News Column

Fortress Reports Second Quarter 2014 Results and Announces Dividend of $0.26 per Share

July 31, 2014

NEW YORK--(BUSINESS WIRE)-- Fortress Investment Group LLC (NYSE:FIG) (“Fortress” or the “Company”) today reported its second quarter 2014 financial results.

FINANCIAL SUMMARY

  • Fortress declares a cash dividend of $0.26 per dividend paying share for the second quarter of 2014
  • Management Fee Paying Assets Under Management (“AUM”) of $63.8 billion as of June 30, 2014, an increase of 2% from the previous quarter and an increase of 17% from June 30, 2013
  • GAAP net income of $69 million, or $0.12 per diluted Class A share, for the second quarter of 2014, compared to a GAAP net loss of $2 million, or $0.01 loss per diluted Class A share, for the second quarter of 2013
  • Pre-tax distributable earnings (“DE”) of $172 million, or $0.39 per dividend paying share, for the second quarter of 2014, compared to pre-tax DE of $148 million, or $0.30 per dividend paying share, for the second quarter of 2013
  • Net cash and investments of $3.03 per dividend paying share as of June 30, 2014, up 5% from June 30, 2013
  • $1.0 billion of gross embedded incentive income across funds and permanent capital vehicles as of June 30, 2014, that has not been recognized in DE
  • Total uncalled capital, or “dry powder,” of $7.4 billion as of June 30, 2014, including approximately $5.7 billion available for general investment purposes

    BUSINESS HIGHLIGHTS

  • Sold ownership stakes in Private Equity portfolio companies GAGFAH and Brookdale, resulting in realized investment gains of $91 million recognized in DE in the second quarter
  • Raised $1.8 billion of capital across alternative investment businesses during the quarter
  • Recorded $1.7 billion of net client inflows for Logan Circle during the quarter
  • Investment performance summary as of June 30, 2014:
  • Second quarter 2014 net returns of 2.5% for Drawbridge Special Opportunities Fund (“DBSO”) LP, (0.4)% for Fortress Macro Fund Ltd and (1.9)% for the Fortress Asia Macro Fund Ltd
  • Private Equity fund valuations increased 2.8% during the quarter
  • Annualized inception-to-date net IRRs for the Credit Opportunities Fund and Credit Opportunities Fund II of 25.7% and 18.9%, respectively
  • All 16 Logan Circle fixed income strategies outperformed respective benchmarks in the quarter and 15 of 16 strategies have outperformed respective benchmarks since inception
  • Fortress named “Institutional Hedge Fund Manager of the Year” by Institutional Investor

    “Fortress had a terrific second quarter, marked by our second highest distributable earnings since going public, record assets under management, and our largest ever quarterly distribution to shareholders,” said Fortress Chief Executive Officer Randy Nardone. “Our results reflect the significant impact that Private Equity realizations can have on our earnings and distributions, and we expect realizations activity to continue to trend up in the coming years. Credit fund performance drove total gross unrecognized incentive income to over $1 billion, which also bodes well for future periods. We have great momentum going into the second half of the year, substantial embedded value in our funds and on our balance sheet, and we see significant potential for growth and value creation in every one of our businesses.”

    SUMMARY FINANCIAL RESULTS

    Fortress’s business model is highly diversified, and management believes that this positions the Company to capitalize on opportunities for investing, capital formation and harvesting profits that can occur at different points in any cycle for our individual businesses. Fortress’s business model generates stable and predictable management fees, which is a function of the majority of Fortress’s alternative AUM residing in long-term investment structures. Fortress’s alternative investment businesses also generate variable incentive income based on performance, and this incentive income can contribute meaningfully to financial results. Balance sheet investments represent a third component of Fortress’s business model, and the Company has built substantial value in these investments, which are made in Fortress funds alongside the funds’ limited partners.

    The table below summarizes Fortress’s operating results for the quarter and year ended June 30, 2014. The consolidated GAAP statement of operations and balance sheet are presented on pages 13-14 of this press release.

      2Q   1Q   2Q   % Change   1H   1H   % Change
    2014 2014 2013 QoQ   YoY 2014 2013 YoY
    (in millions, except per share amount)
    GAAP
    Revenues $

    427

     

    $

    310

     

    $ 223 38 % 91 % $

    737

     

    $

    467

     

    58 %
    Expenses 379 307 250 23 % 52 % 686 470 46 %
    Other Income 27 9 26 200 % 4 % 37 95 (61 )%
    Net income (loss) 69 6 (2 ) N/M N/M 75 65 15 %
    Net income (loss) attributable to Class A Shareholders   31     3     (2 ) N/M   N/M     34     12   183 %
    Per diluted share $ 0.12   $ 0.01   $ (0.01 ) N/M   N/M   $ 0.14   $ 0.04   250 %
    Weighted average Class A shares outstanding, diluted 445 229 237 460 498
     
    Distributable Earnings
    Fund management DE $ 76 $ 87 $ 144 (13 )% (47 )% $ 163 $ 241 (32 )%
    Pre-tax DE   172     97     148   77 % 16 %   268     248   8 %
    Per dividend paying share/unit $ 0.39   $ 0.21   $ 0.30   86 % 30 % $ 0.59   $ 0.51   16 %
    Weighted average dividend paying shares and units outstanding 442 469 492 455 491
     
    Assets Under Management
    Private Equity $ 13,831 $ 15,243 $ 14,284 (9 )% (3 )% $ 13,831 $ 14,284 (3 )%
    Credit 12,982 12,947 12,468 0 % 4 % 12,982 12,468 4 %
    Liquid Markets 7,867 7,738 6,461 2 % 22 % 7,867 6,461 22 %
    Logan Circle   29,133     26,592     21,397   10 % 36 %   29,133     21,397   36 %
    Total Assets Under Management $ 63,813   $ 62,520   $ 54,610   2 % 17 % $ 63,813   $ 54,610   17 %
     


    CONSOLIDATED GAAP RESULTS

    Fortress recorded GAAP net income of $69 million, or $0.12 per diluted Class A share, for the second quarter of 2014, compared to GAAP net loss of $2 million, or $0.01 loss per diluted Class A share, for the second quarter of 2013. Our diluted earnings per share for all periods presented includes the income tax effects to net income (loss) attributable to Class A shareholders from the assumed conversion of Fortress Operating Group units and fully vested restricted partnership units to Class A shares.

    In June 2014, Fortress formed a new liquid hedge fund that Fortress determined qualifies as a variable interest entity and that it was the primary beneficiary and therefore consolidates the fund. Consequently, Fortress’s financial statements reflect the assets, liabilities, related operations and cash flows of the consolidated fund (“Investment Company”) on a gross basis. In our consolidated financial statements, Fortress’s results and the results of the consolidated fund are disclosed under the Investment Manager caption and the consolidated fund’s related amounts are further detailed under the Investment Company caption.

    Fortress also consolidates New Media Investment Group Inc.’s (“New Media” or the “Media Business”) (NYSE: NEWM) financial position and results of operations. Although New Media’s operating results impact GAAP net income, it does not have a material impact on the net income attributable to Fortress’s Class A shareholders, Class A basic and diluted earnings per share or total Fortress shareholders’ equity, as substantially all of the operating results of New Media are attributable to non-controlling interests. In our consolidated financial statements, New Media’s results are disclosed under the Non-Investment Manager caption.

    The year-over-year increase in Fortress’s second quarter 2014 GAAP net income was primarily driven by a $204 million increase in GAAP revenues, partially offset by a $129 million increase in GAAP expenses.

    The increase in GAAP revenues was primarily attributable to $158 million of revenues from the Media Business as a result of the consolidation of New Media beginning in February 2014, as well as a $30 million increase in incentive income from affiliates primarily attributable to realization activity in our Private Equity funds and higher crystallized incentive income from our Permanent Capital Vehicles.

    The increase in GAAP expenses was primarily attributable to $163 million of expenses associated with the Media Business as a result of the consolidation of New Media, partially offset by a $34 million decrease in Investment Manager expenses primarily related to lower compensation and benefits.

    CONSOLIDATED SEGMENT RESULTS (NON-GAAP)

    This section provides information about each of Fortress’s businesses: (i) Credit Hedge Funds and Private Equity (“PE”) Funds, (ii) Private Equity Funds and Permanent Capital Vehicles, (iii) Liquid Hedge Funds, and (iv) Logan Circle.

    Fortress uses DE as the primary metric to manage its businesses and gauge the Company’s performance, and it uses DE exclusively to report segment results. All DE figures are presented on a pre-tax basis. Consolidated segment results are non-GAAP information and are not presented as a substitute for Fortress’s GAAP results. Fortress urges you to read “Non-GAAP Information” below.

