S-1/A 1 file1.htm Table of Contents

As filed with the Securities and Exchange Commission on February 2, 2007

Registration No. 333-138514

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Amendment No. 4
to

FORM S-1

REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

FORTRESS INVESTMENT GROUP LLC

(Exact name of registrant as specified in its charter)


Delaware 6282 20-5837959
(State or Other Jurisdiction of
Incorporation or Organization)
(Primary Standard Industrial
Classification Code Number)
(I.R.S. Employer
Identification No.)
  1345 Avenue of the Americas
46th Floor
New York, New York 10105
(212) 798-6100
 

(Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant’s
Principal Executive Offices)

Alan Chesick, Esq.
General Counsel
Fortress Investment Group LLC
1345 Avenue of the Americas
46th Floor
New York, New York 10105
(212) 798-6100

(Name, Address, Including Zip Code, and Telephone Number, Including Area Code, of Agent For Service)


  Copies to:  
Joseph A. Coco, Esq.
Skadden,   Arps,  Slate,  Meagher  &  Flom  LLP
Four Times Square
New York, New York 10036-6522
(212) 735-3000
  Edward F. Petrosky, Esq.
J. Gerard Cummins, Esq.
Sidley Austin LLP
787 Seventh Avenue
New York, New York 10019
(212) 839-5300

Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this registration statement.

If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box.   [ ]

If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of earlier effective registration statement for the same offering. [ ]

If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ]

If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ]

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.




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The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities, and we are not soliciting offers to buy these securities, in any state or other jurisdiction where the offer or sale is not permitted.

Subject to completion, dated February 2, 2007.

PROSPECTUS

Fortress Investment Group LLC

34,286,000 Class A Shares
Representing Class A Limited Liability Company Interests

This is the initial public offering of our Class A shares representing Class A limited liability company interests. We are selling all of the Class A shares in this offering. None of our five principals will be selling any shares in this offering.

Prior to this offering there has been no public market for our Class A shares. It is currently estimated that the public offering price per Class A share will be between $16.50 and $18.50. We have applied to list our Class A shares on the New York Stock Exchange under the symbol ‘‘FIG’’.

Our five principals will own all of our outstanding Class B shares representing Class B limited liability company interests upon completion of this offering. Holders of our Class B shares will vote together with holders of our Class A shares on all matters to be voted on by our shareholders generally. All shareholders will be entitled to one vote per share. Accordingly, following this offering, our principals will hold approximately 77.7% of the total combined voting power of our outstanding Class A and Class B shares and will be able to exercise control over all matters requiring shareholder approval. In addition, our principals will have certain approval rights with respect to several extraordinary matters or structural changes. See ‘‘Description of Shares’’ beginning on page 198.


  Per Class A
Share
Total
Initial public offering price $ $
Underwriting discount $ $
Proceeds to us (before expenses) $ $

To the extent that the underwriters sell more than 34,286,000 Class A shares, the underwriters have the option to purchase up to an additional 5,142,900 Class A shares from us at the initial public offering price less the underwriting discount.

Investing in our Class A shares involves a high degree of risk. See ‘‘Risk Factors’’ beginning on page 30.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

The underwriters expect to deliver the Class A shares against payment in New York, New York on                 , 2007.


 
Goldman, Sachs & Co.   Lehman Brothers
  
Banc of America Securities LLC Citigroup Deutsche Bank Securities

Bear, Stearns & Co. Inc.     Lazard Capital Markets     Merrill Lynch & Co.     Morgan Stanley     Wells Fargo Securities

                , 2007




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As used in this prospectus, unless the context otherwise requires:

‘‘Assets Under Management’’, or ‘‘AUM’’, refers to the assets we manage, including capital we have the right to call from our investors pursuant to their capital commitments to various funds. Our AUM equals the sum of:

(i)  the net asset value, or ‘‘NAV’’, of our private equity funds plus the capital that we are entitled to call from investors in the private equity funds pursuant to the terms of their capital commitments to those funds;
(ii)  the NAV of our hedge funds; and
(iii)  the market capitalization of the common stock of each of our publicly traded alternative investment vehicles, which we refer to as our Castles.

We earn management fees pursuant to management agreements on a basis which varies from Fortress Fund to Fortress Fund (e.g. any of ‘‘net asset value’’, ‘‘capital commitments’’, ‘‘invested equity’’ or ‘‘gross equity’’, each as defined in the applicable management agreement, may form the basis for a management fee calculation). Our calculation of AUM may differ from the calculations of other asset managers and, as a result, this measure may not be comparable to similar measures presented by other asset managers. Our AUM measure includes, for instance, assets under management for which we charge either no or nominal fees, generally related to our principal investments in funds as well as investments in funds by our principals and employees. Our definition of AUM is not based on any definition of assets under management contained in our operating agreement or in any of our Fortress Fund management agreements.

‘‘Fortress’’, ‘‘we’’, ‘‘us’’, ‘‘our’’, and the ‘‘company’’ refer, (i) following the consummation of this offering and related transactions, collectively, to Fortress Investment Group LLC and its subsidiaries, including the Fortress Operating Group and all of its subsidiaries, and, (ii) prior to the completion of this offering and related transactions, to the Fortress Operating Group and all of its subsidiaries, in each case not including funds that, prior to the consummation of this offering, were consolidated funds, except with respect to our historical financial statements and discussion thereof unless otherwise specified.

‘‘Fortress Funds’’ and ‘‘our funds’’ refers to the private investment funds and alternative asset companies which are managed by the Fortress Operating Group.

‘‘Fortress Operating Group’’ refers to the combined entities (which prior to the completion of the Nomura transaction described in ‘‘Prospectus Summary—Nomura Transaction’’ were wholly-owned by our principals) in each of which Fortress Investment Group LLC acquired an indirect controlling interest upon completion of the Nomura transaction.

‘‘principals’’ refers to Peter Briger, Wesley Edens, Robert Kauffman, Randal Nardone and Michael Novogratz, collectively, who prior to the completion of this offering and the Nomura transaction directly owned 100% of the Fortress Operating Group units and following completion of this offering and the Nomura transaction will own approximately 77.7% of the Fortress Operating Group units and all of the Class B shares, representing approximately 77.7% of the total combined voting power of all of our outstanding Class A and Class B shares.

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PROSPECTUS SUMMARY

This summary highlights information contained elsewhere in this prospectus. This summary sets forth the material terms of this offering, but does not contain all of the information that you should consider before investing in our Class A shares. You should read the entire prospectus carefully, including the section entitled ‘‘Risk Factors’’, our financial statements and the related notes and management’s discussion and analysis thereof included elsewhere in this prospectus, before making an investment decision to purchase our Class A shares. Unless otherwise indicated, the information contained in this prospectus assumes that the underwriters’ option to purchase additional shares is not exercised, assumes that the Class A shares to be sold in this offering are sold at $17.50 per share, the mid-point of the range set forth on the cover page of this prospectus and excludes 102,858 restricted Class A shares and 50,920,503 restricted Class A share units that will be issued to certain employees and directors in connection with this offering.

Our Company

Fortress is a leading global alternative asset manager with approximately $29.9 billion in assets under management as of September 30, 2006. We raise, invest and manage private equity funds, hedge funds and publicly traded alternative investment vehicles. We earn management fees based on the size of our funds, incentive income based on the performance of our funds, and investment income from our principal investments in those funds. We believe our funds have produced consistently superior investment returns. We intend to grow our existing businesses, while continuing to create innovative products to meet the increasing demand of sophisticated investors for superior risk-adjusted investment returns. Investors in the company’s Class A shares should note that:

•  The company was formed to act as a holding company that will hold interests in a number of limited partnerships we refer to as the Fortress Operating Group. The company and the Fortress principals will share in the profits (and losses) of the Fortress Operating Group in proportion to their ownership interests. Fortress Operating Group units held by the company and the principals will be economically identical in all respects. The principals will receive distributions on their Fortress Operating Group units and will not receive any management fees or incentive fees from our funds.
•  On January 17, 2007, Nomura Investment Managers U.S.A., Inc., or ‘‘Nomura’’, a subsidiary of Nomura Holdings, acquired for $888.0 million 55,071,450 Class A Shares representing, immediately prior to this offering, 15% of the Fortress Operating Group. The company used the entire proceeds of the issuance to acquire a 15% interest in Fortress Operating Group from Fortress’s principals. Upon completion of this offering, Nomura’s shares will represent approximately 13.7% of the Fortress Operating Group. In connection with the closing, we entered into an Investor Shareholder Agreement pursuant to which we granted Nomura certain demand registration rights. See ‘‘Certain Relationships and Related Party Transactions — Investor Shareholder Agreement.’’
•  Following the Nomura transaction and this offering, all of Fortress’s business activities will continue to be conducted by, and all of its principal assets will continue to be held by, the Fortress Operating Group.
•  Upon completion of this offering, Fortress’s principals will directly own approximately 77.7% of the Fortress Operating Group and the holders of Class A shares (including Nomura) will, through their interest in the company, indirectly own approximately 22.3% of the Fortress Operating Group, 8.6% of which will be owned by the public.
•  The principals’ Fortress Operating Group units, which are non-voting interests, are exchangeable (together with the corresponding Class B shares) on a one-for-one basis into Class A shares.

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•  The principals will also own a number of the company’s Class B shares equal to the number of their Fortress Operating Group units. These Class B shares, which have no economic interest in the company, vote together with the Class A shares and will enable the principals to maintain voting and operating control of the company and the businesses we conduct.

Fortress was founded in 1998 as an asset-based investment management firm with a fundamental philosophy premised on alignment of interests with the investors in our funds. Our managed funds primarily employ absolute return strategies; we strive to have positive returns regardless of the performance of the markets. Investment performance is our cornerstone – as an investment manager, we earn more if our investors earn more. In keeping with our fundamental philosophy, we invest capital in each of our businesses. As of September 30, 2006, Fortress’s investments in and commitments to our funds were $495.6 million, consisting of the net asset value of Fortress’s principal investments of $426.9 million, and unfunded commitments to private equity funds of $68.7 million. We make investments in our private equity funds by making capital commitments to the funds when they are raised, which amounts are drawn down over time as investments are made by the funds.

Fortress will be the first global alternative asset manager listed on the New York Stock Exchange (NYSE: FIG). Fortress Operating Group will continue to own all of the businesses created by Fortress since 1998. We believe this offering is a unique opportunity to become aligned with our principals: Wesley Edens, Peter Briger, Robert Kauffman, Randal Nardone and Michael Novogratz. Our principals’ investing success has enabled us to grow rapidly while diversifying our management fee and incentive income streams. Our net income grew from $40.3 million for 2003 to $192.7 million for 2005, a 119% compounded annual growth rate.

We are an intellectual capital business. The management of alternative assets is a highly specialized undertaking that demands talent, skill and experience. Our success depends on our more than 250 investment professionals. With headquarters in New York and affiliate offices in Dallas, San Diego, Toronto, London, Rome, Frankfurt and Sydney, we are well positioned to capitalize on the growing demand for alternative asset management services on a global basis.

We have grown our assets under management significantly, from approximately $1.2 billion as of December 31, 2001 to approximately $29.9 billion as of September 30, 2006, or a 96.8% compounded annual growth rate. We will continue to strategically grow our assets under management and will seek to generate superior risk-adjusted investment returns in our funds over the long term solidifying our status as what we believe to be a best-of-class global alternative asset management enterprise. We are guided by the following key objectives and values:

•  generating top-tier risk-adjusted investment returns;
•  introducing innovative new investment products, while remaining focused on, and continuing to grow, our existing lines of business;
•  maintaining our disciplined investment process and intensive asset management; and
•  adhering to the highest standards of professionalism and integrity.

Why We Are Going Public

In order to maintain and expand our position as a leading global alternative asset manager, we need people, permanence, capital and currency. As a public company, we will be best positioned to meet each of these goals:

•  People — to increase our ability to provide financial incentives to our existing and future employees through the issuance of publicly-traded equity securities that represent the value and performance of the company as a whole. In a highly competitive market for investment professional talent, publicly-traded equity securities provide us with a valuable additional compensation tool;

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•  Permanence — to solidify our institutional presence as an ‘‘investor.’’ Being a public alternative asset manager will benefit us as institutions and individuals increase the portion of the capital they allocate to us;
•  Capital — to more efficiently access capital that we can use to grow our businesses and create new investment products; and
•  Currency — to provide us with a publicly-traded equity security that we can use to finance future strategic acquisitions.

Our Current Businesses

As of September 30, 2006, we managed approximately $29.9 billion of alternative assets in three core businesses:

Private Equity Funds — a business that manages approximately $17.5 billion of AUM that primarily makes significant, control-oriented investments in North America and Western Europe, with a focus on acquiring and building asset-based businesses with significant cash flows. We also manage a family of ‘‘long dated value’’ funds focused on investing in undervalued assets with limited current cash flows and long investment horizons;

Hedge Funds — a business that manages approximately $9.4 billion of AUM comprised of two business segments: (i) hybrid hedge funds – which make highly diversified investments globally in undervalued and distressed assets, including loans, assets and corporate securities; and (ii) liquid hedge funds – which invest globally in fixed income, currency, equity and commodity markets and related derivatives to capitalize on imbalances in the financial markets; and

Publicly Traded Alternative Investment Vehicles, which we refer to as ‘‘Castles’’ — approximately $3.0 billion of aggregate market capitalization in two publicly traded companies managed by us. The Castles currently invest primarily in real estate and real estate debt instruments.

Our Growth Strategy

Our focus is to create long term value for our shareholders and to grow our dividends on an annual basis. We will raise capital (and correspondingly increase our assets under management) only when we believe appropriate investment opportunities are available. Accordingly, we intend to pursue the following initiatives:

Continue to Generate Strong Investment Performance in our Existing Managed Funds.    We believe the most effective strategy for continuing the growth of our businesses is to align our economic interests with those of our investors and to deliver strong investment performance. Crucial to this strategy is our ability to devote time, attention, energy, resources and expertise to effectively manage our assets under management. In particular, we believe that our highly disciplined investment process, intensive credit analysis and fundamental research, and our ‘‘hands-on’’ approach to asset management and risk management will enable us to continue to create value in and maintain the solid performance of the Fortress Funds.

Selectively Expand our Investment Products.    We intend to raise additional funds within our existing businesses and to selectively diversify our business into new alternative asset strategies. We have a broad base of institutional and high net worth individual investors who have traditionally supported our new business initiatives. We believe opportunities exist to raise capital for infrastructure funds, real estate funds, structured debt products and funds focused on industry or geographic sectors within our investment expertise. In addition, we believe that we are well positioned to explore a number of traditional asset management strategies, such as equity funds, that capitalize on the strengths of our investment professionals.

In addition, we expect that we will be able to selectively and opportunistically pursue acquisitions that will add to our investment team’s expertise and product offerings. We believe a number of

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smaller, successful alternative asset managers will seek the infrastructure, resources and investor relationships available within a larger, more established and independent alternative asset manager.

Competitive Strengths

By taking advantage of what we perceive as our competitive strengths, we expect to continue to grow our asset management business and consistently deliver superior returns for our investors:

•  Distinguished Investment Track Record.    We believe that our funds have produced superior investment returns consistently, and have earned Fortress a reputation as a top-tier firm that is able to deliver strong and consistent performance across industries, geographic regions and economic cycles. A defining feature of our investing approach has been our ability to deliver these returns while also minimizing the risk of investment loss;
•  Alignment with Our Investors.    In keeping with our fundamental philosophy premised on an alignment of interest with our investors, we invest capital in each of our businesses. As of September 30, 2006, the net asset value of Fortress’s principal investments in, and the amount of our unfunded commitments to, our funds was approximately $495.6 million. We make investments in our funds by making capital commitments to the funds when they are raised, which amounts are drawn down over time as investments are made by the funds. In addition, a significant portion of the compensation of our senior investment professionals is based on the performance of our investment funds;
•  People.    We have assembled a team of more than 250 investment professionals to deliver focused idea generation and execution across our businesses. The team is led by our five principals, who have participated in investment activities together in various capacities for many years. The success and dynamism of the company, and our investment-oriented culture, help us attract and retain the highest quality, result-driven people;
•  Global Platform.    We invest broadly in multiple geographic markets. We believe that our ability to successfully translate our investment strategies into various geographic markets allows us to take advantage of a diverse range of opportunities and provides us with attractive opportunities to deploy capital on behalf of our funds;
•  Dividend Policy.    We intend to pay out quarterly dividends in amounts that reflect management’s view of our financial performance. However, no assurance can be given that any dividends, whether quarterly or otherwise, will or can be paid. We believe that the payment of dividends, and our intent to increase our dividends on a basis commensurate with improvements in the company’s financial performance, will provide transparency to our Class A shareholders and will impose upon us an investment discipline with respect to new products, businesses and strategies;
•  Strong Investor Base with Efficient Distribution. The entities and individuals that invest in our funds, which we refer to as ‘‘our investors,’’ include many of the largest pension funds, university endowments, and financial institutions, as well as individuals. We manage capital for approximately 650 investors in our private equity funds and hedge funds. Many of our investors are invested in multiple Fortress Funds, and have invested in new products at launch. We believe that our deep investor relationships, founded on our consistent performance, disciplined and prudent management of our investors’ capital and emphasis on clear, responsive investor communication, make it easier for us to grow our existing businesses and launch new businesses. In addition, the strong performance of the companies whose initial public offerings we have sponsored, including our Castles and certain portfolio companies of our private equity funds, has earned us brand recognition as a financial sponsor and support among institutional public equity investors, which should positively affect our ongoing ability to capitalize new businesses in the public markets; and

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•  Long-Standing Relationships. We manage diverse and highly transactional businesses, and therefore we are continuously active in the capital markets on behalf of our funds as both an issuer and investor. We have close relationships with key financing sources and capital market intermediaries that have augmented our ability to execute transactions in various businesses. We have long-standing relationships with business and financial leaders that are also crucial to the success of our transactional businesses.

Distributions to the Principals Prior to this Offering

Prior to the acquisition by Fortress Investment Group LLC of an interest in the Fortress Operating Group in connection with the closing of the Nomura transaction, 100% of the Fortress Operating Group was owned by the principals. Distributions in 2006 to the principals in respect of their Fortress Operating Group units totaled approximately $446.9 million, of which $97.2 million, $109.2 million, $66.4 million, $69.7 million and $104.4 million was distributed to Mr. Briger, Mr. Edens, Mr. Kauffman, Mr. Nardone and Mr. Novogratz, respectively. These distributions include a portion of the proceeds from the collection of receivables reflected on our pro forma balance sheet as of September 30, 2006 as ‘‘Due from affiliates’’ relating to previously earned fees. See footnote (b) in ‘‘Unaudited Pro Forma Financial Information’’ which discusses the portion of the proceeds from the collection of such receivables to be distributed to the principals.

Fortress Operating Group also made additional distributions to the principals in 2007, prior to the completion of the Nomura transaction, in an amount totaling approximately $409.2 million, of which approximately $372.2 million represented the remaining value of the net proceeds of the collection of these receivables for fees earned in prior periods, including increases in the amount of such receivables for the period between October 1, 2006 through the estimated date of distribution. Of such additional distributions, $98.1 million, $95.1 million, $63.8 million, $59.4 million and $92.8 million was distributed to Mr. Briger, Mr. Edens, Mr. Kauffman, Mr. Nardone and Mr. Novogratz, respectively. The principals will not receive following completion of this offering, any such distributions relating to fees earned prior to this offering.

In addition, we expect that the Fortress Operating Group will distribute to its partners, including the principals and the intermediate holding companies, an aggregate amount corresponding to a $22.8 million dividend on the Class A shares on a diluted basis for each month for the period beginning January 17, 2007 through completion of this offering (prorated for any partial month). Holders of our diluted Class A shares (that is, outstanding Class A shares assuming the exchange of all of the Fortress Operating Group units held by the principals for Class A shares) prior to completion of this offering, namely the principals and Nomura, will receive these distributions based on their relative percentage ownership of Fortress for the period prior to completion of this offering. These distributions will result in Nomura receiving for each month it has held its Class A shares a dividend of approximately $0.06 per Class A share (prorated for any partial month) prior to completion of this offering. These dividends will be paid using cash on hand and may not be indicative of the amount of any future dividends. Purchasers in this offering will not be entitled to receive these dividends.

You should note that the $888.0 million in proceeds resulting from Nomura’s acquisition of its Class A shares was paid to the principals for Fortress Operating Group units and the company did not retain any portion of this $888.0 million.

The principals do not hold (and have not held) in any personal capacity any portion of the right to receive incentive income, or ‘‘carried interest’’, in any fund managed by Fortress and the Fortress Operating Group will not be distributing or otherwise transferring prior to completion of this offering to the principals any such carried interest. The right of a general partner or an investment manager of a fund to receive incentive income, or performance fees, from the fund based on the fund’s performance is often referred to in the alternative asset management industry as the ‘‘carried interest’’ in the fund. A central premise of the principals’ decision to enable public investors to participate in Fortress’s business — by creating a public company that would, through the intermediate holding

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companies, become a partner in the Fortress Operating Group — is that the entirety of their business interests should be owned by the investment management business in which the public is, indirectly, investing. Accordingly, for a variety of reasons, the principals determined that the Fortress Operating Group would continue to hold the entirety of the carried interests of each Fortress-managed fund in which the principals have an economic interest, including all fully invested private equity funds.

The net proceeds of this offering are being used as described in ‘‘Use of Proceeds’’ and are not being distributed to the principals or to Nomura.

Deconsolidation of the Fortress Funds

Investors in Class A shares should note that a large number of significant Fortress Funds have historically been consolidated under GAAP into Fortress’s financial statements, notwithstanding that Fortress has only a minority interest in these funds. As of September 30, 2006, the assets of Fortress Funds consolidated on our balance sheet were $17.7 billion, while the net asset value of Fortress’s principal investments in these consolidated funds was approximately $400.2 million. Consequently, Fortress’s historical financial statements do not reflect the net asset value of Fortress’s principal investments in such funds, but reflect rather the assets, liabilities, revenues, expenses and cash flows of these consolidated Fortress Funds on a gross basis. All management fees and incentive income earned by Fortress from these funds were eliminated as a result of the consolidation of these funds and are reflected on Fortress’s historical financial statements as an increase in Fortress’s allocated share of the net income from these funds.

The company believes that continued consolidation of these funds and elimination, from a financial statement point of view, of a significant portion of its management fee and incentive income revenues results in a presentation of the results of operations of its investment management businesses that differs significantly from the manner in which management evaluates these results of operations. Accordingly, in connection with this offering, each Fortress subsidiary that acts as a general partner of a consolidated Fortress Fund will grant rights to the investors in the fund to provide that a simple majority of the fund’s unrelated investors will be able to liquidate the fund, without cause, in accordance with certain procedures. The granting of these rights will lead to the deconsolidation of the Fortress Funds from our financial statements. For a detailed description of the effects of deconsolidation on our financial statements, see ‘‘Unaudited Pro Forma Financial Information’’.

Since the investors’ interests in these funds, reflected as ‘‘non-controlling interests in consolidated subsidiaries’’ on our historical balance sheets and as ‘‘non-controlling interests in income of consolidated subsidiaries’’ on our historical income statements, will also be eliminated in connection with the deconsolidation, there will be no change in either our equity or net income as a result of the deconsolidation. See ‘‘Unaudited Pro Forma Financial Information.’’

Recent Developments

Although the closing of the accounting records of Fortress and its subsidiaries is not yet completed, management anticipates that our results for the fourth quarter of 2006 will be consistent with the results of the previous nine months.

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Structure and Formation of our Company

The diagram below depicts our organizational structure immediately after the consummation of the Nomura transaction, this offering and related transactions. See ‘‘Our Structure — The Transactions’’.

(1) Investors in this offering will hold 38.4% of the Class A shares, which represent approximately 8.6% of the total combined voting power in Fortress Investment Group LLC and Nomura will hold 61.6% of the Class A shares, which represent approximately 13.7% of the total combined voting power in Fortress Investment Group LLC. These shares represent collectively approximately 22.3% of the Fortress Operating Group units.
(2) The principals hold 100% of the Class B shares, which represent approximately 77.7% of the total combined voting power in Fortress Investment Group LLC. The Class B shares have no economic interest in Fortress Investment Group LLC.
(3) Represents approximately 22.3% of the limited partner interests (voting) and a 100% general partner interest in each of the Operating Entities and in Principal Holdings.
(4) Represents approximately 77.7% of the limited partner interests (non-voting) in each of the Operating Entities and in Principal Holdings.
(5) Excludes the effect of (i) equity interests to be granted under our equity incentive plan to employees and directors in connection with this offering and (ii) the issuance of Class A shares upon the exercise of the underwriters’ option to purchase additional shares, if applicable.

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Assuming the issuance of Class A shares upon the full exercise of the underwriters’ option to purchase additional shares and the vesting of the grant of equity interests to employees and directors under our equity incentive plan of equity interests representing 11.1% of the Class A shares on a fully diluted basis, then, (i) Fortress Investment Group LLC would indirectly own approximately 31.8% of the limited partner interests in the Fortress Operating Group, (ii) investors in this offering would hold approximately 8.6% of the Class A shares on a fully diluted basis and (iii) the principals would hold approximately 68.2% of the limited partner interests in the Fortress Operating Group.

