8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): August 5, 2011 (August 4, 2011)

Fortress Investment Group LLC

(Exact name of registrant as specified in its charter)

Delaware

(State or other jurisdiction of incorporation)

001-33294	20-5837959
(Commission File Number)	(IRS Employer Identification No.)
1345 Avenue of the Americas, 46th Floor New York, New York	10105
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code (212) 798-6100

N/A

(Former name or former address, if changed since last report.)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02. Results of Operation and Financial Condition.

On August 4, 2011, Fortress Investment Group LLC (the “Company”) issued a press release announcing the Company’s results for its second fiscal quarter ended June 30, 2011. A copy of the Company’s press release and a copy of the transcript of the Company’s conference call are attached to this Current Report on Form 8-K (the “Current Report”) as Exhibit 99.1 and Exhibit 99.2, respectively, and are incorporated herein solely for purposes of this Item 2.02 disclosure.

This Current Report, including the exhibits attached hereto, is being furnished and shall not be deemed to be filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be incorporated by reference into any of the Company’s filings under the Securities Act of 1933, as amended, or the Exchange Act, unless expressly set forth as being incorporated by reference into such filing.

Item 9.01. Financial Statements and Exhibits.

(d) Exhibits.

Exhibit Number	Description
99.1	Press release, dated August 4, 2011, issued by Fortress Investment Group LLC
99.2	Transcript of conference call held on August 4, 2011

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SIGNATURE

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

NEWCASTLE INVESTMENT CORP.

(Registrant)

/s/    DAVID N. BROOKS        

David N. Brooks

General Counsel

Date: August 5, 2011

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EXHIBIT INDEX

Exhibit Number	Description
99.1	Press release, dated August 4, 2011, issued by Fortress Investment Group LLC
99.2	Transcript of conference call held on August 4, 2011

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EX-99.1

Exhibit 99.1

FORTRESS INVESTMENT GROUP LLC

Contact:

Gordon E. Runté

212-798-6082

Fortress Reports Second Quarter 2011 Financial Results –

Board of Directors Approves Revised Dividend Policy; Reinstates Quarterly Distributions

Fortress Principals Enter Into New Five-Year Employment Agreements

New York, NY. August 4, 2011 – Fortress Investment Group LLC (NYSE: FIG) today reported its second quarter 2011 results.

SECOND QUARTER 2011 HIGHLIGHTS

• Assets under management of $43.8 billion as of June 30, 2011, up 5% from $41.7 billion as of June 30, 2010.

• Pre-tax distributable earnings (DE) of $46 million in the second quarter of 2011, down from $73 million in the second quarter of 2010; pre-tax DE of $0.09 per dividend paying share in the second quarter of 2011, down 36% from $0.14 per dividend paying share in the second quarter of 2010.

• Fund management DE of $54 million in the second quarter of 2011, down 26% from $73 million in the second quarter of 2010.

• GAAP net loss, excluding principals agreement compensation, of $9 million in the second quarter of 2011, compared to a net loss of $14 million in the second quarter of 2010; GAAP net loss attributable to Class A Shareholders in the second quarter of 2011 was $95 million, compared to a net loss of $92 million in the second quarter of 2010.

• Fortress’s principals, Wesley Edens, Peter Briger, Robert Kauffman, Randal Nardone and Michael Novogratz, entered into new five-year employment agreements, effective as of January 1, 2012.

• The board of directors has approved a revised dividend policy under which it will reinstate the quarterly dividend to Class A shareholders beginning in the fourth quarter of 2011. The dividend related to the fourth quarter of 2011 will be $0.05 per share.

• Total cash and cash equivalents plus investments net of debt obligations payable of $2.03 per dividend paying share, and GAAP book value per share of $2.09 as of June 30, 2011.

“Today marks more progress for Fortress and our shareholders,” said Daniel Mudd, Fortress Chief Executive Officer. “Our dividend reinstatement reflects the Board’s confidence in the financial strength and earnings power of our company, and I am pleased that we are able to reward shareholders for their investment. Our new Principals Agreement ensures that Fortress will continue to benefit from the contributions and leadership of those who founded and built this company.

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“Our earnings today were just off expectations, but further off what we expect from ourselves. In a non-linear and untethered global environment, our Macro funds had a challenging quarter that took our earnings down a notch. But diversity is a strength at Fortress. Our Credit business continues to generate strong returns, our PE business saw continued valuation gains, our deal pipeline remains robust, and our outlook is optimistic for the second half of the year.”

Please see the exhibits to this press release for a reconciliation of non-GAAP measures referred to in this press release to the related GAAP measures.

CONSOLIDATED RESULTS – SEGMENTS

As of June 30, 2011, assets under management totaled $43.8 billion, up 2% from $43.1 billion as of March 31, 2011 and up 5% from $41.7 billion as of June 30, 2010. During the second quarter of 2011, Fortress (i) invested over $900 million of capital, (ii) raised $635 million of third-party capital, directly adding to assets under management, (iii) returned almost $500 million of capital to investors and (iv) made liquidation payments of approximately $390 million in the Credit Hedge Funds.

Pre-tax DE was $46 million in the second quarter of 2011, down from $73 million in the second quarter of 2010. On a dividend paying share basis, pre-tax DE was $0.09 per share in the second quarter of 2011, down 36% from $0.14 per share in the second quarter of 2010. Pre-tax DE decreased primarily as a result of negative performance in the Liquid Hedge Funds and fewer realizations in the Credit PE Funds than in the second quarter of 2010, offset by the positive performance of the Credit Hedge Funds. As a result of the negative returns, substantially all of the accrued incentive income recorded in the first quarter of 2011 for the Liquid Hedge Funds was reversed from the results for the second quarter of 2011.

In the second quarter of 2011, fund management distributable earnings were $54 million, down 26% from $73 million in the second quarter of 2010. This decrease was driven by a $22 million decrease in total segment revenues, offset by a $3 million decrease in total segment expenses.

Total segment revenues were $151 million in the second quarter of 2011, down 13% from $173 million in the second quarter of 2010. Notably, incentive income from the Credit Hedge Funds and management fees for all the segments increased by $12 million and $7 million, respectively, while incentive income from the Credit PE Funds and Liquid Hedge Funds decreased by $24 million and $18 million, respectively. The Credit Funds continued to exhibit strong performance in the quarter. However, due to the timing of realization events, incentive income declined in the Credit PE Funds. The Liquid Funds’ incentive income decreased primarily as a result of the aforementioned first quarter incentive income reversal.

Total segment expenses were $97 million in the second quarter of 2011, down 3% from $100 million in the second quarter of 2010, largely driven by a decrease of $13 million in profit sharing compensation expenses, partially offset by an increase of $9 million in operating expense from the Credit Funds.

The Company’s quarterly 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 profits in any particular quarter should not be expected to be indicative of future results.

CONSOLIDATED RESULTS – GAAP

Fortress had a GAAP net loss of $246 million in the second quarter of 2011, compared to a loss of $251 million in the second quarter of 2010. This included revenues of $190 million in the second quarter of 2011 and $191 million in the second quarter of 2010. Excluding principals agreement compensation, Fortress had a net loss of $9 million in the second quarter of 2011, compared to a net loss of $14 million in the second quarter of 2010.

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In the second quarter of 2011, GAAP net loss attributable to Class A Shareholders was $0.56 per diluted share, compared to $0.57 per diluted share in the second quarter of 2010.

SUMMARY FINANCIAL RESULTS

The table below details Fortress’s Distributable Earnings and GAAP Net Income (Loss) for the second quarter and first half of 2011 and 2010:

	Second Quarter						$			First Half						$
	2011			2010			Change			2011			2010			Change
(in millions, except per share amount)
Distributable Earnings
Fund management DE	$	54		$	73		$	(19	)	$	149		$	165		$	(16	)
Pre-tax DE	$	46		$	73		$	(27	)	$	149		$	169		$	(20	)
Per dividend paying share/unit	$	0.09		$	0.14		$	(0.05	)	$	0.28		$	0.33		$	(0.05	)
Weighted Average Dividend Paying Shares and Units Outstanding		526			516						526			516
GAAP
Net income (loss)	$	(246	)	$	(251	)	$	5		$	(501	)	$	(513	)	$	12
Net income (loss) attributable to Class A Shareholders	$	(95	)	$	(92	)	$	(3	)	$	(198	)	$	(177	)	$	(21	)
Per diluted share	$	(0.56	)	$	(0.57	)	$	0.01		$	(1.11	)	$	(1.16	)	$	0.05
Net income (loss) excluding principals agreement compensation	$	(9	)	$	(14	)	$	5		$	(29	)	$	(40	)	$	11

The discussion of Fortress’s results under “Business Segment Results” below is based on segment reporting as presented in its Quarterly Report on Form 10-Q. The GAAP statement of operations and balance sheet are presented following this discussion.

DIVIDEND POLICY

Fortress’s board of directors has approved a revised dividend policy under which it will reinstate a quarterly dividend to Class A shareholders beginning in the fourth quarter of 2011. The dividend related to the fourth quarter of 2011 will be $0.05 per share.

Under the revised dividend policy, Fortress intends to make quarterly dividends to Class A shareholders based upon its annual distributable earnings. Any dividend declared by the Company will be subject to the need to: maintain prudent working capital reserves to provide for the conduct of its business, make investments in its businesses and funds, and comply with applicable law and its debt instruments and other obligations.

Since annual distributable earnings are not finalized until the end of a given year, Fortress intends to base the first three quarterly dividends for any given year upon management fee revenues net of related expenses, subject to the reserves discussed above. Fortress intends to base the final quarterly dividend for each year upon this amount plus an adjustment based on full-year incentive income. As a result, the final quarterly dividend for any given year, other than the fourth quarter of 2011, is generally expected to exceed the dividend amount for each of the first three quarters of such year.

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Actual dividends paid to Class A shareholders will depend upon the board’s assessment of a number of factors, including general economic and business conditions, strategic plans and prospects, business and investment opportunities, the Company’s financial condition, liquidity and operating results, working capital requirements and anticipated cash needs, contractual restrictions and obligations including fulfilling its current and future capital commitments, legal, tax and regulatory restrictions and other factors that the board of directors may deem relevant.

Dividend declarations will, in the future, be announced concurrently with earnings releases. The payment of any dividends are made in the sole discretion of the board of directors, which may decide to change the Company’s dividend policy at any time.

PRINCIPALS’ EMPLOYMENT AGREEMENT

In August 2011, Fortress’s principals agreed to extend their employment for a new five-year term effective January 1, 2012, on substantially similar terms and conditions as their current employment agreements. Under a new compensation plan adopted by the Company, the principals will receive payments (“Principal Performance Payments”) based on the performance of the existing AUM of Fortress’s flagship hedge funds and on their success in raising and investing new funds in all businesses in 2012 and beyond. The Principal Performance Payments will be comprised of a mix of cash and equity, with the equity component becoming larger as performance, and the size of the payments, increases.

Specifically, the new compensation plan calls for payments of 20% of the incentive income earned from existing flagship hedge fund AUM and between 10% and 20% of the fund management distributable earnings of new AUM in all businesses. Payments of up to 10% of fund management distributable earnings before Principal Performance Payments, in each of the principals’ respective businesses, will be made in cash, and payments in excess of this threshold will be made in restricted share units that will vest over three years.

