Fortress Investment Group LLC (NYSE:FIG) (“Fortress” or the
“Company”) today reported its fourth quarter and year end 2016
financial results.
RECENT DEVELOPMENTS
- On February 14, 2017, Fortress
announced that it had entered into a definitive merger agreement
pursuant to which it will be acquired by SoftBank Group Corp.
(“SoftBank”) in an all-cash transaction. The transaction is
anticipated to close in the second half of 2017, after which
Fortress will operate as an independent business within SoftBank
under the continuing leadership of Fortress Principals Pete Briger,
Wes Edens and Randy Nardone
FINANCIAL SUMMARY
- Fortress declared a cash dividend of
$0.09 per dividend paying share for the fourth quarter 2016
- Management Fee Paying Assets Under
Management (“AUM”) of $69.6 billion as of December 31, 2016, down
1% compared to the previous quarter and compared to December 31,
2015
- GAAP net income of $165 million and
$181 million (per diluted Class A share of $0.33 and $0.38) for the
fourth quarter and year ended December 31, 2016, respectively;
compared to GAAP net income of $116 million and $182 million (per
diluted Class A share of $0.20 and $0.28) for the fourth quarter
and year ended December 31, 2015, respectively
- Pre-tax distributable earnings (“DE”)
of $107 million and $362 million for the fourth quarter and year
ended December 31, 2016, respectively; compared to pre-tax DE of
$130 million and $391 million for the fourth quarter and year ended
December 31, 2015, respectively
- Pre-tax DE per dividend paying share of
$0.27 and $0.92 for the fourth quarter and year ended December 31,
2016, respectively, compared to pre-tax DE per dividend paying
share of $0.30 and $0.87 for the fourth quarter and year ended
December 31, 2015, respectively
- Net cash and investments of $1.1
billion, or $2.77 per dividend paying share, as of December 31,
2016
- $1.3 billion of gross embedded
incentive income across funds and permanent capital vehicles as of
December 31, 2016, that has not yet been recognized in DE
- Total uncalled capital, or “dry
powder,” of $6.9 billion as of December 31, 2016, including $4.2
billion available for general investment purposes
BUSINESS HIGHLIGHTS
- Raised $1.3 billion of capital across
alternative investment businesses in 2016
- Subsequent to year end, New Residential
Investment Corp. (NYSE: NRZ) raised approximately $835 million of
capital
- Investment performance summary as of
December 31, 2016:
- Annualized inception-to-date net IRRs
for Credit Opportunities Fund (“FCO”), FCO II and FCO III of 23.3%,
16.0% and 10.3%, respectively
- Fourth quarter and full year 2016 net
returns of 3.3% and 9.7%, respectively, for the Drawbridge Special
Opportunities Fund (“DBSO”) LP
- Private Equity fund valuations
increased 2.8% in 2016
- All 16 Logan Circle strategies
outperformed respective benchmarks in the fourth quarter and full
year 2016
___________________________________
Note: This release contains certain Non-GAAP financial measures.
Fortress urges you to read the “Non-GAAP Information” section below
and to review the exhibits in this release for reconciliations of
these measures to the comparable GAAP measures.
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 three months ended December
31, 2016. The condensed consolidated GAAP statement of operations
and balance sheet are presented on pages 11-12 of this press
release.
4Q
3Q 4Q % Change FY FY %
Change 2016 2016 2015 QoQ YoY 2016 2015 YoY (in
millions, except per share amount)
GAAP Revenues $ 438 $ 261
$ 415 68 % 6 % $ 1,164 $ 1,214 (4 )% Expenses 280 225 242 24 % 16 %
951 1,053 (10 )% Other Income (loss) 23 30 (18 ) (23 )% N/A (4 ) 76
N/A Net income (loss) 165 58 116 184 % 42 % 181 182 (1 )% Net
income (loss) attributable to Class A Shareholders 86
31 54 177 % 59 % 94 78 21 % Per
diluted share $ 0.33 $ 0.07 $ 0.20 371 % 65 % $ 0.38
$ 0.28 36 % Weighted average Class A shares outstanding, diluted
391 390 425 390 443
Distributable Earnings Fund
management DE $ 96 $ 88 $ 113 9 % (15 )% $ 345 $ 364 (5 )% Pre-tax
DE 107 90 130 19 % (18 )% 362
391 (7 )% Per dividend paying share/unit $ 0.27 $
0.23 $ 0.30 17 % (10 )% $ 0.92 $ 0.87 5 % Weighted
average dividend paying shares and units outstanding 394 394 430
395 447
Assets Under Management Private Equity and
Permanent Capital $ 13,493 $ 13,917 $ 15,807 (3 )% (15 )% $ 13,493
$ 15,807 (15 )% Credit1 18,109 18,287 18,107 (1 )% 0 % 18,109
18,107 0 % Liquid Markets2 4,589 4,541 5,409 1 % (15 )% 4,589 5,409
(15 )% Logan Circle 33,436 33,386 31,178
0 % 7 % 33,436 31,178 7 % Total Assets
Under Management $ 69,627 $ 70,131 $ 70,501 (1 )% (1 )% $
69,627 $ 70,501 (1 )%
___________________________________
1
The Assets Under Management presented for
Credit includes $1,696 million of AUM related to co-managed funds
as of 4Q 2016.
2
The Assets Under Management presented for
Liquid Markets includes $4,365 million of AUM related to the
Affiliated Manager as of 4Q 2016.
GAAP RESULTS
Fortress recorded GAAP net income of $165 million, or $0.33 per
diluted Class A share, for the fourth quarter of 2016, compared to
GAAP net income of $116 million, or $0.20 per diluted Class A
share, for the fourth quarter of 2015. Our diluted earnings per
share includes the income tax effects to net income (loss)
attributable to Class A shareholders from the assumed conversion of
Fortress Operating Group units to Class A shares in periods when
the effect is dilutive.
The year-over-year increase in Fortress’s fourth quarter 2016
GAAP net income was primarily driven by a $41 million increase in
other income and a $24 million increase in revenues, partially
offset by a $38 million increase in expenses.
Other income in the fourth quarter of 2016 totaled $23 million,
up from a loss of $18 million in the fourth quarter of 2015. The
year-over-year increase was primarily due to net realized and
unrealized gains in the fair value of derivatives, primarily
related to Japanese Yen foreign exchange contracts, and net
realized and unrealized gains in the fair value of our direct
investments, including options held in our publicly traded
permanent capital vehicles.
The $24 million increase in revenues was primarily attributable
to higher incentive income, partially offset by lower management
fees.
The $38 million increase in expenses was primarily related to
higher compensation and benefits expense.