Fortress Investment Group LLC, or the public company.    As a result of the transactions contemplated by this offering and the Nomura transaction, we will become the owner of, and the Class A shareholders (including Nomura and investors in this offering) will therefore have an approximately 22.3% economic interest in the Fortress Operating Group, while the principals will retain an approximately 77.7% economic interest in, the Fortress Operating Group as well as voting and operating control of the public company. You should note, in particular, that:

•  Investors in this offering will own 38.4% of the Class A shares of the public company, which represent 38.4% of the economic interest in the public company but only approximately 8.6% of the voting power of the public company’s shares and 8.6% of the economic interest in the Fortress Operating Group. Nomura will own 61.6% of the Class A shares of the public company, which represents 61.6% of the economic interest in the public company and approximately 13.7% of the combined voting power of the public company’s shares and 13.7% of the economic interest in the Fortress Operating Group.
•  The public company will own, in turn, through two newly formed wholly-owned subsidiaries, which we refer to as our ‘‘intermediate holding companies’’, approximately 22.3% of the Fortress Operating Group units. The public company will also control the Fortress Operating Group by means of general partner interests in the Fortress Operating Group entities which will be owned by these holding companies.
•  The principals will own 100% of the public company’s Class B shares, which will vote together with the Class A shares on a one vote per share basis, and which will represent upon completion of this offering approximately 77.7% of the combined voting power of the public company’s shares. The Class B shares do not represent an economic interest in the public company and are therefore not entitled to any dividends. The principals will control the public company since the Class B shares represent more than a majority of the combined voting power in the public company. The voting rights of the principals are further enhanced by the shareholders agreement, described below under ‘‘Certain Relationships and Related Party Transactions — Shareholders Agreements’’.
•  While the Class B shares, as indicated above, have no economic interest in Fortress, each holder of a Class B share also owns an economic interest in Fortress via a corresponding Fortress Operating Group unit.
•  The principals’ Fortress Operating Group units, described below, are exchangeable (together with the corresponding Class B shares) on a one-for-one basis for Class A shares. However, the exchange of Fortress Operating Group units for Class A shares will not affect the principals’ voting power since the votes represented by the cancelled Class B shares will be replaced with the votes represented by the Class A shares for which such units are exchanged.

Fortress Operating Group — the limited partnerships operating Fortress’s businesses.    The Fortress Operating Group comprises:

•  the limited partnerships through which the principals currently operate our business; we refer to these entities as the ‘‘Operating Entities’’; and
•  one or more limited partnerships formed for the purpose of, among other activities, holding certain of our principal investments; we refer to these entities as ‘‘Principal Holdings’’.

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We have historically used multiple Operating Entities to segregate operations for business, financial and other reasons. Going forward, we may increase or decrease the number of our Operating Entities or Principal Holdings, based on our views regarding the appropriate balance between (a) administrative convenience and (b) continued business, financial, tax and other optimization. As described more fully below, all of our interests in the Operating Entities will be held through FIG Corp.

We refer to the Operating Entities and Principal Holdings together as the Fortress Operating Group. Each of the Fortress Operating Group entities is a limited partnership. Each Fortress Operating Group unit represents one limited partner interest, or LP interest, in each Operating Entity and in Principal Holdings. A Fortress Operating Group unit is not a legal interest but is the term we use to refer to the aggregate of one LP interest in each Fortress Operating Group entity.

The number of Fortress Operating Group units we will own equals the number of our outstanding Class A shares, while the number of Fortress Operating Group units which the principals will own equals the number of outstanding Class B shares they hold. The economic interest represented by each Fortress Operating Group unit corresponds, in other words, to one of our shares; and the total number of Fortress Operating Group units owned by us and the principals equals the sum of our outstanding Class A shares and Class B shares. We will own our Fortress Operating Group units through our intermediate holding companies, and the principals will own their Fortress Operating Group units directly. In addition, you should note that:

•  Under the terms of the company’s operating agreement, the Class B shares cannot be transferred except in connection with a transfer of the corresponding Fortress Operating Group unit. Further, as described below, a Fortress Operating Group unit cannot be exchanged for a Class A share without the corresponding Class B share being delivered together with such unit at the time of exchange for cancellation by the company.
•  We do not intend to list the Class B shares on any stock exchange.

The Intermediate Holding Companies and Control of Fortress Operating Group. Fortress Investment Group LLC, the public company, will own 100% of:

•  FIG Corp. which in turn will own the sole general partner interest and approximately 22.3% of the LP interests in the Operating Entities; and
•  FIG Asset Co. LLC which in turn will own the sole general partner interest and approximately 22.3% of the LP interests in Principal Holdings.

The LP interests in the Operating Entities and Principal Holdings that will be held by both FIG Corp. and FIG Asset Co. LLC represent, together, approximately 22.3% of the Fortress Operating Group units.

The general partner interests of each of the Fortress Operating Group entities, which will be held by FIG Corp. and FIG Asset Co. LLC, possess no economic interest in such entities and are not entitled to any allocation of gains or losses of, or any distributions from, the Fortress Operating Group. However, under the limited partnership agreements of each of the Fortress Operating Group entities, management and control rights will be vested in these general partner interests. Accordingly, since our wholly-owned intermediate holding companies will own 100% of the general partner interests in the Fortress Operating Group entities, we will control Fortress Operating Group. While the LP interests in the Fortress Operating Group entities which the principals own have no voting rights, the principals will control us through their ownership of the Class B shares.

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Allocation of Net Proceeds of this Offering and the Intermediate Holding Company Demand Note.     As described below, we will allocate a portion of the net proceeds of this offering to each of FIG Corp. and FIG Asset Co. LLC, based on the aggregate values of the Operating Entities, on the one hand, and the value of Principal Holdings plus an amount equal to $70 million, on the other.

•  FIG Asset Co. LLC will contribute to Principal Holdings a portion of the net offering proceeds allocated to it, and to the extent that FIG Asset Co. LLC does not have an immediate need for the balance of such proceeds, it will loan the balance to FIG Corp. pursuant to a demand note. FIG Asset Co. LLC may from time to time demand the repayment of all or a portion of this loan to fund additional investments in Principal Holdings or for other purposes.
•  FIG Corp. will contribute its portion of the net offering proceeds allocated to it, plus the proceeds of any demand loan received from FIG Asset Co. LLC, to the Operating Entities, based on their relative values.

Amounts contributed by FIG Asset Co. LLC to Principal Holdings and by FIG Corp. to the Operating Entities upon completion of this offering will dilute the percentage ownership interests of the principals in those entities by approximately 8.6%. The relative percentage ownership interests in Fortress Operating Group of the public company on the one hand and the principals on the other will continue to change over time, as follows:

•  whenever we issue Class A shares to raise capital, we will contribute the proceeds of any such capital raise, via the intermediate holding companies, to Fortress Operating Group entities and each such contribution by us will dilute the principals’ direct percentage ownership therein;
•  whenever we grant any awards under our equity incentive plan, (i) in the case of Fortress Operating Group units, we will issue a corresponding number of Class B shares and (ii) in the case of all other awards, each of the Operating Entities and Principal Holdings will make comparable awards, in the same amounts, to our intermediate holding companies, FIG Corp. and FIG Asset Co. LLC; and
•  whenever the principals exchange their Fortress Operating Group units for Class A shares, our ownership interest in the Fortress Operating Group will increase and the principals’ direct ownership interest will decrease correspondingly.

Following this offering, as a result of these contributions, FIG Corp. will own 22.3% and the principals will own 77.7% of the LP interests in each of the Operating Entities, and FIG Asset Co. LLC will own 22.3% and the principals will own 77.7% of the LP interests in Principal Holdings.

Certain Attributes of our Structure.    Our structure is designed to accomplish a number of objectives, the most important of which are as follows:

•  We are a holding company that will be qualified as a partnership for U.S. federal income tax purposes. Our intermediate holding companies will enable us to maintain our partnership status.
•  The interposition of our intermediate holding companies will allow the company to serve as a public holding company with its Class A shares widely held and actively traded. The principals, however, will retain their economic investment in the form of direct interests in the Fortress Operating Group, rather than in the Class A shares. All of the businesses operated by Fortress prior to the closing of the Nomura transaction and this offering, and all of the interests held by Fortress in such businesses prior to the closing of the Nomura transaction and this offering, will continue to be operated or held, as the case may be, by the Fortress Operating Group following the closing of the Nomura transaction and this offering, and the principals will retain their remaining economic interests in these businesses through their ownership interests in the Fortress Operating Group entities. Although distributions on the

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  Fortress Operating Group units must be made on a pro rata basis, the principals will receive their distributions directly, while the same distribution must first be made to FIG Corp. and FIG Asset Co. LLC before any amounts, net of taxes, debt service payments and payments under the tax receivable agreement (as described below), can be distributed to us, and in turn to the Class A shareholders.
•  Although the principals currently own no economic interest in Fortress Investment Group LLC (that is, they own no Class A shares), they will own non-economic Class B ‘‘vote-only’’ shares that as a percentage of the combined voting power of our shares will be commensurate with their economic ownership in Fortress Operating Group.
•  In the event a principal wishes to exchange Fortress Operating Group units for Class A shares, he must deliver the units to us together with a corresponding number of Class B shares, and as a result of the exchange:
•  we will deliver to the principal a number of Class A shares corresponding to the number of Fortress Operating Group units delivered to us;
•  we will cancel the Class B shares delivered to us; and
•  the Fortress Operating Group units we acquire from the principal will be held by our intermediate holding companies, FIG Corp and FIG Asset Co. LLC, as applicable.

Summary.    Following the transactions contemplated by this offering and the Nomura transaction:

•  the public company (through the intermediate holding companies) and the principals (through direct ownership) will hold, respectively, approximately 22.3% and approximately 77.7% of the Fortress Operating Group units;
•  the Class A shareholders’ voting and economic interests in Fortress will be represented by their Class A shares in the public company. The principals’ economic interests, by comparison, will be represented by their Fortress Operating Group units while their voting interests will be represented by their Class B shares in the public company;
•  the Class A shares held by Nomura represent, on a per share basis, the same economic and voting interest in the public company as the Class A shares to be issued in connection with this offering. However, Nomura has additional rights pursuant to its shareholder agreement with the public company, including its right to designate a member of the public company’s board of directors. See ‘‘Certain Relationships and Related Party Transactions — Investor Shareholder Agreement’’;
•  all of the businesses engaged in by Fortress as a historical matter will continue, following completion of this offering, to be conducted by the Fortress Operating Group; accordingly, Fortress Investment Group LLC, the public company, and the principals will participate in the net operating results of the Fortress Operating Group, which are derived largely from the management fees and incentive income from the Fortress Funds, on a pari passu basis, in accordance with their pro rata ownership of Fortress Operating Group units;
•  the principals will retain voting control of Fortress Investment Group LLC following this offering through their ownership of our Class B shares; and
•  future issuances, if any, of Class A shares will result in a corresponding increase in the number of Fortress Operating Group units held by the intermediate holding companies and result in a corresponding dilution of the principals’ percentage ownership interest in the Fortress Operating Group.

The Transactions

Our business is presently conducted by Fortress Operating Group. Fortress Investment Group LLC was formed as a Delaware limited liability company for the purpose of completing the Nomura

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transaction, this offering and the related transactions in order to carry on our business as a publicly-traded entity. As a result of the Nomura transaction and the transactions contemplated by this offering, Fortress Investment Group LLC will acquire control of the Fortress Operating Group and hold approximately 22.3% of the Fortress Operating Group units.

In connection with the closing of the Nomura transaction, we formed FIG Corp. as a Delaware corporation and FIG Asset Co. LLC as a Delaware limited liability company, our two wholly-owned intermediate holding companies. In connection with the consummation of this offering, we have completed or will complete the following transactions:

•  we will grant rights to the investors in the consolidated Fortress Funds to provide a simple majority of the respective limited partners with the right to accelerate the date on which the fund is liquidated, without cause, in accordance with certain procedures, or otherwise with the ability to exert control over the fund, which will result in our deconsolidation of these funds as of the date of grant;
•  subsequent to September 30, 2006, we distributed $528.5 million to our principals in the period prior to the consummation of this offering;
•  we collected $469.2 million pursuant to certain contractual arrangements from our offshore hedge funds representing a portion of receivables relating to previously earned fees, of which $435.0 million is reflected on our pro forma September 30, 2006 balance sheet, and used the proceeds, net of non-controlling interests, to partially fund the distributions to our principals described immediately above;
•  we issued Class A shares to Nomura for net proceeds of $888.0 million;
•  we contributed $609.8 million of the net proceeds from the Nomura transaction to FIG Corp. which will in turn use those net proceeds, together with the proceeds it receives from FIG Asset Co. LLC under a demand note, as described below, to purchase from the principals a 15% limited partner interest in each of the Operating Entities (which will be approximately 13.7% upon consummation of this offering). In connection with its admission as a limited partner to the Operating Entities, FIG Corp. also became the sole general partner in each Operating Entity;
•  we contributed $278.2 million of the net proceeds from the Nomura transaction to FIG Asset Co. LLC, which will (i) loan a portion of these net proceeds to FIG Corp. pursuant to a demand note and (ii) use the remaining portion of these proceeds to purchase from the principals a 15% limited partner interest in Principal Holdings (which will be approximately 13.7% upon consummation of this offering), the Fortress Operating Group entity which, among other things, will hold certain of our principal investments. In connection with its admission as a limited partner to Principal Holdings, FIG Asset Co. LLC also became the sole general partner in Principal Holdings;
•  we entered into an Investor Shareholder Agreement with Nomura, as described below;
•  FIG Corp. and FIG Asset Co. LLC (on behalf of any affiliated corporation) entered into a tax receivable agreement with our principals, as described below;
•  we entered into an employment agreement with each of our principals, as described below;
•  we will issue Class A shares in this offering for net proceeds of approximately $533.0 million (based on the mid-point of the range set forth on the cover page of this prospectus);
•  we expect to contribute $383.0 million of the net proceeds from this offering to FIG Corp. which will in turn contribute those net proceeds, together with the proceeds it receives from FIG Asset Co. LLC under a demand note, as described below, to the Operating Entities in exchange for an additional approximately 8.6% limited partner interest in each of the Operating Entities;

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•  we expect to contribute $150.0 million of the net proceeds from this offering to FIG Asset Co. LLC, which will (i) loan a portion of these net proceeds to FIG Corp. pursuant to a demand note and (ii) contribute the remaining portion of these proceeds in exchange for an additional approximately 8.6% limited partner interest in Principal Holdings;
•  Fortress Operating Group will apply the net proceeds from this offering: (a) to pay $250 million outstanding under our term loan facility, (b) to pay $85 million currently outstanding under our revolving credit facility, (c) to fund $169 million of commitments to existing private equity funds and (d) to use $29 million for general business purposes.
•  we will grant pursuant to our equity incentive plan, effective upon consummation of this offering, restricted Class A shares and restricted Class A share units to certain directors and employees having a fair value of $1.8 million and $870.4 million, respectively, based on the mid-point of the price range set forth on the cover page of this prospectus;
•  we will enter into a shareholders agreement with our principals, and our principals will enter into the principals agreement, in each case as described below;
•  we refinanced our credit agreement in June 2006 and as of September 30, 2006 had borrowed $600 million under the term loan facility portion thereof (which includes $250 million which is to be paid as described above); and
•  we expect to distribute $208.5 million in relation to the liquidation of Northcastle Trust (a Fortress Fund) or ‘‘Northcastle’’, to its investors; as of November 30, 2006 the liquidation was substantially complete.

We refer to the foregoing collectively as the ‘‘Transactions.’’

As a result of the Transactions:

•  Fortress Investment Group LLC will be a holding company, and our primary assets will be our indirect controlling general partner interest in the Fortress Operating Group and approximately 22.3% of the Fortress Operating Group units, held through the intermediate holding companies;
•  our principals’ percentage ownership of the Fortress Operating Group units will decrease to approximately 77.7% and our principals’ Class B shares will represent 77.7% of the total combined voting power in the public company, by means of which they will maintain control of the public company;
•  FIG Corp. or FIG Asset Co. LLC, as applicable, became the sole general partner of each of the entities that constitute the Fortress Operating Group. Accordingly, we will operate and control the business of the Fortress Operating Group and its subsidiaries; and
•  net profits, net losses and distributions of the Fortress Operating Group will be allocated and made to its unitholders, on a pro rata basis in accordance with their respective Fortress Operating Group units. Accordingly, net profits and net losses allocable to Fortress Operating Group unitholders will initially be allocated, and distributions will initially be made, approximately 22.3% indirectly to us and approximately 77.7% to our principals.

The Transactions were or will be effected for a variety of reasons, including the following:

•  The deconsolidation of the Fortress Funds will, we believe, result in our financial statements reflecting our investment management business, including our management fee and incentive income revenues, in a manner that we believe more closely reflects both the manner in which our management evaluates our business and the risks of the assets and liabilities of the public company.
•  We will distribute the proceeds of the collection of receivables from our offshore hedge funds relating to previously earned fees and certain other amounts specified above to the principals prior to the completion of this offering.

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•  One of the primary reasons we are going public is to increase our ability to retain our existing employees by means of grants of equity interests in Fortress, as reflected by equity grants we expect to make to employees in connection with this offering.
•  In addition to our operating agreement, the agreements to which our principals are party — the principals agreement, the shareholders agreement, the tax receivable agreement and their individual employment agreements - reflect the terms of our relationship with the principals as well as their relationship among themselves, in light of Fortress’s transition from a private enterprise owned by five individuals to a public enterprise in which a variety of stakeholders have interests.
•  We refinanced our credit agreement in June 2006 in connection with our continuing growth to provide additional borrowing capacity to enable us to make principal investments in new or existing Fortress Funds and to effect a $250.0 million distribution to the principals.
•  Our determination not to proceed with a public market capitalization of Northcastle in light of market conditions in Canada resulted, in the fourth quarter of 2006, following an assessment of various factors, in our determination to liquidate Northcastle Trust and return investor capital.
•  The remaining Transactions collectively comprise the reorganization pursuant to which the principals, Nomura and the public will acquire 100% of our outstanding Class A and Class B shares, and our concurrent acquisition, through two intermediate holding companies, of the controlling general partner interest in the Fortress Operating Group and approximately 22.3% of the Fortress Operating Group units.

As we are a newly formed company, Fortress Operating Group is considered our predecessor for accounting purposes, and its combined financial statements will be our historical financial statements following completion of the Transactions. Also, because the principals control Fortress Operating Group before the Transactions and will control us after the Transactions, the Transactions are to be accounted for as a reorganization of entities under common control. Accordingly, we will carry forward unchanged the value of assets and liabilities recognized in Fortress Operating Group’s combined financial statements into our consolidated financial statements. Following completion of this offering, substantially all of Fortress’s expenses (other than (i) income tax expenses of Fortress Investment Group LLC, FIG Corp. and FIG Asset Co. LLC, (ii) obligations incurred under the tax receivable agreement and (iii) payments on indebtedness incurred by Fortress Investment Group LLC, FIG Corp. and FIG Asset Co. LLC), including substantially all expenses incurred by or attributable solely to Fortress Investment Group LLC, such as expenses incurred in connection with this offering, will be accounted for as expenses of the Fortress Operating Group.

We generally intend to hold all our assets through the Fortress Operating Group. In the future, if we make a significant tax-free corporate acquisition, we may add additional intermediate holding companies in the event we are unable to effect such acquisition through the Fortress Operating Group because of various business, financial or tax constraints.

Class A Shares.    Immediately following this offering, 38.4% of our outstanding Class A shares will be owned by purchasers in this offering and 61.6% of our outstanding Class A shares will be owned by Nomura. Holders of Class A shares will be entitled to one vote per share on all matters submitted to a vote by our shareholders. Holders of our Class A shares and our Class B shares will vote together as a single class on all matters submitted to a vote of our shareholders. Class A shares owned by purchasers in this offering will initially represent approximately 8.6% of the total combined voting power of our outstanding Class A and Class B shares and Class A shares owned by Nomura, upon consummation of this offering, will represent 13.7% of the total combined voting power of our outstanding Class A and Class B shares. As a result, our principals will exercise control over all matters requiring shareholder approval and certain other matters described below.

Class B Shares.    Immediately following this offering, all of our outstanding Class B shares will be owned by our principals. Holders of Class B shares will be entitled to one vote per share. Holders of

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our Class A shares and our Class B shares will vote together as a single class on all matters submitted to a vote of our shareholders. The Class B shares will have no economic rights and are not entitled to any dividends, although they will initially represent approximately 77.7% of the total combined voting power of our outstanding Class A and Class B shares. As a result, our principals will be able to exercise control over all matters requiring shareholder approval. In addition, our principals will have additional approval rights under the shareholders agreement described below.

Exchange of Fortress Operating Group Units.    Immediately after this offering, the principals will own 77.7% of the outstanding Fortress Operating Group units, which will be non-voting but will represent 77.7% of the equity interest in the Fortress Operating Group. In connection with the completion of this offering, the principals will enter into an exchange agreement with us under which at any time and from time to time, each principal (or certain transferees thereof) will have the right to exchange one of their Fortress Operating Group units (together with the corresponding Class B share) for one of our Class A shares. Under the exchange agreement, to effect an exchange, a principal must simultaneously exchange one Fortress Operating Group unit – being an equal limited partner interest in each Fortress Operating Group entity. In connection with any exchange of Fortress Operating Group units, the principal will receive a right, under a tax receivable agreement described below, to receive 85% of the value of the applicable tax benefit in cash when FIG Corp. or FIG Asset Co. LLC (on behalf of any affiliated corporation that holds an interest in a Fortress Operating Group entity) (the ‘‘corporate taxpayers’’) actually realizes certain tax savings. These tax savings would result from the increase in the tax basis of the assets of certain Fortress Operating Group entities, which would lead to an increase in depreciation and amortization deductions or reduced gains on sales and imputed interest expense deductions. A principal may also elect to exchange his Fortress Operating Group units in a tax-free transaction where the principal is making a charitable contribution. In such case, we will not obtain an increase in the tax basis of the assets of the Fortress Operating Group entities and no payments will be required to be made pursuant to the tax receivable agreement because there will be no tax savings realized. As a principal exchanges his Fortress Operating Group units, our interest in the Fortress Operating Group units will be correspondingly increased and his corresponding Class B shares will be cancelled. We have reserved for issuance 312,071,550 Class A shares, corresponding to the number of existing Fortress Operating Group units held by our principals.

Tax Receivable Agreement.    In connection with the closing of the Nomura transaction, the corporate taxpayers entered into a tax receivable agreement with our principals. Upon the occurrence of a taxable exchange by a principal of his Fortress Operating Group units for Class A shares, the corporate taxpayers’ share of the depreciation, amortization and interest expense tax deductions, as well as an increase in the tax basis of other assets, of certain Fortress Operating Group entities resulting from the exchanged units, may be larger than they would have been had such units been acquired in a non-taxable exchange. Additionally, our acquisition of Fortress Operating Group units from the principals, such as in the Nomura transaction, also will result in increases in tax deductions and tax basis that would reduce the amount of tax that the corporate taxpayers would otherwise be required to pay in the future. Because these increases in tax deductions, as well as the increase in the tax basis of other assets, would not otherwise have been available to, and would reduce the tax liability of, the corporate taxpayers, the corporate taxpayers will be required to make payments to the exchanging or selling principal equal to 85% of the resulting tax savings as and when realized by the corporate taxpayers. The payments that the corporate taxpayers may make to our principals could be material in amount and will be an obligation of our intermediate holding companies and not the Fortress Operating Group. The corporate taxpayers will benefit from the remaining 15% of the tax savings realized. In general, estimating the amount of payments that may be made to the principals under the tax receivable agreement is by its nature, imprecise, in the absence of an actual transaction, insofar as the calculation of amounts payable depends on a variety of factors. The actual increase in tax basis and the amount and timing of any payments under the tax receivable agreement will vary depending upon a number of factors, including:

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•  the timing of the transactions — For instance, the increase in any tax deductions will vary depending on the fair market value, which may fluctuate over time, of the depreciable or amortizable assets of the Fortress Operating Group entities at the time of the transaction;
•  the price of our Class A shares at the time of the transaction — The increase in any tax deductions, as well as tax basis increase in other assets, of the Fortress Operating Group entities, is directly proportional to the price of the Class A shares at the time of the transaction;
•  the taxability of exchanges — If an exchange is not taxable for any reason, increased deductions will not be available; and
•  the amount and timing of our income — The corporate taxpayers will be required to pay 85% of the tax savings as and when realized, if any. If a corporate taxpayer does not have taxable income, the corporate taxpayer is not required to make payments under the tax receivable agreement for that taxable year because no tax savings were actually realized.

The occurence of an actual transaction in which Fortress Operating Group units are exchanged or purchased will permit us to make a number of actual determinations. For instance, the Nomura transaction would have resulted, if it had occurred on September 30, 2006, in an increase in the tax basis of the assets owned by the Fortress Operating Group at the date of the purchase of approximately $945.2 million and likely will result in us making payments under the tax receivable agreement. Any payments under the tax receivable agreement will give rise to additional tax benefits and additional potential payments under the tax receivable agreement. Any payments under the tax receivable agreement will depend upon whether FIG Corp. has taxable income to utilize the benefit of the increase in the tax basis of the assets owned by the Fortress Operating Group. For additional information regarding the impact of the Nomura transaction on our unaudited pro forma balance sheet as of September 30, 2006, see footnote (d) of ‘‘Unaudited Pro Forma Financial Information.’’

In addition, the tax receivable agreement provides that, upon a merger, asset sale or other form of business combination or certain other changes of control, the corporate taxpayers’ (or their successors’) obligations with respect to exchanged or acquired units (whether exchanged or acquired before or after such change of control) would be based on certain assumptions, including that the corporate taxpayers would have sufficient taxable income to fully utilize the deductions arising from the increased tax deductions and tax basis and other benefits related to entering into the tax receivable agreement. As noted above, no payments will be made if a principal elects to exchange his Fortress Operating Group units in a tax free transaction.

Shareholders Agreement.    Prior to the consummation of this offering, we will enter into a shareholders agreement with our principals pursuant to which, so long as our principals and their permitted transferees collectively own more than 40% of the total combined voting power of our outstanding Class A and Class B shares, the principals who are then employed by the Fortress Operating Group holding shares greater than 50% of the total combined voting power of all shares held by such principals will have certain approval rights over the following transactions:

•  any incurrence of indebtedness in excess of 10% of our then existing long-term consolidated indebtedness;
•  any issuance by us of equity or equity-related securities that would represent, after such issuance or upon conversion, exchange or exercise, as the case may be, at least 10% of the total combined voting power of our outstanding Class A and Class B shares (except in certain circumstances);
•  any debt or equity investment by us (including any commitment to invest) in an amount greater than $250 million;
•  any entry by us into a new line of business that does not involve investment management and that requires a principal investment in excess of $100 million;

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•  the adoption of a shareholder rights plan;
•  any appointment of a chief executive officer or co-chief executive officer; or
•  the termination of the employment of a principal with us or any of our material subsidiaries without cause.

