Earnings Release

Fortress Reports Third Quarter 2008 Financial Results

Company Release - 11/13/2008 6:00 AM EST

NEW YORK, Nov. 13 /PRNewswire-FirstCall/ -- Fortress Investment Group LLC (NYSE: FIG) today reported its results for the third quarter ended September 30, 2008.

Third Quarter 2008

For the quarter ended September 30, 2008, our GAAP net loss was $57 million, or ($0.66) per diluted share. Excluding principals agreement compensation, third quarter GAAP net loss was $2 million.

Fund management distributable earnings for the third quarter of 2008 was $63 million versus $115 million in the third quarter of 2007. Pre-tax distributable earnings (DE) for the quarter was a loss of $20 million, or ($0.04) per dividend paying share, versus earnings of $111 million for the third quarter 2007.

For reconciliations from pre-tax distributable earnings and fund management DE to GAAP net income (loss), from GAAP net income (loss) excluding principals agreement compensation to GAAP net income (loss), from segment revenues to GAAP revenues and from segment assets to GAAP assets see "Reconciliation of Fund Management DE to Pre-tax Distributable Earnings and GAAP Net Income (Loss)", "Reconciliation of GAAP Net Income (Loss) Excluding Principals Agreement Compensation to GAAP Net Income (Loss)" and "Reconciliation of Segment Revenues to GAAP Revenues & Segment Assets to GAAP Assets" in this release. Distributable earnings is a supplemental measure of our operating performance that we believe provides a meaningful basis for comparison between present and future periods(2).

The Company's quarterly segment revenues and distributable earnings will fluctuate materially depending upon the performance of our funds and the realization events within our private equity business, as well as other factors. Accordingly, the revenues and profits in any particular quarter should not be expected to be indicative of future results. Quarterly dividends are not necessarily representative of the Company's earnings in the current quarter.

The following discussion of our results is based on segment reporting as presented in our Quarterly Report on Form 10-Q. Our GAAP statement of operations and balance sheet are presented following this discussion. The following table is a summary presentation of our segment performance with supplemental data provided for informational purposes. For a reconciliation of our segment results to the corresponding GAAP data, see the reconciliation information included later in this release.