SEGMENT RESULTS (NON-GAAP)
This section provides information about each of Fortress’s
businesses: (i) Credit Hedge Funds and Credit 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 December 31, 2016 Private Equity
Credit Funds
(in millions)
Total Funds
Permanent Capital
Vehicles
Hedge Funds PE Funds
Liquid Hedge Funds
Logan Circle Partners
Assets Under Management3 $ 69,627 $ 6,532 $
6,961 $ 8,803 $ 9,306 $ 4,589 $ 33,436
Dry Powder $ 6,926 $
601 $ - $ 327 $ 5,998 N/A N/A
Average Management Fee
Rate4 1.2 % 1.5 % 2.0 % 1.3 % 1.3 % 0.2 %
Incentive Eligible NAV Above Incentive Income
Threshold5 $
23,244
$ 2,027 $ 5,119 $ 5,984 $ 10,022 $ - $ 92 Undistributed Incentive
Income: Unrecognized $ 1,253 $ 229 $ 30 $ 63 $ 930 $ 1 $ -
Undistributed Incentive Income: Recognized - -
- - - -
-
Undistributed Incentive
Income6 $ 1,253 $ 229 $ 30 $ 63
$ 930 $ 1 $ -
Three Months
Ended December 31, 2016 Private Equity Credit
Funds
(in millions)
Total Funds
Permanent Capital
Vehicles
Hedge Funds PE Funds
Liquid Hedge Funds
Logan Circle Partners
Third-Party Capital Raised $ 437 $ - $ 135 $ - $ 302
$ - $ -
Segment Revenues Management fees $ 133 $ 21 $
28 $ 37 $ 32 $ 1 $ 14 Incentive income 133 -
41 47 44 -
1 Total 266 21 69 84 76 1 15
Segment
Expenses Operating expenses (119 ) (8 ) (26 ) (27 ) (38 ) (5 )
(15 ) Profit sharing compensation expenses (49 ) -
(6 ) (20 ) (23 ) -
- Total (168 ) (8 ) (32 ) (47 ) (61 ) (5 ) (15 )
Earnings
From Affiliated Manager 10 - - - - 10 -
Principal
Performance Payments (12 ) - (6 )
(5 ) (1 ) - -
Fund
Management DE $ 96 $ 13 $ 31 $ 32 $
14 $ 6 $ - Net Investment Income7 11
2 1 3 6
1 (1 )
Pre-tax Distributable
Earnings $ 107 $ 15 $ 32 $ 35 $ 20
$ 7 $ (1 )
___________________________________
3 The Assets Under Management presented for the Credit Hedge Funds
includes $1,696 million related to co-managed funds and $840
million related to the third party originated JP Funds and Value
Recovery Funds. The Assets Under Management presented for the
Liquid Hedge Funds includes $4,365 million related to the
Affiliated Manager. 4 The Average Management Fee Rate presented for
the Credit Hedge Funds excludes the co-managed funds and
third-party originated JP Funds and Value Recovery Funds (see
footnote 3 above). The Average Management Fee Rate presented for
the Liquid Hedge Funds excludes the Affiliated Manager. 5 The
Incentive Eligible NAV Above Incentive Income Threshold presented
for Credit Hedge Funds excludes co-managed funds, certain third
party originated funds and sidepocket investments and for Liquid
Hedge Funds, excludes the Affiliated Manager and sidepocket
investments. The Incentive Eligible NAV Above Incentive Income
Threshold presented for Private Equity Funds and Credit PE Funds
(except for a certain FCO Managed Account in its investment period
and a portion of Long Dated Value Fund I, whose capital was above
the incentive income threshold as of December 31, 2016), represents
total fund NAV. The Incentive Eligible NAV Above Incentive Income
Threshold presented for the Permanent Capital Vehicles represents
the equity basis that is used to calculate incentive income. 6
Undistributed Incentive Income - Recognized represents the results
of the main fund investments for the Credit Hedge Funds including
the impact of realized gains and losses and unrealized losses on
sidepocket investments. Undistributed Incentive Income -
Unrecognized represents the results of the Private Equity Funds,
Credit PE Funds and Liquid and Credit Hedge Fund sidepocket and
redeeming capital account (RCA) investments which have not been
recognized in Distributable Earnings and will be recognized when
realized. The Undistributed Incentive Income presented for the
Credit Hedge Funds excludes co-managed funds and certain third
party originated funds and for Liquid Hedge Funds, excludes the
Affiliated Manager. Undistributed Incentive Income for Credit PE
Funds includes $14 million of net unrealized gains that would have
been recorded in Distributable Earnings if Fortress had settled
Japanese Yen foreign exchange derivative contracts used to
economically hedge estimated future incentive income it had
outstanding as of December 31, 2016. Undistributed Incentive Income
for Permanent Capital Vehicles includes incentive income that would
have been recorded in Distributable Earnings if Fortress had (i)
exercised all of its in-the-money options it holds in the Permanent
Capital Vehicles and sold all of the resulting shares and (ii) sold
all of its Permanent Capital Vehicle common shares which it
received as incentive income, based on their December 31, 2016
closing price. 7 Net Investment Income includes Unallocated
Investment Income of $1 million and Unallocated Expenses of $2
million.
Pre-tax DE was $107 million in the fourth quarter of 2016, down
18% from $130 million in the fourth quarter of 2015, primarily due
to lower management fees, lower net investment income and higher
operating expenses, partially offset by higher earnings from
Affiliated Manager. Pre-tax DE was $362 million in the full year of
2016, down from $391 million in full year 2015, primarily due to
lower management fees, lower net investment income and higher
profit sharing expenses, partially offset by higher incentive
income, lower operating expenses and higher earnings from
Affiliated Manager.
Management fees were $133 million in the fourth quarter of 2016,
down from $148 million in the fourth quarter of 2015. The decrease
was primarily due to lower management fees from the Liquid Hedge
Funds and Private Equity Funds, partially offset by higher
management fees from the Permanent Capital Vehicles. Management
fees were $551 million in the full year of 2016, down from $582
million in the full year of 2015. The decrease was primarily due to
lower management fees from the Liquid Hedge Funds and Private
Equity Funds, partially offset by higher management fees from the
Credit Hedge Funds, Credit PE Funds and Permanent Capital
Vehicles.
Incentive income in the fourth quarter of 2016 totaled $133
million, up from $132 million in the fourth quarter of 2015,
primarily due to higher incentive income from the Credit Hedge
Funds and Permanent Capital Vehicles, partially offset by lower
incentive income from the Credit PE Funds. Incentive income in the
full year of 2016 totaled $441 million, up from $436 million in the
full year of 2015. The year-over-year increase was primarily due to
higher incentive income from the Credit Hedge Funds, partially
offset by lower incentive income from the Permanent Capital
Vehicles.
Earnings from Affiliated Manager totaled $10 million and $15
million in the fourth quarter and full year of 2016, respectively,
up from a $1 million loss and $9 million in the fourth quarter and
full year of 2015, respectively.
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 December 31, 2016, AUM totaled $69.6 billion, down
slightly compared to the previous quarter. As of year end,
approximately 87% of alternative AUM was in funds with long-term
investment structures.
During the quarter, Fortress’s AUM decreased primarily due to
(i) $1.6 billion of net market-driven valuation declines, (ii) $0.5
billion of capital distributions to investors, and (iii) $0.1
billion in distributions to investors in redeeming capital
accounts. These decreases to AUM were partially offset by (i) $1.0
billion of net client inflows for Logan Circle, (ii) a $0.6 billion
increase in invested capital, and (iii) $0.1 billion of equity
raised that was directly added to AUM.
As of December 31, 2016, the Credit Funds and Private Equity
Funds had $6.3 billion and $0.6 billion of uncalled capital,
respectively, that will become AUM if called. Uncalled capital or
dry powder – capital committed to the funds but not invested and
generating management fees – includes $2.7 billion that is only
available for follow-on investments, management fees and other fund
expenses.
BUSINESS SEGMENT RESULTS
Below is a discussion of fourth quarter and full year 2016
segment results and business highlights.
Credit:
- DBSO LP net returns for the fourth
quarter and full year 2016 of 3.3% and 9.7%, respectively
- FCO, FCO II, FCO III, FJOF and FJOF
II (Yen) recorded annualized inception-to-date net IRRs of 23.3%,
16.0%, 10.3%, 31.9% and 27.4%, respectively, through December 31,
2016
- Recorded $91 million of gross
incentive income in the quarter and $372 million of gross incentive
income for full year 2016
- Approximately $1.0 billion of gross
embedded incentive income that has not yet been recognized in
DE
(See supplemental data on pages 18-19 for more detail on Credit
results)
The Credit business, which includes our Credit PE Funds and
Credit Hedge Funds, generated pre-tax DE of $55 million in the
fourth quarter of 2016, down from $76 million in the fourth quarter
of 2015. The year-over-year decrease in DE was primarily driven by
lower incentive income and higher operating expenses, partially
offset by lower profit sharing expense.
The Credit Hedge Funds generated pre-tax DE of $35 million for
the quarter, up from $14 million in the fourth quarter of 2015,
primarily due to higher incentive income. Fortress’s flagship
credit hedge fund, DBSO LP, had net returns of 3.3% for the quarter
and full year net returns of 9.7% as of December 31, 2016.
The Credit PE Funds generated pre-tax DE of $20 million in the
quarter, down from $62 million in the fourth quarter of 2015,
primarily due to lower incentive income. Over the last twelve
months, the Credit PE Funds have recognized $241 million of gross
incentive income, while gross unrecognized Credit PE incentive
income has increased $63 million year-over-year to $930 million as
of December 31, 2016.
Private Equity and Permanent Capital Vehicles:
- Raised $135 million of equity for
New Media that was directly added to AUM in the quarter
- Subsequent to year end, raised
approximately $835 million of equity for New Residential
(See supplemental data on pages 16-17 for more detail on Private
Equity results)
The Private Equity business recorded pre-tax DE of $47 million
in the fourth quarter of 2016, including $32 million for the
Permanent Capital Vehicles and $15 million for the Private Equity
Funds, down from $58 million in the fourth quarter of 2015. The
year-over-year decrease was primarily driven by lower management
fees for the Private Equity Funds, partially offset by higher
incentive income for the Permanent Capital Vehicles.
During the quarter, the Permanent Capital Vehicles generated $41
million of incentive income, including contributions from New
Residential, New Media Investment Group Inc. (NYSE: NEWM), New
Senior Investment Group Inc. (NYSE: SNR) and Eurocastle Investment
Limited (Euronext Amsterdam: ECT).
Logan Circle:
- In the fourth quarter and full year
of 2016, all 16 Logan Circle strategies generated positive net
returns and outperformed their respective benchmarks
- Net client inflows of $1.0 billion
in the fourth quarter of 2016
(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 $1 million for the fourth quarter of
2016, flat compared to the fourth quarter of 2015. For the full
year of 2016, Logan Circle recorded pre-tax DE of $4 million, up
from a $2 million pre-tax DE loss in 2015, primarily due to higher
management fees.
Logan Circle ended the year with $33.4 billion in AUM, up 7%
compared to the previous year, primarily due to $2.4 billion of
market-driven valuation gains.
