Company Website:
http://www.fortress.com
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)
| | Total | | Funds | | Capital Vehicles | | Funds | | Hedge Funds | | PE 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)
| | Total | | Funds | | Capital Vehicles | | Funds | | Hedge Funds | | PE 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 million
Liquid 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 |
| 2013 | | 2014 |
| 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)
| | Total | | Funds | | Vehicles | | Funds | | Hedge Funds | | PE 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)
| | Total | | Funds | | Vehicles | | Funds | | Hedge Funds | | PE 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)
| | Total | | Funds | | Vehicles | | Funds | | Hedge Funds | | PE 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)
| | Total | | Funds | | Vehicles | | Funds | | Hedge Funds | | PE 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 Ended | | | | Three 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 Ended | | | | Three 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 Ended | | | | Three 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 Ended | | | | Three 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 Ended | | | | Three 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 Ended | | | | Three 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, 2014 | | As 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.
|
Contacts:
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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