(1)  Assets under management in this press release refers to management
fee paying assets under management.
(2)  Comparisons of after tax or per share amounts to periods prior to our
reorganization, including the first quarter of 2007 (prior to January
17), may not be meaningful because of the impact of the
reorganization transactions on our financial statements.
Supplemental Data for Three Months:
Three Months Ended
September 30, 2008                   Private Equity  Hedge Funds Principal
Invest-
(in millions)               Total    Funds  Castles Liquid  Hybrid  ments
AUM
AUM - July 1, 2008       $35,089  $13,496  $3,498  $9,705  $8,390    $-
Capital raised           1,136        -       -     600     536     -
Redemptions(3),(4)        (185)       -       -    (185)      -     -
Increase in invested
capital                 1,581    1,581       -       -       -     -
Return of Capital         (251)    (141)      -       -    (110)    -
Reset Date                   -        -       -       -       -     -
Equity buyback             (31)       -     (31)      -       -     -
Crystallized Incentive
Income                    (15)       -       -     (15)      -     -
+/- Net Asset Value &
Foreign Exchange rate
change                 (2,985)  (1,199)   (212) (1,001)   (573)    -
AUM - Ending Balance     $34,339  $13,737  $3,255  $9,104  $8,243    $-
Third-Party Capital Raised  $2,581   $1,445      $-    $600    $536    $-
Segment Revenues
Management fee              $156      $44     $13     $60     $39    $-
Incentive income              (3)     (16)      -       -      13     -
Total                      153       28      13      60      52     -
Segment Expenses
Profit sharing
compensation expenses        (9)       5      (2)     (5)     (7)    -
Operating expenses           (81)     (15)     (7)    (29)    (30)    -
Unallocated Expenses           -
Total                      (90)     (10)     (9)    (34)    (37)    -
Fund Management DE              63       18       4      26      15     -
Investment Income              (73)                                   (73)
Interest Expense               (10)                                   (10)
Pre-tax Distributable
Earnings                     $(20)     $18      $4     $26     $15  $(83)
Weighted Average Dividend
Paying Shares and Units
Outstanding                   462
Three Months Ended
September 30, 2007                   Private Equity  Hedge Funds Principal
Invest-
(in millions)               Total    Funds  Castles Liquid  Hybrid  ments
AUM
AUM - July 1, 2007       $28,569  $10,993  $3,173  $7,416  $6,987    $-
New capital raised,
increase in invested
capital                 2,749    1,991    (130)    459     429     -
Return of Capital (PE) /
Redemptions (Hedge Funds) (40)       -       -     (40)      -     -
Reset date                   -        -       -       -       -     -
+/- Net Asset Value &
Foreign Exchange rate
change                    (93)     (70)    236    (283)     24     -
AUM - Ending Balance     $31,185  $12,914  $3,279  $7,552  $7,440    $-
Segment Revenues
Management fee              $125      $35     $12     $45     $33    $-
Incentive income              94       84       -       -      10     -
Total                      219      119      12      45      43     -
Segment Expenses
Profit sharing
compensation expenses       (37)     (28)     (1)     (2)     (6)    -
Operating expenses           (64)      (9)     (6)    (19)    (30)    -
Unallocated Expenses          (3)
Total                     (104)     (37)     (7)    (21)    (36)    -
Fund Management DE             115       82       5      24       7     -
Investment Income                3                                      3
Interest Expense                (7)                                    (7)
Pre-tax Distributable
Earnings                     $111      $82      $5     $24      $7   $(4)
Weighted Average Dividend
Paying Shares and Units
Outstanding                   431
Supplemental Data for Nine Months:
Nine Months Ended
September 30, 2008                  Private Equity  Hedge Funds  Principal
Invest-
(in millions)              Total    Funds  Castles Liquid  Hybrid   ments
AUM
AUM - January 1, 2008   $33,234  $13,278  $3,328  $8,128  $8,500     $-
Capital raised          4,955      745       -   2,811   1,399      -
Redemptions(3),(4)     (1,072)       -       -    (599)   (473)     -
Increase in invested
capital                2,629    2,629       -       -       -      -
Return of Capital        (658)    (335)      -      (7)   (316)     -
Reset Date                  -        -       -       -       -      -
Equity buyback            (31)       -     (31)      -       -      -
Crystallized Incentive
Income                  (110)       -       -     (15)    (95)     -
+/- Net Asset Value &
Foreign Exchange rate
change                (4,608)  (2,580)    (42) (1,214)   (772)     -
AUM - Ending Balance    $34,339  $13,737  $3,255  $9,104  $8,243     $-
Third-Party Capital
Raised                    $8,244   $4,034      $-  $2,811  $1,399     $-
Segment Revenues
Management fee             $451     $128     $41    $170    $112     $-
Incentive income             44       13       -      17      14      -
Total                     495      141      41     187     126      -
Segment Expenses
Profit sharing
compensation expenses      (61)      (8)     (4)    (38)    (11)     -
Operating expenses         (225)     (33)    (25)    (78)    (89)     -
Unallocated Expenses          -
Total                    (286)     (41)    (29)   (116)   (100)     -
Fund Management DE            209      100      12      71      26      -
Investment Income             (83)                                    (83)
Interest Expense              (30)                                    (30)
Pre-tax Distributable
Earnings                     $96     $100     $12     $71     $26  $(113)
Weighted Average Dividend
Paying Shares and Units
Outstanding                  450
Nine Months Ended
September 30, 2007                   Private Equity  Hedge Funds Principal
Invest-
(in millions)               Total    Funds  Castles Liquid  Hybrid  ments
AUM
AUM - January 1, 2007    $20,853   $7,539  $2,842  $5,022  $5,450    $-
New capital raised,
increase in invested
capital                11,578    7,609     201   2,235   1,533     -
Return of Capital
(PE) / Redemptions
(Hedge Funds)            (862)    (691)      -    (118)    (53)    -
Reset Date              (1,367)  (1,367)      -       -       -     -
+/- Net Asset Value &
Foreign Exchange rate
change                    983     (176)    236     413     510     -
AUM - Ending Balance     $31,185  $12,914  $3,279  $7,552  $7,440    $-
Segment Revenues
Management fee              $341      $98     $35    $114     $94    $-
Incentive income             544      274      18     158      94     -
Total                      885      372      53     272     188     -
Segment Expenses
Profit sharing
compensation expenses      (242)    (101)     (8)    (89)    (44)    -
Operating expenses          (185)     (22)    (21)    (54)    (88)    -
Unallocated Expenses         (10)
Total                     (437)    (123)    (29)   (143)   (132)    -
Fund Management DE             448      249      24     129      56     -
Investment Income               52                                     52
Interest Expense               (26)                                   (26)
Pre-tax Distributable
Earnings                     $474     $249     $24    $129     $56   $26
Weighted Average Dividend
Paying Shares and Units
Outstanding                   422
(3)  The liquid hedge funds had redemptions of approximately $0.9 billion
on October 1, 2008.  In addition, the liquid hedge funds have
received notice of an additional $1.7 billion in redemptions which
would become payable on or before the end of January 2009.
(4)  The hybrid hedge funds, which have an annual notice date for
redemptions, received notice of $1.9 billion of redemptions effective
December 31, 2008.  Redemptions will be paid out over time as the
underlying investments are liquidated, in accordance with the
governing documents of the applicable funds.