The effect of the agreement is that our principals will maintain control over our significant corporate transactions even when they collectively hold less than a majority of the combined total voting power of our Class A and Class B shares. However, although we may qualify as a ‘‘controlled company’’ under the rules of the New York Stock Exchange, we nonetheless intend to comply, upon completion of this offering, with the corporate governance requirements of the NYSE which are applicable to companies that do not qualify as a ‘‘controlled company.’’

The agreement also will prohibit our principals from, directly or indirectly, voluntarily effecting cumulative transfers of specified amounts of their interests in us and the Fortress Operating Group for a period of five years after this offering. The principals may exchange their Fortress Operating Group units for Class A shares at any time, which Class A shares also are subject to the foregoing transfer restrictions. When the principals exchange their Fortress Operating Group units for Class A shares, the Class B shares corresponding to the Fortress Operating Group units will be cancelled. Therefore, the existing Class A shareholders’ ownership percentage of Class A shares will be diluted by an amount equal to the number of Class A shares delivered to the principals upon exchange of Fortress Operating Group units, but their total combined voting power remains unchanged. See ‘‘Certain Relationships and Related Party Transactions — Transfer Restrictions.’’ The agreement also will provide that so long as our principals and their permitted transferees collectively own more than 50% of the total combined voting power of all our outstanding Class A and Class B shares, our board of directors will nominate individuals designated by the principals such that the principals will have six designees (out of a total possible eleven members) to the board and if the principals own more than 10% and equal to or less than 50% of the total combined voting power of our outstanding Class A and Class B shares, our board of directors will nominate individuals designated by the principals such that the principals will have between two and five designees to the board, based on their collective ownership of our outstanding shares.

The shareholders agreement also will provide that we will indemnify our principals in respect of matters relating to private equity fund ‘‘clawback’’ obligations. We earn incentive income — generally 20% of the profits — from each of our private equity funds based on a percentage of the profits earned by the fund as a whole, provided that the fund achieves specified performance criteria. We generally receive, however, our percentage share of the profits on each investment in the fund as it is realized, before it is known with certainty that the fund as a whole will meet the specified criteria. As a result, the incentive income paid to us as a particular investment made by the funds is realized is subject to contingent repayment (or ‘‘clawback’’) if, upon liquidation of the fund, the aggregate amount paid to us as incentive income exceeds the amount actually due to us based upon the aggregate performance of the fund. Since all of the incentive income such funds have paid to date is still subject to clawback, this clawback obligation is approximately $283.6 million as of September 30, 2006, of which $64.0 million related to an unconsolidated private equity fund. The principals have personally guaranteed, subject to certain limitations, this ‘‘clawback’’ obligation. The shareholders agreement contains our agreement to indemnify the principals for all amounts which the principals pay pursuant to any of these personal guaranties in favor of our private equity funds.

In addition, the principals have certain consent rights with respect to structural changes as described under ‘‘Description of Shares — Operating Agreement — Relationship with Fortress Operating Group Entities.’’

Agreement Among Principals.    Prior to the consummation of this offering, the principals will enter into an agreement (the ‘‘Principals Agreement’’) which provides that, in the event a principal voluntarily terminates his employment with us for any reason prior to the fifth anniversary of the

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consummation of this offering, a portion of the Fortress Operating Group units (and corresponding Class B shares and certain rights under the tax receivable agreement) held by that principal as of the completion of this offering will be forfeited to the principals who are employed by Fortress Operating Group on the date which is the earlier of (i) the date that is six months after such termination of employment and (ii) the date on or after such termination date that is six months after the latest publicly-reported disposition of our equity securities by applicable principals (excluding certain exempt dispositions). The amount of such forfeiture will scale down over the five-year period.

The Principals Agreement may be amended upon the approval of a majority of the principals who are then employed by the Fortress Operating Group. We, our shareholders and the Fortress Operating Group have no ability to enforce any provision thereof or to prevent the principals from amending the Principals Agreement or waiving any forfeiture obligation.

Employment, Non-Competition and Non-Solicitation Agreements.     Prior to the closing of the Nomura transaction, we entered into an employment, non-competition and non-solicitation agreement with each of our principals. Each such agreement will terminate on the fifth anniversary of completion of this offering, subject to automatic yearly renewals, unless either party terminates the agreement in accordance with its terms. The principal’s covenants survive any termination or expiration of the employment agreement. Each principal will be entitled to an annual salary that may be increased, but not decreased, at the discretion of our board of directors. The agreement also requires the principal to protect the confidential information of our company both during and after employment, and refrain from soliciting employees or interfering with our relationships with our investors both during and for a 24-month period after employment. If we terminate a principal’s employment without cause (as defined in the agreement), we will pay the principal a separation payment equal to three times his then-current annual salary and his accrued but unpaid salary and accrued but unused vacation pay through the date of termination of employment. The employment agreement provides that if a principal terminates his employment voluntarily or we terminate his employment with cause, whether during the agreement’s term or thereafter in the event the agreement’s term is not renewed, the principal will be paid his accrued but unpaid salary and accrued but unused vacation pay through the date of termination of employment and will be subject to an eighteen-month post-employment covenant requiring the principal not to compete with us.

Tax Consequences.     Skadden, Arps, Slate, Meagher & Flom LLP has acted as our counsel in connection with this offering. Skadden, Arps, Slate, Meagher & Flom LLP has opined that, under current law, we will be treated, for U.S. federal income tax purposes, as a partnership and not as an association or a publicly traded partnership taxable as a corporation. Accordingly, holders of Class A shares will be required to report their allocable share of our income for U.S. federal income tax purposes, regardless of whether any cash or other dividends are made to them. See ‘‘Material U.S. Federal Tax Considerations — Taxation of the Company — Federal Income Tax Opinion Regarding Partnership Status.’’

FIG Corp., our wholly-owned subsidiary and general partner of the Fortress Operating Group entities (other than Principal Holdings), will incur U.S. federal, state, local and foreign income taxes on its proportionate share of any net taxable income of such entities.

FIG Asset Co. LLC, our wholly-owned subsidiary and general partner of Principal Holdings, will be, for U.S. federal income tax purposes, an entity disregarded as an entity separate from its owner, and not as an association taxable as a corporation.

Accordingly, income will be allocable to holders of Class A shares as a result of FIG Corp.’s dividends and FIG Asset Co. LLC’s income.

In accordance with the applicable partnership agreement, we will cause the applicable Fortress Operating Group entities to distribute cash on a pro rata basis to holders of Fortress Operating Group units (that is, our intermediate holding companies and the principals) in an amount at least equal to the maximum tax liabilities arising from the ownership of such units, if any, subject to compliance with

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any financial covenants or other obligations. Since the purpose of such tax distributions is to enable FIG Corp. and the principals to satisfy their respective tax liabilities, no such distribution will necessarily be required to be distributed by our intermediate holding companies to us and there can be no assurance that we will pay cash dividends on the Class A shares in an amount sufficient to cover any tax liability arising from the ownership of Class A shares. The declaration and payment of dividends by us will be at the discretion of our board of directors. A holder of Class A shares will be required to report its share of our taxable income even if the board of directors does not pay dividends.

Nomura Transaction

On December 18, 2006, our principals entered into a securities purchase agreement with Nomura Investment Managers U.S.A., Inc., a Delaware corporation, or Nomura pursuant to which Nomura acquired a 15% stake in Fortress for $888.0 million, on January 17, 2007. In the agreement, our principals agreed to cause us to issue and sell 55,071,450 Class A shares, at a price per share equal to $16.12, to Nomura representing 15% of the outstanding equity interests in the Fortress Operating Group as of the date of the purchase (without giving effect to this offering and the issuance of restricted Class A shares or share units that will be issued to certain employees and directors). We used all of the proceeds from the issuance of Class A shares to Nomura to purchase from the principals 15% of their Fortress Operating Group units through our intermediate holding companies. Upon completion of this offering, the Class A shares purchased by Nomura will represent approximately 61.6% of our issued and outstanding Class A shares and approximately 13.7% of the combined voting power in Fortress Investment Group LLC (without giving effect to any issuances to certain employees and directors). Nomura’s obligations under the securities purchase agreement are guaranteed by its ultimate parent, Nomura Holdings, Inc., a Japanese corporation.

This transaction with Nomura is expected to facilitate the expansion of our business in Asia. In the securities purchase agreement, the parties agreed that during the six months following the date of the agreement, Nomura will work with us in good faith to develop a strategy to market and sell our investment products and once such strategy is formulated, the parties agreed that they will use their respective best efforts to promptly finalize and enter into a mutually satisfactory distribution agreement containing customary terms. However, there is currently no agreement in place with Nomura to market or sell our investment products and we cannot provide any assurances that any agreement will be reached; there will be no changes in Nomura’s rights as a shareholder in the event that no such agreement is reached.

Pursuant to the terms of the securities purchase agreement, each of the principals, severally and not jointly, must indemnify Nomura and its affiliates against losses incurred by Nomura and its affiliates if such principal breaches the representations and agreements he made with respect to himself or Fortress. Nomura must indemnify the principals, subject to certain exceptions, Fortress and their respective affiliates from losses incurred if Nomura breaches its representations or agreements. Each of Nomura and collectively, the principals are required to indemnify each other for the aggregate amount of such losses which, in each case, exceed $10,000,000, up to a cap equal to the purchase price of $888 million. We are not required to indemnify Nomura under the securities purchase agreement or in any way in connection with the Nomura transaction.

Upon consummation of the sale of Class A shares to Nomura, we entered into an Investor Shareholder Agreement with Nomura. The Investor Shareholder Agreement provides Nomura with certain rights with respect to the designation of a nominee to serve on our board of directors or an observer to attend meetings of our board of directors, as well as registration rights for our securities that it owns, and places certain restrictions on actions that Nomura may take with respect to us and our securities. Nomura agreed pursuant to the Investor Shareholder Agreement not to transfer the Class A shares (other than to its controlled affiliates) for a period of one year following the closing of

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the Nomura transaction. For a more detailed summary of the Investor Shareholder Agreement, see ‘‘Certain Relationships and Related Party Transactions — Investor Shareholder Agreement.’’

Additional Information

Our principal executive offices are located at 1345 Avenue of the Americas, New York, New York 10105. Our telephone number is (212) 798-6100. Our internet address is www.fortressinv.com. Information on our website does not constitute part of this prospectus.

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THE OFFERING

Shares offered by us in this offering 34,286,000 Class A shares
Shares to be outstanding immediately after this offering:
        • Class A shares 89,357,450 Class A shares
        • Class B shares 312,071,550 Class B shares
Shares to be held by our principals immediately after this offering:
        • Class A shares none
        • Class B shares 312,071,550 Class B shares
Fortress Operating Group units held
by us 89,357,450 or approximately 22.3%
by our principals 312,071,550 or approximately 77.7%
Voting
        • Class A shares one vote per share
        • Class B shares one vote per share
        • Voting Rights Holders of our Class A shares and Class B shares will vote together as a single class on all matters submitted to our shareholders for their vote or approval. See ‘‘Description of Shares’’.
Approval rights Our principals will have approval rights with respect to certain extraordinary transactions so long as they and their permitted transferees continue to hold more than 40% of the total combined voting power of our outstanding Class A and Class B shares. See ‘‘Certain Relationships and Related Party Transactions — Shareholders Agreement’’.
Majority independent directors Immediately preceding the consummation of this offering, a majority of our directors will be ‘‘independent’’ as defined under New York Stock Exchange, or NYSE, rules.
Our operating agreement provides that the authority and function of our board of directors and officers shall be identical to the authority and functions of a board of directors and officers of a corporation organized under the Delaware General Corporation Law, except as expressly modified by the terms of our operating agreement. See ‘‘Description of Shares — Operating Agreement — Duties of Officers and Directors’’ for details regarding the differences between our operating agreement and

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Delaware General Corporation Law with regard to the duties and obligations of our officers and directors.
Use of proceeds We estimate that the net proceeds from the sale of our Class A shares in this offering, after deducting offering expenses and the underwriting discounts, will be $533 million. We intend to contribute the net proceeds from this offering to the Fortress Operating Group, which in turn will apply those proceeds as follows: (a) to pay $250 million outstanding under our term loan facility, as required by our credit agreement, (b) to pay $85 million currently outstanding under our revolving credit facility, (c) to fund $169 million of commitments to existing private equity funds and (d) to use $29 million for general business purposes.
Cash dividend policy We intend to pay quarterly dividends on our Class A shares in amounts that reflect management’s view of our financial performance. However, no assurance can be given that any dividends, whether quarterly or otherwise, will or can be paid. Because we are a holding company that owns intermediate holding companies, the funding of each dividend, if declared by the board of directors, will occur in three steps, as follows:
          first, we will cause Fortress Operating Group to make a distribution to all of its unitholders, on a pro rata basis; that is, the limited partnerships making up Fortress Operating Group will make distributions to their respective partners, as follows:
in the case of the Operating Entities, distributions will be made to FIG Corp. and the principals on a pro rata basis
in the case of Principal Holdings, distributions will be made to FIG Asset Co. LLC and the principals on a pro rata basis;
          second, we will cause our intermediate holding companies to distribute to us, from their net proceeds, amounts equal to the aggregate dividend declared by our board of directors; and
          third, we will distribute the proceeds received by us to our Class A shareholders on a pro rata basis. Our Class B shareholders are not entitled to any dividends.
If Fortress Operating Group units are issued to other parties, such as employees, such parties would be entitled to distributions by Fortress Operating Group as partners described above.

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We believe that the payment of dividends will provide transparency to our Class A shareholders and will impose upon us an investment discipline with respect to new products, businesses and strategies.
As a holding company, our ability to pay dividends to our Class A shareholders will be subject to the ability of our subsidiaries (including our two wholly owned intermediate holding companies that hold our Fortress Operating Group units) to provide cash to us. The declaration and payment of dividends by us will be at the discretion of our board of directors and will depend on, among other things, cash available for distributions, general economic and business conditions, our strategic plans and prospects, our financial results and condition, contractual, legal and regulatory restrictions on the payment of distributions by us or our subsidiaries, and such other factors as our board of directors considers to be relevant.
Principals’ exchange rights At any time and from time to time, each principal will have the right to exchange each of his Fortress Operating Group units (together with the corresponding Class B share) for one of our Class A shares. We have reserved for issuance 312,071,550 Class A shares, corresponding to the number of existing Fortress Operating Group units held by our principals. To effect an exchange, a principal must simultaneously exchange one Fortress Operating Group unit – being an equal limited partner interest in each Fortress Operating Group entity. In connection with any exchange of Fortress Operating Group units, the principal will receive a right, under a tax receivable agreement, to receive 85% of the value of the applicable tax benefit in cash when FIG Corp. or FIG Asset Co. LLC (on behalf of any affiliated corporation that holds an interest in a Fortress Operating Group entity) actually realizes certain tax savings resulting from the increase in tax deductions, as well as an increase in the tax basis of other assets, of certain Fortress Operating Group entities resulting from the exchanged units. See ‘‘Certain Relationships and Related Party Transactions — Tax Receivable Agreement.’’ As a principal exchanges his Fortress Operating Group units, our interest in the Fortress Operating Group units will be correspondingly increased and his corresponding Class B shares will be cancelled.
Proposed New York Stock Exchange symbol ‘‘FIG’’
Risk factors Please read the section entitled ‘‘Risk Factors’’ beginning on page 30 for a discussion of some of the factors you should carefully consider before deciding to invest in our Class A shares.

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References in this section to the number of our Class A shares and our Class B shares to be outstanding after this offering, and the percent of our voting rights held, exclude:

•  312,071,550 Class A shares issuable upon exchange of Fortress Operating Group units by our principals;
•  5,142,900 Class A shares issuable upon exercise of the underwriters’ option to purchase additional Class A shares from us, if exercised; and
•  interests granted under our equity incentive plan, consisting of:
•  50,920,503 restricted Class A share units to be granted to certain employees and 102,858 restricted Class A shares to be granted to directors in connection with the consummation of this offering; and
•  an additional 63,976,639 interests reserved for issuance under our equity incentive plan, subject to automatic increases annually.

Class A shares will be issued to persons holding Fortress Operating Group units, including our principals, when they wish to exchange those units, as described above in ‘‘Structure and Formation of our Company—Certain Attributes of our Structure’’.

We expect to grant awards to employees and directors in connection with this offering, which will take the form of grants of restricted Class A shares and restricted Class A share units, as described below in ‘‘Management—Equity Incentive Plan’’.

In the event the underwriters exercise their option to purchase additional Class A shares, the economic interest and voting power of holders of our Class A shares as a group and our interest in the Fortress Operating Group will increase by 1.0 percentage point.

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SUMMARY HISTORICAL AND UNAUDITED PRO FORMA FINANCIAL AND
OPERATING INFORMATION

Summary Historical Financial Information

The following table sets forth certain summary financial information on a historical basis.

The summary historical financial information set forth below as of December 31, 2005 and 2004, and for each of the three years in the period ended December 31, 2005, has been derived from our audited combined financial statements. The summary historical financial information set forth below as of September 30, 2006, and for the nine month periods ended September 30, 2006 and 2005, has been derived from our unaudited interim combined financial statements. The summary historical financial information set forth below as of December 31, 2003, 2002 and 2001, and for each of the two years in the period ended December 31, 2002, and as of September 30, 2005 has been derived from our unaudited accounting records prepared on a consistent basis with the financial statements described above. The unaudited interim combined financial statements include all adjustments (consisting of normal, recurring adjustments) that are, in the opinion of management, necessary for a fair presentation of our financial position and results of operations for the periods presented. The interim results of operations are not necessarily indicative of operations for a full fiscal year.

The information below should be read in conjunction with ‘‘Management’s Discussion and Analysis of Financial Condition and Results of Operations’’ and the combined financial statements and notes thereto included in this prospectus.

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Summary Historical Combined Financial Information
(in thousands)


  Nine Months Ended
September 30,
Year Ended December 31,
  2006 2005 2005 2004 2003 2002 2001
Operating Data              
Revenues  
 
 
 
 
 
 
Management fees and incentive income from affiliates and other revenues $ 255,017
$ 116,990
$ 284,313
$ 128,671
$ 47,557
$ 13,720
$ 9,092
Interest and dividend income – investment company holdings 810,381
387,232
720,549
222,707
172,759
64,097
87,325
  1,065,398
504,222
1,004,862
351,378
220,316
77,817
96,417
Expenses 804,828
384,564
646,692
198,403
81,627
33,579
10,829
Other Income  
 
 
 
 
 
 
Gains – investment company holdings 2,681,754
1,416,537
2,903,978
881,658
123,276
37,624
54,150
Gains – other investments 94,873
31,737
37,181
20,512
9,120
Earnings from equity method investees 3,412
9,015
10,465
14,616
4,762
2,334
6,597
  2,780,039
1,457,289
2,951,624
916,786
137,158
39,958
60,747
Income before deferred incentive income, non-
controlling interests in income of consolidated subsidiaries and income taxes
3,040,609
1,576,947
3,309,794
1,069,761
275,847
84,196
146,335
Deferred incentive income (475,655
)
(224,263
)
(444,567
)
(104,558
)
(17,487
)
(6,542
)
(12,710
)
Non-controlling interests in income of consolidated subsidiaries (2,403,346
)
(1,316,885
)
(2,662,926
)
(847,365
)
(216,594
)
(67,306
)
(118,547
)
Income before income taxes 161,608
35,799
202,301
117,838
41,766
10,348
15,078
Income tax expense (8,898
)
(3,130
)
(9,625
)
(3,388
)
(1,495
)
(920
)
(446
)
Net income $ 152,710
$ 32,669
$ 192,676
$ 114,450
$ 40,271
$ 9,428
$ 14,632

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  As of September 30, As of December 31,
  2006 2005 2005 2004 2003 2002 2001
Balance Sheet Data                   
Investment company holdings, at fair value $ 16,564,782
$ 8,597,796
$ 10,582,109
$ 5,365,309
$ 2,036,107
$ 1,047,424
$ 611,158
Other investments 547,657
440,548
451,489
48,444
52,879
51,556
54,947
Cash, cash equivalents and restricted cash 569,447
306,752
288,363
179,727
41,661
15,907
2,858
Total assets 18,497,040
9,682,896
11,863,938
5,796,733
2,212,564
1,165,075
675,272
Debt obligations payable 3,128,770
1,672,985
2,250,433
928,504
226,205
36,936
36,250
Deferred incentive income 1,061,519
365,560
585,864
141,277
36,739
19,252
12,710
Total liabilities 4,727,484
2,295,127
3,343,262
1,306,021
339,031
78,804
53,730
Non-controlling interests in consolidated subsidiaries 13,841,723
7,353,697
8,397,167
4,405,835
1,836,163
1,046,896
599,827
Members’ equity (deficit) including accumulated other comprehensive income (loss) (72,167
)
34,072
123,509
84,877
37,370
39,375
21,715

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Summary Unaudited Pro Forma Financial Information

The following table sets forth our summary unaudited pro forma financial information as of September 30, 2006 and for the year ended December 31, 2005 and the nine month periods ended September 30, 2006 and 2005, which has been derived from our unaudited pro forma financial information included elsewhere in this prospectus. The summary unaudited pro forma statement of operations information is presented as if the Transactions had been consummated on January 1, 2005. The summary unaudited pro forma balance sheet information is presented as if the Transactions had been consummated on September 30, 2006.

The pro forma adjustments are based upon available information and assumptions that we believe are reasonable. The summary unaudited pro forma financial information is presented for illustrative and informational purposes only, and is not necessarily indicative of what our actual financial position or results of operations would have been had the Transactions occurred on the dates or during the periods presented, nor does it purport to represent the results of any future periods.

The information below should be read in conjunction with ‘‘Management’s Discussion and Analysis of Financial Condition and Results of Operations’’ and the pro forma financial information and notes thereto included elsewhere in this prospectus, including ‘‘Unaudited Pro Forma Financial Information’’. For a description of the Transactions, see ‘‘Our Structure — The Transactions’’.

The pro forma weighted average number of Class A shares outstanding used to compute diluted pro forma net loss per Class A share assumes that each of our Fortress Operating Group units, including units outstanding not subject to forfeiture, units outstanding subject to forfeiture among principals and unvested restricted units granted to employees, have been exchanged for newly issued Class A shares on a one-for-one basis and includes unvested restricted Class A shares granted to employees, in all cases as if all such shares have been outstanding from the beginning of the respective period.

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Summary Unaudited Pro Forma Financial Information
(in thousands, except per share data)


  Nine Months Ended
September 30,
Year Ended
December 31,
  2006 2005 2005
Pro Forma Operating Information  
 
 
Revenues  
 
 
Management fees and incentive income from affiliates and other revenues $ 325,124
$ 168,149
$ 416,406
Expenses 1,069,023
969,948
1,325,598
Other income  
 
 
Gains – other investments 49,744
10,378
13,721
Earnings from equity method investees 46,230
24,622
40,063
  95,974
35,000
53,784
Loss before non-controlling interests in income of consolidated subsidiaries and income taxes (647,925
)
(766,799
)
(855,408
)
Non-controlling interests in loss of consolidated subsidiaries 502,695
596,654
663,894
Loss before income taxes (145,230
)
(170,145
)
(191,514
)
Income tax benefit 6,255
6,373
7,173
Pro forma net loss $ (138,975
)
$ (163,772
)
$ (184,341
)
Pro forma net loss per Class A share, diluted $ (1.63
)
$ (1.86
)
$ (2.15
)
Weighted average number of Class A shares outstanding, diluted 401,429
401,429
401,429

  As of
September 30,
2006
   
Pro Forma Balance Sheet Information  
   
Cash and cash equivalents $ 141,909
   
Equity method investments 431,221
   
Other investments, excluding equity method investments 78,064
   
Total assets 1,367,869
   
Debt obligations payable 362,153
   
Total liabilities 1,230,233
   
Non-controlling interests in consolidated subsidiaries 89,626
   
Shareholders’ equity 48,010
   

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RISK FACTORS

Investing in our Class A shares involves a high degree of risk. You should carefully consider the following risk factors, as well as other information contained in this prospectus, before deciding to invest in our Class A shares. The occurrence of any of the following risks could materially and adversely affect our business, prospects, financial condition, results of operations and cash flow, in which case, the trading price of our Class A shares could decline and you could lose all or part of your investment.

Risks Related To Our Business

We depend on Messrs. Briger, Edens, Kauffman, Nardone and Novogratz, and the loss of any of their services would have a material adverse effect on us.

The success of our business depends on the efforts, judgment and personal reputations of our principals, Peter Briger, Wesley Edens, Robert Kauffman, Randal Nardone and Michael Novogratz. Our principals’ reputations, expertise in investing, relationships with our investors and relationships with members of the business community on whom our funds depend for investment opportunities and financing, are each critical elements in operating and expanding our businesses. We believe our performance is strongly correlated to the performance of these individuals. Accordingly, the retention of our principals is crucial to our success. In addition, if any of our principals were to join or form a competitor, some of our investors could choose to invest with that competitor rather than in our funds. The loss of the services of any of our principals would have a material adverse effect on us, including our ability to retain and attract investors and raise new funds, and the performance of our funds. We do not carry any ‘‘key man’’ insurance that would provide us with proceeds in the event of the death or disability of any of our principals.

