UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended September 30, 2018

Commission File Number 001-33805

OCH-ZIFF CAPITAL MANAGEMENT GROUP LLC

(Exact Name of Registrant as Specified in its Charter)

Delaware	26-0354783
(State of Incorporation)	(I.R.S. Employer Identification Number)

9 West 57th Street, New York, New York 10019

(Address of Principal Executive Offices)

Registrant’s telephone number: (212) 790-0000

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  þ    No  ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes  þ    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	¨	Accelerated filer	þ
Non-accelerated filer	¨	Smaller reporting company	¨
		Emerging growth company	¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.			¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨   No þ

As of October 30, 2018, there were 191,620,504 Class A Shares and 300,339,478 Class B Shares outstanding.

OCH-ZIFF CAPITAL MANAGEMENT GROUP LLC

TABLE OF CONTENTS

		Page
PART I — FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)	5
	Consolidated Balance Sheets as of September 30, 2018 and December 31, 2017	5
	Consolidated Statements of Comprehensive Income (Loss) for the Three and Nine Months Ended September 30, 2018 and 2017	6
	Consolidated Statement of Changes in Shareholders’ (Deficit) Equity for the Nine Months Ended September 30, 2018 and 2017	7
	Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2018 and 2017	9
	Notes to Consolidated Financial Statements	11
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	38
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	75
Item 4.	Controls and Procedures	77
PART II — OTHER INFORMATION
Item 1.	Legal Proceedings	78
Item 1A.	Risk Factors	78
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	80
Item 3.	Defaults upon Senior Securities	80
Item 4.	Mine Safety Disclosures	80
Item 5.	Other Information	80
Item 6.	Exhibits	80
Signatures		81

i

Defined Terms

2007 Offerings	Refers collectively to our IPO and the concurrent private offering of approximately 38.1 million Class A Shares to DIC Sahir Limited, a wholly owned indirect subsidiary of Dubai Holdings LLC
active executive managing directors	Executive managing directors who remain active in our business
Annual Report	Our annual report on Form 10-K for the year ended December 31, 2017, dated February 23, 2018 and filed with the SEC
Class A Shares	Our Class A Shares, representing Class A limited liability company interests of Och-Ziff Capital Management Group LLC, which are publicly traded and listed on the NYSE
Class B Shares	Class B Shares of Och-Ziff Capital Management Group LLC, which are not publicly traded, are currently held solely by our executive managing directors and have no economic rights but entitle the holders thereof to one vote per share together with the holders of our Class A Shares
CLOs	Collateralized loan obligations
Exchange Act	Securities Exchange Act of 1934, as amended
executive managing directors	The current limited partners of the Oz Operating Partnerships other than our intermediate holding companies, including our founder, Daniel S. Och, and, except where the context requires otherwise, include certain limited partners who are no longer active in our business
funds	The multi-strategy funds, dedicated credit funds, including opportunistic credit funds and Institutional Credit Strategies products, real estate funds and other alternative investment vehicles for which we provide asset management services
GAAP	U.S. generally accepted accounting principles
Group A Units	Refers collectively to one Class A operating group unit in each of the Oz Operating Partnerships. Group A Units are equity interests held by our executive managing directors
Group B Units	Refers collectively to one Class B operating group unit in each of the Oz Operating Partnerships. Group B Units are equity interests held by our intermediate holding companies
Group D Units	Refers collectively to one Class D operating group unit in each of the Oz Operating Partnerships. Group D Units are non-equity, limited partner profits interests held by our executive managing directors
Group P Units	Refers collectively to one Class P operating group unit in each of the Oz Operating Partnerships. Group P Units are equity interests held by our executive managing directors
Institutional Credit Strategies	Our 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
intermediate holding companies	Refers collectively to Oz Corp and Oz Holding, both of which are wholly owned subsidiaries of Och-Ziff Capital Management Group LLC
IPO	Our initial public offering of 36.0 million Class A Shares that occurred in November 2007

1

NYSE	New York Stock Exchange
the Company, the firm, we, us, our	Refers, unless the context requires otherwise, to Och-Ziff Capital Management Group LLC, a Delaware limited liability company, and its consolidated subsidiaries, including the Oz Operating Group
Oz Corp	Och-Ziff Holding Corporation, a Delaware corporation
Oz Holding	Och-Ziff Holding LLC, a Delaware limited liability company
Oz Operating Group	Refers collectively to the Oz Operating Partnerships and their consolidated subsidiaries
Oz Operating Partnerships	Refers collectively to OZ Management LP, OZ Advisors LP and OZ Advisors II LP
Partner Equity Units	Refers collectively to the Group A Units and Group P Units
Preferred Units	One Class A cumulative preferred unit in each of the Oz Operating Partnerships collectively represents one “Preferred Unit.” Certain of our executive managing directors collectively own 100% of the Preferred Units
PSUs	Class A performance-based RSUs
Registrant	Och-Ziff Capital Management Group LLC, a Delaware limited liability company
RSUs	Class A restricted share units
SEC	U.S. Securities and Exchange Commission
Securities Act	Securities Act of 1933, as amended
Special Investments	Investments that we, as investment manager, believe lack a readily ascertainable market value, are illiquid or should be held until the resolution of a special event or circumstance
Ziffs	Refers collectively to Ziff Investors Partnership, L.P. II and certain of its affiliates and control persons

2

Available Information

We file annual, quarterly and current reports, proxy statements and other information required by the Exchange Act with the SEC. We make available free of charge on our website (www.ozm.com) our 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. We also use our website to distribute company information, and such information may be deemed material. Accordingly, investors should monitor our website, in addition to our press releases, SEC filings and public conference calls and webcast. The contents of our website are not, however, a part of this report.

Also posted on our website in the “Public Investors – Governance” section are charters for our Audit Committee; Compensation Committee; Nominating, Corporate Governance and Conflicts Committee and Corporate Responsibility and Compliance Committee, as well as our Corporate Governance Guidelines and Code of Business Conduct and Ethics governing our directors, officers and employees. Information on, or accessible through, our website is not a part of, and is not incorporated into, this report or any other SEC filing. Copies of our SEC filings or corporate governance materials are available without charge upon written request to Och-Ziff Capital Management Group LLC, 9 West 57th Street, New York, New York 10019, Attention: Office of the Secretary. Any materials we file with the SEC are also publicly available through the SEC’s website (www.sec.gov).