Fortress believes that the new compensation plan provides it with the following benefits:

• Ensures the ongoing, uninterrupted management of each of its businesses by the principals who sponsor them and, in many cases, act as their chief investment officers;

• Further incentivizes the principals to raise new capital for the Fortress Funds; and

• Further aligns the interests of the principals with the Fortress Funds and public company investors.

The principals’ new employment agreements contain customary post-employment non-competition and non-solicitation covenants. In order to ensure the principals’ compliance with such covenants, 50% of the after-tax cash portion of any Principal Performance Payments will be subject to mandatory investment in Fortress-managed funds, and such invested amounts will serve as collateral against any breach of those covenants.

The principals are currently party to an agreement (the “Principals Agreement”) under which they are obligated to forfeit a percentage of their Fortress equity in the event that they voluntarily resign from Fortress prior to the fifth anniversary of the Company’s IPO (i.e., February 8, 2012). In order to align the termination of the Principals Agreement with the effective date of their new employment agreements, the principals have agreed to amend the expiration date of the Principals Agreement to December 31, 2011. As a result, all of the remaining expense related to this agreement, including $99.1 million that would otherwise have been recognized in 2012, will be recorded as principals agreement compensation in the Statement of Operations in 2011.

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SEGMENT REORGANIZATION

In the second quarter of 2011, Fortress reorganized its segments by moving two of its funds, Fortress Partners Fund LP and Fortress Partners Offshore Fund LP, from its Credit Hedge Fund segment to its Liquid Hedge Fund segment. As of June 30, 2011, an additional $1.5 billion of assets under management are included in the Liquid Hedge Funds segment as a result. All historical segment information has been adjusted to reflect this reorganization.

BUSINESS SEGMENT RESULTS

Private Equity – Funds

Assets under management for the Private Equity Funds was $10.0 billion as of June 30, 2011, compared to $10.0 billion as of March 31, 2011 and $11.5 billion as of June 30, 2010.

With respect to investments held at the beginning of the period, the Fortress Private Equity investments appreciated 3.1% during the second quarter of 2011.

The Private Equity Funds generated pre-tax DE of $28 million in the second quarter of 2011, up 12% from $25 million in the second quarter of 2010, as a result of an increase in management fees of $3 million.

Segment revenues were $36 million in the second quarter of 2011, up 9% from $33 million in the second quarter of 2010. The year-over-year increase in segment revenue was driven by the $3 million increase in management fees as previously mentioned.

Private Equity – Castles

Assets under management for the Castles, which are comprised of two managed publicly traded companies (Newcastle Investment Corp. and Eurocastle Investment Limited), was $3.3 billion as of June 30, 2011, compared to $3.2 billion as of March 31, 2011 and $2.9 billion as of June 30, 2010.

The Castles generated pre-tax DE of $7 million in the second quarter of 2011, up 40% from $5 million in the second quarter of 2010, as a result of an increase in management fees of $2 million.

Segment revenues were $14 million in the second quarter of 2011, up 17% from $12 million in the second quarter of 2010. The year-over-year increase in segment revenue was driven by the $2 million increase in management fees as previously mentioned.

Liquid Hedge Funds

Assets under management for the Liquid Hedge Funds was $6.3 billion as of June 30, 2011, compared to $6.3 billion as of March 31, 2011 and $5.7 billion as of June 30, 2010.

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The following table shows gross and net returns by fund:¹

	Second Quarter 2011			Six Months 2011			Estimated Seven Months Ended July 31, 2011
Gross Returns
Fortress Macro Fund Ltd		-5.4	%		-2.6	%		-3.6	%
Drawbridge Global Macro Fund Ltd		-5.6	%		-3.0	%		-4.1	%
Fortress Commodities Fund L.P.		-6.6	%		-2.7	%		-3.0	%
Fortress Asia Macro Fund Ltd 2		-0.9	%		3.5	%		4.3	%
Fortress Partners Fund LP		0.2	%		3.8	%		N/A
Fortress Partners Offshore Fund L.P.		0.1	%		3.6	%		N/A
Net Returns
Fortress Macro Fund Ltd		-5.4	%		-3.6	%		-4.7	%
Drawbridge Global Macro Fund Ltd		-6.0	%		-4.4	%		-5.7	%
Fortress Commodities Fund L.P.		-6.4	%		-3.7	%		-4.1	%
Fortress Asia Macro Fund Ltd 2		-1.0	%		2.4	%		3.0	%
Fortress Partners Fund LP		-0.1	%		3.2	%		N/A
Fortress Partners Offshore Fund L.P.		-0.1	%		3.1	%		N/A

The Liquid Hedge Funds generated a pre-tax DE loss of $6 million in the second quarter of 2011, down from pre-tax DE of $3 million in the second quarter of 2010, as a result of a decrease in segment revenues of $13 million, partially offset by a decrease in segment expenses of $4 million.

Segment revenues were $10 million in the second quarter of 2011, down 57% from $23 million in the second quarter of 2010. The year-over-year decrease in segment revenues was a result of an $18 million decrease in incentive income, partially offset by a $5 million increase in management fees.

Credit – Hedge Funds

Assets under management for the Credit Hedge Funds was $6.4 billion as of June 30, 2011, compared to $6.5 billion as of March 31, 2011 and $7.2 billion as of June 30, 2010. Excluding the Value Recovery Funds, which are third-party originated funds for which Fortress was engaged to manage the orderly liquidation of existing portfolios, assets under management was essentially flat in the Credit Hedge Funds at $5.3 billion as of June 30, 2011 compared to June 30, 2010.

¹  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. Gross returns reflect performance data prior to management fees borne by the Fund and incentive allocations, while net returns reflect performance data after taking into account management fees borne by the Fund and incentive allocations.

²  The Fortress Asia Macro Funds were launched on March 1, 2011. Accordingly, the above six-month returns actually represent the four-month period beginning on March 1, 2011 through June 30, 2011, and the estimated seven-month returns represent the five-month period beginning on March 1, 2011 through July 31, 2011. The investor class represented in the above returns is closed to new investors. Certain fees payable by investors in such class differ from the fees payable by the investors in the class that remains open, and the returns for different classes will vary.

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The following table shows gross and net returns by fund:³

	Second Quarter 2011			Six Months 2011
Gross Returns
Drawbridge Special Opportunities LP		3.2	%		10.2	%
Drawbridge Special Opportunities Ltd.		4.1	%		12.4	%
Net Returns
Drawbridge Special Opportunities LP		2.2	%		7.2	%
Drawbridge Special Opportunities Ltd.		2.9	%		8.8	%

The Credit Hedge Funds generated pre-tax DE of $11 million in the second quarter of 2011, down 31% from $16 million in the second quarter of 2010, as a result of an increase in segment expenses of $8 million, partially offset by an increase in segment revenues of $3 million.

Segment revenues were $46 million in the second quarter of 2011, up 7% from $43 million in the second quarter of 2010. The year-over-year increase in segment revenues resulted from a $12 million increase in incentive income, partially offset by a $9 million decrease in management fees due to a management fee adjustment in the second quarter of 2010. As a result of the positive performance across each of the Credit Hedge Funds, all of the capital that is eligible to earn incentive income within these funds continued to exceed their respective high water marks and therefore incentive income was recognized.

Credit – Private Equity Funds

Assets under management for the Credit Private Equity Funds was $4.9 billion as of June 30, 2011, compared to $4.5 billion as of March 31, 2011 and $2.9 billion as of June 30, 2010. As of June 30, 2011, the Credit Private Equity Funds had approximately $3.1 billion of uncalled or recallable committed capital that will become assets under management when invested.

The Credit Private Equity Funds generated pre-tax DE of $19 million in the second quarter of 2011, down 34% from $29 million in the second quarter of 2010, as a result of a decrease in segment revenues of $18 million, partially offset by a decrease in segment expenses of $8 million.

Segment revenues were $40 million in the second quarter of 2011, down 31% from $58 million in the second quarter of 2010. The year-over-year decrease in segment revenues was largely driven by a $24 million decrease in incentive income, partially offset by a $6 million increase in management fees. During the second quarter of 2011, the Credit Funds continued to exhibit strong performance and generated a total of $23 million of incentive income. However, due to the timing of realization events, incentive income declined in the Credit PE Funds.

Principal Investments

As of June 30, 2011, Principal Investments had segment assets (excluding cash and cash equivalents) totaling $1.1 billion, up from $0.9 billion as of June 30, 2010.⁴ As of June 30, 2011, Fortress’s share of the net asset value of its direct and indirect investments exceeded its segment cost basis by $321 million, representing unrealized gains.

³  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. Gross returns reflect performance data prior to management fees borne by the Fund and incentive allocations while 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, and December 31, 2010 redemptions.

⁴  Assets at June 30, 2010 have been adjusted to reflect a change in the Company’s method of reporting segment basis assets in order to be comparable to the assets reported at June 30, 2011.

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Principal Investments, which is comprised of investments in Fortress’s underlying funds, generated a pre-tax DE loss of $8 million in the second quarter of 2011, compared to $0 in the second quarter of 2010, as a result of a decrease in investment income of $7 million and an increase in interest expense of $1 million.

As of June 30, 2011, Fortress had a total of $99 million of outstanding commitments to its funds as detailed in the table below.

(dollars in thousands)	Outstanding Commitments June 30, 2011
Private equity funds	$	29,625
Credit PE funds		69,442
	$	99,067

LIQUIDITY & CAPITAL

As of June 30, 2011, Fortress had cash on hand of $228 million and debt obligations of $273 million. As of June 30, 2011, Fortress had $55 million available for further borrowing under its revolving credit facility.

NON-GAAP INFORMATION

Fortress discloses certain non-GAAP financial information, which management believes provides a meaningful basis for comparison among present and future periods. The following are non-GAAP measures used in this press release and the accompanying financial information:

• Pre-tax DE and pre-tax DE per dividend paying share

• Fund management DE

• Segment revenues

• Segment expenses

• GAAP net income excluding principals agreement compensation

• Weighted Average Dividend Paying Shares and Units Outstanding (Used for DEPS)

• Total cash and cash equivalents plus investments net of debt obligations payable per dividend paying share

The Company urges you to read the reconciliation of such data to the related GAAP measures appearing in the exhibits to this release.

CONFERENCE CALL

Management will host a conference call today, Thursday, August 4, 2011 at 8:30 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 1-877-717-3044 (from within the U.S.) or 1-706-679-1521 (from outside of the U.S.) ten minutes prior to the scheduled start of the call; please reference “Fortress Second Quarter Earnings Call.”

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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 Friday, August 12, 2011 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 “84168303.”

ABOUT FORTRESS

Fortress is a leading, diversified global investment manager with approximately $43.8 billion in assets under management as of June 30, 2011. Fortress offers alternative and traditional investment products and was founded in 1998. 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, the amount and source of expected capital commitments and amount of redemptions. 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.