Each of our principals has entered into an employment agreement with us. The initial term of these agreements is five years, with automatic one-year renewals until a non-renewal notice is given by us or the principal. If a principal terminates his employment voluntarily or we terminate his employment for cause (as defined in the agreement), the principal will be subject to eighteen-month post-employment covenants requiring him not to compete with us. However, if we terminate a principal’s employment without cause, the principal will not be subject to the non-competition provisions.

The principals have also entered into an agreement among themselves which provides that, in the event a principal voluntarily terminates his employment with us for any reason prior to the fifth anniversary of the consummation of this offering, the principal may be required to forfeit a portion of his Fortress Operating Group units (and the corresponding Class B shares) to the other principals who continue to be employed by the Fortress Operating Group. However, this agreement may be amended by the principals who are then employed by the Fortress Operating Group. We, our shareholders and the Fortress Operating Group have no ability to enforce any provision of this agreement or to prevent the principals from amending the agreement or waiving any of its obligations.

There is no guarantee that our principals will not resign, join our competitors or form a competing company, or that the non-competition provisions in the employment agreements would be upheld by a court. If any of these events were to occur, our business would be materially adversely affected.

Several of our funds have ‘‘key man’’ provisions pursuant to which the failure of one or more of our principals to be actively involved in the business provides investors with the right to redeem from the funds or otherwise limits our rights to manage the funds. The loss of the services of any one of Messrs. Briger, Edens or Novogratz, or both of Mr. Kauffman and Mr. Nardone, would have a material adverse effect on certain of our funds and on us.

Investors in most of our hedge funds may generally redeem their investment without paying redemption fees if the relevant principal ceases to perform his functions with respect to the fund for 90 consecutive days. In addition, the terms of certain of our hedge funds’ financing arrangements

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contain ‘‘key man’’ provisions which may result, under certain circumstances, in the acceleration of such funds’ debt or the inability to continue funding certain investments if the relevant principal ceases to perform his functions with respect to the fund and a replacement has not been approved.

The loss or inability of Mr. Novogratz to perform his services for 90 days could result in substantial withdrawal requests from investors in our Drawbridge Global Macro funds (which at September 30, 2006, had AUM of approximately $4.4 billion) and, in the event that a replacement is not approved, the termination of a substantial portion of the funds’ financing arrangements. Such withdrawals and terminations would have a material adverse effect on the Drawbridge Global Macro funds by reducing our management fees from those funds and, since the funds would have fewer assets, such withdrawals would reduce the amount of incentive income potential of those funds. Further, such withdrawals and terminations could lead possibly to the liquidation of the funds and a corresponding elimination of our management fees and potential to earn incentive income from those funds. The loss of Mr. Novogratz could, therefore, ultimately result in a loss of substantially all of our earnings attributable to our liquid hedge fund business segment.

The loss or inability of Mr. Briger to perform his services for 90 days could result in substantial withdrawal requests from investors in our Drawbridge Special Opportunities funds (which at September 30, 2006, had AUM of approximately $4.6 billion) and, in the event that a replacement for him is not approved, the termination of a substantial portion of the funds’ financing arrangements. Such withdrawals and terminations would have a material adverse effect on the Drawbridge Special Opportunities funds, by reducing our management fees from those funds and, since the funds would have fewer assets, such withdrawals would reduce the amount of incentive income potential of those funds. Further, such withdrawals and terminations could lead possibly to the eventual liquidation of the funds and a corresponding elimination of our management fees and potential to earn incentive income from those funds. The loss or inability of Mr. Briger to perform his services or devote an appropriate portion of his business time to the long dated value funds for 90 days would (unless approved by a majority of fund investors) prevent the Drawbridge long dated value funds from making additional investments. This could have a material adverse effect on the long dated value funds, resulting in us receiving reduced management fees and incentive income. The loss of Mr. Briger could, therefore, ultimately result in a loss of substantially all of our earnings attributable to our hybrid hedge fund business segment with respect to the Drawbridge Special Opportunities funds, and a relatively small loss of earnings attributable to our private equity fund business segment with respect to the long dated value funds.

If either Mr. Edens or both of Mr. Kauffman and Mr. Nardone cease to devote certain minimum portions of their business time to the affairs of certain of our private equity funds, the funds will not be permitted to make further investments, and then existing investments may be liquidated if investors vote to do so. Our ability to earn management fees and realize incentive income from our private equity funds therefore would be adversely affected if we cannot make further investments or if we are required to liquidate fund investments at a time when market conditions result in our obtaining less for investments than could be obtained at later times. In addition, we may be unable to raise additional private equity funds if existing private equity fund key-man provisions are triggered. The loss of either Mr. Edens or both of Mr. Kauffman and Mr. Nardone could, therefore, ultimately result in a loss of substantially all of our earnings attributable to our private equity fund business segment, which at September 30, 2006, had AUM of approximately $17.5 billion.

In addition, the decline of more than 20% of its assets under management of a fund following one of such ‘‘key-men’’ events would result in a default under our credit agreement.

Any such events would have a direct material adverse effect on our revenues and earnings, and would likely harm our ability to maintain or grow assets under management in existing funds or raise additional funds in the future.

Our ability to retain our managing directors is critical to our success and our ability to grow depends on our ability to attract additional key personnel.

Our success depends on our ability to retain our managing directors and the other members of our investment management team and recruit additional qualified personnel. We collectively refer to

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these key employees (other than our principals) as our investment professionals. We anticipate that it will be necessary for us to add investment professionals as we pursue our growth strategy. However, we may not succeed in recruiting additional personnel or retaining current personnel, as the market for qualified investment professionals is extremely competitive. Our investment professionals possess substantial experience and expertise in investing, are responsible for locating and executing our funds’ investments, have significant relationships with the institutions which are the source of many of our funds’ investment opportunities, and in certain cases have strong relationships with our investors. Therefore, if our investment professionals join competitors or form competing companies it could result in the loss of significant investment opportunities and certain existing investors. As a result, the loss of even a small number of our investment professionals could jeopardize the performance of our funds, which would have a material adverse effect on our results of operations. Efforts to retain or attract investment professionals may result in significant additional expenses, which could adversely affect our profitability.

We have experienced rapid growth, which may be difficult to sustain and which may place significant demands on our administrative, operational and financial resources.

Our assets under management have grown from approximately $1.2 billion as of December 31, 2001 to $29.9 billion as of September 30, 2006. Our rapid growth has caused, and if it continues will continue to cause, significant demands on our legal, accounting and operational infrastructure, and increased expenses. The complexity of these demands, and the expense required to address them, is a function not simply of the amount by which our assets under management have grown, but of significant differences in the investing strategies of our different funds. In addition, we are required to continuously develop our systems and infrastructure in response to the increasing sophistication of the investment management market and legal, accounting and regulatory developments.

Our future growth will depend, among other things, on our ability to maintain an operating platform and management system sufficient to address our growth and will require us to incur significant additional expenses and to commit additional senior management and operational resources. As a result, we face significant challenges:

•  in maintaining adequate financial and business controls,
•  implementing new or updated information and financial systems and procedures, and
•  in training, managing and appropriately sizing our work force and other components of our business on a timely and cost-effective basis.

There can be no assurance that we will be able to manage our expanding operations effectively or that we will be able to continue to grow, and any failure to do so could adversely affect our ability to generate revenue and control our expenses.

Operational risks may disrupt our businesses, result in losses or limit our growth.

We face operational risk from errors made in the execution, confirmation or settlement of transactions. We also face operational risk from transactions not being properly recorded, evaluated or accounted for in our funds. In particular, our liquid and hybrid hedge fund businesses are highly dependent on our ability to process and evaluate, on a daily basis, transactions across markets and geographies in a time-sensitive, efficient and accurate manner. Consequently, we rely heavily on our financial, accounting and other data processing systems. In addition, new investment products we introduce create (and recently introduced products created) a significant risk that our existing systems may not be adequate to identify or control the relevant risks in the investment strategies employed by such new investment products. If any of these systems do not operate properly or are disabled, we could suffer financial loss, a disruption of our businesses, liability to our funds, regulatory intervention and reputational damage.

In addition, we operate in an industry that is highly dependent on its information systems and technology. We believe that we have designed, purchased and installed high-quality information

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systems to support our business. There can be no assurance, however, that our information systems and technology will continue to be able to accommodate our growth, or that the cost of maintaining such systems will not increase from its current level. Such a failure to accommodate growth, or an increase in costs related to such information systems, could have a material adverse effect on us.

Furthermore, we depend on our headquarters, which is located in New York City, for the operation of our business. A disaster or a disruption in the infrastructure that supports our businesses, including a disruption involving electronic communications or other services used by us or third parties with whom we conduct business, or directly affecting our headquarters, may have an adverse impact on our ability to continue to operate our business without interruption which could have a material adverse effect on us. Although we have disaster recovery programs in place, there can be no assurance that these will be sufficient to mitigate the harm that may result from such a disaster or disruption. In addition, insurance and other safeguards might only partially reimburse us for our losses.

Finally, we rely on third party service providers for certain aspects of our business, including certain financial operations of our hedge funds. Any interruption or deterioration in the performance of these third parties could impair the quality of the funds’ operations and could impact our reputation and adversely affect our business and limit our ability to grow.

The historical and unaudited pro forma financial information included in this prospectus is not necessarily indicative of our future performance.

The historical combined financial information included in this prospectus is not indicative of our future financial results. Our historical combined financial information consolidates a large number of our significant funds, which will not be consolidated after this offering. See ‘‘Unaudited Pro Forma Financial Information.’’ In addition, the historical combined financial information included in this prospectus does not reflect the added costs that we will incur as a public company or the impact of our change in structure. Because we operated through limited liability companies prior to this offering, we paid little or no taxes on profits. In preparing our unaudited pro forma financial information for the years prior to this offering, we adjusted our historical combined financial information for the transactions described in ‘‘Prospectus Summary—The Offering—The Transactions’’ and, as such, this financial information does not purport to represent the results of any future periods.

The results of future periods are likely to be materially different as a result of:

•  the impact of transactions occurring in connection with this offering on a pro forma basis in relation to the size of the company during the pro forma periods;
•  fund performance in the future which differs from the historical performance reflected in our unaudited pro forma financial information; and
•  the pace of growth of our business in the future, including the formation of new funds, which differs from the historical growth reflected in our unaudited pro forma financial information.

The estimates we used in our unaudited pro forma financial information are not intended to be an accurate estimate of our actual experience as a public company or indicative in any way of our future performance.

We derive a substantial portion of our revenues from funds managed pursuant to management agreements that may be terminated or fund partnership agreements that permit investors to request liquidation of investments in our funds on short notice.

The terms of our funds generally give either the general partner of the fund or the fund’s board of directors the right to terminate our investment management agreement with the fund. However, insofar as we control the general partner of our funds which are limited partnerships, the risk of termination of investment management agreement for such funds is limited, subject to our fiduciary or contractual duties as general partner. This risk is more significant for our offshore hedge funds where we do not serve as the general partner. As of September 30, 2006, we had $4.7 billion of assets under management in our offshore hedge funds.

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With respect to our private equity funds formed as registered investment companies, each fund’s investment management agreement must be approved annually by the independent members of such fund’s board of directors and, in certain cases, by its members, as required by law. Termination of these agreements would reduce the fees we earn from the relevant funds, which could have a material adverse effect on our results of operations.

In addition, investors in any private equity fund and certain hedge funds will have the ability following consummation of this offering to act, without cause, to accelerate the date on which the fund must be wound down. Our ability to realize incentive income from such funds therefore would be adversely affected if we are required to liquidate fund investments at a time when market conditions result in our obtaining less for investments than could be obtained at later times.

In addition, management agreements of our funds which are registered investment companies under the Investment Company Act of 1940 would terminate if we were to experience a change of control without obtaining investor consent. Such a change of control could be deemed to occur in the event our principals exchange enough of their interests in the Fortress Operating Group into our Class A shares such that our principals no longer own a controlling interest in us. We cannot be certain that consents required for the assignment of our investment management agreements will be obtained if such a deemed change of control occurs. In addition, the board of directors of certain hedge funds have the right under certain circumstances to terminate the investment management agreements with the applicable fund. Termination of these agreements would affect the fees we earn from the relevant funds, which could have a material adverse effect on our results of operations.

We are subject to third-party litigation risk which could result in significant liabilities and reputational harm which could materially adversely affect our results of operations, financial condition and liquidity.

In general, we will be exposed to risk of litigation by our investors if our management of any fund is alleged to constitute gross negligence or willful misconduct. Investors could sue us to recover amounts lost by our funds due to our alleged misconduct, up to the entire amount of loss. Further, we may be subject to litigation arising from investor dissatisfaction with the performance of our funds or from allegations that we improperly exercised control or influence over companies in which our funds have large investments. By way of example, we, our funds and certain of our employees, are each exposed to the risks of litigation relating to investment activities in our funds and actions taken by the officers and directors (some of whom may be Fortress employees) of portfolio companies, such as risks relating to a funds’ high-yield lending activities and the risk of shareholder litigation by other shareholders of public companies in which our funds have large investments. In addition, we are exposed to risks of litigation or investigation relating to transactions which presented conflicts of interest that were not properly addressed. In such actions we would be obligated to bear legal, settlement and other costs (which may be in excess of available insurance coverage). In addition, although we are indemnified by the funds we manage, our rights to indemnification may be challenged. If we are required to incur all or a portion of the costs arising out of litigation or investigations as a result of inadequate insurance proceeds or failure to obtain indemnification from our funds, our results of operations, financial condition and liquidity would be materially adversely affected.

In our liquid hedge funds, we are exposed to the risk of litigation if the funds suffer catastrophic losses due to the failure of a particular investment strategy or due to the trading activity of an employee who has violated market rules and regulations. Any litigation arising in such circumstances is likely to be protracted, expensive and surrounded by circumstances which are materially damaging to our reputation and our business. In addition, we face the risk of litigation from investors in our private equity funds and hybrid hedge funds if we violate restrictions in such funds’ organizational documents (for example, by failing to seek approval for related party transactions requiring approval or by exceeding the mandate of such funds).

Our liquid hedge funds, our offshore hybrid hedge fund and many of our private equity funds are incorporated or formed under the laws of the Cayman Islands. Cayman Islands laws, particularly with

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respect to shareholders rights, partner rights and bankruptcy, may differ from the laws of the United States. Cayman Islands laws could change, possibly to the detriment of our funds and investment management subsidiaries.

In addition, with a workforce consisting of many very highly paid investment professionals, we face the risk of lawsuits relating to claims for compensation, which may individually or in the aggregate be significant in amount. The cost of settling such claims could adversely affect our results of operations.

Our reputation, business and operations could be adversely affected by regulatory compliance failures, the potential adverse effect of changes in laws and regulations applicable to our business and effects of negative publicity surrounding the hedge fund industry in general.

Potential regulatory action poses a significant risk to our reputation and thereby to our business. Our business is subject to extensive regulation in the United States and in the other countries in which our investment activities occur. The Securities and Exchange Commission, or SEC, oversees our activities as a registered investment adviser under the Investment Advisers Act of 1940. In addition, we are subject to regulation under the Investment Company Act of 1940, the Securities Exchange Act of 1934, and various other statutes. We are subject to regulation by the Department of Labor under the Employee Retirement Income Security Act of 1974 or ERISA. Our Castles, as public companies, are subject to applicable stock exchange regulations, and in the case of Newcastle, to the Sarbanes-Oxley Act of 2002. A number of our investing activities, such as our lending business, are subject to regulation by various U.S. state regulators. In the United Kingdom, we are subject to regulation by the U.K. Financial Services Authority. Our other European operations, and our investment activities around the globe, are subject to a variety of regulatory regimes that vary country by country.

Each of the regulatory bodies with jurisdiction over us has regulatory powers dealing with many aspects of financial services, including the authority to grant, and in specific circumstances to cancel, permissions to carry on particular businesses. A failure to comply with the obligations imposed by the Investment Advisers Act of 1940 on investment advisers, including record-keeping, advertising and operating requirements, disclosure obligations and prohibitions on fraudulent activities, or by the Investment Company Act of 1940, could result in investigations, sanctions and reputational damage. Our liquid hedge fund business, and, to a lesser degree, our hybrid hedge fund business, are involved regularly in trading activities which implicate a broad number of U.S. and foreign securities law regimes, including laws governing trading on inside information, market manipulation and a broad number of technical trading requirements that implicate fundamental market regulation policies. Violation of such laws could result in severe restrictions on our activities and in damage to our reputation.

Some of our private equity funds currently qualify as venture capital operating companies, or VCOC, and therefore are not subject to the fiduciary requirements of ERISA with respect to their assets. However, it is possible that the U.S. Department of Labor may amend the relevant regulations. If these funds fail to satisfy the requirements of ERISA, including the requirement of investment prudence and diversification or the prohibited transaction rules, it could materially interfere with our activities in relation to these funds or expose us to risks related to our failure to comply with such requirements.

Our failure to comply with applicable laws or regulations could result in fines, censure, suspensions of personnel or other sanctions, including revocation of our registration as an investment adviser. The regulations that our businesses are subject to are designed primarily to protect investors in our funds and to ensure the integrity of the financial markets. They are not designed to protect you, our Class A shareholders. Even if a sanction imposed against us or our personnel by a regulator is for a small monetary amount, the adverse publicity related to such sanction against us by regulators could harm our reputation, result in redemptions by investors from our hedge funds and impede our ability to raise additional capital or new funds.

As a result of recent highly-publicized financial scandals, investors have exhibited concerns over the integrity of the U.S. financial markets, and the regulatory environment in which we operate is

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subject to further regulation. In recent years, there has been debate in both the U.S. and foreign government about new rules or regulations to be applicable to hedge funds or other alternative investment products. We may be adversely affected if new or revised legislation or regulations are enacted, or by changes in the interpretation or enforcement of existing rules and regulations imposed by the SEC, other U.S. or foreign governmental regulatory authorities or self-regulatory organizations that supervise the financial markets. Such changes could place limitations on the type of investor that can invest in alternative asset funds or on the conditions under which such investors may invest. Further, such changes may limit the scope of investing activities that may be undertaken by alternative asset managers. Any such changes could increase our costs of doing business or materially adversely affect our profitability.

Our failure to deal appropriately with conflicts of interest could damage our reputation and adversely affect our business.

As we have expanded the number and scope of our businesses, we increasingly confront potential conflicts of interest relating to our funds’ investment activities. Certain of our funds have overlapping investment objectives, including funds which have different fee structures, and potential conflicts may arise with respect to our decisions regarding how to allocate investment opportunities among those funds. For example, a decision to acquire material non-public information about a company while pursuing an investment opportunity for a particular fund gives rise to a potential conflict of interest when it results in our having to restrict the ability of other funds to take any action. In addition, investors (or holders of Class A shares) may perceive conflicts of interest regarding investment decisions for funds in which our principals, who have and may continue to make significant personal investments in a variety of Fortress Funds, are personally invested. Similarly, conflicts of interest may exist regarding decisions about the allocation of specific investment opportunities between Fortress and the Fortress Funds. In addition, because the Operating Entities are held, in part, by FIG Corp., which is subject to tax, conflicts of interest may exist regarding decisions about which of Fortress’s holdings should be held by Operating Entities and which by Principal Holdings.

Pursuant to the terms of our operating agreement, whenever a potential conflict of interest exists or arises between any of the principals, one or more directors or their respective affiliates, on the one hand, and the company, any subsidiary of the company or any member other than a principal, on the other, any resolution or course of action by our board of directors shall be permitted and deemed approved by all shareholders if (i) the resolution or course of action has been specifically approved by a majority of the members of a committee composed entirely of two or more independent directors, or it is deemed approved because it complies with rules or guidelines established by such committee, (ii) has been approved a majority of the total votes that may be cast in the election of directors that are held by disinterested parties, (iii) is on terms no less favorable to the company or shareholders (other than a principal) than those generally being provided to or available from unrelated third parties or (iv) it is fair and reasonable to the company taking into account the totality of the relationships between the parties involved. All conflicts of interest described in this prospectus will be deemed to have been specifically approved by all shareholders. Notwithstanding the foregoing, it is possible that potential or perceived conflicts could give rise to investor dissatisfaction or litigation or regulatory enforcement actions. Appropriately dealing with conflicts of interest is complex and difficult and our reputation could be damaged if we fail, or appear to fail, to deal appropriately with one or more potential or actual conflicts of interest. Regulatory scrutiny of, or litigation in connection with, conflicts of interest would have a material adverse effect on our reputation which would materially adversely affect our business in a number of ways, including as a result of redemptions by our investors from our hedge funds, an inability to raise additional funds and a reluctance of counterparties to do business with us.

Employee misconduct could harm us by impairing our ability to attract and retain investors and by subjecting us to significant legal liability, regulatory scrutiny and reputational harm.

Our reputation is critical to maintaining and developing relationships with the investors in our funds, potential investors and third-parties with whom we do business. In recent years, there have

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been a number of highly-publicized cases involving fraud, conflicts of interest or other misconduct by individuals in the financial services industry in general and the hedge fund industry in particular. There is a risk that our employees could engage in misconduct that adversely affects our business. For example, if an employee were to engage in illegal or suspicious activities, we could be subject to regulatory sanctions and suffer serious harm to our reputation, financial position, investor relationships and ability to attract future investors. It is not always possible to deter employee misconduct, and the precautions we take to detect and prevent this activity may not be effective in all cases. Misconduct by our employees, or even unsubstantiated allegations, could result in a material adverse effect on our reputation and our business.

The investment management business is intensely competitive.

Over the past several years, the size and number of hedge funds and private equity funds has continued to increase. If this trend continues, it is possible that it will become increasingly difficult for our funds to raise capital. More significantly, the allocation of increasing amounts of capital to alternative investment strategies by institutional and individual investors may lead to a reduction in profitable investment opportunities, including by driving prices for investments higher and increasing the difficulty of achieving targeted returns. In addition, if interest rates were to rise or there were to be a prolonged bull market in equities, the attractiveness of our funds relative to investments in other investment products could decrease. Competition is based on a variety of factors, including:

•  investment performance;
•  investor perception of investment managers’ drive, focus and alignment of interest;
•  quality of service provided to and duration of relationship with investors;
•  business reputation; and
•  level of fees and expenses charged for services.

We compete in all aspects of our business with a large number of investment management firms, private equity fund sponsors, hedge fund sponsors and other financial institutions. A number of factors serve to increase our competitive risks:

•  investors may develop concerns that we will allow a business to grow to the detriment of its performance;
•  some of our competitors have greater capital, lower targeted returns or greater sector or investment strategy specific expertise than we do, which creates competitive disadvantages with respect to investment opportunities; some of our competitors may perceive risk differently than we do which could allow them either to outbid us for investments in particular sectors or, generally, to consider a wider variety of investments;
•  there are relatively few barriers to entry impeding new private equity and hedge fund management firms, and the successful efforts of new entrants into our various lines of business, including former ‘‘star’’ portfolio managers at large diversified financial institutions as well as such institutions themselves, will continue to result in increased competition; and
•  other industry participants continuously seek to recruit our best and brightest investment professionals away from us.

These and other factors could reduce our earnings and revenues and materially adversely affect our business. In addition, if we are forced to compete with other alternative asset managers on the basis of price, we may not be able to maintain our current management and performance fee structures. We have historically competed primarily on the performance of our funds, and not on the level of our fees relative to those of our competitors. However, there is a risk that fees in the alternative investment management industry will decline, without regard to the historical performance of a manager. Fee reductions on existing or future funds, without corresponding decreases in our cost structure, would adversely affect our revenues and profitability.

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Our internal control over financial reporting does not currently meet all of the standards contemplated by Section 404 of the Sarbanes-Oxley Act of 2002, and failure to achieve and maintain effective internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act could have a material adverse effect on our business and stock price.

Our internal control over financial reporting does not currently meet all of the standards contemplated by Section 404 of the Sarbanes-Oxley Act that we will eventually be required to meet. We are in the process of addressing our internal control over financial reporting and are establishing formal committees to oversee our policies and processes related to financial reporting and to the identification of key financial reporting risks, assessment of their potential impact and linkage of those risks to specific areas and activities within our organization.

While we do not believe we have any material weaknesses in our internal controls, we do not currently have comprehensive documentation of our system of controls, nor do we yet fully document or test our compliance with this system on a periodic basis in accordance with Section 404 of the Sarbanes-Oxley Act. Furthermore, we have not yet fully tested our internal controls in accordance with Section 404 and, due to our lack of documentation, such a test would not be possible to perform at this time. As a result, we cannot conclude in accordance with Section 404 that we do not have a material weakness, or possibly a combination of significant deficiencies which could result in the conclusion that we have a material weakness in our internal controls in accordance with such rules.

We have begun the process of documenting and testing our internal control procedures to satisfy the requirements of Section 404, which requires annual management assessments of the effectiveness of our internal control over financial reporting and a report by our independent registered public accounting firm addressing these assessments. As a public company, we will be required to complete our initial assessment in a timely manner. If we are not able to implement the requirements of Section 404 in a timely manner or with adequate compliance, our independent registered public accounting firm may not be able to certify as to the adequacy of our internal control over financial reporting. Matters impacting our internal controls may cause us to be unable to report our financial information on a timely basis and thereby subject us to adverse regulatory consequences, including sanctions by the SEC, or violations of applicable stock exchange listing rules, and result in a breach of the covenants under our credit agreement. There could also be a negative reaction in the financial markets due to a loss of investor confidence in us and the reliability of our financial statements. Confidence in the reliability of our financial statements is also likely to suffer if our independent registered public accounting firm reports a material weakness in our internal control over financial reporting. This could materially adversely affect us and lead to a decline in our share price. In addition, we will incur incremental costs in order to improve our internal control over financial reporting and comply with Section 404, including increased auditing and legal fees and costs associated with hiring additional accounting and administrative staff.

Our organizational documents do not limit our ability to enter into new lines of businesses, and we may enter into new businesses, make future strategic investments or acquisitions or enter into joint ventures, each of which may result in additional risks and uncertainties in our business.

