The RMR Group Inc. Annual Report 2016

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FY2016 Annual Report · The RMR Group Inc.

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13OCT201513332394

The RMR Group Inc.
2016 Annual Report

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K

(cid:1) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

(cid:2)

For the fiscal year ended September 30, 2016
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

Commission file number 001-37616
THE RMR GROUP INC.
(Exact Name of Registrant as Specified in Its Charter)

Maryland
(State of Organization)

47-4122583
(IRS Employer Identification No.)

Two Newton Place, 255 Washington Street, Suite 300, Newton, MA 02458-1634

(Address of Principal Executive Offices)

(Zip Code)

Registrant’s Telephone Number, Including Area Code 617-796-8230

Securities registered pursuant to Section 12(b) of the Act:
Title Of Each Class

Name Of Each Exchange On Which Registered

Class A common stock, $0.001 par value per
share

The NASDAQ Stock Market LLC
(Nasdaq Capital Market)

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities

Act. Yes (cid:2) No (cid:1)

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of

the Act. Yes (cid:2) No (cid:1)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d)
of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing requirements for the past
90 days. Yes (cid:1) No (cid:2)

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if
any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the
preceding 12 months (or for such shorter period that the registrant was required to submit and post such
files). Yes (cid:1) No (cid:2)

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained

herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. (cid:2)

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated

filer, or a smaller reporting company. See the definitions of ‘‘large accelerated filer’’, ‘‘accelerated filer’’ and ‘‘smaller
reporting company’’ in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer (cid:2)

Accelerated filer (cid:2)

Smaller reporting company (cid:2)

Non-accelerated filer (cid:1)
(Do not check if a
smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange

Act). Yes (cid:2) No (cid:1)

The aggregate market value of the voting shares of Class A common stock, $0.001 par value, of the registrant

held by non-affiliates was approximately $173.2 million based on the $25.01 closing price per common share on The
NASDAQ Stock Market LLC, on March 31, 2016. For purposes of this calculation, an aggregate of 8,081,070 common
shares of Class A common Stock, held directly by, or by affiliates of, the directors and the executive officers of the
registrant have been included in the number of common shares held by affiliates.

As of December 13, 2016, there were 15,082,432 shares of Class A common stock, par value $0.001 per share,

1,000,000 shares of Class B-1 common stock, par value $0.001 per share and 15,000,000 shares of Class B-2
common stock, par value $0.001 per share outstanding.

Portions of the Registrant’s definitive proxy statement for its 2017 annual meeting of shareholders are

incorporated by reference in Part III of this Form 10- K.

DOCUMENTS INCORPORATED BY REFERENCE

WARNING CONCERNING FORWARD LOOKING STATEMENTS

THIS ANNUAL REPORT ON FORM 10-K CONTAINS FORWARD LOOKING STATEMENTS

WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
AND OTHER SECURITIES LAWS. OUR FORWARD LOOKING STATEMENTS REFLECT OUR
CURRENT VIEWS, INTENTS AND EXPECTATIONS WITH RESPECT TO, AMONG OTHER
THINGS, OUR OPERATIONS AND FINANCIAL PERFORMANCE. OUR FORWARD LOOKING
STATEMENTS CAN BE IDENTIFIED BY THE USE OF WORDS SUCH AS ‘‘OUTLOOK,’’
‘‘BELIEVE,’’ ‘‘EXPECT,’’ ‘‘POTENTIAL,’’ ‘‘WILL,’’ ‘‘MAY,’’ ‘‘ESTIMATE,’’ ‘‘ANTICIPATE,’’
DERIVATIVES OR NEGATIVES OF SUCH WORDS OR SIMILAR WORDS. SUCH FORWARD
LOOKING STATEMENTS ARE SUBJECT TO VARIOUS RISKS AND UNCERTAINTIES.
ACCORDINGLY, THERE ARE OR WILL BE FACTORS THAT COULD CAUSE ACTUAL
OUTCOMES OR RESULTS TO DIFFER MATERIALLY FROM THOSE INDICATED OR IMPLIED IN
THESE STATEMENTS. WE BELIEVE THESE FACTORS INCLUDE, BUT ARE NOT LIMITED TO
THE FOLLOWING:

• SUBSTANTIALLY ALL OF OUR REVENUES ARE DERIVED FROM SERVICES TO A

LIMITED NUMBER OF CLIENT COMPANIES;

• CHANGING MARKET CONDITIONS, INCLUDING RISING INTEREST RATES THAT MAY
ADVERSELY IMPACT OUR CLIENT COMPANIES AND OUR BUSINESS WITH THEM;

• POTENTIAL TERMINATIONS OF OUR MANAGEMENT AGREEMENTS WITH OUR CLIENT

COMPANIES;

• OUR ABILITY TO EXPAND OUR BUSINESS DEPENDS UPON THE GROWTH AND
PERFORMANCE OF OUR CLIENT COMPANIES AND OUR ABILITY TO OBTAIN OR
CREATE NEW CLIENTS FOR OUR BUSINESS AND IS OFTEN DEPENDENT UPON
CIRCUMSTANCES BEYOND OUR CONTROL;

• LITIGATION RISKS;

• ALLEGATIONS OF ANY CONFLICTS OF INTEREST ARISING FROM OUR MANAGEMENT

ACTIVITIES;

• OUR ABILITY TO RETAIN THE SERVICES OF OUR FOUNDERS AND OTHER KEY

PERSONNEL;

• RISKS ASSOCIATED WITH AND COSTS OF COMPLIANCE WITH LAWS AND

REGULATIONS, INCLUDING SECURITIES REGULATIONS, EXCHANGE LISTING
STANDARDS AND OTHER LAWS AND REGULATIONS AFFECTING PUBLIC COMPANIES;
AND

• OTHER RISKS DESCRIBED UNDER ‘‘RISK FACTORS’’ BEGINNING ON PAGE 19.

FOR EXAMPLE:

• WE HAVE A LIMITED NUMBER OF CLIENT COMPANIES. WE HAVE LONG TERM

CONTRACTS WITH OUR MANAGED REITS (COLLECTIVELY, GOVERNMENT
PROPERTIES INCOME TRUST, A MARYLAND REAL ESTATE INVESTMENT TRUST,
INCLUDING ITS SUBSIDIARIES, OR GOV; HOSPITALITY PROPERTIES TRUST, A
MARYLAND REAL ESTATE INVESTMENT TRUST, INCLUDING ITS SUBSIDIARIES, OR
HPT; SELECT INCOME REIT, A MARYLAND REAL ESTATE INVESTMENT TRUST,
INCLUDING ITS SUBSIDIARIES, OR SIR; AND SENIOR HOUSING PROPERTIES TRUST,
A MARYLAND REAL ESTATE INVESTMENT TRUST, INCLUDING ITS SUBSIDIARIES, OR
SNH); HOWEVER, THE OTHER CONTRACTS UNDER WHICH WE EARN OUR REVENUES
ARE FOR SHORTER TERMS AND THE LONG TERM CONTRACTS WITH OUR MANAGED

REITS MAY BE TERMINATED IN CERTAIN CIRCUMSTANCES. THE TERMINATION OR
LOSS OF ANY OF OUR MANAGEMENT CONTRACTS MAY HAVE A MATERIAL ADVERSE
IMPACT UPON OUR REVENUES, PROFITS AND CASH FLOWS.

• OUR MANAGEMENT FEES FROM OUR MANAGED REITS ARE CALCULATED BASED
UPON THE LOWER OF EACH REIT’S COST OF ITS APPLICABLE ASSETS OR SUCH
REIT’S MARKET CAPITALIZATION. OUR MANAGEMENT FEES FROM OUR MANAGED
OPERATORS (COLLECTIVELY, FIVE STAR QUALITY CARE, INC., A MARYLAND
CORPORATION, INCLUDING ITS SUBSIDIARIES, OR FIVE STAR; SONESTA
INTERNATIONAL HOTELS CORPORATION, A MARYLAND CORPORATION, INCLUDING
ITS SUBSIDIARIES, OR SONESTA; AND TRAVELCENTERS OF AMERICA LLC, A
DELAWARE LIMITED LIABILITY COMPANY, INCLUDING ITS SUBSIDIARIES, OR TA) ARE
CALCULATED BASED UPON CERTAIN REVENUES OF EACH OPERATOR.
ACCORDINGLY, OUR FUTURE REVENUES, INCOME AND CASH FLOWS WILL DECLINE
IF THE BUSINESSES, ASSETS OR MARKET CAPITALIZATION OF OUR CLIENT
COMPANIES DECLINE.

• THE FACT THAT WE EARNED A SIGNIFICANT INCENTIVE MANAGEMENT FEE FROM

ONE OF OUR MANAGED REITS FOR THE CALENDAR YEAR 2015 AND THAT WE
ESTIMATE THAT WE WOULD HAVE EARNED AN ADDITIONAL INCENTIVE
MANAGEMENT FEE FROM A MANAGED REIT AS OF SEPTEMBER 30, 2016 IF THAT
DATE HAD BEEN THE END DATE FOR A MEASUREMENT PERIOD FOR DETERMINING
INCENTIVE MANAGEMENT FEES MAY IMPLY THAT WE WILL EARN AN INCENTIVE
MANAGEMENT FEE FOR THE CALENDAR YEAR 2016 OR IN FUTURE YEARS. THE
INCENTIVE MANAGEMENT FEES, WHICH WE MAY EARN FROM OUR MANAGED REITS,
ARE BASED UPON TOTAL RETURNS REALIZED BY THE REITS’ SHAREHOLDERS
COMPARED TO THE TOTAL SHAREHOLDERS RETURN OF CERTAIN IDENTIFIED
INDICES. WE HAVE ONLY LIMITED CONTROL OVER THE TOTAL RETURNS REALIZED
BY SHAREHOLDERS OF THE MANAGED REITS AND EFFECTIVELY NO CONTROL OVER
INDEXED TOTAL RETURNS. THERE CAN BE NO ASSURANCE THAT WE WILL EARN
INCENTIVE MANAGEMENT FEES IN THE FUTURE.