No statements herein, available on our website or in any of the materials we file with the SEC constitute, or should be viewed as constituting, an offer of any fund.

Forward-Looking Statements

Some of the statements under “Part I — Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations,” which we refer to as the “MD&A,” “Part I — Item 3. Quantitative and Qualitative Disclosures About Market Risk,” “Part II — Item 1A. Risk Factors” and elsewhere in this quarterly report may contain forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act that reflect our current views with respect to, among other things, future events and financial performance. We generally identify 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 herein are based upon historical information and on our current plans, estimates and expectations. The inclusion of this or other forward-looking information should not be regarded as a representation by us or any other person that the future plans, estimates or expectations contemplated by us will be achieved.

We caution 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 us; the consequences of the Foreign Corrupt Practices Act settlements with the SEC and the U.S. Department of Justice (the “DOJ”); conditions impacting the alternative asset management industry; our ability to retain existing fund investor capital; our ability to successfully compete for fund investors, assets, professional talent and investment opportunities; our ability to retain our active executive managing directors, managing directors and other investment professionals; our successful formulation and execution of our business and growth strategies; our ability to appropriately manage conflicts of interest and tax and other regulatory factors relevant to our business; and assumptions relating to our 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 our assumptions or estimates prove to be incorrect, our 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 our filings with the SEC, including but not limited to our Annual Report.

3

There may be additional risks, uncertainties and factors that we do not currently view as material or that are not known. The forward-looking statements contained in this report are made only as of the date of this report. We do not undertake to update any forward-looking statement because of new information, future developments or otherwise.

4

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

OCH-ZIFF CAPITAL MANAGEMENT GROUP LLC

CONSOLIDATED BALANCE SHEETS — UNAUDITED

	September 30, 2018			December 31, 2017
	(dollars in thousands)
Assets
Cash and cash equivalents	$	195,041		$	469,513
Investments (includes assets measured at fair value of $452,959 and $224,722, including assets sold under agreements to repurchase of $42,526 and $0 as of September 30, 2018, and December 31, 2017, respectively)	485,210			238,974
Income and fees receivable	39,522			354,456
Due from related parties	32,344			28,202
Deferred income tax assets	367,240			375,230
Other assets, net	79,145			116,361
Assets of consolidated funds:
Investments of consolidated funds, at fair value	183,894			43,366
Other assets of consolidated funds	39,302			13,331
Total Assets	$	1,421,698		$	1,639,433
Liabilities and Shareholders’ (Deficit) Equity
Liabilities
Compensation payable	$	66,589		$	208,639
Unearned incentive	67,985			143,710
Due to related parties	281,996			281,555
Debt obligations	290,127			569,379
Securities sold under agreements to repurchase	42,378			—
Other liabilities	75,081			75,122
Liabilities of consolidated funds:
Other liabilities of consolidated funds	37,134			11,340
Total Liabilities	861,290			1,289,745
Commitments and Contingencies (Note 16)
Redeemable Noncontrolling Interests (Note 3)	585,206			445,617
Shareholders’ (Deficit) Equity
Class A Shares, no par value, 1,000,000,000 shares authorized, 191,607,259 and 189,573,210 shares issued and outstanding as of September 30, 2018 and December 31, 2017, respectively	—			—
Class B Shares, no par value, 750,000,000 shares authorized, 300,339,478 and 339,339,478 shares issued and outstanding as of September 30, 2018 and December 31, 2017, respectively	—			—
Paid-in capital	3,128,587			3,102,074
Accumulated deficit	(3,559,259		)	(3,555,905		)
Shareholders’ deficit attributable to Class A Shareholders	(430,672		)	(453,831		)
Shareholders’ equity attributable to noncontrolling interests	405,874			357,902
Total Shareholders’ Deficit	(24,798		)	(95,929		)
Total Liabilities, Redeemable Noncontrolling Interests and Shareholders’ Deficit	$	1,421,698		$	1,639,433

See notes to consolidated financial statements.

5

OCH-ZIFF CAPITAL MANAGEMENT GROUP LLC

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) — UNAUDITED

	Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2017			2018			2017
	(dollars in thousands)
Revenues
Management fees	$	70,675		$	77,171		$	213,718		$	243,508
Incentive income	19,303			51,249			104,793			168,990
Other revenues	3,342			1,524			11,751			4,081
Income of consolidated funds	507			2,055			1,741			3,518
Total Revenues	93,827			131,999			332,003			420,097
Expenses
Compensation and benefits	74,635			74,490			218,061			214,112
Interest expense	4,820			5,611			18,923			17,043
General, administrative and other	50,289			33,136			136,648			114,229
Expenses of consolidated funds	(5		)	8,824			103			9,368
Total Expenses	129,739			122,061			373,735			354,752
Other (Loss) Income
Net losses on early retirement of debt	—			—			(14,303		)	—
Net (losses) gains on investments in funds and joint ventures	(541		)	264			(1,014		)	1,050
Net gains of consolidated funds	290			7,658			756			8,278
Total Other (Loss) Income	(251		)	7,922			(14,561		)	9,328
(Loss) Income Before Income Taxes	(36,163		)	17,860			(56,293		)	74,673
Income taxes	(860		)	1,942			(372		)	17,242
Consolidated and Comprehensive Net (Loss) Income	(35,303		)	15,918			(55,921		)	57,431
Less: Net loss (income) attributable to noncontrolling interests	21,140			(9,760		)	33,945			(41,680		)
Less: Net income attributable to redeemable noncontrolling interests	(374		)	(432		)	(1,327		)	(1,238		)
Net (Loss) Income Attributable to Och-Ziff Capital Management Group LLC	(14,537		)	5,726			(23,303		)	14,513
Less: Change in redemption value of Preferred Units	—			—			—			(2,853		)
Net (Loss) Income Attributable to Class A Shareholders	$	(14,537	)	$	5,726		$	(23,303	)	$	11,660
(Loss) Earnings per Class A Share
(Loss) Income per Class A Share - basic	$	(0.08	)	$	0.03		$	(0.12	)	$	0.06
(Loss) Income per Class A Share - diluted	$	(0.08	)	$	0.03		$	(0.12	)	$	0.06
Weighted-average Class A Shares outstanding - basic	192,657,766			186,235,651			192,485,281			186,201,389
Weighted-average Class A Shares outstanding - diluted	192,657,766			186,235,651			192,485,281			186,201,389

See notes to consolidated financial statements.