We intend, to the extent that market conditions warrant, to grow our business by increasing assets under management in existing businesses and creating new investment products. Our organizational documents, however, do not limit us to the investment management business. Accordingly, we may pursue growth through strategic investments, acquisitions or joint ventures, which may include entering into new lines of business, such as the insurance, broker-dealer or financial advisory industries. In addition, we expect opportunities will arise to acquire other alternative or traditional asset managers. To the extent we make strategic investments or acquisitions, enter into joint ventures, or enter into a new line of business, we will face numerous risks and uncertainties, including risks associated with (i) the required investment of capital and other resources, (ii) the possibility that we have insufficient expertise to engage in such activities profitably or without incurring inappropriate amounts of risk, and (iii) combining or integrating operational and management systems and controls. Entry into certain lines of business may subject us to new laws and regulations with which we are not familiar, or from which we are currently exempt, and may lead to increased litigation and regulatory

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risk. If a new business generates insufficient revenues or if we are unable to efficiently manage our expanded operations, our results of operations will be adversely affected. In the case of joint ventures, we are subject to additional risks and uncertainties in that we may be dependent upon, and subject to liability, losses or reputational damage relating to, systems, controls and personnel that are not under our control.

Our revenue and profitability fluctuate, particularly inasmuch as we cannot predict the timing of realization events in our private equity business, which may make it difficult for us to achieve steady earnings growth on a quarterly basis and may cause volatility in the price of our Class A shares.

We experience significant variations in revenues and profitability during the year and among years because we are paid incentive income from certain funds only when investments are realized, rather than periodically on the basis of increases in the funds’ net asset values. The timing and receipt of incentive income generated by our private equity funds is event driven and thus highly variable, which contributes to the volatility of our segment revenue, and our ability to realize incentive income from our private equity funds may be limited. We cannot predict when, or if, any realization of investments will occur. If we were to have a realization event in a particular quarter, it may have a significant impact on our segment revenues and profits for that particular quarter which may not be replicated in subsequent quarters. In addition, our private equity investments are adjusted for accounting purposes to fair value at the end of each quarter, resulting in revenue attributable to our principal investments, even though we receive no cash distributions from our private equity funds, which could increase the volatility of our quarterly earnings.

With respect to our hedge funds, our incentive income is paid annually or quarterly if the net asset value of a fund has increased for the period. The amount (if any) of the incentive income we earn from our hedge funds depends on the increase in the net asset value of the funds, which is subject to market volatility. Our liquid hedge funds have historically experienced significant fluctuations in net asset value from month to month. Certain of our hedge funds also have ‘‘high water marks’’ whereby we do not earn incentive income for a particular period even though the fund had positive returns in such period if the fund had greater losses in prior periods. Therefore, if a hedge fund experiences losses in a period, we will not be able to earn incentive income from that fund until it surpasses the previous high water mark. These quarterly fluctuations in our revenues and profits in any of our businesses could lead to significant volatility in the price of our Class A shares.

An increase in our borrowing costs may adversely affect our earnings and liquidity.

Under our credit agreement, we have a revolving credit facility in the amount of $150 million, $95 million of which was outstanding at September 30, 2006, and an outstanding term loan facility in the amount of $600 million. Borrowings under the credit facility mature on June 23, 2011. As our facilities mature, we will be required to either refinance them by entering into new facilities, which could result in higher borrowing costs, or issuing equity, which would dilute existing shareholders. We could also repay them by using cash on hand or cash from the sale of our assets. No assurance can be given that we will be able to enter into new facilities or issue equity in the future on attractive terms, or at all.

Our credit facilities are LIBOR-based floating-rate obligations and the interest expense we incur will vary with changes in the applicable LIBOR reference rate. As a result, an increase in short-term interest rates will increase our interest costs and will reduce the spread between the returns on our investments and the cost of our borrowings. An increase in interest rates would adversely affect the market value of any fixed-rate debt investments and/or subject them to prepayment or extension risk, which may adversely affect our earnings and liquidity.

There can be no assurance that we will be successful in developing a market for our investment products in Asia or that our relationship with Nomura will yield profitable investment opportunities for the funds we manage.

On December 18, 2006, our principals entered into an agreement with Nomura pursuant to which Nomura acquired a 15% stake in Fortress for $888.0 million on January 17, 2007. Pursuant to the

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terms of the agreement, the parties agreed that Nomura will work with us to develop a strategy to market and sell our investment products. We believe that a strategic relationship with Nomura, the largest leading Japanese financial institution, could provide us with access to Nomura’s distribution capabilities in Asia. In addition, we believe that our relationship will provide us with potential investment opportunities for the funds we manage. However, there can be no assurance that we will be able to develop a strategy and enter into a mutually satisfactory distribution agreement with Nomura, or that if reached, a market for our investment products will ever develop in Asia.

Risks Related to Our Funds

Our results of operations are dependent on the performance of our funds. Poor fund performance will result in reduced revenues, reduced returns on our principal investments in the funds and reduced earnings. Poor performance of our funds will make it difficult for us to retain or attract investors to our funds and to grow our business. The performance of each fund we manage is subject to some or all of the following risks.

The historical returns attributable to our funds should not be considered as indicative of the future results of our funds or of our future results or of any returns expected on an investment in our Class A shares.

We have presented in this prospectus under ‘‘Business–Investment Performance of Our Funds’’ the net annualized returns relating to the historical performance of our private equity funds, hedge funds and Castles. The returns are relevant to us primarily insofar as they are indicative of incentive income we have earned to date and, in respect of private equity funds, incentive income we may earn in the future from these funds. The historical and potential future returns of the funds we manage are not, however, directly linked to returns on our Class A shares. Therefore, you should not conclude that continued positive performance of the funds we manage will necessarily result in positive returns on an investment in Class A shares. However, poor performance of the funds we manage will cause a decline in our revenue from such funds, and would therefore have a negative effect on our performance and the returns on an investment in our Class A shares.

Moreover, with respect to the historical returns of our funds:

•  the historical returns of our funds should not be considered indicative of the future results that should be expected from such funds or from any future funds we may raise;
•  our private equity funds’ rates of returns, which are calculated on the basis of net asset value of the funds’ investments, reflect unrealized gains which may never be realized;
•  our private equity funds’ rates of returns have been positively influenced by a select number of investments that experienced rapid and substantial increases in value following the initial public offerings of the private equity portfolio companies in which those investments were made; and
•  our funds’ returns have benefited from investment opportunities and general market conditions that may not repeat themselves, and there can be no assurance that our current or future funds will be able to avail themselves of profitable investment opportunities.

Poor performance of our funds would cause a decline in our revenue and results of operations, may obligate us to repay incentive income previously paid to us, and would adversely affect our ability to raise capital for future funds.

Our revenue from the Fortress Funds is derived principally from three sources: (1) management fees, based on the size of our funds; (2) incentive income, earned based on the performance of our funds; and (3) gains or losses on our investments in the funds, which we refer to as our ‘‘principal investments.’’ In the event that any of our funds perform poorly, our revenue and results of operations will decline, and it will likely be more difficult for us to raise new capital. In addition, hedge fund investors may withdraw their investments in our funds, while investors in private equity funds may

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decline to invest in future funds we raise, as a result of poor performance of our funds or otherwise. Furthermore, if, as a result of poor performance of later investments in a private equity fund’s life, the fund does not achieve total investment returns that exceed a specified investment return threshold for the life of the fund, we will be obligated to repay the amount by which incentive income that was previously distributed to us exceeds amounts to which we are ultimately entitled. Our investors and potential investors continually assess our funds’ performance and our ability to raise capital.

Difficult market conditions can adversely affect our funds in many ways, including by reducing the value or performance of the investments made by our funds and reducing the ability of our funds to raise or deploy capital, which could materially reduce our revenue and results of operations.

If economic conditions are unfavorable our funds may not perform well and we may not be able to raise money in existing or new funds. Our funds are materially affected by conditions in the global financial markets and economic conditions throughout the world. The global market and economic climate may deteriorate because of many factors beyond our control, including rising interest rates or inflation, terrorism or political uncertainty. In the event of a market downturn, each of our businesses could be affected in different ways. Our private equity funds may face reduced opportunities to sell and realize value from their existing investments, and a lack of suitable investments for the funds to make. In addition, adverse market or economic conditions as well as a slowdown of activities in a particular sector in which portfolio companies of these funds operate could have an adverse effect on the earnings of those portfolio companies, and therefore, our earnings.

A general market downturn, or a specific market dislocation, may cause our revenue and results of operations to decline by causing:

•  the net asset value of the assets under management to decrease, lowering management fees;
•  lower investment returns, reducing incentive income;
•  material reductions in the value of our private equity fund investments in portfolio companies which reduce our ‘‘surplus’’ and, therefore, our ability to realize incentive income from these investments; and
•  investor redemptions, resulting in lower fees.

Furthermore, while difficult market conditions may increase opportunities to make certain distressed asset investments, such conditions also increase the risk of default with respect to investments held by our funds with debt investments, such as the hybrid hedge funds and the Castles. Our liquid hedge funds may also be adversely affected by difficult market conditions if they fail to predict the adverse effect of such conditions on particular investments, resulting in a significant reduction in the value of those investments. In addition, the publicly traded portfolio companies owned by our private equity funds currently pay a material amount of dividends. This makes their share prices vulnerable to increases in interest rates, which would, by causing declines in the value of the share prices, in turn result in lower management fees and incentive income for us.

Investors in our hedge funds may redeem their investments and investors in our private equity funds may elect to dissolve the funds at any time without cause. These events would lead to a decrease in our revenues, which could be substantial and lead, therefore, to a material adverse effect on our business.

Investors in our hedge funds may generally redeem their investments on an annual or quarterly basis, subject to the applicable fund’s specific redemption provisions (e.g., a redeeming Drawbridge Special Opportunities Fund investor is not entitled to cash at the redemption date, but retains instead an interest in the investments as of the redemption date and receives monies from the fund only as and when such investments are realized). Investors may decide to move their capital away from us to other investments for any number of reasons in addition to poor investment performance. Factors which could result in investors leaving our funds include changes in interest rates which make other investments more attractive, changes in investor perception regarding our focus or alignment of interest, unhappiness with changes in or broadening of a fund’s investment strategy, changes in our

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reputation, and departures or changes in responsibilities of key investment professionals. In a declining financial market, the pace of redemptions and consequent reduction in our assets under management could accelerate. The decrease in our revenues that would result from significant redemptions in our hedge fund business would have a material adverse effect on our business.

In addition, the investors in our private equity and domestic hedge funds may, subject to certain conditions, act at any time to accelerate the liquidation date of the fund without cause, resulting in a reduction in management fees we earn from such funds, and a significant reduction in the amounts of total incentive income we could earn from those funds. Incentive income could be significantly reduced as a result of our inability to maximize the value of a fund’s investments in a liquidation. The occurrence of such an event with respect to any of our funds would, in addition to the significant negative impact on our revenue and earnings, likely result in significant reputational damages as well.

Many of our funds invest in relatively high-risk, illiquid assets that often have significantly leveraged capital structures, and we may fail to realize any profits from these activities for a considerable period of time or lose some or all of the principal amount we invest in these activities.

Many of our funds invest in securities that are not publicly traded. In many cases, our funds may be prohibited by contract or by applicable securities laws from selling such securities for a period of time. Our funds will generally not be able to sell these securities publicly unless their sale is registered under applicable securities laws, or unless an exemption from such registration requirements is available. Accordingly, our funds may be forced to sell securities at a loss, under certain conditions. The ability of many of our funds, particularly our private equity funds, to dispose of investments is heavily dependent on the public equity markets, inasmuch as the ability to realize any value from an investment may depend upon the ability to complete an initial public offering of the portfolio company in which such investment is held. Furthermore, large holdings even of publicly traded equity securities can often be disposed of only over a substantial period of time, exposing the investment returns to risks of downward movement in market prices during the disposition period.

In addition, many of our funds, particularly our private equity funds, hybrid hedge funds and our Castles, invest in businesses with capital structures that have significant leverage. The large amount of borrowing in the leveraged capital structure of such businesses increases the risk of losses due to factors such as rising interest rates, downturns in the economy or deteriorations in the condition of the investment or its industry. In the event of defaults under borrowings, the assets being financed would be at risk of foreclosure, and the fund could lose its entire investment.

Our hedge funds are subject to risks due to potential illiquidity of assets.

Our hedge funds may make investments or hold trading positions in markets that are volatile and which may become illiquid. Timely divestiture or sale of trading positions can be impaired by decreased trading volume, increased price volatility, concentrated trading positions, limitations on the ability to transfer positions in highly specialized or structured transactions to which we may be a party, and changes in industry and government regulations. When a fund holds a security or position it is vulnerable to price and value fluctuations and may experience losses to the extent the value of the position decreases and it is unable to timely sell, hedge or transfer the position. Therefore, it may be impossible or costly for our funds to liquidate positions rapidly, particularly if the relevant market is moving against a position or in the event of trading halts or daily price movement limits on the market or otherwise. Alternatively, it may not be possible in certain circumstances for a position to be purchased or sold promptly, particularly if there is insufficient trading activity in the relevant market or otherwise.

The hedge funds we manage may operate with a substantial degree of leverage. They may borrow, invest in derivative instruments and purchase securities using borrowed money, so that the positions held by the funds may in aggregate value exceed the net asset value of the funds. This leverage creates the potential for higher returns, but also increases the volatility of a fund, including the risk of a total loss of the amount invested.

The risks identified above will be increased if a fund is required to rapidly liquidate positions to meet margin requests, margin calls or other funding requirements on that position or otherwise. The

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inability to rapidly sell positions due to a lack of liquidity has historically been the cause of substantial losses in the hedge fund industry. The ability of counterparties to force liquidations following losses or a failure to meet a margin call can result in the rapid sale of highly leveraged positions in declining markets, which would likely subject our hedge funds to substantial losses. We may fail to adequately predict the liquidity which our hedge funds require to address counterparty requirements due to falling values of fund investments being financed by such counterparties, which could result not only in losses related to such investments, but in losses related to the need to liquidate unrelated investments in order to meet the fund’s obligations. Our hedge funds may incur substantial losses in the event significant capital is invested in highly leveraged investments or investment strategies. Such losses would result in a decline in assets under management, lead to investor requests to redeem remaining assets under management, and damage our reputation, each of which would materially and adversely impact our earnings.

Valuation methodologies for certain assets in our funds can be subject to significant subjectivity and the values of assets established pursuant to such methodologies may never be realized, which could result in significant losses for our funds.

There are no readily-ascertainable market prices for a very large number of illiquid investments in our private equity and hybrid hedge funds. The value of the investments of our funds is determined periodically by us based on the fair value of such investments. The fair value of investments is determined using a number of methodologies described in the funds’ valuation policies. These policies are based on a number of factors, including the nature of the investment, the expected cash flows from the investment, bid or ask prices provided by third parties for the investment, the length of time the investment has been held, the trading price of securities (in the case of publicly traded securities), restrictions on transfer and other recognized valuation methodologies. The methodologies we use in valuing individual investments are based on a variety of estimates and assumptions specific to the particular investments, and actual results related to the investment therefore often vary materially as a result of the inaccuracy of such assumptions or estimates. In addition, because many of the illiquid investments held by our funds are in industries or sectors which are unstable, in distress, or undergoing some uncertainty, such investments are subject to rapid changes in value caused by sudden company-specific or industry-wide developments.

Because there is significant uncertainty in the valuation of, or in the stability of the value of illiquid investments, the fair values of such investments as reflected in a fund’s net asset value do not necessarily reflect the prices that would actually be obtained by us on behalf of the fund when such investments are sold. Realizations at values significantly lower than the values at which investments have been reflected in fund net asset values would result in losses for the applicable fund, a decline in asset management fees and the loss of potential incentive income. Also, a situation where asset values turn out to be materially different than values reflected in fund net asset values will cause investors to lose confidence in us which would, in turn, result in redemptions from our hedge funds or difficulties in raising additional private equity funds.

In some cases, the Fortress Funds realize value from an illiquid portfolio company when the portfolio company is able to sell equity in the public markets through an initial public offering (an ‘‘IPO’’). An IPO of a portfolio company increases the liquidity of the funds’ investment in the company and can create significant value when the dividend yield on the company’s shares after the IPO is lower than the return being generated by the company’s net assets, thereby increasing the value of its equity. Because of the significant uncertainties, both market-driven and regulatory in consummating an IPO, Fortress believes that the theoretical value added to a portfolio company investment by an IPO should not be recorded in the asset value of a fund until the IPO is completed. Therefore, Fortress values illiquid portfolio companies for which an IPO is being contemplated, or is in process, at fair value without regard to the value which may be created by the IPO.

Certain of our funds utilize special situation and distressed debt investment strategies which involve significant risks.

Our private equity and hybrid hedge funds invest in obligors and issuers with weak financial conditions, poor operating results, substantial financial needs, negative net worth, and/or special

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competitive problems. These funds also invest in obligors and issuers that are involved in bankruptcy or reorganization proceedings. In such situations, it may be difficult to obtain full information as to the exact financial and operating conditions of these obligors and issuers. Additionally, the fair values of such investments are subject to abrupt and erratic market movements and significant price volatility if they are publicly traded securities, and are subject to significant uncertainty in general if they are not publicly traded securities. Furthermore, some of our funds’ distressed investments may not be widely traded or may have no recognized market. A fund’s exposure to such investments may be substantial in relation to the market for those investments, and the assets are likely to be illiquid and difficult to sell or transfer. As a result, it may take a number of years for the fair value of such investments to ultimately reflect their intrinsic value as perceived by us.

A central feature of our distressed investment strategy is our ability to successfully predict the occurrence of certain corporate events, such as debt and/or equity offerings, restructurings, reorganizations, mergers, takeover offers and other transactions. If the corporate event we predict is delayed, changed or never completed, the market price and value of the applicable fund’s investment could decline sharply.

If our risk management systems for our hedge fund business are ineffective, we may be exposed to material unanticipated losses.

In our hedge fund business, we continue to refine our risk management techniques, strategies and assessment methods. However, our risk management techniques and strategies may not fully mitigate the risk exposure of our funds in all economic or market environments, or against all types of risk, including risks that we might fail to identify or anticipate. Some of our strategies for managing risk in our funds are based upon our use of historical market behavior statistics. We apply statistical and other tools to these observations to measure and analyze the risks to which our funds are exposed. Any failures in our risk management techniques and strategies to accurately quantify such risk exposure could limit our ability to manage risks in the funds or to seek adequate risk-adjusted returns. In addition, any risk management failures could cause fund losses to be significantly greater than the historical measures predict. Further, our mathematical modeling does not take all risks into account. Our more qualitative approach to managing those risks could prove insufficient, exposing us to material unanticipated losses. See ‘‘Business — Our Investment Process and Risk Controls’’.

Some of our funds invest in foreign countries and securities of issuers located outside of the United States, which may involve foreign exchange, political, social and economic uncertainties and risks.

Some of our funds invest a portion of their assets in the equity, debt, loans or other securities of issuers located outside the U.S. In addition to business uncertainties, such investments may be affected by changes in exchange values as well as political, social and economic uncertainty affecting a country or region. Many financial markets are not as developed or as efficient as those in the U.S., and as a result, liquidity may be reduced and price volatility may be higher. The legal and regulatory environment may also be different, particularly with respect to bankruptcy and reorganization. Financial accounting standards and practices may differ, and there may be less publicly available information in respect of such companies.

Restrictions imposed or actions taken by foreign governments may adversely impact the value of our fund investments. Such restrictions or actions could include exchange controls, seizure or nationalization of foreign deposits and adoption of other governmental restrictions which adversely affect the prices of securities or the ability to repatriate profits on investments or the capital invested itself. Income received by our funds from sources in some countries may be reduced by withholding and other taxes. Any such taxes paid by a fund will reduce the net income or return from such investments. While our funds will take these factors into consideration in making investment decisions, including when hedging positions, no assurance can be given that the funds will be able to fully avoid these risks or generate sufficient risk-adjusted returns.

We are subject to risks in using prime brokers and custodians.

The funds in our liquid hedge funds business depend on the services of prime brokers and custodians to carry out certain securities transactions. In the event of the insolvency of a prime broker

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and/or custodian, the funds might not be able to recover equivalent assets in full as they will rank among the prime broker and custodian’s unsecured creditors in relation to assets which the prime broker or custodian borrows, lends or otherwise uses. In addition, the funds’ cash held with a prime broker or custodian will not be segregated from the prime broker’s or custodian’s own cash, and the funds will therefore rank as unsecured creditors in relation thereto.

Risks Related to Our Organization and Structure

Control by our principals of the combined voting power of our shares and holding their economic interest through Fortress Operating Group may give rise to conflicts of interests.

Upon consummation of this offering, our principals will control approximately 77.7% of the combined voting power of our Class A and Class B shares. Accordingly, our principals will have the ability to elect all of the members of our board of directors, subject to Nomura’s right to nominate one designee, and thereby to control our management and affairs. In addition, they will be able to determine the outcome of all matters requiring shareholder approval and will be able to cause or prevent a change of control of our company or a change in the composition of our board of directors, and could preclude any unsolicited acquisition of our company. The control of voting power by our principals could deprive Class A shareholders of an opportunity to receive a premium for their Class A shares as part of a sale of our company, and might ultimately affect the market price of the Class A shares.

In addition, the shareholders agreement among us and the principals will provide the principals who are then employed by the Fortress Operating Group holding shares greater than 50% of the total combined voting power of all shares held by such principals, so long as the principals and their permitted transferees continue to hold more than 40% of the total combined voting power of our outstanding Class A and Class B shares, with approval rights over a variety of significant corporate actions, including:

•  ten percent indebtedness: any incurrence of indebtedness, in one transaction or a series of related transactions, by us or any of our subsidiaries in an amount in excess of approximately 10% of the then existing long-term indebtedness of us and our subsidiaries;
•  ten percent share issuance: any issuance by us, in any transaction or series of related transactions, of equity or equity-related securities which would represent, after such issuance, or upon conversion, exchange or exercise, as the case may be, at least 10% of the total combined voting power of our outstanding Class A and Class B shares other than (1) pursuant to transactions solely among us and our wholly-owned subsidiaries, or (2) upon conversion of convertible securities or upon exercise of warrants or options, which convertible securities, warrants or options are either outstanding on the date of, or issued in compliance with, the shareholders agreement;
•  investment of $250 million or greater: any equity or debt commitment or investment or series of related equity or debt commitments or investments in an entity or related group of entities in an amount greater than $250 million;
•  new business requiring investment in excess of $100 million: any entry by us or any of our controlled affiliates into a new line of business that does not involve investment management and that requires a principal investment in excess of $100 million;
•  the adoption of a shareholder rights plan;
•  any appointment of a chief executive officer or co-chief executive officer; or
•  the termination of the employment of a principal with us or any of our material subsidiaries without cause.

Furthermore, the principals have certain consent rights with respect to structural changes involving our company as described under ‘‘Description of Shares—Amendment of Our Operating Agreement—Relationship with Fortress Operating Group Entities.’’

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In addition, our principals are entitled to approximately 77.7% of our economic returns through their holdings of 77.7% of Fortress Operating Group units. Because they hold their economic interest in our business directly through Fortress Operating Group, rather than through the public company, our principals may have conflicting interests with holders of Class A shares. For example, our principals may have different tax positions from us which could influence their decisions regarding whether and when to dispose of assets, and whether and when to incur new or refinance existing indebtedness, especially in light of the existence of the tax receivable agreement. In addition, the structuring of future transactions may take into consideration the principals’ tax considerations even where no similar benefit would accrue to us.

We intend to pay regular dividends but our ability to do so may be limited by our holding company structure; we are dependent on distributions from the Fortress Operating Group to pay dividends, taxes and other expenses. Our ability to pay dividends is also subject to not defaulting on our credit agreement.

As a holding company, our ability to pay dividends will be subject to the ability of our subsidiaries to provide cash to us. We intend to distribute quarterly dividends to our Class A shareholders. Accordingly, we expect to cause the Fortress Operating Group to make distributions to its unitholders, including our wholly-owned subsidiaries, pro rata in an amount sufficient to enable us to pay such dividends to our Class A shareholders; however, no assurance can be given that such distributions will or can be made. Our board can reduce or eliminate our dividend at any time, in its discretion. In addition, Fortress Operating Group is required to make minimum tax distributions to its unitholders. See also ‘‘Risk Factors—Risks Related to Taxation—There Can Be No Assurance That Amounts Paid As Dividends on Class A Shares Will Be Sufficient To Cover The Tax Liability Arising From Ownership Of Class A Shares.’’ If Fortress Operating Group has insufficient funds, we may have to borrow additional funds or sell assets, which could materially adversely affect our liquidity and financial condition. In addition, Fortress Operating Group’s earnings may be insufficient to enable it to make required minimum tax distributions to unitholders.

There may be circumstances under which we are restricted from paying dividends under applicable law or regulation (for example due to Delaware limited partnership or limited liability company act limitations on making distributions if liabilities of the entity after the distribution would exceed the value of the entity’s assets). In addition, under our credit agreement, we are permitted to make cash distributions subject to the following restrictions: (a) no event of default exists immediately prior to or subsequent to the distribution, (b) the amount of distributions over the prior 12 months do not exceed free cash flow (as defined in our credit agreement as net income plus (i) taxes, depreciation and private equity incentive income presented on an as-received basis less (ii) capital expenditures, permitted tax distributions and certain other adjustments) for the prior 12 month period, and (c) after giving effect to the distribution, we have cash on hand of not less than accrued but unpaid taxes (based on estimated entity level taxes due and payable by the Fortress Operating Group entities, primarily New York City unincorporated business tax) and amortization obligations (including scheduled principal payments) under the credit agreement which are required in the next 90 days. The events of default under the credit agreement are typical of such agreements and include payment defaults, failure to comply with credit agreement covenants, cross-defaults to material indebtedness, bankruptcy and insolvency, change of control, and adverse events with respect to our material funds. Our lenders may also attempt to exercise their security interests over substantially all of the assets of the Fortress Operating Group.