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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,
	2011			2010			2011			2010
Revenues
Management fees: affiliates	$	116,048		$	112,894		$	234,916		$	219,430
Management fees: non-affiliates		14,375			6,284			28,776			8,885
Incentive income: affiliates		14,531			28,849			29,607			46,405
Incentive income: non-affiliates		7			233			985			5,387
Expense reimbursements from affiliates		43,645			40,794			87,987			63,861
Other revenues		1,210			2,276			4,362			7,550
		189,816			191,330			386,633			351,518
Expenses
Interest expense		4,640			3,698			9,300			7,494
Compensation and benefits		161,398			159,529			376,833			338,922
Principals agreement compensation		237,367			237,367			472,126			472,126
General, administrative and other		35,198			24,242			75,380			45,350
Depreciation and amortization		3,267			3,294			6,347			5,976
		441,870			428,130			939,986			869,868
Other Income (Loss)
Gains (losses)		(6,759	)		(12,957	)		(11,522	)		(12,385	)
Tax receivable agreement liability adjustment		—			—			(116	)		1,317
Earnings (losses) from equity method investees		18,497			6,150			90,900			26,031
		11,738			(6,807	)		79,262			14,963
Income (Loss) Before Income Taxes		(240,316	)		(243,607	)		(474,091	)		(503,387	)
Income tax benefit (expense)		(5,786	)		(7,634	)		(27,205	)		(9,186	)
Net Income (Loss)	$	(246,102	)	$	(251,241	)	$	(501,296	)	$	(512,573	)
Principals’ and Others’ Interests in Income (Loss) of Consolidated Subsidiaries	$	(151,566	)	$	(158,857	)	$	(303,328	)	$	(336,038	)
Net Income (Loss) Attributable to Class A Shareholders	$	(94,536	)	$	(92,384	)	$	(197,968	)	$	(176,535	)
Dividends Declared Per Class A Share	$	—		$	—		$	—		$	—
Earnings (Loss) Per Class A Share
Net income (loss) per Class A share, basic	$	(0.52	)	$	(0.57	)	$	(1.10	)	$	(1.14	)
Net income (loss) per Class A share, diluted	$	(0.56	)	$	(0.57	)	$	(1.11	)	$	(1.16	)
Weighted average number of Class A shares outstanding, basic		184,952,566			165,246,781			183,018,516			161,385,135
Weighted average number of Class A shares outstanding, diluted		490,810,317			165,246,781			490,634,345			465,388,269

10

Fortress Investment Group LLC

Consolidated Balance Sheets

(dollars in thousands)

	June 30, 2011
	(Unaudited)			December 31, 2010
Assets
Cash and cash equivalents	$	227,894		$	210,632
Due from affiliates		174,686			303,043
Investments		1,114,367			1,012,883
Deferred tax asset		407,192			415,990
Other assets		116,682			134,147
	$	2,040,821		$	2,076,695
Liabilities and Equity
Liabilities
Accrued compensation and benefits	$	138,593		$	260,790
Due to affiliates		288,416			342,397
Deferred incentive income		254,145			198,363
Debt obligations payable		272,500			277,500
Other liabilities		64,207			68,230
		1,017,861			1,147,280
Commitments and Contingencies
Equity
Class A shares, no par value, 1,000,000,000 shares authorized, 184,439,525 and 169,536,968 shares issued and outstanding at June 30, 2011 and December 31, 2010, respectively		—			—
Class B shares, no par value, 750,000,000 shares authorized, 305,857,751 and 300,273,852 shares issued and outstanding at June 30, 2011 and December 31, 2010, respectively		—			—
Paid-in capital		1,703,243			1,465,358
Retained earnings (accumulated deficit)		(1,250,573	)		(1,052,605	)
Accumulated other comprehensive income (loss)		(1,228	)		(1,289	)
Total Fortress shareholders’ equity		451,442			411,464
Principals’ and others’ interests in equity of consolidated subsidiaries		571,518			517,951
Total Equity		1,022,960			929,415
	$	2,040,821		$	2,076,695

11

Fortress Investment Group LLC

Exhibit 1

Supplemental Data for the Second Quarter 2011 and 2010

	Three Months Ended June 30, 2011
				Private Equity						Liquid Hedge Funds			Credit Funds						Principal
(in millions)	Total 5			Funds			Castles						Hedge Funds			PE Funds			Investments
Assets Under Management
AUM - April 1, 2011	$	43,107		$	10,016		$	3,228		$	6,303		$	6,545		$	4,531		$	—
Capital raised		635			—			—			519			79			37			—
Equity raised		—			—			—			—			—			—			—
Increase in invested capital		939			215			—			—			50			674			—
Capital acquisitions		—			—			—			—			—			—			—
Redemptions		(182	)		—			—			(179	)		(3	)		—			—
SPV distribution		—			—			—			—			—			—			—
RCA distributions 6		(386	)		—			—			—			(386	)		—			—
Return of capital distributions		(496	)		(112	)		—			—			(55	)		(329	)		—
Adjustment for reset date		—			—			—			—			—			—			—
Crystallized Incentive Income		(3	)		—			—			(3	)		—			—			—
Equity buyback		—			—			—			—			—			—			—
Net Client Flows		162			—			—			—			—			—			—
Income (loss) and foreign exchange		47			(140	)		49			(319	)		144			28			—
AUM - Ending Balance	$	43,823		$	9,979		$	3,277		$	6,321		$	6,374		$	4,941		$	—
Third-Party Capital Raised	$	811		$	51		$	—		$	519		$	204		$	37		$	—
Segment Revenues
Management fees	$	126		$	36		$	14		$	29		$	30		$	17		$	—
Incentive income		20			—			—			(19	)		16			23			—
Unallocated Revenues		5
Total		151			36			14			10			46			40			—
Segment Expenses
Operating expenses	$	(70	)	$	(8	)	$	(7	)	$	(18	)	$	(28	)	$	(9	)	$	—
Profit sharing compensation expenses		(17	)		—			—			2			(7	)		(12	)		—
Unallocated Expenses		(10	)
Total		(97	)		(8	)		(7	)		(16	)		(35	)		(21	)		—
Fund Management DE		54			28			7			(6	)		11			19			—
Investment Income		(3	)																	(3	)
Interest Expense		(5	)																	(5	)
Pre-tax Distributable Earnings	$	46		$	28		$	7		$	(6	)	$	11		$	19		$	(8	)

	Three Months Ended June 30, 2010
				Private Equity						Liquid Hedge Funds			Credit Funds						Principal
(in millions)	Total 5			Funds			Castles						Hedge Funds			PE Funds			Investments
Assets Under Management
AUM - April 1, 2010	$	30,197		$	11,555		$	3,055		$	5,837		$	7,553		$	2,197		$	—
Capital raised		652			—			—			319			47			286			—
Equity raised		—			—			—			—			—			—			—
Increase in invested capital		490			3			—			3			—			484			—
Capital acquisitions		11,448			—			—			—			—			—			—
Redemptions		(335	)		—			—			(333	)		(2	)		—			—
SPV distribution		(64	)		—			—			(64	)		—			—			—
RCA distributions 6		(392	)		—			—			—			(392	)		—			—
Return of capital distributions		(272	)		(157	)		—			—			(1	)		(114	)		—
Crystallized Incentive Income		(1	)		—			—			(1	)		—			—			—
Equity buyback		—			—			—			—			—			—			—
Net Client Flows		(150	)		—			—			—			—			—			—
Income (loss) and foreign exchange		87			110			(184	)		(55	)		—			43			—
AUM - Ending Balance	$	41,660		$	11,511		$	2,871		$	5,706		$	7,205		$	2,896		$	—
Third-Party Capital Raised	$	1,531		$	—		$	—		$	319		$	47		$	1,165		$	—
Segment Revenues
Management fees	$	119		$	33		$	12		$	24		$	39		$	11		$	—
Incentive income		50			—			—			(1	)		4			47			—
Unallocated Revenues		4
Total		173			33			12			23			43			58			—
Segment Expenses
Operating expenses		(61	)		(8	)		(7	)		(18	)		(23	)		(5	)		—
Profit sharing compensation expenses		(30	)		—			—			(2	)		(4	)		(24	)		—
Unallocated Expenses		(9	)
Total		(100	)		(8	)		(7	)		(20	)		(27	)		(29	)		—
Fund Management DE		73			25			5			3			16			29			—
Investment Income		4																		4
Interest Expense		(4	)																	(4	)
Pre-tax Distributable Earnings	$	73		$	25		$	5		$	3		$	16		$	29		$	—

⁵  Total includes Logan Circle Partners, which is not a segment.

⁶  Represents distributions from (i) assets held by redeeming capital accounts in the Drawbridge Special Opportunities Funds, and (ii) the Value Recovery Funds.

12

Fortress Investment Group LLC

Exhibit 1

Supplemental Data for the First Half 2011 and 2010

	Six Months Ended June 30, 2011
				Private Equity						Liquid Hedge			Credit Funds						Principal
(in millions)	Total 7			Funds			Castles			Funds			Hedge Funds			PE Funds			Investments
Assets Under Management
AUM - January 1, 2011	$	44,613		$	11,923		$	3,037		$	6,355		$	6,773		$	4,817		$	—
Capital raised		1,158			—			—			849			228			81			—
Equity raised		98			—			98			—			—			—
Increase in invested capital		1,398			215			—			6			50			1,127			—
Capital acquisitions		—			—			—			—			—			—			—
Redemptions		(796	)		—			—			(651	)		(145	)		—			—
SPV distribution		—			—			—			—			—			—			—
RCA distributions 8		(810	)		—			—			—			(810	)		—			—
Return of capital distributions		(1,443	)		(313	)		—			—			(60	)		(1,070	)		—
Adjustment for reset date		(1,997	)		(1,997	)		—			—			—			—
Crystallized Incentive Income		(160	)		—			—			(69	)		(91	)		—			—
Equity buyback		(19	)		—			(19	)		—			—			—			—
Net Client Flows		707			—			—			—			—			—			—
Income (loss) and foreign exchange		1,074			151			161			(169	)		429			(14	)		—
AUM - Ending Balance	$	43,823		$	9,979		$	3,277		$	6,321		$	6,374		$	4,941		$	—
Third-Party Capital Raised	$	1,362		$	51		$	—		$	849		$	353		$	109		$	—
Segment Revenues
Management fees	$	247		$	71		$	26		$	56		$	61		$	33		$	—
Incentive income		138			1			—			3			54			80			—
Unallocated Revenues		10
Total		395			72			26			59			115			113			—
Segment Expenses
Operating expenses	$	(153	)	$	(22	)	$	(14	)	$	(39	)	$	(62	)	$	(16	)		—
Profit sharing compensation expenses		(75	)		—			—			(11	)		(24	)		(40	)		—
Unallocated Expenses		(18	)
Total		(246	)		(22	)		(14	)		(50	)		(86	)		(56	)		—
Fund Management DE		149			50			12			9			29			57			—
Investment Income		9																		9
Interest Expense		(9	)																	(9	)
Pre-tax Distributable Earnings	$	149		$	50		$	12		$	9		$	29		$	57		$	—