      As of June 30, 2014
      Private Equity  

     

      Credit Funds  

     

     

    Permanent

    Liquid Hedge

     

    Logan Circle

    (in millions) TotalFunds

    Capital Vehicles

    Funds

    Hedge FundsPE Funds

    Partners

     
    Assets Under Management1 $ 63,813 $ 10,141 $ 3,690 $ 7,867 $ 6,084 $ 6,898 $ 29,133
    Dry Powder $ 7,442 $ 2,343 N/A N/A $ 464 $ 4,635 N/A
    Average Management Fee Rate2 1.2 % 1.5 % 1.8 % 2.0 % 1.4 % 0.2 %
     
    Incentive Eligible NAV Above Incentive Income Threshold3 $ 17,353 $ 780 $ 1,372 $ 146 $ 5,354 $ 9,701 N/A
     
    Undistributed Incentive Income: Unrecognized $ 1,031 $ 11 $ 95 $ 7 $ 82 $ 836 N/A
    Undistributed Incentive Income: Recognized   56     -     -     -     56     -     N/A  
    Undistributed Incentive Income4 $ 1,087   $ 11   $ 95   $ 7   $ 138   $ 836     N/A  
     
    Three Months Ended June 30, 2014
    Private Equity

     

    Credit Funds

     

    Permanent

    Liquid Hedge

    Logan Circle

    (in millions) TotalFunds

    Capital Vehicles

    Funds

    Hedge FundsPE Funds

    Partners

     
    Third-Party Capital Raised $ 1,762 $ 260 $ 171 $ 523 $ 554 $ 254 $ -
     
    Segment Revenues
    Management fees $ 152 $ 37 $ 16 $ 37 $ 28 $ 23 $ 11
    Incentive income   78     1     21     1     42     13     -  
    Total 230 38 37 38 70 36 11
    Segment Expenses
    Operating expenses (109 ) (15 ) (14 ) (24 ) (17 ) (26 ) (13 )
    Profit sharing compensation expenses   (39 )   1     (6 )   (7 )   (20 )   (7 )   -  
    Total   (148 )   (14 )   (20 )   (31 )   (37 )   (33 )   (13 )
     
    Principal Performance Payments (6 ) - (2 ) (1 ) (3 ) - -
                 
    Fund Management DE $ 76   $ 24   $ 15   $ 6   $ 30   $ 3   $ (2 )
     
    Net Investment Income 96
                 
    Pre-tax Distributable Earnings $ 172   $ 24   $ 15   $ 6   $ 30   $ 3   $ (2 )


    Pre-tax DE was $172 million in the second quarter of 2014, up from $148 million in the second quarter of 2013. This increase was primarily due to higher net investment income and management fees, partially offset by lower incentive income and higher operating expenses.

    _________________________

    1 The Assets Under Management presented for the Credit Hedge Funds includes $324 million related to the third-party originated Value Recovery Funds. Fortress earns fees from the Value Recovery Funds based only on collections.
    2 The Average Management Fee Rate presented for the Credit Hedge Funds excludes the third-party originated Value Recovery Funds. See footnote (1) above.

    3 The Incentive Eligible NAV Above Incentive Income Threshold presented for Liquid and Credit Hedge Funds excludes sidepocket investments. The Incentive Eligible NAV Above Incentive Income Threshold presented for Private Equity Funds and Credit PE Funds represents total fund NAV. The Incentive Eligible NAV Above Incentive Income Threshold presented for our Permanent Capital Vehicles represents the equity basis that is used to calculate incentive income.

    4 The Undistributed Incentive Income presented includes the impact of sidepocket investments on Liquid and Credit Hedge Funds. Undistributed Incentive Income for Private Equity Funds, Credit PE Funds and Liquid and Credit Hedge Fund sidepocket and redeeming capital account (RCA) investments has not been recognized in Distributable Earnings and will be recognized when realized; Undistributed Incentive Income for other Hedge Fund investments was recognized in Distributable Earnings when earned. Undistributed Incentive Income for Permanent Capital Vehicles includes incentive income that would have been recorded in Distributable Earnings if Fortress had exercised all of its in-the-money Newcastle, New Residential and Eurocastle options and sold all of the resulting shares at their June 30, 2014 closing price.

     


    Net investment income totaled $96 million in the second quarter of 2014, compared to $4 million in the second quarter of 2013, primarily attributable to investment income recognized from the sale of GAGFAH S.A. (Xetra: GFJ) and Brookdale Senior Living (NYSE: BKD) shares during the quarter.

    Management fees were $152 million in the second quarter of 2014, up from $129 million in the second quarter of 2013, primarily due to higher management fees from the Liquid Hedge Funds, Private Equity Funds, Permanent Capital Vehicles, Credit Hedge Funds, Logan Circle and Credit PE Funds.

    Incentive income recorded in the second quarter of 2014 totaled $78 million, down from $199 million recorded in the second quarter of 2013, primarily due to lower incentive income from the Liquid Hedge Funds, Credit PE Funds, Credit Hedge Funds and Private Equity Funds, partially offset by higher incentive income from the Permanent Capital Vehicles.

    Additionally, Fortress had $1.0 billion in gross undistributed, unrecognized incentive income based on investment valuations as of June 30, 2014. This includes $936 million from our funds and $95 million from options in our permanent capital vehicles.

    The Company’s segment revenues and distributable earnings will fluctuate materially depending upon the performance of its funds and the realization events within its Private Equity businesses, as well as other factors.Accordingly, the revenues and distributable earnings in any particular period should not be expected to be indicative of future results.

    ASSETS UNDER MANAGEMENT

    As of June 30, 2014, AUM totaled $63.8 billion, up from $62.5 billion as of March 31, 2014. During the second quarter, Fortress recorded $1.7 billion of net client inflows for Logan Circle, had $1.1 billion of market-driven valuation gains, raised $0.8 billion of capital that was directly added to AUM and had a $0.2 billion increase in invested capital. These increases to AUM were partially offset by (i) $2.1 billion of capital distributions to investors, (ii) $0.3 billion of Liquid Hedge Fund redemptions and (iii) $0.2 billion of payments to Credit Hedge Fund investors from redeeming capital accounts. As of June 30, 2014, the Credit Funds and Private Equity Funds had approximately $5.1 billion and $2.3 billion of uncalled capital, respectively, that will become AUM if deployed/called. Uncalled capital or dry powder – capital committed to the funds but not invested and generating management fees – includes $1.7 billion that is only available for follow-on investments, management fees and other fund expenses. Notably, approximately 77% of alternative AUM was in funds with long-term investment structures as of June 30, 2014, which provides for a stable, predictable base of management fees.

    BUSINESS SEGMENT RESULTS

    Below is a discussion of second quarter 2014 segment results and business highlights.

    Credit:

  • DBSO LP net returns of 2.5% for the second quarter of 2014
  • Credit Opportunities Fund, Credit Opportunities Fund II and Japan Opportunity Fund recorded annualized inception-to-date net IRRs of 25.7%, 18.9% and 27.9%, respectively, through June 30, 2014
  • Raised $554 million of capital across Credit Hedge Funds
  • Raised $254 million of capital for second-generation Real Estate Opportunities Fund

    (See supplemental data on pages 19-20 for more detail on Credit results)

    The Credit business, which includes our Credit Hedge Funds and Credit PE Funds, generated pre-tax DE of $33 million in the second quarter of 2014, compared to $53 million in second quarter of 2013. The year-over-year decline in DE was primarily driven by lower incentive income recorded in quarter, partially offset by higher management fees.

    DBSO LP, Fortress’s flagship credit hedge fund, had net returns of 2.5% in the second quarter and 5.8% for the six month period ending June 30, 2014. At quarter end, the Credit Hedge Funds had $5.4 billion of incentive eligible NAV above performance thresholds and eligible to generate additional incentive income. The Credit Hedge Funds raised $554 million of third-party capital in the quarter, primarily for the DBSO funds, of which $143 million immediately contributed to AUM. The remaining $411 million is callable through the period ending June 30, 2016.

    Positive Credit PE Fund performance contributed to a $114 million net change in gross unrecognized Credit PE incentive income in the quarter, which totaled $836 million as of June 30, 2014. At quarter end, the Credit PE Funds had $9.7 billion of incentive-eligible NAV above performance thresholds as all flagship Credit Opportunities and Japan Real Estate Funds were valued above their preferred thresholds and eligible to generate incentive income.

    During the quarter, the Credit PE Funds held a first close for our second-generation Real Estate Opportunities Fund with $254 million of capital. Our first set of dedicated Real Estate Opportunities Funds closed in 2012 with $284 million in total third-party commitments.

    Private Equity:

  • Fund portfolio investment valuations increased 2.8% in the quarter
  • Fortress funds and affiliates sold remaining stakes in GAGFAH and Brookdale
  • Raised $234 million of capital for WWTAI in the quarter and approximately $350 million of additional capital subsequent to quarter end
  • New Residential Investment Corp. raised $171 million of capital in the quarter
  • Newcastle Investment Corp. announced plans to spin off its senior housing business into a new publicly traded REIT

    (See supplemental data on page 18 for more detail on Private Equity results)

    The Private Equity business, which includes Private Equity Funds and Permanent Capital Vehicles, recorded pre-tax DE of $39 million in the second quarter of 2014, up from $30 million in the second quarter of 2013, primarily due to higher Permanent Capital Vehicle incentive income, partially offset by lower Private Equity Fund incentive income.

    Private Equity Fund valuations increased 2.8% in the quarter, primarily due to appreciation of certain of our publicly-traded portfolio company investments.

    During the quarter, Fortress funds and affiliates sold their remaining stake in GAGFAH, generating $1.4 billion of proceeds from the sale of 90.5 million GAGFAH shares. Over the lifetime of Fortress’s investment in GAGFAH, Fortress funds have realized proceeds of $3.8 billion on a total equity investment of approximately $2.9 billion.

    Fortress funds and affiliates also sold their remaining stake in Brookdale during the quarter, generating $621.5 million of proceeds from the sale of 19.4 million Brookdale shares. Over the lifetime of Fortress’s investment in Brookdale, Fortress funds have realized proceeds of $1.7 billion on a total equity investment of approximately $1.2 billion.

    The Private Equity business raised $431 million of capital during the quarter, including $234 million for WWTAI, $171 million for New Residential Investment Corp. (NYSE: NRZ) and $26 million for the Italian NPL Opportunities Fund. Subsequent to quarter end, we raised approximately $350 million of additional capital for WWTAI, bringing total third-party commitments to approximately $955 million.

    In June 2014, Newcastle Investment Corp. (NYSE: NCT) announced plans to spin off all of its senior housing assets into a new publicly traded real estate investment trust, New Senior Investment Group Inc. (“New Senior”). New Senior will be externally managed by an affiliate of Fortress and will primarily target senior housing related investments. Over the past two years, Newcastle has invested over $700 million of equity to acquire 95 senior housing properties.