6

OCH-ZIFF CAPITAL MANAGEMENT GROUP LLC

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ (DEFICIT) EQUITY — UNAUDITED

	Och-Ziff Capital Management Group LLC
	Number of Class A Shares	Number of Class B Shares		Paid-in Capital			Accumulated Deficit			Shareholders’ Deficit Attributable to Class A Shareholders			Shareholders’ Equity Attributable to Noncontrolling Interests			Total Shareholders’ Equity (Deficit)
				(dollars in thousands)
As of December 31, 2017	189,573,210	339,339,478		$	3,102,074		$	(3,555,905	)	$	(453,831	)	$	357,902		$	(95,929	)
Impact of adoption of ASU 2014-09	—	—		—			41,922			41,922			75,062			116,984
Capital contributions	—	—		—			—			—			750			750
Capital distributions	—	—		—			—			—			(17,690		)	(17,690		)
Cash dividends declared on Class A Shares ($0.07 per share)	—	—		—			(13,354		)	(13,354		)	—			(13,354		)
Dividend equivalents on Class A restricted share units	—	—		1,072			(1,072		)	—			—			—
Equity-based compensation, net of taxes	1,556,563	(35,000,000	)	7,803			—			7,803			10,673			18,476
Impact of changes in Oz Operating Group ownership (Note 3)	—	—		190			—			190			(190		)	—
Comprehensive net income, excluding amounts attributable to redeemable noncontrolling interests	—	—		—			3,490			3,490			8,635			12,125
As of March 31, 2018	191,129,773	304,339,478		$	3,111,139		$	(3,524,919	)	$	(413,780	)	$	435,142		$	21,362
Capital contributions	—	—		—			—			—			128			128
Capital distributions	—	—		—			—			—			(6,793		)	(6,793		)
Cash dividends declared on Class A Shares ($0.02 per share)	—	—		—			(3,823		)	(3,823		)	—			(3,823		)
Dividend equivalents on Class A restricted share units	—	—		(195		)	195			—			—			—
Equity-based compensation, net of taxes	139,812	(500,000	)	9,025			—			9,025			12,344			21,369
Impact of changes in Oz Operating Group ownership (Note 3)	—	—		(505		)	—			(505		)	505			—
Comprehensive net loss, excluding amounts attributable to redeemable noncontrolling interests	—	—		—			(12,256		)	(12,256		)	(21,440		)	(33,696		)
As of June 30, 2018	191,269,585	303,839,478		$	3,119,464		$	(3,540,803	)	$	(421,339	)	$	419,886		$	(1,453	)
Capital contributions	—	—		—			—			—			24			24
Capital distributions	—	—		—			—			—			(5,611		)	(5,611		)
Cash dividends declared on Class A Shares ($0.02 per share)	—	—		—			(3,829		)	(3,829		)	—			(3,829		)
Dividend equivalents on Class A restricted share units	—	—		90			(90		)	—			—			—
Equity-based compensation, net of taxes	337,674	—		9,238			—			9,238			12,510			21,748
Relinquishment of Group A Units	—	(3,500,000	)	—			—			—			—			—
Impact of changes in Oz Operating Group ownership (Note 3)	—	—		(205		)	—			(205		)	205			—
Comprehensive net loss, excluding amounts attributable to redeemable noncontrolling interests	—	—		—			(14,537		)	(14,537		)	(21,140		)	(35,677		)
As of September 30, 2018	191,607,259	300,339,478		$	3,128,587		$	(3,559,259	)	$	(430,672	)	$	405,874		$	(24,798	)

7

OCH-ZIFF CAPITAL MANAGEMENT GROUP LLC

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ (DEFICIT) EQUITY — UNAUDITED

	Och-Ziff Capital Management Group LLC
	Number of Class A Shares	Number of Class B Shares		Paid-in Capital			Accumulated Deficit			Shareholders’ Deficit Attributable to Class A Shareholders			Shareholders’ Equity Attributable to Noncontrolling Interests			Total Shareholders’ Equity (Deficit)
				(dollars in thousands)
As of December 31, 2016	184,843,255	297,317,019		$	3,097,431		$	(3,563,452	)	$	(466,021	)	$	171,929		$	(294,092	)
Capital contributions	—	—		—			—			—			251			251
Capital distributions	—	—		—			—			—			(4,563		)	(4,563		)
Cash dividends declared on Class A Shares ($0.01 per share)	—	—		—			(1,849		)	(1,849		)	—			(1,849		)
Dividend equivalents on Class A restricted share units	—	—		151			(151		)	—			—			—
Equity-based compensation, net of taxes	283,698	172,459		7,451			—			7,451			10,766			18,217
Relinquishment of Group A Units	—	(30,000,000	)	—			—			—			—			—
Impact of changes in Oz Operating Group ownership (Note 3)	—	—		(12,173		)	—			(12,173		)	12,173			—
Dilution of proceeds from tax receivable agreement waiver				(21,219		)				(21,219		)	21,219			—
Change in redemption value of Preferred Units	—	—		(2,853		)				(2,853		)	(4,593		)	(7,446		)
Comprehensive net (loss) income, excluding amounts attributable to redeemable noncontrolling interests	—	—		—			(4,311		)	(4,311		)	9,778			5,467
As of March 31, 2017	185,126,953	267,489,478		$	3,068,788		$	(3,569,763	)	$	(500,975	)	$	216,960		$	(284,015	)
Capital contributions	—	—		—			—			—			341			341
Capital distributions	—	—		—			—			—			(5,634		)	(5,634		)
Cash dividends declared on Class A Shares ($0.02 per share)	—	—		—			(3,703		)	(3,703		)	—			(3,703		)
Dividend equivalents on Class A restricted share units	—	—		114			(114		)	—			—			—
Equity-based compensation, net of taxes	87,739	—		9,294			—			9,294			13,421			22,715
Class B Shares granted to holders of Group P Units	—	71,850,000		—			—			—			—			—
Impact of changes in Oz Operating Group ownership (Note 3)	—	—		(46		)	—			(46		)	46			—
Comprehensive net income, excluding amounts attributable to redeemable noncontrolling interests	—	—		—			13,098			13,098			22,142			35,240
As of June 30, 2017	185,214,692	339,339,478		$	3,078,150		$	(3,560,482	)	$	(482,332	)	$	247,276		$	(235,056	)
Capital contributions	—	—		—			—			—			191			191
Capital distributions	—	—		—			—			—			(6,120		)	(6,120		)
Cash dividends declared on Class A Shares ($0.02 per share)	—	—		—			(3,704		)	(3,704		)	—			(3,704		)
Dividend equivalents on Class A restricted share units	—	—		173			(173		)	—			—			—
Equity-based compensation, net of taxes	97,747	—		8,971			—			8,971			12,948			21,919
Impact of changes in Oz Operating Group ownership (Note 3)	—	—		(47		)	—			(47		)	47			—
Comprehensive net income, excluding amounts attributable to redeemable noncontrolling interests	—	—		—			5,726			5,726			9,760			15,486
As of September 30, 2017	185,312,439	339,339,478		$	3,087,247		$	(3,558,633	)	$	(471,386	)	$	264,102		$	(207,284	)

