~~OCH-ZIFF~~SCULPTOR CAPITAL MANAGEMENT, ~~GROUP~~ INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS — UNAUDITED


	Three Months Ended March 31,
	2020		2019

	(dollars in thousands)
Cash Flows from Operating Activities
Consolidated net loss	$	(53,025)	$	(8,981)
Adjustments to reconcile consolidated net loss to net cash provided by operating activities:
Amortization of equity-based compensation	24,729		37,223
Depreciation, amortization and net gains and losses on fixed assets	1,802		2,411
Net losses on early retirement of debt	523		5,458
Deferred income taxes	(11,195)		2,064
Non-cash lease expense	5,298		5,310
Net losses (gains) on investments, net of dividends	35,204		(2,064)
Operating cash flows due to changes in:
Income and fees receivable	171,613		9,400
Due from related parties	(2,458)		75
Other assets, net	4,439		(686)
Compensation payable	(164,961)		(80,690)
Unearned incentive income	1,569		2,371
Due to related parties	(16,716)		1,428
Operating lease liabilities	(6,261)		(2,383)
Other liabilities	(5,616)		(14,225)
Consolidated funds related items:
Net gains of consolidated funds	—		(3,746)
Purchases of investments	—		(49,598)
Proceeds from sale of investments	—		60,094
Other assets of consolidated funds	—		(1,541)
Other liabilities of consolidated funds	—		2,402
Net Cash Used in Operating Activities	(15,055)		(35,678)

Cash Flows from Investing Activities
Purchases of fixed assets	(394)		(287)

Purchases of United States government obligations	(89,489)		—
Maturities and sales of United States government obligations	50,632		11,800
Investments in funds	(7,852)		(14,631)
Return of investments in funds	288		30,345

Net Cash (Used in) Provided by Investing Activities	(46,815)		27,227

Three Months Ended March 31,
2019 2018

(dollars in thousands)
Cash Flows from Operating Activities
Consolidated net (loss) income $ (8,981 ) $ 12,746
Adjustments to reconcile consolidated net (loss) income to net cash provided by operating activities:
Amortization of equity-based compensation 37,223
22,171
Depreciation, amortization and net gains and losses on fixed assets 2,411
2,372
Net losses on early retirement of debt 5,458
—
Deferred income taxes 2,064
2,157
Operating and finance lease assets amortization 2,683
—
Operating and finance lease liabilities accretion 2,627
—
Net gains on investments, net of dividends (2,064 ) (312 )
Operating cash flows due to changes in:
Income and fees receivable 9,400
315,488
Due from related parties 75
(5,248 )
Other assets, net (686 ) 23,342
Compensation payable (80,690 ) (184,414 )
Unearned incentive income 2,371
10,930
Due to related parties 1,428
(43 )
Operating lease liabilities (2,383 ) —
Other liabilities (14,225 ) (16,435 )
Consolidated funds related items:
Net gains of consolidated funds (3,746 ) (492 )
Purchases of investments (49,598 ) (87,438 )
Proceeds from sale of investments 60,094
63,739
Other assets of consolidated funds (1,541 ) (29,191 )
Other liabilities of consolidated funds 2,402
30,567
Net Cash (Used in) Provided by Operating Activities (35,678 ) 159,939

Cash Flows from Investing Activities
Purchases of fixed assets (287 ) (1,205 )
Purchases of United States government obligations —
(7,435 )
Maturities of United States government obligations 11,800
13,000
Investments in funds (14,631 ) (77,990 )
Return of investments in funds 30,345
3,353
Net Cash Provided by (Used in) Investing Activities 27,227
(70,277 )

~~OCH-ZIFF~~SCULPTOR CAPITAL MANAGEMENT, ~~GROUP~~ INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS — UNAUDITED — (continued)


	Three Months Ended March 31,
	2020		2019

	(dollars in thousands)
Cash Flows from Financing Activities

Contributions from noncontrolling and redeemable noncontrolling interests	1,490		2,134
Distributions to noncontrolling and redeemable noncontrolling interests	(285)		(15,897)
Dividends on Class A Shares	(11,613)		(4,703)
Proceeds from debt obligations, net of issuance costs	1,988		—
Repayment of debt obligations, including prepayment costs	(27,000)		(141,068)



Other, net	(789)		(1,886)
Net Cash Used in Financing Activities	(36,209)		(161,420)
Net change in cash and cash equivalents and restricted cash	(98,079)		(169,871)
Cash and cash equivalents and restricted cash, beginning of period	245,439		323,884
Cash and Cash Equivalents and Restricted Cash, End of Period	$	147,360	$	154,013

Supplemental Disclosure of Cash Flow Information
Cash paid during the period:
Interest	$	2,937	$	5,487
Income taxes	$	2,113	$	2,462








Reconciliation of cash and cash equivalents and restricted cash:
Cash and cash equivalents	$	142,753	$	144,750
Restricted cash	4,607		9,263
Total Cash and Cash Equivalents and Restricted Cash	$	147,360	$	154,013

Three Months Ended March 31,
2019 2018

(dollars in thousands)
Cash Flows from Financing Activities
Contributions from noncontrolling and redeemable noncontrolling interests 2,134
22,857
Distributions to noncontrolling and redeemable noncontrolling interests (15,897 ) (18,023 )
Dividends on Class A Shares (4,703 ) (13,354 )
Proceeds from debt obligations, net of issuance costs —
60,719
Repayment of debt obligations, including prepayment costs (141,068 ) (69 )
Other, net (1,886 ) (2,065 )
Net Cash (Used in) Provided by Financing Activities (161,420 ) 50,065
Net Change in Cash and Cash Equivalents and Restricted Cash (169,871 ) 139,727
Cash and Cash Equivalents and Restricted Cash, Beginning of Period 323,884
469,513
Cash and Cash Equivalents and Restricted Cash, End of Period $ 154,013
$ 609,240

Supplemental Disclosure of Cash Flow Information

Cash paid during the period:

Interest $ 5,487
$ 1,362
Income taxes $ 2,462
$ 644

Reconciliation of cash and cash equivalents and restricted cash:
Cash and cash equivalents $ 144,750
$ 609,240
Restricted cash $ 9,263
$ —
Total Cash and Cash Equivalents and Restricted Cash $ 154,013
$ 609,240

See notes to consolidated financial statements.

~~OCH-ZIFF~~SCULPTOR CAPITAL MANAGEMENT, ~~GROUP~~ INC. — UNAUDITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ~~— UNAUDITED~~

MARCH 31, ~~2019~~2020

1. OVERVIEW

~~Och-Ziff~~Sculptor Capital Management, ~~Group Inc,~~Inc. (the “Registrant”), a Delaware corporation, together with its consolidated subsidiaries (collectively, the “Company” or ~~“Oz Management”~~“Sculptor Capital”), is a global alternative asset management firm ~~with~~providing investment products in a range of areas, including multi-strategy, credit and real estate. With offices in New York, London, Hong Kong ~~Mumbai~~ and ~~Shanghai.~~ Shanghai, the Company serves global clients through commingled funds, separate accounts and specialized products (collectively, the “funds”). Sculptor Capital’s distinct investment process seeks to generate attractive and consistent risk-adjusted returns across market cycles through a combination of bottom-up fundamental analysis, a high degree of flexibility, a collaborative team and integrated risk management. The Company’s capabilities span all major geographies, in strategies including fundamental equities, corporate credit, real estate debt and equity, merger arbitrage, structured credit and private investments.

The Company ~~provides asset management services to its investment funds (the “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. Through Institutional Credit Strategies, the Company’s asset management platform that invests in performing credits, the Company manages collateralized loan obligations (“CLOs”), aircraft securitizations, collateralized bond obligations (“CBOs”), commingled products 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~~one operating ~~segments: Oz Funds~~ and ~~Real Estate. The Oz Funds~~reportable segment ~~provides asset management services to the Company’s multi-strategy funds, dedicated credit funds~~ and other alternative investment vehicles. The Real Estate segment provides asset management services to the Company’s real estate funds. In the fourth quarter of 2018, the Real Estate segment met the threshold for a reportable segment. As a result, the Company began reporting operating segment results for both segments and has adjusted prior-period disclosures to present comparable information. The Company generates substantially all of its revenues in the United States.

The Company conducts its operations through ~~OZ Management~~Sculptor Capital LP, OZSculptor Capital Advisors LP and OZSculptor Capital Advisors II LP (collectively, the ~~“Oz~~“Sculptor Operating Partnerships” and collectively with their consolidated subsidiaries, the ~~“Oz~~“Sculptor Operating Group”). The Registrant holds its interests in the Sculptor Operating Group indirectly through Sculptor Capital Holding Corporation (“Sculptor Corp”), a wholly owned subsidiary of the Registrant.

References to the Company’s “executive managing directors” ~~refer to~~include the current ~~limited partners~~executive managing directors of ~~OZ Management LP, OZ Advisors LP and OZ Advisors II LP other than~~ the ~~Company’s intermediate holding companies,~~Company, and, except where the context requires otherwise, also include certain ~~limited partners~~executive managing directors who are no longer active in the ~~business of the Company.~~Company’s business. References to the Company’s “active executive managing directors” refer to executive managing directors who remain active in the Company’s business. ~~References~~

COVID-19 Pandemic

In the first quarter of 2020, a novel strain of coronavirus (“COVID-19”) spread across the world resulting in a wide-spread economic downturn. As a result, the Company’s funds experienced significant performance-related depreciation, which has had a negative impact on the Company’s incentive income during the first quarter of 2020, as well as on the opening balance of assets under management in the second quarter, and therefore may cause the Company to recognize lower management fees from these funds in the second quarter. To the extent these losses are not reversed by gains later this year, it will have a material impact on the Company’s ability to earn incentive income in 2020, as well as in future years until the losses are recovered for continuing fund investors.

In addition, the Company experienced unrealized losses on its risk retention investments held in certain of the CLOs that it manages. While the Company is required to hold these investments for the entire duration of the CLOs, to the ~~“Ziffs” refer collectively to Ziff Investors Partnership, L.P. II~~extent that cash flows in the CLOs deteriorate, the Company could experience declining interest income and ~~certain of its affiliates and control persons. References~~impairments on these investments. The Company may also experience detrimental impacts to the ~~Company’s “intermediate holding companies” refer, collectively,~~management fees it earns from the CLOs if market conditions do not sufficiently recover over the life cycle of these CLOs.

SCULPTOR CAPITAL MANAGEMENT, INC. — UNAUDITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2020

The Company has also evaluated its long-lived assets including operating lease assets and goodwill and has not identified any impairments to ~~Och-Ziff Holding Corporation (“Oz Corp”) and Och-Ziff Holding LLC (“Oz Holding”), each~~these assets as of ~~which are wholly owned subsidiaries of the Registrant. Oz Holding was merged into Oz Corp effective April 1, 2019.~~

As previously disclosed, the Registrant, certain of its subsidiaries and Mr. Och entered into a letter agreement dated December 5, 2018, providing for the implementation of certain transactions (the letter agreement together with the term sheet attached thereto, as amended, collectively, the “Letter Agreement”). The Letter Agreement provided for, among other things, the preparation and execution of further agreements (the “Implementing Agreements”) and other actions to implement the transactions contemplated by the Letter Agreement (collectively, the “Recapitalization”). In February 2019, the Company completed the Recapitalization. See Note 3 for additional details.March 31, 2020.

Company Structure

As of March 31, ~~2019,~~2020, the Registrant is a holding company that, through ~~its intermediate holding companies,~~Sculptor Corp, holds equity ownership interests in the OzSculptor Operating Group. The Registrant had issued and outstanding the following share classes:

•Class A Shares—Class A Shares are publicly traded and entitle the holders thereof to one vote per share on matters submitted to a vote of shareholders. The holders of Class A Shares are entitled to any distributions declared on the Class A Shares by the Registrant’s Board of Directors (the “Board”).

~~OCH-ZIFF CAPITAL MANAGEMENT GROUP INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — UNAUDITED~~

~~MARCH 31, 2019~~

•Class B Shares—Class B Shares are held by ~~the Company’s~~ executive managing ~~directors.~~directors, as further discussed below. These shares are not publicly traded but rather entitle the executive managing directors to one vote per share on matters submitted to a vote of shareholders. These shares do not participate in the earnings of the Registrant, as the executive managing directors participate in the related economics of the OzSculptor Operating Group through their direct ownership in the OzSculptor Operating ~~Group. Holders of the Class B Shares have granted an irrevocable proxy to vote all of their Class B Shares~~Group, subject to the Class B Shareholder Committee, the sole member of which is currently Mr. Och, as it may determine in its sole discretion. As a result, Mr. Och is currently able to control all matters requiring the approval of the Company’s shareholders. In connection with the Recapitalization described in Note 3~~, this proxy will terminate on the “Transition Date,” which will be on or around May 29, 2019.~~

Distribution Holiday discussed below.

The Company conducts its operations through the OzSculptor Operating Group. The following is a list of the outstanding units of the OzSculptor Operating Partnerships as of March 31, ~~2019:~~2020:

•Group A Units—Group A Units are limited partner interests issued to certain executive managing directors. Beginning on the final day of the Distribution Holiday (as defined in Note 3)3), each executive managing ~~directors~~director may exchange his or her vested and booked-up (as defined below) Group A Units for an equal number of Class A Shares (or the cash equivalent thereof) over a period of two years in three equal installments commencing upon the final day of the Distribution Holiday and on each of the first and second anniversary thereof (or, for units that become vested and booked-up Group A Units after the final day of the Distribution Holiday, from the later of the date on which they would have been exchangeable in accordance with the foregoing and the date on which they become vested and booked-up Group A Units) (and thereafter such units will remain exchangeable), in each case, subject to certain restrictions. A “book-up” is achieved when sufficient appreciation has occurred to meet a prescribed capital account book-up target under the terms of the OzSculptor Operating Partnership limited partnership ~~agreements~~

agreements.

~~In connection with the Recapitalization, each Group A Unit was recapitalized into 0.65 Group A Units and 0.35 Group A-1 Units.~~ Holders of Group A Units do not receive distributions during the Distribution Holiday. Group A Unit grants are accounted for as equity-based compensation. See Note 14 in the Company’s Annual Report on Form 10-K, as amended, for the year ended December 31, 2019, dated February 25, 2020 (“Annual Report”) for additional information. The Company completed a recapitalization in February 2019 (“Recapitalization”). See Note 3 for additional details. In connection with the Recapitalization each Group A Unit outstanding on the Recapitalization date was recapitalized into 0.65 Group A Units and 0.35 Group A-1 Units.

•Group A-1 Units—Group A-1 Units are limited partner interests into which 0.35 of each Group A Unit was recapitalized in connection with the reallocation that was effectuated by the Recapitalization. The Group A-1 Units will be canceled at such time and to the extent that the Group E Units ~~associated~~granted in connection with ~~such Group A-1 Units~~the Recapitalization vest and achieve a book-up. Group A-1 Units are not eligible to receive distributions at any time and do not participate in the net income (loss) of the OzSculptor Operating Group. However, the holders of Group A-1 Units shall participate in any sale, change of control or other liquidity ~~event.~~event that takes place prior to cancellation of the Group A-1 Units. In the Recapitalization, the holders of the 2016 Preferred Units (as defined below) forfeited an additional 749,813 Group A Units, which were recapitalized into Group A-1 Units.

•Group B Units—~~Each intermediate holding company~~Sculptor Corp holds a general partner interest and Group B Units in each OzSculptor Operating ~~Group entity that it controls. Our intermediate holding companies own~~Partnership. Sculptor Corp owns all of the Group B Units, which represent equity interest in the OzSculptor Operating ~~Group.~~

SCULPTOR CAPITAL MANAGEMENT, INC. — UNAUDITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2020

Partnerships. Except during the Distribution Holiday as described above, the Group B Units are economically identical to the Group A Units held by executive managing directors but are not exchangeable for Class A Shares and are not subject to vesting, forfeiture or minimum retained ownership requirements.

•Group E Units—Group E Units are limited partner interests issued to certain executive managing directors that are only entitled to future profits and gains. Each Group E Unit converts into a Group A Unit and becomes exchangeable for one Class A Share (or the cash equivalent thereof) to the extent there has been a sufficient amount of appreciation for a Group E Unit to achieve a book-up target and, subject to other conditions contained in the limited partnership agreements of the OzSculptor Operating Partnerships, the Distribution Holiday has ended (or an earlier exchange date is established by the Exchange Committee). The Group E Units are entitled to share in residual assets upon liquidation, dissolution or winding up and become eligible to participate in any tag along right, in a change of control transaction or other liquidity event only to the extent of their relative positive capital accounts (if any). In connection with the Recapitalization, all outstanding Group D Units, which were non-equity profits interests, converted into Group E Units on a one-for-one basis. Holders of Group E Units do not receive

~~OCH-ZIFF CAPITAL MANAGEMENT GROUP INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — UNAUDITED~~

~~MARCH 31, 2019~~

distributions during the Distribution Holiday. See Note 3 for additional information. Group E Unit grants are accounted for as equity-based compensation. See Note 14 in the Annual Report for additional information.

•Group P Units—Group P Units are limited partner interests issued to certain executive managing directors that are only entitled to future profits and gains. Each Group P Unit becomes exchangeable for one Class A Share (or the cash equivalent thereof), in each case upon satisfaction of certain service and performance conditions at such time and, with respect to exchanges, to the extent there has been sufficient appreciation for a Group P Unit to achieve a book-up target and, subject to other conditions contained in the limited partnership agreements of the OzSculptor Operating Partnerships, the Distribution Holiday has ended (or an earlier exchange date is established by the Exchange Committee). The Group P Units are entitled to share in residual assets upon liquidation, dissolution or winding up and become eligible to participate in any tag along right, in a change of control transaction or other liquidity event only to the extent that certain performance conditions are met and to the extent of their relative positive capital accounts (if any). The terms of the Group P Units may be varied for certain executive managing directors. Group P Unit grants are accounted for as equity-based compensation. See Note 14 in the Annual Report for additional information.

•Preferred Units— The Preferred Units are non-voting preferred equity interests in the OzSculptor Operating ~~Group entities.~~Partnerships. Preferred Units issued in 2016 and 2017 are collectively referred to as the “2016 Preferred Units.” The Preferred Units issued in 2019 are referred to as ~~“the 2019~~the “2019 Preferred Units.” See Note 10 for additional information.

~~The Company’s current and former executive~~Executive managing directors hold a number of Class B Shares ~~of the Registrant~~ equal to the number of Group A Units, vested Group E Units, Group A-1 Units (to the extent the corresponding Class B Shares have not been canceled in connection with the vesting of certain Group E Units issued in connection with the Recapitalization, as further discussed in Note 3) and Group P Units held. Upon the exchange of a Group A Unit or a Group P Unit for a Class A Share, the corresponding Class B Share is canceled and a Group B Unit is issued to the intermediate holding companies of the Company. One Class B Share will be issued to each holder of Group E Units upon the vesting of each such holder’s Group E Unit, at which time a corresponding number of Class B Shares held by holders of Group A-1 Units will be canceled.Sculptor Corp.

SCULPTOR CAPITAL MANAGEMENT, INC. — UNAUDITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2020

The following table presents the number of shares and units (excluding Preferred Units) of the Registrant and the OzSculptor Operating ~~Group,~~Partnerships, respectively, that were outstanding as of March 31, ~~2019:~~

2020:


		As of March 31, 2020
Sculptor Capital Management, Inc.
Class A Shares		21,946,639
Class B Shares		32,845,414

Sculptor Operating Partnerships		~~As of March 31, 2019~~
~~Och-Ziff Capital Management Group Inc.~~
~~Class A Shares~~	~~20,484,430~~
~~Class B Shares~~	~~29,208,952~~

~~Oz Operating Partnerships~~
Group A Units	16,019,506
Group A-1 Units		9,779,446
Group B Units		~~20,484,430~~21,946,639
Group E Units		~~13,542,440~~13,450,821
Group P Units		3,410,000

In addition, the Company ~~issues~~grants Class A restricted share units (“RSUs”) and ~~beginning in 2018,~~ performance-based RSUs (“PSUs”) to its employees and executive managing directors as a form of compensation. RSU and PSU grants are accounted for as equity-based compensation. See Note 14 in the Annual Report for additional information.

~~Reverse Share Split~~

At the close of trading on January 3, 2019, the Company effectuated a 1-for-10 reverse share split (the “Reverse Share Split”) of the Class A Shares. As a result of the Reverse Share Split, every ten issued and outstanding Class A Shares were

~~OCH-ZIFF CAPITAL MANAGEMENT GROUP INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — UNAUDITED~~

~~MARCH 31, 2019~~

combined into one Class A Share. In addition, corresponding adjustments were made to the Class B Shares, Oz Operating Group Units, RSUs and PSUs. All prior period share, unit, per share and per unit amounts have been restated to give retroactive effect to the Reverse Share Split.

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~~U.S. generally accepted accounting principles (“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, 2018 (the “Annual Report”).~~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.

~~Leases~~

~~The Company adopted Accounting Standards Update (“ASU”) No. 2016-02,~~ ~~Leases (Topic 842)~~, as amended, as of January 1, 2019 (“ASC 842”). The Company applied ASC 842 to lease arrangements outstanding as of the date of adoption. The Company did not restate prior periods and there were no adjustments to retained earnings upon adoption of ASC 842. The Company applied the package of practical expedients permitted under the transition guidance within the new standard, including carrying forward the historical lease classification and not reassessing whether certain costs capitalized under the prior guidance are eligible for capitalization under ASC 842. Adoption of ASC 842 resulted in the recognition of $126.0 million and $135.9 million of operating lease assets and liabilities, respectively, with the net of these amounts offsetting the deferred rent credit liability in existence immediately prior to adoption.

The Company determines if an arrangement is a lease at inception. Right-of-use lease assets and lease liabilities are recognized at commencement date based on the present value of lease payments over the lease term. Right-of-use lease assets represent the Company’s right to use a leased asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. The Company does not recognize right-of-use lease assets and lease liabilities for leases with an initial term of one year or less.

As the Company’s leases do not provide an implicit rate, the Company uses its estimated incremental borrowing rate based on information available at the lease commencement date in determining the present value of lease payments. The Company gave consideration to its recently issued term loan, as well as publicly available data for instruments with similar characteristics when calculating its incremental borrowing rates.

The operating lease assets include any lease payments made and excludes lease incentives. Lease terms include options to extend or terminate when it is reasonably certain that the Company will exercise that option. In addition, the Company separates lease and non-lease components embedded within lease agreements, except for data center leases.

Right-of-use assets and liabilities related to operating leases are included within operating lease assets and operating lease liabilities, respectively, in the Company’s consolidated balance sheets. Right-of-use assets and liabilities related to finance leases are included within other assets and other liabilities, respectively, in the Company’s consolidated balance sheets.

Lease expense for operating lease payments, which is comprised of amortization of right-of-use assets and interest accretion on lease liabilities, is generally recognized on a straight-line basis over the lease term and included within general,

~~OCH-ZIFF CAPITAL MANAGEMENT GROUP INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — UNAUDITED~~

~~MARCH 31, 2019~~

administrative and other expenses in the consolidated statements of comprehensive income. Amortization of right-of-use lease assets related to finance leases is included within general, administrative and other expenses and interest accretion on lease liabilities related to finance leases is included within interest expense.

Subrental income is recognized on a straight-line basis over the lease term and is included within other revenues in the consolidated statements of comprehensive income. Where the Company has entered into a sublease arrangement, the Company will evaluate the lease arrangement for impairment. To the extent an impairment of the right-of-use lease asset is recognized, the Company will amortize the remaining lease asset on a straight-line basis over the remaining lease term.

Recently Adopted Accounting Pronouncements

~~Other than the adoption of ASC 842 discussed above, none of the other~~No changes to GAAP that went into effect in the three months ended March 31, ~~2019~~2020 had a material effect on the Company’s consolidated financial statements.

Future Adoption of Accounting Pronouncements

No changes to GAAP that are not yet effective are expected to have a material effect on the Company’s consolidated financial statements.