For the quarter and year ended December 31, 2016, all 16 Logan
Circle fixed income strategies outperformed their respective
benchmarks. Since inception, 15 of 16 Logan Circle fixed income
strategies have outperformed their respective benchmarks and eight
were ranked in the top quartile of performance for their competitor
universe.
Liquid Hedge Funds:
- Earnings from Affiliated Manager
totaled $10 million in the quarter
(See supplemental data on page 20 for more detail on Liquid
Hedge Funds results)
The Liquid Hedge Funds recorded pre-tax DE of $7 million in the
fourth quarter of 2016, up from a $2 million pre-tax DE loss in the
fourth quarter of 2015. The year-over-year increase was primarily
due to higher earnings from the Affiliated Manager, partially
offset by lower management fees.
The Liquid Hedge Funds had $4.6 billion of AUM at quarter end,
including $4.4 billion related to the Affiliated Manager.
LIQUIDITY & CAPITAL
As of December 31, 2016, Fortress had cash and cash equivalents
of $397 million and debt obligations of $183 million.
As of December 31, 2016, Fortress had approximately $0.9 billion
of investments in Fortress funds and options in publicly traded
permanent capital vehicles and a total of $143 million in
outstanding commitments to its funds. In addition, the NAV of
Fortress’s investments in its own funds exceeded its segment cost
basis by $433 million at quarter end, representing net unrealized
gains that have not yet been recognized for segment reporting
purposes.
DIVIDEND
Fortress’s Board of Directors declared a cash dividend of $0.09
per dividend paying share. The dividend is payable on March 21,
2017 to Class A shareholders of record as of the close of business
on March 15, 2017. Please see below for information on the U.S.
federal income tax implications of the dividend.
In connection with the proposed merger between Fortress and an
affiliate of SoftBank, each Fortress Class A shareholder may also
receive a dividend in an amount not to exceed $0.09 per share with
respect to the quarterly period ended March 31, 2017, if closing
does not occur prior to the applicable payment date. In connection
with the merger, Fortress has contractually agreed that it will not
pay dividends for the quarterly period ended March 31, 2017 in any
amount greater than $0.09 per share, and that it will not pay any
dividends with respect to periods ending after that while the
merger agreement remains in effect. Fortress Class A shareholders
should therefore not anticipate receiving a dividend with respect
to the quarterly periods ended June 30, 2017 or September 30, 2017,
even if the merger has not yet been consummated at the time of the
customary dividend payment dates for such periods.
NON-GAAP INFORMATION
DE is a supplemental metric used by management to measure
Fortress’s operating performance. DE is a 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 and Logan Circle. 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 annual
report on Form 10-K.
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.
ABOUT FORTRESS
Fortress Investment Group LLC is a leading, highly diversified
global investment firm with $69.6 billion in assets under
management as of December 31, 2016. Founded in 1998, Fortress
manages assets on behalf of over 1,750 institutional clients and
private investors worldwide across a range of credit and real
estate, private equity and traditional asset management strategies.
Fortress is publicly traded on the New York Stock Exchange
(NYSE:FIG). 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 communication may constitute
“forward-looking statements” within the meaning of the Private
Securities Litigation Reform Act of 1995. These statements are
generally identified by the use of words such as “outlook,”
“believe,” “expect,” “potential,” “continue,” “may,” “will,”
“should,” “could,” “would,” “seek,” “approximately,” “predict,”
“intend,” “plan,” “estimate,” “anticipate,” “opportunity,”
“pipeline,” “comfortable,” “assume,” “remain,” “maintain,”
“sustain,” “achieve” or the negative version of those words or
other comparable words. Forward-looking statements are not
historical facts, but instead represent only Fortress’s beliefs as
of the date of this communication regarding future events, many of
which, by their nature, are inherently uncertain and outside of
Fortress’s control. Numerous factors could cause actual events to
differ from these forward-looking statements, and any such
differences could cause our actual results to differ materially
from the results expressed or implied by these forward-looking
statements. Such factors include but are not limited to the
following: (1) Fortress may be unable to obtain shareholder
approval as required for the proposed merger; (2) conditions to the
closing of the merger, including the obtaining of required
regulatory approvals, may not be satisfied; (3) the merger may
involve unexpected costs, liabilities or delays; (4) the business
of Fortress may suffer as a result of uncertainty surrounding the
merger; (5) the outcome of any legal proceedings related to the
merger; (6) Fortress may be adversely affected by other economic,
business, and/or competitive factors, including the net asset value
of assets in certain of Fortress’s funds; (7) the occurrence of any
event, change or other circumstances that could give rise to the
termination of the merger agreement; (8) risks that the merger
disrupts current plans and operations and the potential
difficulties in employee retention as a result of the merger; (9)
other risks to consummation of the merger, including the risk that
the merger will not be consummated within the expected time period
or at all; and (10) the risks described from time to time in
Fortress’s reports filed with the SEC under the heading “Risk
Factors,” including the Annual Report on Form 10-K, Quarterly
Reports on Form 10-Q and Current Reports on Form 8-K and in other
of Fortress’s filings with the SEC. In addition, new risks and
uncertainties emerge from time to time, and it is not possible for
Fortress to predict or assess the impact of every factor that may
cause its actual results to differ from those expressed or implied
in any forward-looking statements.
Accordingly, you should not place undue reliance on any
forward-looking statements contained in this communication, and you
should not regard any forward-looking statement as a representation
by Fortress or any other person that the future plans, estimates or
expectations currently contemplated by Fortress will be achieved.
Fortress 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 communication.
Fortress expressly disclaims any obligation to release publicly any
updates or revisions to any forward-looking statements contained
herein to reflect any change in Fortress’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 March 2017 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 $0.0000 U.S. Portfolio
Interest Income (2) $0.0450 U.S. Dividend Income (3) $0.0020 Income
Not from U.S. Sources (4) $0.0000 Return of Capital
$0.0430
Distribution Per Share
$0.0900
(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 per share
data)
Three Months Ended December 31, Twelve Months
Ended December 31, 2016 2015 2016
2015 Revenues Management fees: affiliates $
120,469 $ 134,052 $ 497,738 $ 547,109 Management fees:
non-affiliates 14,476 13,823 56,542 59,480 Incentive income:
affiliates 239,526 189,898 310,860 345,052 Incentive income:
non-affiliates 880 78 41,742 813 Expense reimbursements: affiliates
57,136 68,614 223,177 237,158 Expense reimbursements:
non-affiliates 1,343 1,432 5,407 11,005 Other revenues 4,508
6,763 28,340 13,239
Total Revenues 438,338 414,660
1,163,806 1,213,856
Expenses Compensation and benefits 234,027 196,839 773,670
743,862 General, administrative and other 38,526 38,141 143,468
164,194 Depreciation and amortization 5,367 5,042 22,729 39,243
Interest expense 2,032 1,783 10,694 4,579 Transfer of interest in
Graticule - - -
101,000
Total Expenses 279,952
241,805 950,561 1,052,878
Other Income (Loss) Gains (losses) 45,900 (3,805 ) 23,823
(18,919 ) Tax receivable agreement liability adjustment (4,524 )
1,749 (7,223 ) (6,141 ) Earnings (losses) from equity method
investees (18,469 ) (16,107 ) (20,889 ) (32,915 ) Gain on transfer
of Graticule - - -
134,400
Total Other Income (Loss) 22,907
(18,163 ) (4,289 ) 76,425
Income (Loss) Before Income Taxes 181,293 154,692 208,956
237,403 Income tax benefit (expense) (16,451 )
(39,004 ) (28,314 ) (55,788 )
Net Income
(Loss) $ 164,842 $ 115,688 $ 180,642 $
181,615
Allocation of Net Income (Loss) Principals'
and Others' Interests in Income (Loss) of Consolidated Subsidiaries
78,591 60,980 86,200 103,129 Redeemable Non-Controlling Interests
in Income (Loss) of Consolidated Subsidiaries - - - (6 ) Net Income
(Loss) Attributable to Class A Shareholders 86,251
54,708 94,442 78,492 $
164,842 $ 115,688 $ 180,642 $ 181,615
Earnings (Loss) Per
Class A Share
Net income (loss) per Class A share, basic $ 0.38 $ 0.24
$ 0.42 $ 0.35 Net income (loss) per Class A
share, diluted $ 0.33 $ 0.20 $ 0.38 $ 0.28
Weighted average number of Class A shares outstanding, basic
217,183,951 217,587,096
217,914,753 216,503,554 Weighted average
number of Class A shares outstanding, diluted 390,657,656
425,302,366 390,345,532
442,686,774
Fortress Investment
Group LLC
Consolidated Balance Sheets
(dollars in thousands)
December 31, 2016 December 31, 2015
Assets Cash and cash equivalents $ 397,125 $ 339,842 Due
from affiliates 320,633 273,811 Investments 880,001 1,055,789
Investments in options 53,206 30,427 Deferred tax asset, net
424,244 427,102 Other assets 126,165 148,310
Total Assets $ 2,201,374 $ 2,275,281
Liabilities and Equity Liabilities
Accrued compensation and benefits $ 370,413 $ 318,750 Due to
affiliates 360,769 365,218 Deferred incentive income 330,354
332,329 Debt obligations payable 182,838 230,677 Other liabilities
69,255 86,503
Total Liabilities
1,313,629 1,333,477
Commitments and Contingencies Redeemable
Non-controlling Interests - -
Equity Class A
shares, no par value, 1,000,000,000 shares authorized, 216,891,601
and 216,790,409 shares issued and outstanding at December 31, 2016
and December 31, 2015, respectively - - Class B shares, no par
value, 750,000,000 shares authorized, 169,207,335 and 169,514,478
shares issued and outstanding at December 31, 2016 - - and December
31, 2015, respectively Paid-in capital 1,899,163 1,988,707 Retained
earnings (accumulated deficit) (1,333,828 ) (1,415,113 )
Accumulated other comprehensive income (loss) (1,094 )
(2,909 ) Total Fortress shareholders' equity 564,241
570,685 Principals' and others' interests in equity of consolidated
subsidiaries 323,504 371,119
Total
Equity 887,745 941,804 $ 2,201,374
$ 2,275,281
Fortress Investment
Group LLC Exhibit 1-a
Supplemental Data for the Three Months
Ended December 31, 2016 and 2015
Three Months Ended December 31, 2016
Private Equity Credit Funds
(in millions)
Total Funds
Permanent Capital
Vehicles
Hedge Funds PE Funds
Liquid Hedge Funds
Logan Circle
Assets Under Management AUM - October 1, 2016 $
70,131 $ 7,071 $ 6,846 $ 8,804 $ 9,483 $ 4,541 $ 33,386 Capital
raised - - - - - - - Equity raised (Permanent Capital Vehicles) 135
- 135 - - - - Increase in invested capital 588 17 - 7 564 - -
Redemptions (19 ) - - (3 ) - (16 ) - RCA distributions8 (78 ) - -
(78 ) - - - Return of capital distributions (479 ) (108 ) (25 ) (9
) (336 ) (1 ) - Adjustment for capital reset (42 ) - - - - (42 ) -
Crystallized Incentive Income (7 ) - - (7 ) - - - Change in AUM of
Affiliated Manager and co-managed funds (17 ) - - (142 ) - 125
-
Net Client Flows 1,049 - - - - - 1,049 Income (loss) and foreign
exchange (1,634 ) (448 ) 5 231
(405 ) (18 ) (999 )
AUM - Ending
Balance $ 69,627 $ 6,532 $ 6,961 $ 8,803 $ 9,306 $ 4,589 $
33,436
Third-Party Capital Raised $ 437 $ -
$ 135 $ - $ 302 $ - $ -
Segment Revenues Management fees $ 133 $ 21 $ 28 $ 37
$ 32 $ 1 $ 14 Incentive income 133 -
41 47 44 -
1 Total 266 21 69 84 76 1 15
Segment
Expenses Operating expenses (119 ) (8 ) (26 ) (27 ) (38 ) (5 )
(15 ) Profit sharing compensation expenses (49 ) -
(6 ) (20 ) (23 ) -
- Total (168 ) (8 ) (32 ) (47 ) (61 ) (5 ) (15 )
Earnings From Affiliated Manager 10 - - - - 10 -
Fund Management DE
(before Principal Performance Payments) 108
13 37 37 15
6 - Principal Performance
Payments (12 ) - (6 ) (5 ) (1 ) - -
Fund Management DE 96
13 31 32 14
6 - Investment Income 12 2 1 3 6
1 (1 ) Unallocated Investment Income 1 Unallocated Expenses (2 )
Pre-tax
Distributable Earnings $ 107 $ 15 $ 32 $
35 $ 20 $ 7 $ (1 )
Pre-tax Distributable
Earnings per Dividend Paying Share $ 0.27
Three Months Ended December 31, 2015 Private
Equity Credit Funds
Liquid Hedge Funds
Logan Circle (in millions)
Total Funds
Permanent Capital
Vehicles
Hedge Funds PE Funds Assets Under
Management AUM - October 1, 2015 $ 74,330 $ 9,195 $
6,896 $ 9,070 $ 8,356 $ 7,367 $ 33,446 Capital raised 194 - - - 166
28 - Equity raised (Permanent Capital Vehicles) - - - - - - -
Increase in invested capital 1,609 227 9 - 1,373 - - Redemptions
(1,499 ) - - (1 ) - (1,498 ) - RCA distributions8 (73 ) - - (73 ) -
- - Return of capital distributions (800 ) (148 ) (90 ) (19 ) (530
) (13 ) - Equity buyback (14 ) - (14 ) -
- - - Crystallized Incentive Income (2 ) - - (2 ) - - - Change in
AUM of Affiliated Managers and co-managed funds (613 ) - - (165 ) -
(448 ) - Net Client Flows (1,867 ) - - - - - (1,867 ) Income (loss)
and foreign exchange (764 ) (283 ) 15
(11 ) (57 ) (27 ) (401 )
AUM -
Ending Balance $ 70,501 $ 8,991 $ 6,816 $ 8,799 $ 9,308 $ 5,409
$ 31,178
Third-Party Capital Raised $ 215 $ -
$ - $ 21 $ 166 $ 28 $ -
Segment Revenues Management fees $ 148 $ 29 $ 27 $ 38
$ 32 $ 8 $ 14 Incentive income 132 -
30 11 90 1
- Total 280 29 57 49 122 9 14
Segment
Expenses Operating expenses (105 ) (3 ) (19 ) (27 ) (26 ) (16 )
(14 ) Profit sharing compensation expenses (47 ) 1
(3 ) (5 ) (41 ) 1
- Total (152 ) (2 ) (22 ) (32 ) (67 ) (15 ) (14 )
Earnings From Affiliated Managers (1 ) -
- - - (1 )
-
Fund Management DE (before Principal Performance
Payments) 127 27 35
17 55 (7 ) -
Principal Performance Payments (14 ) -
(5 ) (4 ) (5 ) - -
Fund Management DE 113 27
30 13 50 (7 ) -
Investment Income 18 - 1 1 12 5 (1 ) Unallocated Expenses (1
)
Pre-tax
Distributable Earnings $ 130 $ 27 $ 31 $
14 $ 62 $ (2 ) $ (1 )
Pre-tax Distributable
Earnings per Dividend Paying Share $ 0.30
___________________________________
8 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-b
Supplemental Data for the Twelve Months
Ended December 31, 2016 and 2015
Twelve Months Ended December 31, 2016
Private Equity Credit Funds
(in millions)
Total Funds
Permanent Capital
Vehicles
Hedge Funds PE Funds
Liquid Hedge Funds
Logan Circle
Assets Under Management AUM - January 1, 2016 $
70,501 $ 8,991 $ 6,816 $ 8,799 $ 9,308 $ 5,409 $ 31,178 Capital
raised 523 - - 268 176 79 - Equity raised (Permanent Capital
Vehicles) 414 - 414 - - - - Increase in invested capital 1,353 36 -