Overview

We manage $34.3 billion of assets in private equity funds and hedge funds as of September 30, 2008. Fortress's revenues consist of (i) management fees, which are based on the size of our funds, (ii) incentive income, which is based on the performance of our funds, and (iii) investment income, which is based on our principal investments.

In the third quarter of 2008, we generated fund management DE of $63 million. After principal investments, Fortress generated pre-tax distributable earnings of a loss of $20 million for the quarter ended September 30, 2008. These results include $50 million in non-cash impairments.

For the quarter ended September 30, 2008, the private equity segments accounted for approximately 27% of total segment revenues and the hedge fund segments accounted for approximately 73% of total segment revenues.

For the quarter ended September 30, 2008, the private equity and hedge fund businesses accounted for approximately 35% and 65%, respectively, of total fund management DE.

Private Equity - Funds

For the quarter ended September 30, 2008, the Company's private equity funds generated $18 million of pre-tax distributable earnings as compared to $82 million for the quarter ended September 30, 2007.

Assets under management as of September 30, 2008 increased 6.4% to $13.7 billion from $12.9 billion as of September 30, 2007.

As of September 30, 2008, our funds' private equity capital invested in non-public transactions totaled approximately $11 billion, and our private equity funds' unfunded commitments were approximately $495 million.

Private Equity - Castles

For the quarter ended September 30, 2008, the Company's Castles generated $4 million of pre-tax distributable earnings as compared to $5 million for the quarter ended September 30, 2007.

Assets under management remained stable at $3.3 billion from September 30, 2007 to September 30, 2008.

Liquid Hedge Funds

For the quarter ended September 30, 2008, the Company's liquid hedge fund business generated $26 million of pre-tax distributable earnings as compared to $24 million for the quarter ended September 30, 2007.

Assets under management increased 20.6% to $9.1 billion as of September 30, 2008 from $7.6 billion as of September 30, 2007. September 30 redemption notices (which are taken into account for purposes of AUM as of October 1, 2008) were approximately $0.9 billion. We have received notices of approximately $1.7 billion in additional redemptions to date.

    The following table shows our Assets Under Management by fund:
(dollars in billions)         September 30,    December 31, September 30,
2008            2007          2007
Drawbridge Global
Macro Funds(5)                    $8.0            $8.1          $7.6
Fortress Commodities Fund(6)       $1.1            $0.0          $0.0
The following table shows our gross and net returns by fund: (7)
Three Months Ended  Nine Months Ended
September 30, 2008  September 30, 2008
Gross Returns(8)
Drawbridge Global Macro Fund Ltd.      -10.6%            -12.2%
Fortress Commodities Fund LP            -1.1%             11.1%
Net Returns(8)
Drawbridge Global Macro Fund Ltd.      -11.1%            -13.5%
Fortress Commodities Fund LP            -1.6%              7.2%

Hybrid Hedge Funds

For the quarter ended September 30, 2008, the Company's hybrid hedge fund business generated $15 million of pre-tax distributable earnings as compared to $7 million for the quarter ended September 30, 2007.