See notes to consolidated financial statements.

8

OCH-ZIFF CAPITAL MANAGEMENT GROUP LLC

CONSOLIDATED STATEMENTS OF CASH FLOWS — UNAUDITED

	Nine Months Ended September 30,
	2018			2017
	(dollars in thousands)
Cash Flows from Operating Activities
Consolidated net (loss) income	$	(55,921	)	$	57,431
Adjustments to reconcile consolidated net (loss) income to net cash provided by operating activities:
Amortization of equity-based compensation	67,848			63,696
Depreciation, amortization and net gains and losses on fixed assets	7,709			7,693
Net losses on early retirement of debt	14,303			—
Deferred income taxes	(3,341		)	12,395
Net losses (gains) on investments in funds and joint ventures, net of dividends	4,238			(1,050		)
Operating cash flows due to changes in:
Income and fees receivable	343,769			98,791
Due from related parties	(4,141		)	(2,308		)
Other assets, net	35,489			27,175
Compensation payable	(145,612		)	(152,838		)
Unearned incentive income	23,697			26,754
Due to related parties	442			(153		)
Other liabilities	8			(21,468		)
Consolidated funds related items:
Net gains of consolidated funds	(756		)	(8,278		)
Purchases of investments	(333,657		)	(383,184		)
Proceeds from sale of investments	194,802			146,907
Other assets of consolidated funds	(26,888		)	(306,453		)
Other liabilities of consolidated funds	25,792			78,044
Cash Provided by (Used in) Operating Activities	147,781			(356,846		)
Cash Flows from Investing Activities
Purchases of fixed assets	(3,596		)	(3,857		)
Proceeds from sale of fixed assets	—			57,599
Purchases of United States government obligations	(293,183		)	(112,400		)
Maturities of United States government obligations	20,500			—
Investments in funds	(152,272		)	(132,102		)
Proceeds from sales and maturities in investments in funds	172,950			4,310
Cash Used in Investing Activities	(255,601		)	(186,450		)

9

OCH-ZIFF CAPITAL MANAGEMENT GROUP LLC

CONSOLIDATED STATEMENTS OF CASH FLOWS — (continued)

	Nine Months Ended September 30,
	2018			2017
	(dollars in thousands)
Cash Flows from Financing Activities
Issuance and sale of Preferred Units, net of issuance costs	—			150,054
Contributions from noncontrolling and redeemable noncontrolling interests	150,074			3,066
Distributions to noncontrolling and redeemable noncontrolling interests	(41,005		)	(16,317		)
Dividends on Class A Shares	(21,006		)	(9,256		)
Proceeds from debt obligations, net of issuance costs	301,681			127,864
Repayment of debt obligations, including prepayment costs	(595,431		)	(167,319		)
Proceeds from securities sold under agreements to repurchase, net of issuance costs	42,348			—
Proceeds from debt obligations of consolidated CLO	—			666,712
Repayment of debt obligation of consolidated CLO	—			(222,434		)
Other	(3,313		)	(970		)
Cash (Used in) Provided by Financing Activities	(166,652		)	531,400
Net Change in Cash and Cash Equivalents	(274,472		)	(11,896		)
Cash and Cash Equivalents, Beginning of Period	469,513			329,813
Cash and Cash Equivalents, End of Period	$	195,041		$	317,917
Supplemental Disclosure of Cash Flow Information
Cash paid during the period:
Interest	$	25,245		$	11,199
Income taxes	$	2,061		$	3,196
Non-cash transactions:
Assets related to the initial consolidation of CLO	$	—		$	100,156
Liabilities related to the initial consolidation of CLO	$	—		$	99,878
Assets related to the deconsolidation of funds	$	—		$	653,629
Liabilities related to the deconsolidation of funds	$	—		$	629,282

See notes to consolidated financial statements.

10

OCH-ZIFF CAPITAL MANAGEMENT GROUP LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — UNAUDITED

SEPTEMBER 30, 2018

1. OVERVIEW

Och-Ziff Capital Management Group LLC (the “Registrant”), a Delaware limited liability company, together with its consolidated subsidiaries (collectively, the “Company”), is a global alternative asset management firm with offices in New York, London, Hong Kong, Mumbai, Beijing, and Shanghai. The Company provides asset management services to its investment funds, which pursue a broad range of global investment opportunities. The Company currently manages multi-strategy funds, dedicated credit funds, including opportunistic credit funds and Institutional Credit Strategies products, real estate funds and other alternative investment vehicles (collectively the “funds”). Through Institutional Credit Strategies, the Company’s asset management platform that invests in performing credits, the Company manages collateralized loan obligations (“CLOs”) and other customized solutions for clients.

The Company’s primary sources of revenues are management fees, which are based on the amount of the Company’s assets under management, and incentive income, which is based on the investment performance of its funds. Accordingly, for any given period, the Company’s revenues will be driven by the combination of assets under management and the investment performance of the funds.