The cash reflected on our historical balance sheets, which consolidates many of our funds, is not our cash and is not available to us; we depend on the cash we receive from the Fortress Operating Group.

Our historical combined financial information includes significant balances of cash and restricted cash held at consolidated subsidiaries as assets on our balance sheet. Although the cash and other assets of certain Fortress Funds have historically been included in our assets on a consolidated basis for financial reporting purposes, such cash is not available to us to pay dividends or for other liquidity needs but rather is property of the relevant fund. Following changes to our fund documents

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concurrent with this offering, these funds will no longer be consolidated, and such cash amounts will no longer be included in our balance sheet assets. We depend on distributions from the Fortress Operating Group for cash. Although the Fortress Operating Group may borrow under our credit facility, it depends primarily on the management fees and incentive income it receives from the Fortress Funds and its portion of the distributions made by the Fortress Funds, if any, for cash.

Tax consequences to the principals may give rise to conflicts of interests.

As a result of unrealized built-in gain attributable to the value of our assets held by the Fortress Operating Group entities at the time of this offering, upon the sale or, refinancing or disposition of the assets owned by the Fortress Operating Group entities, our principals will incur different and significantly greater tax liabilities as a result of the disproportionately greater allocations of items of taxable income and gain to the principals upon a realization event. As the principals will not receive a corresponding greater distribution of cash proceeds, they may, subject to applicable fiduciary or contractual duties, have different objectives regarding the appropriate pricing, timing and other material terms of any sale, refinancing, or disposition, or whether to sell such assets at all. Decisions made with respect to an acceleration or deferral of income or the sale or disposition of assets may also influence the timing and amount of payments that are received by an exchanging or selling principal under the tax receivable agreement. All other factors being equal, earlier disposition of assets following a transaction will tend to accelerate such payments and increase the present value of the tax receivable agreement, and disposition of assets before a transaction will increase a principal’s tax liability without giving rise to any rights to receive payments under the tax receivable agreement. Decisions made regarding a change of control also could have a material influence on the timing and amount of payments received by the principals pursuant to the tax receivable agreement.

We will be required to pay our principals for most of the tax benefits we realize as a result of the tax basis step-up we receive in connection with taxable exchanges by our principals of units held in the Fortress Operating Group entities or our acquisitions of units from our principals.

At any time and from time to time, each principal will have the right to exchange their Fortress Operating Group units for our Class A shares in a taxable transaction. These taxable exchanges, as well as our acquisitions of units from our principals, may result in increases in the tax depreciation and amortization deductions, as well as an increase in the tax basis of other assets, of the Fortress Operating Group that otherwise would not have been available. These increases in tax depreciation and amortization deductions, as well as the tax basis of other assets, may reduce the amount of tax that FIG Corp. or FIG Asset Co. LLC and any other corporate taxpayers would otherwise be required to pay in the future, although the IRS may challenge all or part of increased deductions and tax basis increase, and a court could sustain such a challenge.

We have entered into a tax receivable agreement with our principals that provides for the payment by the corporate taxpayers to our principals of 85% of the amount of tax savings, if any, that the corporate taxpayers actually realize (or are deemed to realize in the case of an early termination payment by the corporate taxpayers or a change of control, as discussed below) as a result of these increases in tax deductions and tax basis of the Fortress Operating Group. The payments that the corporate taxpayers may make to our principals could be material in amount.

Although we are not aware of any issue that would cause the IRS to challenge a tax basis increase, our principals will not reimburse the corporate taxpayers for any payments that have been previously made under the tax receivable agreement. As a result, in certain circumstances, payments could be made to our principals under the tax receivable agreement in excess of the corporate taxpayers’ cash tax savings. The corporate taxpayers’ ability to achieve benefits from any tax basis increase, and the payments to be made under this agreement, will depend upon a number of factors, including the timing and amount of our future income.

In addition, the tax receivable agreement provides that, upon a merger, asset sale or other form of business combination or certain other changes of control, the corporate taxpayers’ (or their successors’) obligations with respect to exchanged or acquired units (whether exchanged or acquired

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before or after such change of control) would be based on certain assumptions, including that the corporate taxpayers would have sufficient taxable income to fully utilize the deductions arising from the increased tax deductions and tax basis and other benefits related to entering into the tax receivable agreement.

See ‘‘Certain Relationships and Related Party Transactions—Tax Receivable Agreement’’.

If we were deemed an investment company under the Investment Company Act of 1940, applicable restrictions could make it impractical for us to continue our business as contemplated and could have a material adverse effect on our business and the price of our Class A shares.

We do not believe that we are an ‘‘investment company’’ under the Investment Company Act of 1940 because the nature of our assets and the sources of our income exclude us from the definition of an investment company pursuant to Rule 3a-1 under the Investment Company Act of 1940. In addition, we believe the company is not an investment company under Section 3(b)(1) of the Investment Company Act because it is primarily engaged in a non-investment company business. If one or more of the Fortress Operating Group entities ceased to be a wholly-owned subsidiary of ours, our interests in those subsidiaries could be deemed an ‘‘investment security’’ for purposes of the Investment Company Act of 1940. Generally, a person is an ‘‘investment company’’ if it owns investment securities having a value exceeding 40% of the value of its total assets (exclusive of U.S. government securities and cash items) on an unconsolidated basis. We intend to conduct our operations so that we will not be deemed an investment company. However, if we were to be deemed an investment company, restrictions imposed by the Investment Company Act of 1940, including limitations on our capital structure and our ability to transact with affiliates, could make it impractical for us to continue our business as contemplated and would have a material adverse effect on our business and the price of our Class A shares.

Risks Related To This Offering

An active market for our Class A shares may not develop.

We have applied to have our Class A shares listed on the New York Stock Exchange under the symbol ‘‘FIG’’. However, we cannot assure you that our Class A shares will be approved for listing on the New York Stock Exchange or, if approved, that a regular trading market of our Class A shares will develop on that exchange or elsewhere or, if developed, that any market will be sustained. Accordingly, we cannot assure you of the likelihood that an active trading market for our Class A shares will develop or be maintained, the liquidity of any trading market, your ability to sell your Class A shares when desired, or at all, or the prices that you may obtain for your Class A shares.

The market price and trading volume of our Class A shares may be volatile, which could result in rapid and substantial losses for our shareholders.

Even if an active trading market develops, the market price of our Class A shares may be highly volatile and could be subject to wide fluctuations. In addition, the trading volume in our Class A shares may fluctuate and cause significant price variations to occur. If the market price of our Class A shares declines significantly, you may be unable to resell your Class A shares at or above your purchase price, if at all. We cannot assure you that the market price of our Class A shares will not fluctuate or decline significantly in the future. Some of the factors that could negatively affect the price of our Class A shares or result in fluctuations in the price or trading volume of our Class A shares include:

•  variations in our quarterly operating results or dividends;
•  failure to meet analysts’ earnings estimates or failure to meet, or the lowering of, our own earnings guidance;
•  publication of research reports about us or the investment management industry or the failure of securities analysts to cover our Class A shares after this offering;

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•  additions or departures of our principals and other key management personnel;
•  adverse market reaction to any indebtedness we may incur or securities we may issue in the future;
•  actions by shareholders;
•  changes in market valuations of similar companies;
•  speculation in the press or investment community;
•  changes or proposed changes in laws or regulations or differing interpretations thereof affecting our business or enforcement of these laws and regulations, or announcements relating to these matters;
•  adverse publicity about the asset management industry generally or individual scandals, specifically; and
•  general market and economic conditions.

Our Class A share price may decline due to the large number of shares eligible for future sale and for exchange into Class A shares.

The market price of our Class A shares could decline as a result of sales of a large number of our Class A shares or the perception that such sales could occur. These sales, or the possibility that these sales may occur, also might make it more difficult for us to sell equity securities in the future at a time and price that we deem appropriate. After the consummation of this offering, we will have 401,429,000 outstanding Class A shares on a fully diluted basis, 50,920,503 restricted Class A share units granted to employees and 102,858 restricted Class A shares granted to directors pursuant to our equity incentive plan, and 63,976,639 Class A shares and Fortress Operating Group units will remain available for future grant under our equity incentive plan. See ‘‘Shares Eligible for Future Sale’’. Beginning in 2008, the Class A shares reserved under our equity incentive plan will be increased on the first day of each fiscal year during the plan’s term by the lesser of (x) the excess of (i) 15% of the number of outstanding Class A and Class B shares of the company on the last day of the immediately preceding fiscal year over (ii) the number of shares reserved and available for issuance under our equity incentive plan as of such date or (y) 60,000,000 shares.

We have agreed with the underwriters not to sell, otherwise dispose of or hedge any of our Class A shares or any securities issuable upon conversion of, or exchange or exercise for, Class A shares (including Fortress Operating Group units), subject to specified exceptions, during the period from the date of this prospectus continuing through the date 120 days after the date of this prospectus, except with the prior written consent of the representatives. Subject to these agreements, we may issue and sell in the future additional Class A shares or any securities issuable upon conversion of, or exchange or exercise for, Class A shares (including Fortress Operating Group units).

Our principals will own an aggregate of 312,071,550 Fortress Operating Group units. Each principal will have the right to exchange each of his Fortress Operating Group units for one of our Class A shares at any time, subject to the Principals Agreement. Our principals, executive officers, directors and certain employees who are receiving Class A shares and Fortress Operating Group units in connection with this offering, Nomura and participants in our directed share program have agreed with the underwriters not to dispose of or hedge any of our Class A shares, or Fortress Operating Group units, subject to specified exceptions, during the period from the date of this prospectus continuing through the date 120 days after the date of this prospectus, except with the prior written consent of the representatives. After the expiration of this 120-day lock-up period, these Class A shares and Fortress Operating Group units will be eligible for resale from time to time, subject to certain contractual restrictions and Securities Act limitations. Under certain circumstances the 120-day lock-up period may be extended.

Our principals and Nomura are parties to shareholders agreements with us. After the expiration of their 120-day lock-up period, the principals will have the ability to cause us to register the Class A

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shares they acquire upon exchange for their Fortress Operating Group units. Nomura will have the ability to cause us to register any of its 55,071,450 Class A shares beginning one year after its acquisition of Class A shares and may only transfer its Class A shares prior to such time to its controlled affiliates.

Investors in this offering will suffer immediate and substantial dilution.

The initial public offering price per Class A share will be substantially higher than our pro forma net tangible book value per share immediately after this offering. As a result, you will pay a price per Class A share that substantially exceeds our pro forma tangible book value per share. At an offering price of $17.50 (the mid-point of the range set forth on the cover page of this prospectus), you will incur immediate and substantial dilution in an amount of $17.38 per Class A share.

Our principals’ beneficial ownership of Class B shares and anti-takeover provisions in our charter documents and Delaware law could delay or prevent a change in control.

Upon consummation of this offering, our principals will beneficially own all of our Class B shares. The principals’ Class B shares will represent approximately 77.7% of the total combined voting power of our outstanding Class A and Class B shares. As a result, if they vote all of their shares in the same manner, they will be able to exercise control over all matters requiring the approval of shareholders and will be able to prevent a change in control of our company. In addition, provisions in our operating agreement may make it more difficult and expensive for a third party to acquire control of us even if a change of control would be beneficial to the interests of our shareholders. For example, our operating agreement will provide for a staggered board, will require advance notice for proposals by shareholders and nominations, will place limitations on convening shareholder meetings, and will authorize the issuance of preferred shares that could be issued by our board of directors to thwart a takeover attempt. In addition, certain provisions of Delaware law may delay or prevent a transaction that could cause a change in our control. The market price of our Class A shares could be adversely affected to the extent that our principals’ control over us, as well as provisions of our operating agreement, discourage potential takeover attempts that our shareholders may favor.

There are certain provisions in our operating agreement regarding exculpation and indemnification of our officers and directors that differ from the Delaware General Corporation Law (DGCL) in a manner that may be less protective of the interests of our Class A shareholders.

Our operating agreement provides that to the fullest extent permitted by applicable law our directors or officers will not be liable to us. However, under the DGCL, a director or officer would be liable to us for (i) breach of duty of loyalty to us or our shareholders, (ii) international misconduct or knowing violations of the law that are not done in good faith, (iii) improper redemption of shares or declaration of dividend, or (iv) a transaction from which the director derived an improper personal benefit. In addition, our operating agreement provides that we indemnify our directors and officers for acts or omissions to the fullest extent provided by law. However, under the DGCL, a corporation can only indemnify directors and officers for acts or omissions if the director or officer acted in good faith, in a manner he reasonably believed to be in the best interests of the corporation, and, in criminal action, if the officer or director had no reasonable cause to believe his conduct was unlawful. Accordingly, our operating agreement may be less protective of the interests of our Class A shareholders, when compared to the DGCL, insofar as it relates to the exculpation and indemnification of our officers and directors.

Risks Related to Taxation

You may be subject to U.S. federal income tax on your share of our taxable income, regardless of whether you receive any cash dividends from us.

So long as we are not required to register as an investment company under the Investment Company Act of 1940 and 90% of our gross income for each taxable year constitutes ‘‘qualifying income’’ within the meaning of the Internal Revenue Code of 1986, as amended (the ‘‘Code’’), on a

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continuing basis, we will be treated, for U.S. federal income tax purposes, as a partnership and not as an association or a publicly traded partnership taxable as a corporation. You may be subject to U.S. federal, state, local and possibly, in some cases, foreign income taxation on your allocable share of our items of income, gain, loss, deduction and credit (including our allocable share of those items of any entity in which we invest that is treated as a partnership or is otherwise subject to tax on a flow through basis) for each of our taxable years ending with or within your taxable year, regardless of whether or not you receive cash dividends from us. See ‘‘Material U.S. Federal Tax Considerations.’’ You may not receive cash dividends equal to your allocable share of our net taxable income or even the tax liability that results from that income. In addition, certain of our holdings, including holdings, if any, in a Controlled Foreign Corporation (‘‘CFC’’) and a Passive Foreign Investment Company (‘‘PFIC’’), may produce taxable income prior to the receipt of cash relating to such income, and holders of our Class A shares will be required to take such income into account in determining their taxable income. Under our operating agreement, in the event of an inadvertent partnership termination in which the Internal Revenue Service (‘‘IRS’’) has granted us limited relief, each holder of our Class A shares also is obligated to make such adjustments as are required by the IRS to maintain our status as a partnership. Such adjustments may require persons who hold our Class A shares to recognize additional amounts in income during the years in which they hold such shares. We may also be required to make payments to the IRS.

Our intermediate holding company, FIG Corp., will be subject to corporate income taxation in the United States.

A significant portion of our investments and activities may be made or conducted through FIG Corp. Dividends paid by FIG Corp. from time to time will, as is usual in the case of a U.S. corporation, then be included in our income. Income received as a result of investments made or activities conducted through FIG Asset Co. LLC (but excluding through its taxable corporate affiliates) will not be subject to corporate income taxation in our structure.

There can be no assurance that amounts paid as dividends on Class A shares will be sufficient to cover the tax liability arising from ownership of Class A shares.

Any dividends paid on Class A shares will not take into account your particular tax situation (including the possible application of the alternative minimum tax) and, therefore, because of the foregoing as well as other possible reasons, may not be sufficient to pay your full amount of tax based upon your share of our net taxable income. In addition, the actual amount and timing of dividends will always be subject to the discretion of our board of directors and we cannot assure you that we will in fact pay cash dividends as currently intended. In particular, the amount and timing of dividends will depend upon a number of factors, including, among others:

•  our actual results of operations and financial condition;
•  restrictions imposed by our operating agreement or applicable law;
•  restrictions imposed by our credit agreements;
•  reinvestment of our capital;
•  the timing of the investment of our capital;
•  the amount of cash that is generated by our investments or to fund liquidity needs;
•  levels of operating and other expenses;
•  contingent liabilities; or
•  factors that our board of directors deems relevant. Even if we do not distribute cash in an amount that is sufficient to fund your tax liabilities, you will still be required to pay income taxes on your share of our taxable income.

If we are treated as a corporation for U.S. federal income tax purposes, the value of the Class A shares would be adversely affected.

We have not requested, and do not plan to request, a ruling from the IRS on our treatment as a partnership for U.S. federal income tax purposes, or on any other matter affecting us. Under current

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law and assuming full compliance with the terms of our operating agreement (and other relevant documents) and based upon factual statements and representations made by us, Skadden, Arps, Slate, Meagher & Flom LLP has opined that we will be treated as a partnership, and not as an association or a publicly traded partnership taxable as a corporation for U.S. federal income tax purposes. However, opinions of counsel are not binding upon the IRS or any court, and the IRS may challenge this conclusion and a court may sustain such a challenge. The factual representations made by us upon which Skadden, Arps, Slate, Meagher & Flom LLP will rely relate to our organization, operation, assets, activities, income, and present and future conduct of our operations. In general, if an entity that would otherwise be classified as a partnership for U.S. federal income tax purposes is a ‘‘publicly traded partnership’’ (as defined in the Code) it will be nonetheless treated as a corporation for U.S. federal income tax purposes, unless the exception described below, and upon which we intend to rely, applies. A publicly traded partnership will, however, be treated as a partnership, and not as a corporation for U.S. federal income tax purposes, so long as 90% or more of its gross income for each taxable year constitutes ‘‘qualifying income’’ within the meaning of the Code and it is not required to register as an investment company under the Investment Company Act of 1940. We refer to this exception as the ‘‘qualifying income exception.’’

Qualifying income generally includes dividends, interest, capital gains from the sale or other disposition of stocks and securities and certain other forms of investment income. We expect that our income generally will consist of interest, dividends, capital gains and other types of qualifying income, including dividends from FIG Corp. and interest on indebtedness from FIG Corp. No assurance can be given as to the types of income that will be earned in any given year. If we fail to satisfy the qualifying income exception described above, items of income and deduction would not pass through to holders of the Class A shares and holders of the Class A shares would be treated for U.S. federal (and certain state and local) income tax purposes as shareholders in a corporation. In such a case, we would be required to pay income tax at regular corporate rates on all of our income. In addition, we would likely be liable for state and local income and/or franchise taxes on all of such income. Dividends to holders of the Class A shares would constitute ordinary dividend income taxable to such holders to the extent of our earnings and profits, and the payment of these dividends would not be deductible by us. Taxation of us as a publicly traded partnership taxable as a corporation could result in a material adverse effect on our cash flow and the after-tax returns for holders of Class A shares and thus could result in a substantial reduction in the value of the Class A shares.

Our structure involves complex provisions of U.S. federal income tax law for which no clear precedent or authority may be available. Our structure also is subject to potential legislative, judicial or administrative change and differing interpretations, possibly on a retroactive basis.

The U.S. federal income tax treatment of holders of the Class A shares depends in some instances on determinations of fact and interpretations of complex provisions of U.S. federal income tax law for which no clear precedent or authority may be available. You should be aware that the U.S. federal income tax rules are constantly under review by persons involved in the legislative process, the IRS, and the U.S. Treasury Department, frequently resulting in revised interpretations of established concepts, statutory changes, revisions to regulations and other modifications and interpretations. The IRS pays close attention to the proper application of tax laws to partnerships. The present U.S. federal income tax treatment of an investment in the Class A shares may be modified by administrative, legislative or judicial interpretation at any time, and any such action may affect investments and commitments previously made. For example, changes to the U.S. federal tax laws and interpretations thereof could make it more difficult or impossible to meet the qualifying income exception for us to be treated as a partnership for U.S. federal income tax purposes that is not taxable as a corporation, affect or cause us to change our investments and commitments, affect the tax considerations of an investment in us and adversely affect an investment in our Class A shares.

Our organizational documents and agreements permit the board of directors to modify our operating agreement from time to time, without the consent of the holders of Class A shares, in order to address certain changes in U.S. federal income tax regulations, legislation or interpretation. In some circumstances, such revisions could have a material adverse impact on some or all of the holders of

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our Class A shares. Moreover, we will apply certain assumptions and conventions in an attempt to comply with applicable rules and to report income, gain, deduction, loss and credit to holders in a manner that reflects such holders’ beneficial ownership of partnership items, taking into account variation in ownership interests during each taxable year because of trading activity. However, these assumptions and conventions may not be in compliance with all aspects of applicable tax requirements. It is possible that the IRS will assert successfully that the conventions and assumptions used by us do not satisfy the technical requirements of the Code and/or Treasury regulations and could require that items of income, gain, deductions, loss or credit, including interest deductions, be adjusted, reallocated, or disallowed, in a manner that adversely affects holders of the Class A shares.

FIG Asset Co. LLC may not be able to invest in certain assets, other than through a taxable corporation.

In certain circumstances, FIG Asset Co. LLC or one of its subsidiaries may have an opportunity to invest in certain assets through an entity that is characterized as a partnership for U.S. federal income tax purposes, where the income of such entity may not be ‘‘qualifying income’’ for purposes of the publicly traded partnership rules. See ‘‘Material U.S. Federal Tax Considerations—Taxation of the Company.’’ In order to manage our affairs so that we will meet the qualifying income exception, we may either refrain from investing in such entities or, alternatively, we may structure our investment through an entity classified as a corporation for U.S. federal income tax purposes. If the entity were a U.S. corporation, it would be subject to U.S. federal income tax on its operating income, including any gain recognized on its disposal of its interest in the entity in which the opportunistic investment has been made, as the case may be, and such income taxes would reduce the return on that investment.

Complying with certain tax-related requirements may cause us to forego otherwise attractive business or investment opportunities or enter into acquisitions, borrowings, financings or arrangements we may not have otherwise entered into.

In order for us to be treated as a partnership for U.S. federal income tax purposes, and not as an association or publicly traded partnership taxable as a corporation, we must meet the qualifying income exception discussed above on a continuing basis and we must not be required to register as an investment company under the Investment Company Act of 1940. In order to effect such treatment we (or our subsidiaries) may be required to invest through foreign or domestic corporations, forego attractive business or investment opportunities or enter into borrowings or financings we may not have otherwise entered into. This may adversely affect our ability to operate solely to maximize our cash flow. Our structure also may impede our ability to engage in certain corporate acquisitive transactions because we generally intend to hold all of our assets through the Fortress Operating Group. In addition, we may be unable to participate in certain corporate reorganization transactions that would be tax free to our holders if we were a corporation. To the extent we hold assets other than through the Fortress Operating Group, we will make appropriate adjustments to the Fortress Operating Group agreements so that distributions to principals and us would be the same as if such assets were held at that level.

The IRS could assert that we are engaged in a U.S. trade or business, with the result that some portion of our income is properly treated as effectively connected income with respect to non-U.S. holders. Moreover, certain REIT dividends and other stock gains may be treated as effectively connected income with respect to non-U.S. holders.

While we expect that our method of operation will not result in a determination that we are engaged in a U.S. trade or business, there can be no assurance that the IRS will not assert successfully that we are engaged in a U.S. trade or business, with the result that some portion of our income is properly treated as effectively connected income with respect to non-U.S. holders. Moreover, dividends paid by an investment that we make in a REIT that is attributable to gains from the sale of U.S. real property interests will, and sales of certain investments in the stock of U.S. corporations owning significant U.S. real property may, be treated as effectively connected income with respect to non-U.S. holders. To the extent our income is treated as effectively connected income, non-U.S.

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holders generally would be subject to withholding tax on their allocable shares of such income, would be required to file a U.S. federal income tax return for such year reporting their allocable shares of income effectively connected with such trade or business, and would be subject to U.S. federal income tax at regular U.S. tax rates on any such income. Non-U.S. holders may also be subject to a 30% branch profits tax on such income in the hands of non-U.S. holders that are corporations.

An investment in Class A shares will give rise to UBTI to certain tax-exempt holders.

We will not make investments through taxable U.S. corporations solely for the purpose of limiting unrelated business taxable income, or UBTI, from ‘‘debt-financed’’ property and, thus, an investment in Class A shares will give rise to UBTI to certain tax-exempt holders. For example, FIG Asset Co. LLC will invest in or hold interests in entities that are treated as partnerships, or are otherwise subject to tax on a flow-through basis, that will incur indebtedness. FIG Asset Co. LLC may borrow funds from FIG Corp. or third parties from time to time to make investments. These investments will give rise to UBTI from ‘‘debt-financed’’ property. However, we expect to manage our activities to avoid a determination that we are engaged in a trade or business, thereby limiting the amount of UBTI that is realized by tax-exempt holders of our Class A shares.

We may hold or acquire certain investments through an entity classified as a PFIC or CFC for U.S. federal income tax purposes.

Certain of our investments may be in foreign corporations or may be acquired through a foreign subsidiary that would be classified as a corporation for U.S. federal income tax purposes. Such an entity may be a PFIC or a CFC for U.S. federal income tax purposes. U.S. holders of Class A shares indirectly owning an interest in a PFIC or a CFC may experience adverse U.S. tax consequences. See ‘‘Material U.S. Federal Tax Considerations—Passive Foreign Investment Companies’’ and ‘‘—Controlled Foreign Corporations.’’

We strongly urge you to review carefully the discussion under ‘‘Material U.S. Federal Tax Considerations’’ and to seek advice based on your particular circumstances from an independent tax advisor.

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

Some of the statements under ‘‘Prospectus Summary,’’ ‘‘Risk Factors,’’ ‘‘Management’s Discussion and Analysis of Financial Condition and Results of Operations,’’ ‘‘Business’’ and elsewhere in this prospectus may contain forward-looking statements which reflect our current views with respect to, among other things, future events and financial performance. You can identify these forward-looking statements by the use of forward-looking words such as ‘‘outlook,’’ ‘‘believes,’’ ‘‘expects,’’ ‘‘potential,’’ ‘‘continues,’’ ‘‘may,’’ ‘‘will,’’ ‘‘should,’’ ‘‘seeks,’’ ‘‘approximately,’’ ‘‘predicts,’’ ‘‘intends,’’ ‘‘plans,’’ ‘‘estimates,’’ ‘‘anticipates’’ or the negative version of those words or other comparable words. Any forward-looking statements contained in this prospectus are based upon the historical performance of us and our subsidiaries and on our current plans, estimates and expectations. The inclusion of this forward-looking information should not be regarded as a representation by us, the underwriters or any other person that the future plans, estimates or expectations contemplated by us will be achieved. Such forward-looking statements are subject to various risks and uncertainties and assumptions relating to our operations, financial results, financial condition, business prospects, growth strategy and liquidity. If one or more of these or other risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, our actual results may vary materially from those indicated in these statements. These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included in this prospectus. We do not undertake any obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise.