3. RECAPITALIZATION

On February 7, 2019, the Company completed the Recapitalization, which included a series of transactions that involved the reallocation of certain ownership interests in the OzSculptor Operating ~~Group~~Partnerships to existing members of senior management, a “Distribution Holiday” on interests held by active and former executive managing directors, an amendment to the tax receivable

SCULPTOR CAPITAL MANAGEMENT, INC. — UNAUDITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2020

agreement, a “Cash Sweep” to pay down the 2018 Term Loan (as defined in Note 8) and 2019 Preferred Units, and various other related transactions. In addition, (i) $200.0 million of the 2016 Preferred Units was restructured into the Debt Securities (as ~~defined~~described in Note 8) and (ii) $200.0 million of the 2016 Preferred Units was restructured into the 2019 Preferred Units. ~~In addition, the holders of the 2016 Preferred Units forfeited an additional 749,813 Group A Units (which were recapitalized into Group A-1 Units).~~

Reallocation of Equity

~~The Company’s founder, Mr. Daniel S. Och and~~In connection with the ~~other~~Recapitalization, holders of Group A Units ~~have~~ collectively reallocated 35% of their Group A Units to existing members of senior management and for potential grants to new hires. The reallocation ~~has been~~was effected by (i) recapitalizing such Group A Units into Group A-1 Units and (ii) creating and making grants to existing members of senior management (and reserving for future grants to active managing directors and new hires) of Group E Units. ~~The~~An equivalent number of Group A-1 Units will be canceled at such time and to the extent ~~as such~~that Group E Units vest and achieve a book-up. Upon vesting, holders of Group E Units received in connection with the reallocation of Group A Units will be entitled to vote a corresponding number of Class B ~~Shares. Following the Liquidity Redemption (as defined below) and Mr. Och’s receipt of the Credit Fund Balance Redemption (as defined below), and until~~Shares previously allocated to Group A-1 Units. Until such time as the relevant Group E Units become vested, the Class B Shares corresponding to the Group A-1 Units will be voted pro rata in accordance with the vote of the Class A ~~Shares held by non-affiliates.~~Shares. In connection with the Recapitalization, the holders of the 2016 Preferred Units forfeited an additional 749,813 Group A Units (which were recapitalized into Group A-1 Units).

Distribution Holiday

The OzSculptor Operating Partnerships initiated a distribution holiday (the “Distribution Holiday”) on the Group A Units, Group D Units, Group E Units and Group P Units and on certain RSUs that will terminate on the earlier of (x) 45 days after the last day of the first calendar quarter as of which the achievement of $600.0 million of Distribution Holiday Economic Income (as defined in the OzSculptor Operating Partnerships’ limited partnership agreements) is realized and (y) April 1, 2026.

During the Distribution Holiday, (i) the OzSculptor Operating Partnerships shall only make distributions with respect to Group B Units, (ii) the performance thresholds of Group P Units and PSUs shall be adjusted to take into account performance

~~OCH-ZIFF CAPITAL MANAGEMENT GROUP INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — UNAUDITED~~

~~MARCH 31, 2019~~

and distributions during such period, and (iii) RSUs will continue to receive dividend equivalents in respect of dividends or distributions paid on the Class A Shares. For executive managing directors that have received Group E Units, distributions on Group P Units, RSUs and PSUs is limited to an aggregate amount not to exceed $4.00 per Group P Unit, PSU or RSU, as applicable, cumulatively during the Distribution Holiday. Following the termination of the Distribution Holiday, Group A Units and Group E Units (whether vested or unvested) shall receive distributions even if such units have not been booked-up.

The Distribution Holiday was effective retroactively to October 1, 2018. As a result, the Company recorded ~~and~~an adjustment to additional paid-in capital and noncontrolling interests to reallocate a portion of pre-Recapitalization earnings and related income tax effects from noncontrolling interests to the Company’s additional paid-in capital. Such adjustment is recorded within Recapitalization adjustment in the consolidated statement of shareholders’ equity (deficit).

In connection with his transition from the Company, Mr. Och submitted redemption notices for all liquid balances of Mr. Och and his related parties (other than their liquid balances in the Oz Credit Opportunities Master Fund) - half of which would be redeemed effective as of December 31, 2018 and the remainder effective March 31, 2019. The receipt by Mr. Och and his related parties of redemption proceeds associated with these redemptions is referred to as the “Liquidity Redemption.” Redemptions are generally paid in the month following the effective date of the redemption. The Liquidity Redemptions had been completed as of April 29, 2019. Mr. Och and his related parties are redeeming their liquid balances in the OZ Credit Opportunities Master Fund effective September 30, 2019, for which redemption notices have been delivered (the “Credit Fund Balance Redemption”).

Cash Sweep

As part of the Recapitalization, the Company instituted a “Cash Sweep” with regards to the paydowns of the 2018 Term Loan and the 2019 Preferred Units. During the Distribution Holiday, on a quarterly basis, for each of the first three quarters of the year 100% of all Economic Income (subject to certain adjustments described in the 2019 Preferred Unit Designations as defined in Note 10) will be applied to repay the 2018 Term Loan and then to redeem the 2019 Preferred Units, in each case, together with accrued interest. The Cash Sweep will not apply to the extent that it would result in the OzSculptor Operating Group having a minimum “Free Cash Balance” (as defined in the 2019 Preferred Unit Designations) of less than $200.0 million except in certain specified circumstances. In the fourth quarter of each year, an amount equal to the excess of the Free Cash Balance over the minimum Free Cash Balance of $200.0 million, will be used to repay the 2018 Term Loan and redeem the 2019 Preferred Units. In addition, without duplication of the Cash Sweep, (i) certain of the proceeds resulting from the realization of incentive income from certain longer term assets under management described in the 2019 Preferred Units Designations (“Designated Accrued Unrecognized Incentive”) and (ii) 85% of the net cash proceeds from any Asset Sales (as defined in the 2019 Preferred Units Designations), will be used to repay the 2018 Term Loan and redeem the 2019 Preferred Units.

SCULPTOR CAPITAL MANAGEMENT, INC. — UNAUDITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2020

As long as the Cash Sweep is in effect, the OzSculptor Operating Group may only use funds from a cumulative discretionary one-time basket of up to $50.0 million in the aggregate, or reserve up to $17.0 million in the aggregate annually (the “Discretionary Basket”), to engage in certain “Restricted Activities” (as defined below) or any other activities related to the strategic expansion of the OzSculptor Operating Group, and may not use any other funds of the OzSculptor Operating Group to fund such activities, subject to certain exceptions. The Discretionary Basket will not be subject to the Distribution Holiday or the Cash Sweep and, subject to certain exceptions, may only be used to fund new firm investments or new firm products or to fund share buybacks (including RSU cash settlements in excess of permitted amounts) in an aggregate amount not to exceed $25.0 million (the “Restricted Activities”). The Discretionary Basket may not be used to fund employee compensation payments.

4. NONCONTROLLING INTERESTS

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.

Prior to the Recapitalization, the attribution of net income (loss) of each OzSculptor Operating Partnership was based on the relative ownership percentages of the Group A Units (noncontrolling interests) and the Group B Units (indirectly held by the

~~OCH-ZIFF CAPITAL MANAGEMENT GROUP INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — UNAUDITED~~

~~MARCH 31, 2019~~

Registrant). In applying the substantive ~~profit sharing~~profit-sharing arrangements in the OzSculptor Operating ~~Partnership~~Partnerships’ limited partnership agreements to the Company’s consolidated financial statements, for periods subsequent to the Recapitalization and for the duration of the Distribution Holiday, the Company will allocate net income of each OzSculptor Operating Partnership in any fiscal year solely to the Group B Units and any net loss on a pro rata basis based on the relative ownership percentages of the Group A Units and Group B Units. To the extent ~~an Oz~~a Sculptor Operating Partnership incurs a net loss in an interim period, any net income recognized in a subsequent interim period in the same fiscal year is allocated on a pro rata basis to the extent of previously allocated net loss. Conversely, to the extent ~~an Oz~~a Sculptor Operating Partnership recognizes net income in an interim period, any net loss incurred in a subsequent interim period in the same fiscal year is allocated solely to the Group B Units to the extent of previously allocated net income.

SCULPTOR CAPITAL MANAGEMENT, INC. — UNAUDITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2020

The table below sets forth the calculation of noncontrolling interests related to the Group A Units for each OzSculptor Operating Partnership (rounding differences may occur). The blended participation percentages presented below take into account ownership changes throughout the ~~year.~~periods presented. In addition, the blended participation percentages in 2019 take into account the difference in methodology described above for the period prior to the Recapitalization Date compared to the period following the Recapitalization Date. For example, OzSculptor Capital Advisors LP had net income in the period prior to the Recapitalization Date, and as a result, allocates a portion of its net income for the three months ended March 31, 2019 to the Group A Units.


	Three Months Ended March 31,
	2020			2019
	(dollars in thousands)
	(dollars in thousands)

Sculptor Capital LP
Net loss	$	(41,177)		$	(32,049)
Blended participation percentage	42		%	44		%
Net Loss Attributable to Group A Units	$	(17,374)		$	(14,064)

Sculptor Capital Advisors LP
Net (loss) income	$	(9,938)		$	17,497
Blended participation percentage	42		%	38		%
Net (Loss) Income Attributable to Group A Units	$	(4,193)		$	6,695

Sculptor Capital Advisors II LP
Net (loss) income	$	(8,933)		$	2,053
Blended participation percentage	42		%	0		%
Net (Loss) Income Attributable to Group A Units	$	(3,770)		$	—

Total Sculptor Operating Group
Net loss	$	(60,048)		$	(12,499)
Blended participation percentage	42		%	59		%
Net Loss Attributable to Group A Units	$	(25,337)		$	(7,369)

Oz Management LP Oz Advisors LP Oz Advisors II LP Total Oz Operating Group

(dollars in thousands)
January 1, 2019 to March 31, 2019
Net (loss) income $ (32,049 ) $ 17,497
$ 2,053
$ (12,499 )
Blended participation percentage 44 % 38 % 0 % 59 %
Net (Loss) Income Attributable to Group A Units $ (14,064 ) $ 6,695
$ —
$ (7,369 )

January 1, 2018 to March 31, 2018
Net income (loss) $ 2,405
$ 17,735
$ (5,653 ) $ 14,487
Blended participation percentage 58 % 58 % 58 % 58 %
Net Income (Loss) Attributable to Group A Units $ 1,389
$ 10,247
$ (3,266 ) $ 8,370

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


	Three Months Ended March 31,
	2020		2019
	(dollars in thousands)
Group A Units	$	(25,337)	$	(7,369)

Other	(748)		135
	$	(26,085)	$	(7,234)

Three Months Ended March 31,
2019 2018

(dollars in thousands)
Group A Units $ (7,369 ) $ 8,370
Other 135
265
$ (7,234 ) $ 8,635

SCULPTOR CAPITAL MANAGEMENT, INC. — UNAUDITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2020

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

March 31, 2019 December 31, 2018

(dollars in thousands)
Group A Units $ 441,056
$ 415,928
Other 3,781
3,503
$ 444,837
$ 419,431

~~OCH-ZIFF CAPITAL MANAGEMENT GROUP INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — UNAUDITED~~

~~MARCH 31, 2019~~


	March 31, 2020		December 31, 2019
	(dollars in thousands)
Group A Units	$	419,476	$	434,943

Other	6,292		5,836
	$	425,768	$	440,779

The Preferred Units and fund investors’ interests in certain consolidated funds (which were deconsolidated in the third quarter of 2019) are redeemable outside of the Company’s control. These interests are classified within redeemable noncontrolling interests in the consolidated balance sheets. The following ~~table presents~~tables present the activity in redeemable noncontrolling interests:


	Three Months Ended March 31,
	2020		2019
	Preferred Units		Funds		Preferred Units		Total
	(dollars in thousands)
Beginning balance	$	150,000	$	157,660	$	420,000	$	577,660
Fair value of Debt Securities exchanged for 2016 Preferred Units	—		—		(167,799)		(167,799)
Fair value of 2019 Preferred Units exchanged for 2016 Preferred Units	—		—		(137,759)		(137,759)
Issuance of 2019 Preferred Units, net of issuance costs	—		—		136,964		136,964
Change in redemption value of Preferred Units	1,327		—		(101,406)		(101,406)
Capital contributions	—		1,707		—		1,707
Capital distributions	—		(15,611)		—		(15,611)

Comprehensive income	—		5,534		—		5,534
Ending Balance	$	151,327	$	149,290	$	150,000	$	299,290

Three Months Ended March 31,
2019 2018
Funds Preferred Units Total Funds Preferred Units Total

(dollars in thousands)
Beginning balance $ 157,660
$ 420,000
$ 577,660
$ 25,617
$ 420,000
$ 445,617
Fair value of Debt Securities exchanged for 2016 Preferred Units —
(167,799 ) (167,799 ) —
—
—
Fair value of 2019 Preferred Units exchanged for 2016 Preferred Units —
(137,759 ) (137,759 ) —
—
—
Issuance of 2019 Preferred Units, net of issuance costs —
136,964
136,964
—
—
—
Change in redemption value —
(101,406 ) (101,406 ) —
—
—
Capital contributions 1,707
—
1,707
22,107
—
22,107
Capital distributions (15,611 ) —
(15,611 ) (333 ) —
(333 )
Comprehensive income 5,534
—
5,534
621
—
621
Ending Balance $ 149,290
$ 150,000
$ 299,290
$ 48,012
$ 420,000
$ 468,012

5. INVESTMENTS AND FAIR VALUE DISCLOSURES

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


						March 31, 2020		December 31, 2019
	March 31, 2019		December 31, 2018
	(dollars in thousands)					(dollars in thousands)
United States government obligations, at fair value	$	168,762	$	179,510	United States government obligations, at fair value	$	186,979	$	146,565
CLOs, at fair value	158,468		181,868		CLOs, at fair value	155,287		182,870
Other investments, equity method	35,607		28,519		Other investments, equity method	77,540		81,991
Total Investments	$	362,837	$	389,897	Total Investments	$	419,806	$	411,426

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.

SCULPTOR CAPITAL MANAGEMENT, INC. — UNAUDITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2020

~~OCH-ZIFF CAPITAL MANAGEMENT GROUP INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — UNAUDITED~~

~~MARCH 31, 2019~~

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 an input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability.

~~OCH-ZIFF CAPITAL MANAGEMENT GROUP INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — UNAUDITED~~

~~MARCH 31, 2019~~

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 March 31, ~~2019:~~2020:


	As of March 31, 2019									As of March 31, 2020
	Level I		Level II		Level III		Total			Level I		Level II		Level III		Total

	(dollars in thousands)									(dollars in thousands)
Assets, at Fair Value									Assets, at Fair Value
Included within cash and cash equivalents:
United States government obligations	$	32,784	$	—	$	—	$	32,784


Included within investments:									Included within investments:
United States government obligations	$	168,762	$	—	$	—	$	168,762	United States government obligations	$	186,979	$	—	$	—	$	186,979
CLOs⁽¹⁾	$	—	$	—	$	158,468	$	158,468	CLOs⁽¹⁾	$	—	$	—	$	155,287	$	155,287

Investments of consolidated funds:
Bank debt	$	—	$	101,724	$	59,169	$	160,893
Corporate bonds	—		3,862		—		3,862
Total Investments of Consolidated Funds	$	—	$	105,586	$	59,169	$	164,755

_______________

(1) As of March 31, ~~2019,~~2020, investments in CLOs had contractual principal amounts of ~~$147.3~~$169.6 million outstanding, which excludes the Company’s investments in subordinated tranches of the notes, as these do not have contractual principal payments.

SCULPTOR CAPITAL MANAGEMENT, INC. — UNAUDITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2020

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, ~~2018:~~2019:


	As of December 31, 2018									As of December 31, 2019
	Level I		Level II		Level III		Total			Level I		Level II		Level III		Total

	(dollars in thousands)									(dollars in thousands)
Assets, at Fair Value									Assets, at Fair Value
Included within cash and cash equivalents:									Included within cash and cash equivalents:
United States government obligations	$	58,054	$	—	$	—	$	58,054	United States government obligations	$	97,034	$	—	$	—	$	97,034

Included within investments:									Included within investments:
United States government obligations	$	179,510	$	—	$	—	$	179,510	United States government obligations	$	146,565	$	—	$	—	$	146,565
CLOs⁽¹⁾	$	—	$	—	$	181,868	$	181,868	CLOs⁽¹⁾	$	—	$	—	$	182,870	$	182,870

Investments of consolidated funds:
Bank debt	$	—	$	91,345	$	75,613	$	166,958
Corporate Bonds			$	4,537			$	4,537
Total Investments of Consolidated Funds	$	—	$	95,882	$	75,613	$	171,495

Institutional Credit Strategies

Institutional Credit Strategies is 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, aircraft securitizations, CBOs, and other customized solutions for clients.

Assets under management for Institutional Credit Strategies ~~which are primarily comprised of our CLOs,~~ are generally based on the par value of the collateral and cash held ~~in the CLOs.~~for CLOs and CBO, and adjusted portfolio values for our aircraft securitizations. However, assets under management are reduced for any investments in ~~our CLOs~~these securitization vehicles held by our other funds ~~in order~~ to avoid double counting these assets. Management fees for Institutional Credit Strategies, ~~which includes our CLOs and aircraft securitization vehicles,~~ generally range from ~~0.35%~~0.30% to 0.50% annually of assets under management. For the first quarter of ~~2019,~~2020, Institutional Credit Strategies had an average management fee rate of ~~0.47%~~0.46% gross of rebates on cross-investments from other funds we manage ~~(0.40%~~(0.37% net of such rebates).

Incentive income from our CLOs and CBO is generally equal to 20% of the excess cash flows due to the holders of the subordinated notes issued by the CLOs and CBO and is generally subject to a 12% hurdle rate. Because of the hurdle rate and structure of our CLOs and CBO, we do not expect to earn a meaningful amount of incentive income from these entities, and therefore no return information is presented for these vehicles. We do not earn incentive income from our aircraft securitizations.

A portion of the management fees we earn from our CLOs are subordinated to other obligations of the CLOs, including principal and interest on the notes issued by the CLOs. When certain overcollateralization and interest coverage tests are triggered, cash flows received on the underlying collateral in the CLOs that would have otherwise been distributed to us are redirected to pay principal and interest on the more senior obligations of the CLOs. Starting in April 2020, because of ratings downgrades and defaults on certain of the collateral held by our CLOs, driven by the market and economic impacts of the COVID-19 pandemic, certain of our CLOs failed to satisfy one or more overcollateralization tests, which has deferred the collection of a portion of our subordinated management fees. We expect to collect these fees at a later date. As of March 31, 2020, we had recognized as revenue approximately $3.4 million of subordinated management fees that were due to be collected in April but that have been deferred to future periods. We will continue to evaluate our ability to collect these and any future fees; however, to the extent the overcollateralization tests in our CLOs have not resolved, the amount of fees deferred would continue to increase, which may negatively impact our liquidity and the amounts we recognize as revenue in future periods.


	Most Recent Closing or Refinancing Year				Assets Under Management as of March 31,
				Deal Size			2020			2019

		(dollars in thousands)
Collateralized loan obligations	2016	$	653,250		$	604,441		$	608,231
	2017	4,209,590			3,467,743			3,494,341
	2018	7,487,273			7,027,289			7,098,813
	2019	2,331,964			2,236,570			948,336
	2020	409,250			398,461			395,554
		15,091,327			13,734,504			12,545,275

Aircraft securitizations	2018	696,000			497,611			573,084
	2019	1,128,000			1,035,459			—
	2020	472,732			398,653			—
		2,296,732			1,931,723			573,084

Collateralized bond obligation	2019	349,550			274,183			—
Other funds	n/a	n/a			53,989			247,284
		$	17,737,609		$	15,994,399		$	13,365,643

~~The OZLM CLOs presented below are our U.S. CLOs, whereas the OZLME CLOs are our European CLOs.~~

Assets Under Management as of March 31,
Initial Closing Date (Most Recent Refinance Date) Deal Size 2019 2018

(dollars in thousands)
CLOs
OZLM I July 19, 2012 (July 24, 2017) $ 523,550
$ 496,427
$ 496,487
OZLM II November 1, 2012 (August 29, 2018) 567,100
508,375
508,455
OZLM III February 20, 2013 (December 15, 2016) 653,250
608,231
608,049
OZLM IV June 27, 2013 (September 15, 2017) 615,500
539,329
539,700
OZLM VI April 16, 2014 (April 17, 2018) 621,250
596,133
594,833
OZLM VII June 26, 2014 (July 17, 2018) 636,775
596,434
792,305
OZLM VIII September 9, 2014 (November 15, 2018) 622,250
597,424
594,514
OZLM IX December 22, 2014 (November 8, 2018) 510,208
500,402
498,466
OZLM XI March 12, 2015 (August 18, 2017) 541,532
515,929
515,451
OZLM XII May 28, 2015 (September 18, 2018) 565,650
548,622
548,126
OZLM XIII August 6, 2015 (September 18, 2018) 511,600
494,476
494,344
OZLM XIV December 21, 2015 (June 4, 2018) 507,420
501,227
501,066
OZLM XV December 20, 2016 409,250
395,554
395,663
OZLME I December 15, 2016 430,490
447,109
489,818
OZLM XVI June 8, 2017 410,250
399,788
400,689
OZLM XVII August 3, 2017 512,000
498,023
497,707
OZLME II September 14, 2017 494,708
444,332
488,048
OZLM XIX November 21, 2017 610,800
600,513
599,644
OZLM XXI January 26, 2018 510,600
500,572
500,620
OZLME III January 31, 2018 509,118
447,224
491,386
OZLM XXII February 22, 2018 509,200
463,697
466,905
OZLM XVIII April 4, 2018 508,000
498,705
—
OZLM XX May 11, 2018 464,150
446,937
—
OZLME IV August 1, 2018 479,385
449,838
—
OZLME V December 11, 2018 471,987
449,974
—
13,196,023
12,545,275
11,022,276
STARR 2018-1 June 27, 2018 696,000
573,084
—
Other funds n/a n/a
247,284
153,830
$ 13,892,023
$ 13,365,643
$ 11,176,106

Assets under management in Institutional Credit Strategies totaled ~~$13.4~~$16.0 billion as of March 31, ~~2019,~~2020, increasing ~~$2.2~~$2.6 billion, or 20%, year-over-year. The year-over-year increase in assets under management in Institutional Credit Strategies was driven primarily by the closing of additional CLOs and anlaunches of aircraft ~~securitization.~~securitizations and a CBO, partially offset by changes in underlying collateral value and distributions. In ~~June 2018,~~addition, in ~~partnership with GE Capital Aviation Services,~~2020 we ~~closed a $696.0 million aircraft securitization, STARR 2018-1, where we serve as the asset manager.~~refinanced one of our 2016 CLOs.

Real Estate Funds

Our real estate funds generally make investments in commercial and residential real estate, including real property, multi-property portfolios, real estate-related joint ventures, real estate operating companies and other real estate-related assets.

Assets under management for our real estate funds are generally based on the amount of capital committed by our fund investors during the investment period and the amount of actual capital invested for periods following the investment period. However, assets under management are reduced for unfunded commitments by our executive managing directors that will be funded through transfers from other funds in order to avoid double counting these assets. Management fees for our real estate funds generally range from ~~0.75%~~0.50% to 1.50% annually of assets under management; however, management fees for ~~Och-Ziff~~Sculptor Real Estate Credit Fund I are based on invested ~~capital.~~capital both during and after the investment period. For the first quarter of ~~2019,~~2020, our real estate funds had an average management fee rate of ~~0.74%~~0.72%.

The ~~table~~tables below ~~presents~~present assets under management, investment performance and other information for our real estate funds. Our real estate funds generally follow an American-style waterfall, whereby incentive income may be paid to us after a fund investment is realized if a fund investor receives distributions in excess of the capital contributed for such investment, as well as a preferential return on such investment, which is generally 6% to 10%. Upon each subsequent realization, incentive income, which is generally 20% of realized profits, is recalculated based on the cumulative realized profits in excess of the preferential return attributable to each investor over the life of the fund. Once the investment performance has exceeded the hurdle rate, we may receive a “catch-up” allocation, resulting in a potential recognition by us of a full 20% of the realized net profits attributable to investors in these funds.