• WE CURRENTLY INTEND TO PAY A REGULAR QUARTERLY DIVIDEND OF $0.25 PER
CLASS A COMMON SHARE AND CLASS B-1 COMMON SHARE. OUR DIVIDENDS ARE
DECLARED AND PAID AT THE DISCRETION OF OUR BOARD OF DIRECTORS. OUR
BOARD MAY CONSIDER MANY FACTORS WHEN DECIDING WHETHER TO DECLARE
AND PAY DIVIDENDS, INCLUDING OUR CURRENT AND PROJECTED EARNINGS, OUR
CASH FLOWS AND ALTERNATIVE USES FOR ANY AVAILABLE CASH. OUR BOARD MAY
DECIDE TO LOWER OR EVEN ELIMINATE OUR DIVIDENDS. THERE CAN BE NO
ASSURANCE THAT WE WILL CONTINUE TO PAY ANY REGULAR DIVIDENDS OR WITH
REGARD TO THE AMOUNT OF DIVIDENDS WE MAY PAY.

ADDITIONALLY, THERE ARE OR WILL BE IMPORTANT FACTORS THAT COULD CAUSE

ACTUAL OUTCOMES OR RESULTS TO DIFFER MATERIALLY FROM THOSE STATED OR
IMPLIED IN OUR FORWARD LOOKING STATEMENTS. FOR EXAMPLE, CHANGING MARKET
CONDITIONS, INCLUDING RISING INTEREST RATES, MAY LOWER THE MARKET VALUE OF
OUR MANAGED REITS OR CAUSE THE REVENUES OF OUR MANAGED OPERATORS TO
DECLINE AND, AS A RESULT, OUR FEES MAY DECLINE.

WE HAVE BASED OUR FORWARD LOOKING STATEMENTS ON OUR CURRENT

EXPECTATIONS ABOUT FUTURE EVENTS THAT WE BELIEVE MAY AFFECT OUR BUSINESS,
FINANCIAL CONDITION AND RESULTS OF OPERATIONS. BECAUSE FORWARD LOOKING
STATEMENTS ARE INHERENTLY SUBJECT TO RISKS AND UNCERTAINTIES, SOME OF

WHICH CANNOT BE PREDICTED OR QUANTIFIED, OUR FORWARD LOOKING STATEMENTS
SHOULD NOT BE RELIED ON AS PREDICTIONS OF FUTURE EVENTS. THE EVENTS AND
CIRCUMSTANCES REFLECTED IN OUR FORWARD LOOKING STATEMENTS MAY NOT BE
ACHIEVED OR OCCUR AND ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE
PROJECTED OR IMPLIED IN OUR FORWARD LOOKING 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 ANNUAL
REPORT ON FORM 10-K. WE UNDERTAKE NO OBLIGATION TO UPDATE ANY FORWARD
LOOKING STATEMENT, WHETHER AS A RESULT OF NEW INFORMATION, FUTURE
DEVELOPMENTS OR OTHERWISE, EXCEPT AS REQUIRED BY LAW.

iii

Part I
Item 1.
Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 1A. Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 1B. Unresolved Staff Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 2.
Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 3.
Mine Safety Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 4.

Part II

Item 5.

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer

Item 6.
Item 7.

Purchases of Equity Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Management’s Discussion and Analysis of Financial Condition and Results of

Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 7a. Quantitative and Qualitative Disclosures About Market Risk . . . . . . . . . . . . . . . . .
Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 8.
Changes in and Disagreements with Accountants on Accounting and Financial
Item 9.

Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 9A. Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 9B. Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Part III

Item 10. Directors, Executive Officers and Corporate Governance . . . . . . . . . . . . . . . . . . .
Item 11. Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related

Stockholder Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 13. Certain Relationships and Related Person Transactions, and Director

Independence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 14. Principal Accountant Fees and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Page

1
19
34
34
34
34

35
36

39
55
55

55
56
56

57
57

Item 15. Exhibits and Financial Statement Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Part IV

Item 1. Business

Our Company

PART I

The RMR Group Inc., or RMR Inc., owns a 51.7% economic interest in and is the managing

member of The RMR Group LLC, or RMR LLC. Substantially all of the business of RMR Inc. is
conducted by RMR LLC. RMR LLC was founded in 1986 to manage real estate related businesses.
In this Annual Report on Form 10-K, unless otherwise indicated, ‘‘we’’, ‘‘us’’ and ‘‘our’’ refers to
RMR Inc. and its direct and indirect subsidiaries, including RMR LLC. Our business primarily
consists of providing management services to our Managed REITs (four publicly traded real estate
investment trusts, or REITs) and our Managed Operators (three real estate operating companies).
Since its founding, RMR LLC has substantially grown the amount of real estate assets under
management and the number of real estate businesses it manages. As of September 30, 2016, we
had $26.9 billion of assets under management in the companies we manage. For more information
about our calculation of assets under management, see Item 6, Selected Financial Data, included in
Part II of this Annual Report on Form 10-K. Our assets under management include more than 1,400
properties, which are primarily owned by our Managed REITs.

As manager of the Managed REITs, we are responsible for implementing investment strategies
and managing day to day operations, subject to supervision and oversight by each Managed REIT’s
board of trustees. The Managed REITs have no employees, and we provide the personnel and
services necessary for each Managed REIT to conduct its business. The Managed REITs invest in
diverse income producing properties as follows:

• Government Properties Income Trust (Nasdaq: GOV), or GOV, primarily owns office

properties leased to the U.S. government and state governments. As of September 30, 2016,
GOV owned 71 properties (91 buildings) located in 31 states and the District of Columbia.

• Hospitality Properties Trust (Nasdaq: HPT), or HPT, primarily owns hotel and travel center

properties. As of September 30, 2016, HPT owned 503 properties (305 hotels and 198 travel
centers) located in 45 states, Puerto Rico and Canada.

• Select Income REIT (Nasdaq: SIR), or SIR, primarily owns properties that are leased to single

tenants, including industrial and commercial lands on the island of Oahu, Hawaii. As of
September 30, 2016, SIR owned 120 properties (361 buildings, leasable land parcels and
easements) located in 35 states.

• Senior Housing Properties Trust (Nasdaq: SNH), or SNH, primarily owns independent and

assisted living communities, continuing care retirement communities, nursing homes, wellness
centers and properties leased to medical service providers, clinics, biotech laboratory tenants
and other medical related businesses. As of September 30, 2016, SNH owned 431 properties
(457 buildings) located in 42 states and the District of Columbia.

We also provide management services to the Managed Operators that have diverse businesses

as follows:

• Five Star Quality Care Inc. (Nasdaq: FVE), or Five Star, is a national healthcare and senior

living services company that operates senior living communities, including independent living,
assisted living, continuing care and skilled nursing facilities, many of which are owned by
SNH. As of September 30, 2016, Five Star operated 276 senior living communities located in
32 states.

• Sonesta International Hotels Corporation, or Sonesta, manages and franchises an

international collection of hotels, resorts and cruise ships offering upscale and extended stay

accommodations to travelers, including hotels in the United States owned by HPT. As of
September 30, 2016, Sonesta’s business included 66 properties in nine countries.

• TravelCenters of America LLC (Nasdaq: TA), or TA, operates a national chain of full service

travel centers located along the U.S. Interstate Highway System, many of which are owned by
HPT. TA also operates convenience stores with retail gasoline stations and operates and
franchises restaurants. As of September 30, 2016, TA’s business included 255 travel centers
in 43 states and Canada, 233 gasoline / convenience stores in 11 states and 52 standalone
restaurants in 15 states.

RMR Advisors LLC, or RMR Advisors, a wholly owned subsidiary of RMR LLC, is an investment

advisor registered with the Securities and Exchange Commission, or SEC, which provides
investment advisory services to the RMR Real Estate Income Fund (NYSE MKT: RIF), or RIF, a
closed end investment company focused on investing in real estate securities, including REITs and
other dividend paying securities (excluding our Client Companies, as defined below). RMR Advisors
has been managing investments in real estate securities since 2003.

On August 5, 2016, we acquired certain assets of Tremont Realty Capital LLC, or the Tremont

business, which specializes in commercial real estate finance, principally providing capital to
commercial real estate owners and developers and serving as advisor to private funds that
principally make commercial real estate debt investments. As part of this transaction, our wholly
owned subsidiary, Tremont Realty Advisors LLC, or Tremont Advisors, an investment advisor
registered with the SEC, was assigned the investment management contracts with investment
advisory clients of the Tremont business. Tremont Advisors advises private funds and separately
managed accounts that invest in commercial real estate debt, including secured mortgage debt and
mezzanine financing opportunities. Tremont Advisors may also provide advice with respect to
commercial real estate that may become owned by its clients. As of September 30, 2016, Tremont
Advisors managed approximately $192 million of client assets.

In addition, we provide management services to certain other businesses, including Affiliates

Insurance Company, or AIC, an Indiana insurance company, and ABP Trust, historically a
Massachusetts business trust, and, as of January 20, 2016, a Maryland statutory trust, wholly owned
by Barry M. Portnoy and Adam D. Portnoy, or collectively our Founders. We refer to the Managed
REITs, Managed Operators, RIF, AIC, ABP Trust and the clients of the Tremont business as our
Client Companies.

Our Business Strategy

Our business strategy is to provide a full range of management services to our Client

Companies and to increase the number of clients to which we provide services.

We believe that we have several strengths that distinguish our business:

• Revenue Base. Our revenues are primarily from recurring fees earned under long term

agreements with high credit quality companies. Our agreements with the Managed REITs
extend for 20 year terms. For the fiscal year ended September 30, 2016, 87.9% of our total
revenue was from the Managed REITs. In addition, the businesses of the Managed Operators
are conducted in large part at properties under long term leases and management
arrangements with the Managed REITs.

• Cash Flow and Dividend. Our net income and Adjusted EBITDA for the fiscal year ended

September 30, 2016 was $122.4 million and $100.1 million, respectively. We have no debt
outstanding. Our current dividend rate of $0.25 per share per quarter ($1.00 per share per
year) has been well covered by our earnings and cash flows. Adjusted EBITDA is a

non-GAAP financial measure. For a reconciliation of Adjusted EBITDA to net income, see
footnote (2) to ‘‘Selected Financial Data’’ beginning on page 36.

• Broad Real Estate Experience. We provide management services to a wide range of real
estate assets and businesses that include healthcare facilities, senior living and other
apartments, hotels, office buildings, industrial buildings, leased lands, travel centers, retail
stores, and various specialized properties such as properties leased to government tenants
and properties specially designed for medical and biotech research. The properties and
businesses we managed as of September 30, 2016, are located throughout the United States
in 48 states and Washington D.C., and in Puerto Rico and Canada.

