-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, BeBuq/hAKzx66mqjLdFXlk2ECQ2YsjrcQaoyCj6lc81Jbx4VI48wjar6Ia4/n0Ke A8rWadZdvZrEzwwkHG4vaA== 0000898822-03-000068.txt : 20030129 0000898822-03-000068.hdr.sgml : 20030129 20030129154222 ACCESSION NUMBER: 0000898822-03-000068 CONFORMED SUBMISSION TYPE: 425 PUBLIC DOCUMENT COUNT: 1 FILED AS OF DATE: 20030129 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: FBR ASSET INVESTMENT CORP/VA CENTRAL INDEX KEY: 0001073208 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 541873198 STATE OF INCORPORATION: VA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 425 SEC ACT: 1934 Act SEC FILE NUMBER: 001-15049 FILM NUMBER: 03529936 BUSINESS ADDRESS: STREET 1: POTOMAC TOWER STREET 2: 1001 NINETEENTH ST NORTH CITY: ARLINGTON STATE: VA ZIP: 22209 BUSINESS PHONE: 7033129500 MAIL ADDRESS: STREET 1: POTOMAC TOWER STREET 2: 1001 NINETEENTH ST NORTH CITY: ARLINGTON STATE: VA ZIP: 22209 FORMER COMPANY: FORMER CONFORMED NAME: FBR ASSET INVESTMENT CORP DATE OF NAME CHANGE: 19990526 FORMER COMPANY: FORMER CONFORMED NAME: FBR ASSET INVESMENT CORP/VA DATE OF NAME CHANGE: 19990528 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: FRIEDMAN BILLINGS RAMSEY GROUP INC CENTRAL INDEX KEY: 0001048750 STANDARD INDUSTRIAL CLASSIFICATION: SECURITY BROKERS, DEALERS & FLOTATION COMPANIES [6211] IRS NUMBER: 541837743 STATE OF INCORPORATION: VA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 425 BUSINESS ADDRESS: STREET 1: 1001 19TH STREET N CITY: ARLINGTON STATE: VA ZIP: 22209 BUSINESS PHONE: 7033129500 MAIL ADDRESS: STREET 1: 1001 NINETEENTH ST N CITY: ARLINGTON STATE: VA ZIP: 22209 425 1 jan29pressreleasegroup.txt FORM 425 Filed by Friedman, Billings, Ramsey Group, Inc. Pursuant to Rule 425 under the Securities Act of 1933 and deemed filed pursuant to Rule 14a-12 under the Securities Act Subject Company: FBR Asset Investment Corporation Commission File No: 001-15049 [FBR Logo] Investor Contact: Kurt Harrington 703.312.9647 or kharrington@fbr.com Media Contacts: Bob Leahy 703.312.9745 or bleahy@fbr.com or Bill Dixon 703.469.1092 or bdixon@fbr.com FRIEDMAN, BILLINGS, RAMSEY GROUP REPORTS FOURTH QUARTER 2002 RESULTS NET INCOME OF $10.1 MILLION, OR $0.22 PER SHARE (BASIC) FOR THE QUARTER COMPANY REPORTS ANNUAL NET INCOME OF $52.4 MILLION, OR $1.14 PER SHARE (BASIC) ARLINGTON, VA., JANUARY 29, 2002 - Friedman, Billings, Ramsey Group, Inc. (NYSE: FBR) today reported net income after tax of $10.1 million, or $0.22 (basic), $0.21 (diluted) per share on revenues of $58.9 million, for the quarter ended December 31, 2002, compared to net income before extraordinary gain of $9.6 million, or $0.21 (basic and diluted) per share on revenues of $61.4 million in the fourth quarter of 2001. The company fully utilized its operating loss carry forwards and began recording income tax expense during the second half of 2002; pre-tax net income for the fourth quarter 2002 was $10.8 million, compared to $7.8 million before extraordinary gain for the fourth quarter of 2001. These results do not include any impact from the planned re-deployment of $70 million of excess capital into a leveraged mortgage backed security (MBS) investment strategy that the company began to implement at the end of the fourth quarter. The company closed on the first tranche of MBS purchases this week with the purchase of $350 million of MBS, utilizing $35 million of re-deployed equity capital. For the full year 2002, FBR reported net income before extraordinary gain of $52.4 million or $1.14 (basic), $1.08 (diluted) per share, on revenues of $268.2 million, compared to a net