73 1,244 - - Capital acquisitions 682 - - 682 - - - Redemptions
(551 ) - - (68 ) - (483 ) - RCA distributions9 (392 ) - - (392 ) -
- - Return of capital distributions (2,313 ) (825 ) (130 ) (13 )
(1,315 ) (30 ) - Adjustment for capital reset (692 ) (650 ) - - -
(42 ) - Crystallized Incentive Income (70 ) - - (70 ) - - - Equity
buyback (125 ) - (125 ) - - - - Change in AUM of Affiliated Manager
and co-managed funds (1,288 ) - - (1,157 ) - (131 ) - Divested
Businesses (177 ) - - - - (177 ) - Net Client Flows (125 ) - - - -
- (125 ) Income (loss) and foreign exchange 1,887
(1,020 ) (14 ) 681 (107 )
(36 ) 2,383
AUM - Ending Balance $ 69,627 $
6,532 $ 6,961 $ 8,803 $ 9,306 $ 4,589 $ 33,436
Third-Party Capital Raised $ 1,270 $ - $ 414
$ 299 $ 478 $ 79 $ -
Segment
Revenues Management fees $ 551 $ 94 $ 110 $ 150 $ 126 $ 14 $ 57
Incentive income 441 - 67
131 241 1 1
Total 992 94 177 281 367 15 58
Segment Expenses
Operating expenses (438 ) (36 ) (80 ) (107 ) (133 ) (28 ) (54 )
Profit sharing compensation expenses (188 ) -
(15 ) (50 ) (122 ) (1 ) -
Total (626 ) (36 ) (95 ) (157 ) (255 ) (29 ) (54 )
Earnings From Affiliated Manager 15 -
- - - 15
-
Fund Management DE (before Principal
Performance Payments) 381 58
82 124 112 1
4 Principal Performance Payments (36 )
- (12 ) (19 ) (5 ) -
-
Fund Management DE 345
58 70 105 107
1 4 Investment Income 27
1 3 6 20 (3 ) - Unallocated Expenses (10 )
Pre-tax Distributable Earnings $
362 $ 59 $ 73 $ 111 $ 127 $ (2 )
$ 4
Pre-tax Distributable Earnings per Dividend Paying
Share $ 0.92
Twelve Months Ended
December 31, 2015 Private Equity Credit
Funds
(in millions)
Total Funds
Permanent Capital
Vehicles
Hedge Funds PE Funds
Liquid Hedge Funds
Logan Circle
Assets Under Management AUM - January 1, 2015 $
67,531 $ 9,366 $ 4,567 $ 6,173 $ 6,955 $ 8,128 $ 32,342 Capital
raised 1,565 - - 254 978 333 - Equity raised (Permanent Capital
Vehicles) 2,441 - 2,441 - - - - Increase in invested capital 3,764
419 296 46 3,003 - - Redemptions (3,328 ) - - (265 ) - (3,063 ) -
RCA distributions9 (361 ) - - (361 ) - - - Return of capital
distributions (2,532 ) (560 ) (200 ) (50 ) (1,547 ) (175 ) - Equity
Buyback (14 ) - (14 ) - - - - Adjustment for capital reset (168 ) -
(168 ) - - - - Crystallized Incentive Income (120 ) - - (120 ) - -
- Change in AUM of Affiliated Managers and co-managed funds 3,354 -
- 2,853 - 501 - Net Client Flows (121 ) - - - - - (121 ) Income
(loss) and foreign exchange (1,510 ) (234 )
(106 ) 269 (81 ) (315 ) (1,043 )
AUM - Ending Balance $ 70,501 $ 8,991 $ 6,816 $ 8,799 $
9,308 $ 5,409 $ 31,178
Third-Party Capital Raised $
8,992 $ - $ 2,441 $ 275 $ 5,943
$ 333 $ -
Segment Revenues Management
fees $ 582 $ 116 $ 96 $ 134 $ 118 $ 64 $ 54 Incentive income
436 - 106 85
244 1 - Total 1,018 116
202 219 362 65 54
Segment Expenses Operating expenses
(453 ) (45 ) (69 ) (85 ) (115 ) (84 ) (55 ) Profit sharing
compensation expenses (168 ) 1 (11 )
(36 ) (121 ) (1 ) - Total (621 )
(44 ) (80 ) (121 ) (236 ) (85 ) (55 )
Earnings From
Affiliated Managers 9 - -
- - 9 -
Fund Management DE (before Principal Performance
Payments) 406 72 122
98 126 (11 ) (1 )
Principal Performance Payments (42 ) -
(19 ) (15 ) (8 ) - -
Fund Management DE 364 72
103 83 118 (11 )
(1 ) Investment Income 32 - 2 2 21 8 (1 ) Unallocated
Investment Income (1 ) Unallocated Expenses (4 )
Pre-tax Distributable
Earnings $ 391 $ 72 $ 105 $ 85 $
139 $ (3 ) $ (2 )
Pre-tax Distributable Earnings per
Dividend Paying Share $ 0.87
___________________________________
9 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 Ended Full Year 2015
Three Months Ended Full Year 2016
Fortress March 31,2015 June
30,2015 September 30,2015
December 31,2015
March 31,2016 June 30,2016
September 30,2016 December
31,2016 Assets Under Management Private Equity
Funds $ 10,179 $ 9,587 $ 9,195 $ 8,991 $ 8,991 $ 7,179 $ 6,640 $
7,071 $ 6,532 $ 6,532 Permanent Capital Vehicles 4,622 6,948 6,896
6,816 6,816 6,773 6,644 6,846 6,961 6,961 Credit Hedge Funds10
6,271 6,244 9,070 8,799 8,799 9,336 8,966 8,804 8,803 8,803 Credit
Private Equity Funds 7,563 8,247 8,356 9,308 9,308 9,353 9,243
9,483 9,306 9,306 Liquid Hedge Funds11 7,838 7,377 7,367 5,409
5,409 5,195 4,622 4,541 4,589 4,589 Logan Circle 33,416
33,564 33,446 31,178
31,178 32,801 34,080
33,386 33,436 33,436
AUM - Ending Balance $ 69,889 $ 71,967
$ 74,330 $ 70,501 $ 70,501 $ 70,637 $
70,195 $ 70,131 $ 69,627 $ 69,627
Third-Party Capital Raised $ 5,360 $ 3,213
$ 204 $ 215 $ 8,992 $ 348 $ 86
$ 399 $ 437 $ 1,270
Segment
Revenues Management fees $ 139 $ 144 $ 151 $ 148 $ 582 $ 141 $
141 $ 136 $ 133 $ 551 Incentive income 51 183
70 132 436
64 131 113 133
441 Total 190 327 221 280 1,018 205 272 249 266 992
Segment Expenses Operating expenses (115 ) (121 )
(112 ) (105 ) (453 ) (109 ) (106 ) (104 ) (119 ) (438 ) Profit
sharing compensation expenses (30 ) (54 ) (37
) (47 ) (168 ) (31 ) (58 ) (50 )
(49 ) (188 ) Total (145 ) (175 ) (149 ) (152 ) (621 )
(140 ) (164 ) (154 ) (168 ) (626 )
Earnings From
Affiliated Manager 9 (1 ) 2 (1 ) 9 1 1 3 10 15
Fund
Management DE (before Principal Performance Payments) 54
151 74 127
406 66 109 98
108 381 Principal Performance
Payments (3 ) (18 ) (7 ) (14 ) (42 ) (3 ) (11 ) (10 ) (12 ) (36 )
Fund Management DE $ 51 $ 133 $ 67
$ 113 $ 364 $ 63 $ 98 $ 88
$ 96 $ 345 Net Investment Income 4 4 2
17 27 1 3 2 11 17
Pre-tax Distributable Earnings $ 55
$ 137 $ 69 $ 130 $ 391 $ 64
$ 101 $ 90 $ 107 $ 362
___________________________________
10 The Assets Under Management presented for the Credit Hedge Funds
includes $1,696 million related to co-managed funds as of 4Q 2016.
11 The Assets Under Management presented for the Liquid Hedge Funds
includes $4,365 million related to the Affiliated Manager as of 4Q
2016.
Fortress Investment
Group LLC Exhibit 2-b
Assets Under Management and Fund
Management DE
(dollars in millions)
Three Months Ended
Three Months Ended
Private Equity Funds March 31,2015
June 30,2015 September 30,2015
December 31,2015
Full Year 2015
March 31,2016 June 30,2016
September 30,2016 December
31,2016
Full Year 2016
Assets Under Management Main Funds12 $ 7,726 $ 7,128
$ 6,874 $ 6,530 $ 6,530 $ 4,907 $ 4,479 $ 4,980 $ 4,502 $ 4,502
Coinvestment Funds13 1,994 1,902 1,785 1,729 1,729 1,552 1,463
1,412 1,374 1,374 MSR Opportunities Funds14 336 417 388 360 360 333
309 285 261 261 Italian NPL Opportunities Fund 19 20 20 225 225 231
225 228 213 213 Fortress Equity Partners 104
120 128 147 147
156 164 166 182
182
AUM - Ending Balance $ 10,179
$ 9,587 $ 9,195 $ 8,991 $ 8,991
$ 7,179 $ 6,640 $ 7,071 $ 6,532 $ 6,532
Third-Party Capital Raised $ - $ -
$ - $ - $ - $ - $ - $ -
$ - $ -
Segment Revenues
Management fees $ 29 $ 29 $ 29 $ 29 $ 116 $ 26 $ 26 $ 21 $ 21 $ 94
Incentive income - - -
- - - -
- - - Total 29 29 29 29
116 26 26 21 21 94
Segment Expenses Operating
expenses (14 ) (15 ) (13 ) (3 ) (45 ) (10 ) (10 ) (8 ) (8 ) (36 )
Profit sharing compensation expenses - -
- 1 1 -
- - - -
Total (14 ) (15 ) (13 ) (2 ) (44 ) (10 ) (10 ) (8 ) (8 ) (36
)
Fund Management DE (before Principal Performance
Payments) 15 14 16
27 72 16 16
13 13 58 Principal
Performance Payments - - - - - - - - - -
Fund Management
DE $ 15 $ 14 $ 16 $ 27 $ 72
$ 16 $ 16 $ 13 $ 13 $ 58
Net Investment Income - - - - - (2 ) 1 - 2 1
Pre-tax
Distributable Earnings $ 15 $ 14 $ 16 $ 27
$ 72 $ 14 $ 17 $ 13 $ 15
$ 59
___________________________________
12 Combined AUM for Fund III, Fund IV and Fund V. Effective January
1, 2016, Fortress no longer earns management fees from Fund III.