Due to the recalculation of cumulative realized profits upon each realization, the fund may clawback incentive income previously paid to us. As a result, we record incentive income paid to us by the real estate funds as unearned revenue in our consolidated balance sheets until the criteria for revenue recognition has been met.

Assets Under Management as of March 31,
2019 2018

Fund (dollars in thousands)
Och-Ziff Real Estate Fund I $ 13,578
$ 13,402
Och-Ziff Real Estate Fund II 100,904
152,257
Och-Ziff Real Estate Fund III 1,483,435
1,461,547
Och-Ziff Real Estate Credit Fund I 725,200
697,647
Other funds 329,371
146,645
$ 2,652,488
$ 2,471,498

Inception to Date as of March 31, 2019
Total Investments
Realized/Partially Realized Investments⁽¹⁾
Total Commitments
Invested Capital⁽²⁾

Total
Value⁽³⁾

Gross IRR⁽⁴⁾

Net IRR⁽⁵⁾

Gross MOIC⁽⁶⁾
Invested Capital
Total
Value

Gross IRR⁽⁴⁾

Gross MOIC⁽⁶⁾

Fund (Investment Period) (dollars in thousands)
Och-Ziff Real Estate Fund I⁽⁷⁾ (2005-2010)
$ 408,081
$ 386,298
$ 836,259
25.4 % 16.0 % 2.2x $ 372,720
$ 836,306
26.8 % 2.2x
Och-Ziff Real Estate Fund II⁽⁷⁾ (2011-2014)
839,508
762,588
1,512,869
32.9 % 21.5 % 2.0x 718,888
1,430,768
33.1 % 2.0x
Och-Ziff Real Estate Fund III(2014-2019)
1,500,000
968,036
1,528,878
31.4 % 21.1 % 1.6x 526,695
983,442
37.7 % 1.9x
Och-Ziff Real Estate Credit Fund I⁽⁸⁾(2015-2020)
736,225
143,346
178,753
n/m
n/m
n/m 54,186
68,106
n/m
n/m
Other funds 443,835
222,875
306,412
n/m
n/m
n/m 61,373
111,172
n/m
n/m
$ 3,927,649
$ 2,483,143
$ 4,363,171
$ 1,733,862
$ 3,429,794


	Assets Under Management as of March 31,
	2020		2019

Fund	(dollars in thousands)
Sculptor Real Estate Fund I	$	—	$	13,578
Sculptor Real Estate Fund II	61,602		100,904
Sculptor Real Estate Fund III	540,979		1,483,435
Sculptor Real Estate Fund IV	2,023,070		—
Sculptor Real Estate Credit Fund I	730,738		725,200
Other funds	633,432		329,371
	$	3,989,821	$	2,652,488


	Inception to Date as of March 31, 2020
			Total Investments																Realized/Partially Realized Investments⁽¹⁾
	Total Commitments		Invested Capital⁽²⁾		Total Value⁽³⁾		Gross IRR⁽⁴⁾		Net IRR⁽⁵⁾		Gross MOIC⁽⁶⁾	Invested Capital		Total Value		Gross IRR⁽⁴⁾		Gross MOIC⁽⁶⁾

Fund (Investment Period)	(dollars in thousands)
Sculptor Real Estate Fund I⁽⁷⁾ (2005-2010)	$	408,081	$	386,298	$	845,975	25.5	%	16.1	%	2.2x	$	386,298	$	845,975	25.5	%	2.2x
Sculptor Real Estate Fund II⁽⁷⁾ (2011-2014)	839,508		762,588		1,547,666		32.9	%	21.6	%	2.0x	762,588		1,547,666		32.9	%	2.0x
Sculptor Real Estate Fund III⁽⁷⁾(2014-2019)	1,500,000		1,053,427		1,685,570		28.7	%	18.7	%	1.6x	603,680		1,090,035		35.5	%	1.8x
Sculptor Real Estate Fund IV⁽⁸⁾ (2019-2023)	2,023,070		—		—		n/m		n/m		n/m	—		—		n/m		n/m
Sculptor Real Estate Credit Fund I⁽⁸⁾(2015-2020)	736,225		318,286		363,757		n/m		n/m		n/m	87,921		114,964		n/m		n/m
Other funds	938,815		434,323		567,195		n/m		n/m		n/m	63,338		112,938		n/m		n/m
	$	6,445,699	$	2,954,922	$	5,010,163						$	1,903,825	$	3,711,578

Unrealized Investments as of March 31, 2019
Invested Capital
Total
Value

Gross
MOIC⁽⁶⁾

Fund (Investment Period) (dollars in thousands)
Och-Ziff Real Estate Fund I (2005-2010)⁽⁷⁾
$ 13,578
$ (47 ) 0.0x
Och-Ziff Real Estate Fund II (2011-2014)⁽⁷⁾
43,700
82,101
1.9x
Och-Ziff Real Estate Fund III (2014-2019) 441,341
545,436
1.2x
Och-Ziff Real Estate Credit Fund I (2015-2020)⁽⁸⁾
89,160
110,647
n/m
Other funds 161,502
195,240
n/m
$ 749,281
$ 933,377


	Unrealized Investments as of March 31, 2020
	Invested Capital		Total Value		Gross MOIC⁽⁶⁾

Fund (Investment Period)	(dollars in thousands)
Sculptor Real Estate Fund I (2005-2010)⁽⁷⁾	$	—	$	—	—
Sculptor Real Estate Fund II (2011-2014)⁽⁷⁾	—		—		—
Sculptor Real Estate Fund III (2014-2019)⁽⁷⁾	449,747		595,535		1.3x
Sculptor Real Estate Fund IV (2019-2023)⁽⁸⁾	—		—		n/m
Sculptor Real Estate Credit Fund I (2015-2020)⁽⁸⁾	230,365		248,793		n/m
Other funds	370,985		454,257		n/m
	$	1,051,097	$	1,298,585

_______________

n/m not meaningful


~~(1)~~	An investment is considered partially realized when the total amount of proceeds received, including dividends, interest or other distributions of income and return of capital, represents at least 50% of invested capital.


~~(2)~~	~~Invested capital represents total aggregate contributions made for investments by the fund.~~

~~(3)~~

~~Total value represents the sum of realized distributions and the fair value of unrealized and partially realized investments as of~~ ~~March 31, 2019~~. Total value will be impacted (either positively or negatively) by future economic and other factors. Accordingly, the total value ultimately realized will likely be higher or lower than the amounts presented as of ~~March 31, 2019~~.

(1)An investment is considered partially realized when the total amount of proceeds received, including dividends, interest or other distributions of income and return of capital, represents at least 50% of invested capital.

(2)Invested capital represents total aggregate contributions made for investments by the fund.

(3)Total value represents the sum of realized distributions and the fair value of unrealized and partially realized investments as of March 31, 2020. Total value will be impacted (either positively or negatively) by future economic and other factors. Accordingly, the total value ultimately realized will likely be higher or lower than the amounts presented as of March 31, 2020.

(4)Gross IRR for our real estate funds represents the estimated, unaudited, annualized return based on the timing of cash inflows and outflows for the aggregated investments as of March 31, 2020, including the fair value of unrealized and partially realized investments as of such date, together with any unrealized appreciation or depreciation from related hedging activity. Gross IRR is not adjusted for estimated management fees, incentive income or other fees or expenses to be paid by the fund, which would reduce the return.

(5)Net IRR is calculated as described in footnote (4), but is reduced by management fees and other fund-level fees and expenses not adjusted for in the calculation of gross IRR. Net IRR is further reduced by paid incentive and accrued incentive income that will be payable upon the distribution of each fund’s capital in accordance with the terms of the relevant fund. Accrued incentive income may be higher or lower at such time. The net IRR represents a composite rate of return for a fund and does not reflect the net IRR specific to any individual investor.

(6)Gross MOIC for our real estate funds is calculated by dividing the value of a fund’s investments by the invested capital, prior to adjustments for incentive income, management fees or other expenses to be paid by the fund.

(7)These funds have concluded their investment periods, and therefore we expect assets under management for these funds to decrease as investments are sold and the related proceeds are distributed to the investors in these funds.

(8)This fund has invested less than half of its committed capital; therefore, IRR and MOIC information is not presented, as it is not meaningful.

~~(4)~~

~~Gross IRR for our real estate funds represents the estimated, unaudited, annualized return based on the timing of cash inflows and outflows for the aggregated investments as of~~ ~~March 31, 2019~~, including the fair value of unrealized and partially realized investments as of such date, together with any unrealized appreciation or depreciation from related hedging activity. Gross IRR is not adjusted for estimated management fees, incentive income or other fees or expenses to be paid by the fund, which would reduce the return.

~~(5)~~

Net IRR is calculated as described in footnote (4), but is reduced by all management fees and other fund-level fees and expenses not adjusted for in the calculation of gross IRR. Net IRR is further reduced by paid incentive and accrued incentive income that will be payable upon the distribution of each fund’s capital in accordance with the terms of the relevant fund. Accrued incentive income may be higher or lower at such time. The net IRR represents a composite rate of return for a fund and does not reflect the net IRR specific to any individual investor.


~~(6)~~	Gross MOIC for our real estate funds is calculated by dividing the value of a fund’s investments by the invested capital, prior to adjustments for incentive income, management fees or other expenses to be paid by the fund.


~~(7)~~	These funds have concluded their investment periods, and therefore we expect assets under management for these funds to decrease as investments are sold and the related proceeds are distributed to the investors in these funds.


~~(8)~~	~~This fund has invested less than half of its committed capital; therefore, IRR and MOIC information is not presented, as it is not meaningful.~~

Assets under management in our real estate funds increased ~~$181.0 million,~~$1.3 billion, or 7%50%, ~~year-over-year.~~year-over-year due to net inflows of $2.6 billion, primarily due to launch of Sculptor Real Estate Fund IV and a related co-investment vehicle, partially offset by $1.2 billion of distributions and other reductions primarily related to the expiration of the investment period of Sculptor Real Estate Fund III and related co-investment vehicles. Our real estate ~~franchise continues~~funds continue to deploy capital and generate strong returns

with ~~a 21.1%~~an 18.7% annualized net return in Sculptor Real Estate Fund III. Despite the recent market dislocation, we believe our diversified approach across product types, position in the capital structure, focus on current ~~opportunistic fund. We look~~income and modest use of leverage has allowed our portfolios to generate consistent returns over time. While we continue to ~~grow this business by expanding~~actively navigate the current economic and market conditions resulting from the COVID-19 pandemic, to the extent our ~~product offering and through raising successor~~ability to realize investments may be delayed or operating cash flows from existing investments may be reduced or deferred, we may experience a delay in our ability to recognize incentive income from these funds.

~~Other~~

Management fees for these funds range from 1.00% to 1.50% annually of assets under management, generally based on the amount of capital committed to these platforms by our fund investors. For the first quarter of 2019, our other funds had an average management fee rate of 0.42%.

Incentive income for these funds is generally 20% of realized and unrealized annual profits or of cumulative profits attributable to each investor. Incentive income for these funds is subject to hurdle rates generally 3% to 8%.

Longer-Term Assets Under Management

As of March 31, ~~2019,~~2020, approximately ~~63%~~71% of our assets under management were subject to initial commitment periods of three years or longer. Incentive income on these assets, if any, is based on the cumulative investment performance generated over this commitment period. The table below presents the amount of these assets under management, as well as the amount of incentive income accrued at the fund level but that has not yet been recognized in our revenues. Further, these amounts may ultimately not be recognized as revenue by us in the event of future losses in the respective funds. See “—Understanding Our Results—Revenues—Incentive Income” for additional information.


	March 31, 2020						December 31, 2019
	Longer-Term Assets Under Management		Accrued Unrecognized Incentive Income		Longer-Term Assets Under Management		Accrued Unrecognized Incentive Income

	(dollars in thousands)
Multi-strategy funds	$	327,649	$	3,112	$	344,623	$	11,280
Credit
Opportunistic credit funds	3,572,500		45,199		4,012,023		143,134
Institutional Credit Strategies	15,981,557		—		15,667,058		—
Real estate funds	3,989,813		91,699		3,393,877		99,163
Other	1,216		—		8,311		—
	$	23,872,735	$	140,010	$	23,425,892	$	253,577

March 31, 2019

Longer-Term Assets Under Management
Accrued Unrecognized Incentive Income

(dollars in thousands)
Multi-strategy funds $ 414,409

$ 7,380
Credit

Opportunistic credit funds 3,904,029

152,859
Institutional Credit Strategies 13,194,489

—
Real estate funds 2,652,487

99,622
Other 224,147

—

$ 20,389,561

$ 259,861

Accrued unrecognized incentive income associated with longer-term assets decreased by $113.6 million during the quarter, primarily driven by negative performance in the Customized Credit Focused Platform within opportunistic credit funds. Based on April 2020 estimated performance, accrued unrecognized incentive income is estimated to have increased by approximately $15 to 20 million. We expect a large portion of the amounts related to our opportunistic credit funds to be recognized in the fourth quarter of 2020. For the remainder of accrued unrecognized incentive income, we generally recognize incentive income ~~on our longer-term assets under management~~ in multi-strategy funds and open-end opportunistic credit funds at or near the end of their respective commitment periods, which are generally three to five years, when such amounts are probable of not significantly reversing. We may begin recognizing incentive income related to assets under management in our closed-end opportunistic credit funds and real estate funds after the conclusion of their respective investment period, when such amounts are probable of not significantly reversing. However, these investment periods may generally be extended for an additional one to two years.

Understanding Our Results

Revenues

Our operations historically have been financed primarily by cash flows generated by our business. Our principal sources of revenues are management fees and incentive income. For any given period, our revenues are influenced by the amount of our assets under management, the investment performance of our funds and the timing of when we recognize incentive income for certain assets under management as discussed below.

The ability of investors to contribute capital to and redeem capital from our funds causes our assets under management to fluctuate from period to period. Fluctuations in assets under management also result from our funds’ investment performance. Both of these factors directly impact the revenues we earn from management fees and incentive income. For example, a $1.0 billion increase or decrease in assets under management subject to a 1% management fee would generally increase or decrease annual management fees by $10.0 million. If profits, net of management fees, attributable to a fee-paying fund investor

were $10.0 million in a given year, we generally would earn incentive income equal to $2.0 million, assuming a 20% incentive income rate, a one-year commitment period, no hurdle rate and no high-water marks from prior years.

For any given quarter, our revenues are influenced by the combination of assets under management and the investment performance of our funds. For example, incentive income for the majority of our multi-strategy assets under management is recognized in the fourth quarter each year, based on full year investment performance.

Management Fees. Management fees are generally calculated and paid to us 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 our 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. See “—Weighted-Average Assets Under Management and Average Management Fee Rates” for information on our average management fee rate and Note 13 to our consolidated financial statements in our Annual Report for additional information regarding management fees.

Incentive Income. We earn incentive income based on the cumulative performance of our funds over a commitment period. We recognize incentive income when such amounts are probable of not significantly reversing. See Note 13 to our consolidated financial statements in our Annual Report for additional information regarding incentive income.

Other Revenues. Other revenues consist primarily of interest income on investments in CLOs, cash equivalents and ~~cash and cash equivalents.~~longer-term U.S. government obligations, as well as subrental income. Interest income is recognized on an effective yield basis. Subrental income is recognized on a straight-line basis over the lease term.

Income of Consolidated Funds. Revenues recorded as income of consolidated funds consist of interest income, dividend income and other miscellaneous items.

Expenses

Compensation and Benefits. Compensation and benefits consist of salaries, benefits, payroll taxes, and discretionary and guaranteed cash bonus expenses. We generally recognize compensation and benefits expenses over the related service period.

On an annual basis, compensation and benefits comprise a significant portion of total expenses, with discretionary cash bonuses generally comprising a significant portion of total compensation and benefits. We accrue minimum annual discretionary cash bonuses on a straight-line basis during the year. The total amount of discretionary cash bonuses ultimately recognized for the full year, which is determined in the fourth quarter of each year, could differ materially from the minimum amount accrued, as the total discretionary cash bonus is dependent upon a variety of factors, including fund performance for the year.

Compensation and benefits also include equity-based compensation expense, which is primarily in the form of RSUs granted to our independent board members, employees and executive managing directors, as well as PSUs and Partner Equity Units granted to executive managing directors.

Prior to 2019, we also issued Group D Units to executive managing directors. Group D Units are not considered equity under GAAP, and therefore no equity-based compensation expense is recognized related to these units when they are granted. Distributions to holders of Group D Units are included within compensation and benefits in the consolidated statements of comprehensive income (loss). Prior to the Distribution Holiday, these distributions were accrued in the quarter in which the related income was earned and were paid out the following quarter at the same time distributions on the Group A Units and dividends on our Class A Shares were paid. A Group D Unit converts into a Group A Unit to the extent it has become economically equivalent to a Group A Unit, at which point it is considered a grant of equity-based compensation for GAAP purposes. Upon the conversion of Group D Units into Group A Units in connection with the Recapitalization, we recognized a one-time charge for the grant-date fair value of the vested units and begin to amortize the grant-date fair value of the unvested units over the service period.

We also have profit-sharing arrangements whereby certain employees or executive managing directors are entitled to a share of incentive income ~~distributed by~~that we earn from certain funds. This incentive income is typically paid to us and then we pay a portion ~~is paid~~ to the profit-sharing participant as investments held by these funds are realized. To the extent that the payments to the employees or executive managing directors are probable and reasonably estimable, we accrue these payments as compensation expense for GAAP purposes, which may occur prior to the recognition of the related incentive income.

Deferred ~~Cash Interests~~cash interests (“DCIs”) are also granted to certain employees and executive managing directors as a form of compensation. DCIs reflect notional fund investments made by us on behalf of an employee or executive managing director. DCIs generally vest over a three-year period, subject to an employee’s or executive managing director’s continued service. Upon vesting, we pay the employee or executive managing director an amount in cash equal to the notional investment represented by the DCIs, as adjusted for notional fund performance. Except as otherwise provided in the relevant ~~deferred cash interest~~DCI plan or in an award

agreement, in the event of a termination of the employee’s or executive managing director’s service, any portion of the DCIs that ~~are~~is unvested as of the date of termination will be forfeited.

Interest Expense. Amounts included within interest expense relate primarily to indebtedness outstanding. See “—Liquidity and Capital Resources—Debt Obligations” and “—Liquidity and Capital Resources—Securities Sold Under Agreements to Repurchase” for additional information.

General, Administrative and Other. General, administrative and other expenses are comprised of professional services, occupancy and equipment, information processing and communications, recurring placement and related service fees, business development, insurance, foreign exchange gains and losses, and other miscellaneous expenses. Legal settlements and provisions are also included within general, administrative and other.

Expenses of Consolidated Funds. Expenses recorded as expenses of consolidated funds consist of interest expense and other miscellaneous expenses.

Other (Loss) Income

Changes in Tax Receivable Agreement Liability. Changes in tax receivable agreement liability consists of changes in our estimate of the future payments related to the tax receivable agreement that result from changes in future income tax savings due to changes in tax rates. See Note 1918 to our consolidated financial statements included in this report for additional information.

Net Losses on Early Retirement of Debt. Net losses on early retirement of debt consist of net losses realized upon the early retirement of ~~the amounts~~any indebtedness outstanding, ~~under our 2018 Term Loan, Senior Notes~~ and ~~certain CLO Investments Loans. These losses~~ include the write-off of unamortized debt discounts and issuance costs, as well as other fees incurred in connection with the early retirement of debt.

Net (Losses) Gains on Investments. Net (losses) gains on investments primarily consist of net gains and losses on investments in our ~~funds.~~funds, including investments in U.S. government obligations, CLOs and other funds we manage.

Net Gains of Consolidated Funds. Net gains of consolidated funds consist of net realized and unrealized gains and losses on investments held by the consolidated funds.

Income Taxes

Income taxes consist of our provision for federal, state and local income taxes in the United States and foreign income taxes, including provisions for deferred income taxes resulting from temporary differences between the tax and GAAP bases. The computation of the provision requires certain estimates and significant judgment, including, but not limited to, the expected taxable income for the year, projections of the proportion of income earned and taxed in foreign jurisdictions, permanent differences between the tax and GAAP bases and the likelihood of being able to fully utilize deferred income tax assets existing as of the end of the period.

The OzSculptor Operating Partnerships are partnerships for U.S. federal income tax purposes. The Registrant was a partnership for U.S. federal income tax purposes until the Corporate Classification Change on April 1, 2019. Prior to the Corporate Classification Change, only a portion of the income we ~~earn has been~~earned was subject to corporate-level income taxes in the United States and foreign jurisdictions. The amount of incentive income we earn in a given year, the resultant flow of revenues and expenses through our legal entity structure, the effect that changes in our Class A Share price may have on the ultimate deduction we are able to take related to the settlement of RSUs, and any changes in future enacted income tax rates may have a significant impact on our income tax provision and effective income tax rate. Following the Corporate Classification Change, generally all of the income allocated to the Registrant ~~earns~~from the Sculptor Operating Group will be subject to corporate-level income taxes in the United States.

Net ~~(Loss) Income~~Loss Attributable to Noncontrolling Interests

Noncontrolling interests represent ownership interests in our subsidiaries held by parties other than us and are primarily made up of GroupA Units. Increases or decreases in net (loss) income attributable to the GroupA Units are driven by the earnings of the OzSculptorOperating Group. See Note 4 for additional information regarding our ownership interest in the OzSculptorOperating Group.

WePrior to the fourth quarter of 2019, we also ~~consolidate~~consolidated certain of our opportunistic credit funds, wherein investors are able to redeem their interests after an initial lock-up period of up to three years. Allocations of earnings to these interests ~~are~~were reflected within net income attributable to redeemable noncontrolling interests in the consolidated statements of comprehensive income (loss). Increases or decreases in the net income (loss) attributable to fund investors’ interests in consolidated funds ~~are~~were driven by the earnings of those funds as allocated under the contractual terms of the relevant fund agreements.

Results of Operations

Three Months Ended March 31, ~~2019~~2020 Compared to Three Months Ended March 31, ~~2018~~2019

Revenues


	Three Months Ended March 31,				Change						Three Months Ended March 31,						Change
	2019		2018		$			%			2020		2019		$		%

	(dollars in thousands)										(dollars in thousands)
Management fees	$	63,623	$	72,450	$	(8,827	)	-12	%	Management fees	$	66,953	$	63,623	$	3,330	5	%
Incentive income	53,198		50,834		2,364			5	%	Incentive income	9,322		53,198		(43,876)		(82)	%
Other revenues	3,769		4,542		(773		)	-17	%	Other revenues	2,953		3,769		(816)		(22)	%
Income of consolidated funds	2,604		584		2,020			346	%	Income of consolidated funds	—		2,604		(2,604)		(100)	%
Total Revenues	$	123,194	$	128,410	$	(5,216	)	-4	%	Total Revenues	$	79,228	$	123,194	$	(43,966)	(36)	%

Total revenues decreased ~~$5.2~~$44.0 million, primarily due to the following:

An ~~$8.8~~•A $3.3 million~~decrease~~ increase in management fees, driven primarily by (i) a ~~$10.0~~$4.9 million ~~decrease~~increase in ~~management fees from our multi-strategy~~real estate funds, ~~due to lower average assets under management, partially offset~~primarily driven by the launch of Sculptor Real Estate Fund IV in the fourth quarter of 2019; and (ii) a ~~$2.5~~$1.5 million increase in Institutional Credit Strategies, primarily due to ~~launches~~launch of additional CLOs, aircraft securitizations, and a CBO. These increases were partially offset by (i) a $2.0 million decrease in multi-strategy funds due to lower average assets under management; and (ii) an ~~aircraft securitization.~~$872 thousand decrease in opportunistic credit funds. See “—Assets Under Management and Fund Performance—Weighted-Average Assets Under Management and Average Management Fee Rates” above for information regarding our average management fee rate.