The Company currently has two operating segments: the Oz Funds segment and the Company’s real estate business. The Oz Funds segment is currently the Company’s only reportable operating segment under U.S. generally accepted accounting principles (“GAAP”) and provides asset management services to the Company’s multi-strategy funds, dedicated credit funds and other alternative investment vehicles. The Company’s real estate business, which provides asset management services to its real estate funds, is included within Other Operations, as it does not meet the threshold of a reportable operating segment.

The Company generates substantially all of its revenues in the United States. The liability of the Company’s Class A Shareholders is limited to the extent of their capital contributions.

The Company conducts its operations through OZ Management LP, OZ Advisors LP and OZ Advisors II LP and their consolidated subsidiaries (collectively, the “Oz Operating Group”). References to the Company’s “executive managing directors” refer to the current limited partners of OZ Management LP, OZ Advisors LP and OZ Advisors II LP other than the Company’s intermediate holding companies, and include the Company’s founder, Daniel S. Och, and, except where the context requires otherwise, include certain limited partners who are no longer active in the business of the Company. References to the Company’s “active executive managing directors” refer to executive managing directors who remain active in the Company’s business. References to the “Ziffs” refer collectively to Ziff Investors Partnership, L.P. II and certain of its affiliates and control persons. References to the Company’s “intermediate holding companies” refer, collectively, to Och-Ziff Holding Corporation (“Oz Corp”) and Och-Ziff Holding LLC, each of which are wholly owned subsidiaries of the Registrant.

2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

These unaudited, interim, consolidated financial statements are prepared in accordance with GAAP as set forth in the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”), and should be read in conjunction with the audited consolidated financial statements included in the Company’s annual report on Form 10-K for the year ended December 31, 2017 (the “Annual Report”). In the opinion of management, all adjustments considered necessary for a fair presentation of the Company’s unaudited, interim, consolidated financial statements have been included and are of a normal and recurring nature. All significant intercompany transactions and balances have been eliminated in consolidation.

The results of operations presented for the interim periods are not necessarily indicative of the results that may be expected for any other interim period or for the entire year. For example, incentive income for the majority of the Company’s multi-strategy assets under management is recognized in the fourth quarter each year, based on full year investment performance.

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OCH-ZIFF CAPITAL MANAGEMENT GROUP LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — UNAUDITED

SEPTEMBER 30, 2018

RevenueRecognitionPolicies

The Company provides asset management services to its customers, including certain administrative services related to the funds’ operations, in exchange for management and incentive fees, which are included in the Company’s agreements with its customers. The services provided in connection with the identified performance obligations are satisfied over time. The agreements are generally automatically renewed on an annual basis unless the agreements are terminated by the general partner or directors of the respective funds.

Management Fees

Management fees for the Company’s multi-strategy funds typically range from 0.98% to 2.25% annually of assets under management based on the net asset value of these funds. For the Company’s opportunistic credit funds, management fees typically range from 0.75% to 1.75% annually based on the net asset value of these funds. Management fees for Institutional Credit Strategies, which relate primarily to the Company’s CLOs, generally range from 0.35% to 0.50% annually, and for CLOs are based on the par value of the collateral and cash held in the CLOs. Management fees for the Company’s real estate funds typically range from 0.75% to 1.50% annually based on the amount of capital committed or invested during the investment period, and on the amount of invested capital after the investment period. Management fees are recognized over the period during which the related services are performed.

Management fees are generally calculated and paid to the Company on a quarterly basis in advance, based on the amount of assets under management at the beginning of the quarter. Management fees are prorated for capital inflows and redemptions during the quarter. Accordingly, changes in the Company’s management fee revenues from quarter to quarter are driven by changes in the quarterly opening balances of assets under management, the relative magnitude and timing of inflows and redemptions during the respective quarter, as well as the impact of differing management fee rates charged on those inflows and redemptions.

The Company considers management fees to be a form of variable consideration, as the amount earned each quarter may depend on various contingencies, such as the value of assets under management, capital inflows and outflows during the period, or changes in committed or invested capital. Management fees, however, are generally crystallized at the end of each reporting period and are not subject to clawback and, therefore, the value of the management fees the Company is entitled to receive at the end of each quarter is generally no longer subject to the constraint.

Incentive Income

The Company earns incentive income based on the cumulative performance of the funds over a commitment period. Prior to the adoption of new revenue recognition accounting guidance in 2018, incentive income was recognized at the end of the applicable commitment period when the amounts were contractually payable, or “crystallized,” and when no longer subject to clawback. Beginning in 2018, as a result of the adoption of the new revenue recognition accounting guidance, the Company recognizes incentive income when such amounts are probable of not significantly reversing.

Incentive income is typically equal to 20% of the realized and unrealized profits, net of management fees, attributable to each fund investor in the Company’s multi-strategy funds, open-end opportunistic credit funds and certain other funds. Incentive income excludes unrealized gains and losses attributable to investments that the Company, as investment manager, believes lack a readily ascertainable market value, are illiquid or should be held until the resolution of a special event or circumstance (“Special Investments”). For the Company’s closed-end opportunistic credit funds, real estate funds and certain other funds, incentive income is typically equal to 20% of the realized profits, net of management fees, attributable to each fund investor. For CLOs, incentive income is typically 20% of the excess cash flows available to the holders of the subordinated notes.

The Company’s ability to earn incentive income from some of its funds may be impacted by hurdle rates, whereby the Company is not entitled to incentive income until the investment returns exceed an agreed upon benchmark. For a portion of

12

OCH-ZIFF CAPITAL MANAGEMENT GROUP LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — UNAUDITED

SEPTEMBER 30, 2018

these assets subject to hurdle rates, once the investment performance has exceeded the hurdle rate, the Company may receive a preferential “catch-up” allocation, equal to a full 20% of the net profits attributable to investors in these assets.

All of the Company’s multi-strategy funds and open-end opportunistic credit funds are subject to a perpetual loss carry forward, or perpetual “high-water mark,” meaning the Company will not be able to earn incentive income with respect to positive investment performance it generates for a fund investor in any year following negative investment performance until that loss is recouped, at which point a fund investor’s investment surpasses the high-water mark. The Company earns incentive income on any profits, net of management fees, in excess of the high-water mark.