Fund III has passed its contractual maturity date and is in the
process of an orderly wind down. 13 Combined AUM for Fund III
Coinvestment, Fund IV Coinvestment, Fund V Coinvestment, FHIF and
FECI. Effective January 1, 2016, Fortress no longer earns
management fees from Fund III Coinvestment. Fund III Coinvestment
has passed its contractual maturity date and is in the process of
an orderly wind down. 14 Combined AUM for MSR Opportunities Fund I
A, MSR Opportunities Fund I B, MSR Opportunities Fund II A, MSR
Opportunities Fund II B and MSR Opportunities Fund MA I.
Fortress Investment Group LLC
Exhibit 2-c
Assets Under Management and Fund
Management DE
(dollars in millions)
Three Months Ended
Three Months Ended
Permanent Capital Vehicles March 31,2015
June 30,2015 September
30,2015 December 31,2015
Full Year 2015
March 31,2016 June 30,2016
September 30,2016 December
31,2016
Full Year 2016
Assets Under Management Drive Shack Inc. $ 680 $ 680
$ 680 $ 680 $ 680 $ 680 $ 680 $ 680 $ 680 $ 680 New Residential
Investment Corp. 1,367 2,725 2,689 2,689 2,689 2,689 2,689 2,948
2,948 2,948 Eurocastle Investment Limited 432 626 605 567 567 608
510 486 488 488 New Media Investment Group Inc. 637 637 637 637 637
637 637 637 772 772 New Senior Investment Group Inc. 813 1,089
1,089 1,076 1,076 1,024 1,024 1,024 1,024 1,024 Fortress
Transportation and Infrastructure Investors LLC15 693
1,191 1,196 1,167
1,167 1,135 1,104 1,071
1,049 1,049
AUM - Ending
Balance $ 4,622 $ 6,948 $ 6,896 $ 6,816
$ 6,816 $ 6,773 $ 6,644 $ 6,846
$ 6,961 $ 6,961
Third-Party Capital
Raised $ 150 $ 2,291 $ - $ - $
2,441 $ - $ - $ 279 $ 135 $ 414
Segment Revenues Management fees $ 19 $ 23 $
27 $ 27 $ 96 $ 27 $ 27 $ 28 $ 28 $ 110 Incentive income 3
74 (1 ) 30 106
2 14 10 41
67 Total 22 97 26 57 202 29 41 38 69 177
Segment Expenses Operating expenses (18 ) (16 ) (16 )
(19 ) (69 ) (19 ) (18 ) (17 ) (26 ) (80 ) Profit sharing
compensation expenses - (9 ) 1
(3 ) (11 ) (1 ) (3 ) (5 )
(6 ) (15 ) Total (18 ) (25 ) (15 ) (22 ) (80 ) (20 ) (21 )
(22 ) (32 ) (95 )
Fund Management DE (before Principal
Performance Payments) 4 72
11 35 122 9
20 16 37 82
Principal Performance Payments - (11 ) (3 ) (5 ) (19 ) (1 ) (3 ) (2
) (6 ) (12 )
Fund Management DE $ 4 $ 61
$ 8 $ 30 $ 103 $ 8 $ 17 $
14 $ 31 $ 70 Net Investment Income - 1
- 1 2 1 1 - 1 3
Pre-tax Distributable Earnings $ 4
$ 62 $ 8 $ 31 $ 105 $ 9 $
18 $ 14 $ 32 $ 73
___________________________________
15 All of the capital of Worldwide Transportation and
Infrastructure Investors ("WWTAI"), a private fund formerly managed
by Fortress, was contributed to FTAI which completed its initial
public offering in 2Q 2015.
Fortress Investment Group LLC Exhibit 2-d
Assets Under Management and Fund
Management DE
(dollars in millions)
Three Months Ended
Three Months Ended
Credit Hedge Funds March 31,2015
June 30,2015 September 30,2015
December 31,2015
Full Year 2015
March 31,2016 June 30,2016
September 30,2016 December
31,2016
Full Year 2016
Assets Under Management Drawbridge Special
Opportunities Funds16 $ 6,023 $ 6,021 $ 5,808 $ 5,756 $ 5,756 $
5,816 $ 5,928 $ 6,019 $ 6,153 $ 6,153 Third Party Originated
Funds17 189 156 150 102 102 815 837 821 840 840 Japan Income Fund
59 67 94 88 88 116 123 125 114 114 Co-Managed Funds18 -
- 3,018 2,853
2,853 2,589 2,078
1,838 1,696 1,696
AUM -
Ending Balance $ 6,271 $ 6,244 $ 9,070 $
8,799 $ 8,799 $ 9,336 $ 8,966 $ 8,804
$ 8,803 $ 8,803
Third-Party Capital
Raised $ 175 $ 79 $ - $ 21 $ 275
$ 272 $ 27 $ - $ - $ 299
Segment Revenues Management fees $ 30 $ 29 $ 37 $ 38
$ 134 $ 37 $ 37 $ 39 $ 37 $ 150 Incentive income 23
50 1 11 85
7 33 44 47
131 Total 53 79 38 49 219 44 70 83 84 281
Segment Expenses Operating expenses (18 ) (19 ) (21 ) (27 )
(85 ) (26 ) (29 ) (25 ) (27 ) (107 ) Profit sharing compensation
expenses (12 ) (18 ) (1 ) (5 )
(36 ) (3 ) (11 ) (16 ) (20 ) (50
) Total (30 ) (37 ) (22 ) (32 ) (121 ) (29 ) (40 ) (41 ) (47 ) (157
)
Fund Management DE (before Principal Performance
Payments) 23 42 16
17 98 15 30
42 37 124
Principal Performance Payments (2 ) (6 ) (3 ) (4 ) (15 ) (1 ) (5 )
(8 ) (5 ) (19 )
Fund Management DE $ 21 $ 36
$ 13 $ 13 $ 83 $ 14 $ 25
$ 34 $ 32 $ 105 Net Investment Income 1
- - 1 2 - 1 2 3 6
Pre-tax Distributable Earnings $ 22
$ 36 $ 13 $ 14 $ 85 $ 14
$ 26 $ 36 $ 35 $ 111
Net
Returns19
Drawbridge Special Opportunities Fund LP 2.2 % 2.3 % 0.3 % 0.9 %
5.8 % 0.6 % 2.8 % 2.7 % 3.3 % 9.7 % Drawbridge Special
Opportunities Fund Ltd 1.1 % 0.4 % (0.8 %) 0.0 % 0.6 % (1.3 %) 1.5
% 3.1 % 2.6 % 5.9 %
___________________________________
16 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. Worden Fund II LP was closed in 1Q 2016.
17 Combined AUM for the third party
originated JP Funds and third party originated Value Recovery
Funds. Fortress began managing the JP Funds in 1Q 2016.
18 Combined AUM for the Mount Kellett
investment funds and related accounts. In 3Q 2015, Fortress became
co-manager of the Mount Kellett Funds.
19 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. The
returns for the Drawbridge Special Opportunities Funds reflect the
performance of each fund excluding special investments and the
performance of the redeeming capital accounts which relate to
December 31, 2009, December 31, 2010, December 31, 2011, December
31, 2012, December 31, 2013, December 31, 2014 and December 31,
2015 redemptions.