Assets under management increased 10.8% to $8.2 billion as of September 30, 2008 from $7.4 billion as of September 30, 2007. The hybrid hedge funds, which have an annual notice date for redemptions, received notice of $1.9 billion of redemptions effective December 31, 2008. Redemptions will be paid out over time as the underlying investments are liquidated, in accordance with the governing documents of the applicable funds.

    The following table shows our  Assets Under Management by fund:
(dollars in billions)         September 30,    December 31, September 30,
2008            2007          2007
Drawbridge Special
Opportunities Funds(9)            $6.4            $6.8          $6.3
Fortress Partners Funds(10)        $1.8            $1.7          $1.1
The following table shows our gross and net returns by fund: (11)
Three Months Ended  Nine Months Ended
September 30, 2008  September 30, 2008
Gross Returns(12)
Drawbridge Special Opportunities LP          -4.6%              -4.3%
Drawbridge Special Opportunities Ltd         -4.6%              -5.5%
Fortress Partners Fund LP                   -12.4%             -15.5%
Fortress Partners Offshore Fund LP           -9.9%             -11.5%
Net Returns(12)
Drawbridge Special Opportunities LP          -5.1%              -5.7%
Drawbridge Special Opportunities Ltd         -5.1%              -7.2%
Fortress Partners Fund LP                   -12.8%             -16.5%
Fortress Partners Offshore Fund LP          -10.3%             -12.5%
(5)  Consolidated AUM for Drawbridge Global Macro Fund Ltd, Drawbridge
Global Macro Fund LP and Drawbridge Global Macro Managed Accounts.
(6)  Fund commenced operations in January 2008.
(7)  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 any fees borne by the Fund while net
returns reflect performance data after taking into account any fees
borne by the Fund.  Specific performance may vary based on, among
other things, whether fund investors are invested in one or more
Special Investments.
(8)  Estimated Gross October 2008 returns are as follows: Drawbridge
Global Macro fund Ltd. -7.3%, Fortress Commodities Fund LP 1.4%.
Estimated Net October 2008 returns are as follows: Drawbridge Global
Macro fund Ltd. -7.4%, Fortress Commodities Fund LP 1.2%.
(9)  Consolidated AUM for Drawbridge Special Opportunities Fund Ltd.,
Drawbridge Special Opportunities Fund LP and Drawbridge Special
Opportunities Fund Managed Accounts.
(10) Consolidated AUM for Fortress Partners Offshore Fund LP and Fortress
Partners Fund LP.
(11) Estimated Gross October 2008 returns are as follows: Fortress
Partners Fund LP -10.7%, Fortress Partners Fund Ltd -8.5%, Drawbridge
Special Opportunities LP -9.6%, Drawbridge Special Opportunities Ltd
-9.3%.  Estimated Net October 2008 returns are as follows: Drawbridge
Special Opportunities LP -9.8%, Drawbridge Special Opportunities Ltd
-9.5%, Fortress Partners Fund LP -10.7%, Fortress Partners Offshore
Fund LP - 8.6%.
(12) 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 any fees borne by the Fund while net
returns reflect performance data after taking into account any fees
borne by the Fund.  Specific performance may vary based on, among
other things, whether fund investors are invested in one or more
Special Investments.

Principal Investments

At September 30, 2008, we had $1.0 billion of assets (excluding $0.3 billion of cash and cash equivalents) in our principal investments segment, compared to $1.0 billion (excluding $0.2 billion of cash and cash equivalents) at September 30, 2007. During the three months ended September 30, 2008, we increased our commitments to our principal investments by $24 million and funded $54 million of our commitments. We had $154 million of unfunded commitments to our principal investments as of September 30, 2008.

Our principal investments segment generated a loss of $83 million for the three months ended September 30, 2008, due to impairments of $50 million on our investments in a number of our private equity funds, a $23 million loss on the mark to market value of our investments in our hedge funds and $10 million of net interest expense.