loss before extraordinary gain of $(13.9) million or $(0.29) (basic and diluted) per share on revenues of $160.8 million the previous year. "FBR's record annual results were driven by continued revenue growth across investment banking, institutional brokerage and asset management," said Emanuel J. Friedman, Chairman and Co-CEO. "For full year 2002 revenue growth was 67% compared to 2001, including revenue growth of 73% in investment banking, 18% in institutional brokerage and 264% in asset management. We continue to actively hire senior producers across our business." "We are gratified with our 2002 results which confirm the success of our continued expansion, and which run counter to the performance of many in our industry," said Vice Chairman and Co-CEO Eric F. Billings. "FBR remains strongly positioned to grow revenues, offering innovative capital solutions and independent research views. The combination of over $269 million in equity (including employee stock purchase loans) with virtually no leverage, prudent hiring and cost discipline allow us to achieve good cash returns on our equity capital, even in a difficult market- as evidenced by our return on average equity for the year of 25%." For the quarter, total revenues of $58.9 million comprised $24.3 million for investment banking, $14.7 million in institutional brokerage, $18.0 million in asset management and $1.9 million in interest and dividends. In investment banking, FBR continued to be a top ranked lead-managing equity underwriter in 2002. FBR ranked #1 among major underwriters for the 1 and 5 year periods ended December 31, 2002 in aftermarket 2 performance of its lead-managed public transactions (lead managers of more than 10 transactions for the one year period and 25 transactions for the five year period across all industries and all capitalizations, according to CommScan Equidesk). Also, for 2002, FBR ranked 8th (by dollar volume raised) as a lead manager of IPOs and secondaries across all industries for issuers with market caps below $1 billion and 12th for all issuers regardless of market capitalization (20 deals, $1.9 billion raised), according to CommScan Equidesk. In institutional brokerage, FBR continued to expand its research, institutional sales and trading capabilities, hiring 7 research analysts, 5 institutional brokers and 2 traders during the quarter. In its asset management business, at December 31, 2002, FBR had approximately $2.7 billion in gross assets under management, excluding FBR Asset Investment Corp. (NYSE: FB). Of FBR's four equity mutual funds with track records of more than one year, three have 5 star ratings and one has a 4 star rating from Morningstar.* Shareholders' equity and basic book value calculations as of December 31, 2002 exclude $24.2 million and 4 million shares relating to the Employee Stock Purchase and Loan Program that was implemented during 2001. Assuming repayment of these loans as of December 31, 2002, shareholders' equity would be $269.3 million and book value per share would be $5.34. FBR had 46.5 million common shares outstanding, shareholders' equity of $245.1 million, and book value per share of $5.28 as of December 31, 2002, compared with 45.6 million common shares outstanding, shareholders' equity of $185.3 million and book value per share of $4.06 as of December 31, 2001. Total assets as of December 31, 2002 were $406.2 million, including net cash and liquid assets of $111.9 million (net of short- term debt of $9.6 million). Friedman, Billings, Ramsey Group, Inc., headquartered in Arlington, Va., is a financial holding company for businesses