The commitment period for most of the Company’s multi-strategy assets under management is for a period of one year on a calendar-year basis with income recognized annually, and therefore it generally crystallizes incentive income annually on December 31. The Company may also recognize incentive income related to fund investor redemptions at other times during the year, as well as on assets under management subject to commitment periods that are longer than one year. The Company may also recognize incentive income for tax distributions related to these assets. Such distributions are amounts distributed to the Company to cover tax liabilities related to incentive income that has been accrued at the fund level but would otherwise not be recognized by the Company until it is probable that a significant reversal will not occur. These distributions are not subject to clawback once distributed to the Company.

Incentive income is considered variable consideration, the recognition of which is subject to constraint. Incentive income is no longer constrained when it is probable that a significant reversal will not occur. Determining the amount of incentive income to record is subject to qualitative and quantitative factors including, where a fund is in its life-cycle, whether the Company has received or is entitled to receive incentive income distributions and potential sales of fund investments. The Company continuously evaluates whether there are additional considerations that could potentially impact the recognition of incentive income. To the extent that distributions have been received, but for which the recognition of incentive income is not appropriate, the Company will recognize a liability for unearned incentive income.

See Note 10 for additional information regarding the Company’s revenues.

Other Revenues

Other revenues consist primarily of interest income on investments in CLOs and cash and cash equivalents. Interest income is recognized on an effective yield basis. Additionally, prior to the sale of the Company’s aircraft in the first half of 2017, revenue related to non-business use of the corporate aircraft by certain executive managing directors was also included within other revenues. Revenue earned from non-business use of the corporate aircraft was recognized on an accrual basis based on actual flight hours.

Securities Sold Under Agreements to Repurchase

Securities sold under agreements to repurchase (“repurchase agreements”) are accounted for as collateralized financing transactions. The Company provides securities to counterparties to collateralize amounts borrowed under repurchase agreements on terms that permit the counterparties to repledge or resell the securities to others. Cash borrowed is included within securities sold under agreements to repurchase in the consolidated balance sheets. Securities transferred to counterparties under repurchase agreements are included within investments in the consolidated balance sheets. Interest expense incurred on these transactions is included within interest expenses in the consolidated statements of comprehensive income (loss). See Note 9 for additional information.

Recently Adopted Accounting Pronouncements

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers, which supersedes the revenue recognition requirements in ASC 605, Revenue Recognition, and most industry-specific revenue recognition guidance. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to

13

OCH-ZIFF CAPITAL MANAGEMENT GROUP LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — UNAUDITED

SEPTEMBER 30, 2018

customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.

The Company adopted ASU 2014-09 using a modified retrospective application approach as of the beginning of the first quarter of 2018 to all contracts within the scope of the standard as of the date of adoption. As a result of the adoption of ASU 2014-09, the Company now recognizes certain incentive income earlier than as prescribed under guidance in effect for fiscal year 2017, as the threshold for recognition of incentive income under ASU 2014-09 is lower than under the previous standard. The Company recognized an opening adjustment to shareholders’ equity of $117.0 million, which is net of $11.3 million of income tax, of which $41.9 million was attributable to Class A shareholders.

The following table details the post-tax impact on the Company’s opening shareholders’ equity, by fund type, upon the adoption of ASU 2014-09:

	(dollars in thousands)
Multi-strategy funds	$	2,727
Opportunistic credit funds	24,462
Real estate funds	89,795
Total	$	116,984

The adoption of this guidance resulted in a decrease to the liability for unearned incentive income of $99.4 million and an increase in income and fees receivable of $28.8 million.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement. The Company elected to early adopt the standard in the third quarter of 2018. The impacts of adoption are reflected in certain disclosures in Note 4 and include removing disclosures related to: the amount of and reasons for transfers between Levels I and II of the fair value hierarchy, the policy for timing of transfers between levels, and the valuation processes for Level III fair value measurements. The adoption of the standard did not have a material effect on the Company’s consolidated financial statements.

None of the other changes to GAAP that went into effect in the nine months endedSeptember 30, 2018 had a material effect on the Company’s consolidated financial statements.

Future Adoption of Accounting Pronouncements

In February 2016, the FASB issued ASU No. 2016-02, Leases. ASU 2016-02 requires that, for leases longer than one year, a lessee recognize in the consolidated balance sheets a right of use asset, representing the right to use the underlying asset for the lease term, and a lease liability, representing the requirement to make lease payments. The recognition, measurement and presentation of expenses and cash flows arising from a lease by a lessee have not significantly changed from existing guidance. The requirements of ASU 2016-02 are effective for the Company beginning in the first quarter of 2019. The Company expects its total assets and total liabilities in its consolidated balance sheets to increase upon adoption as a result of recording a lease asset and lease liability related to the Company’s operating leases. The Company is continuing to evaluate the impact that this guidance will have on its consolidated financial statements. See Note 15 of the Company’s Annual Report for details related to the Company’s existing operating lease obligations.

None of the other changes to GAAP that are not yet effective are expected to have a material effect on the Company’s consolidated financial statements.

14

OCH-ZIFF CAPITAL MANAGEMENT GROUP LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — UNAUDITED

SEPTEMBER 30, 2018

3. NONCONTROLLING INTERESTS AND OZ OPERATING GROUP OWNERSHIP

Noncontrolling interests represent ownership interests in the Company’s subsidiaries held by parties other than the Company, and primarily relate to the Group A Units held by the Company’s executive managing directors. Net (loss) income attributable to the Group A Units is driven by the earnings of the OzOperating Group.