    Liquid Hedge Funds:

  • Raised approximately $523 million of capital during the quarter and an additional $84 million of capital subsequent to quarter end
  • Announced addition of new global equity strategy
  • Fortress Asia Macro Fund Recognized as “Best Asia-Based Macro Fund” and “Best Singapore Hedge Fund” at the Eurekahedge Asian Hedge Fund Awards 2014

    (See supplemental data on page 21 for more detail on Liquid Hedge Funds results)

    The Liquid Hedge Funds recorded pre-tax DE of $6 million in the second quarter of 2014, down from $64 million in the second quarter of 2013, primarily due to lower incentive income, partially offset by higher management fees.

    Net returns for the quarter ended June 30, 2014 for the Fortress Macro Funds, Fortress Asia Macro Funds, Fortress Partners Funds and Fortress Convex Asia Funds were (0.4)%, (1.9)%, 2.0% and (2.6)%, respectively. Net returns year-to-date through July 25, 2014 for the Fortress Macro Funds, Fortress Asia Macro Funds and Fortress Convex Asia Funds were (3.2)%, (4.8)% and (3.9)%, respectively.

    Liquid Hedge Funds ended the quarter with $7.9 billion of AUM, up 2% from the previous quarter, primarily due to $0.5 billion of capital raised, partially offset by $0.3 billion of redemptions and $0.1 billion of market-driven valuation losses.

    Subsequent to quarter end, the Liquid Hedge Funds raised approximately $84 million of additional capital, which will be added to AUM in the third quarter of 2014. As of June 30, 2014, there were $820 millionLiquid Hedge Fund redemption notices outstanding, $512 million of which will be paid primarily within one quarter.

    In May 2014, Fortress announced the addition of the global investment team from Centaurus Capital, which has been rebranded as the Fortress Centaurus Global Strategy.

    Logan Circle:

  • All 16 Logan Circle fixed income investment strategies outperformed their respective benchmarks in the second quarter, and 15 of 16 strategies have outperformed respective benchmarks since inception
  • Traditional asset management AUM totaled $29.1 billion at June 30, 2014, an increase of 36% compared to June 30, 2013
  • Net client inflows totaled $1.7 billion in the second quarter of 2014

    (See supplemental data on page 22 for more detail on Logan Circle results)

    Logan Circle, our traditional asset management business, recorded a pre-tax DE loss of $2 million in the quarter, compared to a pre-tax DE loss of $3 million for the second quarter of 2013. The year-over-year change was primarily due to higher management fees, partially offset by an increase in operating expenses.

    Logan Circle ended the quarter with $29.1 billion in AUM, a 36% increase compared to the previous year and a 10% increase compared to the previous quarter. The quarter-over-quarter increase in AUM was primarily due to net client inflows of $1.7 billion and market-driven valuation gains of $0.8 billion in the quarter.

    Notably, all 16 of Logan Circle’s fixed income strategies outperformed their respective benchmarks in quarter ending June 30, 2014. Since inception, 15 of 16 Logan Circle fixed income strategies have outperformed their respective benchmarks and as of June 30, 2014, eight were ranked in the top quartile of performance for their competitor universe.

    Principal Investments:

    The Principal Investments segment, which is comprised of Fortress’s investments in its own funds, generated pre-tax DE of $96 million in the second quarter of 2014, compared to $4 million in the second quarter of 2013. This year-over-year increase was primarily due to realization events in our private equity-style funds and a decrease in interest expense.

    During the quarter, Fortress sold its remaining ownership stakes in GAGFAH and Brookdale, including direct investments and investments through Fortress PE funds. The share sales resulted in $91 million of realized investment gains that were recognized in DE in the second quarter of 2014.

    As of June 30, 2014, Principal Investments had segment assets (excluding cash and cash equivalents) totaling $1.3 billion, including $1.2 billion of investments in Fortress funds and $0.1 billion of investments in options in our Permanent Capital Vehicles. As of June 30, 2014, Fortress had a total of $154 million of outstanding commitments to its funds.

    In addition, as of June 30, 2014, the NAV of Fortress’s Principal Investments exceeded its segment cost basis by $543 million, representing net unrealized gains that have not yet been recognized for segment reporting purposes.

    LIQUIDITY & CAPITAL

    As of June 30, 2014, Fortress (excluding New Media and Investment Company) had cash and cash equivalents of $243 million and debt obligations of $75 million.

    DIVIDEND

    Fortress’s Board of Directors declared a second quarter 2014 cash dividend of $0.26 per dividend paying share, comprised of a base quarterly cash dividend of $0.08 per dividend paying share and a special cash dividend of $0.18 per dividend paying share. The dividend is payable on August 15, 2014 to Class A shareholders of record as of the close of business on August 12, 2014.

    On an annual basis, we expect to distribute substantially all of our after-tax distributable earnings from all sources, including net management fees, net incentive income and DE generated by balance sheet investment realizations (with potential for incremental distributions based on returns of capital from balance sheet realizations). These distributions will include quarterly base dividends in an amount generally equal to net management fees and potential quarterly special dividends, which would be primarily balance sheet related, with potential special dividends at year-end also taking into consideration net incentive income. Any dividend declared by us will be subject to our determination of cash necessary or appropriate to provide for the conduct of our business, including making investments in our business or funds, and maintaining compliance with applicable laws and covenants associated with our debt instruments or other obligations.

    The declaration and payment of any dividends are at the sole discretion of the Board of Directors, which may decide to change its dividend policy at any time. Please see below for information on the U.S. federal income tax implications of the dividend.

    NON-GAAP INFORMATION

    DE is a primary metric used by management to measure Fortress’s operating performance. Consistent with GAAP, DE is the sole measure that management uses to manage, and thus report on, Fortress’s segments, namely: Private Equity, Permanent Capital Vehicles, Credit Hedge Funds, Credit PE Funds, Liquid Hedge Funds, Logan Circle and Principal Investments. DE differs from GAAP net income in a number of material ways. For a detailed description of the calculation of pre-tax DE and fund management DE, see Exhibit 3 to this release and note 11 to the financial statements included in the Company’s most recent quarterly report on Form 10-Q.

    Fortress aggregates its segment results to report consolidated segment results, as shown in the table under “Summary Financial Results” and in the “Total” column of the table under “Consolidated Segment Results (Non-GAAP).” The consolidated segment results are non-GAAP financial information. Management believes that consolidated segment results provide a meaningful basis for comparison among present and future periods. However, consolidated segment results should not be considered a substitute for Fortress’s consolidated GAAP results. The exhibits to this release contain reconciliations of the components of Fortress’s consolidated segment results to the comparable GAAP measures, and Fortress urges you to review these exhibits. Fortress also uses weighted average dividend paying shares and units outstanding (used to calculate pre-tax DE per dividend paying share) and net cash and investments. The exhibits to this release contain reconciliations of these measures to the comparable GAAP measures, and Fortress urges you to review these exhibits.

    CONFERENCE CALL

    Management will host a conference call today, Thursday, July 31, 2014 at 10:00 A.M. Eastern Time. A copy of the earnings release is posted to the Investor Relations section of Fortress’s website, www.fortress.com. All interested parties are welcome to participate on the live call. The conference call may be accessed by dialing 1-877-694-6694 (from within the U.S.) or 1-970-315-0985 (from outside of the U.S.) ten minutes prior to the scheduled start of the call; please reference “Fortress Second Quarter Earnings Call.” A simultaneous webcast of the conference call will be available to the public on a listen-only basis at www.fortress.com. Please allow extra time prior to the call to visit the site and download the necessary software required to listen to the internet broadcast. A telephonic replay of the conference call will also be available until 11:59 P.M. Eastern Time on Thursday, August 7, 2014 by dialing 1-855-859-2056 (from within the U.S.) or 1-404-537-3406 (from outside of the U.S.); please reference access code “70992397.”

    ABOUT FORTRESS

    Fortress Investment Group LLC (NYSE: FIG) is a leading, highly diversified global investment management firm with $63.8 billion in assets under management as of June 30, 2014. Fortress applies its deep experience and specialized expertise across a range of investment strategies - private equity, credit, liquid hedge funds and traditional asset management - on behalf of approximately 1,600 institutional clients and private investors worldwide. For more information regarding Fortress Investment Group LLC or to be added to its e-mail distribution list, please visit www.fortress.com.

    CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

    Certain statements in this press release may constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding Fortress’s sources of management fees, incentive income and investment income (loss), estimated fund performance and the amount and source of expected capital commitments. These statements are not historical facts, but instead represent only the Company’s beliefs regarding future events, many of which, by their nature, are inherently uncertain and outside of the Company’s control. It is possible that the sources and amounts of management fees, incentive income and investment income, the amount and source of expected capital commitments for any new fund or redemption amounts may differ, possibly materially, from these forward-looking statements, and any such differences could cause the Company’s actual results to differ materially from the results expressed or implied by these forward-looking statements. For a discussion of some of the risks and important factors that could affect such forward-looking statements, see the sections entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s Quarterly Report on Form 10-Q, which is, or will be, available on the Company’s website (www.fortress.com). In addition, new risks and uncertainties emerge from time to time, and it is not possible for the Company to predict or assess the impact of every factor that may cause its actual results to differ from those contained in any forward-looking statements. Accordingly, you should not place undue reliance on any forward-looking statements contained in this press release. The Company can give no assurance that the expectations of any forward-looking statement will be obtained. Such forward-looking statements speak only as of the date of this press release. The Company expressly disclaims any obligation to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in the Company’s expectations with regard thereto or any change in events, conditions or circumstances on which any statement is based.