• Growth. Since the founding of RMR LLC in 1986, we have substantially grown our real estate
assets under management and the number and variety of real estate businesses we manage.
As of September 30, 2016, we had $26.9 billion of assets under management in the
companies we manage, including more than 1,400 properties. The synergies among our
clients may also facilitate their and our growth. We assist our clients in realizing investment
opportunities by working together to make acquisitions and to complete certain development
activities. We expect to use our operating cash flow and we may use our equity to fund our
growth and diversify our operations. We believe that our recent all-cash acquisition of the
Tremont business represents the addition of a new platform to provide for growth and
diversification of our operations and that the commercial real estate finance business
represents an appropriate extension of our existing operations.

• Quality and Depth of Management. Our highly qualified and experienced management team
provides a broad base of deep expertise to our clients. Our senior management has worked
together through several business cycles in which they acquired, financed, managed and
disposed of real estate assets and started real estate businesses. As of September 30, 2016,
we employed over 450 real estate professionals in more than 30 offices throughout the United
States, and the companies we manage collectively had over 52,000 employees. We have also
assisted our clients to grow by successfully accessing the capital markets; since our founding
in 1986, our clients have successfully completed over $32.0 billion of financing in over 150
capital raising transactions.

• Alignment of Interests. We believe our structure fosters strong alignment of interests between
our principal executive officers and our shareholders because our principal executives, Barry
M. Portnoy and Adam D. Portnoy, have a combined direct and indirect 51.9% economic
interest in RMR LLC.

We can provide no assurance that we will be able to implement our business strategy or
achieve our desired growth. Our business and the businesses of our Client Companies are subject
to a number of risks and uncertainties. See ‘‘Risk Factors’’ beginning on page 19.

Our Management Agreements with the Managed REITS

RMR LLC has entered a business management agreement and a property management
agreement with each Managed REIT. The following is a summary of the terms of our business and
property management agreements with the Managed REITs. The summary does not purport to be
complete and is subject to, and qualified in its entirety by, reference to the actual agreements,
copies of which are filed or incorporated as exhibits to this Annual Report on Form 10-K.

Business Management Services

Each business management agreement requires RMR LLC to use its reasonable best efforts to
present the Managed REIT with a continuing and suitable real estate investment program consistent
with the REIT’s real estate investment policies and objectives.

Subject to the overall management, direction and oversight of the Board of Trustees of each

Managed REIT, RMR LLC has the responsibility to:

• provide research and economic and statistical data in connection with the Managed REIT’s

real estate investments and recommend changes in the Managed REIT’s real estate
investment policies when appropriate;

• investigate, evaluate and negotiate contracts for the investment in, or the acquisition or

disposition of, real estate and related interests, financing and refinancing opportunities and
make recommendations concerning specific real estate investments to the Board of Trustees
of the Managed REIT;

• investigate, evaluate, prosecute and negotiate any of the Managed REIT’s claims in

connection with its real estate investments or otherwise in connection with the conduct of the
Managed REIT’s business;

• administer bookkeeping and accounting functions as required for the Managed REIT’s

business and operation, contract for audits and prepare or cause to be prepared reports and
filings required by a governmental authority in connection with the conduct of the Managed
REIT’s business, and otherwise advise and assist the Managed REIT with its compliance with
applicable legal and regulatory requirements;

• advise and assist in the preparation of all equity and debt offering documents and all

registration statements, prospectuses or other documents filed by the Managed REIT with the
SEC or any state;

• retain counsel, consultants and other third party professionals on behalf of the Managed

REIT;

• provide internal audit services;

• advise and assist with the Managed REIT’s risk management and business oversight function;

• advise and assist the Managed REIT with respect to the Managed REIT’s public relations,

preparation of marketing materials, internet website and investor relations services;

• provide communication facilities for the Managed REIT and its officers and trustees and

provide meeting space as required;

• provide office space, equipment and experienced and qualified personnel necessary for the

performance of the foregoing services; and

• to the extent not covered above, advise and assist the Managed REIT in the review and

negotiation of the Managed REIT’s contracts and agreements, coordination and supervision of
all third party legal services and oversight for processing of claims by or against the Managed
REIT.

Property Management Services

Under each property management agreement, RMR LLC is required to act as managing agent

for each Managed REIT’s properties and devote such time, attention and effort as may be
appropriate to operate and manage the Managed REIT’s properties in a diligent, orderly and efficient
manner. Subject to the overall management and supervision of the Board of Trustees of each
Managed REIT, RMR LLC has the responsibility to:

• seek tenants for the Managed REIT’s properties and negotiate leases;

• collect rents and other income from the Managed REIT’s properties;

• make contracts for, and supervise repairs and/or alterations on, the Managed REIT’s

properties;

• for the Managed REIT’s account and at its expense, hire, supervise and discharge employees
as required for the efficient operation and maintenance of the Managed REIT’s properties;

• obtain appropriate insurance for the Managed REIT’s properties and notify the Managed

REIT’s insurance carriers with respect to casualties or injuries at the properties;

• procure supplies and other necessary materials;

• pay from rental receipts, other income derived from the Managed REIT’s properties or other
monies made available by the Managed REIT for such purpose, all costs incurred in the
operation of the Managed REIT’s properties that are expenses of the Managed REIT;

• establish reasonable rules and regulations for tenants of the Managed REIT’s properties;

• institute or defend, on the Managed REIT’s behalf and in the Managed REIT’s name, any and
all legal actions or proceedings relating to the operation of the Managed REIT’s properties;

• maintain the books and records of the Managed REIT reflecting the management and

operation of the Managed REIT’s properties and prepare and deliver statements of expenses
for tenants of the REIT’s properties;

• aid, assist and cooperate with the Managed REIT in matters relating to taxes and

assessments and insurance loss adjustments;

• provide emergency services as may be required for the efficient management and operation

of the Managed REIT’s properties; and

• arrange for day to day operations of the Managed REIT’s properties, including water, fuel,

electricity, cleaning and other services.

Term and Termination

The terms of the business and property management agreements with each Managed REIT end

on December 31, 2036, and automatically extend on December 31st of each year so that the terms
thereafter end on the 20th anniversary of the date of the extension. A Managed REIT has the right
to terminate its management agreements with RMR LLC: (1) at any time upon 60 days’ written
notice for convenience, (2) immediately upon written notice for cause, as defined in the agreement,
(3) on written notice given within 60 days after the end of any calendar year for a performance
reason, as defined in the agreements, and (4) by written notice during the 12 months following a
manager change of control, as defined in the agreements. RMR LLC has the right to terminate the
management agreements for good reason, as defined in the agreements.

If a Managed REIT terminates a management agreement for convenience, or if RMR LLC
terminates a management agreement with a Managed REIT for good reason, the Managed REIT is
obligated to pay RMR LLC a termination fee equal to the sum of the present values of the monthly
future fees, as defined in the agreement, payable for the remaining term of the agreement, assuming
it had not been terminated. If a Managed REIT terminates a management agreement for a
performance reason, as defined in the agreement, the Managed REIT is obligated to pay RMR LLC
the termination fee calculated as described above, but assuming a remaining term of ten years.

The management agreements provide for certain proportional adjustments to the termination
fees if a Managed REIT merges with another REIT to which RMR LLC is providing management
services or if the Managed REIT spins off a subsidiary to which it contributed properties and to
which RMR LLC is providing management services both at the time of the spin off and on the date
of the expiration or termination of either of the management agreements.

A Managed REIT is not required to pay any termination fee if it terminates its business or
property management agreements for cause, or as a result of a manager change of control, in each
case as defined in such agreements.

Business Management Fees and Expense Reimbursement

Each business management agreement between RMR LLC and a Managed REIT provides for

(i) an annual base management fee, payable monthly, and (ii) an annual incentive management fee.

The annual base management fee generally is calculated as the lesser of:

• the sum of (a) 0.5% of the historical cost of transferred real estate assets, if any, as defined
in the applicable business management agreement, plus (b) 0.7% of the average invested
capital (exclusive of the transferred real estate assets), as defined in the applicable business
management agreement, up to $250.0 million, plus (c) 0.5% of the average invested capital
exceeding $250.0 million; and

• the sum of (a) 0.7% of the average market capitalization, as defined in the applicable

business management agreement, up to $250.0 million, plus (b) 0.5% of the average market
capitalization exceeding $250.0 million.

The base management fee is payable monthly in arrears, based on the Managed REIT’s monthly
financial statements and average market capitalization for the applicable month.

The annual incentive management fee payable by each Managed REIT to RMR LLC, if any, is

calculated as follows:

• An amount equal to 12.0% of the product of (a) the equity market capitalization of the

Managed REIT, as defined in the agreement, and (b) the amount, expressed as a percentage,
by which the Managed REIT’s total return per share, as defined in the agreement, exceeds
the benchmark total return per share, as defined in the agreement, of a specified REIT index
identified in the management agreement for the measurement period. Generally, total return
per share measures the change in the Managed REIT’s share price plus dividends. The
benchmark return per share is also adjusted if the total return per share exceeds 12.0% per
year in any measurement period.

• The current measurement period is defined as the three year period ending December 31,

2016 and thereafter a three year period ending on each December 31.

• Generally, no incentive management fee is payable by a Managed REIT unless the Managed

REIT’s total return per share during the measurement period is positive.

• The incentive management fee payable by a Managed REIT is also subject to a cap equal to
the value of 1.5% of the Managed REIT’s common shares then outstanding multiplied by the
average closing price of the Managed REIT’s common shares during the ten consecutive
trading days having the highest average closing prices during the final 30 trading days of the
relevant measurement period.

• Also, if a Managed REIT’s financial statements are restated due to material non-compliance

with any financial reporting requirements under the securities laws as a result of the bad faith,
fraud, willful misconduct or gross negligence of RMR LLC, for one or more periods in respect
of which RMR LLC received an incentive management fee, the incentive management fee
payable with respect to periods for which there has been a restatement shall be recalculated
by, and approved by a majority vote of, the Managed REIT’s Independent Trustees in light of
such restatement, and RMR LLC may be required to pay to the Managed REIT an amount
equal to the value in excess of that which RMR LLC would have received based upon the

incentive management fee as recalculated, either in cash or the Managed REIT common
shares.

If the business management agreement is terminated, the base management fee and incentive
management fee due in respect of any partial period prior to the date of termination will be prorated
as provided in the agreement.

Under each business management agreement: the Managed REIT pays or reimburses

RMR LLC for all of the expenses relating to the Managed REIT’s activities, including the costs and
expenses of investigating, acquiring, owning and disposing of its real estate (third party property
diligence costs, appraisal, reporting, audit and legal fees), its costs of borrowing money, its costs of
securities listing, transfer, registration and compliance with reporting requirements and its costs of
third party professional services, including legal and accounting fees; and RMR LLC bears its
general and administrative expenses relating to its performance of its obligations under the
agreement, including expenses of its personnel, rent and other office expenses. Also, the allocable
cost of internal audit services is reimbursed by each Managed REIT to RMR LLC.