•A ~~$2.4~~$43.9 million~~increase~~ decrease in incentive income, primarily due to the following:

•Multi-strategy funds. A $13.2 million decrease in incentive income from our multi-strategy funds, which was driven by: (i) a $7.9 million decrease related to fund investor redemptions; (ii) a $3.2 million decrease from longer-term assets under management; and (iii) a $3.0 million decrease in tax distributions taken to cover tax liabilities on incentive income that has been accrued on certain longer-term assets under management. These decreases were primarily due to negative fund performance in the first quarter of 2020.

◦

•Opportunistic credit funds. A $26.2 million decrease in incentive income from our opportunistic credit funds, which was driven by: (i) a $13.6 million decrease in tax distributions; (ii) a $7.5 million decrease from longer-term assets under management; (iii) a $4.3 million decrease from assets under management subject to a one-year measurement period; and (iv) a $1.0 million decrease related to fund investor redemptions. These decreases were primarily due to negative fund performance in the first quarter of 2020.

▪Real estate funds. A $4.5 million decrease from assets under management subject to a one-year measurement period; and (ii) a $600 thousand decrease in tax distributions taken to cover tax liabilities on incentive income that has been accrued on certain longer-term assets under management.

◦

~~Opportunistic credit funds.~~ An offsetting $3.3 million decrease in incentive income from our opportunistic credit funds, primarily due to a $14.6 million decrease in incentive from longer-term assets under management. This decrease was partially offset by (i) a $7.8 million increase in tax distributions taken to cover tax liabilities on incentive income that has been accrued on certain longer-term assets under management; and (ii) a $3.6 million increase from assets under management subject to a one-year measurement period.


◦	~~Real estate funds.~~ ~~A $2.5 million increase~~ in incentive income from our real estate funds, ~~driven primarily by a $4.5 million increase from higher realizations. This increase was partially offset by a $2.0 million decrease in tax distributions.~~


◦	~~Other funds.~~ ~~A $1.0 million increase, primarily related to assets under management subject to a one-year measurement period in certain strategy-specific funds.~~

A ~~$773 thousanddecreasein other revenues~~ primarily due to lower ~~interest income earned~~realizations, as these will vary from period to period based on ~~our investments in CLOs due to a reduction in risk retention investments. This decrease was partially offset by higher interest income earned on cash equivalents.~~

exit opportunities.

A ~~$2.0 millionincrease~~ ~~in income of consolidated funds primarily due to higher interest income period-over-period.~~

Expenses


	Three Months Ended March 31,				Change						Three Months Ended March 31,						Change
	2019		2018		$			%			2020		2019		$		%

	(dollars in thousands)										(dollars in thousands)
Compensation and benefits	$	85,715	$	68,924	$	16,791		24	%	Compensation and benefits	$	67,419	$	85,715	$	(18,296)	(21)	%
Interest expense	6,208		6,598		(390		)	-6	%	Interest expense	5,782		6,208		(426)		(7)	%
General, administrative and other	37,788		37,850		(62		)	0	%	General, administrative and other	34,706		37,788		(3,082)		(8)	%
Expenses of consolidated funds	55		84		(29		)	-35	%	Expenses of consolidated funds	—		55		(55)		(100)	%
Total Expenses	$	129,766	$	113,456	$	16,310		14	%	Total Expenses	$	107,907	$	129,766	$	(21,859)	(17)	%

Total expenses ~~increased $16.3~~decreased $21.9 million, primarily due to the following:

A ~~$16.8~~•An $18.3 million~~increase~~ decrease in compensation and benefits expenses driven byby: (i) a ~~$15.1~~$12.5 million ~~increase~~decrease in equity-based compensation expense primarily ~~driven by~~due to (x) a $9.1 million decrease in amounts related to Group E Units, primarily due to certain awards issued in connection with the ~~Recapitalization-related equity-based compensation grants;~~Recapitalization that were fully vested and therefore were fully expensed in the first quarter of 2019, as well as the remaining Group E Units being amortized on an accelerated basis (i.e., each tranche is being amortized over its respective service period), resulting in decreasing expenses each year on these awards, and (y) a $5.1 million decrease in RSUs amortization primarily as a result of fewer average number of awards outstanding in the current year period and lower average grant date fair values; (ii) a ~~$6.1~~$5.0 million ~~increase~~ decrease in bonus expense due to ~~certain reversals~~lower carried interest profit sharing expense as a result of lower realizations in ~~the prior year period.~~ ~~These increases were partially offset by (i)~~our real estate funds, as well as lower discretionary bonus accrual; and (iii) a ~~$2.9 million~~$777 thousand decrease in salaries and benefits, as our worldwide headcount decreased to ~~393~~388 as of March 31, ~~2019~~,2020, from ~~462~~393 as of~~March 31, 2018; and (ii) a $1.4 million decrease in expenses related to distributions accrued on Group D Units, as no amounts were accrued in the current-year period as there were no Group D Units outstanding at~~ March 31, 2019.

~~An offsetting $390~~•A $426 thousand decrease in interest expense ~~which was~~ primarily ~~driven by lower average debt outstanding balance,~~due to a $2.2 million decrease in interest expense related to the 2018 Term Loan due to repayments made in connection with the Recapitalization and subsequent paydowns in accordance with the Cash Sweep, partially offset by a ~~$2.3~~$1.7 million increase in interest expense related to the Debt Securities as a result of interest payments beginning in 2020 (inclusive of non-cash interest expense accretion ~~on Debt Securities issued~~of the discount taken at the time of the Recapitalization).

•A $3.1 million decrease in ~~exchange for Preferred Units~~general, administrative and other expenses primarily driven by a $5.2 million decrease in professional services expenses, primarily due to higher legal and accounting fees incurred in connection with the ~~Recapitalization. Upon exchange, Debt Securities~~Recapitalization in the prior-year period. These decreases were ~~recognized at fair value and are being accreted~~partially offset by a $3.2 million increase in placement fees, primarily related to ~~par value over time through interest expense for GAAP.~~

Sculptor Real Estate Fund IV, which launched in the fourth quarter of 2019.

Other (Loss) Income

~~General, administrative and~~


	Three Months Ended March 31,						Change
	2020		2019		$		%

	(dollars in thousands)
Changes in tax receivable agreement liability	$	278	$	—	$	278	100	%
Net losses on early retirement of debt	(523)		(5,458)		4,935		(90)	%
Net (losses) gains on investments	(34,069)		2,689		(36,758)		NM
Net gains of consolidated funds	—		3,746		(3,746)		(100)	%
Total Other (Loss) Income	$	(34,314)	$	977	$	(35,291)	NM

Total other ~~expenses remained relatively flat period-over-period. During~~income decreased by $35.3 million, primarily due to net losses on investments in the first quarter of ~~2019, we incurred~~ ~~$9.8~~2020. These losses were driven primarily by a $36.8 million decline on our risk retention investments in CLOs and investments in other funds that resulted from the market conditions in March 2020. Further contributing to the decline in other income was a decrease in gains on

investments in consolidated funds as the majority of ~~expenses~~the assets related to the ~~Recapitalization, which~~funds were ~~offset by~~deconsolidated in the third quarter of 2019. Offsetting these decreases, ~~across various professional services.~~

~~Other Income~~

Three Months Ended March 31, Change
2019 2018 $ %

(dollars in thousands)
Net losses on early retirement of debt $ (5,458 ) $ —
$ (5,458 ) NM
Net gains on investments 2,689
312
2,377
NM
Net gains of consolidated funds 3,746
492
3,254
NM
Total Other Income $ 977
$ 804
$ 173
22 %

Total other income increased period-over-period by $173 thousand, driven by net gains on investments, which primarily relates to our CLO risk retention investments, and net gains on investments held by the consolidated funds. These increases were offset by losses recognized on early retirement of debt ~~which primarily relates to~~decreased, as we paid down $155.0 million of amounts outstanding on the ~~write-off of a portion of the discount and deferred financing costs on our~~ 2018 Term ~~Loan.~~Loan in 2019 and terminated the 2018 Revolving Credit Facility in connection with the Recapitalization in the first quarter of 2019.

Income Taxes


	Three Months Ended March 31,						Change
	2020		2019		$		%

	(dollars in thousands)
Income taxes	$	(9,968)	$	3,386	$	(13,354)	NM

Three Months Ended March 31, Change
2019 2018 $ %

(dollars in thousands)
Income taxes $ 3,386
$ 3,012
$ 374
12 %

~~For the year to date period, income~~Income taxes ~~increased~~decreased by ~~$374 thousand,~~$13.4 million year-over-year, primarily due to ~~higher foreign income taxes and write-off of excess deferred income tax assets upon~~lower profitability in the vesting of RSUs, partially offset by lower profitability. Our effective income tax rate for the three months ended March 31, 2019 was impacted by Recapitalization-related expenses, including Group E Units grants and transaction-related expenses, that are not deductible for tax purposes. Please see Note 15 for additional information on the drivers of our effective income tax rate.current period.

Net ~~(Loss) Income~~Loss Attributable to Noncontrolling Interests

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


	Three Months Ended March 31,					Change						Three Months Ended March 31,						Change
	2019			2018		$			%			2020		2019		$		%

	(dollars in thousands)											(dollars in thousands)
Group A Units	$	(7,369	)	$	8,370	$	(15,739	)	-188	%	Group A Units	$	(25,337)	$	(7,369)	$	(17,968)	244	%

Other	135			265		(130		)	-49	%	Other	(748)		135		(883)		NM
Total	$	(7,234	)	$	8,635	$	(15,869	)	-184	%	Total	$	(26,085)	$	(7,234)	$	(18,851)	261	%

Redeemable noncontrolling interests	$	5,534		$	621	$	4,913		NM		Redeemable noncontrolling interests	$	—	$	5,534	$	(5,534)	(100)	%

Net ~~(loss) income allocated~~loss attributable to noncontrolling interests decreased by ~~$15.9~~$18.9 million. ~~This period-over-period~~The year-over-year decrease was driven primarily by ~~amounts attributable to the Group A Units due to~~ lower profitability of the Sculptor Operating Group, resulting from the drivers ~~of which are~~ discussed above. See Note 4 for additional details.

Net (Loss) Income Attributable to Class A Shareholders

Three Months Ended March 31, Change
2019 2018 $ %

(dollars in thousands)
Net Income Attributable to Class A Shareholders $ 37,083
$ 3,490
$ 33,593
NM


	Three Months Ended March 31,						Change
	2020		2019		$		%

	(dollars in thousands)
Net (Loss) Income Attributable to Class A Shareholders	$	(28,267)	$	37,083	$	(65,350)	NM

Net (loss) income attributable to Class A Shareholders ~~increased~~decreased by ~~$33.6 million.~~$65.4 million from the prior year period. The ~~increase in net~~year-over-year decrease was primarily due to lower incentive income ~~attributable~~and unrealized losses on our investments, partially offset by lower income taxes, lower compensation and benefits expenses, lower general, administrative and other expenses and lower losses on early retirement of debt. Also impacting our results to Class A Shareholders ~~for the first quarter of 2019 compared to the first quarter of 2018~~ was ~~primarily due to~~ an adjustment to the redemption value of Preferred Units recognized ~~during~~in connection with the Recapitalization in the first quarter of 2019 that increased net income attributable to Class A Shareholders in ~~connection with~~ the ~~Recapitalization. Partially offsetting this increase were higher compensation and benefits, primarily due~~first quarter of 2019 by $44.4 million. In the first quarter of 2020, an adjustment of $1.3 million to the ~~Recapitalization-related equity-based compensation grants. Management fees were also lower, primarily due~~redemption value of the Preferred Units related to ~~lower assets under management~~the accrual of distributions on the units decreased amounts attributable to Class A Shareholders in ~~multi-strategy funds, partially offset by higher assets under management in Institutional Credit Strategies.~~the first quarter of 2020.

Economic Income Analysis

In addition to analyzing our results on a GAAP basis, management also reviews our results on an “Economic Income” basis. Economic Income excludes the adjustments described below that are required for presentation of our results on a GAAP basis, but that management does not consider when evaluating operating ~~segment~~ performance in any given period. Management uses Economic Income as the basis on which it evaluates our financial performance 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 our results on a GAAP basis:

•Income allocations to our executive managing directors on their direct interests in the OzSculptor Operating Group. Management reviews operating performance at the OzSculptor Operating Group level, where our operations are performed, prior to making any income allocations.

•Equity-based compensation expenses, depreciation and amortization expenses, changes in the tax receivable agreement liability, net losses on early retirement of debt, gains and losses on fixed assets, and gains and losses on investments in funds, as management does not consider these items to be reflective of operating performance. However, the fair value of RSUs that are settled in cash to employees or executive managing directors is included as an expense at the time of settlement.

•Amounts related to non-cash interest expense accretion on Debt Securities issued in exchange for 2016 Preferred Units in connection with the Recapitalization. Upon exchange, Debt Securities were recognized at fair value and are being accreted to par value over time through interest expense for GAAP; however, management does not consider this interest accretion to be reflective of ~~the~~our operating ~~performance of the Company.~~performance.

•Amounts related to the consolidated 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.

In addition, expenses related to incentive income profit-sharing arrangements are generally recognized at the same time the related incentive income revenue is recognized, as management reviews the total compensation expense related to these arrangements in relation to any incentive income earned by the relevant fund. Further, deferred cash compensation is expensed in full in the year granted for Economic Income, rather than over the service period for GAAP.

As a result of the adjustments described above, as well as an adjustment to present management fees net of recurring placement and related service fees (rather than considering these fees an expense), management fees, incentive income, other revenues, compensation and benefits, general, administrative and other expenses and net income (loss) attributable to noncontrolling interests as presented on an Economic Income basis are also non-GAAP measures.

For reconciliations of our non-GAAP measures to the respective GAAP measures, please see “—Economic Income Reconciliations” at the end of this MD&A.

Our non-GAAP financial measures should not be considered as alternatives to our GAAP net income allocated to Class A Shareholders or cash flow from operations, or as indicative of liquidity or the cash available to fund operations. Our non-GAAP measures may not be comparable to similarly titled measures used by other companies.

We currently have two operating segments: Oz Funds and Real Estate. The Oz Funds segment provides asset management services to our multi-strategy funds, dedicated credit funds and other alternative investment vehicles. The Real Estate segment provides asset management services to our real estate funds.

Three Months Ended March 31, ~~2019~~2020 Compared to Three Months Ended March 31, ~~2018~~2019

Economic Income Revenues (Non-GAAP)

Three Months Ended March 31, 2019 Three Months Ended March 31, 2018
Oz Funds Real Estate
Total
Company
Oz Funds Real Estate
Total
Company

(dollars in thousands)
Economic Income Basis
Management fees $ 55,197
$ 4,818
$ 60,015
$ 62,975
$ 4,734
$ 67,709
Incentive income 46,290
6,908
53,198
46,239
4,595
50,834
Other revenues 3,577
192
3,769
4,433
70
4,503
Total Economic Income Revenues $ 105,064
$ 11,918
$ 116,982
$ 113,647
$ 9,399
$ 123,046

~~Oz Funds Segment~~


	Three Months Ended March 31,						Change
	2020		2019		$		%

	(dollars in thousands)
Economic Income Basis
Management fees	$	59,862	$	60,015	$	(153)	—	%
Incentive income	9,322		53,198		(43,876)		(82)	%
Other revenues	2,953		3,769		(816)		(22)	%
Total Economic Income Revenues	$	72,137	$	116,982	$	(44,845)	(38)	%

Economic Income revenues ~~for the Oz Funds segment~~ decreased ~~$8.6~~$44.8 million, primarily due to the following:

A ~~$7.8 milliondecrease~~ ~~in management~~•Management fees remained relatively flat, driven primarily by (i) a ~~$9.0~~$2.0 million decrease in ~~management fees from our~~ multi-strategy funds due to lower average assets under ~~management,~~management; and (ii) an $862 thousand decrease in opportunistic credit funds. These decreases were partially offset by (i) a ~~$2.7~~$1.7 million increase in real estate funds, primarily due to the launch of Sculptor Real Estate Fund IV during the fourth quarter of 2019; and (ii) a $1.2 million increase in Institutional Credit Strategies, primarily due to the launches of additional CLOs, aircraft securitizations, and ~~an aircraft securitization.~~a CBO. See “—Assets Under Management and Fund Performance—Weighted-Average Assets Under Management and Average Management Fee Rates” above for information regarding our average management fee rate.

•A ~~$51 thousandincrease~~$43.9 million decrease in incentive income, primarily due to the following:

◦

~~Multi-strategy funds.~~ A $2.2 million increase in incentive income from our multi-strategy funds, primarily due to (i) a $4.6 million increase related to fund investor redemptions; and (ii) a $1.0 million increase from longer-term assets under management. These increases were partially offset by (i) a $2.9 million decrease from assets under management subject to a one-year measurement period; and (ii) a $600 thousand decrease in tax distributions taken to cover tax liabilities on incentive income that has been accrued on certain longer-term assets under management.

◦


◦	~~Other funds.~~ ~~A $1.0 million increase, primarily related to assets under management subject to a one-year measurement period in certain strategy-specific funds.~~

An ~~$856 thousand~~•Multi-strategy funds. A $13.2 million decreasein ~~other revenues~~incentive income from our multi-strategy funds, which was driven by: (i) a $7.9 million decrease related to fund investor redemptions; (ii) a $3.2 million decrease from longer-term assets under management; and (iii) a $3.0 million decrease in tax distributions taken to cover tax liabilities on incentive income that has been accrued on certain longer-term assets under management. These decreases were primarily due to ~~lower interest~~negative fund performance in the first quarter of 2020.

•Opportunistic credit funds. A $26.2 million decrease in incentive income ~~earned on~~from our ~~investments~~opportunistic credit funds, which was driven by: (i) a $13.6 million decrease in ~~CLOs due~~tax distributions; (ii) a $7.5 million decrease from longer-term assets under management; (iii) a $4.3 million decrease from assets under management subject to a ~~reduction in risk retention investments. This~~one-year measurement period; and (iv) a $1.0 million decrease ~~was partially offset by higher interest income earned on cash equivalents.~~

~~Real Estate Segment~~

~~Economic Income revenues for the Real Estate segment increased $2.5 million,~~related to fund investor redemptions. These decreases were primarily due to negative fund performance in the ~~following:~~first quarter of 2020.

•Real estate funds.A ~~$2.3~~$4.5 million~~increase~~ decrease in incentive income from our real estate funds, primarily due to lower realizations, as these will vary from period to period based on exit opportunities.

Economic Income Expenses (Non-GAAP)


	Three Months Ended March 31,						Change
	2020		2019		$		%

	(dollars in thousands)
Economic Income Basis
Compensation and benefits	$	40,260	$	43,546	$	(3,286)	(8)	%
Interest expense	3,917		3,897		20		1	%
General, administrative and other expenses	25,677		31,762		(6,085)		(19)	%
Total Economic Income Expenses	$	69,854	$	79,205	$	(9,351)	(12)	%

Economic Income expenses decreased by $9.4 million, primarily due to the following:

•A $3.3 million decrease in compensation and benefits expenses, driven by (i) a $2.5 million decrease in bonus expense due to lower carried interest profit sharing expense as a result of lower realizations in our real estate funds, as well as lower discretionary bonus accrual; and (ii) a $777 thousand decrease in salaries and benefits due to lower headcount.

•A $6.1 million decrease in general, administrative and other expenses primarily driven by a ~~$4.5~~$5.2 million decrease in professional services expenses, primarily due to higher legal and accounting fees incurred in connection with the Recapitalization in the prior-year period.

•Partially offset by a $20 thousand increase in interest expense primarily due to a $2.1 million increase ~~from higher realizations. This increase was~~related to the Debt Securities, which began paying interest in 2020, partially offset by a $2.0 million decrease related to the 2018 Term Loan due to repayments made in ~~tax distributions.~~

~~Management fees were flat for~~connection with the ~~comparable periods.~~Recapitalization and subsequent paydowns in accordance with the Cash Sweep.

Economic Income ~~Expenses~~ (Non-GAAP)

Three Months Ended March 31, 2019 Three Months Ended March 31, 2018
Oz Funds Real Estate
Total
Company
Oz Funds Real Estate
Total
Company

(dollars in thousands)
Economic Income Basis
Compensation and benefits $ 36,761
$ 6,785
$ 43,546
$ 25,798
$ 7,221
$ 33,019
Interest expense 3,897
—
3,897
6,598
—
6,598
General, administrative and other expenses 31,116
646
31,762
29,987
711
30,698
Total Economic Income Expenses $ 71,774
$ 7,431
$ 79,205
$ 62,383
$ 7,932
$ 70,315

~~Oz Funds Segment~~


	Three Months Ended March 31,						Change
	2020		2019		$		%

	(dollars in thousands)
Economic Income	$	2,283	$	37,777	$	(35,494)	(94)	%

Economic Income ~~expenses for the Oz Funds segment increased by $9.4~~was $2.3 million in first quarter of 2020, compared to $37.8 million in first quarter of 2019. This decrease was primarily due to ~~the following:~~

An ~~$11.0 millionincrease~~ inlower incentive income, partially offset by lower compensation and benefits expenses driven by primarily by a $14.2 million increase in bonus expense due to reversals of deferred cash compensation due to forfeitures in the first quarter of 2018. This increase was partially offset by a $3.2 million decrease in salaries and ~~benefits, as our worldwide headcount decreased to~~ ~~393~~ ~~as of~~ ~~March 31, 2019, from~~ ~~462~~ ~~as of~~ ~~March 31, 2018~~.

~~An offsetting $2.7 million decrease in interest expense, which was primarily driven by~~ lower ~~average debt outstanding balance.~~

~~General,~~general, administrative and other ~~expenses remained relatively flat period-over-period. During the first quarter of 2019, we incurred~~ ~~$9.8 million~~ ~~of expenses related to the Recapitalization, which were offset by decreases across various professional services.~~

expenses.

~~Real Estate Segment~~

~~Economic Income expenses for the Real Estate segment decreased by $501 thousand, primarily due to lower bonus expense.~~

~~Other Economic Items (Non-GAAP)~~

~~Net loss attributable to noncontrolling interests represent the amount oflossthat was reduced from Economic Income and attributed to residual interests in certain businesses not owned by us.~~

~~Economic Income (Non-GAAP)~~

Three Months Ended March 31, Change
2019 2018 $ %

(dollars in thousands)
Economic Income:
Oz Funds $ 33,290
$ 51,275
$ (17,985 ) -35 %
Real Estate 4,487
1,467
3,020
206 %
Total Company $ 37,777
$ 52,742
$ (14,965 ) -28 %

~~Oz Funds Segment~~

The year-over-year decline was primarily due to higher bonus expense as a result of reversals of deferred cash compensation due to forfeitures in the first quarter of 2018. Also contributing to the decline were lower management fees, primarily due to lower assets under management in multi-strategy funds, partially offset by higher assets under management in Institutional Credit Strategies.

~~Real Estate Segment~~

~~The period-over-period improvement was primarily due to higher incentive income.~~

Liquidity and Capital Resources

The working capital needs of our business have historically been met, and we anticipate will continue to be met, through cash generated from management fees and incentive income earned by the OzSculptor Operating Group from our funds, as well as other sources of liquidity noted above and below.

Over the next 12 months, we expect that our primary liquidity needs will be to:

•Pay our operating expenses.

•Pay interest and principal, as applicable, on our debt obligations, repurchase agreements and 2019 Preferred ~~Units.~~Units, including required paydowns under the Cash Sweep discussed below.

•Provide capital to facilitate the growth of our business, including making risk retention investments in CLOs managed by us that are subject to EU risk retention rules.

•Pay income taxes as well as compensation-related tax withholding obligations.

•Make cash distributions in accordance with our distribution policy as discussed below under “—Dividends and Distributions.”