    U.S. FEDERAL INCOME TAX IMPLICATIONS OF DIVIDEND

    This announcement is intended to be a qualified notice as provided in the Internal Revenue Code (the “Code”) and the Regulations thereunder. For U.S. federal income tax purposes, the dividend declared in July 2014 will be treated as a partnership distribution. The per share distribution components are as follows:

          U.S. Long Term Capital Gain (1)     $0.0000
    Non-U.S. Long Term Capital Gain $0.0416
    U.S. Portfolio Interest Income (2)$0.0371
    U.S. Dividend Income (3)$0.0000
    Other Income (4)$0.0000
    Return of Capital

    $0.1813

    Distribution Per Share

    $0.2600

    (1)   U.S. Long Term Capital Gain realized on the sale of a United States Real Property Holding Corporation. As a result, the gain from the sale will be treated as income that is effectively connected with a U.S. trade or business.
    (2) Eligible for the U.S. portfolio interest exemption for any holder not considered a 10-Percent shareholder under §871(h)(3)(B) of the Code.
    (3) This income is subject to withholding under §1441 of the Code.
    (4) This income is not subject to withholding under §1441 or §1446 of the Code.
     
     

    Fortress Investment Group LLC

    Consolidated Statements of Operations (Unaudited)

    (dollars in thousands, except share data)

       
    Three Months Ended June 30,Six Months Ended June 30,
    2014   20132014   2013
    Revenues
    Investment Manager
    Management fees: affiliates $ 134,581 $ 123,762 $ 263,526 $ 267,364
    Management fees: non-affiliates 17,716 15,355 35,338 30,170
    Incentive income: affiliates 60,442 30,885 94,693 62,242
    Incentive income: non-affiliates 44 1,434 687 2,863
    Expense reimbursements: affiliates 51,662 49,341 102,848 100,007
    Expense reimbursements: non-affiliates 2,614 1,477 5,062 2,848
    Other revenues 1,773 820 3,023 1,935
    Investment Company - consolidated VIE
    Interest and dividend income   48     -     48     -  
      268,880     223,074     505,225     467,429  
    Non-Investment Manager - consolidated VIE
    Advertising 95,837 - 139,673 -
    Circulation 46,102 - 68,246 -
    Commercial printing and other   16,494     -     24,335     -  
      158,433     -     232,254     -  
    Total Revenues   427,313     223,074     737,479     467,429  
     
    Expenses
    Investment Manager
    Compensation and benefits 168,114 212,055 356,633 393,134
    General, administrative and other 41,968 32,657 79,791 66,655
    Depreciation and amortization 5,037 3,354 9,338 6,593
    Interest expense 947 1,783 1,638 4,078
    Investment Company - consolidated VIE
    Other   219     -     219     -  
      216,285     249,849     447,619     470,460  
    Non-Investment Manager - consolidated VIE
    Operating costs 87,960 - 131,533 -
    General, administrative and other 51,409 - 76,525 -
    Depreciation and amortization 10,134 - 15,347 -
    Interest expense 4,160 - 6,294
    Loss on extinguishment of debt   9,047     -     9,047     -  
      162,710     -     238,746     -  
    Total Expenses   378,995     249,849     686,365     470,460  
     
    Other Income (Loss)
    Investment Manager
    Gains (losses) 4,368 (3,200 ) (6,876 ) 38,075
    Tax receivable agreement liability adjustment - - - (7,739 )
    Earnings (losses) from equity method investees 22,448 28,705 42,822 65,007
    Investment Company - consolidated VIE
    Gains (losses)   564     -     564     -  
    Total Other Income (Loss)   27,380     25,505     36,510     95,343  
     
    Income (Loss) Before Income Taxes 75,698 (1,270 ) 87,624 92,312
    Income tax benefit (expense) - Investment Manager (7,916 ) (1,166 ) (13,910 ) (27,442 )
    Income tax benefit (expense) - Non-Investment Manager - consolidated VIE   1,173     -     1,412     -  
    Total Income Tax Benefit (Expense) $ (6,743 ) $ (1,166 ) $ (12,498 ) $ (27,442 )
    Net Income (Loss) $ 68,955   $ (2,436 ) $ 75,126   $ 64,870  
    Allocation of Net Income (Loss)
    Principals' and Others' Interests in Income (Loss) of Consolidated Subsidiaries 42,135 (360 ) 48,104 52,617
    Redeemable Non-Controlling Interests in Income (Loss) of Investment Company - consolidated VIE 157 - 157 -
    Non-Controlling Interests in Income (Loss) of Non-Investment Manager - consolidated VIE (4,557 ) - (7,291 ) -
    Net Income (Loss) Attributable to Class A Shareholders   31,220     (2,076 )   34,156     12,253  
    $ 68,955   $ (2,436 ) $ 75,126   $ 64,870  
     

    Earnings (Loss) Per Class A Share

    Net income (loss) per Class A share, basic $ 0.15   $ (0.01 ) $ 0.16   $ 0.05  
    Net income (loss) per Class A share, diluted $ 0.12   $ (0.01 ) $ 0.14   $ 0.04  
    Weighted average number of Class A shares outstanding, basic   207,783,751     237,426,903     212,328,315     232,385,013  
    Weighted average number of Class A shares outstanding, diluted   444,566,847     237,426,903     459,673,136     498,277,165  
     
     
     

    Fortress Investment Group LLC

    Consolidated Balance Sheets

    (dollars in thousands)

       

    June 30, 2014

    (Unaudited)

    December 31, 2013
    Assets
    Investment Manager
    Cash and cash equivalents $ 242,612 $ 364,583
    Due from affiliates 156,965 407,124
    Investments 1,119,324 1,253,266
    Investments in options 98,583 104,338
    Deferred tax asset, net 383,002 354,526
    Other assets 169,716 190,595
    Investment Company - consolidated VIE
    Cash and cash equivalents 11,878 -
    Receivables from brokers and counterparties 41,302 -
    Investments, at fair value 70,015 -
    Other assets   180     -  
    2,293,577 2,674,432
    Non-Investment Manager - consolidated VIE
    Cash and cash equivalents 31,347 -
    Fixed assets, net 258,498 -
    Goodwill 119,502 -
    Intangible assets, net 144,475 -
    Other assets, net   107,998     -  
      661,820     -  
    Total Assets $ 2,955,397   $ 2,674,432  
     
    Liabilities and Equity
     
    Liabilities
    Investment Manager
    Accrued compensation and benefits $ 199,393 $ 417,309
    Due to affiliates 351,375 344,832
    Deferred incentive income 256,842 247,556
    Debt obligations payable 75,000 -
    Other liabilities 84,384 49,830
    Investment Company - consolidated VIE
    Due to brokers and counterparties 7,305 -
    Securities sold not yet purchased, at fair value 28,103 -
    Other liabilities   800     -  
    1,003,202 1,059,527
    Non-Investment Manager - consolidated VIE
    Deferred revenue 31,866 -
    Debt obligations payable 192,398 -
    Accrued expenses and other liabilities   60,368     -  
    284,632 -
       
    Total Liabilities $ 1,287,834   $ 1,059,527  
     
    Commitments and Contingencies
     
    Redeemable Non-controlling Interests, Investment Company - consolidated VIE 36,929 -
     
    Equity

    Class A shares, no par value, 1,000,000,000 shares authorized, 207,799,156 and 240,741,920 shares issued and outstanding at June 30, 2014 and December 31, 2013, respectively

    - -

    Class B shares, no par value, 750,000,000 shares authorized, 226,331,513 and 249,534,372 shares issued and outstanding at June 30, 2014 and December 31, 2013, respectively

    - -
    Paid-in capital 2,055,456 2,112,720
    Retained earnings (accumulated deficit) (1,416,932 ) (1,286,131 )
    Accumulated other comprehensive income (loss)   (2,068 )   (1,522 )
    Total Fortress shareholders' equity 636,456 825,067
    Principals' and others' interests in equity of consolidated subsidiaries 618,429 789,838
    Non-controlling interests in equity of Non-Investment Manager - consolidated VIE   375,749     -  
    Total Equity   1,630,634     1,614,905  
    $ 2,955,397   $ 2,674,432  
     
     
     

    Fortress Investment Group LLC

    Exhibit 1-a

    Supplemental Data for the Three Months Ended June 30, 2014 and 2013

     
    Three Months Ended June 30, 2014
      Private Equity  

     

      Credit Funds  

     

     
     

    Permanent Capital

     

    Liquid Hedge

       

    Principal

    (in millions) TotalFunds

    Vehicles

    Funds

    Hedge FundsPE Funds

    Logan Circle

    Investments

    Assets Under Management
    AUM - April 1, 2014 $ 62,520 $ 11,779 $ 3,464 $ 7,738 $ 5,968 $ 6,979 $ 26,592 $ -
    Capital raised 666 - - 523 143 - - -
    Equity raised (Permanent capital vehicles) 171 - 171 - - - - -
    Increase in invested capital 225 117 59 - - 49 - -
    Redemptions (319 ) - - (319 ) - - - -
    RCA distributions5 (158 ) - - - (158 ) - - -
    Return of capital distributions (2,086 ) (1,897 ) - (13 ) (28 ) (148 ) - -
    Crystallized Incentive Income (16 ) - - - (16 ) - - -
    Net Client Flows 1,730 - - - - - 1,730 -
    Income (loss) and foreign exchange   1,080     142     (4 )   (62 )   175     18     811     -  
    AUM - Ending Balance $ 63,813 $ 10,141 $ 3,690 $ 7,867 $ 6,084 $ 6,898 $ 29,133 $ -
     
    Third-Party Capital Raised $ 1,762   $ 260   $ 171   $ 523   $ 554   $ 254   $ -   $ -  
     
    Segment Revenues
    Management fees $ 152 $ 37 $ 16 $ 37 $ 28 $ 23 $ 11 $ -
    Incentive income   78     1     21     1     42     13     -     -  
    Total 230 38 37 38 70 36 11 -
     
    Segment Expenses
    Operating expenses (109 ) (15 ) (14 ) (24 ) (17 ) (26 ) (13 ) -
    Profit sharing compensation expenses   (39 )   1     (6 )   (7 )   (20 )   (7 )   -     -  
    Total (148 ) (14 ) (20 ) (31 ) (37 ) (33 ) (13 ) -
                   