Property Management Fees and Expense Reimbursement

No property management fees are payable by a Managed REIT to RMR LLC for any hotels,
senior living communities or travel centers which are leased to, or managed by, a Managed Operator
or another operating business such as a hotel management company or a senior living or healthcare
services provider. For other properties, each property management agreement between RMR LLC
and a Managed REIT provides for (i) a management fee equal to 3.0% of the gross rents collected
from tenants and (ii) a construction supervision fee equal to 5.0% of the cost of any construction,
renovation or repair activities at the Managed REIT’s properties, other than ordinary maintenance
and repairs. Also, under each property management agreement, the Managed REIT pays certain
allocable expenses of RMR LLC in the performance of its duties, including wages for onsite property
management personnel and allocated costs of centralized property management services.

Other Provisions

Under both the business and property management agreements, each Managed REIT has
agreed to indemnify RMR LLC, its members, officers, employees and affiliates against liabilities
relating to acts or omissions of RMR LLC with respect to the provision of services by RMR LLC,
except to the extent such provision was in bad faith or fraudulent, was willful misconduct or was
grossly negligent. In addition, each management agreement provides that any disputes, as defined
in those agreements, arising out of or relating to the agreement or the provision of services pursuant
thereto, upon the demand of a party to the dispute, will be subject to mandatory arbitration in
accordance with procedures provided in the agreement.

Our Management Agreements with the Managed Operators

RMR LLC provides services and earns fees pursuant to a business management agreement

with each of the Managed Operators. Under these agreements, RMR LLC provides services to the
Managed Operators relating to, or assists them with, among other things, their compliance with
various laws and rules applicable to them, capital markets and financing activities, maintenance of
their properties, selection of new business sites and evaluation of other business opportunities,
accounting and financial reporting, internal audit, investor relations and general oversight of the
company’s daily business activities, including legal and tax matters, human resources, insurance
programs and management information systems.

Each Managed Operator pays RMR LLC a fee under its business management agreement in an

amount equal to 0.6% of: (i) for Five Star, Five Star’s revenues from all sources reportable under

U.S. generally accepted accounting principles, or GAAP, other than revenues reportable by Five Star
with respect to properties for which Five Star provides management services, plus the gross
revenues of properties managed by Five Star determined in accordance with GAAP; (ii) for Sonesta,
Sonesta’s revenues from all sources reportable under GAAP, other than any revenues reportable by
Sonesta with respect to hotels for which Sonesta provides management services, plus the revenues
of hotels managed by Sonesta (except to the extent such managed hotel revenues are included in
Sonesta’s gross revenues under GAAP); and (iii) for TA, the sum of TA’s gross fuel margin,
determined as TA’s fuel sales revenues less its cost of fuel sales, plus TA’s total nonfuel revenues.
In addition, the business management agreement with each Managed Operator provides that the
compensation of senior executives of the Managed Operator, who are also employees or officers of
RMR LLC, is the responsibility of the party to or on behalf of which the individual renders services.
In the past, because at least 80.0% of each of these executives’ business time was devoted to
services to the Managed Operator, 80.0% of these executives’ total cash compensation was paid by
the Managed Operator and the remainder was paid by RMR LLC.

The terms of the business management agreements with each Managed Operator end on
December 31, 2016, and automatically extend for successive one year terms, unless RMR LLC or
the applicable Managed Operator gives notice of non-renewal before the expiration of the applicable
term. Also, a Managed Operator may terminate its business management agreement at any time
(i) for Five Star and TA, on 60 days’ notice and RMR LLC may terminate such agreements at any
time on 120 days’ notice and (ii) for Sonesta, on 30 days’ notice and RMR LLC may terminate its
agreement with Sonesta on 30 days’ notice. If Five Star or TA terminates or elects not to renew its
agreement, other than for cause as defined in each agreement, the Managed Operator is obligated
to pay RMR LLC a termination fee equal to 2.875 times the sum of the annual base management
fee and the annual internal audit services expense, which amounts are based on averages during
the 24 consecutive calendar months prior to the date of notice of nonrenewal or termination.

Each Managed Operator has agreed to indemnify RMR LLC, its members, officers, employees

and affiliates against liabilities relating to acts or omissions of RMR LLC with respect to the provision
of services by RMR LLC, except to the extent such provision was in bad faith or was grossly
negligent. In addition, each agreement provides that any disputes, as defined in those agreements,
arising out of or relating to the agreement or the provision of services pursuant thereto, upon the
demand of a party to the dispute, shall be subject to mandatory arbitration in accordance with
procedures provided in the agreement.

Our Advisory Agreements and Other Services to Advisory Clients

RMR Advisors is party to an investment advisory agreement with RIF and Tremont Advisors is
party to an investment advisory agreement with a private fund. Pursuant to each agreement, RMR
Advisors and Tremont Advisors provide RIF and the private fund, respectively, with a continuous
investment program, makes day to day investment decisions and generally manages the business
affairs of RIF and the private fund, respectively, in accordance with each such fund’s investment
objectives and policies. RMR Advisors is compensated pursuant to its agreement with RIF at an
annual rate of 0.85% of RIF’s average daily managed assets, as defined in the agreement. Average
daily managed assets includes the net asset value attributable to RIF’s outstanding common shares,
plus the liquidation preference of RIF’s outstanding preferred shares plus the principal amount of any
borrowings, including from banks or evidenced by notes, commercial paper or other similar
instruments issued by RIF. Tremont Advisors is compensated pursuant to its agreement with the
private fund at an annual rate of 1.35% of the weighted average outstanding balance of all strategic
investments, as defined in the agreement, of the private fund. Strategic investments include any
direct or indirect participating or non-participating debt investment in certain real estate.

RMR Advisors’s agreement with RIF continues from year to year or for such longer term as may

be approved by RIF’s board of trustees, as permitted by the Investment Company Act of 1940, as
amended, or the Investment Company Act. So long as required by the Investment Company Act, the
agreement is terminable by RIF on 60 days’ notice and automatically in the event of an assignment,
as defined in the Investment Company Act. Tremont Advisors’s agreement with the private fund will
terminate upon the removal or withdrawal of the private fund’s general partner; this agreement is
also terminable by the private fund’s general partner at any time, or by Tremont Advisors in certain
circumstances, on 90 days’ notice.

Tremont Advisors is also party to loan servicing agreements with its separately managed
account clients. Under such agreements, Tremont Advisors is compensated at an annual rate of
0.50% of the outstanding principal balance of the outstanding loans. In certain circumstances,
Tremont Advisors is also entitled to performance fees based on exceeding certain performance
targets. Performance fees are realized when a separately managed account client’s cumulative
returns are in excess of a stated return. Tremont Advisors did not earn any such performance fees
in the period subsequent to our acquisition of the Tremont business in August 2016 through
September 30, 2016. The Tremont business may also act as transaction originators for its
non-investment advisory clients for negotiated fees. For the fiscal year ended September 30, 2016,
the Tremont business earned between 0.50% and 0.75% of the aggregate principal amounts of
loans so originated.

Our Management Agreements with AIC and ABP Trust

RMR LLC provides business management services to AIC for a fee calculated as 3.0% of the
total premiums paid for insurance arranged by AIC. RMR LLC also provides business and property
management services to our controlling shareholder, ABP Trust, for which it receives, depending
upon the services provided, a business management fee in an annual amount equal to 0.6% of ABP
Trust’s revenues from all sources reportable under GAAP, a property management fee in an amount
equal to 3.0% of rents collected from managed properties and a construction supervision fee in an
amount equal to 5.0% of the cost of any construction, renovation or repair activities at the managed
properties, other than ordinary maintenance and repairs.

Our Organizational Structure

(In this ‘‘Business—Our Organizational Structure’’ section, the words, ‘‘we,’’ ‘‘our’’ and ‘‘us’’ refer
solely to RMR Inc.)

We were incorporated in Maryland on May 28, 2015 in contemplation of the transaction,

described below, in which, among other things, the Managed REITs acquired 15,000,000 shares of
Class A Common Stock of RMR Inc., par value $0.001 per share, or Class A Common Shares. We
refer to this transaction in this Annual Report on Form 10-K as the Up-C Transaction. For more
information about the Up-C Transaction, please see Note 6, Related Person Transactions, to our
Consolidated Financial Statements included in Part IV, Item 15 of this Annual Report on Form 10-K.
We are a holding company; substantially all of our business is conducted by RMR LLC, we have no
employees and the personnel and various services we require to operate are provided to us by
RMR LLC.

We own a 51.7% economic interest in RMR LLC, a company founded in 1986 to manage real
estate related businesses. Prior to the Up-C Transaction, RMR LLC was 100% owned by ABP Trust,
which is wholly owned by our Founders. We are the sole managing member of RMR LLC and, in
that capacity, we operate and control the business and affairs of RMR LLC.

On December 14, 2015, the Managed REITs completed the distribution of approximately half of

the 15,000,000 Class A Common Shares they acquired in the Up-C Transaction to holders of their
respective common shares. The diagram below depicts our organizational structure as of
September 30, 2016.

Public
Shareholders

Managed REITs*

ABP Trust**

7,140,186 Class A Common

7,942,246 Class A Common

1,000,000 Class B-1

Shares
(cid:1) 44.4% direct economic

interest in RMR Inc.†† (or
23.0% indirect economic
interest in RMR LLC)†
(cid:1) 4.1% voting interest in
RMR Inc.

Shares*
(cid:1) 49.4% direct economic

interest in RMR Inc.†† (or
25.5% indirect economic
interest in RMR LLC)†
(cid:1) 4.5% voting interest in
RMR Inc.

Common Shares
(cid:1) 6.2% direct
economic interest
in RMR Inc.†† (or

3.2% indirect
economic interest
in RMR LLC)†

(cid:1) 5.7% voting

interest in RMR
Inc.

15,000,000 Class B-2
Common Shares
(cid:1) No economic

interest in RMR Inc.

or RMR LLC
(cid:1) Paired with class A
membership units of
RMR LLC held by
ABP Trust
(cid:1) 85.7% voting

interest in RMR Inc.

RMR Inc.