	Six Months Ended June 30, 2010
				Private Equity						Liquid Hedge			Credit Funds						Principal
(in millions)	Total 7			Funds			Castles			Funds			Hedge Funds			PE Funds			Investments
Assets Under Management
AUM - January 1, 2010	$	31,476		$	11,344		$	3,232		$	5,881		$	7,672		$	3,347		$	—
Capital raised		1,390			—			—			958			123			309			—
Equity raised		2			—			2			—			—			—			—
Increase in invested capital		692			5			—			5			—			682			—
Capital acquisitions		11,448			—			—			—			—			—			—
Redemptions		(606	)		—			—			(604	)		(2	)		—			—
SPV distribution		(574	)		—			—			(574	)		—			—			—
RCA distributions 8		(743	)		—			—			—			(743	)		—			—
Return of capital distributions		(1,636	)		(162	)		—			—			(2	)		(1,472	)		—
Crystallized Incentive Income		(8	)		—			—			(8	)		—			—			—
Equity buyback		(62	)		—			(62	)		—			—			—			—
Net Client Flows		(150	)		—			—			—			—			—			—
Income (loss) and foreign exchange		431			324			(301	)		48			157			30			—
AUM - Ending Balance	$	41,660		$	11,511		$	2,871		$	5,706		$	7,205		$	2,896		$	—
Third-Party Capital Raised	$	2,421		$	—		$	—		$	958		$	123		$	1,340		$	—
Segment Revenues
Management fees	$	227		$	66		$	24		$	49		$	67		$	21		$	—
Incentive income		149			—			—			5			12			132			—
Unallocated Revenues		4
Total		380			66			24			54			79			153			—
Segment Expenses
Operating expenses		(125	)		(17	)		(15	)		(35	)		(47	)		(11	)		—
Profit sharing compensation expenses		(80	)		—			—			(6	)		(7	)		(67	)		—
Unallocated Expenses		(10	)
Total		(215	)		(17	)		(15	)		(41	)		(54	)		(78	)		—
Fund Management DE		165			49			9			13			25			75			—
Investment Income		12																		12
Interest Expense		(8	)																	(8	)
Pre-tax Distributable Earnings	$	169		$	49		$	9		$	13		$	25		$	75		$	4

⁷  Total includes Logan Circle Partners, which is not a segment.

⁸  Represents distributions from (i) assets held by redeeming capital accounts in the Drawbridge Special Opportunities Funds, and (ii) the Value Recovery Funds.

13

Fortress Investment Group LLC

Exhibit 2

Assets Under Management and Fund Management DE

(dollars in millions)

	Three Months Ended												Full  Year 2010			Three Months Ended						Six Months
	March 31, 2010			June 30, 2010			September 30, 2010			December 31, 2010						March 31, 2011			June 30, 2011			Ended June 30, 2011
Fortress
Assets Under Management
Private Equity & Castles	$	14,610		$	14,382		$	14,694		$	14,960		$	14,960		$	13,244		$	13,256		$	13,256
Liquid Hedge Funds		5,837			5,706			5,897			6,355			6,355			6,303			6,321			6,321
Credit Hedge Funds		7,553			7,205			6,986			6,773			6,773			6,545			6,374			6,374
Credit Private Equity Funds		2,197			2,896			4,128			4,817			4,817			4,531			4,941			4,941
Traditional Asset Management		—			11,471			12,289			11,708			11,708			12,484			12,931			12,931
AUM - Ending Balance	$	30,197		$	41,660		$	43,994		$	44,613		$	44,613		$	43,107		$	43,823		$	43,823
Third-Party Capital Raised	$	890		$	1,531		$	1,229		$	1,641		$	5,291		$	551		$	811		$	1,362
Segment Revenues
Management fees	$	108		$	119		$	111		$	120		$	458		$	121		$	126		$	247
Incentive income		99			50			75			145			369			118			20			138
Unallocated revenues		—			4			5			4			13			5			5			10
Total		207			173			191			269			840			244			151			395
Segment Expenses
Operating expenses		(64	)		(61	)		(78	)		(79	)		(282	)		(83	)		(70	)		(153	)
Profit sharing compensation expenses		(50	)		(30	)		(32	)		(56	)		(168	)		(58	)		(17	)		(75	)
Unallocated expenses		(1	)		(9	)		(10	)		(12	)		(32	)		(8	)		(10	)		(18	)
Total		(115	)		(100	)		(120	)		(147	)		(482	)		(149	)		(97	)		(246	)
Fund Management DE	$	92		$	73		$	71		$	122		$	358		$	95		$	54		$	149

14

Fortress Investment Group LLC

Exhibit 2

Assets Under Management and Fund Management DE

(dollars in millions)

	Three Months Ended												Full  Year 2010			Three Months Ended						Six Months
	March 31, 2010			June 30, 2010			September 30, 2010			December 31, 2010						March 31, 2011			June 30, 2011			Ended June 30,  2011
Private Equity Funds & Castles
Assets Under Management
Private Equity Funds	$	11,555		$	11,511		$	11,621		$	11,923		$	11,923		$	10,016		$	9,979		$	9,979
Castles		3,055			2,871			3,073			3,037			3,037			3,228			3,277			3,277
AUM - Ending Balance	$	14,610		$	14,382		$	14,694		$	14,960		$	14,960		$	13,244		$	13,256		$	13,256
Third-Party Capital Raised	$	—		$	—		$	—		$	—		$	—		$	—		$	51		$	51
Segment Revenues
Management fees	$	45		$	45		$	49		$	48		$	187		$	47		$	50		$	97
Incentive income		—			—			5			36			41			1			—			1
Total		45			45			54			84			228			48			50			98
Segment Expenses
Operating expenses		(17	)		(15	)	$	(17	)		(16	)		(65	)		(21	)		(15	)		(36	)
Profit sharing compensation expenses		—			—			(2	)		(16	)		(18	)		—			—			—
Total		(17	)		(15	)		(19	)		(32	)		(83	)		(21	)		(15	)		(36	)
Fund Management DE	$	28		$	30		$	35		$	52		$	145		$	27		$	35		$	62

15

Fortress Investment Group LLC

Exhibit 2

Assets Under Management and Fund Management DE

(dollars in millions)

	Three Months Ended												Full  Year 2010			Three Months Ended						Six Months
	March 31, 2010			June 30, 2010			September 30, 2010			December 31, 2010						March 31, 2011			June 30, 2011			Ended June 30,  2011
Liquid Hedge Funds
Assets Under Management
Fortress Macro Funds 9	$	2,482		$	2,427		$	2,810		$	3,170		$	3,170		$	3,281		$	3,251		$	3,251
Drawbridge Global Macro Funds 10		771			657			408			419			419			422			406			406
Fortress Commodities Funds 11		1,020			1,083			1,075			1,095			1,095			1,111			1,189			1,189
Fortress Partners Funds 12		1,564			1,539			1,604			1,671			1,671			1,489			1,475			1,475
AUM - Ending Balance	$	5,837		$	5,706		$	5,897		$	6,355		$	6,355		$	6,303		$	6,321		$	6,321
Third-Party Capital Raised	$	639		$	319		$	429		$	321		$	1,708		$	330		$	519		$	849
Segment Revenues
Management fees	$	25		$	24		$	24		$	26		$	99		$	27		$	29		$	56
Incentive income		6			(1	)		21			41			67			22			(19	)		3
Total		31			23			45			67			166			49			10			59
Segment Expenses
Operating expenses		(17	)		(18	)		(20	)		(24	)		(79	)		(21	)		(18	)		(39	)
Profit sharing compensation expenses		(4	)		(2	)		(6	)		(11	)		(23	)		(13	)		2			(11	)
Total		(21	)		(20	)		(26	)		(35	)		(102	)		(34	)		(16	)		(50	)
Fund Management DE	$	10		$	3		$	19		$	32		$	64		$	15		$	(6	)	$	9
Returns
Gross Returns 13
Fortress Macro Fund Ltd		4.3	%		-0.3	%		4.7	%		6.4	%		15.7	%		2.9	%		-5.4	%		-2.6	%
Drawbridge Global Macro Fund Ltd		4.2	%		-1.0	%		4.1	%		5.7	%		13.5	%		2.7	%		-5.6	%		-3.0	%
Fortress Commodities Fund L.P.		-3.0	%		2.7	%		-1.2	%		6.0	%		4.3	%		4.2	%		-6.6	%		-2.7	%
Fortress Asia Macro Fund Ltd		N/A			N/A			N/A			N/A			N/A			4.4	%		-0.9	%		3.5	%
Fortress Partners Fund LP		3.3	%		-0.1	%		3.6	%		6.2	%		13.5	%		3.6	%		0.2	%		3.8	%
Fortress Partners Offshore Fund L.P.		2.9	%		0.7	%		3.7	%		6.1	%		14.1	%		3.5	%		0.1	%		3.6	%
Net Returns 13
Fortress Macro Fund Ltd		3.0	%		-0.7	%		3.3	%		4.7	%		10.7	%		1.9	%		-5.4	%		-3.6	%
Drawbridge Global Macro Fund Ltd		3.7	%		-1.5	%		3.2	%		4.2	%		9.8	%		1.7	%		-6.0	%		-4.4	%
Fortress Commodities Fund L.P.		-3.5	%		2.2	%		-1.7	%		5.0	%		1.8	%		3.0	%		-6.4	%		-3.7	%
Fortress Asia Macro Fund Ltd		N/A			N/A			N/A			N/A			N/A			3.5	%		-1.0	%		2.4	%
Fortress Partners Fund LP		3.0	%		-0.3	%		3.3	%		5.9	%		12.3	%		3.3	%		-0.1	%		3.2	%
Fortress Partners Offshore Fund L.P.		2.6	%		0.5	%		3.5	%		5.8	%		12.8	%		3.2	%		-0.1	%		3.1	%

⁹  Combined AUM for Fortress Macro Onshore Fund LP, Fortress Macro Offshore Fund L.P., Fortress Macro Fund Ltd, Fortress Macro managed accounts, Fortress Asia Macro Fund Ltd and Fortress Asia Macro Fund LP.

¹⁰  Combined AUM for Drawbridge Global Macro Fund LP, Drawbridge Global Macro Intermediate Fund L.P., Drawbridge Global Alpha Intermediate Fund L.P., DBGM Offshore Ltd, DBGM Onshore LP, DBGM Alpha V Ltd and Drawbridge Global Macro managed accounts.

¹¹  Combined AUM for Fortress Commodities Fund L.P., Fortress Commodities MA1 L.P. and Fortress Commodities managed accounts.

¹²  Combined AUM for Fortress Partners Offshore Fund L.P. and Fortress Partners Fund LP. The Fortress Partners Funds, which were previously part of the Credit Hedge Funds segment, became part of the Liquid Hedge Funds segment in the second quarter of 2011.

¹³  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. Gross returns reflect performance data prior to management fees borne by the Fund and incentive allocations while net returns reflect performance data after taking into account management fees borne by the Fund and incentive allocations. The Fortress Asia Macro Funds were launched on March 1, 2011. Accordingly, the above returns for the Fortress Asia Macro Funds for the three months ended March 31, 2011 actually represent the one-month period beginning on March 1, 2011 through March 31, 2011, and the returns for the six months ended June 30, 2011 represent the four-month period beginning on March 1, 2011 through June 30, 2011. The investor class represented for the Fortress Asia Macro Funds is closed to new investors. Certain fees payable by investors in such class differ from the fees payable by the investors in the class that remains open, and the returns for different classes will vary.