Historically, management fees have been sufficient to cover ~~all of~~ our “fixed” operating expenses, which we define as salaries, benefits, a minimum discretionary bonus and our general, administrative and other expenses incurred in the ordinary course of business. ~~Rate reductions in~~Net capital outflows from our multi-strategy funds ~~combined with year-over-year net capital outflows~~ have resulted in lower management fees over the last several years, and while we are making every effort to scale our operations so that management fees are sufficient to cover our fixed operating

expenses, our current management fees do not cover our current fixed operating expenses. Additionally, the global economic downturn due to the COVID-19 pandemic has increased the risk that our management fees may decline further. No assurances can be given that our management fees ultimately will be sufficient for these purposes in future periods.

InWe have evaluated our financing arrangements in light of the ~~event that~~COVID-19 pandemic to ensure compliance with debt covenants. As of the date of this filing, we remain in compliance with our debt covenants and we expect to continue to be in compliance under the terms of these arrangements in the near term. Our ability to access financial markets, should it be necessary, may be limited because of the COVID-19 pandemic.

Currently our management fees do not cover fixed operating expenses and we ~~would~~intend to continue to rely on cash on hand and incentive income to cover any shortfall, as well as to fund any other liabilities. We cannot predict the amount of incentive income, if any, that we may earn in any given year. Total annual revenues, which are heavily influenced by the amount of incentive income we earn, historically have been sufficient to fund both our fixed operating expenses and all of our other working capital needs, including annual discretionary cash bonuses. These cash bonuses, which historically have comprised our largest cash operating expense, are variable such that in any year where total annual revenues are greater or less than the prior year, cash bonuses may be adjusted accordingly. Our ability to scale our largest cash operating expense to our total annual revenues helps us manage our cash flow and liquidity position from year to year.

Based on our past results, management’s experience and our current level of assets under management, we believe that our existing cash resources, together with the cash generated from management fees will be sufficient to meet our anticipated fixed operating expenses and other working capital needs for at least the next 12 months. Working capital does not include contingent liabilities.

Historically, we have determined the amount of discretionary cash bonuses during the fourth quarter of each year, based on our total annual revenues. We have historically funded these amounts through fourth quarter management fees and incentive income crystallized on December 31, which represents the majority of the incentive income we typically earn each year. To the extent our funds generate incentive income in the fourth quarter, we may elect to increase the amount of cash bonuses paid to employees over the amount already accrued throughout the year, with any incremental amounts recognized as expense in the fourth quarter. Although we cannot predict the amount, if any, of incentive income we may earn, we are able to regularly monitor expected management fees and we believe that we will be able to adjust our expense infrastructure, including discretionary cash bonuses, as needed to meet the requirements of our business and in order to maintain positive operating cash flows. Nevertheless, if we generate insufficient cash flows from operations to meet our short-term liquidity needs, we may have to borrow funds or sell assets, subject to existing contractual arrangements.

We may use cash on hand to repay all or a portion of our indebtedness outstanding or any other liabilities prior to their respective maturity or due dates, which would reduce amounts available to distribute to our Class A Shareholders. Additionally, we may refinance all or a portion of our outstanding indebtedness prior to their respective maturity dates. For any amounts unpaid as of a maturity or due date, we will be required to repay the remaining balance by using cash on hand, refinancing the remaining balance by issuing new notes or entering into new credit facilities, which could result in higher borrowing costs, or by issuing equity or other securities, which would dilute existing shareholders. No assurance can be given that we will be able to issue new notes, enter into new credit facilities or issue equity or other securities in the future on attractive terms or at all. Any new notes or new credit facilities that we may be able to issue or enter into may have covenants that impose additional limitations on us, including with respect to making distributions, entering into business transactions or other matters, and may result in increased interest expense. If we are unable to meet our debt obligations on terms that are favorable to us, our business may be adversely impacted.

On July 27, 2017, the UK Financial Conduct Authority announced that it would phase out LIBOR as a benchmark by the end of 2021. To address a potential transition away from LIBOR, the Senior Subordinated Credit Agreement and Senior Credit Agreement each provide for an agreed upon methodology to calculate the new floating rate reference plus new applicable spreads. See “Part I, Item 1A. Risk Factors—Risks Related to Our Business—Changes in the method of determining LIBOR, or the replacement of LIBOR with an alternative reference rate, may adversely affect our credit arrangements and our collateralized loan obligation transactions” in our Annual Report for additional information.

In order to meet risk retention requirements for certain of the CLOs we manage, we use a combination of cash on hand, as well as financing under the CLO Investments Loans and repurchase agreements to fund our 5% risk retention investments. We expect to continue relying on a combination of cash on hand and financing to fund future CLO risk retention investments.

For our other longer-term liquidity requirements, we expect to continue to fund our fixed operating expenses through management fees and to fund discretionary cash bonuses and the repayment of our debt obligations through a combination of management fees and incentive income. We may also decide to meet these requirements by issuing additional debt, equity or other securities.

Over the long term, we believe we will be able to grow our assets under management and generate positive investment performance in our funds, which we expect will allow us to grow our management fees and incentive income in amounts sufficient to cover our long-term liquidity requirements.

To maintain maximum flexibility to meet demands and opportunities both in the short and long term, and subject to existing contractual arrangements, we may want to retain cash, issue additional equity or borrow additional funds to:

•Support the future growth in our business.

•Create new or enhance existing products and investment platforms.

•Repay ~~borrowings.~~amounts due under our debt obligations, repurchase agreements and 2019 Preferred Units.

•Repurchase Class A Shares or Sculptor Operating Group Units.

•Pursue new investment opportunities.

•Develop new distribution channels.

•Cover potential costs incurred in connection with the legal and regulatory matters described in the notes to our consolidated financial statements included in this report.

Market conditions, including the COVID-19 pandemic, and other factors may make it more difficult or costly to raise or borrow additional funds. Excessive costs or other significant market barriers may limit or prevent us from maximizing our growth potential and flexibility.

Cash Sweep

As part of the Recapitalization, we also instituted the Cash Sweep with regards to the ~~paydowns~~paydown of the 2018 Term Loan and the 2019 Preferred Units. See Note 3 for detailed information regarding how the Cash Sweep amount is determined.

Debt Obligations

2018 Term Loan

~~In February 2019, we repaid $100.0~~As of March 31, 2020, $18.0 million ofremained outstanding under the 2018 Term ~~Loan and terminated the 2018 Revolving Credit Facility.~~Loan. In accordance with the Cash Sweep, we repaid an additional ~~$20.0~~$9.5 million ~~during the first quarter of 2019. As of March 31, 2019, $80.0 million remained outstanding under the 2018 Term Loan. On~~on May ~~8, 2019 we repaid an additional $25.0 million under the Cash Sweep.~~5, 2020. See Note 8 for additional ~~details.~~details, including information regarding financial covenants contained in these agreements. As of the date of this filing, we remain in compliance with these covenants and we expect to continue to be in compliance under the terms of the existing arrangements.

2019 Preferred Units ~~Restructuring~~and Debt Securities

In connection with the Recapitalization, $200.0 million of the 2016 Preferred Units was restructured into the Debt Securities and the remaining $200.0 million of the 2016 Preferred Units was restructured into the 2019 Preferred Units. As of March 31, ~~2019,~~2020, both the Debt Securities and the 2019 Preferred Units remain outstanding. See Notes 8 and 10 for additional ~~information.~~

information, including information regarding financial covenants contained in these agreements. As of the date of this filing, we remain in compliance with these covenants and we expect to continue to be in compliance under the terms of the existing arrangements.

We have the option to defer distributions on the 2019 Preferred Units, in which case such amount is added to the redemption value of the 2019 Preferred Units and would be eligible for the redemption discount described in Note 10. We elected to do so for the first payment due during the first quarter of 2020.

CLO Investments Loans and Securities Sold Under Agreements to Repurchase

We enter into loans and repurchase agreements to finance portions of our required risk retention investments in ~~CLOs (collectively “the CLO Investments Loans”).~~CLOs. In general, we will make interest and principal payments on ~~the loans~~these borrowings at such time interest and principal payments are received on our investments in the ~~CLOs,~~related CLOs. These financing arrangements are not subject to any financial maintenance covenants, but are subject to customary events of default and ~~will~~covenants included in financing arrangements of this type and also include terms that require our continued involvement with the CLOs. In addition to customary events of default included in financing arrangements of this type, the CLO Investments Loans may be accelerated to the extent there is an event of default (“EOD”) at the CLO level. Prior to the relevant CLO’s maturity date, this would include certain material covenant breaches, regulatory and insolvency events for the relevant CLO issuer, as well as a payment default where the relevant CLO is unable to make ~~principal~~interest payments on the ~~loans~~senior, non-deferrable interest notes issued by the CLO. For the repurchase agreements, in addition to ~~the extent principal payments~~customary events of default and covenants included in financing arrangements of this type, there are ~~received on its investments~~margin requirements that may cause us to post additional cash collateral; however, this is only triggered in the ~~CLOs.~~event of an EOD at the CLO level. Currently, we do not view any of the customary or CLO level EODs for these types of financing arrangements as a material risk. In particular, an EOD related to an interest payment default on the senior, non-deferrable interest notes of the type of cash flow CLOs that we manage has been unprecedented even during the credit crisis in 2008 and 2009. See ~~Note~~Notes 9 and 11 to our consolidated financial statements for additional details.

~~Securities Sold Under Agreements to Repurchase~~

See Note 11 to our consolidated financial statements included in this report for a description of securities sold under agreements to repurchase, which we use to finance risk retention investments in certain of our European CLOs.

Tax Receivable Agreement

We have made, and may in the future be required to make, payments under the tax receivable agreement that we entered into with our executive managing directors and Ziff Investors Partnership, L.P. II and certain of its affiliates and control persons (the “Ziffs”). As of March 31, 2020, assuming no material changes in the ~~Ziffs. The purchase by~~relevant tax law and that we generate sufficient taxable income to realize the ~~Oz Operating Group~~full tax benefit of ~~Group A Units from our executive managing directors and~~ the ~~Ziffs with proceeds~~increased amortization resulting from the 2007 Offerings, and subsequent taxable exchanges by them of Group A Units (including Group A Units into which Group D Units or Group E Units may convert) or Group P Units for our Class A Shares on a one-for-one basis (or, at our option, the cash equivalent thereof), resulted, and, in the case of future exchanges, are anticipated to result, in an increase in ~~the~~ tax basis of ~~the assets of the Oz~~certain Sculptor Operating Group ~~that would not otherwise have been available. We anticipate that any such tax basis adjustment resulting from an exchange will be allocated principally to certain intangible~~ assets, ~~of the Oz Operating Group, and~~ we will derive our tax benefits principally through amortization of these intangibles over a 15-year period. Consequently, these tax basis adjustments will increase, for tax purposes, our depreciation and amortization expenses and will therefore reduce the amount of tax that Oz Corp and any other future corporate taxpaying entities that acquire Group B Units in connection with an exchange, if any, would otherwise be required to pay in the future. Accordingly, pursuant to the tax receivable agreement, such corporate taxpaying entities (including Och-Ziff Capital Management Group Inc. once it is treated as a corporate taxpayer following the Corporate Classification Change) have agreedexpected to pay our executive managing directors and the Ziffs ~~a percentage of the amount of~~approximately $187.5 million. Future cash savings ~~if any, in federal, state~~ and ~~local income taxes in the United States that these entities actually realize~~ related payments to ~~their units as a result of such increases in tax basis. Such percentage was originally 85% of such annual cash savings under the tax receivable agreement.~~

In September 2016, we amended the tax receivable agreement to provide that no amounts were due or payable under the agreement with respect to the 2015 and 2016 tax years. In connection with the Recapitalization, in February 2019, we amended the tax receivable agreement to provide that, conditioned on Och-Ziff Capital Management Group Inc. electing to be classified as, or converting into, a corporation for U.S. tax purposes during 2019, (i) no amounts are due or payable with respect to the 2017 tax year, (ii) only partial payments (equal to 85% of the excess of such cash savings that would otherwise be due over 85% of such cash savings determined assuming that taxable income equals Economic Income (the “2018 excess amount”)) are due and payable in respect of the 2018 tax year and (iii) the percentage of cash savings required to be paid with respect to the 2019 tax year and thereafter, as well as with respect to cash savings from subsequent exchanges, is reduced to 75%.

~~In connection with the departure of certain former~~our executive managing directors ~~since the 2007 Offerings, the right to receive payments~~ under the tax receivable agreement ~~by those former executive managing directors was contributed~~in respect of subsequent exchanges would be in addition to ~~the Oz Operating Group. As a result, we expect~~these amounts. See Note 18 to pay to the other executive managing directors and the Ziffs approximately 78% of the 2018 excess amount and 69% of the amount of cash savings, if any, in federal, state and local income taxes in the United States that we actually realize as a result of such increases in tax basis with respect to the 2019 tax year and future tax years. To the extent that we do not realize any cash savings, we would not be required to make corresponding payments under the tax receivable agreement.our consolidated financial statements for additional details.

Payments under the tax receivable agreement are anticipated to increase the tax basis adjustment of intangible assets resulting from a prior exchange, with such increase being amortized over the remainder of the amortization period applicable to the original basis adjustment of such intangible assets resulting from such prior exchange. It is anticipated that this willand, consequently, result in increasing annual amortization deductions in the taxable years of and after such increases to the original basis adjustments, and potentially will give rise to increasing tax savings with respect to such years and correspondingly increasing payments under the tax receivable agreement.

As of March 31, 2019, assuming no material changes in the relevant tax law and that we generate sufficient taxable income to realize the full tax benefit of the increased amortization resulting from the increase in tax basis of our assets (and without taking into account the effect of the 2019 amendment to the tax receivable agreement or the change in our tax classification from a partnership to a corporation, each of which were effective April 1, 2019), we expected to pay our executive managing directors and the Ziffs approximately $277.8 million as a result of the cash savings to our intermediate holding companies from the purchase of Group A Units from our executive managing directors and the Ziffs with proceeds from the 2007 Offerings and the exchange of Group A Units for Class A Shares. Future cash savings and related payments to our executive managing directors under the tax receivable agreement in respect of subsequent exchanges would be in addition to these amounts. The obligation to make payments under the tax receivable agreement is an obligation of OzSculptor Corp, and any other corporate taxpaying entities that hold Group B Units, and not of the OzSculptor Operating Group. We may need to incur debt to finance payments

under the tax receivable agreement to the extent the OzSculptor Operating Group does not distribute cash to ~~our intermediate corporate tax paying entities~~Sculptor Corp in an amount sufficient to meet our obligations under the tax receivable agreement.

The actual increase in tax basis of the OzSculptor Operating Group assets resulting from an exchange or from payments under the tax receivable agreement, as well as the amortization thereof and the timing and amount of payments under the tax receivable agreement, will vary based upon a number of factors, including the following:

•The amount and timing of our income will impact the payments to be made under the tax receivable agreement. To the extent that we do not have sufficient taxable income to utilize the amortization deductions available as a result of the increased tax basis in the OzSculptor Operating Partnerships’ assets, payments required under the tax receivable agreement would be reduced.

•The price of our Class A Shares at the time of any exchange will determine the actual increase in tax basis of the OzSculptor Operating Partnerships’ assets resulting from such exchange; payments under the tax receivable agreement resulting from future exchanges, if any, will be dependent in part upon such actual increase in tax basis.

•The composition of the OzSculptor Operating Group assets at the time of any exchange will determine the extent to which we may benefit from amortizing the increased tax basis in such assets and thus will impact the amount of future payments under the tax receivable agreement resulting from any future exchanges.

•The extent to which future exchanges are taxable will impact the extent to which we will receive an increase in tax basis of the OzSculptor Operating ~~Group’~~Group assets as a result of such exchanges, and thus will impact the benefit derived by us and the resulting payments, if any, to be made under the tax receivable agreement.

•The tax rates in effect at the time any potential tax savings are realized, which would affect the amount of any future payments under the tax receivable agreement.

Depending upon the outcome of these factors, payments that we may be obligated to make to our executive managing directors and the Ziffs under the tax receivable agreement in respect of exchanges could be substantial. In light of the numerous factors affecting our obligation to make payments under the tax receivable agreement, the timing and amounts of any such actual payments are not reasonably ascertainable.

Dividends and Distributions

The table below presents the cash dividends paid on our Class A Shares in ~~2019,~~2020 and ~~the~~2019. We paid no related cash distributions to our executive managing directors on their Sculptor Operating Group A Units ~~and Group D Units.~~in the respective periods.

Class A Shares
Payment Date Record Date Dividend
per Share Related Distributions
to Executive Managing
Directors
(dollars in thousands)
March 29, 2019 March 22, 2019 $ 0.23
$ —


	Class A Shares
Payment Date	Record Date	Dividend per Share
March 3, 2020	February 25, 2020	$	0.53
November 25, 2019	November 18, 2019	$	0.03
August 21, 2019	August 14, 2019	$	0.32
May 28, 2019	May 20, 2019	$	0.37
March 29, 2019	March 22, 2019	$	0.23

As discussed in Note 3, in connection with the Recapitalization, and pursuant to the Cash Sweep, we and our executive managing directors agreed to a “Distribution Holiday” on the Group A Units, Group D Units, Group E Units, Group P Units and certain RSUs that will terminate on the earlier of (x) 45 days after the last day of the first calendar quarter as of which the achievement of $600.0 million of Economic Income adjusted for certain items described in the OzSculptor Operating Partnership limited partnership agreements is realized and (y) April 1, 2026. During the Distribution Holiday, dividends may continue to be paid on our Class A Shares.

As agreed to as part of the Recapitalization, during the Distribution Holiday, pursuant to the Cash Sweep, we expect to pay dividends on our Class A Shares annually in an aggregate amount equal to not less than 20% or greater than 30% of our annual Economic Income less an estimate of payments under the tax receivable agreement, Preferred Units distributions (whether paid or deferred) and income taxes related to the earnings for the ~~periods (“Distributable Earnings”) or more than 30% of Distributable Earnings;~~periods; provided, that, if the minimum amount of dividends

eligible to be made hereunder would be $1.00 or less per Class A Share, then up to $1.00 per Class A Share (subject to appropriate adjustment in the event of any equity dividend, equity split, combination or other similar recapitalization with respect to the Class A Shares).

As a result of our Economic Income for the first quarter of 2020, less an estimate for payments under the tax receivable agreement, accrued Preferred Units distributions and income taxes, we did not declare a dividend in respect of the quarter.

The declaration and payment of any distribution may be subject to legal, contractual or other restrictions. For example, as a Delaware corporation, the ~~Registrant is not permitted to make distributions if~~Registrant’s Board may only declare and ~~to the extent that after giving effect to such distributions, its liabilities plus the par value~~pay dividends either out of its ~~common shares would exceed the fair value~~surplus (as defined in Delaware General Corporation Law) or in case there is no such surplus, out of its ~~assets.~~net profits for the fiscal year in which the dividend is declared and/or the preceding fiscal year. Our cash needs and payment obligations may fluctuate significantly from quarter to quarter, and we may have material unexpected expenses in any period. This may cause amounts available for distribution to significantly fluctuate from quarter to quarter or may reduce or eliminate such amounts.

Additionally, RSUs outstanding accrue dividend equivalents equal to the dividend amounts paid on our Class A Shares. To date, these dividend equivalents have been awarded in the form of additional RSUs, which accrue additional dividend equivalents. The dividend equivalents will only be paid if the related RSUs vest and will be settled at the same time as the underlying RSUs. Our Board of Directors has the right to determine whether the RSUs and any related dividend equivalents will be settled in Class A Shares or in cash. We currently withhold shares to satisfy the tax withholding obligations related to vested RSUs and dividend equivalents held by our employees, which results in the use of cash from operations or borrowings to satisfy these tax-withholding payments.

Historically, when we have paid dividends on our Class A Shares, we also made distributions to our executive managing directors on their interests in the OzSculptor Operating Group, subject to the terms of the limited partnership agreements of the OzSculptor Operating Partnerships; however, as part of the Recapitalization, the OzSculptor Operating Partnerships initiated the Distribution Holiday. See Note 3 to our consolidated financial statements in this report for additional information regarding the Distribution Holiday.

Our cash distribution policy has certain risks and limitations, particularly with respect to our liquidity. Although we expect to pay distributions according to our policy, we may not make distributions according to our policy, or at all, if, among other things, we do not have the cash necessary to pay the distribution. Furthermore, by paying cash distributions rather than investing that cash in our businesses, we might risk slowing the pace of our growth, or not having a sufficient amount of cash to fund our obligations, operations, new investments or unanticipated capital expenditures, should the need arise. In such event, we may not be able to execute our business and growth strategy to the extent intended.

Our Funds’ Liquidity and Capital Resources

Our funds have access to liquidity from our prime brokers and other counterparties. Additionally, our funds may have committed facilities in addition to regular financing from our counterparties. These sources of liquidity provide our funds with additional financing resources, allowing them to take advantage of opportunities in the global marketplace.

Our funds’ current liquidity position could be adversely impacted by any substantial, unanticipated investor redemptions from our funds that are made within a short time period. As discussed above in “—Assets Under Management and Fund Performance,” capital contributions from investors in our multi-strategy and open-end opportunistic credit funds generally are subject to initial lock-up periods of one to three years. Following the expiration of these lock-up periods, subject to certain limitations, investors may redeem capital generally on a quarterly or annual basis upon giving 30 to 90 days’ prior written notice. These lock-ups and redemption notice periods help us to manage our liquidity position. ~~However, upon the payment of a redemption fee to the applicable fund and upon giving 30 days’ prior written notice, certain investors may redeem capital during the lock-up period.~~ Investors in our other funds are generally not allowed to redeem until the end of the life of the fund.

We also follow a rigorous risk management process and regularly monitor the liquidity of our funds’ portfolios in relation to economic and market factors and the timing of potential investor redemptions. As a result of this process, we may determine to reduce exposure or increase the liquidity of our funds’ portfolios at any time, whether in response to global economic and market conditions, redemption requests or otherwise. For these reasons, we believe we will be well prepared to address market conditions and redemption requests, as well as any other events, with limited impact on our funds’ liquidity position. Nevertheless, significant redemptions made during a single quarter could adversely affect our funds’ liquidity position, as

we may meet redemptions by using our funds’ available cash or selling assets (possibly at a loss). Such actions would result in lower assets under management, which would reduce the amount of management fees and incentive income we may earn. Our funds could also meet redemption requests by increasing leverage, provided we are able to obtain financing on reasonable terms, if at all. We believe our funds have sufficient liquidity to meet any anticipated redemptions for the foreseeable future.

Please see the risk factor included in “Item 1A. Risk Factors” in this quarterly report for additional information.

Cash Flows Analysis

Operating Activities. Net cash from operating activities for the three months ended March 31, 2020 and 2019 ~~and 2018~~ was ~~$(35.7)~~$(15.1) million and ~~$159.9~~$(35.7) million, respectively. Our net cash flows from operating activities are generally comprised of current-year management fees, the collection of incentive income earned during the fourth quarter of the previous year, interest income collected on our investments in CLO’s, less cash used for operating expenses, including interest paid on our debt obligations. Additionally, net cash from operating activities also includes the investment activities of the funds we consolidate.

Net cash flows from operating activities for the three months ended March 31, ~~2019 decreased~~2020 increased from the prior year period due to ~~lower~~higher year-end incentive income earned in 2019, a large portion of which was collected in the beginning of 2020, as compared to year-end incentive income earned in 2018, a large portion of which was collected in the beginning of ~~2019,~~2019. Additionally, we paid less in interest in the current year period as compared to ~~incentive earned in 2017,~~the prior year period, primarily as a ~~large portion~~result of ~~which was collected in~~lower average outstanding balance on the ~~beginning of 2018.~~ 2018 Term Loan.

The ~~decrease~~increases in operating cash ~~flow was~~flows were partially offset by ~~lower~~higher discretionary bonuses paid in ~~2019~~2020 as compared to ~~2018.~~2019. The majority of our cash bonus expenses are paid out during the first quarter of the following year. ~~Also contributing to~~Additionally, the ~~decrease~~increases in operating cash ~~in 2019~~flows were ~~costs related to the Recapitalization, which were offset by decreases across various operating expenses categories. The decreases in operating cash were~~also partially offset by ~~the increase in cash inflows in 2019 from the~~ investment activities of the funds we consolidate. These investment-related cash flows are of the consolidated funds and do not directly impact the cash flows related to our Class A Shareholders. As we deconsolidated certain of our funds in the third quarter 2019, we do not expect significant cash flows in the future from consolidated funds.