15,082,432 class A

1,000,000 class B

membership units
(cid:1) 48.5% direct
economic

interest in RMR

LLC††

membership units
(cid:1) Managing Member
(cid:1) 3.2% direct economic
interest in RMR LLC††

15,000,000 redeemable

class A membership units
(cid:1) 48.3% direct economic
interest in RMR LLC††
(cid:1) Paired with Class B-2
Common Shares

RMR LLC

29DEC201620424230

As of September 30, 2016, ABP Trust owned 761,781 common shares of GOV (1.1% of
outstanding), 1,672,783 common shares of HPT (1.0% of outstanding), 1,483,898 common
shares of SIR (1.7% of outstanding) and 2,550,019 common shares of SNH (1.1% of
outstanding).

** As of September 30, 2016, ABP Trust owned 90,564 Class A Common Shares (0.6% of

Class A Common Shares outstanding). In addition, as of September 30, 2016, Adam Portnoy
and Barry Portnoy owned 20,438 and 29,783 Class A Common Shares, respectively (0.1% and
0.2% of Class A Common Shares outstanding, respectively).

†

Indirect economic interests in RMR LLC means, (i) in respect of holders of Class A Common
Shares, the economic interest of RMR Inc. in RMR LLC as the holder of an equivalent number
of class A membership units of RMR LLC and (ii) in respect of holders of Class B-1 Common
Shares, the economic interest of RMR Inc. in RMR LLC as the holder of an equivalent number
of class B membership units of RMR LLC. Indirect economic interests in RMR LLC are the
interests in RMR LLC owned by RMR Inc. and are subject to RMR Inc.’s liabilities including its
liabilities to ABP Trust under the Tax Receivable Agreement.

†† Direct economic interest means, (i) in respect of RMR Inc., the right of a holder of common
stock of RMR Inc. to share in dividends or distributions made by RMR Inc. to holders of its
common stock and, upon liquidation, dissolution or winding up of RMR Inc., to share in the
assets of RMR Inc. after payments to creditors and (ii) in respect of RMR LLC, the right of a
holder of a class A membership unit or class B membership unit of RMR LLC to share in
distributions made by RMR LLC and, upon liquidation, dissolution or winding up of RMR LLC, to
share in the assets of RMR LLC after payments to creditors.

The RMR LLC Operating Agreement

The operating agreement of RMR LLC, or the LLC Operating Agreement, governs the

operations of RMR LLC and the rights and obligations of its members. The material terms of
the LLC Operating Agreement are summarized below. The summary does not purport to be
complete and is subject to, and qualified in its entirety by, reference to the actual agreement, a copy
of which is incorporated by reference as an exhibit to this Annual Report on Form 10-K.

Governance

Through our status as the managing member of RMR LLC, we exercise control over RMR LLC
and are responsible for all operational and administrative decisions of RMR LLC and the day to day
management of RMR LLC’s business. No other members of RMR LLC, in their capacity as such,
have any authority or right to control the management of RMR LLC or to bind it in connection with
any matter, except that members of RMR LLC generally have voting rights in connection with (i) the
transfer by us of our managing member interest in RMR LLC, (ii) the dissolution of RMR LLC and
(iii) amendments to the LLC Operating Agreement. If RMR LLC proposes to engage in a material
transaction, including a merger, consolidation or sale of substantially all of its assets, we, as the
managing member of RMR LLC, have the power and authority to approve or prevent such a
transaction; provided, however, that we may not transfer all or any portion of our interest in
RMR LLC without the majority consent of the non-managing members of RMR LLC. Currently we
and ABP Trust are the only members of RMR LLC.

Distributions by RMR LLC to its members

Pursuant to the LLC Operating Agreement, we determine when distributions will be made to the

members of RMR LLC and the amount of any such distributions, except that RMR LLC is required
by the LLC Operating Agreement to make certain pro rata distributions to each member of RMR LLC
quarterly on the basis of the assumed tax liabilities of the members and in connection with a
dissolution of RMR LLC.

Members of RMR LLC, including us, incur U.S. federal, state and local income taxes on their

allocable share of any net taxable income of RMR LLC. Net profits and net losses of RMR LLC are
generally allocated to its members pro rata in accordance with the percentage interest of the units
they hold. In accordance with the LLC Operating Agreement, we cause RMR LLC to make cash
distributions to its members for purposes of funding their tax obligations in respect of the income of
RMR LLC that is allocated to them. Generally, these tax distributions are computed based on our

estimate of the net taxable income of RMR LLC allocable to the member multiplied by an assumed
tax rate equal to the highest effective marginal combined U.S. federal and state income tax rate
prescribed for an individual or corporation (taking into account the nondeductibility of certain
expenses and the character of our income). Additional amounts may be distributed by RMR LLC if
needed to meet our tax obligations and our obligations pursuant to the tax receivable agreement,
dated June 5, 2015, by and among RMR Inc., RMR LLC and ABP Trust, or the Tax Receivable
Agreement.

We are not permitted to cause RMR LLC to make distributions that would render it insolvent. All
distributions from RMR LLC are made to the members of RMR LLC pro rata in accordance with the
percentage economic interest of the units they hold.

Coordination of RMR Inc. and RMR LLC

Under the LLC Operating Agreement, RMR LLC is permitted to issue additional units from time
to time provided that they are substantially equivalent to additional equity securities issued from time
to time by us. RMR LLC is generally restricted from issuing additional units to us unless (i) (A) the
additional units are (x) class A membership units of RMR LLC, or Class A Units, issued in
connection with an issuance of our Class A Common Shares, (y) class B membership units of
RMR LLC, or Class B Units, issued in connection with an issuance of our class B-1 common stock
of RMR Inc., par value $0.001 per share, or Class B-1 Common Shares, or (z) units issued in
connection with an issuance of our equity securities where the units and equity securities being
issued have substantially the same rights (other than voting rights), restrictions, limitations as to
distributions, qualifications and terms and conditions of redemption, and (B) we contribute to
RMR LLC the cash proceeds or other consideration we receive (less amounts for which we are
permitted to be reimbursed under the LLC Operating Agreement), if any, in connection with the
issuance or (ii) the additional units are issued upon the conversion, redemption or exchange of debt,
units or other securities issued by RMR LLC.

At any time we issue any equity securities, we have agreed to contribute to RMR LLC the net

proceeds, if any, we receive in the connection with the issuance, less amounts (issuance costs,
underwriting discounts, etc.) for which we are permitted to be reimbursed under the LLC Operating
Agreement. In exchange for the contribution, RMR LLC has agreed to issue to us (i) in the case of
an issuance of Class A Common Shares, an equivalent number of Class A Units, (ii) in the case of
an issuance of Class B-1 Common Shares, an equivalent number of Class B Units or (iii) in the case
of an issuance of any other type of equity securities, an equivalent number of units of RMR LLC with
substantially the same rights (other than voting rights), restrictions, limitations as to distributions,
qualifications and terms and conditions of redemption.

Conversely, if we redeem or repurchase any of our equity securities, RMR LLC will, immediately

prior to the redemption or repurchase, redeem or repurchase, upon the same terms and for the
same price, an equal number of (i) in the case of a redemption or repurchase of Class A Common
Shares, Class A Units held by us, (ii) in the case of a redemption or repurchase of Class B-1
Common Shares, Class B Units held by us or (iii) in the case of a redemption or repurchase of any
other type of our equity securities, equity securities of RMR LLC held by us with substantially the
same rights (other than voting rights), restrictions, limitations as to distributions, qualifications and
terms and conditions of redemption, as the equity securities are redeemed or repurchased.

The LLC Operating Agreement restricts us and RMR LLC from subdividing or combining our or
its outstanding equity securities without the other making an identical subdivision or combination, as
the case may be, of its corresponding outstanding equity.

If, at any time, any of our equity securities are converted or exchanged into other equity

securities, in whole or in part, then a number of the corresponding membership units of LLC held by

us equal to the number of equity securities being so converted or exchanged shall automatically be
converted or exchanged, as the case may be, into that same number of membership units of LLC
that correspond to the number of equity securities issued in such conversion or exchange.

The Class A Units not held by us and our class B-2 common stock of RMR Inc., par value
$0.001 per share, or Class B-2 Common Shares, constitute ‘‘paired interests.’’ If RMR LLC issues
additional Class A Units to someone other than us, we have agreed to issue to that member an
equivalent number of our Class B-2 Common Shares. Each Class B-2 Common Share entitles the
holder to ten votes per share, and, accordingly, the issuance of additional Class B-2 Common
Shares would have a significant dilutive effect on the voting power of the then current holders of our
Class A Common Shares.

Redemption rights of holders of Class A Units

Holders of Class A Units, other than us, may cause RMR LLC to redeem their Class A Units for
Class A Common Shares on a one for one basis. At our option, we may elect to pay cash in lieu of
Class A Common Shares for some or all of such redeemed Class A Units; the amount of the
alternative cash payment will be based on the market price of the Class A Common Shares as
determined pursuant to the LLC Operating Agreement. For each Class A Unit redeemed, we will
automatically redeem the corresponding Class B-2 Common Share, comprising the ‘‘paired interest’’
for no additional consideration.

Transfers of membership units of RMR LLC

Membership units of RMR LLC are generally subject to restrictions on transfer in accordance

with the terms of the LLC Operating Agreement. Under the LLC Operating Agreement, we may not
transfer any of our membership units of RMR LLC without the majority consent of the non-managing
members of RMR LLC. Under the LLC Operating Agreement, Class A Units and Class B-2 Common
Shares comprising ‘‘paired interests’’ may be transferred to a permitted transferee, including our
Founders, qualified employees, the immediate family members of our Founders or qualified
employees, any of their respective lineal descendants or any entity controlled by ABP Trust or an
individual named above. In addition, Class A Units and Class B-2 Common Shares comprising
‘‘paired interests’’ may be transferred by the creation of certain security interests, by will or pursuant
to the laws of descent and distribution or in any transfer approved in advance by our Board of
Directors.

Indemnification and exculpation

Under the LLC Operating Agreement, RMR LLC has agreed to indemnify, to the maximum
extent permitted by Maryland law, the current or former members of RMR LLC, executive officers or
directors (or equivalent) of us or RMR LLC, and current or former executive officers or directors (or
equivalent) of us or RMR LLC serving at our request as an executive officer or director (or
equivalent) of another corporation, partnership, joint venture, limited liability company, trust or other
entity, except in respect of a matter for which (i) there has been a final and non-appealable
judgment entered by a court or arbitration panel of competent jurisdiction determining that, in respect
of the matter, the indemnified person actually received an improper benefit or profit in money,
property, or services or (ii) there has been a final, non-appealable judgment or adjudication adverse
to the person entered by a court or arbitration panel of competent jurisdiction in a proceeding based
on a finding in the proceeding, in respect of the matter, that the person’s action or failure to act, was
the result of active and deliberate dishonesty and was material to the cause of action adjudicated in
the proceeding.