16

Fortress Investment Group LLC

Exhibit 2

Assets Under Management and Fund Management DE

(dollars in millions)

	Three Months Ended												Full Year 2010			Three Months Ended						Six Months
	March 31, 2010			June 30, 2010			September 30, 2010			December 31, 2010						March 31, 2011			June 30, 2011			Ended June 30,  2011
Credit Hedge Funds
Assets Under Management
Drawbridge Special Opportunities Funds 14	$	5,227		$	5,176		$	5,200		$	5,474		$	5,474		$	5,341		$	5,272		$	5,272
Value Recovery Funds 15		2,326			2,029			1,786			1,299			1,299			1,204			1,102			1,102
AUM - Ending Balance	$	7,553		$	7,205		$	6,986		$	6,773		$	6,773		$	6,545		$	6,374		$	6,374
Third-Party Capital Raised	$	76		$	47		$	72		$	242		$	437		$	149		$	204		$	353
Segment Revenues
Management fees	$	28		$	39		$	27		$	30		$	124		$	31		$	30		$	61
Incentive income		8			4			40			51			103			38			16			54
Total		36			43			67			81			227			69			46			115
Segment Expenses
Operating expenses		(24	)		(23	)		(33	)		(31	)		(111	)		(34	)		(28	)		(62	)
Profit sharing compensation expenses		(3	)		(4	)		(19	)		(18	)		(44	)		(17	)		(7	)		(24	)
Total		(27	)		(27	)		(52	)		(49	)		(155	)		(51	)		(35	)		(86	)
Fund Management DE	$	9		$	16		$	15		$	32		$	72		$	18		$	11		$	29
Returns
Gross Returns 16
Drawbridge Special Opportunities LP		7.5	%		4.6	%		8.5	%		7.7	%		31.3	%		6.7	%		3.2	%		10.2	%
Drawbridge Special Opportunities Ltd.		7.6	%		4.1	%		11.2	%		9.8	%		36.7	%		7.9	%		4.1	%		12.4	%
Net Returns 16
Drawbridge Special Opportunities LP		6.9	%		4.0	%		6.7	%		5.8	%		25.5	%		4.9	%		2.2	%		7.2	%
Drawbridge Special Opportunities Ltd.		7.0	%		3.4	%		8.4	%		7.5	%		29.0	%		5.8	%		2.9	%		8.8	%

¹⁴  Combined AUM for Drawbridge Special Opportunities Fund Ltd., Drawbridge Special Opportunities Fund LP, Drawbridge Special Opportunities Fund managed accounts, Worden Fund LP and Worden Fund II LP.

¹⁵  Fortress will receive management fees from these funds equal to 1% of cash receipts and up to 1% per annum on certain managed assets, subject to collectability, and may receive limited incentive income if aggregate realizations exceed an agreed threshold.

¹⁶  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. Gross returns reflect performance data prior to management fees borne by the Fund and incentive allocations while 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, and December 31, 2010 redemptions.

17

Fortress Investment Group LLC

Exhibit 2

Assets Under Management and Fund Management DE

(dollars in millions)

	Three Months Ended												Full Year 2010			Three Months Ended						Six  Months Ended June 30, 2011
	March 31, 2010			June 30, 2010			September 30, 2010			December 31, 2010						March 31, 2011			June 30, 2011
Credit Private Equity Funds
Assets Under Management
Long Dated Value Funds	$	665		$	660		$	662		$	618		$	618		$	619		$	575		$	575
Real Assets Funds		167			167			200			193			193			141			123			123
Fortress Credit Opportunities Funds 17		859			1,236			2,333			2,951			2,951			2,699			3,099			3,099
Asia Funds (including FJOF) 18		506			833			933			1,055			1,055			1,072			1,144			1,144
AUM - Ending Balance	$	2,197		$	2,896		$	4,128		$	4,817		$	4,817		$	4,531		$	4,941		$	4,941
Third-Party Capital Raised	$	175		$	1,165		$	728		$	1,078		$	3,146		$	72		$	37		$	109
Segment Revenues
Management fees	$	10		$	11		$	11		$	16		$	48		$	16		$	17		$	33
Incentive income		85			47			9			17			158			57			23			80
Total		95			58			20			33			206			73			40			113
Segment Expenses
Operating expenses		(6	)		(5	)		(8	)		(8	)		(27	)		(7	)		(9	)		(16	)
Profit sharing compensation expenses		(43	)		(24	)		(5	)		(11	)		(83	)		(28	)		(12	)		(40	)
Total		(49	)		(29	)		(13	)		(19	)		(110	)		(35	)		(21	)		(56	)
Fund Management DE	$	46		$	29		$	7		$	14		$	96		$	38		$	19		$	57

¹⁷ Combined AUM for Credit Opportunities Fund, Credit Opportunities Fund II, FTS SIP L.P., FCO MA LSS, FCO MA II, FCO MA Mapleleaf, Net Lease Fund I, Life Settlement Fund and Life Settlement Fund MA.

¹⁸ Combined AUM for Japan Opportunities Fund and Global Opportunities Fund.

18

Fortress Investment Group LLC

Exhibit 3

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

Reconciliation of Segment Revenues to GAAP Revenues

(dollars in millions)

	Three Months Ended												Full Year 2010			Three Months Ended						Six Months
	March 31, 2010			June 30, 2010			September 30, 2010			December 31, 2010						March 31, 2011			June 30, 2011			Ended June 30, 2011
Fund Management DE	$	92		$	73		$	71		$	122		$	358		$	95		$	54		$	149
Investment Income (Loss)		8			4			10			12			34			12			(3	)		9
Interest Expense		(4	)		(4	)		(3	)		(9	)		(20	)		(4	)		(5	)		(9	)
Pre-tax Distributable Earnings	$	96		$	73		$	78		$	125		$	372		$	103		$	46		$	149
Private Equity incentive income		(67	)		(18	)		(8	)		55			(38	)		(47	)		(9	)		(56	)
Hedge Fund incentive income		(6	)		(4	)		(59	)		66			(3	)		(53	)		3			(50	)
Distributions of earnings from equity method investees		(6	)		(3	)		(2	)		(4	)		(15	)		(7	)		(1	)		(8	)
Earnings (losses) from equity method investees		13			4			7			63			87			66			17			83
Gains (losses) on options		1			(1	)		—			2			2			(1	)		(1	)		(2	)
Gains (losses) on other Investments		—			(12	)		2			11			1			(5	)		(4	)		(9	)
Impairment of investments		4			1			—			—			5			—			1			1
Adjust income from the receipt of options		—			—			—			—			—			7			—			7
Mark-to-market of contingent consideration in business combination		—			—			—			1			1			1			2			3
Amortization of intangible assets and impairment of goodwill		—			—			(1	)		—			(1	)		(1	)		—			(1	)
Employee equity-based compensation		(64	)		(49	)		(56	)		(49	)		(218	)		(64	)		(59	)		(123	)
Principal compensation		(235	)		(237	)		(240	)		(240	)		(952	)		(235	)		(237	)		(472	)
Adjust non-controlling interests related to Fortress Operating Group units		180			161			180			(14	)		507			154			153			307
Tax receivable agreement liability reduction		1			—			—			21			22			—			—			—
Taxes		(1	)		(8	)		5			(51	)		(55	)		(21	)		(6	)		(27	)
GAAP Net Income (Loss) Attributable to Class A Shareholders	$	(84	)	$	(93	)	$	(94	)	$	(14	)	$	(285	)	$	(103	)	$	(95	)	$	(198	)
Principals’ and Others’ Interests in Income (Losses) of Consolidated Subsidiaries		(177	)		(159	)		(177	)		16			(497	)		(152	)		(151	)		(303	)
GAAP Net Income (Loss)	$	(261	)	$	(252	)	$	(271	)	$	2		$	(782	)	$	(255	)	$	(246	)	$	(501	)
Segment Revenues	$	207		$	173		$	191		$	269		$	840		$	244		$	151		$	395
Adjust management fees		1			(3	)		—			—			(2	)		—			—			—
Adjust incentive income		(76	)		(21	)		(67	)		121			(43	)		(102	)		(6	)		(108	)
Adjust income from the receipt of options		—			—			—			—			—			7			—			7
Other revenues		28			43			38			46			155			48			45			93
GAAP Revenues	$	160		$	192		$	162		$	436		$	950		$	197		$	190		$	387

“Distributable earnings” is Fortress’s supplemental measure of operating performance. 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

19

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 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 10 to the financial statements included in the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2011.

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.

20

Fortress Investment Group LLC

Exhibit 4

Reconciliation of GAAP Net Income (Loss) Excluding Principals Agreement

Compensation to GAAP Net Income (Loss)

(dollars in thousands)

	Second Quarter						Six Months
	2011			2010			2011			2010
GAAP net income (loss)	$	(246,102	)	$	(251,241	)	$	(501,296	)	$	(512,573	)
Principals agreement compensation		237,367			237,367			472,126			472,126
GAAP net income (loss) excluding principals agreement compensation	$	(8,735	)	$	(13,874	)	$	(29,170	)	$	(40,447	)

21

Fortress Investment Group LLC

Exhibit 5

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,
	2011			2010				2011			2010
Weighted Average Class A Shares Outstanding (Used for Basic EPS)		184,952,566			165,246,781		Weighted Average Class A Shares Outstanding (Used for Basic EPS)		183,018,516			161,385,135
Weighted average fully vested restricted Class A share units with dividend equivalent rights		(3,523,061	)		(3,683,174	)	Weighted average fully vested restricted Class A share units with dividend equivalent rights		(6,437,040	)		(7,466,731	)
Weighted average fully vested restricted Class A shares		(447,567	)		(131,110	)	Weighted average fully vested restricted Class A shares		(420,213	)		(122,823	)
Weighted Average Class A Shares Outstanding		180,981,938			161,432,497		Weighted Average Class A Shares Outstanding		176,161,263			153,795,581
Weighted average restricted Class A shares19		494,616			270,395		Weighted average restricted Class A shares19		473,642			250,951
Weighted average fully vested restricted Class A share units which are entitled to dividend equivalent payments		3,523,061			3,683,174		Weighted average fully vested restricted Class A share units which are entitled to dividend equivalent payments		6,437,040			7,466,731
Weighted average nonvested restricted Class A share units which are entitled to dividend equivalent payments		14,120,654			19,518,811		Weighted average nonvested restricted Class A share units which are entitled to dividend equivalent payments		14,249,462			19,719,641
Weighted average Fortress Operating Group units		305,857,751			300,273,852		Weighted average Fortress Operating Group units		303,790,783			304,003,134
Weighted average Fortress Operating Group RPUs20		20,666,667			31,000,000		Weighted average Fortress Operating Group RPUs20		24,491,713			31,000,000
Weighted Average Class A Shares Outstanding (Used for DEPS)		525,644,687			516,178,729		Weighted Average Class A Shares Outstanding (Used for DEPS)		525,603,903			516,236,038
Weighted average vested and nonvested restricted Class A share units which are not entitled to dividend equivalent payments		25,687,405			27,490,829		Weighted average vested and nonvested restricted Class A share units which are not entitled to dividend equivalent payments		25,594,834			27,583,603
Weighted Average Fully Diluted Shares and Units Outstanding (Used for Diluted DEPS)		551,332,092			543,669,558		Weighted Average Fully Diluted Shares and Units Outstanding (Used for Diluted DEPS)		551,198,737			543,819,641

Reconciliation of Class A Shares Outstanding to Shares Outstanding (Used for Total Cash and Investments Net of Debt Obligations Payable Per Share)

	As of June 30, 2011
Class A Shares Outstanding		183,869,232
Restricted Class A Shares19		570,293
Fortress Operating Group units		305,857,751
Shares Outstanding (Used for GAAP Book Value per Share)		490,297,276
Fully vested restricted Class A share units which are entitled to dividend equivalent payments		745,362
Nonvested restricted Class A share units which are entitled to dividend equivalent payments		14,120,654
Fortress Operating Group RPUs20		20,666,667
Shares Outstanding (Used for Total Cash and Investments Net of Debt Obligations Payable per Share)		525,829,959

¹⁹ Includes both fully vested and nonvested restricted Class A shares.