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MARKET AND INDUSTRY DATA AND FORECASTS

This prospectus includes market and industry data and forecasts that we have developed from independent consultant reports, publicly available information, various industry publications, other published industry sources and our internal data and estimates. Independent consultant reports, industry publications and other published industry sources generally indicate that the information contained therein was obtained from sources believed to be reliable.

Our internal data, estimates and forecasts are based upon information obtained from our investors, partners, trade and business organizations and other contacts in the markets in which we operate and our management’s understanding of industry conditions. Although we believe that such information is reliable, we have not had such information verified by any independent sources.

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OUR STRUCTURE

The diagram below depicts our organizational structure immediately after the consummation of the Nomura transaction, this offering and related transactions. See ‘‘Our Structure — The Transactions.’’

(1) Investors in this offering will hold 38.4% of the Class A shares, which represent approximately 8.6% of the total combined voting power in Fortress Investment Group LLC and Nomura will hold 61.6% of the Class A shares, which represent approximately 13.7% of the total combined voting power in Fortress Investment Group LLC. These shares represent collectively approximately 22.3% of the Fortress Operating Group units.
(2) The principals hold 100% of the Class B shares, which represent approximately 77.7% of the total combined voting power in Fortress Investment Group LLC. The Class B shares have no economic interest in Fortress Investment Group LLC.
(3) Represents approximately 22.3% of the limited partner interests (voting) and a 100% general partner interest in each of the Operating Entities and in Principal Holdings.
(4) Represents approximately 77.7% of the limited partner interests (non-voting) in each of the Operating Entities and in Principal Holdings.
(5) Excludes the effect of (i) equity interests to be granted under our equity incentive plan to employees and directors in connection with this offering and (ii) the issuance of Class A shares upon the exercise of the underwriters’ option to purchase additional shares, if applicable. Assuming the issuance of Class A shares, upon the full exercise of the underwriters’ option to

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purchase additional shares and the vesting of the grant of equity interests to employees and directors under our equity incentive plan of equity interests representing 11.1% of the Class A shares on a fully diluted basis, then (i) Fortress Investment Group LLC own indirectly approximately 31.8% of the limited partner interests in the Fortress Operating Group, (ii) investors in this offering would hold approximately 8.6% of the Class A shares on a fully diluted basis and (iii) the principals would hold approximately 68.2% of the limited partner interests in the Fortress Operating Group.

Fortress Investment Group LLC, or the public company.    As a result of the transactions contemplated by this offering and the Nomura transaction we will become the owner of, and the Class A shareholders (including Nomura and investors in this offering) will therefore have, an approximately 22.3% economic interest in, the Fortress Operating Group, while the principals will retain an approximately 77.7% economic interest in the Fortress Operating Group as well as voting and operating control of the public company. You should note, in particular, that:

•  Investors in this offering will own 38.4% of the Class A shares of the public company, which represent 38.4% of the economic interest in the public company but only approximately 8.6% of the voting power of the public company’s shares and 8.6% of the economic interest in the Fortress Operating Group. Nomura will own 61.6% of the Class A shares of the public company, which represents 61.6% of the economic interest in the public company and approximately 13.7% of the combined voting power of the public company’s shares and 13.7% of the economic interest in the Fortress Operating Group.
•  The public company will own, in turn, through its intermediate holding companies, approximately 22.3% of the Fortress Operating Group units. The public company will also control the Fortress Operating Group by means of general partner interests in the Fortress Operating Group entities which will be owned by these holding companies.
•  The principals will own 100% of the public company’s Class B shares, which will vote together with the Class A shares on a one vote per share basis, and which will represent upon completion of this offering approximately 77.7% of the combined voting power of the public company’s shares. The Class B shares do not represent an economic interest in the public company and are therefore not entitled to any dividends. The principals will control the public company since the Class B shares represent more than a majority of the combined voting power in the public company. The voting rights of the principals are further enhanced by the shareholders agreement, described below under ‘‘Certain Relationships and Related Party Transactions — Shareholders Agreement’’.
•  While the Class B shares, as indicated above, have no economic interest in Fortress, each holder of a Class B share also owns an economic interest in Fortress via a corresponding Fortress Operating Group unit.
•  The principals’ Fortress Operating Group units, described below, are exchangeable (together with the corresponding Class B shares) on a one-for-one basis for Class A shares. However, the exchange of Fortress Operating Group units for Class A shares will not affect the principals’ voting power since the votes represented by the cancelled Class B shares will be replaced with the votes represented by the Class A shares for which such units are exchanged.

Fortress Operating Group — the limited partnerships operating Fortress’s businesses.    The Fortress Operating Group comprises:

•  the limited partnerships through which the principals currently operate our business; we refer to these entities as the ‘‘Operating Entities’’; and
•  one or more limited partnerships formed for the purpose of, among other activities, holding certain of our principal investments; we refer to these entities as ‘‘Principal Holdings.’’

We have historically used multiple Operating Entities to segregate operations for business, financial and other reasons. Going forward, we may increase or decrease the number of our Operating Entities or Principal Holdings, based on our views regarding the appropriate balance between

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(a) administrative convenience and (b) continued business, financial, tax and other optimization. As described more fully below, all of our interests in the Operating Entities will be held through FIG Corp.

The Operating Entities are comprised of Fortress Operating Entity I LP, Fortress Operating Entity II LP and Fortress Operating Entity III LP. Fortress Operating Entity I LP is, directly or through its subsidiaries, the investment manager of all of the Fortress Funds. Principal Holdings I LP’s material assets currently consist of the general partner interest in certain private equity funds, a limited partnership interest in a newly formed private equity fund, and the entity which is entitled to the incentive income from one of our hedge funds.

We refer to the Operating Entities and Principal Holdings together as the Fortress Operating Group. Each of the Fortress Operating Group entities is a limited partnership. Each Fortress Operating Group unit represents one limited partner interest, or LP interest, in each Operating Entity and in Principal Holdings. A Fortress Operating Group unit is not a legal interest but is the term we use to refer to the aggregate of one LP interest in each Fortress Operating Group entity.

The number of Fortress Operating Group units we will own equals the number of our outstanding Class A shares, while the number of Fortress Operating Group units which the principals will own equals the number of outstanding Class B shares they hold. The economic interest represented by each Fortress Operating Group unit corresponds, in other words, to one of our shares; and the total number of Fortress Operating Group units owned by us and the principals equals the sum of our outstanding Class A shares and Class B shares. We will own our Fortress Operating Group units through our intermediate holding companies, and the principals will own their Fortress Operating Group units directly. In addition, you should note that:

•  Under the terms of the company’s operating agreement, the Class B shares cannot be transferred except in connection with a transfer of the corresponding Fortress Operating Group unit. Further, as described below, a Fortress Operating Group unit cannot be exchanged for a Class A share without the corresponding Class B share being delivered together with such unit at the time of exchange for cancellation by the company.
•  We do not intend to list the Class B shares on any stock exchange.

The Intermediate Holding Companies and Control of Fortress Operating Group. Fortress Investment Group LLC, the public company, will own 100% of:

•  FIG Corp. which in turn will own the sole general partner interest and approximately 22.3% of the LP interests in the Operating Entities; and
•  FIG Asset Co. LLC which in turn will own the sole general partner interest and approximately 22.3% of the LP interests in Principal Holdings.

The LP interests in the Operating Entities and Principal Holdings that will be held by both FIG Corp. and FIG Asset Co. LLC represent, together, approximately 22.3% of the Fortress Operating Group units.

The general partner interests of each of the Fortress Operating Group entities, which will be held by FIG Corp. and FIG Asset Co. LLC, possess no economic interest in such entities and are not entitled to any allocation of gains or losses of, or any distributions from, the Fortress Operating Group. However, under the limited partnership agreements of each of the Fortress Operating Group entities, management and control rights will be vested in these general partner interests. Accordingly, since our wholly-owned intermediate holding companies will own 100% of the general partner interests in the Fortress Operating Group entities, we will control Fortress Operating Group. While the LP interests in the Fortress Operating Group entities which the principals own have no voting rights, the principals will control us through their ownership of Class B shares.

Allocation of Net Proceeds of this Offering and the Intermediate Holding Company Demand Note. As described below, we will allocate a portion of the net proceeds of this offering to each of FIG Corp. and FIG Asset Co. LLC, based on the aggregate values of the Operating Entities, on the one hand, and the value of Principal Holdings plus an amount equal to $70 million, on the other.

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•  FIG Asset Co. LLC will contribute to Principal Holdings a portion of the net offering proceeds allocated to it, and to the extent that FIG Asset Co. LLC does not have an immediate need for the balance of such proceeds, it will loan the balance to FIG Corp. pursuant to a demand note. FIG Asset Co. LLC may from time to time demand the repayment of all or a portion of this loan to fund additional investments in Principal Holdings or for other purposes.
•  FIG Corp. will contribute its portion of the net offering proceeds allocated to it, plus the proceeds of any demand loan received from FIG Asset Co. LLC, to the Operating Entities, based on their relative values.

Amounts contributed by FIG Asset Co. LLC to Principal Holdings and by FIG Corp. to the Operating Entities upon completion of this offering will dilute the percentage ownership interests of the principals in those entities by 8.6%. The relative percentage ownership interests in Fortress Operating Group of the public company on the one hand and the principals on the other will continue to change over time, as follows:

•  whenever we issue Class A shares to raise capital, we will contribute the proceeds of any such capital raise, via the intermediate holding companies, to Fortress Operating Group entities, and each such contribution by us will dilute the principals’ direct percentage ownership therein;
•  whenever we grant any awards under our equtiy incentive plan, (i) in the case of Fortress Operating Group units, we may issue a corresponding number of Class B shares and (ii) in the case of all other awards, each of the Operating Entities and Principal Holdings will make comparable awards, in the same amounts, to our intermediate holding companies, FIG Corp. and FIG Asset Co. LLC; and
•  whenever the principals exchange their Fortress Operating Group units for Class A shares, our ownership interest in the Fortress Operating Group will increase and the principals’ direct ownership interest will decrease correspondingly.

Following this offering, as a result of these contributions, FIG Corp. will own 22.3% and the principals will own 77.7% of the LP interests in each of the Operating Entities, and FIG Asset Co. LLC will own 22.3% and the principals will own 77.7% of the LP interests in Principal Holdings.

Certain Attributes of our Structure.    Our structure is designed to accomplish a number of important objectives, the most important of which are as follows:

•  We are a holding company that will be qualified as a partnership for U.S. federal income tax purposes. Our intermediate holding companies will enable us to maintain our partnership status.
•  The interposition of our intermediate holding companies will allow the company to serve as a public holding company with its Class A shares widely held and actively traded. The principals, however, will retain their economic investment in the form of direct interests in the Fortress Operating Group, rather than in the Class A shares. All of the businesses operated by Fortress prior to the closing of the Nomura transaction and this offering, and all of the interests held by Fortress in such businesses prior to the closing of the Nomura transaction and this offering will continue to be operated or held, as the case may be, by the Fortress Operating Group following the closing of the Nomura transaction and this offering, and the principals will retain their remaining economic interests in these businesses through their ownership interests in the Fortress Operating Group entities. Although distributions on the Fortress Operating Group units must be made on a pro rata basis, the principals will receive their distributions directly, while the same distribution must first be made to FIG Corp. and FIG Asset Co. LLC before any amounts, net of taxes, debt service payments and payments under the tax receivable agreement, can be distributed to us, and in turn to the Class A shareholders.

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•  Although the principals currently own no economic interest in Fortress Investment Group LLC (that is, they own no Class A shares), they will own non-economic Class B ‘‘vote-only’’ shares that as a percentage of our voting power will be commensurate with their economic ownership in Fortress Operating Group.
•  In the event a principal wishes to exchange Fortress Operating Group units for Class A shares, he must deliver the units to us together with a corresponding number of Class B shares, and as a result of the exchange:
•  we will deliver to the principal a number of Class A shares corresponding to the number of Fortress Operating Group units delivered to us;
•  we will cancel the Class B shares delivered to us; and
•  the Fortress Operating Group units we acquire from the principal will be held by our intermediate holding companies, FIG Corp and FIG Asset Co. LLC, as applicable.

Summary.    Following the transactions contemplated by this offering and the Nomura transaction:

•  the public company (through the intermediate holding companies) and the principals (through direct ownership) will hold, respectively, approximately 22.3% and approximately 77.7% of the Fortress Operating Group units;
•  the Class A shareholders’ voting and economic interests in Fortress will be represented by their Class A shares in the public company. The principals’ economic interests, by comparison, will be represented by their Fortress Operating Group units while their voting interests will be represented by their Class B shares in the public company;
•  the Class A shares held by Nomura represent, on a per share basis, the same economic and voting interest in the public company as the Class A shares to be issued in connection with this offering. However, Nomura has additional rights pursuant to its shareholder agreement with the public company, including its right to designate a member of the public company’s board of directors. See ‘‘Certain Relationships and Related Party Transactions—Investor Shareholder Agreement’’;
•  all of the businesses engaged in by Fortress as a historical matter will continue, following completion of this offering, to be conducted by the Fortress Operating Group; accordingly, Fortress Investment Group LLC, the public company, and the principals will participate in the net operating results of the Fortress Operating Group, which are derived largely from the management fees and incentive income from the Fortress Funds, on a pari passu basis, in accordance with their pro rata ownership of Fortress Operating Group units;
•  the principals will retain voting control of Fortress Investment Group LLC following this offering through their ownership of our Class B shares; and
•  future issuances, if any, of Class A shares will result in a corresponding increase in the number of Fortress Operating Group units held by the intermediate holding companies and result in a corresponding dilution of the principals’ percentage ownership interest in the Fortress Operating Group.

The Transactions

Our business is presently conducted by Fortress Operating Group. Fortress Investment Group LLC was formed as a Delaware limited liability company for the purpose of completing the Nomura transaction, this offering and the related transactions in order to carry on our business as a publicly-traded entity. As a result of the Nomura transaction and the transactions contemplated by this offering, Fortress Investment Group LLC will acquire control of the Fortress Operating Group and hold approximately 22.3% of the Fortress Operating Group units.

In connection with the closing of the Nomura transaction, we formed FIG Corp. as a Delaware corporation and FIG Asset Co. LLC as a Delaware limited liability company, our two wholly-owned intermediate holding companies. Prior to or in connection with the consummation of this offering, we have completed or will complete the following transactions:

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•  we will grant rights to the investors in the consolidated Fortress Funds to provide a simple majority of the respective unrelated limited partners with the right to accelerate the date on which the fund is liquidated, without cause, in accordance with certain procedures, or otherwise the ability to exert control over the fund, which will result in our deconsolidation of these funds as of the date of grant;
•  subsequent to September 30, 2006 we distributed $528.5 million to our principals in the period prior to the consummation of this offering;
•  we collected $469.2 million pursuant to certain contractual arrangements from our offshore hedge funds representing a portion of receivables relating to previously earned fees, of which $435 million is reflected on our pro forma September 30, 2006 balance sheet, and used the proceeds, net of non-controlling interests, to partially fund the distributions to our principals described immediately above;
•  we issued Class A shares to Nomura for net proceeds of $888.0 million;
•  we contributed $609.8 million of the net proceeds from the Nomura transaction to FIG Corp. which will in turn use those net proceeds, together with the proceeds it receives from FIG Asset Co. LLC under the demand note, as described below, to purchase from the principals a 15% limited partner interest in each of the Operating Entities (which will be approximately 13.7% upon consummation of this offering). In connection with its admission as a limited partner to the Operating Entities, FIG Corp. will also become the sole general partner in each Operating Entity;
•  we contributed $278.2 million of the net proceeds from the Nomura transaction to FIG Asset Co. LLC, which will (i) loan a portion of these net proceeds to FIG Corp. pursuant to a demand note and (ii) use the remaining portion of these proceeds to purchase from the principals a 15% limited partner interest in Principal Holdings (which will be approximately 13.7% upon consummation of this offering), the Fortress Operating Group entity which, among other things, will hold certain of our principal investments. In connection with its admission as a limited partner to Principal Holdings, FIG Asset Co. LLC will also become the sole general partner in Principal Holdings;
•  FIG Corp. and FIG Asset Co. LLC (on behalf of any affiliated corporation) entered into a tax receivable agreement with our principals, as described below;
•  we entered into an employment agreement with each of our principals, as described below;
•  we entered into an investor shareholder agreement with Nomura, as described below;
•  we will issue Class A shares in this offering for net proceeds of approximately $533.0 million (based on the mid-point of the price range set forth on the cover page of this prospectus);
•  we expect to contribute $383.0 million of the net proceeds from this offering to FIG Corp. which will in turn contribute those net proceeds, together with the proceeds it receives from FIG Asset Co. LLC under a demand note, as described below, to the Operating Entities in exchange for an additional approximately 8.6% limited partner interest in each of the Operating Entities;
•  we expect to contribute $150.0 million of the net proceeds from this offering to FIG Asset Co. LLC, which will (i) loan a portion of these net proceeds to FIG Corp. pursuant to a intercompany demand note and (ii) contribute the remaining portion of these proceeds in exchange for an approximately 8.6% limited partner interest in Principal Holdings;
•  Fortress Operating Group will use a portion of the net proceeds from this offering: (a) to pay $250 million under our term loan facility and (b) to pay $85 million currently outstanding under our revolving credit facility;

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•  we will grant pursuant to our equity incentive plan, effective upon consummation of this offering, restricted Class A shares, and restricted Class A share units to certain directors and employees having a fair value of $1.8 million and $870.4 million, respectively, based on the mid-point of the price range set forth on the cover page of this prospectus;
•  we will enter into a shareholders agreement with our principals, and our principals will enter into the principals agreement, in each case as described below;
•  we refinanced our credit agreement in June 2006 and as of September 30, 2006 had borrowed $600 million under the term loan facility portion thereof (which includes $250 million which is to be paid as described above); and
•  we expect to distribute $208.5 million in relation to the liquidation of Northcastle Trust (a Fortress Fund) or ‘‘Northcastle,’’ to its investors; as of November 30, 2006 the liquidation was substantially complete.

We refer to the foregoing collectively as the ‘‘Transactions.’’

As a result of the Transactions:

•  Fortress Investment Group LLC will be a holding company, and our primary assets will be our indirect controlling general partner interest in the Fortress Operating Group and approximately 22.3% of the Fortress Operating Group units, held through the intermediate holding companies;
•  our principals’ percentage ownership of the Fortress Operating Group units will decrease to approximately 77.7% and our principals’ Class B shares will represent 77.7% of the total combined voting power in the public company, by means of which they will maintain control of the company;
•  FIG Corp. or FIG Asset Co. LLC, as applicable, will become the sole general partner of each of the entities that constitute the Fortress Operating Group. Accordingly, we will operate and control the business of the Fortress Operating Group and its subsidiaries; and
•  net profits, net losses and distributions of the Fortress Operating Group will be allocated and made to its unitholders, on a pro rata basis in accordance with their respective Fortress Operating Group units. Accordingly, net profits and net losses allocable to Fortress Operating Group unitholders will initially be allocated, and distributions will initially be made, approximately 22.3% indirectly to us and approximately 77.7% to our principals.

The remaining Transactions collectively comprise the reorganization pursuant to which the principals, Nomura and the public will acquire 100% of our outstanding Class A and Class B shares, and our concurrent acquisition, through two intermediate holding companies, of the controlling general partner interest in the Fortress Operating Group and approximately 22.3% of the Fortress Operating Group units.

Our deconsolidation of the Fortress Funds will have significant effects on many of the items within our financial statements but will have no net effect to our net income (loss) or equity. The following describes the major effect on our financial statements:

•  We will not record on our balance sheet and statement of operations the gross assets, liabilities, revenues, expenses and other income of the deconsolidated Fortress Funds, along with the related non-controlling interests of the fund investors in the equity and income of these funds. This will reduce these financial statement captions by: assets – 91%; liabilities – 71%; revenues – 67%; expenses – 61%; other income – 95%; non-controlling interests in equity of the funds – 98%; and non-controlling interests in income of the funds – 99% (based on comparing our combined historical financial information to our pro forma financial information as of September 30, 2006 and for the nine months then ended).
•  We will reflect our investment in these funds on our balance sheet using the equity method of accounting, rather than eliminating the investment in consolidation.

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•  We will include the management fees and incentive income earned from these funds on our statement of operations rather than eliminating the revenue in consolidation.
•  We will record our equity in the income of these funds using the equity method of accounting. However, we will not record any equity in income arising from incentive income arrangements to the extent that the incentive income is subject to contingent repayment. Therefore, we will not need to record deferred incentive income with respect to these funds for incentive income that is not yet distributed.
•  We will also remove the cash flow activities of the deconsolidated funds from our statement of cash flows and replace them with our cash contributions to and distributions from the deconsolidated funds, which previously were eliminated in consolidation. This would not have any effect on our overall net change in cash for the period; however, it would result in significant changes to our operating, investing and financing cash flow categories. For instance, removing the funds’ investing cash flows (that is, purchases and proceeds from sales of investments and the change in their cash held for investment or reinvestment) previously reported in our operating cash flows would result in our reporting net positive cash flows from operating activities for each period presented in our historical financial statements included in this prospectus. As a result of the deconsolidation of the funds, our net cash flows for the nine months ended September 30, 2006 from operating activities would increase by approximately $3.6 billion and investing and financing activities would decrease by approximately $0.2 billion and $3.4 billion, respectively.
•  We will update our footnotes to the financial statements to remove disclosures related to amounts no longer reflected on our financial statements, including, but not limited to:
—  the accounting policies of the Fortress Funds which do not pertain to us following deconsolidation;
—  detailed disclosure of investments held by the Fortress Funds; and
—  detailed disclosure of debt issued by the Fortress Funds.
•  We also will update our footnotes to the financial statements to include disclosures regarding our investments in these funds under the equity method, including summarized financial information of the funds.
•  We will continue to provide information regarding our management agreements with, and fees earned from, these funds.
•  We will evaluate each period whether we need to provide separate financial statements for investments in companies accounted for using the equity method. Based on our pro forma financial information for the year ended December 31, 2005, and as of September 30, 2006 and for the nine months then ended, we would not have needed to provide separate financial statements for any of the deconsolidated funds.

As we are a newly formed company, Fortress Operating Group is considered our predecessor for accounting purposes and its combined financial statements will be our historical financial statements following completion of the Transactions. Also, because the principals control Fortress Operating Group before the Transactions and will control us after the Transactions, the Transactions are to be accounted for as a reorganization of entities under common control. Accordingly, we will carry forward unchanged the value of assets and liabilities recognized in Fortress Operating Group’s combined financial statements into our consolidated financial statements. Following completion of this offering, substantially all of Fortress’s expenses (other than (i) income tax expenses of Fortress Investment Group LLC, FIG Corp. and FIG Asset Co. LLC, (ii) obligations incurred under the tax receivable agreement and (iii) payments on indebtedness incurred by Fortress Investment Group LLC, FIG Corp. and FIG Asset Co. LLC), including substantially all expenses incurred by or attributable solely to Fortress Investment Group LLC, such as expenses incurred in connection with this offering, will be accounted for as expenses of the Fortress Operating Group.

We intend to continue the operations of the Fortress business and hold all of our assets through the Fortress Operating Group. Following this offering, our principal investments will be made either

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through FIG Corp. and its subsidiaries or, for assets that are appropriate, through Principal Holdings. FIG Asset Co. LLC, our direct wholly-owned subsidiary, is the general partner and a limited partner of Principal Holdings. Transfers of funds among subsidiaries, to the extent necessary to fund operations, will be made by various means, including by intercompany notes. In particular, FIG Asset Co. LLC will loan a portion of the proceeds of this offering to FIG Corp. FIG Asset Co. LLC may demand, at any time and from time to time, repayment of all or any portion of the note to satisfy any funding obligations of Principal Holdings. The principals will not be under any obligation, or have any preemptive right, to fund any ongoing operations or investment of Fortress Operating Group; accordingly, any contribution of capital, including the proceeds of this offering, to the Fortress Operating Group will reduce the aggregate percentage ownership of the principals in the Fortress Operating Group.

We generally intend to hold all our assets through the Fortress Operating Group. In the future, if we make a significant tax-free corporate acquisition, we may add additional intermediate holding companies in the event we are unable to effect such acquisition through the Fortress Operating Group because of various business, financial or tax constraints.

Class A Shares.    Immediately following this offering, 38.4% of our outstanding Class A shares will be owned by purchasers in this offering and 61.6% of our outstanding Class A shares will be owned by Nomura. Holders of Class A shares will be entitled to one vote per share on all matters submitted to a vote by our shareholders. Holders of our Class A shares and our Class B shares will vote together as a single class on all matters submitted to a vote of our shareholders. Class A shares owned by purchasers in this offering will initially represent only approximately 8.6% of the total combined voting power of our outstanding Class A and Class B shares and Class A shares owned by Nomura, upon consummation of this offering, will represent 13.7% of the total combined voting power of our outstanding Class A and Class B shares. As a result, our principals will exercise control over all matters requiring shareholder approval and certain other matters described below.

Class B Shares.    Immediately following this offering, all of our outstanding Class B shares will be owned by our principals. Holders of Class B shares will be entitled to one vote per share. Holders of our Class A shares and our Class B shares will vote together as a single class on all matters submitted to a vote of our shareholders. The Class B shares will have no economic rights and are not entitled to any dividends, although they will initially represent approximately 77.7% of the total combined voting power of our outstanding Class A and Class B shares. As a result, our principals will be able to exercise control over all matters requiring shareholder approval. In addition, our principals will have additional approval rights under the shareholders agreement described below.

