Our Business

Principal Investments

FBR Group invests in mortgage-related assets and merchant banking opportunities. A large proportion of the income from these principal investment sources is untaxed at the corporate level and is passed directly on to shareholders as taxable dividends or capital gains.

FBR Group’s merchant banking portfolio puts our equity capital to work alongside that of our clients and other investors in selected transactions that our investment banking group underwrites. These investment decisions are driven by the same fundamental valuation approach we use in our research and underwriting transactions.

FBR Capital Markets

Investment Banking

A top ten-ranked U.S. equities underwriter¹, FBR Capital Markets Corporation, FBR Group’s principal subsidiary, offers a full range of investment banking and financing services:
• Market leader in 144A institutional equity private placements²
• Initial public offerings
• Mergers, acquisitions, advisory services and dispositions
• Secondary and follow-on offerings
• Innovative financing structures
• High-yield debt and preferred equity
• Restructurings and recapitalizations
• Fairness opinions and other advisory assignments

Our investment banking, research and sales and trading focus is on eight broad industry sectors: financial institutions, real estate, insurance, energy & natural resources, diversified industrials, healthcare, consumer and technology, media & telecom.

We have a particular commitment to supporting the growth of middle market companies, a vitally important sector of the U.S. economy. We provide a high level of service to small- and mid-cap companies, and for the last five years we have been the #1 book-running manager for all U.S. common stock transactions for issuers with market capitalizations of $1 billion or less.³

FBR Capital Markets also has considerable experience in rethinking and restructuring businesses and even entire industry sectors, as well as in “inventing” new companies. For de novo organizations, we typically identify concepts early, finding new opportunities in sectors we know well. We help put in place experienced management teams, establish financing structures, and help arrange early-stage capital if needed. Sometimes debt or equity is provided through our merchant banking group. We have a long and successful record of proprietary investments in ventures we underwrite and/or help start – investments made side by side with our clients.

Institutional Brokerage and Research

FBR Capital Markets is a leading player in institutional brokerage with an ongoing commitment to sell-side research covering U.S. equities. For a number of years, we have been steadily increasing the breadth of our Research group's coverage, particularly in the middle market arena.

We focus on institutional sales and trading services to equity investors and have a highly differentiated distribution capability based on long-standing relationships with a broad cross-section of institutional capital markets clients. Our team of brokers, traders and sales traders cover institutional accounts in the United States, Canada, Europe, Australia and Asia, and we are a market-maker or trader in more than 920 securities as of February 2008.

FBR Capital Markets’ Research group provides independent coverage of more than 490 companies as of February 2008, and its Economic and Washington Policy Analysis groups, teams of experienced analysts and Capitol Hill veterans, offer timely analysis of the ways in which economic, regulatory and legislative trends and events affect market sectors and individual companies.⁴

Asset Management

FBR Capital Markets offers a broad array of managed investment products and services ranging from mutual and hedge funds and other alternative assets to separately managed accounts.

Our Private Wealth group serves individuals, families and foundations, many of whom control substantial ownership interests in one or more companies. Among our services to them are:

• Assistance in addressing liquidity and financial planning issues relating to restricted and Rule 144A stock sales and stock option execution⁵
• Access to FBR proprietary alternative strategies and deal flow
• Access to FBR syndicate deal flow⁵
• Best-of-breed third-party traditional investments
• Liquidity management – monetization and cash management services
• Stock option plan design and management
• Open architecture asset allocation
• Concentrated stock strategies
• Risk-managed portfolio construction
• Portfolios run on a non-discretionary basis with goals of wealth preservation, financial performance and wealth accumulation
• Estate management, wealth transfer strategy and tax planning

The FBR Funds^*are a family of nine equity portfolios spanning various market capitalizations and industry sectors. Our goal is to achieve attractive, long-term returns that are balanced and ever mindful of the downside risks associated with equity investing. We are investors in companies, not traders of stocks. Our balance-sheet approach to investing and attention to valuation allows us to offer diversified exposure to the best-run companies with an eye on capital preservation. We also offer proprietary hedge funds and funds of funds.

*Investors should consider the investment objectives, risks, charges, and expenses carefully before investing. This and other important information can be found in the fund's prospectus. To obtain data current to the most recent month-end and a free prospectus, please call 888.200.4710 or visit www.fbrfunds.com. Investment return and principal will fluctuate so that investors’ shares, when redeemed, may be worth more or less than their original costs. Please read the prospectus carefully before investing. The FBR Funds are distributed by FBR Investment Services, Inc., member NASD/SIPC.
1) Source: Dealogic. As measured by the aggregate value of the U.S. common equity underwritings completed between 1/1/03 and 12/31/07 with apportioned credit including over-allotment to all book-running managers. Includes only rank eligible transactions.
2) Source: Dealogic. Relates to total deal value of all pre-IPO 144A equity offered for U.S. and Bermuda issuers; priced between 1/1/2003 and 12/31/07, with apportioned credit to all book-runners. Excludes closed-end funds, bought deals and best efforts. League table credit is apportioned amount of total capital raised including over-allotment.
3) Source: Dealogic. Relates to total deal value of all common stock or common equity, including private placements, offered for all U.S. companies with a market capitalization of $1 billion or less. Transactions priced between 1/1/03 and 12/31/07, with apportioned credit including over-allotment to all book-runners. Includes only rank eligible transactions.
4) As of 2/14/08. Research is provided by FBRC's Research department, which is independent from the Investment Banking department of FBRC, and has the sole authority to determine which companies receive research coverage and the recommendation contained in the coverage. In the normal course of its business, FBRC seeks to perform investment banking and other fee generating services for companies that are the subject of FBRC research reports. Research analysts are eligible to receive bonus compensation that is based on FBRC's overall operating revenues, including revenues generated by FBRC's Investment Banking department. Specific information is contained in each research report concerning FBRC's relationship with the company that is the subject of the report.
5) Brokerage execution and investment banking services may be provided by Friedman, Billings, Ramsey & Co., Inc.