²⁰ Includes both fully vested and nonvested Fortress Operating Group RPUs.

22

Fortress Investment Group LLC

Exhibit 6

Reconciliation of Total Cash and Investments Net of Debt Obligations Payable to Total GAAP Equity

(dollars in thousands)

	June 30, 2011
Cash and cash equivalents	$	227,894
Investments		1,114,367
Debt obligations payable		(272,500	)
Total Cash and Investments Net of Debt Obligations Payable	$	1,069,761
Assets
Due from affiliates		174,686
Deferred tax asset		407,192
Other assets		116,682
Liabilities
Accrued compensation and benefits		(138,593	)
Due to affiliates		(288,416	)
Deferred incentive income		(254,145	)
Other liabilities		(64,207	)
Total GAAP Equity	$	1,022,960

Fortress believes that Total Cash and Investments Net of Debt Obligations Payable is a useful supplemental measure because it provides investors with information regarding its net investment assets. Because Total Cash and Investments Net of Debt Obligations Payable excludes assets due from affiliates, deferred tax assets, other assets, accrued compensation and benefits, liabilities due to affiliates, deferred incentive income and other liabilities, its utility as a measure of financial position is limited. Accordingly, Total Cash and Investments Net of Debt Obligations Payable should be considered only as a supplement to total equity (computed in accordance with GAAP) as a measure of the Company’s financial position. The Company’s calculation of Total Cash and Investments Net of Debt Obligations Payable may be different from the calculation used by other companies and, therefore, comparability may be limited.

23

EX-99.2

Exhibit 99.2

THOMSON REUTERS STREETEVENTS  |  www.streetevents.com  |  Contact Us   © 2011 Thomson Reuters. All rights reserved. Republication or redistribution of Thomson Reuters content, including by framing or similar means, is prohibited without the prior written consent of Thomson Reuters. ‘Thomson Reuters’ and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies.

FINAL TRANSCRIPT

Aug 04, 2011 / 12:30PM GMT, FIG - Q2 2011 Fortress Investment Group LLC Earnings Conference Call

CORPORATE PARTICIPANTS

Gordon Runte

Fortress Investment Group LLC - IR

Dan Mudd

Fortress Investment Group LLC - CEO

Mike Novogratz

Fortress Investment Group LLC - Principal

Dan Bass

Fortress Investment Group LLC - CFO

Wes Edens

Fortress Investment Group LLC - Co-Chairman

Pete Briger

Fortress Investment Group LLC - Co-Chairman

CONFERENCE CALL PARTICIPANTS

Craig Siegenthaler

Credit Suisse - Analyst

Roger Freeman

Barclays Capital - Analyst

Dan Fannon

Jefferies - Analyst

PRESENTATION

Operator

Good morning. My name is Darla, and I will be your conference operator today. At this time, I would like to welcome everyone to the Fortress second quarter earnings call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question and answer session. (Operator Instructions). Thank you.

I would now like to turn the call over to Gordon Runte. Please go ahead, sir.

Gordon Runte - Fortress Investment Group LLC - IR

Thank you, Darla.

Good morning everyone and welcome to our second quarter 2011 earnings conference call. We will begin our call with opening remarks from Fortress Chief Executive Officer Dan Mudd, principal Mike Novogratz, and Chief Financial Officer Dan Bass. After these remarks, we will save most of our time today for your questions. And we have Fortress co-Chairmen Wes Edens and Pete Briger and other members of their executive team to join us for that portion of the call.

Before we begin, let me remind you that statements made today that are not historical facts may be forward-looking statements. Such statements are by their nature uncertain and may differ materially from actual results. We encourage you to read the forward-looking disclaimer in today’s earnings release in addition to the risk factors described in our quarterly and annual filings.

With that, let me hand off to Dan Mudd. Dan?

2

FINAL TRANSCRIPT

Aug 04, 2011 / 12:30PM GMT, FIG - Q2 2011 Fortress Investment Group LLC Earnings Conference Call

Dan Mudd - Fortress Investment Group LLC - CEO

Okay. Thanks, Gordon and thanks everybody for joining us today.

As you know, in conjunction with our earnings release this morning, we made two announcements that I believe sum to extremely positive news for Fortress and our investors — the reinstatement of our dividend and the renewed five year employment agreements for our principals.

Since this is an earnings call today, so I’m going to begin with an overview of results and the drivers behind them, and then we’ll go to cover those additional matters.

DE was down, which reflected difficult second quarter markets particularly in macro, but on a number of other fronts, as indicated, there’s positive news. The dividend and the principals’ agreement, I think, both express our continued view that the markets are very far from whatever we consider to be the new normal and that the transition from where we are to that new normal will continue to present extraordinary opportunities for Fortress.

Let me go to the financials.

DE was $46 million, down from $73 million a year ago and $103 million from the first quarter. While that’s not far off from the pace of DE midway through last year, it falls short of where we’d like it to be. The short take here is that we have three big alternatives businesses that are putting a great deal of capital to work across geographies and asset classes, and they have a broad range of investment mandates. Our Global Macro Fund and our Commodities Fund operate against annual high water marks, and following a strong first quarter, they crossed under their marks. So while our management fee stream continued to be very strong, incentive income was not.

I would say, and Mike is going to cover this in a minute, in macro, political uncertainty clearly dominated the market — from the European sovereign debt crisis, to Asia/China inflation concerns, to the pace of recovery or potential deterioration of the US economy, and all the way through to the debt ceiling debate. In a longer context, I would say we remain focused on our core structural themes and we are optimistic about the prospects to deliver stronger investment performance and financial results in the second half of the year. Mike, as I said, will get to that in a few minutes.

Longer term investment themes outside of macro continued to play out, centered in large part on this financial system continuing to stumble and meander towards a new normal — regulated and non-regulated financial institutions continuing to sell distressed assets to sanitize their balance sheets, institutions struggling to refinance maturing debt, institutions off-loading core platforms, and a continued unwinding and reconfiguration of overly complex capital structures.

With that, in credit, given the longer themes that I just noted, it remains a very good time for our business with deep experience in structured finance and intensive asset management that can focus on what we’re calling “financial services garbage collection.” Our success, in fact, in this arena earned our credit business the Institutional Investor “Credit Focused Hedge Fund of the Year” award.

In the second quarter Credit PE had more moderate realization than we saw in the first quarter, which resulted in somewhat lower incentive income versus what was an exceptionally strong first quarter. That’s just a reflection of the fact that PE realizations don’t occur on a fixed schedule. In fact, strong investment performance in these funds continued to produce unrealized incentive income, which has now grown to nearly $300 million across our Credit Funds.

Also, in Credit, the Credit Hedge Funds continued to shine, up between 7% and 9% on the year so far, and returns have been strong in our Japan Opportunities Fund, with a 14% increase in the net asset value surplus for the quarter. In Private Equity, the main story is that the trend of investment valuation increases continued into the second quarter. Main fund investments in PE have seen valuation increases in eight of the last nine quarters, which equates to appreciation of 77% or just under $6 billion. So a very positive and sustained valuation trends in Private Equity. In addition, we think that the shakeout of corporate restructurings and recapitalizations, coupled with compelling demographic trends, and strong supply/demand dynamics, all line up well for our core investment strengths in PE in financial services, healthcare/senior living, and transportation, shipping, and infrastructure.

As I noted, our Global Macro and Commodities Funds went below high water marks and, therefore, reversed accrued incentive income. These funds now sit with 90% of their AUM within 5% of high water marks. One other note there, our new Asia Macro Fund has performed well out of the box, up 3% inception-to-date, with approximately $200 million in commitments.

3

FINAL TRANSCRIPT

Aug 04, 2011 / 12:30PM GMT, FIG - Q2 2011 Fortress Investment Group LLC Earnings Conference Call

Let me now turn to today’s other announcements.

First, our Board has approved a revised dividend policy to reinstate quarterly distributions of $0.05 a share, commencing in the fourth quarter of this year. Going forward in 2012, we plan to maintain a consistent quarterly dividend with an annual supplemental top-up dividend in the fourth quarter based on performance. At our current share price, without assuming any potential top-up, our dividend yield would be just under 5%.

The revised dividend policy, which was unanimously approved by the Board, reflects what we believe to be the most appropriate structure given the pattern of earnings at alternative asset managers. The fixed quarterly payout really pivots off the stability and predictability of our management fees and the supplemental year-end top-up distribution will reflect full-year performance fees. After taking into account our balance sheet commitments, opportunities to fund profitable business growth, our debt covenants and our own ability to pay down debt, it’s our objective under the new policy to pay out a substantial portion of DE to shareholders.

In our second announcement, all five of our principals have renewed their five year terms of employment. The objective of our management team and Board has been to structure a durable, long-term agreement with a clear alignment of interests with shareholders, and pay based exclusively on performance. I think the agreement we’ve announced this morning accomplishes these objectives.

First, the agreement is completely forward-looking. The new agreement will go into effect on January 1st, and principal compensation will be calculated from then forward. Principals will be compensated for delivering strong investment returns and raising new assets under management. In strong years, any compensation above 10% of fund management DE would be paid in three-year vesting stock. In weak years, there are no guarantees. An amount equal to 50% of cash payments received under the plan will be reinvested or maintained in Fortress funds.

As an additional reminder, each of our principals owns between $200 million and $300 million of Fortress equity, so there remains an enormous long term incentive to focus on building this institution.

Let me review a few of the details.

First, on structure, for the existing hedge funds where principal serves as CIO, compensation will equal 20% of incentive income. As I noted, there’s no guarantee on that. If performance for our LPs does not result in an incentive income that contributes to DE, there’s no payout. For new assets raised after January 1st, principals will earn 20% of fund management DE for AUM where they serve as the CIO, and 10% where they serve as a sponsor, but not as the CIO. This accomplishes an important corporate objective of helping to develop the next generation of investment managers in the firm.

Importantly, compensation for new hedge fund and PE capital will be calculated on a net, not a gross basis. So all costs will be covered before principal compensation is paid out. This structure, I think, recognizes our principals’ central role in both raising new long-term capital and in leading our efforts to maximize returns for our investors, and, therefore, earnings for our shareholders.

Second point — payments up to 10% of fund management DE for each business will be made in cash. Payments above that amount, if any, will be made 100% in equity, restricted share units that vest over three years. To be clear, that means that the maximum possible DE impact of this plan in a particular year will be 10%, and that will occur only if the firm, as well as all three businesses individually, have a great year.