that provide investment banking, institutional brokerage, specialized asset management, and private client services. FBR focuses capital and financial expertise on six industry sectors: financial services, real estate, technology, energy, healthcare, and diversified industries. FBR also has offices in Atlanta, Bethesda, Boston, Charlotte, Chicago, Cleveland, Dallas, Denver, Irvine, London, New York, Portland, San Francisco, Seattle, and Vienna. Bank products and services are offered by FBR National Bank & Trust, member FDIC and an Equal Housing Lender. For more information, see http://www.fbr.com. A live webcast of FBR's conference call will be available at 9 a.m. (Eastern Time) via http://www.corporate-ir.net/ireye/ir_site.zhtml?ticker=FBR. Replays of the webcast will be available afterward. FINANCIAL DATA FOLLOWS.
[FBR Logo] FRIEDMAN, BILLINGS, RAMSEY GROUP, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Dollars in thousands, except per share amounts) (Unaudited) Quarter ended December 31, 2002 % 2001 % -------------- ------------- -------------- ------------- REVENUES: Investment banking $ 24,321 41.3% $ 29,356 47.8% Institutional brokerage 14,683 24.9% 19,440 31.7% Asset management Base fees 8,119 13.8% 5,810 9.4% Incentive and investment income 9,765 16.6% 7,509 12.2% Technology sector investment and incentive income (loss) 111 0.2% (2,722) -4.4% Interest, dividends and other 1,868 3.2% 2,008 3.3% -------------- ------------ -------------- ------------- Total revenues 58,867 100.0% 61,401 100.0% -------------- ------------- -------------- ------------- EXPENSES: Compensation and benefits 31,617 53.7% 34,829 56.7% Business development and professional services 7,545 12.8% 7,709 12.5% Interest 665 1.1% 346 0.6% Other 8,259 14.0% 10,720 17.5% -------------- ------------- -------------- ------------- Total expenses 48,086 81.6% 53,604 87.3% -------------- ------------- -------------- ------------- Net income before income taxes and 10,781 18.4% 7,797 12.7% extraordinary gain Income tax provision (benefit) 692 1.2% (1,760) -2.9% -------------- ------------- -------------- ------------- Net income before extraordinary gain 10,089 17.2% 9,557 15.6% Extraordinary gain - 0.0% 1,148 1.9% -------------- ------------- -------------- ------------- Net income $ 10,089 17.2% $ 10,705 17.5% ============== ============= ============== ============= Basic earnings per share before extraordinary gain $ 0.22 $ 0.21 ============== ============== Diluted earnings per share before extraordinary gain $ 0.21 $ 0.21 ============== ============== Basic earnings per share $ 0.22 $ 0.24 ============== ============== Diluted earnings per share $ 0.21 $ 0.24 ============== ============== Weighted average shares - basic 46,403 45,517 ============== ============== Weighted average shares - diluted 49,089 45,531 ============== ============== [FBR Logo] FRIEDMAN, BILLINGS, RAMSEY GROUP, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Dollars in thousands, except per share amounts) Year ended December 31, 2002 % 2001 % -------------- ------------- -------------- ------------- REVENUES: Investment banking $143,876 53.6% $ 83,149 51.7% Institutional brokerage 63,184 23.6% 53,414 33.2% Asset management Base fees 28,956 10.8% 19,744 12.3% Incentive and investment income 30,534 11.4% 13,160 8.2% Technology sector investment and incentive loss (5,622) -2.1% (18,100) -11.3% Interest, dividends and other 7,275 2.7% 9,422 5.9% -------------- ------------ -------------- ------------- Total revenues 268,203 100.0% 160,789 100.0% -------------- ------------- -------------- ------------- EXPENSES: Compensation and benefits 147,072 54.8% 108,112 67.2% Business development and professional services 30,589 11.4% 28,879 18.0% Interest 2,073 0.8% 1,083 0.7% Other 33,028 12.3% 38,337 23.8% -------------- ------------- -------------- ------------- Total expenses 212,762 79.3% 176,411 109.7% -------------- ------------ -------------- ------------- Net income (loss) before income taxes 55,441 20.7% (15,622) -9.7% and extraordinary gain Income tax provision (benefit) 3,035 1.1% (1,760) -1.1% -------------- ------------ -------------- ------------- Net income (loss) before extraordinary gain 52,406 19.6% (13,862) -8.6% Extraordinary gain 1,413 0.5% 1,148 0.7% Income tax provision on extraordinary gain 536 0.2% - 0.0% -------------- ------------- -------------- ------------- Net income (loss) $ 53,283 19.9% $ (12,714) -7.9% ============== ============= ============== ============= Basic earnings (loss) per share before extraordinary gain $ 1.14 $ (0.29) ============== ============== Diluted earnings (loss) per share before extraordinary gain $ 1.08 $ (0.29) ============== ============== Basic earnings (loss) per share $ 1.16 $ (0.27) ============== ============== Diluted earnings (loss) per share $ 1.10 $ (0.27) ============== ============== Weighted average shares - basic 46,098 47,466 ============== ============== Weighted average shares - diluted 48,442 47,466 ============== ============== [FBR Logo] FRIEDMAN, BILLINGS, RAMSEY GROUP, INC. Financial & Statistical Supplement -Operating Results (unaudited) (Dollars in thousands, except per share data) YTD 2002 Q-4 02 Q-3 02 Q-2 02 Q-1 02 -------------- --------------- -------------- -------------- --------------- Revenues INVESTMENT BANKING: Underwriting $ 76,556 $ 8,890 $ 30,108 $ 25,248 $ 12,310 Corporate finance 58,595 11,119 26,175 9,827 11,474 Investment gains 8,725 4,312 2,627 1,595 191 INSTITUTIONAL BROKERAGE: Principal transactions 27,512 6,339 5,743 8,372 7,058 Agency commissions 35,672 8,344 8,629 9,954 8,745 ASSET MANAGEMENT: Base management fees 28,956 8,119 7,208 7,633 5,996 Incentive income 14,258 5,291 4,282 2,902 1,783 Net investment income loss 16,276 4,474 (2,737) 8,517 6,022 Technology sector investment and incentive loss (5,622) 111 (2,202) (2,432) (1,099) INTEREST, DIVIDENDS AND OTHER 7,275 1,868 1,879 1,638 1,890 ------------- --------------- -------------- -------------- --------------- Total revenues 268,203 58,867 81,712 73,254 54,370 -------------- --------------- -------------- -------------- --------------- Expenses Compensation and benefits 147,072 31,617 45,725 38,411 31,319 Business development & professional services 30,589 7,545 8,650 7,982 6,412 Clearing and brokerage fees 5,353 1,467 1,443 1,817 626 Occupancy & equipment 8,838 2,274 2,309 2,046 2,209 Communications 8,185 1,910 2,009 2,187 2,079 Interest expense 2,073 665 608 430 370 Other operating expenses 10,652 2,608 2,976 2,602 2,466 Restructuring and software impairment charges - - - - - ------------- --------------- -------------- -------------- --------------- Total expenses 212,762 48,086 63,720 55,475 45,481 -------------- --------------- -------------- -------------- --------------- Net income (loss) before taxes and extraordinary gain 55,441 10,781 17,992 17,779 8,889 -------------- --------------- -------------- -------------- --------------- Income tax provision (benefit) 3,035 692 2,343 - - Net income (loss) before extraordinary gain $ 52,406 $ 10,089 $ 15,649 $ 17,779 $ 8,889 ============== =============== ============== ============== =============== Extraordinary gain 1,413 - - - 1,413 Income tax provision on