    Fund Management DE (before Principal Performance Payments)   82     24     17     7     33     3     (2 )   -  
     
    Principal Performance Payments (6 ) - (2 ) (1 ) (3 ) - - -
                   
    Fund Management DE   76     24     15     6     30     3     (2 )   -  
     
    Investment Income 97 97
    Interest Expense (1 ) (1 )
                   
    Pre-tax Distributable Earnings $ 172   $ 24   $ 15   $ 6   $ 30   $ 3   $ (2 ) $ 96  
     
    Pre-tax Distributable Earnings per Dividend Paying Share $ 0.39  
     
      Three Months Ended June 30, 2013
      Private Equity  

     

      Credit Funds  

     

     
     

    Permanent Capital

    Liquid Hedge

     

    Principal

    (in millions) TotalFunds

    Vehicles

    Funds

    Hedge FundsPE Funds

    Logan Circle

    Investments

    Assets Under Management
    AUM - April 1, 2013 $ 55,583 $ 11,126 $ 4,369 $ 5,490 $ 5,620 $ 7,041 $ 21,937 $ -
    Capital raised 893 - - 726 167 - - -
    Equity raised (Permanent capital vehicles) 333 - 333 - - - - -
    Increase in invested capital 296 137 - - - 159 - -
    Redemptions (179 ) - - (177 ) (2 ) - - -
    RCA distributions5 (282 ) - - - (282 ) - - -
    Return of capital distributions (590 ) (123 ) - (40 ) (8 ) (419 ) - -
    Adjustment for reset date (1,492 ) - (1,492 ) - - - - -
    Crystallized Incentive Income (21 ) - - (4 ) (17 ) - - -
    Net Client Flows 124 - - - - - 124 -
    Income (loss) and foreign exchange   (55 )   (72 )   6     466     282     (73 )   (664 )   -  
    AUM - Ending Balance $ 54,610 $ 11,068 $ 3,216 $ 6,461 $ 5,760 $ 6,708 $ 21,397
     
    Third-Party Capital Raised $ 1,226   $ -   $ 333   $ 726   $ 167   $ -   $ -   $ -  
     
    Segment Revenues
    Management fees $ 129 $ 34 $ 13 $ 26 $ 25 $ 22 $ 9 $ -
    Incentive income   199     5     1     92     64     37     -     -  
    Total 328 39 14 118 89 59 9 -
     
    Segment Expenses
    Operating expenses (91 ) (12 ) (9 ) (18 ) (17 ) (23 ) (12 ) -
    Profit sharing compensation expenses   (80 )   (2 )   -     (29 )   (29 )   (20 )   -     -  
    Total (171 ) (14 ) (9 ) (47 ) (46 ) (43 ) (12 ) -
                   
    Fund Management DE (before Principal Performance Payments)   157     25     5     71     43     16     (3 )   -  
     
    Principal Performance Payments (13 ) - - (7 ) (6 ) - - -
                   
    Fund Management DE   144     25     5     64     37     16     (3 )   -  
     
    Investment Income 6 6
    Interest Expense (2 ) (2 )
                   
    Pre-tax Distributable Earnings $ 148   $ 25   $ 5   $ 64   $ 37   $ 16   $ (3 ) $ 4  
     
    Pre-tax Distributable Earnings per Dividend Paying Share $ 0.30  
     
    5 Represents distributions from (i) assets held by redeeming capital accounts in the Drawbridge Special Opportunities Funds, and (ii) the Value Recovery Funds.
     
     
     

    Fortress Investment Group LLC

    Exhibit 1-a

    Supplemental Data for the Six Months Ended June 30, 2014 and 2013

     
    Six Months Ended June 30, 2014
      Private Equity  

     

      Credit Funds  

     

     
     

    Permanent Capital

     

    Liquid Hedge

       

    Principal

    (in millions) TotalFunds

    Vehicles

    Funds

    Hedge FundsPE Funds

    Logan Circle

    Investments

    Assets Under Management
    AUM - Jan 1, 2014 $ 61,750 $ 12,036 $ 3,547 $ 7,398 $ 5,856 $ 7,527 $ 25,386 $ -
    Capital raised 2,182 - - 1,825 357 - - -
    Equity raised (Permanent capital vehicles) 171 - 171 - - - - -
    Increase in invested capital 588 216 59 - 15 298 - -
    Redemptions (912 ) - - (876 ) (36 ) - - -
    RCA distributions6 (307 ) - - - (307 ) - - -
    Return of capital distributions (3,287 ) (2,154 ) (84 ) (37 ) (28 ) (984 ) - -
    Adjustment for reset date - - - - - - - -
    Crystallized Incentive Income (289 ) - - (129 ) (160 ) - - -
    Net Client Flows 2,207 - - - - - 2,207 -
    Income (loss) and foreign exchange   1,710     43     (3 )   (314 )   387     57     1,540     -  
    AUM - Ending Balance $ 63,813 $ 10,141 $ 3,690 $ 7,867 $ 6,084 $ 6,898 $ 29,133 $ -
     
    Third-Party Capital Raised $ 3,371   $ 339   $ 171   $ 1,825   $ 782   $ 254   $ -   $ -  
     
    Segment Revenues
    Management fees $ 299 $ 73 $ 31 $ 70 $ 55 $ 48 $ 22 $ -
    Incentive income   182     3     25     1     74     79     -     -  
    Total 481 76 56 71 129 127 22 -
     
    Segment Expenses
    Operating expenses (213 ) (28 ) (26 ) (47 ) (34 ) (52 ) (26 ) -
    Profit sharing compensation expenses   (92 )   -     (6 )   (9 )   (35 )   (42 )   -     -  
    Total (305 ) (28 ) (32 ) (56 ) (69 ) (94 ) (26 ) -
                   
    Fund Management DE (before Principal Performance Payments)   176     48     24     15     60     33     (4 )   -  
     
    Principal Performance Payments (13 ) - (3 ) (1 ) (8 ) (1 ) - -
                   
    Fund Management DE   163     48     21     14     52     32     (4 )   -  
     
    Investment Income 107 107
    Interest Expense (2 ) (2 )
                   
    Pre-tax Distributable Earnings $ 268   $ 48   $ 21   $ 14   $ 52   $ 32   $ (4 ) $ 105  
     
    Pre-tax Distributable Earnings per Dividend Paying Share $ 0.59  
     
      Six Months Ended June 30, 2013
      Private Equity  

     

      Credit Funds  

     

     
     

    Permanent Capital

     

    Liquid Hedge

       

    Principal

    (in millions) TotalFunds

    Vehicles

    Funds

    Hedge FundsPE Funds

    Logan Circle

    Investments

    Assets Under Management
    AUM - Jan 1, 2013 $ 53,430 $ 10,611 $ 3,660 $ 5,060 $ 5,665 $ 7,749 $ 20,685 $ -
    Capital raised 1,635 - - 1,393 242 - - -
    Equity raised (Permanent capital vehicles) 1,097 - 1,097 - - - - -
    Increase in invested capital 856 307 - - - 549 - -
    Redemptions (566 ) - - (518 ) (48 ) - - -
    RCA distributions6 (421 ) - - - (421 ) - - -
    Return of capital distributions (1,727 ) (296 ) - (40 ) (8 ) (1,383 ) - -
    Adjustment for reset date (1,492 ) - (1,492 ) - - - - -
    Crystallized Incentive Income (209 ) - - (69 ) (140 ) - - -
    Net Client Flows 1,277 - - - - - 1,277 -
    Income (loss) and foreign exchange   730     446     (49 )   635     470     (207 )   (565 )   -  
    AUM - Ending Balance $ 54,610 $ 11,068 $ 3,216 $ 6,461 $ 5,760 $ 6,708 $ 21,397 $ -
     
    Third-Party Capital Raised $ 2,953   $ 221   $ 1,097   $ 1,393   $ 242   $ -   $ -   $ -  
     
    Segment Revenues
    Management fees $ 261 $ 67 $ 31 $ 49 $ 50 $ 47 $ 17 $ -
    Incentive income   315     8     1     124     97     85     -     -  
    Total 576 75 32 173 147 132 17 -
     
    Segment Expenses
    Operating expenses (181 ) (25 ) (17 ) (36 ) (32 ) (50 ) (21 ) -
    Profit sharing compensation expenses   (134 )   (3 )   -     (39 )   (47 )   (45 )   -     -  
    Total (315 ) (28 ) (17 ) (75 ) (79 ) (95 ) (21 ) -
                   
    Fund Management DE (before Principal Performance Payments)   261     47     15     98     68     37     (4 )   -  
     
    Principal Performance Payments (20 ) - - (9 ) (10 ) (1 ) - -
                   
    Fund Management DE   241     47     15     89     58     36     (4 )   -  
     
    Investment Income 11 11
    Interest Expense (4 ) (4 )
                   
    Pre-tax Distributable Earnings $ 248   $ 47   $ 15   $ 89   $ 58   $ 36   $ (4 ) $ 7  
     
    Pre-tax Distributable Earnings per Dividend Paying Share $ 0.51  
     
    6 Represents distributions from (i) assets held by redeeming capital accounts in the Drawbridge Special Opportunities Funds, and (ii) the Value Recovery Funds.
     