Third point — an amount equal to 50% of cash paid out to principals each year will be mandatorily invested or maintained in Fortress managed funds.

So we believe this is a straightforward, balanced and appropriate compensation and employment agreement that aligns the interest of our principals with our LPs and our public shareholders. We believe it appropriately contemplates the introduction of the next generation of CIOs, which is critical to the continued expansion and diversification of our franchise. And we believe it also puts a final exclamation point on the deep commitment of our principals to this company, a commitment already made abundantly clear by their active hands-on leadership, their focus on maximizing returns for fund investors, and the over $1 billion that they have personally invested alongside our LPs.

It’s forward-looking, it pays only for performance. If the LPs make money, the shareholders make money, and the principals make money.

The last few items I want to touch on before handing off to Mike. First, capital raising activity continued with a focus on more liquid, and therefore smaller closes. So far this year, new commitments were a $1.4 billion through mid-year.

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FINAL TRANSCRIPT

Aug 04, 2011 / 12:30PM GMT, FIG - Q2 2011 Fortress Investment Group LLC Earnings Conference Call

We anticipate forming two new sector-specific Credit PE funds and two new Private Equity funds this year. We had, in fact, the first close of a transportation and infrastructure fund that is our first raise in the traditional PE space since 2008, a reflection of both the hard work and the continued progress in PE valuations that I mentioned.

Fortress’s Asia Macro Fund AUM stood at $108 million at quarter end, but commitments have continued to accelerate and we were at approximately $200 million as of August 1st. So we’re raising capital and we’re in the market in all of our businesses right now.

We’re limited in what else we can say about active fundraising. But as I indicated on our last call, we expect that the timing of our launches will lead to capital commitments more weighted toward the latter part of the year.

Balance sheet investments continued to grow with cash and investment net of debt increasing to $1.1 billion at the end of the second quarter, up 3% from the prior quarter. That translates into roughly $2.03 balance sheet value per share, which represents about 50% of our share price as of yesterday’s close. In my view, this is a really important part of our valuation story because it implies that with credit given for our balance sheet and a conservative multiple applied to management fees, investors in our stock are essentially receiving a free call on incentive income.

Lastly, the value chain that delivers to shareholders begins with delivering investment performance for our LPs. While we absolutely expect the market to remain challenging and volatile and vulnerable to flare-ups from a range of political and other catalysts, I’m confident that this landscape aligns well with the fundamental strengths of the Company, and I think this ultimately accrues to the benefit of Fortress LPs and our shareholders.

So today, three messages from me. Soft quarter, but the environment continues to produce great opportunities. Second, as promised, all the principals have renewed their five year contract on attractive, commercial and well-aligned terms. Three, our new dividend policy and announcement for the fourth quarter reflects our confidence in Fortress and our appreciation for investors.

With that, thanks. Let me hand it off to Mike.

Mike Novogratz - Fortress Investment Group LLC - Principal

Great. Thank you, Dan.

Listen, I’d like to show up today and talk about a bull market. Unfortunately, it’s not in equities, but it’s a bull market in both politics and policy which I think is dominating the investing landscape, making it both challenging but also creating great opportunities. I’m going to spend just a couple minutes and go around the world and touch on five or so hot areas that I think are really driving the markets today.

First, there seems to have been a significant deterioration in the growth outlook both in the U.S. and globally. We think it is derived from a few things.

One, a breakdown in confidence. Early in the year, most economic forecasters had a 3.5% to 4% GDP outlook for the U.S. and a plus 4% global GDP outlook. With both the political grid lock that we saw in DC and the perceived inability to really deal with the fiscal issues, with the constant fiscal problems in Europe and their ability to get to the 75-yard line and never over the 100. You’ve seen a breakdown in both consumer confidence and corporate confidence, which is showing up in ISMs rolling over and new orders rolling over. Markets are nervous and we had a 10% correction in equity markets in the last eight days.

But more importantly, the cyclical factors all seem to be turning over. I think we can say with pretty good certainty that we’ve hit the cyclical peak in the second quarter and the future outlook will be a lower growth, not higher growth. Now, most forecasters have ratcheted down growth to roughly 2% in the US. We think it’s probably going to end up at 2% with downside risk.

Part of it I think is a realization that coming out of the 2008 credit bubble, at one point there was hope that we could have a quick fix. I think the market is sobering up and waking up to the fact that this is going to be a long hard grind out of this deleveraging. It could last three to four more years. And so the market is resetting to a low growth threshold. And both fixed income and equity markets are pricing to that.

The fiscal issues in the US, we got through this last hurdle, but they are going to continue to be a big drag on the economy this year and in the future. When we travel the world, the global investors, and most of our big creditors, are woefully worried about our ability to deal with the fiscal issues. It creates an environment where people continue to want to sell the dollar. We think the dollar will continue to be under pressure for a long time. And that’s creating one of the situations I think that’s most interesting in the world in both creating challenges in the market and opportunity.

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Aug 04, 2011 / 12:30PM GMT, FIG - Q2 2011 Fortress Investment Group LLC Earnings Conference Call

We have seen an unbelievable amount of foreign exchange intervention. In the 20 years I’ve been doing the business, I’ve never encountered players as large and as aggressive as the sovereign wealth funds and central banks are in markets today. It’s creating grand distortions where you have markets that fundamentally should trade at one price but because of both political and fear agendas are trading at completely at a disequilibriated prices.

The Japanese this morning intervened in their currency market. They bought $50 billion to $60 billion of dollars, weakening the yen 3%. I think it’s just an indication of what you’re going to continue to see. Now, that provides both opportunity, but it also provides more nervousness in the markets.

I’ll switch to Europe real quick. The sovereign issues in Europe continue to be the single biggest overhang in the markets. They came up with a deal to help solve the Greece issue two weeks ago, created a forum with the SFF that should have worked but didn’t fund it. And now we’re at a point where the market is going to question the resolve of the Europeans. We fundamentally think it’s a mistake to question Europe’s resolve to hold the euro together, and in the long run, you’ll see a federalization of Europe. But it’s a long run, and the path to get there will be very volatile. So my best guess is while we’ll have quick fixes and you’ll have big relief rallies, this sovereign issue in Europe is also going to be a big overhang in the markets.

And so step back, we have problems in Europe, problems in the US. You’ve got fiscal contraction in both the Europe, US and UK at a time when you have slowing growth so it doesn’t look like a real optimistic scenario.

Finally, I’d say that given all that, what makes markets challenging and always makes a bear market challenging is that the market prices that in very quickly so you have two year rates in the US, you have 30 basis points, you have had 10% to 20% selloffs in equity markets in the last six weeks, risk is as low as it’s been at most of the big investment banks. Risk is low in the hedge fund community. Panic indicators are at a high. So this sets up for a period of big bear market short squeezes which makes markets challenging. So we foresee a very choppy environment where the broad move is lower in equities with big short squeezes to the upside, rates low for a long period of time, and the dollar under continued pressure. I think with that, I’ll stop.

Dan Bass - Fortress Investment Group LLC - CFO

Okay. Thanks, Dan. Thanks, Mike.

As Dan mentioned pre-tax DE for the quarter was $46 million or $0.09 per share. This brings our year-to-date total to $149 million or approximately $0.28 per share. These DE levels are a function of some challenging times in this quarter in our Liquid market segment. That said, management fees of $131 million in the second quarter were up 4% from the first quarter, and up 7% from last year.

Now on to the segment results. Our private equity business produced DE of $35 million for the quarter which was up from $27 million in the first quarter which was a result from increased management fees and lower expenses. The underlying assets in our Private Equity funds have appreciated by another $400 million or 3% in the quarter. These assets have now appreciated by $1.6 billion or 14% from the beginning of the year.

Our Credit business once again had a good quarter, generating $30 million of DE, bringing our year to date total to $86 million. Drilling down into the business, our Credit Hedge Funds generated $16 million of incentive income in the quarter and $54 million for the year. This is a result of strong performance in our special opportunities funds which had net returns between 7% to 9% since the beginning of the year.

Our Credit PE funds generated another $23 million of incentive income in the quarter, bringing year-to-date total to $80 million. This is down from the first quarter due to fewer and smaller realization events versus activity in the first quarter.

You should note that the embedded unrealized value in our Credit funds remains robust. As Dan stated, we still have approximately $300 million of gross, mark-to-market, undistributed, PE-style incentive income in our Credit fund. This $300 million is not included in our current or any prior period reported earnings.

Finally, we raised approximately $450 million in capital in the first half of the year in Credit, primarily in our Credit Hedge Funds.

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Aug 04, 2011 / 12:30PM GMT, FIG - Q2 2011 Fortress Investment Group LLC Earnings Conference Call

Our Liquid markets business faced a challenging second quarter. As a result, the segment’s DE contribution is just under $9 million year-to-date. As you know, our Fortress Macro Fund and Commodities Fund both ended the quarter below their respective high water marks. This led us to reverse $19 million or nearly all of the first quarter gross incentive income accrual.

On a positive note, our management fees were up 7% quarter over quarter helped by the $800 million of capital that we raised in the first half of the year.

Let me turn to operating margins and taxes. Our year-to-date operating margin stands at 38%. This dip in margins is primarily due to low margins in our Liquid business. The main driver of the lower Liquid margins is the minimal amount of incentive income that we have recognized year-to-date.

Additionally, we have made a few strategic portfolio manager hires as a part of our continued build-out of the Liquid markets business. That said, with improved performance in the second half of the year, we would expect the full year margins to come back in line with our annual historical range of 40% to 45%.

On taxes, we still expect our full year effective tax rate for 2011 DE will be between 5% and 10%. This is based upon our expected mix of income and deductions for stock based compensation.

Now turning to AUM, which is the leading indicator of our future earnings. Our AUM ended the second quarter at $43.8 billion, an increase of 2% from the first quarter. Additionally, our alternative asset AUM was up 1% from the first quarter. Further, it is important to note that 80% of our alternative asset AUM remains in locked-up, private equity-style no-redemption structures. And finally, at the end of the quarter, we had substantial dry powder of approximately $3.3 billion which is available for investment and becomes AUM when called.

So in closing, let me leave you with these main points. Our assets are up, our debt is down, and with over $2 per share in book value, our balance sheet and capital structure have never been in a better position. Strong performance in the second half of the year should get us back on the right earnings trajectory.

And finally, as CFO, let me make a few comments on today’s announcements on the dividend and new principals’ agreement. These announcements provide more clarity and certainty around our businesses. These developments are good for all stakeholders.

Thank you and let’s go to Q&A.

QUESTION AND ANSWER

Operator

(Operator Instructions). Your first question comes from the line of Craig Siegenthaler with Credit Suisse.

Craig Siegenthaler - Credit Suisse - Analyst

Thanks. Good morning, guys

Dan Mudd - Fortress Investment Group LLC - CEO

Hey.

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FINAL TRANSCRIPT

Aug 04, 2011 / 12:30PM GMT, FIG - Q2 2011 Fortress Investment Group LLC Earnings Conference Call

Craig Siegenthaler - Credit Suisse - Analyst

Can you provide an update on the private equity business. I know you can’t provide full disclosure here when you’re potentially out raising assets, but can you talk about the effort to grow funds in areas where Fortress has outperformed historically, like transportation, retirement, and also provide color on the $215 million invested capital increase in PE exactly kind of what was that item?