The following table presents the components of the net (loss) income attributable to noncontrolling interests:

	Three Months Ended September 30,					Nine Months Ended September 30,
	2018			2017		2018			2017
	(dollars in thousands)
Group A Units	$	(21,798	)	$	9,500	$	(35,343	)	$	41,145
Other	658			260		1,398			535
	$	(21,140	)	$	9,760	$	(33,945	)	$	41,680

The following table presents the components of the shareholders’ equity attributable to noncontrolling interests:

	September 30, 2018		December 31, 2017
	(dollars in thousands)
Group A Units	$	400,822	$	353,791
Other	5,052		4,111
	$	405,874	$	357,902

The Preferred Units and fund investors’ interests in certain consolidated funds are redeemable outside of the Company’s control. These interests are classified within redeemable noncontrolling interests in the consolidated balance sheets. The following tables present the activity in redeemable noncontrolling interests:

	Three Months Ended September 30, 2018								Nine Months Ended September 30, 2018
	Consolidated Funds			Preferred Units		Total			Consolidated Funds			Preferred Units		Total
	(dollars in thousands)
Beginning balance	$	53,507		$	420,000	$	473,507		$	25,617		$	420,000	$	445,617
Capital contributions	111,887			—		111,887			149,172			—		149,172
Capital distributions	(562		)	—		(562		)	(10,910		)	—		(10,910		)
Comprehensive income	374			—		374			1,327			—		1,327
Ending Balance	$	165,206		$	420,000	$	585,206		$	165,206		$	420,000	$	585,206

15

OCH-ZIFF CAPITAL MANAGEMENT GROUP LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — UNAUDITED

SEPTEMBER 30, 2018

	Three Months Ended September 30, 2017						Nine Months Ended September 30, 2017
	Consolidated Funds		Preferred Units		Total		Consolidated Funds		Preferred Units		Total
	(dollars in thousands)
Beginning balance	$	24,678	$	420,000	$	444,678	$	21,621	$	262,500	$	284,121
Change in redemption value of Preferred Units	—		—		—		—		7,446		7,446
Preferred Units issuance, net of issuance costs	—		—		—		—		150,054		150,054
Capital contributions	32		—		32		2,283		—		2,283
Comprehensive income	432		—		432		1,238		—		1,238
Ending Balance	$	25,142	$	420,000	$	445,142	$	25,142	$	420,000	$	445,142

Oz Operating Group Ownership

The Company’s equity interest in the Oz Operating Group increased to 42.6% as of September 30, 2018, from 41.5% as of December 31, 2017, (excluding Group P Units, as they are not yet participating in the economics of the Oz Operating Group). Changes in the Company’s interest in the Oz Operating Group have historically been, and in the future may be, driven by the following: (i) the exchange of Group A Units and Group P Units for an equal number of Class A Shares, at which time the related Class B Shares are also canceled; (ii) the issuance of Class A Shares under the Company’s Amended and Restated 2007 Equity Incentive Plan and 2013 Incentive Plan related to the settlement of Class A restricted share units (the “RSUs”) or Class A performance-based RSUs (the “PSUs”); (iii) the forfeiture of Group A Units and participating Group P Units by a departing executive managing director; and (iv) the repurchase of Class A Shares and Group A Units. The Company’s interest in the Oz Operating Group is expected to continue to increase over time as additional Class A Shares are issued upon the exchange of Group A Units and Group P Units, as well as the settlement of vested RSUs or PSUs. These increases will be offset upon any conversion by an executive managing director of Group D Units, which are not considered equity for GAAP purposes, into Group A Units, at which time an equal number of Class B Shares is also issued to the executive managing director. Additionally, the Company’s economic interest in the Oz Operating Group will decline when Group P Units begin to participate, as described in Note 10 in the Annual Report.

Relinquishment of Group A Units

In the third quarter of 2018, a former executive managing director of the Company relinquished 3,500,000 Group A Units and an equal number of Class B Shares.

4. INVESTMENTS AND FAIR VALUE DISCLOSURES

The following table presents the components of the Company’s investments as reported in the consolidated balance sheets:

	September 30, 2018		December 31, 2017
	(dollars in thousands)
United States government obligations, at fair value	$	287,164	$	12,973
CLOs, at fair value	165,795		211,749
Other funds and joint ventures, equity method	32,251		14,252
Total Investments	$	485,210	$	238,974

In the second quarter of 2018, as a result of a recent court decision that vacates application of U.S. risk retention rules in certain CLO transactions, the Company sold certain of its investments in CLOs. The Company is still subject to EU risk

16

OCH-ZIFF CAPITAL MANAGEMENT GROUP LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — UNAUDITED

SEPTEMBER 30, 2018

retention rules for certain CLOs managed by the Company, and continues to hold investments in CLOs subject to these requirements.

Fair Value Disclosures

Fair value represents the price that would be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date (i.e., an exit price). Due to the inherent uncertainty of valuations of investments that are determined to be illiquid or do not have readily ascertainable fair values, the estimates of fair value may differ from the values ultimately realized, and those differences can be material.

GAAP prioritizes the level of market price observability used in measuring assets and liabilities at fair value. Market price observability is impacted by a number of factors, including the type of assets and liabilities and the specific characteristics of the assets and liabilities. Assets and liabilities with readily available, actively quoted prices or for which fair value can be measured from actively-quoted prices generally will have a higher degree of market price observability and lesser degree of judgment used in measuring fair value.

Assets and liabilities measured at fair value are classified into one of the following categories:

• Level I – Fair value is determined using quoted prices that are available in active markets for identical assets or liabilities. The types of assets and liabilities that would generally be included in this category are certain listed equities, U.S. government obligations and certain listed derivatives.

• Level II – Fair value is determined using quotations received from dealers making a market for these assets or liabilities (“broker quotes”), valuations obtained from independent third-party pricing services, the use of models or other valuation methodologies based on pricing inputs that are either directly or indirectly market observable as of the measurement date. The types of assets and liabilities that would generally be included in this category are certain corporate bonds, certain credit default swap contracts, certain bank debt securities, certain commercial real estate debt, less liquid equity securities, forward contracts and certain over the-counter (“OTC”) derivatives.

• Level III – Fair value is determined using pricing inputs that are unobservable in the market and includes situations where there is little, if any, market activity for the asset or liability. The fair value of assets and liabilities in this category may require significant judgment or estimation in determining fair value of the assets or liabilities. The fair value of these assets and liabilities may be estimated using a combination of observed transaction prices, independent pricing services, relevant broker quotes, models or other valuation methodologies based on pricing inputs that are neither directly or indirectly market observable. The types of assets and liabilities that would generally be included in this category include CLOs, real estate investments, equity and debt securities issued by private entities, limited partnerships, certain corporate bonds, certain credit default swap contracts, certain bank debt securities, certain commercial real estate debt, certain OTC derivatives, residential and commercial mortgage-backed securities, asset-backed securities, collateralized debt obligations and investments in affiliated credit funds.