Fortress Investment Group
LLC Exhibit 2-e
Assets Under Management and Fund
Management DE
(dollars in millions)
Three Months Ended
Three Months Ended
Credit Private Equity Funds
March 31, 2015
June 30, 2015
September 30, 2015
December 31, 2015
Full Year 2015
March 31, 2016
June 30, 2016
September 30, 2016
December 31, 2016
Full Year 2016
Assets Under Management Long Dated Value Funds20 $
352 $ 315 $ 315 $ 315 $ 315 $ 292 $ 203 $ 186 $ 186 $ 186 Real
Assets Funds 52 40 41 24 24 50 33 33 33 33 Fortress Credit
Opportunities Funds21 6,029 6,802 6,796 6,848 6,848 6,894 6,765
7,031 7,112 7,112 Japan Opportunity Funds22 1,130
1,090 1,204 2,120
2,120 2,117 2,242 2,234
1,975 1,975
AUM - Ending
Balance $ 7,563 $ 8,247 $ 8,356 $ 9,308
$ 9,308 $ 9,353 $ 9,243 $ 9,483
$ 9,306 $ 9,306
Third-Party Capital
Raised $ 4,949 $ 672 $ 156 $ 166 $
5,943 $ 13 $ 43 $ 120 $ 302 $
478
Segment Revenues Management fees $ 27 $ 30
$ 29 $ 32 $ 118 $ 31 $ 31 $ 32 $ 32 $ 126 Incentive income
24 60 70 90
244 53 85 59
44 241 Total 51 90 99 122 362 84 116 91
76 367
Segment Expenses Operating expenses (30 ) (30
) (29 ) (26 ) (115 ) (32 ) (29 ) (34 ) (38 ) (133 ) Profit sharing
compensation expenses (14 ) (30 ) (36 )
(41 ) (121 ) (26 ) (44 ) (29 )
(23 ) (122 ) Total (44 ) (60 ) (65 )
(67 ) (236 ) (58 ) (73 ) (63 )
(61 ) (255 )
Fund Management DE (before Principal
Performance Payments) 7 30
34 55 126 26
43 28 15 112
Principal Performance Payments (1 ) (1
) (1 ) (5 ) (8 ) (1 ) (3 )
- (1 ) (5 )
Fund Management DE $
6 $ 29 $ 33 $ 50 $ 118 $ 25
$ 40 $ 28 $ 14 $ 107 Net
Investment Income 1 3 5
12 21 3 7
4 6 20
Pre-tax
Distributable Earnings $ 7 $ 32 $ 38 $ 62
$ 139 $ 28 $ 47 $ 32 $ 20
$ 127
___________________________________
20 Combined AUM for Long Dated Value Fund I, Long Dated Value Fund
II, Long Dated Value Fund III and LDVF Patent Fund. 21 Combined AUM
for Credit Opportunities Fund, Credit Opportunities Fund II, Credit
Opportunities Fund III, Credit Opportunities Fund IV, FCO Managed
Accounts, Global Opportunities Funds, Life Settlements Fund, Life
Settlements Fund MA, SIP managed account, Real Estate Opportunities
Fund, Real Estate Opportunities Fund II, Real Estate Opportunities
REOC Fund and Secured Lending Fund I. During 2Q 2016, Fortress
stopped earning management fees from SIP managed account. 22
Combined AUM for Japan Opportunity Fund, Japan Opportunity Fund II
(Dollar), Japan Opportunity Fund II (Yen), Japan Opportunity Fund
III (Dollar) and Japan Opportunity Fund III (Yen).
Fortress Investment Group LLC
Exhibit 2-f
Assets Under Management and Fund
Management DE
(dollars in millions)
Three Months Ended
Three Months Ended
Liquid Hedge Funds
March 31, 2015
June 30, 2015
September 30, 2015
December 31, 2015
Full Year 2015
March 31, 2016
June 30, 2016
September 30, 2016
December 31, 2016
Full Year 2016
Assets Under Management Fortress Macro Funds23 $
2,779 $ 2,326 $ 1,791 N/A N/A N/A N/A N/A N/A N/A Drawbridge Global
Macro Funds24 227 210 193 101 101 116 112 101 39 39 Fortress Convex
Asia Funds25 226 220 208 134 134 176 N/A N/A N/A N/A Fortress
Centaurus Global Funds26 64 191 222 204 204 206 182 N/A N/A N/A
Fortress Partners Funds27 541 534 497 474 474 228 215 199 186 186
Affiliated Manager28 4,001 3,896
4,456 4,496 4,496 4,469
4,113 4,240 4,365
4,365
AUM - Ending Balance $ 7,838 $
7,377 $ 7,367 $ 5,409 $ 5,409 $ 5,195
$ 4,622 $ 4,541 $ 4,589 $ 4,589
Third-Party Capital Raised $ 86 $ 171 $
48 $ 28 $ 333 $ 63 $ 16 $ -
$ - $ 79
Segment Revenues
Management fees $ 21 $ 19 $ 16 $ 8 $ 64 $ 6 $ 6 $ 1 $ 1 $ 14
Incentive income 1 (1 ) -
1 1 2 (1 ) -
- 1 Total 22 18 16 9 65 8 5 1 1
15
Segment Expenses Operating expenses (21 ) (27 )
(20 ) (16 ) (84 ) (9 ) (7 ) (7 ) (5 ) (28 ) Profit sharing
compensation expenses (4 ) 3 (1 )
1 (1 ) (1 ) - -
- (1 ) Total (25 ) (24 ) (21 ) (15 )
(85 ) (10 ) (7 ) (7 ) (5 ) (29 )
Earnings From Affiliated
Manager 9 (1 ) 2 (1 )
9 1 1 3
10 15
Fund Management DE (before
Principal Performance Payments) 6 (7 )
(3 ) (7 ) (11 ) (1 ) (1 )
(3 ) 6 1 Principal Performance
Payments - - - -
- - - -
- -
Fund Management DE $
6 $ (7 ) $ (3 ) $ (7 ) $ (11 ) $ (1 ) $ (1 ) $ (3 ) $ 6
$ 1 Net Investment Income 3
1 (1 ) 5 8
3 (5 ) (2 ) 1 (3 )
Pre-tax Distributable Earnings $ 9 $ (6 ) $ (4 ) $ (2
) $ (3 ) $ 2 $ (6 ) $ (5 ) $ 7 $ (2 )
Net
Returns29
Fortress Macro Fund Ltd (4.7 %) (6.3 %) (7.8 %) (0.0 %) (17.6 %)
N/A N/A N/A N/A N/A Drawbridge Global Macro Fund Ltd (4.9 %) (6.5
%) (8.0 %) 0.0 % (18.2 %) N/A N/A N/A N/A N/A Fortress Convex Asia
Fund Ltd (0.6 %) (0.7 %) 3.3 % (4.6 %) (2.8 %) 1.5 % (1.2 %) N/A
N/A 0.3 % Fortress Centaurus Global Fund Ltd 3.9 % (4.1 %) (3.0 %)
5.0 % 1.4 % 1.9 % (6.1 %) (3.3 %) N/A (7.5 %) Fortress Partners
Fund LP30 1.2 % (1.2 %) (4.9 %) (0.1 %) (5.0 %) N/A N/A N/A N/A N/A
Fortress Partners Offshore Fund LP30 0.3 % (2.5 %) (3.4 %) 0.5 %
(5.1 %) N/A N/A N/A N/A N/A
___________________________________
23 Combined AUM for Fortress Macro Onshore Fund LP, Fortress Macro
Fund Ltd, Fortress Macro MA1, Fortress Redwood Fund Ltd and
Fortress Macro managed accounts. In 4Q 2015, Fortress closed the
Fortress Macro Funds and related managed accounts. 24 Combined AUM
for Drawbridge Global Macro Fund LP and Drawbridge Global Macro
Intermediate Fund LP. 25 Combined AUM for Fortress Convex Asia Fund
LP, Fortress Convex Asia Fund Ltd, Fortress Convex Asia Fund PF LP
and Fortress Convex Asia Fund PF Ltd. In June 2016, Fortress
transferred its interests as general partner and investment manager
of the Fortress Convex Asia Funds to a third party. 26 Combined AUM
for Fortress Centaurus Global Fund LP and Fortress Centaurus Global
Fund Ltd. In 3Q 2016, Fortress closed the Fortress Centaurus Global
Funds. 27 Combined AUM for Fortress Partners Fund LP and Fortress
Partners Offshore Fund LP. 28 In 1Q 2015, the Fortress Asia Macro
Funds and related managed accounts transitioned to Graticule Asset
Management and became an Affiliated Manager. 29 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. 30 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-g Assets Under
Management and Fund Management DE
(dollars in millions)
Three Months Ended Full Year 2015
Three Months Ended Full Year 2016 Logan
Circle March 31,2015 June
30,2015 September 30,2015
December 31,2015 March 31,2016
June 30,2016 September 30,2016
December 31,2016 Assets Under
Management AUM - Ending Balance $ 33,416 $ 33,564
$ 33,446 $ 31,178 $ 31,178 $ 32,801
$ 34,080 $ 33,386 $ 33,436 $ 33,436
Net Client Flows $ 589 $ 1,056 $
101 $ (1,867 ) $ (121 ) $ 261 $ 18 $ (1,453 )
$ 1,049 $ (125 )
Segment Revenues Management
fees $ 13 $ 14 $ 13 $ 14 $ 54 $ 14 $ 14 $ 15 $ 14 $ 57 Incentive
income - - - -
- - - -
1 1 Total 13 14 13 14 54 14 14
15 15 58
Segment Expenses Operating expenses (14 )
(14 ) (13 ) (14 ) (55 ) (13 ) (13 ) (13 ) (15 ) (54 ) Profit
sharing compensation expenses - -
- - - -
- - - -
Total (14 ) (14 ) (13 ) (14 )
(55 ) (13 ) (13 ) (13 ) (15 )
(54 )
Fund Management DE $ (1 ) $ - $ - $ -
$ (1 ) $ 1 $ 1 $ 2 $ - $ 4
Net Investment Income - -
- (1 ) (1 ) - 1
- (1 ) -
Pre-tax
Distributable Earnings $ (1 ) $ - $ - $ (1 ) $ (2
) $ 1 $ 2 $ 2 $ (1 ) $ 4
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, 2015
June 30, 2015
September 30, 2015
December 31, 2015
Full Year 2015
March 31, 2016
June 30, 2016
September 30, 2016
December 31, 2016
Full Year 2016
GAAP Net Income (Loss) $ 87
$ 5 $ (26 ) $
116 $ 182 $ (16
) $ (27 ) $ 58
$ 165 $ 181 Principals'