     
     

    Fortress Investment Group LLC

    Exhibit 2-a

    Assets Under Management and Fund Management DE

    (dollars in millions)

         
    Three Months EndedThree Months Ended

    March 31,

     

    June 30,

     

    September 30,

     

    December 31,

    Full Year

    March 31,

     

    June 30,

    Fortress

    2013

    2013

    2013

    2013

    2013

    2014

    2014

    Assets Under Management
    Private Equity Funds & Permanent Capital Vehicles $ 15,495 $ 14,284 $ 14,873 $ 15,583 $ 15,583 $ 15,243 $ 13,831
    Liquid Hedge Funds 5,490 6,461 6,922 7,398 7,398 7,738 7,867
    Credit Hedge Funds 5,620 5,760 5,667 5,856 5,856 5,968 6,084
    Credit Private Equity Funds 7,041 6,708 6,928 7,527 7,527 6,979 6,898
    Logan Circle   21,937     21,397     23,581     25,386     25,386     26,592     29,133  
    AUM - Ending Balance $ 55,583   $ 54,610   $ 57,971   $ 61,750   $ 61,750   $ 62,520   $ 63,813  
     
    Third-Party Capital Raised $ 1,727   $ 1,226   $ 2,036   $ 1,489   $ 6,478   $ 1,609   $ 1,762  
     
    Segment Revenues
    Management fees $ 132 $ 129 $ 136 $ 143 $ 540 $ 147 $ 152
    Incentive income   116     199     42     136     493     104     78  
    Total 248 328 178 279 1,033 251 230
     
    Segment Expenses
    Operating expenses (90 ) (91 ) (94 ) (102 ) (377 ) (104 ) (109 )
    Profit sharing compensation expenses (54 ) (80 ) (27 ) (57 ) (218 ) (53 ) (39 )
    Unallocated expenses   -     -     -     -     -     -     -  
    Total (144 ) (171 ) (121 ) (159 ) (595 ) (157 ) (148 )
                 
    Fund Management DE (before Principal Performance Payments)   104     157     57     120     438     94     82  
     
    Principal Performance Payments (7 ) (13 ) (4 ) (11 ) (35 ) (7 ) (6 )
                 
    Fund Management DE $ 97   $ 144   $ 53   $ 109   $ 403   $ 87   $ 76  
     
     
     

    Fortress Investment Group LLC

    Exhibit 2-b

    Assets Under Management and Fund Management DE

     (dollars in millions)

         
    Three Months EndedThree Months Ended

    March 31,

     

    June 30,

     

    September 30,

     

    December 31,

    Full Year

    March 31,

     

    June 30,

    2013

    2013

    2013

    2013

    2013

    2014

    2014

     
    Private Equity Funds & Permanent Capital Vehicles
     
    Assets Under Management
    Private Equity Funds $ 11,126 $ 11,068 $ 11,636 $ 12,036 $ 12,036 $ 11,779 $ 10,141
    Permanent Capital Vehicles   4,369     3,216     3,237     3,547     3,547     3,464     3,690  
    AUM - Ending Balance $ 15,495   $ 14,284   $ 14,873   $ 15,583   $ 15,583   $ 15,243   $ 13,831  
     
    Third-Party Capital Raised $ 985   $ 333   $ 1,083   $ 924   $ 3,325   $ 79   $ 431  
     
    Segment Revenues
    Management fees $ 51 $ 47 $ 48 $ 49 $ 195 $ 51 $ 53
    Incentive income   3     6     7     16     32     6     22  
    Total 54 53 55 65 227 57 75
     
    Segment Expenses
    Operating expenses (21 ) (21 ) (22 ) (26 ) (90 ) (25 ) (29 )
    Profit sharing compensation expenses   (1 )   (2 )   (2 )   (4 )   (9 )   (1 )   (5 )
    Total (22 ) (23 ) (24 ) (30 ) (99 ) (26 ) (34 )
                 
    Fund Management DE (before Principal Performance Payments)   32     30     31     35     128     31     41  
     
    Principal Performance Payments - - (1 ) (2 ) (3 ) (1 ) (2 )
                 
    Fund Management DE $ 32   $ 30   $ 30   $ 33   $ 125   $ 30   $ 39  
     
     
     

    Fortress Investment Group LLC

    Exhibit 2-c

    Assets Under Management and Fund Management DE

     (dollars in millions)

         
    Three Months EndedThree Months Ended

    March 31,

     

    June 30,

     

    September 30,

     

    December 31,

    Full Year

    March 31,

     

    June 30,

    Credit Hedge Funds

    2013

    2013

    2013

    2013

    2013

    2014

    2014

     
    Assets Under Management
    Drawbridge Special Opportunities Funds7 $ 5,152 $ 5,302 $ 5,218 $ 5,454 $ 5,454 $ 5,616 $ 5,745
    Value Recovery Funds8 468 458 449 402 402 338 324
    Japan Income Fund   -     -     -     -     -     14     15  
    AUM - Ending Balance $ 5,620   $ 5,760   $ 5,667   $ 5,856   $ 5,856   $ 5,968   $ 6,084  
     
    Third-Party Capital Raised $ 75   $ 167   $ 96   $ 219   $ 557   $ 228   $ 554  
     
    Segment Revenues
    Management fees $ 25 $ 25 $ 25 $ 27 $ 102 $ 27 $ 28
    Incentive income   33     64     44     50     191     32     42  
    Total 58 89 69 77 293 59 70
     
    Segment Expenses
    Operating expenses (15 ) (17 ) (16 ) (14 ) (62 ) (17 ) (17 )
    Profit sharing compensation expenses   (18 )   (29 )   (20 )   (24 )   (91 )   (15 )   (20 )
    Total (33 ) (46 ) (36 ) (38 ) (153 ) (32 ) (37 )
                 
    Fund Management DE (before Principal Performance Payments)   25     43     33     39     140     27     33  
     
    Principal Performance Payments (4 ) (6 ) (4 ) (5 ) (19 ) (5 ) (3 )
                 
    Fund Management DE $ 21   $ 37   $ 29   $ 34   $ 121   $ 22   $ 30  
     
     

    Net Returns9

    Drawbridge Special Opportunities Fund LP 4.0 % 5.2 % 3.8 % 4.3 % 18.4 % 3.2 % 2.5 %
    Drawbridge Special Opportunities Fund Ltd 3.4 % 6.9 % 2.4 % 2.2 % 15.6 % 2.2 % 1.6 %
     
    7 Combined AUM for Drawbridge Special Opportunities Fund LP, Drawbridge Special Opportunities Fund Ltd, Drawbridge Special Opportunities Fund managed accounts, Worden Fund LP and Worden Fund II LP.
    8 Fortress will receive management fees from these funds equal to 1% of cash receipts and may receive limited incentive income if aggregate realizations exceed an agreed threshold.
    9 The performance data contained herein reflects returns for a "new issue eligible," single investor class as of the close of business on the last day of the relevant period. Net returns reflect performance data after taking into account management fees borne by the Fund and incentive allocations. Specific performance may vary based on, among other things, whether fund investors are invested in one or more special investments. The returns for the Drawbridge Special Opportunities Funds reflect the performance of each fund excluding the performance of the redeeming capital accounts which relate to December 31, 2008, December 31, 2009, December 31, 2010, December 31, 2011, December 31, 2012 and December 31, 2013 redemptions.
     
     
     

    Fortress Investment Group LLC

    Exhibit 2-d

    Assets Under Management and Fund Management DE

     (dollars in millions)

         
    Three Months EndedThree Months Ended

    March 31,

     

    June 30,

     

    September 30,

     

    December 31,

    Full Year

    March 31,

     

    June 30,

    Credit Private Equity Funds

    2013

    2013

    2013

    2013

    2013

    2014

    2014

     
    Assets Under Management
    Long Dated Value Funds10 $ 459 $ 458 $ 421 $ 417 $ 417 $ 395 $ 375
    Real Assets Funds 90 86 85 77 77 78 70
    Fortress Credit Opportunities Funds11 4,479 4,287 4,554 5,260 5,260 4,712 4,649
    Japan Opportunity Funds12   2,013     1,877     1,868     1,773     1,773     1,794     1,804  
    AUM - Ending Balance $ 7,041   $ 6,708   $ 6,928   $ 7,527   $ 7,527   $ 6,979   $ 6,898  
     
    Third-Party Capital Raised $ -   $ -   $ -   $ 50   $ 50   $ -   $ 254  
     
    Segment Revenues
    Management fees $ 25 $ 22 $ 24 $ 25 $ 96 $ 25 $ 23
    Incentive income   48     37     17     18     120     66     13  
    Total 73 59 41 43 216 91 36
     
    Segment Expenses
    Operating expenses (27 ) (23 ) (25 ) (18 ) (93 ) (26 ) (26 )
    Profit sharing compensation expenses   (25 )   (20 )   (8 )   (13 )   (66 )   (35 )   (7 )
    Total (52 ) (43 ) (33 ) (31 ) (159 ) (61 ) (33 )
                 
    Fund Management DE (before Principal Performance Payments)   21     16     8     12     57     30     3  
     
    Principal Performance Payments (1 ) - - - (1 ) (1 ) -
                 
    Fund Management DE $ 20   $ 16   $ 8   $ 12   $ 56   $ 29   $ 3  
     
    10 Combined AUM for Long Dated Value Fund I, Long Dated Value Fund II, Long Dated Value Fund III and LDVF Patent Fund.
    11 Combined AUM for Credit Opportunities Fund, Credit Opportunities Fund II, Credit Opportunities Fund III, FCO Managed Accounts, Net Lease Fund I, Global Opportunities Fund, Life Settlements Fund, Life Settlements Fund MA, SIP managed account, Real Estate Opportunities Fund and Real Estate Opportunities REOC Fund.
    12 Combined AUM for Japan Opportunity Fund, Japan Opportunity Fund II (Dollar) and Japan Opportunity Fund II (Yen).
     