Except as otherwise expressly provided in the LLC Operating Agreement or in any written
agreement, the LLC Operating Agreement provides that we, our affiliates and executive officers, the
tax matters partner of RMR LLC and the executive officers of RMR LLC will not be liable to
RMR LLC or to any non-managing member of RMR LLC for any act or omission performed or
omitted by or on behalf of (i) us, in our capacity as the sole managing member of RMR LLC, (ii) our
affiliate, in its, his or her capacity as such, (iii) the tax matters partner, in its capacity as such, or
(iv) an executive officer of RMR LLC, in his or her capacity as an officer of RMR LLC, except that
the limitation of liability will not apply to limit the liability of a person in respect of a matter if (a) there
has been a final, non-appealable judgment entered by a court or arbitration panel of competent
jurisdiction determining that, in respect of the matter, the person actually received an improper
benefit or profit in money, property, or services or (b) there has been a final, non-appealable
judgment or adjudication adverse to the person entered by a court or arbitration panel of competent
jurisdiction in a proceeding based on a finding in the proceeding, in respect of the matter, that the
person’s action or failure to act, was the result of active and deliberate dishonesty and was material
to the cause of action adjudicated in the proceeding.

Dissolution

RMR LLC may be dissolved only upon the occurrence of certain events specified in the LLC

Operating Agreement, including the approval of the managing member of RMR LLC and the
unanimous approval of the members of RMR LLC that then hold any units with voting rights.

Tax Receivable Agreement

Pursuant to the Up-C Transaction, we purchased Class A Units from ABP Trust. In the future,
additional Class A Units may be redeemed by ABP Trust for our Class A Common Shares or cash.
We expect that, as a result of both this initial purchase and any future redemptions of Class A Units
for our Class A Common Shares or cash, the tax basis of the assets of RMR LLC attributable to our
interests in RMR LLC will be increased. These increases in the tax basis of the assets of RMR LLC
attributable to our interests in RMR LLC would not have been available to us but for this initial
purchase and future redemptions of Class A Units for Class A Common Shares or cash. Such
increases in tax basis are likely to increase (for tax purposes) depreciation and amortization
deductions and therefore reduce the amount of income tax we would otherwise be required to pay in
the future. These increases in tax basis may also decrease gain (or increase loss) on future
dispositions of certain capital assets to the extent the increased tax basis is allocated to those
capital assets. The United States Internal Revenue Service, or IRS, may challenge all or part of
these tax basis increases, and a court might sustain such a challenge.

We and RMR LLC have entered into the Tax Receivable Agreement with ABP Trust, the
material terms of which are summarized below. This summary of the Tax Receivable Agreement
does not purport to be complete and is subject to, and qualified in its entirety by, reference to the
actual agreement, a copy of which is incorporated by reference as an exhibit to this Annual Report
on Form 10-K.

The Tax Receivable Agreement provides for the payment by us to ABP Trust of 85.0% of the
amount of cash savings, if any, in U.S. federal, state and local income tax or franchise tax that we
realize as a result of (a) the increases in tax basis attributable to our dealings with ABP Trust and
(b) tax benefits related to imputed interest deemed to be paid by us as a result of this Tax
Receivable Agreement. We expect to benefit from the remaining 15.0% of cash savings, if any, in
income tax that we realize. For purposes of the Tax Receivable Agreement, cash savings in income
tax will be computed by comparing our income tax liability to the amount of such taxes that we
would have been required to pay had there been no increase to the tax basis of the tangible and
intangible assets of RMR LLC as a result of our purchase of RMR LLC Class A Units and the future

redemptions, if any, and had we not entered into the Tax Receivable Agreement. The term of the
Tax Receivable Agreement commenced on June 5, 2015 and will continue until all such tax benefits
have been utilized or expired, unless the Tax Receivable Agreement is terminated upon a change of
control or upon certain breaches of the agreement that we fail to cure in accordance with the terms
of the agreement.

ABP Trust will not reimburse us for any payments made under the Tax Receivable Agreement.

As a result, in certain circumstances, we may make payments to ABP Trust under the Tax
Receivable Agreement in excess of our cash tax savings. While the amount and timing of any
payments under this agreement will vary depending upon a number of factors, including the timing of
redemptions, the price of our Class A Common Shares at the time of the redemption, the extent to
which such redemptions are taxable and the amount and timing of our income, we expect that, as a
result of the size of the increases of the tangible and intangible assets of RMR LLC attributable to
our interests in RMR LLC, during the expected term of the Tax Receivable Agreement, the payments
that we may make to ABP Trust could be substantial. Payments made under the Tax Receivable
Agreement are required to be made within 80 days of the filing of our tax returns. Because we
generally expect to receive the tax savings prior to making the cash payments to the redeeming
holders of Class A Units, we do not expect the cash payments to have a material impact on our
liquidity.

The Tax Receivable Agreement provides that, upon certain changes of control and certain
breaches of the agreement that we fail to cure in accordance with the terms of the agreement, our
obligations with respect to exchangeable Class A Units will be accelerated. In those circumstances,
our obligations under the Tax Receivable Agreement would be based on certain assumptions,
including that we would have sufficient taxable income to fully utilize the deductions arising from the
increased tax deductions and tax basis and other benefits described in the Tax Receivable
Agreement, and that any Class A Units that have not been redeemed will be deemed redeemed for
the market value of our Class A Common Shares at the time of the change of control or breach, as
applicable. It is possible, in these circumstances, that the cash tax savings realized by us may be
significantly less than the corresponding Tax Receivable Agreement payments.

Regulation

We and our Client Companies are subject to supervision and regulation by state, federal and
non-U.S. governmental authorities and are subject to various laws and judicial and administrative
decisions imposing various requirements and restrictions upon the ways in which we and our Client
Companies do business including various requirements for public disclosure of our and their
activities.

The Managed REITs have qualified and expect to continue to qualify to be taxed as real estate

investment trusts under Sections 856 through 860 of the Internal Revenue Code of 1986, as
amended, or the Code. In addition, the Managed REITs generally distribute 100.0% of their taxable
income to avoid paying corporate federal income taxes; and as REITs, such companies must
currently distribute, at a minimum, an amount equal to 90.0% of their taxable income. REITs are
also subject to a number of organizational and operational requirements in order to elect and
maintain REIT status, including share ownership tests and assets and gross income composition
tests. If a Managed REIT fails to continue to qualify as a REIT under Sections 856 through 860 of
the Code in any taxable year, it will be subject to federal income tax (including any applicable
alternative minimum tax) on its taxable income at regular corporate tax rates. Even if a Managed
REIT qualifies for taxation as a REIT, it may be subject to state and local income taxes and to
federal income tax and excise tax on its undistributed income.

Certain of our Client Companies own or operate healthcare and senior living properties. These
companies are subject to numerous federal, state and local laws and regulation that are subject to
frequent and material changes (sometimes applied retroactively) resulting from legislation, adoption
of rules and regulations and administrative and judicial interpretations of existing laws. Some of the
revenues received by these companies are paid by governmental programs which are also subject
to periodic and material changes.

Certain of our Client Companies own and operate hotels and some provide dining, food and
beverage services, including the sale of alcoholic beverages. The operation of such properties is
subject to numerous regulations by various governmental entities.

TA is also required to comply with federal and state regulations regarding the storage and sale
of petroleum and natural gas products and franchising of petroleum retailers. In addition, as a result
of TA’s involvement in gaming operations, TA and certain of its subsidiaries are subject to gaming
regulations in Illinois, Louisiana, Montana and Nevada; and because HPT owns TA properties where
gaming occurs, HPT is also subject to gaming regulations in some of those jurisdictions.

RMR Advisors and Tremont Advisors are each registered with the SEC as investment advisers

under the Investment Advisers Act of 1940, as amended, or the Investment Advisers Act. RMR
Advisors provides investment advisory and administrative services to RIF. RIF is a closed end
investment company registered under the Investment Company Act of 1940, as amended, or the
Investment Company Act. Tremont Advisors provides investment advisory services to private funds
and separately managed accounts that principally make commercial real estate debt investments.
The Tremont business may also act as transaction originators for its non-investment advisory clients.
These activities result in certain aspects of our asset management business being supervised by the
SEC and requires our compliance with numerous obligations, including record keeping requirements,
operational procedures and disclosure obligations.

The ownership and operation of real estate properties are subject to various federal, state and

local laws and regulations concerning the protection of the environment, including air and water
quality, hazardous or toxic substances and health and safety. Certain of our Client Companies own
real estate, and we may be responsible for compliance with some of these environmental protection
laws.

Each of the Managed REITs, Five Star, TA and ABP Trust are shareholders of, and participate

in a combined property insurance program through, AIC. We provide certain management and
administrative services to AIC and we and AIC are subject to insurance regulations in Indiana.

While we incur significant expense to comply with the various regulations to which we and our
Client Companies are subject, we do not believe that existing statutes and regulations have had a
material adverse effect on our business. However, it is not possible to forecast the nature of future
legislation, regulations, judicial decisions, orders or interpretations, nor their impact upon our future
business, financial condition, results of operations or prospects.

Competition

Our growth will depend upon our ability to manage or assist the growth of our Client Companies

and our ability to expand our services to new clients. The Managed REITs compete on a national
and regional basis with many third parties engaged in real estate investment activities including other
publicly traded REITs, non-traded REITs, insurance companies, commercial and investment banking
firms, private institutional funds, hedge funds, private equity funds and other investors. Five Star
competes with numerous other companies that provide senior living services, including home
healthcare companies and other real estate based service providers. Sonesta competes with other
hotel operators and franchisors. TA competes on a national and local basis with companies

operating travel centers, as well as retailers operating in the convenience store and retail gas station
industries. RMR Advisors competes with other mutual fund managers. We compete with other
businesses in the real estate management and asset management businesses. The Tremont
business competes with banks, commercial mortgage backed securities originators, private equity
funds and other sources of commercial mortgage backed lending. Many of these competitors may
have greater financial, technical, marketing and other resources than we or our Client Companies
have. Such competitors may also enjoy significant competitive advantages that result from, among
other things, a lower cost of capital, greater business scale and enhanced operating efficiencies.
Certain competitors may also be subject to different regulatory regimes or rules that may allow them
more flexibility or better access to pursue potential investments and raise capital for themselves or
their managed companies. In addition, certain competitors may have higher risk tolerance, different
risk assessments or lower return thresholds, which could allow them to consider a broader range of
investments and to bid more aggressively for investment opportunities than we or our Client
Companies. Our ability and the ability of our Client Companies to continue to compete effectively will
depend in large part upon the ability to attract, retain and motivate employees, and we and they
regularly must compete with other companies to attract and retain employees.