and Others' Interests in (Income) Loss of Consolidated Subsidiaries
(52 ) (2 ) 12 (62 ) (104 ) 7 13 (28 ) (79 ) (87 ) Redeemable
non-controlling interests in Income (Loss) - -
- - - -
- - - -
GAAP Net Income (Loss) Attributable to Class A
Shareholders $ 35 $ 3
$ (14 ) $ 54 $
78 $ (9 ) $ (14
) $ 31 $ 86
$ 94 Private Equity incentive income 3 19 21
(16 ) 27 23 73 8 (38 ) 66 Hedge Fund, PCV and Logan Circle
incentive income 23 23 1 (47 ) - 8 26 35 (69 ) - Incentive income
received related to exercise of options - 57 - 1 58 - - 4 - 4
Reserve for clawback - - - - - - - - - - Distributions of earnings
from equity method investees 4 9 5 17 35 3 8 4 11 26 Losses
(earnings) from equity method investees (27 ) 33 23 17 46 24 8 (24
) 30 38 Losses (gains) on options (32 ) 9 27 2 6 2 (12 ) (4 ) (9 )
(23 ) Losses (gains) on other Investments (1 ) (5 ) 14 (1 ) 7 15 19
1 (37 ) (2 ) Impairment of investments (3 ) - (1 ) (2 ) (6 ) (2 )
(1 ) - (1 ) (4 ) Adjust income from the receipt of options (4 ) (21
) - - (25 ) - - (2 ) (3 ) (5 ) Gain on transfer of Graticule (134 )
- - - (134 ) - - - - - Amortization of intangible assets and
impairment of goodwill - - - 1 1 1 - 1 1 3 Employee, Principal and
director compensation 20 6 2 5 33 3 2 2 37 44 Adjust
non-controlling interests related to Fortress Operating Group units
52 1 (12 ) 62 103 (8 ) (12 ) 27 79 86 Tax receivable agreement
liability reduction - 8 - (2 ) 6 3 - - 4 7 Adjust income taxes and
other tax related items 18 (5 ) 3 39 55 1 4 7 16 28 Adjust transfer
of interest in Graticule 101 - -
- 101 - -
- - -
Pre-tax
Distributable Earnings $ 55 $
137 $ 69 $ 130
$ 391 $ 64
$ 101 $ 90 $
107 $ 362 Investment Loss
(income) (5 ) (4 ) (3 ) (19 ) (31 ) (4 ) (6 ) (4 ) (13 ) (27 )
Interest Expense 1 - 1
2 4 3 3
2 2 10
Fund Management
DE $ 51 $ 133
$ 67 $ 113 $
364 $ 63 $ 98
$ 88 $ 96 $
345 GAAP Revenues $ 227
$ 308 $ 264 $
415 $ 1,214 $ 232
$ 232 $ 261
$ 438 $ 1,164 Adjust
management fees (1 ) 1 - - - 1 - - - 1 Adjust incentive income 27
100 22 (59 ) 90 31 100 65 (107 ) 89 Adjust income from the receipt
of options (4 ) (21 ) - - (25 ) - - (2 ) (3 ) (5 ) Other revenues
(59 ) (61 ) (65 ) (76 ) (261 )
(59 ) (60 ) (75 ) (62 ) (257 )
Segment Revenues $ 190 $
327 $ 221 $ 280
$ 1,018 $ 205
$ 272 $ 249 $
266 $ 992 GAAP Expenses
$ 329 $ 258 $
224 $ 242 $ 1,053
$ 207 $ 238
$ 226 $ 280 $
951 Adjust interest expense (1 ) - (1 ) (2 ) (4 ) (3
) (3 ) (2 ) (2 ) (10 ) Adjust employee, Principal and director
compensation (18 ) (2 ) (1 ) (5 ) (26 ) (2 ) (1 ) (1 ) (35 ) (39 )
Adjust amortization of intangible assets and impairment of goodwill
- - - (1 ) (1 ) (1 ) - (1 ) (1 ) (3 ) Adjust expense reimbursements
from affiliates and non-affiliates (59 ) (61 ) (64 ) (68 ) (252 )
(57 ) (58 ) (58 ) (60 ) (233 ) Adjust Principal Performance
Payments (5 ) (20 ) (9 ) (14 ) (48 ) (4 ) (12 ) (10 ) (14 ) (40 )
Adjust transfer of interest in Graticule (101 ) -
- - (101 ) -
- - - -
Segment Expenses $ 145 $
175 $ 149 $ 152
$ 621 $ 140
$ 164 $ 154 $
168 $ 626
"Distributable earnings" is Fortress’s supplemental measure of
operating performance used by management in analyzing segment and
overall results. 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 Annual Report on Form 10-K for the year ended December
31, 2016.
Fortress’s management uses distributable earnings:
- 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;
- as a valuation measure in strategic
analyses in connection with the performance of its funds and the
performance of its employees; and
- to assist in evaluating its periodic
distributions to equity holders.
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. Fund management DE
is comprised of “Pre-tax Distributable Earnings” excluding
“Investment Loss (Income)” and “Interest Expense.” 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 December 31, Twelve Months
Ended December 31, 2016 2015 2016 2015
Weighted Average Class A Shares
Outstanding (Used for Basic EPS)
217,183,951 217,587,096
217,914,753 216,503,554 Weighted average fully
vested restricted Class A share units with dividend equivalent
rights (313,818 ) (1,495,044 ) (644,550 ) (3,272,595 ) Weighted
average restricted Class A shares (886,867 )
(729,348 ) (838,775 ) (766,420 )
Weighted Average Class A Shares
Outstanding
215,983,266 215,362,704
216,431,428 212,464,539 Weighted average
restricted Class A shares31 886,867 729,348 838,775 766,420
Weighted average fully vested restricted Class A share units which
are entitled to dividend equivalent payments 313,818 1,495,044
644,550 3,272,595 Weighted average unvested restricted Class A
share units which are entitled to dividend equivalent payments
8,063,715 9,738,355 8,002,595 10,023,561 Weighted average Fortress
Operating Group units 169,207,335
202,863,607 169,417,971 220,416,315
Weighted Average Class A Shares
Outstanding (Used for DEPS)
394,455,001 430,189,058
395,335,319 446,943,430 Weighted average
vested and unvested restricted Class A share units which are not
entitled to dividend equivalent payments 9,027,096
10,963,693 9,081,237 12,139,050
Weighted Average Fully Diluted Shares
and Units Outstanding (Used for Diluted DEPS)
403,482,097 441,152,751
404,416,556 459,082,480
“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.
___________________________________
31 Includes both fully vested and unvested restricted Class A
shares.
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 December 31, 2016 As of December 31,
2015
GAAP Book Value
Net Cash and Investments
GAAP Book Value
Net Cash and Investments
Cash and Cash equivalents $ 397,125 $ 397,125 $ 339,842 $ 339,842
Investments 880,001 880,001 1,055,789 1,055,789 Investments in
options32 53,206 - 30,427 - Due from Affiliates 320,633 - 273,811 -
Deferred Tax Asset, net 424,244 - 427,102 - Other Assets
126,165 - 148,310 -
Total Assets
2,201,374 1,277,126 2,275,281 1,395,631
Debt Obligations Payable $ 182,838 $ 182,838 $ 230,677 $ 230,677
Accrued Compensation and Benefits 370,413 - 318,750 - Due to
Affiliates 360,769 - 365,218 - Deferred Incentive Income 330,354 -
332,329 - Other Liabilities 69,255 - 86,503
-
Total Liabilities 1,313,629 182,838
1,333,477 230,677
Net $ 887,745 $ 1,094,288 $ 941,804 $ 1,164,954
Shares Outstanding
Dividend Paying Shares and
Units Outstanding
Shares Outstanding
Dividend Paying Shares and
Units Outstanding
Class A Shares 216,005 216,005 216,061 216,061 Restricted Class A
Shares 887 887 729 729 Fortress Operating Group Units 169,207
169,207 169,515 169,515 Fully Vested Class A Shares - Dividend
Paying - 468 - 1,361 Unvested Class A Shares - Dividend Paying
- 8,064 - 9,175
Shares
Outstanding 386,099 394,631 386,305
396,841
Per Share $
2.30 $ 2.77 $ 2.44 $
2.94
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) and 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.
___________________________________
32 The intrinsic value of options in equity method investees
totaled $30 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 options
it holds in the Permanent Capital Vehicles and sold all of the
resulting shares at their December 31, 2016 closing price and
differs from the fair value derived from option pricing models
included in the table above.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20170228006017/en/
Investor & Media Relations:Fortress Investment
GroupGordon E. Runté, +1-212-798-6082grunte@fortress.com
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