extraordinary gain 536 - 536 - - Net income (loss) $ 53,283 $ 10,089 $ 15,113 $ 17,779 $ 10,302 ============== =============== ============== ============== =============== Net income (loss) before taxes and extraordinary gain as a percentage of revenue 20.7% 18.3% 22.0% 24.3% 16.3% ROE (annualized) 24.8% 16.8% 26.7% 34.4% 21.7% Total shareholders' equity $ 245,165 $245,165 $234,625 $218,368 $194,590 Basic earnings (loss) per share $ 1.16 $ 0.22 $ 0.33 $ 0.39 $ 0.23 Diluted earnings (loss) per share $ 1.10 $ 0.21 $ 0.31 $ 0.36 $ 0.22 Ending shares outstanding (in thousands) 46,456 46,456 46,396 46,339 45,751 Book value per share $ 5.28 $ 5.28 $ 5.06 $ 4.71 $ 4.25 Gross assets under management (in millions) Managed accounts $6,538.0 $ 6,538.0 $ 7,356.0 $ 4,152.3 $ 2,757.7 Hedge & offshore funds 247.0 247.0 232.3 216.0 209.2 Mutual funds 1,188.5 1,188.5 1,071.2 1,313.4 1,270.4 Private equity funds 34.7 34.7 41.7 46.1 46.4 Technology sector funds 63.8 63.8 54.0 56.6 60.4 ------------- --------------- -------------- -------------- --------------- Total $8,072.0 $ 8,072.0 $ 8,755.2 $ 5,784.4 $ 4,344.1 ============== =============== ============== ============== =============== Net assets under management (in millions) Managed accounts $ 871.5 $ 871.5 $ 849.7 $ 748.5 $ 394.5 Hedge & offshore funds 162.4 162.4 162.9 188.5 157.7 Mutual funds 1,173.3 1,173.3 1,064.4 1,297.7 1,214.1 Private equity funds 30.9 30.9 40.1 45.5 45.5 Technology sector funds 48.2 48.2 48.6 52.3 55.8 ------------- --------------- -------------- -------------- --------------- Total $2,286.3 $ 2,286.3 $ 2,165.7 $ 2,332.5 $ 1,867.6 ============== =============== ============== ============== =============== Productive assets under management (in millions) Managed accounts $6,538.0 $ 6,538.0 $ 7,356.0 $ 4,152.3 $ 2,757.7 Hedge & offshore funds 162.4 162.4 162.9 188.5 157.7 Mutual funds 1,173.3 1,173.3 1,064.4 1,297.7 1,214.1 Private equity funds 91.2 91.2 92.5 94.8 95.3 Technology sector funds 249.0 249.0 248.5 248.1 249.3 ------------- --------------- -------------- -------------- --------------- Total $8,213.9 $ 8,213.9 $ 8,924.3 $ 5,981.4 $ 4,474.1 ============== =============== ============== ============== =============== Employee count 481 481 464 445 441 ============== =============== ============== ============== =============== [FBR Logo] FRIEDMAN, BILLINGS, RAMSEY GROUP, INC. Financial & Statistical Supplement -Operating Results (unaudited) (Dollars in thousands, except per share data) YTD 2001 Q-4 01 Q-3 01 Q-2 01 Q-1 01 -------------------------------------------------- Revenues Investment banking: Underwriting $47,853 $ 20,928 $ 9,857 $ 9,414 $ 7,654 Corporate finance 28,534 7,080 1,153 18,057 2,244 Investment gains 6,762 1,348 74 5,340 - Institutional brokerage: Principal transactions 26,330 10,817 4,158 5,383 5,972 Agency commissions 27,084 8,623 5,934 5,962 6,565 Asset management: Base management fees 19,744 5,810 5,836 5,191 2,907 Incentive income 3,628 1,811 975 474 368 Net investment income loss 9,532 5,698 (2,780) 5,009 1,605 Technology sector investment and incentive loss (18,100) (2,722) (6,592) (1,684) (7,102) Interest, dividends and other 9,422 2,008 3,168 2,006 2,240 ------ ------- ---------------------------- Total revenues 160,789 61,401 21,783 55,152 22,453 ------- ------- ---------------------------- Expenses Compensation and benefits 108,112 34,829 24,276 32,756 16,251 Business development & 28,879 7,709 7,639 8,205 5,326 professional services Clearing and brokerage fees 7,087 1,981 1,786 1,588 1,732 Occupancy & equipment 10,852 2,468 3,001 2,883 2,500 Communications 