Segment Expenses

Segment expenses were $90 million in the third quarter of 2008, down from $104 million from the third quarter of 2007. Segment expenses for the third quarters of 2008 and 2007 included $9 million and $37 million of profit sharing compensation, respectively, which is a function of the performance of various funds.

Fortress's headcount increased by approximately 2.3% since the second quarter of 2008. As of September 30, 2008, the firm and its affiliates employed 900 people around the world.

The Company had $298 million of share-based compensation expense (primarily relating to expense recorded in connection with the principals agreement, the issuance of restricted stock units to Fortress employees in the IPO, and the issuance of restricted partnership units) for the quarter ended September 30, 2008, which contributed to our reporting a GAAP net loss per share. Share-based compensation expense is not included in segment expenses or in the calculation of distributable earnings.

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 the accompanying financial information:

-- Pre-tax distributable earnings (DE)
-- Fund management DE
-- Segment revenues
-- Segment management fees
-- GAAP net income excluding principals agreement compensation
-- Segment assets

We urge you to read the reconciliation of such data to the related GAAP measures appearing later in this release.

Conference Call

Management will host a conference call today, Thursday, November 13, 2008 at 8:00 AM eastern time. A copy of the earnings release and an online presentation will be 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 1-877-252-8576 (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 Third Quarter Earnings Call." A simultaneous webcast of the conference call will be available to the public on a listen-only basis at www.fortress.com. Please allow extra time prior to the call to visit the site and download the necessary software required to listen to the internet broadcast.

A telephonic replay of the conference call will also be available until 11:59 P.M. eastern time on Friday, November 21, 2008 by dialing 1-800-642-1687 (from within the U.S.) or 1-706-645-9291 (from outside of the U.S.); please reference access code "70216393."

Fortress is a leading global alternative asset manager with approximately $34.3 billion in assets under management as of September 30, 2008. Fortress manages private equity funds and hedge funds. Fortress was founded in 1998. For more information regarding Fortress Investment Group LLC or to be added to our 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 our sources of management fees, incentive income and investment income, estimated fund performance, the amount and source of expected capital commitments, amount of redemptions and our effective tax rate. 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, redemption amounts or our effective tax rate may differ, possibly materially, from these forward-looking statements, and any such differences could cause our actual results to differ materially from the results expressed or implied by these forward-looking statements. 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 Annual Report on Form 10-K and Quarterly Report on Form 10-Q, each of 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.

Fortress Investment Group LLC
(Prior to January 17, 2007, Fortress Operating Group)
Consolidated and Combined Statements of Operations (Unaudited)
(dollars in thousands, except share data)
Three Months Ended        Nine Months Ended
September 30,             September 30,
2008         2007         2008         2007