In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an asset or liability’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability.

17

OCH-ZIFF CAPITAL MANAGEMENT GROUP LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — UNAUDITED

SEPTEMBER 30, 2018

Fair Value Measurements Categorized within the Fair Value Hierarchy

The following table summarizes the Company’s investments measured at fair value on a recurring basis within the fair value hierarchy as of September 30, 2018:

	As of September 30, 2018
	Level I		Level II		Level III		Total
	(dollars in thousands)
Assets, at Fair Value
Included within cash and cash equivalents:
United States government obligations	$	79,994	$	—	$	—	$	79,994
Included within investments:
United States government obligations	$	287,164	$	—	$	—	$	287,164
CLOs(1)	$	—	$	—	$	165,795	$	165,795
Investments of consolidated funds:
Bank debt	$	—	$	120,468	$	61,598	$	182,066
Corporate bonds	—		1,828		—		1,828
Total Investments of Consolidated Funds	$	—	$	122,296	$	61,598	$	183,894

_______________

(1) As of September 30, 2018, investments in CLOs had contractual principal amounts of $153.2 million outstanding, which excludes the Company’s investments in subordinated tranches of the notes, as these do not have contractual principal payments.

The following table summarizes the Company’s investments measured at fair value on a recurring basis within the fair value hierarchy as of December 31, 2017:

	As of December 31, 2017
	Level I		Level II		Level III		Total
	(dollars in thousands)
Assets, at Fair Value
Included within cash and cash equivalents:
United States government obligations	$	99,704	$	—	$	—	$	99,704
Included within investments:
United States government obligations	$	12,973	$	—	$	—	$	12,973
CLOs(1)	$	—	$	—	$	211,749	$	211,749
Investments of consolidated funds:
Bank debt	$	—	$	24,559	$	18,807	$	43,366

_______________

(1) As of December 31, 2017, investments in CLOs had contractual principal amounts of $189.2 million outstanding, which excludes the Company’s investments in subordinated tranches of the notes, as these do not have contractual principal payments.

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OCH-ZIFF CAPITAL MANAGEMENT GROUP LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — UNAUDITED

SEPTEMBER 30, 2018

Reconciliation of Fair Value Measurements Categorized within Level III

Gains and losses, excluding those of the consolidated funds are recorded within net (losses) gains on investments in funds and joint ventures in the consolidated statements of comprehensive income (loss), and gains and losses of the consolidated funds are recorded within net gains of consolidated funds. Foreign exchange gains and losses on non-U.S. Dollar investments are also included within gains and losses in the tables below.

The following table summarizes the changes in the Company’s Level III investments for the three months endedSeptember 30, 2018:

	June 30, 2018		Transfers In		Transfers Out			Investment Purchases		Investment Sales / Settlements			Gains / Losses			September 30, 2018
	(dollars in thousands)
Assets, at Fair Value
Included within investments:
CLOs	$	148,127	$	—	$	—		$	24,655	$	(5,483	)	$	(1,504	)	$	165,795
Investments of consolidated funds:
Bank debt	$	32,515	$	6,094	$	(13,795	)	$	55,761	$	(19,356	)	$	379		$	61,598

The following table summarizes the changes in the Company’s Level III investments for the three months endedSeptember 30, 2017: 

	June 30, 2017		Transfers In		Transfers Out			Investment Purchases		Investment Sales / Settlements			Gains / Losses		September 30, 2017
	(dollars in thousands)
Assets, at Fair Value
Included within investments:
CLOs	$	43,723	$	—	$	—		$	132,685	$	—		$	395	$	176,803
Investments of consolidated funds:
Bank debt	$	39,338	$	8,840	$	(21,900	)	$	30,470	$	(33,975	)	$	564	$	23,337

The following tables summarize the changes in the Company’s Level III assets and liabilities for the nine months endedSeptember 30, 2018:

	December 31, 2017		Transfers In		Transfers Out			Investment Purchases		Investment Sales / Settlements			Gains / Losses			September 30, 2018
	(dollars in thousands)
Assets, at Fair Value
Included within investments:
CLOs	$	211,749	$	—	$	—		$	131,104	$	(170,403	)	$	(6,655	)	$	165,795
Investments of consolidated funds:
Bank debt	$	18,807	$	2,438	$	(1,690	)	$	114,154	$	(72,838	)	$	727		$	61,598

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OCH-ZIFF CAPITAL MANAGEMENT GROUP LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — UNAUDITED

SEPTEMBER 30, 2018

The following tables summarize the changes in the Company’s Level III assets and liabilities for the nine months endedSeptember 30, 2017:

	December 31, 2016		Transfers In		Transfers Out			Investment Purchases		Investment Sales / Settlements			Gains / Losses		September 30, 2017
	(dollars in thousands)
Assets, at Fair Value
Included within investments:
CLOs	$	21,341	$	—	$	—		$	152,885	$	—		$	2,577	$	176,803
Investments of consolidated funds:
Bank debt	$	18,127	$	767	$	(17,311	)	$	87,611	$	(67,082	)	$	1,225	$	23,337

In the second quarter of 2017, the Company consolidated a CLO, the amounts related to the initial consolidation of the CLO are reflected in the investment purchases in the table above. The Company deconsolidated the CLO in the third quarter of 2017, amounts related to the deconsolidation of the CLO are included within investment sales.

Transfers out of Level III presented in the tables above resulted from the fair values of certain securities becoming market observable, with fair value determined using independent pricing services. Transfers into Level III presented in the table above resulted from the valuation of certain investments with decreased market observability, with fair values determined using independent pricing services.

The table below summarizes the net change in unrealized gains and losses on the Company’s Level III investments held as of the reporting date:

	Three Months Ended September 30,					Nine Months Ended September 30,
	2018			2017		2018			2017
	(dollars in thousands)
Assets, at Fair Value
Included within investments:
CLOs	$	(1,576	)	$	178	$	(4,944	)	$	2,360