9)Amortization of deferred cash compensation and adjustment for expenses related to compensation arrangements based on fund investment performance - 600 1 ,500 6,201 10,480 Other (7 7 0) 35 (324) (3,490) 4,923 Econom ic Incom e—Non-GAAP 694,114 27 3,7 7 2 566,7 58 403,67 9 304,409 Adjusted Income Taxes—Non-GAAP (156,686) (7 4,17 6) (105,37 2) (48,341) (119,231) Distributable Earnings—Non-GAAP 537 ,428$ 199,596$ 461,386$ 355,338$ 185,17 8$
Weighted-Average Class A Shares Outstanding 142,97 0,660 102,848,812 87 ,910,97 7 7 8,387 ,368 7 4,398,336 Weighted-Average Partner Units 303,923,127 303,681,837 307 ,939,421 310,422,848 310,680,006 Weighted-Average Class A Restricted Share Units (RSUs) 8,216,856 12,037 ,663 13,7 7 5,7 49 15,27 6,619 14,923,7 7 2 Weighted-Average Adjusted Class A Shares 455,110,643 418,568,312 409,626,147 404,086,835 400,002,114
Distributable Earnings Per Adjusted Class A Share—Non-GAAP 1.18$ 0.48$ 1.13$ 0.88$ 0.46$
Dividends with Respect to Year 1.11$ 0.40$ 1.01$ 0.7 2$ 0.27$
Dividend Pay out Ratio 94% 83% 89% 82% 58%
Year Ended Decem ber 31,
Barclays Global Financial Services Conference
Daniel S. Och Chairman and Chief Executive Officer
September 10, 2013