Revenues

Management fees from
affiliates             $154,266     $124,991     $447,928     $286,956
Incentive income from
affiliates                  718      106,690       56,162      283,879
Other revenues            30,152       15,601       70,022       51,866
Interest and dividend
income  - investment
company holdings
Interest income              -            -            -      243,713
Interest income from
controlled affiliate
investments                 -            -            -        4,707
Dividend income              -            -            -        7,436
Dividend income from
controlled affiliate
investments                 -            -            -       53,174
185,136      247,282      574,112      931,731
Expenses
Interest expense
Investment company
holdings                    -            -            -      132,620
Other                    9,481        7,285       29,705       26,016
Compensation and
benefits                134,774      101,703      399,253      507,003
Principals agreement
compensation            239,976      232,048      714,710      612,981
General,
administrative and
other                    23,536       17,412       59,852       80,320
Depreciation and
amortization              2,437        2,230        7,309        6,423
410,204      360,678    1,210,829    1,365,363
Other Income (Loss)
Gains (losses) from
investments
Investment company
holdings
Net realized gains
(losses)                  -            -            -       86,264
Net realized gains
(losses) from
controlled
affiliate
investments               -            -            -      715,024
Net unrealized gains
(losses)                  -            -            -      (19,928)
Net unrealized gains
(losses) from
controlled
affiliate
investments               -            -            -   (1,428,837)
Other investments
Net realized gains
(losses)             (2,477)         777         (803)         831
Net realized gains
(losses) from
affiliate
investments            (671)      (2,475)        (516)     143,017
Net unrealized gains
(losses)                  -       (1,921)           -       (2,597)
Net unrealized gains
(losses) from
affiliate
investments          (6,951)     (54,579)     (43,352)    (221,745)
Earnings (losses) from
equity method
investees               (37,921)     (30,716)    (113,550)     (23,289)
(48,020)     (88,914)    (158,221)    (751,260)
Income (Loss) Before
Deferred Incentive
Income, Principals' and
Others' Interests in
Income of Consolidated
Subsidiaries and
Income Taxes             (273,088)    (202,310)    (794,938)  (1,184,892)
Deferred incentive
income                        -            -            -      307,034
Principals' and
others' interests in
(income) loss of
consolidated
subsidiaries            210,012      152,534      612,692      854,550
Income (Loss) Before
Income Taxes              (63,076)     (49,776)    (182,246)     (23,308)
Income tax benefit
(expense)                 5,636       12,219          333       (7,237)
Net Income (Loss)         $(57,440)    $(37,557)   $(181,913)    $(30,545)
Dividends declared per
Class A share                  $-      $0.2250      $0.4500      $0.6174
Earnings Per Unit -                                              January 1
Fortress Operating                                               through
Group                                                          January 16
Net income per
Fortress Operating
Group unit                                                         $0.36
Weighted average
number of Fortress
Operating Group
units outstanding                                            367,143,000
Earnings Per Class A                                            January 17
share - Fortress                                                through
Investment Group                                             September 30
Net income (loss) per
Class A share, basic       $(0.61)      $(0.41)      $(1.96)      $(1.83)
Net income (loss) per
Class A share,
diluted                    $(0.66)      $(0.52)      $(1.97)      $(1.83)
Weighted average
number of Class A
shares outstanding,
basic                  94,938,434   94,894,636   94,915,666   91,255,519

Weighted average

number of Class A

shares outstanding,

     diluted               407,009,984  406,966,186  406,987,216   91,255,519
Fortress Investment Group LLC
Consolidated Balance Sheets
(dollars in thousands, except share data)
September 30,      December 31,
2008              2007
(Unaudited)
Assets
      Cash and cash equivalents                 $259,252          $100,409
Due from affiliates                         49,429           198,669
Investments
Equity method investees                  949,709         1,091,918
Options in affiliates                        137            16,001
Deferred tax asset                         517,578           511,204
Other assets                                78,772            71,580
$1,854,877        $1,989,781

Liabilities and Shareholders' Equity

Liabilities

      Accrued compensation and benefits         $146,702          $269,324
Due to affiliates                          395,508           455,734
Dividends payable                                -            21,285
Deferred incentive income                  163,635           173,561
Debt obligations payable                   750,000           535,000
Other liabilities                           57,726            36,729
1,513,571         1,491,633