Employees

As of September 30, 2016, RMR LLC employed over 450 real estate professionals in more than

30 offices throughout the United States, and the companies managed by RMR LLC collectively had
over 52,000 employees. None of our employees are subject to collective bargaining agreements, but
certain employees of our Client Companies are.

Internet Website

Our internet website address is www.rmrgroup.com. We make available, free of charge, on our

website, our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on
Form 8-K and amendments to these reports filed or furnished pursuant to Section 13(a) or 15(d) of
the Securities Exchange Act of 1934, as amended, or the Exchange Act, as soon as reasonably
practicable after these forms are filed with, or furnished to, the SEC. The information on or
accessible through our website is not incorporated by reference into this Annual Report on
Form 10-K.

Emerging Growth Company Status

We are an ‘‘emerging growth company,’’ as defined in the Jumpstart Our Business Startups Act
of 2012, or the JOBS Act, and we are eligible to take advantage of certain exemptions from various
reporting requirements that are applicable to other public companies that are not ‘‘emerging growth
companies.’’ These exemptions include not being required to comply with the auditor attestation
requirements of Section 404 of the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, reduced
disclosure obligations regarding executive compensation in our periodic reports and proxy
statements and exemptions from the requirements of holding a nonbinding advisory vote on
executive compensation and shareholder approval of any golden parachute payments not previously
approved.

We expect to take advantage of some or all of the reduced regulatory and reporting

requirements that will be available to us as long as we qualify as an emerging growth company,
including the extension of time to comply with new or revised financial accounting standards
available under Section 102(b) of the JOBS Act.

We will, in general, remain as an emerging growth company up to September 30, 2021. We
would cease to be an emerging growth company and, therefore, become ineligible to rely on the
above exemptions, if we:

• have more than $1.0 billion in annual revenue in a fiscal year;

• issue more than $1.0 billion of non-convertible debt during the preceding three year period; or

• become a ‘‘large accelerated filer’’ as defined in Rule 12b-2 promulgated under the Exchange

Act, which would occur after: (i) we have filed at least one annual report pursuant to the
Exchange Act; (ii) we have been a company reporting with the SEC for at least 12 months;
and (iii) the market value of our common shares that are held by non-affiliates equals or
exceeds $700.0 million as of the last business day of our most recently completed second
fiscal quarter.

Item 1A. Risk Factors

Our business is subject to a number of risks and uncertainties. Prospective investors should
carefully consider the risks described below, together with all of the other information in this Annual
Report on Form 10-K. The risks described below may not be the only risks we face but are risks we
believe may be material at this time. Additional risks that we do not yet know of, or that we currently
think are immaterial, may also impair our business operations or financial results. If any of the
events or circumstances described below occurs, our business, financial condition or results of
operations and the trading price of our securities could decline. Investors and prospective investors
should consider the following risks and the information contained under the heading ‘‘Warning
Concerning Forward Looking Statements’’ before deciding whether to invest in our securities.

Risks Related to Our Business

Substantially all of our revenues are derived from the provision of business and property
management services to our Client Companies. The loss or failure, or decline in business or
assets, of any of the Managed REITs or Managed Operators, or a decline in the market
capitalization of any of the Managed REITs, could substantially reduce our revenues.

The fees paid to us by our Client Companies comprise substantially all our revenues. For the
fiscal year ended September 30, 2016, the percentages of our total revenues earned from each of
our Client Companies was as follows: GOV (12.0%), HPT (38.1%), SIR (15.9%), SNH (21.9%), Five
Star (3.5%), Sonesta (0.8%), TA (5.6%), AIC (0.1%), RIF (0.9%), ABP Trust (1.1%) and the clients
of the Tremont business (0.1%). Therefore, our ability to maintain and grow our revenues depends
upon the ability of our Client Companies to maintain and grow their respective businesses. Reduced
business activities by, or failure of, any of the Managed REITs or certain of our Managed Operators
or the termination of their management agreements with us would materially reduce our revenues
and our profitability.

Our revenues depend in large part on the ability of our Client Companies to raise capital to
invest in real estate assets or their other respective businesses and on the positive performance of
the investments or businesses of our Client Companies, which are subject to a number of risks and
uncertainties. See ‘‘—Risks Related to the Businesses of our Client Companies.’’ Our business
management agreement with each Managed REIT provides for a base management fee which is
based on the lesser of the historical costs of the Managed REIT’s assets under management or its
total market capitalization, as calculated in accordance with the applicable business management
agreement, and an incentive management fee which is based on the Managed REIT’s relative
outperformance of a specified REIT total shareholder return index. As a result, the management fees
we earn from a Managed REIT may increase or decrease as the Managed REIT acquires or
disposes of real estate assets or its market capitalization increases or decreases. Further, our ability
to earn incentive fees under our agreements with the Managed REITs will be primarily driven by
their outperformance as compared with their respective peers, based on total stockholder return. The
shareholder returns realized by a Managed REIT, its market capitalization and its ability to raise
capital or make investments may be impacted by trends in the Managed REIT’s portfolio, the U.S.
real estate industry generally, the Managed REIT’s industry specifically or other factors which are
outside of our or its control. A severe or sustained decline in the market capitalization or business of
a Managed REIT could significantly decrease the fees we earn from that Managed REIT. Similarly,
the fees under our management agreements with the Managed Operators are based on a
percentage of revenues (in the case of TA, gross fuel margin and nonfuel revenues) earned by
them. A material decline in the revenues of the Managed Operators may materially reduce our
revenues. There can also be no assurance that we will maintain the level of revenues we have
earned in the past under our management agreements and advisory agreements with our Client

Companies or that the amount of fees we receive will increase. It is possible that the revenues we
earn will fluctuate significantly or materially decline.

Rising market interest rates may significantly reduce our revenues.

Since the most recent recession, the U.S. Federal Reserve has taken actions which have
resulted in low interest rates prevailing in the marketplace for a historically long period of time, and
since the beginning of that recession, it had not raised its benchmark interest rate until December
2015. The U.S. Federal Reserve indicated in November 2016 that the case for an increase in the
federal funds rate has continued to strengthen but decided, for the time being, to wait for some
further evidence to support such an increase. Further, recent market activity reflects an expectation
that the policies that may be pursued by the new U.S. President and his administration will result in
increased inflation and interest rates. Any increase or increases in market interest rates may
materially and negatively affect us. One of the factors that investors typically consider important in
deciding whether to buy or sell the common shares of our Managed REITs and which they may
consider important in deciding whether to buy or sell our Class A Common Shares is the distribution
rate with respect to such shares relative to prevailing market interest rates. If market interest rates
go up, investors may expect a higher distribution rate before investing in our Class A Common
Shares or in a Managed REIT or may sell our Class A Common Shares or the Managed REITs’
common shares and seek alternate investments with a higher distribution rate. Sales of our Class A
Common Shares may cause the market value of such shares to decline. Sales of common shares of
the Managed REITs may cause a decline in the market prices of such shares which reduces the
market capitalizations and total shareholder returns of the Managed REITs, which, in turn, may
materially reduce the fees we earn under our business management agreements with them.
Moreover, an increase in interest rates could raise borrowing costs for our Client Companies,
negatively impact their access to capital to fund future growth and reduce their total shareholder
returns, which may materially reduce the fees we earn under our business management agreements
with them.

Our management agreements with our Client Companies are subject to termination, and any
such termination could have a material adverse effect on our business, results of operations
and financial condition.

Our management agreements with our Client Companies may be terminated by a Client

Company or by us in certain circumstances. Depending upon the circumstances of a termination, we
may or may not be entitled to receive a termination fee. If any of our management agreements with
a Client Company is terminated, we may be unable to replace the lost revenue. Even if we receive a
termination fee upon the termination of a management agreement with a Client Company, we may
be unable to invest the after tax proceeds of the termination fee we receive to replace the lost
revenues. The termination of our management agreements with any of our Client Companies could
have a material adverse impact on our business, results of operations and financial condition.

The commercial real estate industry has been and may continue to be adversely affected by
economic conditions in the United States generally.

Our business and operations are significantly dependent on conditions in the commercial real

estate industry, which in turn is impacted by general economic conditions in the United States.
Commercial real estate markets in the United States were significantly negatively impacted during
the recent recession. Although commercial real estate markets have improved, with valuations
approaching, and in some cases exceeding, 2007 levels, new challenges have arisen, including
uncertain U.S. Federal Reserve policy regarding the timing and amount of future increases in
interest rates and increasing real estate development activities. Adverse conditions in the

commercial real estate industry could harm our business and financial condition by limiting our and
our Client Companies’ access to debt and equity capital and our and their ability to grow our and
their businesses. If we do not increase the number of clients to which we provide services or if our
Client Companies do not grow their businesses, our income may not grow and it may decline.

The asset management business is highly competitive.

Our business is highly competitive and our success will be determined by a variety of factors,

including, without limitation, the following:

• other asset managers may have greater financial, technical, marketing and other resources

and more personnel than our Client Companies and we do;

• our Client Companies may not perform as well as other companies, including companies

managed by other asset managers;

• other asset managers and the companies that compete with our Client Companies may have
access to more capital or access to capital at lower costs than our Client Companies and we
do;

• other asset managers and the companies that compete with the Client Companies may have
higher risk tolerance, different risk assessment or a lower return threshold, which could allow
them to acquire a wider variety of assets and a broader range of investments and as a result
we and our Client Companies may grow our business less and more slowly than those
competitors;

• there are few barriers to entry into the asset management business, and new entrants will

result in increased competition;

• other asset managers may have more scalable platforms and may operate more efficiently

than we do;

• other asset managers may have better brand recognition than we have; and

• our competitors may from time to time recruit our employees away from us.

If we fail to compete effectively, our business, results of operations and financial condition may be
materially adversely impacted.

Significant legal proceedings may adversely affect our results of operations or financial
condition.

We and our clients are subject to the risk of litigation, derivative claims, securities class actions,

regulatory and governmental investigations and other litigation including proceedings arising from
investor dissatisfaction with the performance of our clients and our clients’ relationships with us and
amongst themselves. If any claims were brought against us and resulted in a finding of substantial
legal liability, the finding could materially adversely affect our business, financial condition or results
of operations or cause significant reputational harm to us, which could seriously adversely impact
our business. Allegations of improper conduct by private litigants or regulators, regardless of
veracity, may harm our reputation and adversely impact the ability of our Client Companies and us
to grow our respective businesses.