Investing Activities. Net cash from investing activities for the three months ended March 31, 2020 and 2019 was $(46.8) million, and ~~2018 was~~ $27.2 million, respectively. Investing cash outflows in 2020 primarily related to purchases of U.S. government obligations and ~~$(70.3) million respectively.~~investments made in Sculptor funds, partially offset by maturities and sales of U.S. government obligations. Investing cash inflows in 2019 primarily related to return of investments in funds and ~~purchases~~maturities and sales of U.S. government obligations, partially offset by purchases of investments in funds made during the quarter. ~~Investing cash outflows in 2018 primarily related to sales of investments. Investment-related cash flows of the consolidated funds are classified within operating activities.~~

Financing Activities. Net cash from financing activities for the three months ended March 31, 2020 and 2019 ~~and 2018~~ was ~~$(161.4)~~$(36.2) million, and ~~$50.1~~$(161.4) million, respectively. Net cash from financing activities is generally comprised of dividends paid to our Class A Shareholders, borrowings and repayments related to our debt obligations, and proceeds from repurchase agreements used to finance risk retention investments in our European CLOs. Contributions from noncontrolling interests, which primarily relate to fund investor contributions into the consolidated funds (prior to the deconsolidation of certain of our funds in the third quarter of 2019), and distributions to noncontrolling interests, which primarily relate to fund investor redemptions from the consolidated funds (prior to the deconsolidation of certain of our funds in the third quarter of 2019) and distributions to our executive managing directors on their Group A Units ~~prior~~(prior to the Distribution ~~Holiday,~~Holiday), are also included in net cash from financing activities.

As we deconsolidated certain of our funds in the third quarter 2019, we do not expect significant cash flows in the future from consolidated funds.

In the three months ended March 31, 2020, we repaid $27.0 million of the 2018 Term Loan. In thethree months ended March 31, 2019, we repaid $120.0 million of the 2018 Term Loan and a $21.1 million CLO Investment Loan. In

We paid dividends of $11.6 million to our Class A Shareholders in the three months ended March 31, ~~2018, we made $60.7 million of borrowings related~~2020, compared to ~~CLO Investments Loans.~~

~~We paid~~ dividends of $4.7 million to our Class A Shareholders in the three months ended March 31, 2019. ~~We paid dividends of $13.4 million to our Class A Shareholders and $17.2 million of~~No distributions were made to our executive managing directors ~~on their Group A Units~~ in the three months ended March 31, ~~2018.~~

2020 or the three months ended March 31, 2019, as a result of the Distribution Holiday.

Contractual Obligations

The table below summarizes our contractual cash obligations as of March 31, ~~2019,~~2020, and the effect such obligations are expected to have on our liquidity and cash flows in future periods.


	April 1, 2019-December 31, 2019		2020 - 2021		2022 - 2023		2024 - Thereafter		Total			April 1, 2020-December 31, 2020		2021-2022		2023-2024		Thereafter		Total

	(dollars in thousands)											(dollars in thousands)
Long-term debt⁽¹⁾	$	—	$	—	$	176,998	$	177,498	$	354,496	Long-term debt⁽¹⁾	$	—	$	45,386	$	115,972	$	119,201	$	280,559
Estimated interest on long-term debt⁽²⁾	4,432		40,374		31,934		34,415		111,155		Estimated interest on long-term debt⁽²⁾	11,658		30,047		19,390		10,460		71,555
Securities sold under agreements to repurchase⁽³⁾	—		—		—		62,013		62,013		Securities sold under agreements to repurchase⁽³⁾	—		—		—		95,775		95,775
Operating leases⁽⁴⁾	16,136		43,577		39,004		97,587		196,304		Operating leases⁽⁴⁾	16,814		40,622		34,385		82,234		174,055
Tax receivable agreement⁽⁵⁾	72,249		58,436		71,439		75,649		277,773		Tax receivable agreement⁽⁵⁾	11,796		3,689		59,950		112,026		187,461
Unrecognized tax benefits⁽⁶⁾	—		—		—		—		—		Unrecognized tax benefits⁽⁶⁾	—		—		—		—		—
Incentive income subject to clawback⁽⁷⁾	—		—		—		—		—		Incentive income subject to clawback⁽⁷⁾	—		—		—		—		—
Total Contractual Obligations	$	92,817	$	142,387	$	319,375	$	447,162	$	1,001,741	Total Contractual Obligations	$	40,268	$	119,744	$	229,697	$	419,696	$	809,405

_______________

~~(1)~~

Represents indebtedness outstanding under the Debt Securities, 2018 Term Loan and the CLO Investments Loans. In relation to CLO Investments Loans, the amounts present our best estimate of the timing of expected payments on investments in CLOs, as the timing of payments on CLO Investments Loans is contingent on principal payments made to us on our investments in CLOs. Amounts presented represent expected cash payments, and have not been reduced for any discounts or deferred debt issuance costs that are netted against these balances for presentation in our consolidated balance sheet.

~~(2)~~

~~Represents expected future interest payments on long-term debt based on the LIBOR and EURIBOR rates that were in effect as of~~ ~~March 31, 2019~~.

(1)Represents indebtedness outstanding under the Debt Securities, 2018 Term Loan and the CLO Investments Loans. In relation to CLO Investments Loans, the amounts present our best estimate of the timing of expected payments on investments in CLOs, as the timing of payments on CLO Investments Loans is contingent on principal payments made to us on our investments in CLOs. Amounts presented represent expected cash payments, and have not been reduced for any discounts or deferred debt issuance costs that are netted against these balances for presentation in our consolidated balance sheet.

(2)Represents expected future interest payments on long-term debt based on the LIBOR and EURIBOR rates that were in effect as of March 31, 2020.

(3)Represents payments on securities sold under agreements to repurchase in accordance with the set scheduled maturity date that corresponds to the maturities of the securities sold under such transaction and exclude any interest payments as such amounts cannot be reasonably estimated. Interest payments on securities sold under agreements are based on the weighted average effective interest rate of each class of securities that have been sold, plus a spread to be agreed upon by the parties.

(4)Represents the payments required under our various operating leases for office space and data centers.

(5)Represents the maximum amounts that would be payable to our executive managing directors and the Ziffs under the tax receivable agreement assuming that we will have sufficient taxable income each year to fully realize the expected tax savings resulting from the purchase by the Sculptor Operating Group of Group A Units with proceeds from the 2007 Offerings, as well as subsequent exchanges. In light of the numerous factors affecting our obligation to make such payments, the timing and amounts of any such actual payments may differ materially from those presented in the table above.

(6)We are not currently able to make a reasonable estimate of the timing of payments in individual years in connection with our unrecognized tax benefits of $8.3 million, and therefore these amounts are not included in the table above.

(7)As of March 31, 2020, we had incentive income collected from certain of our funds that is subject to clawback in the event of future losses in the respective fund. We are not currently able to make a reasonable estimate of the timing of payments, if any, as the payments are contingent on future realizations of investments in the respective fund, the timing of which is uncertain.

~~(3)~~

Represents payments on securities sold under agreements to repurchase in accordance with the set scheduled maturity date that corresponds to the maturities of the securities sold under such transaction and exclude any interest payments as such amounts cannot be reasonably estimated. Interest payments on securities sold under agreements are based on the weighted average effective interest rate of each class of securities that have been sold, plus a spread to be agreed upon by the parties


~~(4)~~	~~Represents the payments required under our various operating leases for office space and data centers.~~

~~(5)~~

Represents the maximum amounts that would be payable to our executive managing directors and the Ziffs under the tax receivable agreement assuming that we will have sufficient taxable income each year to fully realize the expected tax savings resulting from the purchase by the Oz Operating Group of Group A Units with proceeds from the 2007 Offerings, as well as subsequent exchanges as discussed above under the heading “—Liquidity and Capital Resources—Tax Receivable Agreement.” In light of the numerous factors affecting our obligation to make such payments, the timing and amounts of any such actual payments may differ materially from those presented in the table above.


~~(6)~~	We are not currently able to make a reasonable estimate of the timing of payments in individual years in connection with our unrecognized tax benefits of $7.0 million, and therefore these amounts are not included in the table above.


~~(7)~~	~~As of~~ ~~March 31, 2019~~, we had incentive income collected from certain of our funds that is subject to clawback in the event of future losses in the respective fund. We are not currently able to make a reasonable estimate of the timing of payments, if any, as the payments are contingent on future realizations of investments in the respective fund, the timing of which is uncertain.

Off-Balance Sheet Arrangements

In the normal course of business, we enter into various off-balance sheet arrangements including sponsoring and owning general partner interests in our funds and retained interests in a CLO we manage. We also have ongoing capital commitment arrangements with certain of our funds. None of our off-balance sheet arrangements require us to fund losses or guarantee target returns to investors in any of our other investment funds. See Notes 5 and 6 of our consolidated financial statements included in this report for information on our retained and variable interests in our funds and CLOs.

Critical Accounting Policies and Estimates

Critical accounting policies are those that require us to make significant judgments, estimates or assumptions that affect amounts reported in our financial statements or the notes thereto. We base our judgments, estimates and assumptions on current facts, historical experience and various other factors that we believe to be reasonable and prudent. Actual results may differ

materially from these estimates. See Note 2 to our consolidated financial statements included in this report for a description of our accounting policies. Set forth below is a summary of what we believe to be our most critical accounting policies and estimates.

Fair Value of Investments

The valuation of investments held by our funds is the most critical estimate made by management impacting our results. Pursuant to specialized accounting for investment companies under GAAP, investments held by the funds are carried at their estimated fair values. The valuation of investments held by our funds has a significant impact on our results, as our management fees and incentive income are generally determined based on the fair value of these investments.

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 (Level I) or for which fair value can be measured from actively quoted prices (Level II) generally will have a higher degree of market price observability and lesser degree of judgment used in measuring fair value than those measured using pricing inputs that are unobservable in the market (Level III). See Note 5 to our consolidated financial statements included in this report for additional information regarding fair value measurements.

As of March 31, 2020, the absolute values of our funds’ invested assets and liabilities (excluding the notes and loans payable of our securitization vehicles) were classified within the fair value hierarchy as follows: approximately 27% within Level I; approximately 41% within Level II; and approximately 32% within Level III. As of December 31, 2019, the absolute values of our funds’ invested assets and liabilities (excluding the notes and loans payable of our ~~CLOs)~~securitization vehicles) were classified within the fair value hierarchy as follows: approximately ~~34%~~30% within Level I; approximately ~~45%~~51% within Level II; and approximately 21% within Level III. As of December 31, 2018, the absolute values of our funds’ invested assets and liabilities (excluding the notes and loans payable of our CLOs) were classified within the fair value hierarchy as follows: approximately 36% within Level I; approximately 41% within Level II; and approximately 23%19% within Level III. The percentage of our funds’ assets and liabilities within the fair value hierarchy will fluctuate based on the investments made at any given time and such fluctuations could be significant. A portion of our funds’ Level III assets relate to Special Investments or other investments on which we do not earn any incentive income until such investments are sold or otherwise realized. Upon the sale or realization event of these assets, any realized profits are included in the calculation of incentive income for such year. Accordingly, the estimated fair value of our funds’ Level III assets may not have any relation to the amount of incentive income actually earned with respect to such assets.

Valuation of Investments. Fair value represents the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants as of the measurement date. The fair value of our funds’ investments is based on observable market prices when available. We, as the investment manager of our funds, determine the fair value of investments that are not actively traded on a recognized securities exchange or otherwise lack a readily ascertainable market value. The methods and procedures to value these investments may include the following: performing comparisons with prices of comparable or similar securities; obtaining valuation-related information from the issuers; calculating the present value of future cash flows; assessing other analytical data and information relating to the investment that is an indication of value; obtaining information provided by third parties; and evaluating financial information provided by the management of these investments.

Significant judgment and estimation go into the assumptions that drive our valuation methodologies and procedures for assets that are not actively traded on a recognized securities exchange or otherwise lack a readily ascertainable market value. The valuation of investments can be more difficult when severe economic and market shocks occur. The COVID-19 pandemic is an example of such a shock. The actual amounts ultimately realized could differ materially from the values estimated based on the use of these methodologies. Realizations at values significantly lower than the values at which investments have been reflected could result in losses at the fund level and a decline in future management fees and incentive income. Such situations may also negatively impact fund investor perception of our valuation policies and procedures, which could result in redemptions and difficulties in raising additional capital.

We have established an internal control infrastructure over the valuation of financial instruments that includes ongoing oversight by our Valuation Controls Group and Valuation Committee, as well as periodic audits by our Internal Audit Group. These management control functions are segregated from the trading and investing functions.

The Valuation Committee is responsible for establishing the valuation policy and monitors compliance with the policy, ensuring that all of the funds’ investments reflect fair value, as well as providing oversight of the valuation process. The valuation

policy includes, but is not limited to the following: determining the pricing sources used to value specific investment classes; the selection of independent pricing services; performing due diligence of independent pricing services; and the classification of

investments within the fair value hierarchy. The Valuation Committee reviews a variety of reports on a monthly basis, which include the following: summaries of the sources used to determine the value of the funds’ investments; summaries of the fair value hierarchy of the funds’ investments; methodology changes and variance reports that compare the values of investments to independent pricing services. The Valuation Committee is independent from the investment professionals and may obtain input from investment professionals for consideration in carrying out its responsibilities.

The Valuation Committee has assigned the responsibility of performing price verification and related quality controls in accordance with the valuation policy to the Valuation Controls Group. The Valuation Controls Group’s other responsibilities include the following: overseeing the collection and evaluation of counterparty prices, broker-dealer quotations, exchange prices and pricing information provided by independent pricing services. Additionally, the Valuation Controls Group is responsible for performing back testing by comparing prices observed in executed transactions to valuations and valuations provided by independent pricing service providers on a bi-weekly and monthly basis; performing stale pricing analysis on a monthly basis; performing due diligence reviews on independent pricing services on an annual basis; and recommending changes in valuation policies to the Valuation Committee. The Valuation Controls Group also verifies that indicative broker quotations used to value certain investments are representative of fair value through procedures such as comparison to independent pricing services, back testing procedures, review of stale pricing reports and performance of other due diligence procedures as may be deemed necessary.

Investment professionals and members of the Valuation Controls Group review a daily profit and loss report, as well as other periodic reports that analyze the profit and loss and related asset class exposure of the funds’ investments.

The Internal Audit Group employs a risk-based program of audit coverage that is designed to provide an assessment of the design and effectiveness of controls over our operations, regulatory compliance, valuation of financial instruments and reporting. Additionally, the Internal Audit Group meets periodically with management and the Audit Committee of our Board of Directors to evaluate and provide guidance on the existing risk framework and control environment assessments.

For information regarding the impact that the fair value measurement of assets under management has on our results, please see “Part I—Item 3. Quantitative and Qualitative Disclosures About Market Risk.”

Recognition of Incentive Income

The determination of whether to recognize incentive income under GAAP requires a significant amount of judgment regarding whether it is probable that a significant revenue reversal of incentive income that we are potentially entitled to as of a point in time will not occur in future periods, which would preclude the recognition of such amounts as incentive income. Management considers a variety of factors when evaluating whether the recognition of incentive income is appropriate, including: the performance of the fund, whether ~~the~~ we have received or are entitled to receive incentive income distributions and whether such amounts are restricted, the investment period and expected term of the fund, where the fund is in its life-cycle, the volatility and liquidity of investments held by the fund, our team’s experience with similar investments and potential sales of investments within the fund. Management continuously evaluates whether there are additional considerations that could potentially impact the recognition of incentive income and notes that the recognition, and potential reversal, of incentive income is subject to potentially significant variability due to changes to the aforementioned considerations.

Variable Interest Entities

The determination of whether or not to consolidate a variable interest entity under GAAP requires a significant amount of judgment concerning the degree of control over an entity by its holders of variable interests. To make these judgments, management has conducted an analysis, on a case-by-case basis, of whether we are the primary beneficiary and are therefore required to consolidate the entity. Management continually reconsiders whether we should consolidate a variable interest entity. Upon the occurrence of certain events, such as investor redemptions or modifications to fund organizational documents and investment management agreements, management will reconsider its conclusion regarding the status of an entity as a variable interest entity.

Income Taxes

We use the asset and liability method of accounting for deferred income taxes. Under this method, deferred income tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the carrying amounts of existing assets and liabilities and their respective tax bases. A valuation allowance is established when management believes it is more likely than not that a deferred income tax asset will not be realized.

Substantially all of our deferred income tax assets relate to the goodwill and other intangible assets deductible for tax purposes by OzSculptor Corp that arose in connection with the purchase of Group A Units ~~from our executive managing directors and the Ziffs~~ with proceeds from the 2007 Offerings, subsequent exchanges of Group A Units for Class A Shares and subsequent payments ~~to our executive managing directors and the Ziffs~~ made under the tax receivable agreement, in addition to any related net operating loss carryforward. In accordance with relevant provisions of the ~~Internal Revenue~~ Code, we expect to take these goodwill and other intangible deductions over the 15-year period following the 2007 Offerings and subsequent exchanges, as well as an additional 20-year loss carryforward period available to us for net operating losses generated prior to 2018 and indefinite carryforward period for net operating losses generated beginning 2018, in order to fully realize the deferred income tax assets. Our analysis of whether we expect to have sufficient future taxable income to realize these deductions is based solely on estimates over this period.

OzSculptor Corp generated taxable ~~income~~loss of ~~$17.3~~$14.2 million for the three months ended March 31, ~~2019,~~2020, before taking into account deductions related to the amortization of the goodwill and other intangible assets. We determined that we would need to generate taxable income of at least ~~$1.3~~$1.0 billion over the remaining ~~Five-year~~4-year weighted-average amortization period, as well as an additional 20-year loss carryforward period available for expiring losses, in order to fully realize the deferred income tax assets. Using the estimates and assumptions discussed below, we expect to generate sufficient taxable income over the remaining amortization and loss carryforward periods available to us in order to fully realize ~~these~~the deferred income tax assets.

To generate ~~$1.3~~$1.0 billion in taxable income over the remaining amortization and loss carryforward periods available to us, we estimated that, based on estimated assets under management of ~~$31.5~~$33.5 billion as of April 1, ~~2019,~~2020, we would need to generate a minimum compound annual growth rate in assets under management of less than 3% over the period for which the taxable income estimate relates to fully realize the deferred income tax assets, assuming no performance-related growth, and therefore no incentive income. The assumed nature and amount of this estimated growth rate are not based on historical results or current expectations of future growth; however, the other assumptions underlying the taxable income estimate, such as general maintenance of current expense ratios and cost allocation percentages among the OzSculptor Operating Partnerships, which impact the amount of taxable income flowing through our legal structure, are based on our near-term operating budget. If our actual growth rate in assets under management falls below this minimum threshold for any extended time during the period for which these estimates relate and we do not otherwise experience offsetting growth rates in other periods, we may not generate taxable income sufficient to realize the deferred income tax assets and may need to record a valuation allowance.

Management regularly reviews the model used to generate the estimates, including the underlying assumptions. If it determines that a valuation allowance is required for any reason, the amount would be determined based on the relevant circumstances at that time. To the extent we record a valuation allowance against our deferred income tax assets related to the goodwill and other intangible assets, we would record a corresponding decrease in the liability ~~to our executive managing directors and the Ziffs~~ under the tax receivable agreement equal to approximately ~~78%~~69% of such amount; therefore, our consolidated net income (loss) ~~allocated to Class A Shareholders~~ would only be impacted by ~~22%~~31% of any valuation allowance recorded against the deferred income tax assets.

Actual taxable income may differ from the estimate described above, which was prepared solely for determining whether we currently expect to have sufficient future taxable income to realize the deferred income tax assets. Furthermore, actual or estimated future taxable income may be materially impacted by significant changes in assets under management, whether as a result of fund investment performance or fund investor contributions or redemptions, significant changes to the assumptions underlying our estimates, future changes in income tax law, state income tax apportionment or other factors.

As of March 31, ~~2019, the Company~~2020, we had ~~$260.8~~$243.1 million of net operating losses available to offset future taxable income for federal income tax purposes that will expire between 2030 and 2037, and ~~$109.7~~$121.0 million of net operating losses available to be carried forward without expiration. Additionally, ~~$172.0~~$165.6 million of net operating losses are available to offset future taxable

income for state income tax purposes and ~~$168.3~~$161.8 million for local income tax purposes that will expire between 2035 and 2039.

Based on the analysis set forth above, as of March 31, ~~2019,~~2020, we have determined that it is not necessary to record a valuation allowance with respect to our deferred income tax assets related to the goodwill and other intangible assets deductible for tax purposes, and any related net operating loss carryforward. However, we have determined that we may not realize certain foreign income tax credits and accordingly, a valuation allowance of ~~$11.9~~$11.1 million has been established for these items.

Impact of Recently Adopted Accounting Pronouncements on Recent and Future Trends

The Financial Accounting Standards Board (the “FASB”) has issued various Accounting Standards Updates (“ASUs”) that could impact our future trends. For additional details regarding these ASUs, including methods of adoption, see Note 2 to our consolidated financial statements included in this report for additional information.

~~We adopted ASC No. 2016-02,~~ ~~Leases (Topic 842)~~, as amended, as of January 1, 2019 (“ASC 842”). Adoption of ASC 842 resulted in the recognition of $126.0 million and $135.9 million of operating lease assets and liabilities, respectively, with the net of these amounts offsetting the deferred rent credit liability in existence immediately prior to adoption. Operating lease-related expense recognition is generally in line with the accounting guidance in effect prior to the adoption of ASC 842, and therefore we do not expect ASC 842 to have a material impact on our future operating expense trends.

~~None of the other~~No changes to GAAP that went into effect during the three months ended March 31, ~~2019~~2020 are expected to substantively impact our future trends.

Expected Impact of Future Adoption of New Accounting Pronouncements on Future Trends

None of the changes to GAAP that have been issued but that we have not yet adopted are expected to substantively impact our future trends.