     
     

    Fortress Investment Group LLC

    Exhibit 2-e

    Assets Under Management and Fund Management DE

     (dollars in millions)

         
    Three Months EndedThree Months Ended

    March 31,

     

    June 30,

     

    September 30,

     

    December 31,

    Full Year

    March 31,

     

    June 30,

    Liquid Hedge Funds

    2013

    2013

    2013

    2013

    2013

    2014

    2014

     
    Assets Under Management
    Fortress Macro Funds13 $ 3,055 $ 3,446 $ 3,528 $ 3,885 $ 3,885 $ 3,503 $ 3,391
    Fortress Convex Asia Funds14 75 85 107 96 96 130 136
    Drawbridge Global Macro Funds15 342 340 293 284 284 286 261
    Fortress Asia Macro Funds16 792 1,399 1,785 1,898 1,898 2,867 3,114
    Fortress Partners Funds17   1,226     1,191     1,209     1,235     1,235     952     965  
    AUM - Ending Balance $ 5,490   $ 6,461   $ 6,922   $ 7,398   $ 7,398   $ 7,738   $ 7,867  
     
    Third-Party Capital Raised $ 667   $ 726   $ 857   $ 296   $ 2,546   $ 1,302   $ 523  
     
    Segment Revenues
    Management fees $ 23 $ 26 $ 30 $ 32 $ 111 $ 33 $ 37
    Incentive income   32     92     (26 )   52     150     -     1  
    Total 55 118 4 84 261 33 38
     
    Segment Expenses
    Operating expenses (18 ) (18 ) (19 ) (29 ) (84 ) (23 ) (24 )
    Profit sharing compensation expenses   (10 )   (29 )   3     (16 )   (52 )   (2 )   (7 )
    Total (28 ) (47 ) (16 ) (45 ) (136 ) (25 ) (31 )
                 
    Fund Management DE (before Principal Performance Payments)   27     71     (12 )   39     125     8     7  
     
    Principal Performance Payments (2 ) (7 ) 1 (4 ) (12 ) - (1 )
                 
    Fund Management DE $ 25   $ 64   $ (11 ) $ 35   $ 113   $ 8   $ 6  
     
     

    Net Returns18

    Fortress Macro Fund Ltd 3.8 % 9.1 % (3.0 %) 4.0 % 14.1 % (5.5 %) (0.4 %)
    Drawbridge Global Macro Fund Ltd 3.6 % 8.9 % (3.8 %) 4.7 % 13.7 % (5.5 %) (0.6 %)
    Fortress Asia Macro Fund Ltd 2.8 % 9.8 % (1.1 %) 4.8 % 17.1 % (3.6 %) (1.9 %)
    Fortress Convex Asia Fund Ltd (0.9 %) 1.6 % (2.1 %) (1.9 %) (3.3 %) (1.1 %) (2.6 %)
    Fortress Partners Fund LP19 2.2 % (2.0 %) 4.1 % 0.6 % 4.8 % 1.1 % 2.0 %
    Fortress Partners Offshore Fund LP19 3.1 % (0.9 %) 5.0 % (0.6 %) 6.7 % 0.8 % 2.2 %
     
    13 Combined AUM for Fortress Macro Onshore Fund LP, Fortress Macro Fund Ltd, Fortress Macro MA1, Fortress Redwood Fund Ltd and Fortress Macro managed accounts.
    14 Combined AUM for Fortress Convex Asia Fund LP and Fortress Convex Asia Fund Ltd.
    15 Combined AUM for Drawbridge Global Macro Fund LP and Drawbridge Global Macro Intermediate Fund LP.
    16 Combined AUM for Fortress Asia Macro Fund Ltd, Fortress Asia Macro Fund LP and Fortress Asia Macro managed accounts.
    17 Combined AUM for Fortress Partners Fund LP and Fortress Partners Offshore Fund LP.
    18 The performance data contained herein reflects returns for a "new issue eligible," single investor class as of the close of business on the last day of the relevant period. Net returns reflect performance data after taking into account management fees borne by the Fund and incentive allocations.
    19 The returns for the Fortress Partners Funds include gains and losses from Special Investments. Investors' specific performance may vary dependent upon their ownership in one or more Special Investments.
     
     
     

    Fortress Investment Group LLC

    Exhibit 2-f

    Assets Under Management and Fund Management DE

     (dollars in millions)

         
    Three Months EndedThree Months Ended

    March 31,

     

    June 30,

     

    September 30,

     

    December 31,

    Full Year

    March 31,

     

    June 30,

    Logan Circle

    2013

    2013

    2013

    2013

    2013

    2014

    2014

     
    Assets Under Management
    AUM - Ending Balance $ 21,937   $ 21,397   $ 23,581   $ 25,386   $ 25,386   $ 26,592   $ 29,133  
     
    Net Client Flows $ 1,153   $ 124   $ 1,938   $ 1,538   $ 4,753   $ 477   $ 1,730  
     
    Segment Revenues
    Management fees $ 8 $ 9 $ 9 $ 10 $ 36 $ 11 $ 11
    Incentive income   -     -     -     -     -     -     -  
    Total 8 9 9 10 36 11 11
     
    Segment Expenses
    Operating expenses (9 ) (12 ) (12 ) (15 ) (48 ) (13 ) (13 )
    Profit sharing compensation expenses   -     -     -     -     -     -     -  
    Total (9 ) (12 ) (12 ) (15 ) (48 ) (13 ) (13 )
                 
    Fund Management DE $ (1 ) $ (3 ) $ (3 ) $ (5 ) $ (12 ) $ (2 ) $ (2 )
     
     
     

    Fortress Investment Group LLC

    Exhibit 3

    Reconciliation of GAAP Net Income (Loss) to Pre-tax Distributable Earnings and Fund Management DE,

    Reconciliation of GAAP Revenues to Segment Revenues and Reconciliation of GAAP Expenses to Segment Expenses

    (dollars in millions)

           
    Three Months Ended

     

    Three Months Ended

     

    March 31,

     

    June 30,

     

    September 30,

     

    December 31,

    Full Year

    March 31,

     

    June 30,

    Six Months Ended

    2013

    2013

    2013

    2013

    2013

    2014

    2014

    June 30, 2014

     
                   
    GAAP Net Income (Loss)$67   $(2)$101   $318   $484   $6   $69   $75  
    Principals' and Others' Interests in (Income) Loss of Consolidated Subsidiaries (53 ) - (59 ) (171 ) (283 ) (6 ) (42 ) (48 )
    Redeemable non-controlling interests in Income (Loss) of Consolidated Fund - - - - - - - -
    Non-Controlling Interests in (Income) Loss of Non-Investment Manager - consolidated VIE   -     -     -     -     -     3     4     7  
    GAAP Net Income (Loss) Attributable to Class A Shareholders$14   $(2)$42   $147   $201   $3   $31   $34  
    Private Equity incentive income 22 34 2 (38 ) 20 37 (8 ) 29
    Hedge Fund incentive income 59 133 (6 ) (186 ) - 30 26 56
    Reserve for clawback 2 - 1 4 7 2 - 2
    Distributions of earnings from equity method investees 4 5 3 3 15 9 47 56
    Losses (earnings) from equity method investees (35 ) (24 ) (57 ) (8 ) (124 ) (17 ) (20 ) (37 )
    Equity method (earnings) losses earned by Fortress for consolidated fund - - - - - - - -
    Losses (gains) on options (29 ) 5 (3 ) 2 (25 ) 5 1 6
    Losses (gains) on other Investments (11 ) (2 ) 4 (6 ) (15 ) 5 42 47
    Impairment of investments - (1 ) - - (1 ) - - -
    Adjust income from the receipt of options (26 ) (10 ) - (7 ) (43 ) - (2 ) (2 )
    Amortization of intangible assets and impairment of goodwill - - - - - - - -
    Employee, Principal and director compensation 15 13 6 13 47 12 6 18
    Adjust non-controlling interests related to Fortress Operating Group units 51 (4 ) 58 172 277 5 40 45
    Tax receivable agreement liability reduction 8 - - 1 9 - - -
    Adjust income taxes - Investment Manager 26 1 15 24 66 6 8 13
    Adjust consolidated Non-Investment Manager income (loss) allocable to Class A Shareholders - - - - - - 1 1
    Adjust consolidated fund income (loss) allocable to Class A Shareholders   -     -     -     -     -     -     -     -  
    Pre-tax Distributable Earnings$100   $148   $65   $121   $434   $97   $172   $268  
    Investment Loss (income) (5 ) (6 ) (13 ) (12 ) (36 ) (10 ) (97 ) (107 )
    Interest Expense   2     2     1     -     5     -     1    

    2

     
    Fund Management DE$97   $144   $53   $109   $403   $87   $76   $163  
                   
    GAAP Revenues$244   $223   $232   $566   $1,265   $310   $427   $737  
    Adjust management fees - - - (1 ) (1 ) - - -
    Adjust management fees for Non-Investment Manager - consolidated VIE - - - - - 1 1 2
    Adjust management fees for Investment Company - consolidated VIE - - - - - - - -
    Adjust incentive income 83 167 (3 ) (218 ) 29 69 17 86
    Adjust income from the receipt of options (26 ) (10 ) - (7 ) (43 ) - (1 ) (1 )
    Other revenues (53 ) (53 ) (51 ) (60 ) (217 ) (55 ) (56 ) (111 )
    Total revenues - consolidated Non-Investment Manager - - - - - (74 ) (158 ) (232 )
    Total revenues - consolidated Investment Company   -     -     -     -     -     -     -     -  
    Segment Revenues$248   $327   $178   $280   $1,033   $251   $230   $481  
                   
    GAAP Expenses$221   $249   $184   $244   $898   $307   $379   $686  
    Adjust interest expense (2 ) (2 ) (1 ) - (5 ) - (1 )

    (2

    )
    Adjust employee, Principal and director compensation (15 ) (6 ) (3 ) (11 ) (35 ) (12 ) (6 ) (18 )
    Adjust amortization of intangible assets and impairment of goodwill - - - - - - - -
    Adjust expense reimbursements from affiliates and non-affiliates (51 ) (52 ) (51 ) (60 ) (214 ) (54 ) (52 )

    (105

    )
    Adjust Principal Performance Payments (10 ) (17 ) (7 ) (13 ) (47 ) (9 ) (9 ) (18 )
    Other - (1 ) (1 ) - (2 ) - - -
    Total expenses - consolidated Non-Investment Manager   -     -     -     -     -     (75 )   (163 )   (238 )
    Segment Expenses$143   $171   $121   $160   $595   $157   $148   $305  
     


    ‘‘Distributable earnings’’ is Fortress’s supplemental measure of operating performance used by management in analyzing segment and overall results. It reflects the value created which management considers available for distribution during any period. As compared to generally accepted accounting principles (‘‘GAAP’’) net income, distributable earnings excludes the effects of unrealized gains (or losses) on illiquid investments, reflects contingent revenue which has been received as income to the extent it is not expected to be reversed, and disregards expenses which do not require an outlay of assets, whether currently or on an accrued basis. Distributable earnings is reflected on an unconsolidated and pre-tax basis, and, therefore, the interests in consolidated subsidiaries related to Fortress Operating Group units (held by the principals) and income tax expense are added back in its calculation. Distributable earnings is not a measure of cash generated by operations which is available for distribution nor should it be considered in isolation or as an alternative to cash flow or net income in accordance with GAAP and it is not necessarily indicative of liquidity or cash available to fund the Company’s operations. For a complete discussion of distributable earnings and its reconciliation to GAAP, as well as an explanation of the calculation of distributable earnings impairment, see note 11 to the financial statements included in the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2014.