Commitments and Contingencies

Principals' and Others' Interests in

Equity of Consolidated Subsidiaries 174,854 308,023

Shareholders' Equity

      Class A shares, no par value,
1,000,000,000 shares authorized,
94,609,525 and 94,597,646 shares
issued and outstanding at
September 30, 2008 and
December 31, 2007, respectively.                -                 -
Class B shares, no par value,
750,000,000 shares authorized,
312,071,550 shares issued and
outstanding                                     -                 -
Paid-in capital                            538,619           384,700
Retained earnings (accumulated
deficit)                                 (373,004)         (193,200)
Accumulated other comprehensive
income (loss)                                 837            (1,375)
166,452           190,125
$1,854,877        $1,989,781
Fortress Investment Group LLC
(Prior to January 17, 2007, Fortress Operating Group)
Reconciliation of Fund Management DE to Pre-tax Distributable
Earnings and GAAP Net Income (Loss)
(dollars in millions)
Three Months Ended
September 30,    September 30,
2008             2007
Fund Management DE                                 $63              $115
Investment Income (Loss)                        (73)                3
Interest Expense                                (10)               (7)
Pre-tax Distributable Earnings                     (20)              111
Private equity incentive income                   1                23
Hybrid hedge fund incentive income                -                (9)
Castle option incentive income                    -                 -
Reserve for clawback                             16                 -
Castle options management fee                     -                 -
Distributions of earnings from
equity method investees                          -                (2)
Earnings from equity method investees           (13)              (31)
Gains/losses on options                          (1)              (58)
Gains/losses on other Investments                (6)                -
Impairment of investments                        50                 -
Employee equity-based compensation              (58)              (32)
Principal compensation                         (240)             (232)
Employee portion of incentive income              -                25
Principals' interest in income of
consolidated subsidiaries                      208               155
Taxes                                             6                12
GAAP Net Income (Loss)(13)                        $(57)             $(38)
Nine Months Ended
September 30,   September 30,
2008             2007
Fund Management DE                                $209              $448
Investment Income (Loss)                        (83)               52
Interest Expense                                (30)              (26)
Pre-tax Distributable Earnings                      96               474
Private equity incentive income                  10                44
Hybrid hedge fund incentive income                -               (92)
Castle option incentive income                    -                 -
Reserve for clawback                             16                 -
Castle options management fee                     -                 2
Distributions of earnings from
equity method investees                          -               (14)
Earnings from equity method investees           (81)              (50)
Gains/losses on options                         (16)              (83)
Gains/losses on other Investments               (27)                -
Impairment of investments                        60                 -
Employee equity-based compensation             (147)              (99)
Principal compensation                         (715)             (613)
Employee portion of incentive income             10                 5
Principals' interest in income of
consolidated subsidiaries                      612               402
Taxes                                             -                (7)
GAAP Net Income (Loss)(13)                       $(182)             $(31)

(13) We had GAAP net income of $133.4 million for the period from

         January 1, 2007 through January 16, 2007 and a GAAP net loss of
$163.9 million for the period from January 17, 2007 through
September 30, 2007.
Fortress Investment Group LLC
(Prior to January 17, 2007, Fortress Operating Group)
 Reconciliation of Segment Revenues to GAAP Revenues & Segment Assets to GAAP
                                    Assets
(dollars in millions)
Three Months Ended
September 30,     September 30,
2008              2007
Segment Revenues                                  $153              $219
Adjust management fees                          (2)                -
Adjust incentive income                          4                13
Adjust income from the receipt of options        -                 -
Other revenues                                  30                16
Consolidation and elimination                    -                 -
GAAP Revenues                                     $185              $248
Nine Months Ended
September 30,     September 30,
2008              2007
Segment Revenues                                  $495              $885
Adjust management fees                          (3)               (2)
Adjust incentive income                         13               (49)
Adjust income from the receipt of options        -                 2
Other revenues                                  69                48
Consolidation and elimination                    -                48
GAAP Revenues                                     $574              $932
Assets as of
September 30,     September 30,
2008               2007
Segment Assets                                  $1,887            $1,740
Equity investments from fair value
to equity method                                 -               (37)
Equity investments from cost to
equity method                                  (65)               24
Equity investments from net to
gross of employees interests                    33                73
Option investments from intrinsic
value to fair value                              -                 8
GAAP Assets                                     $1,855            $1,808

"Distributable earnings" is our 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 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 our 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 our financial statements included in our Quarterly Report on Form 10-Q for the quarter ended September 30, 2008.

    Our management uses distributable earnings:
-- in its determination of periodic distributions to equity holders;
-- in making operating decisions and assessing the performance of each of
our core businesses;
-- for planning purposes, including the preparation of our annual
operating budgets; and
-- as a valuation measure in strategic analyses in connection with the
performance of our funds and the performance of our employees.

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

                        Fortress Investment Group LLC
(Prior to January 17, 2007, Fortress Operating Group) Reconciliation of GAAP
               Net Income (Loss) Excluding Principals Agreement
Compensation to GAAP Net Income (Loss)
(dollars in thousands)
Three months ended  Nine months ended
September 30, 2008  September 30, 2008
GAAP net loss                             $(57,440)          $(181,913)
Principals agreement compensation          239,976             714,710
Portion not allocable to public
shareholders                         (184,157)           (548,468)
GAAP net loss excluding principals
agreement compensation                    $(1,621)           $(15,671)

SOURCE Fortress Investment Group LLC

Contact: Lilly H. Donohue, +1-212-798-6118