Economic Income Reconciliations

The tables below present the reconciliations of total ~~segments~~ Economic Income and its components to the respective GAAP measures for the periods presented in this MD~~&A.~~&A:


	Three Months Ended March 31,
	2020		2019

	(dollars in thousands)
Net (Loss) Income Attributable to Class A Shareholders—GAAP	$	(28,267)	$	37,083
Change in redemption value of Preferred Units	1,327		(44,364)
Net Loss Allocated to Sculptor Capital Management, Inc.—GAAP	(26,940)		(7,281)
Net loss allocated to Group A Units	(25,337)		(7,369)
Equity-based compensation, net of RSUs settled in cash	24,398		37,223
Adjustment to recognize deferred cash compensation in the period of grant	2,179		2,568
Recapitalization-related non-cash interest expense accretion	1,865		2,311
Income taxes	(9,968)		3,386
Net losses on early retirement of debt	523		5,458
Net losses (gains) on investments	34,068		(2,689)
Adjustment for expenses related to compensation and profit-sharing arrangements based on fund investment performance	582		2,377
Changes in tax receivable agreement liability	(278)		—
Depreciation, amortization and net gains and losses on fixed assets	1,802		2,411
Other adjustments	(611)		(618)
Economic Income—Non-GAAP	$	2,283	$	37,777

Three Months Ended March 31,
2019 2018

(dollars in thousands)
Net Income Attributable to Class A Shareholders—GAAP $ 37,083
$ 3,490
Change in redemption value of Preferred Units (44,364 ) —
Net (Loss) Income Allocated to Och-Ziff Capital Management Group Inc—GAAP (7,281 ) 3,490
Net (loss) income allocated to Group A Units (7,369 ) 8,370
Equity-based compensation, net of RSUs settled in cash 37,223
21,895
Adjustment to recognize deferred cash compensation in the period of grant 2,568
12,783
Recapitalization-related non-cash interest expense accretion 2,311
—
Income taxes 3,386
3,012
Net losses on early retirement of debt 5,458
—
Adjustment for expenses related to compensation and profit-sharing arrangements based on fund investment performance 2,377
(162 )
Depreciation, amortization and net gains and losses on fixed assets 2,411
2,372
Other adjustments (3,307 ) 982
Economic Income $ 37,777
$ 52,742

Economic Income Revenues

Three Months Ended March 31,
2019 2018

(dollars in thousands)
Management fees—GAAP $ 63,623
$ 72,450
Adjustment to management fees⁽¹⁾
(3,608 ) (4,741 )
Management Fees—Economic Income Basis—Non-GAAP 60,015
67,709

Incentive income—GAAP 53,198
50,834
Adjustment to incentive income⁽²⁾
—
—
Incentive Income—Economic Income Basis—Non-GAAP 53,198
50,834

Other revenues—GAAP 3,769
4,542
Adjustment to other revenues⁽³⁾
—
(39 )
Other Revenues—Economic Income Basis—Non-GAAP 3,769
4,503
Total Revenues—Economic Income Basis—Non-GAAP $ 116,982
$ 123,046


	Three Months Ended March 31,
	2020		2019

	(dollars in thousands)
Management fees—GAAP	$	66,953	$	63,623
Adjustment to management fees⁽¹⁾	(7,091)		(3,608)
Management Fees—Economic Income Basis—Non-GAAP	59,862		60,015

Incentive income—Economic Income Basis—GAAP and Non-GAAP	9,322		53,198



Other revenues—Economic Income Basis—GAAP and Non-GAAP	2,953		3,769


Total Revenues—Economic Income Basis—Non-GAAP	$	72,137	$	116,982

_______________


~~(1)~~	Adjustment to present management fees net of recurring placement and related service fees, as management considers these fees a reduction in management fees, not an expense. The impact of eliminations related to the consolidated funds is also removed.


~~(2)~~	~~Adjustment to exclude the impact of eliminations related to the consolidated funds.~~


~~(3)~~	~~Adjustment to exclude gains on fixed assets.~~

(1)Adjustment to present management fees net of recurring placement and related service fees, as management considers these fees a reduction in management fees, not an expense. The impact of eliminations related to the consolidated funds is also removed.

Economic Income Expenses


	Three Months Ended March 31,							Three Months Ended March 31,
	2019			2018				2020		2019

	(dollars in thousands)							(dollars in thousands)
Compensation and benefits—GAAP	$	85,715		$	68,924		Compensation and benefits—GAAP	$	67,419	$	85,715
Adjustment to compensation and benefits⁽¹⁾	(42,169		)	(35,905		)	Adjustment to compensation and benefits⁽¹⁾	(27,159)		(42,169)
Compensation and Benefits—Economic Income Basis—Non-GAAP	$	43,546		$	33,019		Compensation and Benefits—Economic Income Basis—Non-GAAP	$	40,260	$	43,546

Interest expense—GAAP	$	6,208		$	6,598		Interest expense—GAAP	$	5,782	$	6,208
Adjustment to interest expense⁽²⁾	(2,311		)	—			Adjustment to interest expense⁽²⁾	(1,865)		(2,311)
Interest Expense—Economic Income Basis—Non-GAAP	$	3,897		$	6,598		Interest Expense—Economic Income Basis—Non-GAAP	$	3,917	$	3,897

General, administrative and other expenses—GAAP	$	37,788		$	37,850		General, administrative and other expenses—GAAP	$	34,706	$	37,788
Adjustment to general, administrative and other expenses⁽³⁾	(6,026		)	(7,152		)	Adjustment to general, administrative and other expenses⁽³⁾	(9,029)		(6,026)
General, Administrative and Other Expenses—Economic Income Basis—Non-GAAP	$	31,762		$	30,698		General, Administrative and Other Expenses—Economic Income Basis—Non-GAAP	$	25,677	$	31,762

_______________

~~(1)~~

(1)Adjustment to exclude equity-based compensation, as management does not consider these non-cash expenses to be reflective of our operating performance. However, the fair value of RSUs that are settled in cash to employees or executive managing directors is included as an expense at the time of settlement. In addition, expenses related to incentive income profit-sharing arrangements are generally recognized at the same time the related incentive income revenue is recognized, as management reviews the total compensation expense related to these arrangements in relation to any incentive income earned by the relevant fund. Further, deferred cash compensation is expensed in full in the year granted for Economic Income, rather than over the service period for GAAP. Distributions to the Group D Units are also excluded, as management reviews operating performance at the Oz Operating Group level, where substantially all of our operations are performed, prior to making any income allocations.

~~(2)~~

Adjustment to exclude non-cash interest expense accretion on Debt Securities issued in exchange for Preferred Units in connection with the Recapitalization. Upon exchange, Debt Securities were recognized at fair value and are being accreted to par value over time through interest expense for GAAP; however, management does not consider this interest accretion to be reflective of the operating performance of the Company.


~~(3)~~	Adjustment to exclude depreciation, amortization and losses on fixed assets as management does not consider these items to be reflective of our operating performance. Additionally, recurring placement and related service fees are excluded, as management considers these fees a reduction in management fees, not an expense.

~~Other~~ Economic Income, ~~Items~~rather than over the service period for GAAP.

(2)Adjustment to exclude non-cash interest expense accretion on Debt Securities issued in exchange for 2016 Preferred Units in connection with the Recapitalization. Upon exchange, Debt Securities were recognized at fair value and are being accreted to par value over time through interest expense for GAAP; however, management does not consider this interest accretion to be reflective of the operating performance of the Company.

(3)Adjustment to exclude depreciation, amortization and losses on fixed assets as management does not consider these items to be reflective of our operating performance. Additionally, recurring placement and related service fees are excluded, as management considers these fees a reduction in management fees, not an expense.

Three Months Ended March 31,
2019 2018

(dollars in thousands)
Net (loss) income attributable to noncontrolling interests—GAAP $ (7,234 ) $ 8,635
Adjustment to net (loss) income attributable to noncontrolling interests⁽¹⁾
7,234
(8,646 )
Net Loss Attributable to Noncontrolling Interests—Economic Income Basis—Non-GAAP $ —
$ (11 )

~~_______________~~


~~(1)~~	Adjustment to exclude amounts allocated to our executive managing directors on their interests in the Oz Operating Group, as management reviews operating performance at the Oz Operating Group level. We conduct substantially all of our activities through the Oz Operating Group.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Our predominant exposure to market risk is related to our role as general partner or investment manager for the funds, and the sensitivities to movements in the fair value of their investments that may adversely affect our management fees and incentive income.

Fair value of the financial assets and liabilities of the funds may fluctuate in response to changes in the value of investments, foreign currency exchange rates, commodity prices and interest rates. The fair value changes in the assets and liabilities of the funds may affect the management fees and incentive income we may earn from the funds.

With regards to the consolidated funds, the net effect of these fair value changes primarily impacts the net gains of consolidated funds in our consolidated statements of comprehensive income (loss); however, a large portion of these fair value changes is absorbed by the investors of these funds (noncontrolling interests). We may also be entitled to a portion of these earnings through our incentive income allocation as general partner of these funds.

Impact on Management Fees

Management fees for our multi-strategy and opportunistic credit funds are generally based on the net asset value of those funds. Accordingly, management fees will generally change in proportion to changes in the fair value of investments held by these funds. Management fees for our real estate funds and certain other funds are generally based on committed capital during the original investment period and invested capital thereafter; therefore, management fees are not impacted by changes in the fair value of investments held by those funds.

Impact on Incentive Income

Incentive income for our funds is generally based on a percentage of profits generated by our funds over a commitment period, which is impacted by global market conditions and other factors. Major factors that influence the degree of impact include how the investments held by our funds are impacted by changes in the market and the extent to which any high-water marks impact our ability to earn incentive income. Consequently, incentive income cannot be readily predicted or estimated.

Market Risk

The amount of our assets under management is generally based on the net asset value of multi-strategy and opportunistic credit funds, ~~(plus unfunded commitments for certain closed-end opportunistic credit funds),~~ and committed or invested capital for our real estate ~~funds and certain other~~ funds. A 10% change in the fair value of the net assets held by our funds as of March 31, ~~2019~~2020 and ~~2018,~~December 31, 2019, would have resulted in a change of approximately ~~$1.5~~$1.2 billion and $1.4 billion, respectively, in our assets under ~~management, respectively.~~management.

A 10% change in the fair value of the net assets held by our funds as of April 1, ~~2019~~2020 (the date management fees are calculated for the second quarter of ~~2019)~~2020) would impact management fees charged on that day by approximately ~~$4.0~~$3.3 million. A 10% change in the fair value of the net assets held by our funds as of January ~~31, 2019,~~1, 2020, would have impacted management fees charged on that day by approximately ~~$4.0~~$3.6 million.

A 10% change in the fair value of the net assets held by our funds as of the end of any year (excluding unrealized gains and losses in Special Investments or other investments on which we do not earn any incentive income until such investments are sold or otherwise realized), could significantly affect our incentive income, as incentive income is generally based on a percentage of annual profits generated by our funds. We do not earn incentive income on unrealized gains attributable to Special Investments and certain other investments, and therefore a change in the fair value of those investments would have no effect on incentive income.

Exchange Rate Risk

Our funds hold investments denominated in non-U.S. dollar currencies, which may be affected by movements in the rate of exchange between the U.S. dollar and foreign currencies. We estimate that as of March 31, ~~2019~~2020 and ~~2018,~~December 31, 2019, a 10% weakening or strengthening of the U.S. dollar against all or any combination of currencies to which our funds have exposure to exchange rates would not have a material effect on our revenues, net income attributable to Class A Shareholders or Economic Income.

Interest Rate Risk

Borrowings under the ~~CLO Investments Loans, the Senior Credit Facility and the Subordinated Credit Facility, if any,~~Debt Securities, 2018 Term Loan as well as our investments in CLOs accrue interest at variable rates. Our funds also have financing arrangements and hold credit instruments that accrue interest at variable rates. Interest rate changes may therefore impact the amount of interest income and interest expense, future earnings and cash flows.

We estimate that as of March 31, ~~2019~~2020 and ~~2018,~~December 31, 2019, a 100 basis point increase or decrease in variable rates would not have a material effect on our annual interest income, interest expense, net income attributable to Class A Shareholders or Economic Income. A tightening of credit and an increase in prevailing interest rates could make it more difficult for us to raise capital and sustain the growth rate of the funds.

Credit Risk

Credit risk is the risk that counterparties or debt issuers may fail to fulfill their obligations or that the collateral value may become inadequate to cover our exposure. We manage credit risk by monitoring the credit exposure to and the creditworthiness of counterparties, requiring additional collateral where appropriate.

Item 4. Controls and Procedures

Effectiveness of Disclosure Controls and Procedures

We maintain disclosure controls and procedures, as defined in Rule 13a-15(e) under the Exchange Act, that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

As of March 31, ~~2019,~~2020, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective and were operating at a reasonable assurance level as of March 31, ~~2019.~~2020.

Changes in Internal Control over Financial Reporting

There were no changes to our internal control over financial reporting, as defined in Rule 13a-15(f) under the Exchange Act, that occurred in the first quarter of ~~2019~~2020 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Inherent Limitations on Effectiveness of Controls

Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls or our internal control over financial reporting will prevent or detect all error and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. The design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Further, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of a simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls.

The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of the effectiveness of controls to future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.

PART II – OTHER INFORMATION

Item 1. Legal Proceedings

~~We are not currently subject to any pending judicial, administrative or arbitration proceedings that we expect to have a material impact on our consolidated financial statements.~~ We are from time to time involved in litigation and claims incidental to the conduct of our business. Like other businesses in our industry, we are subject to extensive scrutiny by regulatory agencies globally that have, or may in the future have, regulatory authority over us and our business activities. This has resulted in, or may in the future result in, regulatory agency investigations, litigation and subpoenas, and related sanctions and costs. See ~~“Item 1A. Risk Factors” below and~~ “Part I, Item 1A. Risk Factors—Risks Related to Our Business—Regulatory changes in jurisdictions outside the United States could adversely affect our business” in our Annual Report. See Note 1918 to our consolidated financial statements included in this report for additional information.

Item 1A. Risk Factors

~~Please~~In addition to the risk factor below, please see “Item 1A. Risk Factors” in our Annual Report for a discussion of the risks material to our business.

The uncertainty surrounding the COVID-19 pandemic, including the length and severity of its impact on global economic activity, has had a substantial negative impact on many benchmark market indices and significantly increased volatility in equity and debt prices, interest and exchange rates, commodity prices and the ratings and cash flows of collateral in the CLOs that we manage. These factors have adversely impacted our business in many ways, including reducing the amount of our assets under management and our incentive income in the first quarter of 2020 and may cause us to recognize lower management fees and incentive income in the remainder of 2020, which could further adversely impact our business, financial condition, results of operations and liquidity. Additionally, we face various potential operational challenges due to the COVID-19 pandemic.

The recent global economic downturn related to the COVID-19 pandemic has adversely impacted the amount of our assets under management and may cause us to recognize lower management fees and incentive income in 2020 and may continue to adversely impact our revenues in the near term. The degree to which COVID-19 may continue to impact our business, results of operations, financial condition and liquidity will depend on future developments, which are highly uncertain, difficult to predict and outside of our control, including the continued global spread of COVID-19, the severity and the duration of the pandemic, further actions that may be taken by governmental authorities, businesses or individuals and how quickly and to what extent normal economic and operating conditions can resume. Risks that could be brought by the continuation of the COVID-19 pandemic include, but are not limited to, dislocations in market prices for investments in our funds, substantial market uncertainty which could lead to a decline in assets under management and other negative effects that could flow from an overall economic downturn. As a result, the further impact on our business, results of operations, financial condition and liquidity cannot be reasonably estimated at this time, but the impact could be significant.

In the first quarter of 2020, we experienced unrealized losses on our risk retention investments held in certain of the CLOs that we manage. Although this has not had a material impact on the interest income generated from our CLO investments to date, it has reduced the fair value of our investments and may have a material impact on the amount of interest income we may earn from these investments in the future. Furthermore, starting in April 2020, because of ratings downgrades on certain of the collateral held by our CLOs, some of those CLOs failed to satisfy one or more overcollateralization tests, which has deferred the collection of a portion of our subordinated management fees. While we expect to collect these management fees at a later date, to the extent the overcollateralization tests in our CLOs have not been resolved, the amount of management fees deferred would continue to increase, which may negatively impact the amounts we recognize as revenue in future periods.

To ensure the safety of our employees and in response to mandated precautions, where applicable, nearly all of our employees are working remotely at this time to seek to mitigate the risks associated with COVID-19. While we believe we have been successful in implementing our business continuity plan, operational challenges may arise in the future. If we or any of our key service providers were to experience material disruptions in the ability for our or their employees to work remotely, our ability to operate our business could be materially adversely impacted. If our employees, including our executive managing directors and key investment professionals, were to become seriously ill, our ability to operate our business could be materially disrupted. Any such disruptions to our business operations could have a material adverse impact on our business, results of operation, financial condition or liquidity

In addition, the continuation or a resurgence of the COVID-19 pandemic could heighten many other risks described in the “Risk Factors” section of our Annual Report.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults upon Senior Securities

None.

Item 4. Mine Safety Disclosures

None.

Item 5. Other Information

None.

Item 6. Exhibits


Exhibit No.		Description


~~Exhibit No.~~		~~Description~~







































































































































































































































~~3.1~~10.1*+		~~Plan~~Amended and Restated Partner Agreement between OZ Management LP and David Levine, dated as of ~~Conversion, incorporated herein by reference to Exhibit 99.1 of our Current Report on Form 8-K, filed on April 30, 2019.~~June 2, 2017.

~~3.2~~10.2*+		~~Certificate~~Amended and Restated Partner Agreement between OZ Advisors LP and David Levine, dated as of ~~Conversion~~June 2, 2017.

10.3*+		Amended and Restated Partner Agreement between OZ Advisors LP II and David Levine, dated as of June 2, 2017.

10.4		Amendment to ~~a Corporation~~Deferred Prosecution Agreement, dated as of ~~Och-Ziff~~January 23, 2020, by and among Sculptor Capital Management, ~~Group LLC, incorporated herein by reference to Exhibit 99.2~~Inc., the U.S. Department of ~~our Current Report on Form 8-K, filed on April 30, 2019.~~
~~3.3~~	~~Certificate~~Justice and the U.S. Attorney’s Office for the Eastern District of ~~Incorporation of Och-Ziff Capital Management Group Inc., incorporated herein by reference to Exhibit 99.3 of our Current Report on Form 8-K, filed on April 30, 2019.~~
~~3.4~~	~~By-Laws of Och-Ziff Capital Management Group Inc., incorporated herein by reference to Exhibit 99.4 of our Current Report on Form 8-K, filed on April 30, 2019.~~
~~10.1~~	~~Amendment to the Letter Agreement and Term Sheet, dated January 14, 2019, by and between Och-Ziff Capital Management Group LLC and Daniel S. Och,~~New York, incorporated herein by reference to Exhibit 10.1 of our Current Report on Form 8-K, filed on January ~~14, 2019.~~23, 2020.
~~10.2~~		Amendment No. 2 to the Letter Agreement and Term Sheet, dated January 31, 2019, by and between Och-Ziff Capital Management Group LLC and Daniel S. Och, incorporated herein by reference to Exhibit 10.1 of our Current Report on Form 8-K, filed on February 1, 2019.
~~10.3~~31.1*		Amendment No. 3 to the Letter Agreement and Term Sheet, dated February 6, 2019, by and between Och-Ziff Capital Management Group LLC and Daniel S. Och, incorporated herein by reference to Exhibit 10.1 of our Current Report on Form 8-K, filed on February 7, 2019.
~~31.1~~	Certificate of Chief Executive Officer pursuant to Rule 13a-14(a)/Rule 15d-14(a) under the Securities Exchange Act of 1934.

~~31.2~~31.2*		Certificate of Chief Financial Officer pursuant to Rule 13a-14(a)/Rule 15d-14(a) under the Securities Exchange Act of 1934.

~~32.1~~32.1*		Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
~~101~~
101*		The following financial information from the Quarterly Report on Form 10-Q for the three months ended March 31, 2020, formatted in iXBRL (Inline Extensible Business Reporting Language): (i) Consolidated Balance Sheets; (ii) Consolidated Statements of Comprehensive Income (Loss); (iii) Consolidated Statements of Changes in Shareholders’ Equity (Deficit); (iv) Consolidated Statements of Cash Flows; and (v) Notes to Consolidated Financial Statements.

104*		Cover Page Interactive ~~data files pursuant to Rule 405 of Regulation S-T (XBRL)~~Data File (formatted as iXBRL and contained in Exhibit 101)

*		Filed herewith



+		Management contract or compensatory plan or arrangement

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Dated: May ~~9, 2019~~7, 2020

~~OCH-ZIFF~~SCULPTOR CAPITAL MANAGEMENT, ~~GROUP~~ INC.

By:

/s/ Thomas M. Sipp

Thomas M. Sipp

Chief Financial Officer and Executive Managing Director

8177



☑			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
			For the ~~Quarterly Period Ended~~quarterly period ended March 31, ~~2019~~2020
			or
☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
			For the transition period from ________ to ________

	~~26-0354783~~
Delaware		26-0354783
(State or other jurisdiction of ~~Incorporation)~~incorporation or organization)		(I.R.S. Employer Identification ~~Number)~~No.)




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, aircraft securitizations, collateralized bond obligations, 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 Inc.~~

IPO			Our initial public offering of 3.6 million Class A Shares that occurred in November 2007

NYSE			New York Stock Exchange

~~the Company, Oz Management, the firm, we, us, our~~	~~Refers, unless the context requires otherwise, to the Registrant 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, which was merged into Oz Corp on April 1, 2019~~

~~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, Group E Units and Group P Units

Preferred Units			One Class A cumulative preferred unit in each of the OzSculptor Operating Partnerships collectively represents one “Preferred Unit.” Certain of our executive managing directors collectively own 100% of the Preferred Units. Preferred Units issued in 2016 and 2017 are, collectively, referred to as “2016 Preferred Units.” Preferred Units issued in 2019 are referred to as “2019 Preferred Units.”

PSUs			Class A performance-based RSUs

Recapitalization			Refers to the recapitalization of our business that occurred in February 2019. As part of the Recapitalization, a portion of the interests held by our active and former executive managing directors were reallocated to existing members of senior management. In addition, we restructured the previously outstanding senior debt and Preferred ~~Units.~~Units

Registrant			~~Och-Ziff~~Sculptor Capital Management, ~~Group~~ Inc., a Delaware corporation

RSUs			Class A restricted share units

Sculptor Corp			Sculptor Capital Holding Corporation, a Delaware corporation

Sculptor Operating Group			Refers collectively to the Sculptor Operating Partnerships and their consolidated subsidiaries

Sculptor Operating Group Units			Refers collectively to Sculptor Operating Group A, B, D, E, and P Units

Sculptor Operating Partnerships			Refers collectively to Sculptor Capital LP, Sculptor Capital Advisors LP and Sculptor Capital Advisors II LP

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~~


	March 31, 2020		December 31, 2019
	(dollars in thousands)
Assets
Cash and cash equivalents	$	142,753	$	240,938
Restricted cash	4,607		4,501
Investments (includes assets measured at fair value of $342,266 and $329,435, including assets sold under agreements to repurchase of $84,200 and $98,085 as of March 31, 2020 and December 31, 2019, respectively)	419,806		411,426
Income and fees receivable	43,782		215,395
Due from related parties	17,813		15,355
Deferred income tax assets	321,754		310,557
Operating lease assets	113,127		115,810
Other assets, net	79,262		82,608
Assets of consolidated funds:

Other assets of consolidated funds	649		649
Total Assets	$	1,143,553	$	1,397,239
Liabilities and Shareholders’ Equity
Liabilities
Compensation payable	$	22,770	$	187,180
Unearned incentive income	62,366		60,798
Due to related parties	195,199		211,915
Operating lease liabilities	124,240		128,043
Debt obligations	263,777		286,728
Securities sold under agreements to repurchase	95,775		97,508
Other liabilities	53,614		59,217
Liabilities of consolidated funds:
Other liabilities of consolidated funds	389		389
Total Liabilities	818,130		1,031,778
Commitments and Contingencies (Note 18)
Redeemable Noncontrolling Interests (Note 4)	151,327		150,000
Shareholders’ Equity
Class A Shares, $0.01 and $0.01 par value, 100,000,000 and 100,000,000 shares authorized, 21,946,639 and 21,284,945 shares issued and outstanding as of March 31, 2020 and December 31, 2019, respectively	219		213
Class B Shares, $0.01 and $0.01 par value, 75,000,000 and 75,000,000 shares authorized, 32,845,414 and 29,208,952 shares issued and outstanding as of March 31, 2020 and December 31, 2019, respectively	328		292
Additional paid-in capital	130,968		117,936
Accumulated deficit	(383,187)		(343,759)
Shareholders’ deficit attributable to Class A Shareholders	(251,672)		(225,318)
Shareholders’ equity attributable to noncontrolling interests	425,768		440,779
Total Shareholders’ Equity	174,096		215,461
Total Liabilities, Redeemable Noncontrolling Interests and Shareholders’ Equity	$	1,143,553	$	1,397,239



	March 31, 2019			December 31, 2018

	(dollars in thousands)
Assets
Cash and cash equivalents	$	144,750		$	315,809
Restricted cash	9,263			8,075
Investments (includes assets measured at fair value of $327,230 and $361,378, of which $61,715 and $62,186 related to securities sold under agreements to repurchase as of March 31, 2019 and December 31, 2018, respectively)	362,837			389,897
Income and fees receivable	73,443			82,843
Due from related parties	20,679			20,754
Deferred income tax assets	349,289			355,025
Operating lease assets	123,454			—
Other assets, net	85,519			82,403
Assets of consolidated funds:
Investments of consolidated funds, at fair value	164,755			171,495
Other assets of consolidated funds	22,618			21,090
Total Assets	$	1,356,607		$	1,447,391