Exchange of Fortress Operating Group Units.    Immediately after this offering, the principals will own 77.7% of the outstanding Fortress Operating Group Units, which will be non-voting but will represent a 77.7% equity interest in the Fortress Operating Group. In connection with the completion of this offering, the principals will enter into an exchange agreement with us under which, at any time and from time to time, each principal (or certain transferees thereof) will have the right to exchange one of their Fortress Operating Group units (together with the corresponding Class B shares) for one of our Class A shares. Under the exchange agreement, to effect an exchange, a principal must simultaneously exchange one Fortress Operating Group unit – being an equal limited partner interest in each Fortress Operating Group entity. In connection with any exchange of Fortress Operating Group units, the principal will receive a right, under a tax receivable agreement described below, to receive 85% of the value of the applicable tax benefit in cash when the corporate taxpayers actually realize certain tax savings. These tax savings would result from the increase in the tax basis of the assets of certain Fortress Operating Group entities, which would lead to an increase in depreciation and amortization deductions, reduced gains on sales and imputed interest expense deductions. A principal may also elect to exchange his Fortress Operating Group units in a tax-free transaction where the principal is making a charitable contribution. In such case, we will not obtain an increase in the tax basis of the assets of the Fortress Operating Group entities and no payments will be required to be made pursuant to the tax receivable agreement because there will be no tax savings realized. As a principal exchanges his Fortress Operating Group units, our interest in the Fortress Operating Group units will be correspondingly increased and his corresponding Class B shares will be cancelled.

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We have reserved for issuance 312,071,550 Class A shares, corresponding to the number of outstanding Fortress Operating Group units held by our principals.

Tax Receivable Agreement.    In connection with the closing of the Nomura transaction, the corporate taxpayers entered into a tax receivable agreement with our principals. Upon the occurrence of a taxable exchange by a principal of his Fortress Operating Group units for Class A shares, the corporate taxpayers’ share of the depreciation, amortization and interest expense tax deductions, as well as an increase in the tax basis of other assets, of certain Fortress Operating Group entities resulting from the exchanged units may be larger than they would have been had such units been acquired in a non-taxable exchange. Additionally, our acquisition of Fortress Operating Group units from the principals, such as in the Nomura transaction, also will result in increases in tax deductions and tax basis that would reduce the amount of tax that the corporate taxpayers would otherwise be required to pay in the future. Because these increases in tax deductions, as well as the increase in the tax basis of other assets, would not otherwise have been available to, and would reduce the tax liability of, the corporate taxpayers, the corporate taxpayers will be required to make payments to the exchanging or selling principal equal to 85% of the tax savings as and when realized by the corporate taxpayers resulting from such increases in the tax deductions and tax basis of the assets of the Fortress Operating Group. The payments that the corporate taxpayers may make to our principals could be material in amount and will be an expense of our intermediate holding companies and not Fortress Operating Group. The corporate taxpayers will benefit from the remaining 15% of the tax savings realized. In general, estimating the amount of payments that may be made to the principals under the tax receivable agreement is by its nature, imprecise in the absence of an actual transaction, insofar as the calculation of amounts payable depends on a variety of factors. The actual increase in tax basis and the amount and timing of any payments under the tax receivable agreement will vary depending upon a number of factors, including:

•  the timing of the transactions — For instance, the increase in any tax deductions will vary depending on the fair market value, which may fluctuate over time, of the depreciable or amortizable assets of the Fortress Operating Group entities at the time of the transaction;
•  the price of our Class A shares at the time of the transaction — The increase in any tax deductions, as well as tax basis increase in other assets, of the Fortress Operating Group entities, is directly proportional to the price of the Class A shares at the time of the transaction;
•  the taxability of exchanges — If an exchange is not taxable for any reason, increased deductions will not be available; and
•  the amount and timing of our income — The corporate taxpayers will be required to pay 85% of the tax savings as and when realized, if any. If a corporate taxpayer does not have taxable income, the corporate taxpayer is not required to make payments under the tax receivable agreement for that taxable year because no tax savings were actually realized.

The occurence of an actual transaction in which Fortress Operating Group units are exchanged or purchased will permit us to make a number of actual determinations. For instance, the Nomura transaction would have resulted, if it had occured on September 30, 2006, in an increase in the tax basis of the assets owned by the Fortress Operating Group at the date of the purchase of approximately $945.2 million, which likely will result in us making payments under the tax receivable agreement. Any payments under the tax receivable agreement will give rise to additional tax benefits and additional potential payments under the tax receivable agreement. Any payments under the tax receivable agreement will depend upon whether FIG Corp. has taxable income to utilize the benefit of the increase in the tax basis of the assets owned by the Fortress Operating Group. For additional information regarding the impact of the Nomura transaction on our unaudited pro forma balance sheet as of September 30, 2006, see footnote (d) of ‘‘Unaudited Pro Forma Financial Information.’’

In addition, the tax receivable agreement provides that, upon a merger, asset sale or other form of business combination or certain other changes of control, the corporate taxpayers’ (or their successors’) obligations with respect to exchanged or acquired units (whether exchanged or acquired

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before or after such change of control) would be based on certain assumptions, including that the corporate taxpayers would have sufficient taxable income to fully utilize the deductions arising from the increased tax deductions and tax basis and other benefits related to entering into the tax receivable agreement. As noted above, no payments will be made if a principal elects to exchange his Fortress Operating Group units in a tax-free transaction. The payments that the corporate taxpayers may make to our principals could be material in amount.

Shareholders Agreement.    Prior to the consummation of this offering, we will enter into a shareholders agreement with our principals pursuant to which, so long as our principals and their permitted transferees collectively own more than 40% of the total combined voting power of our outstanding Class A and Class B shares, the principals who are then employed by the Fortress Operating Group holding shares greater than 50% of the total combined voting power of all shares held by such principals will have certain approval rights over the following transactions:

•  any incurrence of indebtedness in excess of 10% of our then existing long-term consolidated indebtedness;
•  any issuance by us of equity or equity-related securities that would represent, after such issuance or upon conversion, exchange or exercise, as the case may be, at least 10% of the total combined voting power of our outstanding Class A and Class B shares (except in certain circumstances);
•  any debt or equity investment by us (including any commitment to invest) in an amount greater than $250 million;
•  any entry by us into a new line of business that does not involve investment management and that requires a principal investment in excess of $100 million;
•  the adoption of a shareholder rights plan;
•  any appointment of a chief executive officer or co-chief executive officer; or
•  the termination of the employment of a principal with us or any of our material subsidiaries without cause.

The effect of the agreement is that our principals will maintain control over significant corporate transactions even when they collectively hold less than a majority of the combined total voting power of our Class A and Class B shares. However, although we may qualify as a ‘‘controlled company’’ under the rules of the New York Stock Exchange, we nonetheless intend to comply, upon completion of this offering, with the corporate governance requirements of the NYSE which are applicable to companies that do not qualify as a ‘‘controlled company.’’

The agreement also prohibits our principals from, directly or indirectly, voluntarily effecting cumulative transfers of specified amounts of their interests in us and the Fortress Operating Group for a period of five years after this offering. The principals may exchange their Fortress Operating Group units for Class A shares at any time, which Class A shares also are subject to the foregoing transfer restrictions. When the principals exchange their Fortress Operating Group units for Class A shares, the Class B shares corresponding to the Fortress Operating Group units will be cancelled. Therefore, the existing Class A shareholders’ ownership percentage of Class A shares will be diluted by an amount equal to the number of Class A shares delivered to the principals upon the exchange of Fortress Operating Group units, but their total combined voting power remains unchanged. See ‘‘Certain Relationships and Related Party Transactions — Transfer Restrictions’’. The agreement also will provide that so long as our principals and their permitted transferees collectively own more than 50% of the total combined voting power of all our outstanding Class A and Class B shares, our board of directors will nominate individuals designated by the principals such that the principals will have six designees (out of a total possible eleven members) to the board, and if the principals own more than 10% and equal to or less than 50% of the total combined voting power of all our outstanding Class A and Class B shares, our board of directors will nominate individuals designated by the principals such that the principals will have between two and five designees to the board, based on their collective ownership of our outstanding shares.

The shareholders agreement also provides that we will indemnify our principals in respect of matters relating to private equity fund ‘‘clawback’’ obligations. We earn incentive income – generally

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20% of the profits - from each of our private equity funds based on a percentage of the profits earned by the fund as a whole, provided that the fund achieves specified performance criteria. We generally receive, however, our percentage share of the profits on each investment in the fund as it is realized, before it is known with certainty that the fund as a whole will meet the specified criteria. As a result, the incentive income paid to us as a particular investment made by the funds is realized is subject to contingent repayment (or ‘‘clawback’’) if, upon liquidation of the fund, the aggregate amount paid to us as incentive income exceeds the amount actually due to us based upon the aggregate performance of the fund. Since all of the incentive income such funds have been paid to date is still subject to clawback, this clawback obligation is approximately $283.6 million as of September 30, 2006 of which $64.0 million related to an unconsolidated private equity fund. The principals have personally guaranteed, subject to certain limitations, this ‘‘clawback’’ obligation. The shareholders agreement contains our agreement to indemnify the principals for all amounts which the principals pay pursuant to any of these personal guaranties in favor of our private equity funds.

In addition, the principals have certain consent rights with respect to structural changes as described under ‘‘Description of Shares — Operating Agreement — Relationship with Fortress Operating Group Entities.’’

Agreement Among Principals.    Prior to the consummation of this offering, the principals will enter into the Principals Agreement, which provides, that in the event a principal voluntarily terminates his employment with us for any reason prior to the fifth anniversary of the consummation of this offering, a portion of the Fortress Operating Group units (and corresponding Class B shares and certain rights under the tax receivable agreement) held by that principal as of the completion of this offering (the ‘‘Initial Class B Shares’’ and ‘‘Initial Partnership Units,’’ respectively, and, together with the applicable rights under the tax receivable agreement and all securities and/or cash into which such Initial Class B Shares or Initial Partnership Units are exchanged, including Class A shares into which Fortress Operating Group units shall have been exchanged, collectively, the ‘‘Forfeitable Interests’’) will be forfeited as of the Forfeiture Date (as defined below) to the principals (‘‘Continuing Principals’’) who continue to be employed by Fortress as of the applicable Forfeiture Date, as follows: (i) in the event such termination occurs prior to the first anniversary of the consummation of this offering, 82.5% of such principal’s Forfeitable Interests (and such percentage of all distributions received with respect to such Forfeitable Interests after the date such principal voluntarily terminates his employment with us) shall be forfeited; (ii) in the event such termination occurs after the first anniversary but prior to the second anniversary of the consummation of this offering, 66% of such principal’s Forfeitable Interests (and such percentage of all distributions received with respect to such Forfeitable Interests after the date such principal voluntarily terminates his employment with us) shall be forfeited; (iii) in the event such termination occurs after the second anniversary but prior to the third anniversary of the consummation of this offering, 49.5% of such principal’s Forfeitable Interests (and such percentage of all distributions received with respect to such Forfeitable Interests after the date such principal voluntarily terminates his employment with us) shall be forfeited; (iv) in the event such termination occurs after the third anniversary but prior to the fourth anniversary of the consummation of this offering, 33% of such principal’s Forfeitable Interests (and such percentage of all distributions received with respect to such Forfeitable Interests after the date such principal voluntarily terminates his employment with us) shall be forfeited; and (v) in the event such termination occurs after the fourth anniversary but prior to the fifth anniversary of the consummation of this offering, 16.5% of such principal’s Forfeitable Interests (and such percentage of all distributions received with respect to such Forfeitable Interests after the date such principal voluntarily terminates his employment with us) shall be forfeited.

The Principals Agreement may be amended and the terms and conditions of the Principals Agreement may be changed or modified upon the approval of a majority of the principals who are then employed by the Fortress Operating Group. We, our shareholders and the Fortress Operating Group have no ability to enforce any provision thereof or to prevent the principals from amending the Principals Agreement or waiving any forfeiture obligation.

For the purposes of the Principals Agreement, ‘‘Forfeiture Date’’ means, as to the Forfeitable Interests to be forfeited to any continuing principal, the date which is the earlier of (i) the date that is six months after the applicable date of termination of employment and (ii) the date on or after such

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termination date that is six months after the date of the latest publicly-reported disposition of our equity securities by any such continuing principals, which disposition is not exempt from the application of the provisions of Section 16(b) of the Securities Exchange Act of 1934.

Employment, Non-Competition and Non-Solicitation Agreements.    In connection with the closing of the Nomura transaction, we entered into an employment, non-competition and non-solicitation agreement with each of our principals. Each such agreement will terminate on the fifth anniversary of completion of this offering, subject to automatic yearly renewals unless either party terminates the agreement in accordance with its terms. The principal’s covenants survive any termination or expiration of the employment agreement. Each principal will be entitled to an annual salary that may be increased, but not decreased, at the discretion of our board of directors. The agreement also requires the principal to protect the confidential information of our company both during and after employment, and refrain from soliciting employees or interfering with our relationships with our investors both during and for a 24-month period after employment. If we terminate a principal’s employment without cause (as defined in the agreement) we will pay the principal a separation payment equal to three times his then-current annual salary and his accrued but unpaid salary and accrued but unused vacation pay through the date of termination of employment. The employment agreement provides that if a principal terminates his employment voluntarily or we terminate his employment with cause, whether during the agreement’s term or thereafter in the event the agreement’s term is not renewed, the principal will be paid his accrued but unpaid salary and accrued but unused vacation pay through the date of termination of employment and will be subject to an eighteen-month post-employment covenant requiring the principal not to compete with us.

Tax Consequences.     Skadden, Arps, Slate, Meagher & Flom LLP has acted as our counsel in connection with this offering. Skadden, Arps, Slate, Meagher & Flom LLP has opined that, under current law, we will be treated, for U.S. federal income tax purposes, as a partnership and not as an association or a publicly traded partnership taxable as a corporation. Accordingly, holders of Class A shares will be required to report their allocable share of our income for U.S. federal income tax purposes, regardless of whether any cash or other dividends are paid to them. See ‘‘Material U.S. Federal Tax Considerations — Taxation of the Company — Federal Income Tax Opinion Regarding Partnership Status.’’

FIG Corp., our wholly-owned subsidiary and general partner of the Fortress Operating Group entities (other than Principal Holdings), will incur U.S. federal, state, local and foreign income taxes on its proportionate share of any net taxable income of such entities.

FIG Asset Co. LLC, our wholly-owned subsidiary and general partner of Principal Holdings, will be, for U.S. federal income tax purposes, an entity disregarded as an entity separate from its owner, and not as an association taxable as a corporation.

Accordingly, income will be allocable to holders of Class A shares as a result of FIG Corp.’s dividends and FIG Asset Co. LLC’s income.

In accordance with the applicable partnership agreement, we will cause the applicable Fortress Operating Group entities to distribute cash on a pro rata basis to holders of Fortress Operating Group units (that is, our intermediate holding companies and the principals) in an amount at least equal to the maximum tax liabilities arising from the ownership of such units, if any. Since the purpose of such tax distributions is to enable FIG Corp. and the principals to satisfy their respective tax liabilities, no such distribution will necessarily be required to be distributed by our intermediate holding companies to us and there can be no assurance that we will pay cash dividends on the Class A shares in an amount sufficient to cover any tax liability arising from the ownership of Class A shares. The declaration and payment of dividends by us will be at the discretion of our board of directors. A holder of Class A shares will be required to report its share of our taxable income even if the board of directors does not pay dividends.

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USE OF PROCEEDS

The net proceeds to us from the sale of our Class A shares in this offering are estimated to be approximately $533.0 million, assuming an initial public offering price of $17.50 per Class A share (the mid-point of the price range set forth on the cover page of this prospectus) and after deducting the estimated underwriting discount and offering expenses payable by us. Our net proceeds will increase by approximately $83.7 million if the underwriters’ option to purchase additional shares is exercised in full. A $1.00 increase (decrease) in the assumed initial public offering price of $17.50 per Class A share (the mid-point of the price range set forth on the cover page of this prospectus) would increase (decrease) the net proceeds to us from this offering by approximately $31.9 million, assuming the number of Class A shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting the estimated underwriting discount and estimated offering expenses payable by us.

We intend to contribute the net proceeds from this offering to the Fortress Operating Group, which in turn will apply those proceeds as follows: (a) to pay $250 million outstanding under our term loan facility, as required by our credit agreement, (b) to pay approximately $85 million currently outstanding under our revolving credit facility, (c) to fund approximately $169 million of commitments to existing private equity funds and (d) to use $29 million for general business purposes.

As of September 30, 2006, we had borrowed $95 million under the credit agreement’s revolving credit facility and $600 million under our term loan facility. As of September 30, 2006, borrowings under the credit agreement accrued interest at a rate equal to LIBOR plus 2.00%, which was 7.57% per annum. Upon consummation of this offering, borrowings under the credit agreement accrue interest at a rate equal to LIBOR plus 1.50%. Borrowings outstanding under our term loan facility mature on June 23, 2011. Borrowings under our credit agreement have been used to repay prior debt of $233 million, to make a distribution to our principals of $250 million and to increase working capital. Amounts repaid under our credit agreement may be reborrowed from time to time, subject to compliance with borrowing conditions. Certain of the underwriters or their affiliates are lenders under our credit agreement and will receive their pro rata share of amounts repaid thereunder with the net proceeds of this offering. See ‘‘Underwriting.’’

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CASH DIVIDEND POLICY

On February     , 2007, our board of directors declared a dividend of $0.045 per Class A share to Nomura, our sole Class A shareholder of record as of February 7, 2007, which is payable on February 15, 2007 for the period commencing on January 17, 2007 and ending on February 13, 2007. We are paying this dividend so that the holder of our Class A shares prior to this offering will receive a distribution for the period prior to this offering. This dividend may not be indicative of the amount of any future dividends. Purchasers in this offering will not be entitled to receive this dividend.

We intend to pay quarterly dividends on our Class A shares, commencing with a dividend to be paid in respect of the fiscal quarter in which this offering is completed. The amount of such dividends will be determined by our board of directors. However, no assurance can be given that any dividends, whether quarterly or otherwise, will or can be paid. In determining the amount of dividends, our board will take into account various factors, including our financial performance, on both an actual and projected basis, earnings, liquidity and the operating performance of our segments as assessed by management. Our historical earnings and liquidity are disclosed on the face of our combined financial statements and the operating performance of our segments as assessed by management is disclosed in Note 10 (years ended December 31, 2005, 2004 and 2003) and Note 8 (September 30, 2006 and 2005) of our combined financial statements included in this prospectus.

Because we are a holding company that owns intermediate holding companies, the funding of each dividend, if declared by the board of directors, will occur in three steps, as follows:

first, we will cause Fortress Operating Group to make a distribution to all of its unitholders on a pro rata basis; that is, the limited partnerships making up Fortress Operating Group will make distributions to their respective partners, as follows:

•  in the case of the Operating Entities, distributions will be made to FIG Corp. and the principals on a pro rata basis;
•  in the case of Principal Holdings, distributions will be made to FIG Asset Co. LLC and the principals on a pro rata basis;

second, we will cause our intermediate holding companies, FIG Corp. and FIG Asset Co. LLC, to distribute to us, from their net proceeds, amounts equal to the aggregate dividend declared by our board of directors, and

third, we will distribute the proceeds received by us to our Class A shareholders on a pro rata basis.

Our Class B shareholders are not entitled to any dividends.

Payments that any of our intermediate holding companies make under the tax receivable agreement will reduce amounts that would otherwise be available for distribution by us on Class A shares.

If Fortress Operating Group units are issued to other parties, such as employees, such parties would be entitled to distributions by Fortress Operating Group as partners described above.

We believe that the payment of dividends will provide transparency to our Class A shareholders and will impose upon us an investment discipline with respect to new products, businesses and strategies.

Fortress Operating Group will make periodic distributions to its unitholders (that is, the principals and our intermediate holding companies) in amounts sufficient to cover hypothetical income tax obligations attributable to allocations of taxable income resulting from their ownership interest in the various limited partnerships making up the Fortress Operating Group, subject to compliance with any financial covenants or other obligations. Tax distributions will be calculated assuming each unitholder was subject to the maximum (corporate or individual, whichever is higher) combined U.S. federal, New York State and New York City tax rates, without regard to whether any unitholder was subject to income tax liability at those rates. Because tax distributions to unitholders are made without regard to their particular tax situation, tax distributions to all unitholders, including our intermediate holding companies, will be increased to reflect the disproportionate income allocation to the principals with respect to ‘‘built-in gain’’ assets at the time of this offering. Tax distributions will be made only to the extent all distributions from the Fortress Operating Group for such year were insufficient to cover such tax liabilities.

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As a holding company our ability to pay dividends to our Class A shareholders will be subject to the ability of our subsidiaries (including the intermediate holding companies that hold our Fortress Operating Group units) to provide cash to us. Any distribution to Fortress Operating Group unitholders in excess of the required tax distributions, and the declaration and payment of future dividends by us, will be at the discretion of our board of directors and will depend on, among other things, cash available for distributions, general economic and business conditions, our strategic plans and prospects, our financial results and condition, contractual, legal and regulatory restrictions on the payment of distributions by us or our subsidiaries, and such other factors as our board of directors considers to be relevant.

In particular, under Delaware law we are prohibited from making a distribution to the extent that our liabilities, after such distribution, exceed the fair value of our assets. Our operating agreement does not contain any restrictions on our ability to make distributions, except that we may only distribute Class A shares to holders of Class A shares. In addition, under our credit agreement, we are permitted to make cash distributions subject to the following restrictions: (a) no event of default exists immediately prior to or subsequent to the distribution, (b) the amount of distributions over the prior 12 months do not exceed free cash flow (as defined in our credit agreement as net income plus (i) taxes, depreciation and private equity incentive income presented on an as-received basis less (ii) capital expenditures, permitted tax distributions and certain other adjustments) for the prior 12 month period, and (c) after giving effect to the distribution, we have cash on hand of not less than accrued but unpaid taxes (based on estimated entity level taxes due and payable by the Fortress Operating Group entities, primarily New York City unincorporated business tax) and amortization obligations (including scheduled principal payments) under the credit agreement which are required in the next 90 days. The events of default under the credit agreement are typical of such agreements and include payment defaults, failure to comply with credit agreement covenants, cross-defaults to material indebtedness, bankruptcy and insolvency, change of control, and adverse events with respect to our material funds. See ‘‘Description of Indebtedness’’.

Our dividend policy has certain risks and limitations, particularly with respect to liquidity. Although we expect to pay dividends according to our dividend policy, we may not pay dividends according to our policy, or at all, if, among other things, we do not have the cash necessary to pay the intended dividends. To the extent we do not have cash on hand sufficient to pay dividends, we may have to borrow funds to pay dividends, or we may determine not to borrow funds to pay dividends. By paying cash dividends rather than investing that cash in our future growth, we risk slowing that pace of our growth, or not having a sufficient amount of cash to fund our operations or unanticipated capital expenditures, should the need arise.

Historical Distributions

Distributions in 2006 to the principals in respect of their Fortress Operating Group units totaled approximately $446.9 million, of which $97.2 million, $109.2 million, $66.4 million, $69.7 million and $104.4 million was distributed to Mr. Briger, Mr. Edens, Mr. Kauffman, Mr. Nardone and Mr. Novogratz, respectively. Of these distributions $250.0 million was funded with $250.0 million of borrowings under the company’s June 2006 credit agreement. See ‘‘Summary — Distributions to the Principals Prior to this Offering’’.

Distributions in 2005 to the principals in respect of their Fortress Operating Group units totaled approximately $157.8 million, of which $38.0 million, $30.8 million, $32.6 million, $19.5 million and $36.9 million was distributed to Mr. Briger, Mr. Edens, Mr. Kauffman, Mr. Nardone and Mr. Novogratz, respectively.

Prior to the acquisition by Fortress Investment Group LLC of its interest in the Fortress Operating Group in connection with the Nomura transaction, 100% of the Fortress Operating Group was owned by the principals. Accordingly, all decisions regarding the amount and timing of distributions were made in prior periods by the principals with regard to their personal financial and tax situations and their assessments of appropriate amounts of distributions, taking into account Fortress’s capital needs as well as actual and potential earnings and borrowings.

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CAPITALIZATION

The following table sets forth our capitalization as of September 30, 2006:

•  on a historical basis based on the combined Fortress Operating Group as our accounting predecessor;
•  on a pro forma basis before the effects of this offering, including adjustments for:
—  the sale of Class A shares to Nomura, including the impact of tax adjustments to reflect changes to our tax basis in Fortress Operating Group;
—  the deconsolidation of the Fortress Funds and the liquidation of Northcastle; and
—  the distributions we made to our principals prior to this offering.
•  on a pro forma basis, as adjusted to give effect to:
—  the sale of 34,286,000 of our Class A shares offered by us in this offering at an assumed initial public offering price of $17.50 per share (the midpoint of the price range set forth on the cover of this prospectus) and the application of the net proceeds therefrom as described under ‘‘Use of Proceeds’’; and
—  the impact of tax adjustments to reflect changes to our tax basis in Fortress Operating Group resulting from this offering.

This table should be read in conjunction with ‘‘Our Structure — The Transactions,’’ ‘‘Use of Proceeds,’’ ‘‘Management’s Discussion and Analysis of Financial Condition and Results of Operations,’’ ‘‘Unaudited Pro Forma Financial Information,’’ and the financial statements and notes thereto included in this prospectus.

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  Fortress
Operating
Group
Combined
Historical
Pro Forma
before this
Offering
Fortress
Investment
Group LLC
Consolidated
Pro Forma
  (dollars in thousands)
Cash, cash equivalents, cash held at consolidated subsidiaries and restricted cash $ 569,447
$