5,832 1,612 1,555 1,498 1,167 Interest expense 1,083 346 322 334 81 Other operating expenses 9,415 2,249 2,853 2,778 1,535 Restructuring and software 5,151 2,410 2,741 - - impairment charges ------ ------- -------------------------- Total expenses 176,411 53,604 44,173 50,042 28,592 ------- ------- -------------------------- Net income (loss) before taxes (15,622) 7,797 (22,390) 5,110 (6,139) and extraordinary gain ------- ------- --------------------------- Income tax provision (benefit) (1,760) (1,760) - - - Net income (loss) before $(13,862) $9,557 $(22,390) $5,110 $(6,139) extraordinary gain ======= ======= ============================= Extraordinary gain 1,148 1,148 - - - Income tax provision on - - - - - extraordinary gain Net income (loss) $ (12,714) $10,705 $(22,390) $5,110 $(6,139) ======= ======= ============================= Net income (loss) before taxes and extraordinary gain as a percentage of revenue -9.7% 12.7% -102.8% 9.3% -27.3% ROE (annualized) -6.4% 23.9% -47.9% 9.9% -11.5% Total shareholders' equity $ 185,311 $ 185,311 $ 173,667 $200,313 $211,001 BASIC EARNINGS (LOSS) PER SHARE $ (0.27) $ 0.24 $ (0.49) $ 0.10 $ (0.12) DILUTED EARNINGS (LOSS) PER SHARE $ (0.27) $ 0.24 $(0.49) $ 0.10 $ (0.12) Ending shares outstanding 45,605 45,605 45,514 46,100 49,391 (in thousands) Book value per share $ 4.06 $ 4.06 $ 3.82 $ 4.35 $ 4.27 Assets under management (in millions) Managed accounts $ 250.2 $ 250.2 $ 237.5 $ 142.4 $ 126.1 Hedge & offshore funds 164.6 164.6 176.1 186.6 164.7 Mutual funds 1,004.0 1,004.0 1,008.3 1,153.1 148.5 Private equity & venture capital 295.5 295.5 305.6 341.2 336.2 ------- ------- ------------------------------- Total $ 1,714.3 $1,714.3 $1,727.5 $1,823.3$ 775.5 ======= ======= =============================== Gross assets under management (in millions) Managed accounts $ 1,371.4 Hedge & offshore funds 260.6 Mutual funds 1,005.8 Private equity funds 48.3 Technology sector funds 71.0 ------- Total $ 2,757.1 ======= Net assets under management (in millions) Managed accounts $ 250.2 Hedge & offshore funds 153.4 Mutual funds 1,001.7 Private equity funds 47.6 Technology sector funds 64.9 ------- Total $ 1,517.8 ======= Productive assets under management (in millions) Managed accounts $ 1,371.4 Hedge & offshore funds 153.5 Mutual funds 1,001.7 Private equity funds 93.3 Technology sector funds 248.2 ------- Total $ 2,868.1 ======= Employee count 433 433 502 488 400 ======= ======= ======================
STATEMENTS CONCERNING FUTURE PERFORMANCE, DEVELOPMENTS, EVENTS, MARKET FORECASTS, REVENUES, EXPENSES, EARNINGS, RUN RATES AND ANY OTHER GUIDANCE ON PRESENT OR FUTURE PERIODS, CONSTITUTE FORWARD-LOOKING STATEMENTS THAT ARE SUBJECT TO A NUMBER OF FACTORS, RISKS AND UNCERTAINTIES THAT MIGHT CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM STATED EXPECTATIONS OR CURRENT CIRCUMSTANCES. THESE FACTORS INCLUDE, BUT ARE NOT LIMITED TO, THE EFFECT OF DEMAND FOR PUBLIC OFFERINGS, ACTIVITY IN THE SECONDARY SECURITIES MARKETS, INTEREST RATES, THE HIGH DEGREE OF RISK ASSOCIATED WITH TECHNOLOGY AND OTHER VENTURE CAPITAL INVESTMENTS, AVAILABLE TECHNOLOGIES, COMPETITION FOR BUSINESS AND PERSONNEL, AND GENERAL ECONOMIC, POLITICAL AND MARKET CONDITIONS. PROXY INFORMATION IN CONNECTION WITH THE PROPOSED TRANSACTIONS, FRIEDMAN, BILLINGS, RAMSEY GROUP, INC., FBR ASSET INVESTMENT CORPORATION AND FOREST MERGER CORPORATION HAVE FILED A PRELIMINARY JOINT PROXY STATEMENT/PROSPECTUS WITH THE SECURITIES AND EXCHANGE COMMISSION. IN ADDITION, FBR GROUP, FBR ASSET AND FOREST MERGER CORPORATION WILL PREPARE AND FILE A DEFINITIVE JOINT PROXY STATEMENT/PROSPECTUS AND