Liabilities and Shareholders’ Equity (Deficit)
Liabilities
Compensation payable	$	27,204		$	105,036
Unearned incentive income	63,769			61,397
Due to related parties	283,249			281,821
Operating lease liabilities	136,166			—
Debt obligations	321,804			289,987
Securities sold under agreements to repurchase	61,437			62,801
Other liabilities	43,430			63,603
Liabilities of consolidated funds:
Other liabilities of consolidated funds	16,943			14,541
Total Liabilities	954,002			879,186

Commitments and Contingencies (Note 19)

Redeemable Noncontrolling Interests (Note 4)	299,290			577,660

Shareholders’ Equity (Deficit)
Class A Shares, no par value, 100,000,000 shares authorized, 20,484,430 and 19,905,126 shares issued and outstanding as of March 31, 2019 and December 31, 2018, respectively	—			—
Class B Shares, no par value, 75,000,000 shares authorized, 29,208,952 and 29,458,948 shares issued and outstanding as of March 31, 2019 and December 31, 2018, respectively	—			—
Paid-in capital	3,235,728			3,135,841
Accumulated deficit	(3,577,250		)	(3,564,727		)
Shareholders’ deficit attributable to Class A Shareholders	(341,522		)	(428,886		)
Shareholders’ equity attributable to noncontrolling interests	444,837			419,431
Total Shareholders’ Equity (Deficit)	103,315			(9,455		)
Total Liabilities, Redeemable Noncontrolling Interests and Shareholders’ Equity (Deficit)	$	1,356,607		$	1,447,391



	~~Page~~
PART I — FINANCIAL INFORMATION

Item 1.		Financial Statements (Unaudited)	5

		Consolidated Balance Sheets as of March 31, ~~2019~~2020 and December 31, ~~2018~~2019	5

		Consolidated Statements of Comprehensive Income (Loss) for the Three Months Ended March 31, ~~2019~~2020 and ~~2018~~2019	6

		Consolidated ~~Statement~~Statements of Changes in Shareholders’ Equity (Deficit) for the Three Months Ended March 31, ~~2019~~2020 and ~~2018~~2019	7

		Consolidated Statements of Cash Flows for the Three Months Ended March 31, ~~2019~~2020 and ~~2018~~2019	89

		Notes to Consolidated Financial Statements	1011

Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations	4238

Item 3.		Quantitative and Qualitative Disclosures about Market Risk	7671

Item 4.		Controls and Procedures	7873

PART II — OTHER INFORMATION

Item 1.		Legal Proceedings	7974

Item 1A.		Risk Factors	7974

Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds	7975

Item 3.		Defaults upon Senior Securities	7975

Item 4.		Mine Safety Disclosures	7975

Item 5.		Other Information	8075

Item 6.		Exhibits	8076

Signatures				8177



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, ~~2018,~~2019, as amended, dated ~~March 15, 2019~~February 25, 2020 and filed with the SEC

Advisers Act						Investment Advisers Act of 1940, as amended

Class A Shares						Our Class A Shares, representing Class A common stock of ~~Och-Ziff~~Sculptor Capital Management, ~~Group~~ Inc., which are publicly traded and listed on the NYSE

Class B Shares						Class B Shares of ~~Och-Ziff~~Sculptor Capital Management, ~~Group~~ Inc., 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

the Company, Sculptor Capital, the firm, we, us, our						Refers, unless the context requires otherwise, to the Registrant and its consolidated subsidiaries, including the Sculptor Operating Group

Exchange Act						Securities Exchange Act of 1934, as amended

executive managing directors						The current ~~limited partners~~executive managing directors of the ~~Oz Operating Partnerships other than our intermediate holding companies,~~Company, and, except where the context requires otherwise, ~~include~~also includes certain ~~limited partners~~executive managing directors 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 OzSculptor Operating Partnerships. Group A Units are limited partner interests held by our executive managing directors

Group A-1 Units						Refers collectively to one Class A-1 operating group unit in each of the OzSculptor Operating Partnerships. Group A-1 Units are limited partner interests held by our executive managing directors

Group B Units						Refers collectively to one Class B operating group unit in each of the OzSculptor Operating Partnerships. Group B Units are limited partner interests held by ~~our intermediate holding companies~~Sculptor Corp

Group D Units						Refers collectively to one Class D operating group unit in each of the OzSculptor Operating Partnerships. Group D Units are limited partner interests held by our executive managing directors


Group E Units						Refers collectively to one Class E operating group unit in each of the OzSculptor Operating Partnerships. Group E Units are limited partner interests held by our executive managing directors

Group P Units						Refers collectively to one Class P operating group unit in each of the OzSculptor Operating Partnerships. Group P Units are limited partner interests held by our executive managing directors


																				Three Months Ended March 31,
	Och-Ziff Capital Management Group Inc.																			2020		2019
	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)
Accumulated Deficit																			Accumulated Deficit
Beginning balance																			Beginning balance	$	(343,759)	$	(3,564,727)
Cash dividends declared on Class A Shares																			Cash dividends declared on Class A Shares	(11,613)		(4,703)
Dividend equivalents on Class A restricted share units																			Dividend equivalents on Class A restricted share units	(875)		(539)

Comprehensive net loss, excluding amounts attributable to redeemable noncontrolling interests																			Comprehensive net loss, excluding amounts attributable to redeemable noncontrolling interests	(26,940)		(7,281)
Ending Balance																			Ending Balance	$	(383,187)	$	(3,577,250)
Shareholders’ Deficit Attributable to Class A Shareholders																			Shareholders’ Deficit Attributable to Class A Shareholders	$	(251,672)	$	(341,522)
				(dollars in thousands)
As of December 31, 2018	19,905,126	29,458,948		$	3,135,841		$	(3,564,727	)	$	(428,886	)	$	419,431		$	(9,455	)
Shareholders’ Equity Attributable to Noncontrolling Interests																			Shareholders’ Equity Attributable to Noncontrolling Interests
Beginning balance																			Beginning balance	$	440,779	$	419,431
Capital contributions	—	—		—			—			—			427			427			Capital contributions	1,490		427
Capital distributions	—	—		—			—			—			(285		)	(285		)	Capital distributions	(286)		(285)
Cash dividends declared on Class A Shares ($0.23 per share)	—	—		—			(4,703		)	(4,703		)	—			(4,703		)
Dividend equivalents on Class A restricted share units	—	—		539			(539		)	—			—			—
Equity-based compensation, net of taxes	579,304	(249,996	)	19,700			—			19,700			14,418			34,118			Equity-based compensation, net of taxes	9,870		14,418
Impact of changes in Oz Operating Group ownership (Note 4)	—	—		(124		)	—			(124		)	124			—
Impact of changes in Sculptor Operating Group ownership																			Impact of changes in Sculptor Operating Group ownership	—		124
Reallocation of equity and income tax effects of Recapitalization	—	—		35,408			—			35,408			(39,086		)	(3,678		)	Reallocation of equity and income tax effects of Recapitalization	—		(39,086)
Change in redemption value of Preferred Units	—	—		44,364			—			44,364			57,042			101,406			Change in redemption value of Preferred Units	—		57,042
Comprehensive net loss, excluding amounts attributable to redeemable noncontrolling interests	—	—		—			(7,281		)	(7,281		)	(7,234		)	(14,515		)	Comprehensive net loss, excluding amounts attributable to redeemable noncontrolling interests	(26,085)		(7,234)
As of March 31, 2019	20,484,430	29,208,952		$	3,235,728		$	(3,577,250	)	$	(341,522	)	$	444,837		$	103,315
Ending Balance																			Ending Balance	$	425,768	$	444,837
Total Shareholders’ Equity																			Total Shareholders’ Equity	$	174,096	$	103,315

Cash dividends paid on Class A Shares																			Cash dividends paid on Class A Shares	$	0.53	$	0.23



	Oz Management LP			Oz Advisors LP			Oz Advisors II LP			Total Oz Operating Group

	(dollars in thousands)
January 1, 2019 to March 31, 2019
Net (loss) income	$	(32,049	)	$	17,497		$	2,053		$	(12,499	)
Blended participation percentage	44		%	38		%	0		%	59		%
Net (Loss) Income Attributable to Group A Units	$	(14,064	)	$	6,695		$	—		$	(7,369	)

January 1, 2018 to March 31, 2018
Net income (loss)	$	2,405		$	17,735		$	(5,653	)	$	14,487
Blended participation percentage	58		%	58		%	58		%	58		%
Net Income (Loss) Attributable to Group A Units	$	1,389		$	10,247		$	(3,266	)	$	8,370


	December 31, 2018		Transfers In		Transfers Out			Investment Purchases / Issuances		Investment Sales / Settlements			Gains / Losses			March 31, 2019			December 31, 2019		Transfers In		Transfers Out		Investment Purchases / Issuances		Investment Sales / Settlements		Gains / Losses		March 31, 2020

	(dollars in thousands)																		(dollars in thousands)
Assets, at Fair Value																		Assets, at Fair Value
Included within investments:																		Included within investments:
CLOs	$	181,868	$	—	$	—		$	808	$	(23,135	)	$	(1,073	)	$	158,468	CLOs	$	182,870	$	—	$	—	$	3,333	$	—	$	(30,916)	$	155,287

Investments of consolidated funds:
Bank debt	$	75,613	$	5,178	$	(23,617	)	$	17,557	$	(16,082	)	$	520		$	59,169
Corporate bonds	$	—	$	—	$	—		$	987	$	(981	)	$	(6	)	$	—



	December 31, 2017		Transfers In		Transfers Out			Investment Purchases / Issuances		Investment Sales			Gains/Losses		March 31, 2018

	(dollars in thousands)
Assets, at Fair Value
Included within investments:
CLOs	$	211,749	$	—	$	—		$	76,622	$	(2,775	)	$	1,374	$	286,970

Investments of consolidated funds:
Bank debt	$	18,807	$	1,004	$	(2,906	)	$	28,560	$	(26,563	)	$	232	$	19,134



	Three Months Ended March 31, 2019

	(dollars in thousands)
Lease Cost
Operating lease cost	$	5,149
Short-term lease cost	18
Finance lease cost - amortization of leased assets	137
Finance lease cost - imputed interest on lease liabilities	24
Less: Sublease income	(384		)
Net Lease Cost	$	4,944


	March 31, 2020		December 31, 2019

Lease Term and Discount Rate
Weighted average remaining lease term
Operating leases	9.1 years		9.3 years
Finance leases	2.0 years		2.1 years

Weighted average discount rate
Operating leases	7.9	%	7.9	%
Finance leases	7.9	%	7.9	%



	Three Months Ended March 31, 2019

	(dollars in thousands)
Supplemental Lease Cash Flow Information
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows for operating leases	$	3,998
Operating cash flows for finance leases	$	24
Finance cash flows for finance leases	$	457

Right-of-use assets obtained in exchange for lease obligations
Operating leases	$	126,000
Financing leases	$	1,702



~~Delaware~~



	~~March 31, 2019~~

~~Lease Term and Discount Rate~~
~~Weighted average remaining lease term~~
~~Operating leases~~	~~9.9 years~~
~~Finance leases~~	~~2.9 years~~

~~Weighted average discount rate~~
~~Operating leases~~	~~7.9~~	%
~~Finance leases~~	~~7.9~~	%


	Operating Leases			Finance Leases				Operating Leases		Finance Leases

	(dollars in thousands)							(dollars in thousands)
Maturity of Lease Liabilities							Maturity of Lease Liabilities
April 1, 2019 to December 31, 2019	$	16,136		$	157
2020	22,535			618
April 1, 2020 to December 31, 2020							April 1, 2020 to December 31, 2020	$	16,814	$	156
2021	21,042			618			2021	20,909		618
2022	19,858			—			2022	19,713		—
2023	19,146			—			2023	19,032		—
2024							2024	15,353		—
Thereafter	97,587			—			Thereafter	82,234		—
Total Lease Payments	196,304			1,393			Total Lease Payments	174,055		774
Imputed interest	(60,138		)	(129		)	Imputed interest	(49,815)		(44)
Total Lease Liabilities	$	136,166		$	1,264		Total Lease Liabilities	$	124,240	$	730


	Operating Leases

	(dollars in thousands)
Sublease Rent Payments Receivable
April 1, 2020 to December 31, 2020	$	1,112
2021	1,482
2022	1,482
2023	1,160
2024	—
Thereafter	—
Total Sublease Rent Payments Receivable	$	5,236



	Operating Lease

	(dollars in thousands)
Sublease Rent Payments Receivable
April 1, 2019 to December 31, 2019	$	1,162
2020	1,550
2021	1,550
2022	1,550
2023	1,213
Thereafter	—
Total Sublease Rent Payments Receivable	$	7,025


	Debt Securities			2018 Term Loan			CLO Investments Loans			Total				Debt Securities		2018 Term Loan		CLO Investments Loans		Total

	(dollars in thousands)													(dollars in thousands)
Maturity of Debt Obligations													Maturity of Debt Obligations
April 1, 2019 to December 31, 2019	$	—		$	—		$	—		$	—
2020	—			—			—			—
April 1, 2020 to December 31, 2020													April 1, 2020 to December 31, 2020	$	—	$	—	$	—	$	—
2021	—			—			—			—			2021	—		—		5,111		5,111
2022	40,000			8,125			—			48,125			2022	40,000		—		275		40,275
2023	40,000			71,875			16,998			128,873			2023	40,000		18,000		—		58,000
2024													2024	40,000		—		17,972		57,972
Thereafter	120,000			—			57,498			177,498			Thereafter	80,000		—		39,201		119,201
Total Payments	200,000			80,000			74,496			354,496			Total Payments	200,000		18,000		62,559		280,559
Unamortized discounts & deferred financing costs	(30,244		)	(1,956		)	(492		)	(32,692		)	Unamortized discounts & deferred financing costs	(16,124)		(330)		(328)		(16,782)
Total Debt Obligations	$	169,756		$	78,044		$	74,004		$	321,804		Total Debt Obligations	$	183,876	$	17,670	$	62,231	$	263,777


Initial Borrowing Date	Contractual Rate	Final Maturity Date	Carrying Value
			March 31, 2020		December 31, 2019

			(dollars in thousands)
June 7, 2017	LIBOR plus 1.48%	November 16, 2029	$	17,250	$	17,245
August 2, 2017	LIBOR plus 1.41%	January 21, 2030	21,680		21,679
September 14, 2017	EURIBOR plus 2.21%	September 14, 2024	17,915		18,237
August 1, 2019	EURIBOR plus 1.15%	June 29, 2021	5,111		3,464
February 27, 2020	EURIBOR plus 0.80%	January 11, 2022	275		—
			$	62,231	$	60,625



Borrowing Date	Contractual Rate	Final Maturity Date	Carrying Value
			March 2019		December 2018

			(dollars in thousands)
November 28, 2016	EURIBOR plus 2.23%	December 15, 2023	$	16,875	$	17,235
June 7, 2017	LIBOR plus 1.48%	November 16, 2029	17,229		17,224
August 2, 2017	LIBOR plus 1.41%	January 21, 2030	21,676		21,674
September 14, 2017	EURIBOR plus 2.21%	September 14, 2024	18,224		18,614
February 21, 2018	LIBOR plus 1.27%	February 21, 2019	—		21,060
			$	74,004	$	95,807



Securities Sold under Agreements to Repurchase	Gross Amounts of Recognized Liabilities		Gross Amounts Offset in the Consolidated Balance Sheet		Net Amounts of Liabilities in the Consolidated Balance Sheet		Securities Transferred		Net Amount

	(dollars in thousands)
As of March 31, 2019	$	61,437	$	—	$	61,437	$	61,437	$	—
As of December 31, 2018	$	62,801	$	—	$	62,801	$	62,186	$	615


	Investments in CLOs
Securities Sold under Agreements to Repurchase	Overnight and Continuous		Up to 30 Days		30-90 Days		Greater Than 90 Days		Total

	(dollars in thousands)
As of March 31, 2020	$	—	$	—	$	—	$	95,775	$	95,775
As of December 31, 2019	$	—	$	—	$	—	$	97,508	$	97,508


	Three Months Ended March 31, 2019				Three Months Ended March 31, 2018					Three Months Ended March 31, 2020						Three Months Ended March 31, 2019
	Management Fees		Incentive Income		Management Fees		Incentive Income			Management Fees		Incentive Income		Management Fees		Incentive Income

	(dollars in thousands)									(dollars in thousands)
Multi-strategy funds	$	34,381	$	14,984	$	44,406	$	11,832	Multi-strategy funds	$	32,373	$	1,824	$	34,381	$	14,984
Credit									Credit
Opportunistic credit funds	10,435		30,920		11,107		34,235		Opportunistic credit funds	9,563		4,670		10,435		30,920
Institutional Credit Strategies	13,723		—		11,193		—		Institutional Credit Strategies	15,266		—		13,723		—
Real estate funds	4,832		7,294		4,764		4,767		Real estate funds	9,743		2,828		4,832		7,294
Other	252		—		980		—		Other	8		—		252		—
Total	$	63,623	$	53,198	$	72,450	$	50,834	Total	$	66,953	$	9,322	$	63,623	$	53,198



	Equity-Classified RSUs				Liability-Classified RSUs			PSUs
	Unvested RSUs		Weighted-Average Grant-Date Fair Value		Unvested RSUs	Weighted-Average Grant-Date Fair Value		Unvested PSUs	Weighted-Average Grant-Date Fair Value
December 31, 2018	3,784,536		$	30.00	433,133	$	66.75	1,000,000	$	11.82
Granted	1,334,766		$	12.98	47,933	$	13.45	—	$	—
Vested	(610,372	)	$	20.70	—	$	—	—	$	—
Canceled or forfeited	(65,532	)	$	25.36	—	$	—	—	$	—
March 31, 2019	4,443,398		$	26.34	481,066	$	61.45	1,000,000	$	11.82


Three Months Ended March 31, 2020	Net Loss Attributable to Class A Shareholders		Weighted- Average Class A Shares Outstanding	Loss Per Class A Share		Number of Antidilutive Units Excluded from Diluted Calculation

	(dollars in thousands, except per share amounts)
Basic	$	(28,267)	22,304,713	$	(1.27)
Effect of dilutive securities:
Group A Units	(20,416)		16,014,635			—
Group E Units	—		—			13,450,821
RSUs	—		—			4,169,785
Diluted	$	(48,683)	38,319,348	$	(1.27)


Three Months Ended March 31, 2019	Net Income Attributable to Class A Shareholders		Weighted- Average Class A Shares Outstanding	Earnings Per Class A Share		Number of Antidilutive Units Excluded from Diluted Calculation

	(dollars in thousands, except per share amounts)
Basic	$	37,083	20,475,359	$	1.81
Effect of dilutive securities:
Group A Units	—		—			20,039,945
Group E Units	—		1,016,611			—
RSUs	—		—			4,606,223
Diluted	$	37,083	21,491,970	$	1.73


	Potential Payments Under Tax Receivable Agreement
	(dollars in thousands)
April 1, 2020 to December 31, 2020	$	11,796
2021	—
2022	3,689
2023	24,109
2024	35,841
Thereafter	112,026
Total Payments	$	187,461


~~(2)~~	~~Adjustment to exclude realized gains on sale of fixed assets.~~


	Three Months Ended March 31, 2020
	December 31, 2019		Inflows / (Outflows)		Distributions / Other Reductions		Appreciation / (Depreciation)		March 31, 2020

	(dollars in thousands)
Multi-strategy funds	$	9,332,118	$	(209,674)	$	(5,446)	$	(656,788)	$	8,460,210
Credit
Opportunistic credit funds	6,025,306		(279,275)		—		(801,199)		4,944,832
Institutional Credit Strategies	15,710,319		396,992		(6)		(112,906)		15,994,399
Real estate funds	3,393,876		646,876		(41,390)		(9,541)		3,989,821
Other	8,311		16		(7,113)		—		1,214
Total	$	34,469,930	$	554,935	$	(53,955)	$	(1,580,434)	$	33,390,476


	Assets Under Management as of March 31,				Returns for the Three Months Ended March 31,								Annualized Returns Since Inception Through March 31, 2019																Returns for the Three Months Ended March 31,																		Annualized Returns Since Inception Through March 31, 2020
					2019				2018											Assets Under Management as of March 31,								2020										2019
	2019		2018		Gross		Net		Gross		Net			Gross			Net					2020		2019		Gross				Net			Gross			Net				Gross				Net

Fund	(dollars in thousands)																		Fund		(dollars in thousands)
Oz Master Fund⁽¹⁾	$	9,191,339	$	11,241,001	9.5	%	7.9	%	3.0	%	2.1	%	16.3	%	⁽¹⁾	11.4	%	⁽¹⁾
Oz Enhanced Master Fund	886,834		642,820		15.0	%	12.7	%	5.1	%	3.8	%	14.0	%		9.5	%
Sculptor Master Fund⁽¹⁾																			Sculptor Master Fund⁽¹⁾		$	7,776,131	$	9,191,339	-6.5		%		-6.6		%	10.1		%	8.4		%		16.0		%	⁽²⁾	11.0		%	⁽²⁾
Sculptor Enhanced Master Fund																			Sculptor Enhanced Master Fund		622,453		886,834		-7.5		%		-7.2		%	15.0		%	12.7		%		12.4		%		8.2		%
Other funds	214,378		1,441,409		n/m		n/m		n/m		n/m		n/m			n/m			Other funds		61,626		214,378		n/m				n/m			n/m			n/m				n/m				n/m
	$	10,292,551	$	13,325,230																	$	8,460,210	$	10,292,551



	Assets Under Management as of March 31,				Inception to Date as of March 31, 2019
									IRR
	2019		2018		Total Commitments		Total Invested Capital⁽¹⁾		Gross⁽²⁾		Net⁽³⁾		Gross MOIC⁽⁴⁾

Fund (Investment Period)	(dollars in thousands)
Oz European Credit Opportunities Fund (2012-2015)	$	1,455	$	47,137	$	459,600	$	305,487	15.7	%	11.8	%	1.5x
Oz Structured Products Domestic Fund II (2011-2014)	61,966		79,729		326,850		326,850		19.8	%	15.7	%	2.1x
Oz Structured Products Offshore Fund II (2011-2014)	64,360		81,920		304,531		304,531		17.3	%	13.6	%	1.9x
Oz Structured Products Offshore Fund I (2010-2013)	6,095		5,906		155,098		155,098		23.9	%	19.1	%	2.1x
Oz Structured Products Domestic Fund I (2010-2013)	5,350		5,358		99,986		99,986		22.7	%	18.1	%	2.0x
Other funds	308,750		178		309,000		—		n/m		n/m		n/m
	$	447,976	$	220,228	$	1,655,065	$	1,191,952


	Assets Under Management as of March 31,						Inception to Date as of March 31,2020
	2020		2019		Total Commitments		Total Invested Capital⁽¹⁾		Gross IRR⁽²⁾		Net IRR⁽³⁾		Gross MOIC⁽⁴⁾

Fund (Investment Period)	(dollars in thousands)
Sculptor European Credit Opportunities Fund (2012-2015)	$	—	$	1,455	n/a		n/a		n/a		n/a		n/a
Sculptor Structured Products Domestic Fund II (2011-2014)	46,610		61,966		326,850		326,850		19.3	%	15.2	%	2.1x
Sculptor Structured Products Offshore Fund II (2011-2014)	50,480		64,360		304,531		304,531		16.7	%	13.0	%	1.9x
Sculptor Structured Products Offshore Fund I (2010-2013)	3,744		6,095		155,098		155,098		23.8	%	19.1	%	2.1x
Sculptor Structured Products Domestic Fund I (2010-2013)	3,270		5,350		99,986		99,986		22.6	%	18.0	%	2.0x
Other funds	414,000		308,750		414,750		80,959		n/m		n/m		n/m
	$	518,104	$	447,976	$	1,301,215	$	967,424


~~(1)~~	~~Represents funded capital commitments net of recallable distributions to investors.~~