    Fortress’s management uses distributable earnings:

  • in its determination of periodic distributions to equity holders;
  • in making operating decisions and assessing the performance of each of the Company’s core businesses;
  • for planning purposes, including the preparation of annual operating budgets; and
  • as a valuation measure in strategic analyses in connection with the performance of its funds and the performance of its employees.

    Growing distributable earnings is a key component to the Company’s business strategy and distributable earnings is the supplemental measure used by management to evaluate the economic profitability of each of the Company’s businesses and total operations. Therefore, Fortress believes that it provides useful information to investors in evaluating its operating performance. Fortress’s definition of distributable earnings is not based on any definition contained in its amended and restated operating agreement.

    “Fund management DE” is equal to pre-tax distributable earnings excluding our direct investment-related results. It is comprised of “Segment Revenues” net of “Segment Expenses” and “Principal Performance Payments.” Fund management DE and its components are used by management to analyze and measure the performance of our investment management business on a stand-alone basis. Fortress defines segment operating margin to be equal to fund management DE divided by segment revenues. The Company believes that it is useful to provide investors with the opportunity to review our investment management business using the same metrics. Fund management DE and its components are subject to the same limitations as pre-tax distributable earnings, as described above.

     
     

    Fortress Investment Group LLC

    Exhibit 4

    Reconciliation of Weighted Average Class A Shares Outstanding (Used for Basic EPS) to Weighted Average Dividend Paying Shares and Units Outstanding (Used for DEPS)

         
    Three Months Ended June 30,Six Months Ended June 30,
    2014   2013 2014   2013
                   

    Weighted Average Class A Shares Outstanding (Used for Basic EPS)

      207,783,751     237,426,903   212,328,315     232,385,013  
     
    Weighted average fully vested restricted Class A share units with dividend equivalent rights (1,431,885 ) (584,851 ) (2,653,378 ) (3,755,642 )
    Weighted average fully vested restricted Class A shares (1,000,310 ) (900,457 ) (986,867 ) (888,102 )
                   

    Weighted Average Class A Shares Outstanding

      205,351,556     235,941,595   208,688,070     227,741,269  
     
    Weighted average restricted Class A shares20 1,000,310 900,457 986,867 888,102
    Weighted average fully vested restricted Class A share units which are entitled to dividend equivalent payments 1,431,885 584,851 2,653,378 3,755,642
    Weighted average unvested restricted Class A share units which are entitled to dividend equivalent payments 7,513,984 4,970,562 6,763,630 4,259,267
    Weighted average Fortress Operating Group units 226,331,513 249,534,372 236,074,150 249,534,372
    Weighted average Fortress Operating Group RPUs21 - - - 4,909,761
                   

    Weighted Average Class A Shares Outstanding (Used for DEPS)

      441,629,248     491,931,837   455,166,095     491,088,413  
    Weighted average vested and unvested restricted Class A share units which are not entitled to dividend equivalent payments   13,418,337     16,786,047   12,932,088     16,266,780  

    Weighted Average Fully Diluted Shares and Units Outstanding (Used for Diluted DEPS)

      455,047,585     508,717,884   468,098,183     507,355,193  
     


    “Dividend paying shares and units” represents the number of shares and units outstanding at the end of the period which were entitled to receive dividends or related distributions. The Company believes it is useful for investors in computing the aggregate amount of cash required to make a current per share distribution of a given amount per share. It excludes certain potentially dilutive equity instruments, primarily non-dividend paying restricted Class A share units, and, therefore, is limited in its usefulness in computing per share amounts. Accordingly, dividend paying shares and units should be considered only as a supplement and not an alternative to GAAP basic and diluted shares outstanding. The Company’s calculation of dividend paying shares and units may be different from the calculation used by other companies and, therefore, comparability may be limited.

     
    20 Includes both fully vested and unvested restricted Class A shares.
    21 Includes both fully vested and unvested Fortress Operating Group RPUs.
     
     

    Fortress Investment Group LLC

    Exhibit 5

    Reconciliation of GAAP Book Value Per Share to Net Cash and Investments Per Share  

     (dollars and shares in thousands)

       
    As of June 30, 2014As of December 31, 2013

    GAAP

     

    Investment Manager

     

    Net Cash and

    GAAP

     

    Investment Manager

     

    Net Cash and

    Book Value

    Book Value22

    Investments

    Book Value

    Book Value22

    Investments

    Cash and Cash equivalents $ 242,612 $ 242,612 $ 242,612 $ 364,583 $ 364,583 $ 364,583
    Investments 1,119,324 1,119,324 1,119,324 1,253,266 1,253,266 1,253,266
    Investments in options23 98,583 98,583 - 104,338 104,338 -
    Due from Affiliates 156,965 156,965 - 407,124 407,124 -
    Deferred Tax Asset, net 383,002 383,002 - 354,526 354,526 -
    Other Assets 169,716 169,716 - 190,595 190,595 -
    Investment Company - consolidated VIE   123,375   123,375   50,238      
    Assets - Investment Manager 2,293,577 2,293,577 1,412,174 2,674,432 2,674,432 1,617,849
    Assets - Non-Investment Manager - consolidated VIE   661,820   -   -   -   -   -
    Total Assets   2,955,397   2,293,577   1,412,174   2,674,432   2,674,432   1,617,849
     
    Debt Obligations Payable $ 75,000 $ 75,000 $ 75,000 $ - $ - $ -
    Accrued Compensation and Benefits 199,393 199,393 - 417,309 417,309 -
    Due to Affiliates 351,375 351,375 - 344,832 344,832 -
    Deferred Incentive Income 256,842 256,842 - 247,556 247,556 -
    Other Liabilities 84,384 84,384 - 49,830 49,830 -
    Investment Company - consolidated VIE   36,208   36,208        
    Liabilities - Investment Manager 1,003,202 1,003,202 75,000 1,059,527 1,059,527 -
    Liabilities - Non-Investment Manager - consolidated VIE   284,632   -   -   -   -   -
    Total Liabilities   1,287,834   1,003,202   75,000   1,059,527   1,059,527   -
     
    Less: Redeemable Non-controlling Interests, Investment Company - consolidated VIE 36,929 36,929 N/A N/A - -
    Add: Investment in and Receivables due from Non-Investment Manager - consolidated VIE N/A 1,453 1,056 N/A - -
               
    Net $ 1,630,634 $ 1,254,899 $ 1,338,230 $ 1,614,905 $ 1,614,905 $ 1,617,849
     

    Dividend Paying

    Dividend Paying

    Shares

    Shares and Units

    Shares

    Shares and Units

    Outstanding

     

    Outstanding

    Outstanding

     

    Outstanding

    Class A Shares 206,754 206,754 239,786 239,786
    Restricted Class A Shares 1,045 1,045 956 956
    Fortress Operating Group Units 226,332 226,332 249,534 249,534
    Fully Vested Class A Shares - Dividend Paying - 144 - 7
    Unvested Class A Shares - Dividend Paying   -   7,514   -   5,233
    Shares Outstanding   434,131   441,789   490,276   495,516
           
    Per Share$2.89$3.03$3.29$3.26
     


    Net cash and investments represents cash and cash equivalents plus investments less debt outstanding. The Company believes that net cash and investments is a useful supplemental measure because it provides investors with information regarding the Company’s net investment assets. Net cash and investments excludes certain assets (investments in options, due from affiliates, deferred tax asset, other assets) and liabilities (due to affiliates, accrued compensation and benefits, deferred incentive income and other liabilities), its utility as a measure of financial position is limited. Accordingly, net cash and investments should be considered only as a supplement and not an alternative to GAAP book value as a measure of the Company’s financial position. The Company’s calculation of net cash and investments may be different from the calculation used by other companies and, therefore, comparability may be limited.

     
    22 Investment Manager Book Value excludes Non-Investment Manager - consolidated VIE as Fortress has no obligation to satisfy the liabilities of New Media and, similarly, Fortress does not have the right to make use of New Media's assets to satisfy its obligations.
    23 The definition of Net Cash and Investments has been modified to exclude investments in options. The intrinsic value of options in equity method investees totaled $95 million at quarter end and is included in our undistributed, unrecognized incentive income. This value represents incentive income that would have been recorded in Distributable Earnings if Fortress had exercised all of its in-the-money Newcastle, New Residential and Eurocastle options and sold all of the resulting shares at their June 30, 2014 closing price and differs from the fair value derived from option pricing models included in the table above. All prior periods have been recast to reflect this change.





    INVESTOR & MEDIA RELATIONS:

    Fortress Investment Group

    Gordon E. RuntÉ, +1-212-798-6082

    grunte@fortress.com

    Source: Fortress Investment Group LLC


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