OTHER DOCUMENTS REGARDING THE PROPOSED TRANSACTION WITH THE SEC. INVESTORS AND SECURITY HOLDERS ARE URGED TO CAREFULLY READ THE DEFINITIVE JOINT PROXY STATEMENT/PROSPECTUS REGARDING THE PROPOSED TRANSACTIONS WHEN IT BECOMES AVAILABLE, BECAUSE IT WILL CONTAIN IMPORTANT INFORMATION. INVESTORS AND SECURITY HOLDERS MAY OBTAIN A FREE COPY OF THE DEFINITIVE JOINT PROXY STATEMENT/ PROSPECTUS (WHEN IT IS AVAILABLE) AND OTHER DOCUMENTS CONTAINING INFORMATION ABOUT FBR GROUP AND FBR ASSET, WITHOUT CHARGE, AT THE SEC'S WEB SITE AT HTTP://WWW.SEC.GOV. FREE COPIES OF BOTH COMPANIES' FILINGS MAY BE OBTAINED BY DIRECTING A REQUEST TO 1001 NINETEENTH STREET NORTH, ARLINGTON, VIRGINIA 22209, ATTENTION: INVESTOR RELATIONS. PARTICIPANTS IN SOLICITATION FBR GROUP, FBR ASSET AND THEIR RESPECTIVE DIRECTORS, EXECUTIVE OFFICERS AND OTHER MEMBERS OF THEIR MANAGEMENT AND EMPLOYEES MAY BE SOLICITING PROXIES FROM THEIR RESPECTIVE STOCKHOLDERS IN CONNECTION WITH THE PROPOSED MERGER. INFORMATION CONCERNING FBR GROUP'S PARTICIPANTS IN THE SOLICITATION IS SET FORTH IN FBR GROUP'S PROXY STATEMENT FOR ITS ANNUAL MEETING OF STOCKHOLDERS, FILED WITH THE SEC ON MAY 30, 2002. INFORMATION CONCERNING FBR ASSET'S PARTICIPANTS IN THE SOLICITATION IS SET FORTH IN FBR ASSET'S PROXY STATEMENT FOR ITS ANNUAL MEETING OF STOCKHOLDERS, FILED WITH THE SEC ON APRIL 23, 2002. ADDITIONAL INFORMATION IS SET FORTH IN THE PRELIMINARY JOINT PROXY STATEMENT/PROSPECTUS AND WILL BE SET FORTH IN THE DEFINITIVE PRELIMINARY JOINT PROXY STATEMENT/PROSPECTUS WHEN IT IS FILED WITH THE SEC. - -------------------------------------------------------------------------------- *PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. FOR EACH FUND WITH AT LEAST A THREE-YEAR HISTORY, MORNINGSTAR CALCULATES A MORNINGSTAR RATING(TM) BASED ON A MORNINGSTAR RISK-ADJUSTED RETURN MEASURE THAT ACCOUNTS FOR VARIATION IN A FUND'S MONTHLY PERFORMANCE (INCLUDING THE EFFECTS OF SALES CHARGES, LOADS AND REDEMPTION FEES), PLACING MORE EMPHASIS ON DOWNWARD VARIATIONS AND REWARDING CONSISTENT PERFORMANCE. THE TOP 10% OF FUNDS IN EACH CATEGORY RECEIVE 5 STARS, THE NEXT 22.5% RECEIVE 4 STARS, THE NEXT 35% RECEIVE 3 STARS, THE NEXT 22.5% RECEIVE 2 STARS AND THE BOTTOM 10% RECEIVE 1 STAR. (EACH SHARE CLASS IS COUNTED AS A FRACTION OF ONE FUND WITHIN THIS SCALE AND RATED SEPARATELY, WHICH MAY CAUSE SLIGHT VARIATIONS IN THE DISTRIBUTION PERCENTAGES.) THE OVERALL MORNINGSTAR RATING FOR A FUND IS DERIVED FROM A WEIGHTED AVERAGE OF THE PERFORMANCE FIGURES ASSOCIATED WITH ITS 3-,5- AND 10-YEAR (IF APPLICABLE) MORNINGSTAR RATING METRICS. THE FBR SMALL CAP FINANCIAL FUND RECEIVED 5 STARS FOR THE 3-AND 5-YEARS AND WAS RATED AMONG 72 AND 42 U.S. DOMICILED SPECIALTY FINANCIAL FUNDS. THE FBR FINANCIAL SERVICES RECEIVED 4 STARS FOR THE 3- AND 5- YEAR PERIOD AND WAS RATED AMONG 72 AND 42 U.S. DOMICILED SPECIALTY FINANCIAL FUNDS. THE FBR SMALL CAP VALUE FUND RECEIVED 5 STARS FOR THE 3- AND 5-YEAR PERIODS AND WAS RATED AMONG 406 AND 276 U.S. DOMICILED SMALL GROWTH FUNDS. THE FBR AMERICAN GAS INDEX FUND RECEIVED 5 STARS FOR THE 3-, 5-YEARS AND 4 STARS FOR THE 10-YEAR PERIODS AND WAS RATED AMONG 83, 77 AND 21 U.S. DOMICILED SPECIALTY UTILITY FUNDS RESPECTIVELY. (C)2002 MORNINGSTAR, INC. ALL RIGHTS RESERVED. THE INFORMATION CONTAINED HEREIN: (1) IS PROPRIETARY TO MORNINGSTAR AND/OR ITS CONTENT PROVIDERS; (2) MAY NOT BE COPIED OR DISTRIBUTED; AND (3) IS NOT WARRANTED TO BE ACCURATE, COMPLETE OR TIMELY. NEITHER MORNINGSTAR NOR ITS CONTENT PROVIDERS ARE RESPONSIBLE FOR ANY DAMAGES OR LOSSES ARISING FROM ANY USE OF THIS INFORMATION. ### -----END PRIVACY-ENHANCED MESSAGE-----