Dan Mudd - Fortress Investment Group LLC - CEO

Yes. Why don’t I let Wes take it from there.

Wes Edens - Fortress Investment Group LLC - Co-Chairman

Sure. We had a good quarter, Craig, in terms of the portfolios overall.

As Dan said, we’ve had a pretty consistent increase in valuations as the businesses have broadly continued to do well over the last couple of years. And this quarter was no exception.

The good news from our standpoint is that the biggest exposures that we’ve got, senior housing, transportation, and financial services, all across the board had some real great performance and there’s not a lot I can say about a couple of the companies because we’re in registration in them right now. We have filings on both the consumer finance business Springleaf, we have filings on our mortgage servicing business, Nationstar, and so you can read about those but I can’t really talk to those. But obviously the numbers speak to themselves. They’ve done really terrifically. Senior housing, which is the biggest single investment we’ve got on the private side, had another tremendous first half of the year where they had record occupancy gains in both the months of June and July. So we’re very positive about that.

As Dan mentioned, we had a first closing on a transportation-only fund that’s run by my partners and Joe Adams and John Atkenson. It’s a big event in that it’s the first time they have raised independent capital, something we think what has got a tremendous amount of potential so I think there should be a lot more to go on that side of it. And capital raising as a general matter is about ready to commence on the general fund. So I think we’ll have some good things to report in the near term there.

But I’m very, very positively constructive about the business and think the prospects for this portfolio really across all of the different funds looks very, very good.

Craig Siegenthaler - Credit Suisse - Analyst

And, Wes, or maybe Dan can help out there. What was that $215 million item for further — I think it was —

Dan Bass - Fortress Investment Group LLC - CFO

Yes. To be clear the $215 million was just capital calls coming in from Fund V and V-Co — as those funds went off of AUM on committed capital and now we’re on called capital so it’s just continued capital.

Craig Siegenthaler - Credit Suisse - Analyst

Got it. Thank you.

And one last question maybe Stu or Mike can handle this one. But can you talk about kind of where you are in the process of building out the Liquid Hedge Fund business both here in the US, including areas like long/short and also maybe in Asia with Adam?

Mike Novogratz - Fortress Investment Group LLC - Principal

Sure. Right now, we have three hedge funds the Macro Fund, the Commodity Fund, and the Asia Fund. This year’s focus has been getting the Asia Fund up and growing and it’s got a nice forward trajectory there. We have a credit fund that we would hope to bring to market sometime in the next 6 to 18 months. We’ve gotten 4 to 5 long/short equity portfolio managers, one of which we think we could be in the market within the next, call it 6 to 18 months as well and are in the market interviewing to hire another team. Our hope would be two more hedge funds within 12 months and to go from there.

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Aug 04, 2011 / 12:30PM GMT, FIG - Q2 2011 Fortress Investment Group LLC Earnings Conference Call

Craig Siegenthaler - Credit Suisse - Analyst

Got it. All right. Great. Thank you for taking my questions

Dan Mudd - Fortress Investment Group LLC - CEO

Thanks, Craig.

Operator

Your next question comes from the line of Roger Freeman with Barclays Capital.

Roger Freeman - Barclays Capital - Analyst

Hi. Good morning. Actually, just a follow-up on the last point.

Of the hires that you’ve made in Liquids, these are — the intention there is to build new hedge funds as opposed to sort of within Macro, segmenting that further? Because I’m just thinking back to in the past where you’ve had at one point you had more industry focus within the Macro Fund and then you kind of brought it up to more concentrated level. Can you just kind of talk to that?

Mike Novogratz - Fortress Investment Group LLC - Principal

Certainly. So the Macro Fund apparently has eight portfolio managers in it. We think it will stay between seven and ten portfolio managers. One of our Credit traders in the fund would potentially be a spinout for one of the new hedge funds. Other funds we’re going to start, we’re going to start independently where they’re not going to be also portfolio managers in the macro fund.

Dan Mudd - Fortress Investment Group LLC - CEO

The other — Roger, it’s Dan Mudd — the other thing I would add there too is that in parallel to the front end and investing build-out, we, led by Stu, are focusing on making sure that the back end and the infrastructure keeping space. So over the course of the past 12 months in addition to adding Stu as the President and Chief Operating COO we’ve added a CFO, a CRO, and a new Chief Technology Officer just to make sure that the infrastructure can support the build-out without taking anybody’s concentration off of the day-to-day investing activities.

Roger Freeman - Barclays Capital - Analyst

Okay. That’s helpful. And then just on the transportation fund, I know you can’t talk a lot about it, but can you say what the first close brought in?

Dan Mudd - Fortress Investment Group LLC - CEO

I think we cannot. We did a relatively small first close built around a deal and to get the fund up and going and I would just sort of characterize generally that as we build out new funds, I think the experience has been that it’s much easier to market a fund in any of our businesses when you’ve got actual transactions that have funded and have operated to go out and talk to investors about; as contrasted to kind of here’s our idea and here’s how we size up the market. So that was certainly the pattern with building out Asia Macro and I would anticipate that would be the pattern with building out the Worldwide Transportation Fund.

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Aug 04, 2011 / 12:30PM GMT, FIG - Q2 2011 Fortress Investment Group LLC Earnings Conference Call

Wes Edens - Fortress Investment Group LLC - Co-Chairman

Yes. Given the size of the market operates in, Roger, you’ve got ships, airplanes, containers, infrastructures, railroads, there’s all kinds of things that could be prospectively be invested there. Those markets are in the hundreds and hundreds and hundreds of billions of dollars. We think the scale of the business, given our experience with it and what we think the opportunities are worldwide is really tremendous.

Roger Freeman - Barclays Capital - Analyst

Yes. Okay, thanks, Wes. Two more.

Dividends — so if I understand this correctly, the $0.05, is that kind of representative of what the base quarterly payout is? I’m just confused because it’s the fourth quarter, that would be the top off?

Dan Mudd - Fortress Investment Group LLC - CEO

No. That’s the base and we do not anticipate a top off for Q4 2011.

Roger Freeman - Barclays Capital - Analyst

Is that primarily because of the credit covenant restrictions?

Dan Mudd - Fortress Investment Group LLC - CEO

It’s a bunch of factors but I think the important thing is get the dividend back up and going, get ourselves that consistent with the introduction of the new principals’ agreement. We’re in a choppy market but we wanted to give you guys some certainty in terms of where we’re going to be end of this year and then with a steady run through 2012 we’ll go into the full year top-up.

Roger Freeman - Barclays Capital - Analyst

Last question on the management agreement. So I was wondering if you could sort of talk to this question, which is the old agreement was, if I recall correctly, I think the principals were getting paid $150,000 or $175,000 a year and then they got their portion of the distributable earnings. And under the new one, there’s going to be a piece that comes out of distributable earnings and also share count dilution and then they still get their portion of what’s left of the distribution. And just from a layman’s standpoint and given that they each have you say said $300 million to $400 million of equity in the business and obviously have a vested interest in the success, how do you sort of compare new versus old?

Dan Mudd - Fortress Investment Group LLC - CEO

Yes. I think there are a couple points that you’ve got a little bit sideways there. First, basically, the way I think about it is at the IPO the principals turned in their points and took back shares for that. So they’ve had an annual salary since the IPO in 2007 of $200,000 period. So that was for the first five years from the introduction of the IPO until January 1st of 2012.

Then going forward, based only on results going forward and based on new capital in the case of private equity funds, or based on annual performance in the case of hedge funds, there is a 20-point payout to the principals as a result of that performance

Roger Freeman - Barclays Capital - Analyst

Okay.

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Aug 04, 2011 / 12:30PM GMT, FIG - Q2 2011 Fortress Investment Group LLC Earnings Conference Call

Pete Briger - Fortress Investment Group LLC - Co-Chairman

And just I would add I think when you talked about us each owning $300 million or $400 million worth of stock, we do own that $300 million or $400 million worth of stock, but we also have additionally in excess of $1 billion of investments alongside our LPs.

Roger Freeman - Barclays Capital - Analyst

Right. Absolutely. Okay. All right. Thanks.

Operator

Thank you. (Operator Instructions). Your next question comes from the line of Dan Fannon with Jefferies.

Dan Fannon - Jefferies - Analyst

Good morning. You mentioned I think it was $300 million in unrealized value in Credit Hedge Funds — can you talk about where that was maybe last quarter or at the end of the year?

Dan Bass - Fortress Investment Group LLC - CFO

It’s in the entirety of the Credit business of PE and Hedge Funds. And it was $280 million at the end of the year, but we’ve realized $80 million on a year to date basis. So it’s up $100 million of which we’ve realized $80 million and the remaining amount left is $300 million. So —

Dan Fannon - Jefferies - Analyst

Okay. And then —

Dan Bass - Fortress Investment Group LLC - CFO

It was up $100 million on $280 million from your end.

Dan Fannon - Jefferies - Analyst

Okay. That’s helpful. And then, Wes, I think you mentioned getting ready for capital raising of a general fund. So is that something as we think about 2012 we should think about a larger PE fund formation starting?

Wes Edens - Fortress Investment Group LLC - Co-Chairman

Yes. I think we’ve got on the schedule right now to start after Labor Day raising the fund. So as we have results from that, we will talk about it. I think the other — the other thing I’ve been spending a lot of my time on is China, where we’ve got an office we opened up there recently, and we’re in the process of getting into the senior housing business there. So there’s interesting activity both through the spectrum of our portfolio companies as well as prospectively raising capital in that part of the world. So those are both things that are very much in the hopper that we should have good results on shortly, I think.

Dan Fannon - Jefferies - Analyst

Okay. And then going back to the hedge fund business quickly, could you maybe break out kind of the — so we have an idea of what kind of the redemption periods are for the different funds, the liquid fund, I’m wondering how much of your investors are generally on monthly redemption notices? And then within the credit business, the credit hedge funds, is that all annual or is there some that’s tied up beyond one year?

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FINAL TRANSCRIPT

Aug 04, 2011 / 12:30PM GMT, FIG - Q2 2011 Fortress Investment Group LLC Earnings Conference Call

Dan Bass - Fortress Investment Group LLC - CFO

In the liquid business, it’s between one month and three months redemption notices, I think with a bias to the three month class. In the credit hedge fund, it is an annual redemption notice that coincides with the end of the third quarter is when the time frame for when that occurs.

Dan Fannon - Jefferies - Analyst

So when you report 3Q, you would tell us the annual redemptions, if there are any, for that fund?

Dan Bass - Fortress Investment Group LLC - CFO

Yes.

Dan Fannon - Jefferies - Analyst

Okay. Thank you.

Operator

At this time, there are no further questions. Presenters, I’ll hand the floor back to you.

Dan Mudd - Fortress Investment Group LLC - CEO

Okay. It’s Dan Mudd. Thanks, everybody, for joining us today.

In summary, we continue to like the market, we continue to like the way that it sets up for Fortress. I think we’ve provided a lot of forward-looking clarity both in terms of the dividend and the engagement of the senior management to get us through this period. So we’ll look forward to continuing our dialogue with you and posting you on the results as we go. Thanks.

Operator

Ladies and gentlemen, this concludes Fortress second quarter earnings conference call. You may now disconnect.

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