If we cannot retain and motivate our key personnel and recruit, retain and motivate new key
personnel, our business, results and financial condition could be adversely affected.

Our continued success depends to a great extent on our ability to retain and motivate our
Founders and other key personnel and strategically to recruit, retain and motivate new talented

personnel. However, we may not be successful in these efforts as the market for qualified
employees in the asset management industry is extremely competitive. Historically we have not had
employment agreements with our key employees and we have no present intention to enter into any.
Our ability to recruit, retain and motivate our personnel is dependent on our ability to offer attractive
compensation. There can be no assurance that we will have sufficient cash available to continue to
offer our employees attractive compensation. In addition, we or our Client Companies may be
unwilling to grant our employees significant equity awards in our business, and the value of any
equity awards they receive may be lower than anticipated. Also, in order to recruit and retain existing
and future personnel, we may need to increase the level of compensation that we pay to them,
which may cause a higher amount of our revenue to be paid out in the form of compensation, which
may have an adverse impact on our profits.

We depend on our Founders and other key personnel.

We depend on the efforts, skills, reputations and business contacts of our Founders and other

key personnel. The extent and nature of the experience of our executive officers and of the
relationships they have with real estate professionals and financial institutions, although not a
guarantee of positive results, are critical to the success of our business. The loss of the services of
any of them could have a material adverse effect on our revenues, net income and cash flows and
could impair our ability to maintain or grow assets under management in our Client Companies or
otherwise maintain or grow our business.

We are subject to substantial regulation and numerous contractual obligations and internal
policies, and failure to comply with these provisions could have a material adverse effect on
our business, financial condition and results of operations.

We are subject to substantial regulation and numerous contractual obligations and internal
policies. We are subject to regulation by the SEC, The Nasdaq Stock Market LLC, or Nasdaq, and
other federal, state and local or international governmental bodies and agencies or self-regulatory
organizations. Moreover, RMR Advisors and Tremont Advisors must comply with the Investment
Advisers Act. We are also responsible for managing or assisting the regulatory aspects of certain of
our Client Companies, including compliance with applicable REIT rules and, in the case of RIF, the
Investment Company Act. The level of regulation and supervision to which we are subject varies
from jurisdiction to jurisdiction and is based on the type of business activity involved. These
regulations are extensive, complex and require substantial management time and attention. Our
failure to comply with any of the regulations, contractual obligations or policies may subject us to
extensive investigations, as well as substantial penalties and reputational risk, and our business and
operations could be materially adversely affected.

Our lack of compliance with applicable law could result in, among other things, our inability to
enforce contracts, our default under contracts (including our management agreements with our Client
Companies) and our ineligibility to contract with, and receive revenue from, governmental authorities
and agencies, our Client Companies or other third parties. We have numerous contractual
obligations with which we must comply on a continuous basis to operate our business, the default of
which could have a material adverse effect on our business and financial condition. We have
established internal policies designed to ensure that we manage our business in accordance with
applicable law and regulation and in accordance with our contractual obligations. These internal
policies may not be effective in all regards; and, if we fail to comply with our internal policies, we
could be subjected to additional risk and liability.

We rely on information technology in our operations, and any material failure, inadequacy,
interruption or security failure of that technology could harm our business.

We rely on information technology networks and systems, including the Internet, to process,

transmit and store electronic information and to manage or support a variety of our business
processes, including financial transactions and maintenance of records, which may include personal
identifying information of employees and tenants and lease data.

We rely on commercially available systems, software, tools and monitoring to provide security
for processing, transmitting and storing confidential tenant, customer and vendor information, such
as individually identifiable information relating to financial accounts. Although we take various actions
to protect the security of the data maintained in our information systems, it is possible that our
security measures will not prevent the systems’ improper functioning, or the improper disclosure of
personally identifiable information such as in the event of cyber attacks. Security breaches, including
physical or electronic break-ins, computer viruses, attacks by hackers and similar breaches, can
create system disruptions, shutdowns or unauthorized disclosure of confidential information. Any
failure to maintain proper function, security and availability of our information systems could interrupt
our operations, damage our reputation, subject us to liability claims or regulatory penalties and could
materially and adversely affect us.

Two of our subsidiaries, RMR Advisors and Tremont Advisors, are registered with the SEC as
investment advisers under the Investment Advisers Act. Compliance with laws and
regulations applicable to registered investment advisers is complex and the failure of these
subsidiaries to do so may adversely impact our business.

Our subsidiaries, RMR Advisors and Tremont Advisors, are registered with the SEC as
investment advisers under the Investment Advisers Act. The Investment Advisers Act requires
registered investment advisers to comply with numerous obligations, including compliance, record
keeping, operating and marketing requirements, disclosure obligations and limitations on certain
activities. Investment advisers also may owe fiduciary duties to certain of their clients. These
regulatory and fiduciary obligations may result in increased costs or otherwise adversely impact our
business. If RMR Advisors or Tremont Advisors fails to meet its respective compliance and fiduciary
obligations under the Investment Advisers Act, it may be subject to litigation, regulatory
investigations and enforcement actions, fines and penalties, or it may be unable or no longer
permitted to provide investment advisory services to its clients, which would reduce our revenues.

Employee misconduct could harm us by subjecting us to significant legal liability,
reputational harm and loss of business.

There is a risk that our employees could engage in misconduct that adversely affects our
business. We are subject to a number of obligations and standards arising from our business and
our authority over the companies and assets we manage. The violation of these obligations and
standards by any of our employees may adversely affect our clients and us. Our business often
requires that we deal with confidential matters of great significance to our clients. If our employees
improperly use or disclose confidential information, we and the concerned client could suffer serious
harm to our and its reputation, financial position and current and future business relationships, as
well as face potentially significant litigation. It is not always possible to detect or deter employee
misconduct, and the precautions we take to detect and prevent this activity may not be effective in
all cases. If any of our employees were to engage in misconduct or were to be accused of such
misconduct, our business and our reputation could be adversely affected, and such conduct might
rise to the level of a default that would permit a Client Company to terminate its management
agreements or advisory agreements with us for cause and without paying us a termination fee,
which could materially adversely affect our business, results of operations and financial condition.

RMR LLC’s required quarterly tax distributions and payments under our Tax Receivable
Agreement with ABP Trust may limit our ability to implement our business or pursue growth
opportunities.

The LLC Operating Agreement requires RMR LLC to make certain pro rata distributions to each
member of RMR LLC, including RMR Inc., quarterly on the basis of the assumed tax liabilities of the
members and our Tax Receivable Agreement with ABP Trust requires that RMR Inc. pay to ABP
Trust 85.0% of the amount of cash savings, if any, in U.S. federal, state and local income tax or
franchise tax that RMR Inc. realizes as a result of (a) the increases in tax basis attributable to
RMR Inc.’s dealings with ABP Trust and (b) tax benefits related to imputed interest deemed to be
paid by RMR Inc. as a result of the tax receivable agreement. From time to time, RMR LLC’s cash
flows from operations may be insufficient to enable it to make required minimum tax distributions to
its members and payments due under the Tax Receivable Agreement. RMR LLC may have to
borrow funds or sell assets, and thereby materially adversely affect our liquidity and financial
condition. Further, by making cash distributions and payments under the Tax Receivable Agreement
rather than investing that cash in our businesses, we might risk slowing the pace of our growth, or
not having a sufficient amount of cash to fund our operations, new investments or unanticipated
capital expenditures, should the need arise. In such event, we may not be able to implement our
business and growth strategy to the extent intended. In addition, we may have to borrow additional
amounts to fund our operations or make capital expenditures, in which case our borrowing costs
would increase and our liquidity would be negatively impacted.

Risks Related to the Businesses of our Client Companies

Risks associated with our Client Companies’ businesses generally could adversely affect
their respective abilities to grow, generate revenue and pay management fees to us and,
thereby, adversely affect our business.

We have presented in this Annual Report on Form 10-K historical fees that we have earned
from our clients. The historical fees earned from our clients, including those presented in this Annual
Report on Form 10-K, should not be considered as indicative of the future results of our Client
Companies or of our future results. The risks associated with each of the Client Companies’
businesses could adversely affect its ability to carry out its business plans and objectives, and, as a
result, could adversely impact its ability to pay us our management fees or cause the amounts of
those fees to decline. We may experience difficulty sustainably replacing the revenue we lost when
our management agreements with Equity Commonwealth, or EQC, were terminated. For more
information see ‘‘Management’s Discussion and Analysis of Financial Condition and Results of
Operations—Overview—EQC.’’

Risks to our Client Companies include, but are not limited to, the following:

• the Managed REITs face competition for tenants at substantially all of their properties and

competing properties may be more attractive to tenants;

• our Client Companies face significant competition for investment opportunities from other real
estate investors, some of which have greater financial resources, including publicly traded
REITs, non-traded REITs, insurance companies, banking firms, private institutional funds,
hedge funds, private equity funds and other investors;

• rising interest rates may increase operating costs, reduce the value of properties and make

raising capital difficult for our Client Companies;

• changing general economic and financial market conditions could significantly reduce the
value of the real estate and other investments of our Client Companies and reduce the
amounts earned on those investments;

• changes in investor preferences or market conditions could limit our Client Companies’ ability
to raise capital to properly maintain their properties and operations or make new investments;

• shareholder activism, complaints about management strategies and structures, corporate
governance and other matters may divert management attention and be disruptive to the
operation of our Client Companies;

• changes in tax laws, regulation or accounting rules may make certain types of investments by

our Client Companies less valuable;

• our Client Companies are exposed to environmental, building and other laws, natural

disasters and other factors beyond their control as a result of their ownership of real estate;

• our Client Companies have significant investments in certain types of assets, such as hotels,
senior living communities, healthcare properties, travel centers and convenience stores, and
market changes which impact these specific types of assets (e.g., new competition for short
term accommodations, changes in Medicare and Medicaid rates and fuel efficiency
improvements) may adversely impact certain of the Client Companies’ ability to maintain or
grow their business;

• a Managed REIT’s failure to continue to qualify as a REIT would subject it to federal income
tax and reduce cash available for distributions to its shareholders, adversely impacting its
ability to raise capital and operate its business; and

• complying with REIT requirements may cause the Managed REITs to forego otherwise

attractive opportunities or liquidate otherwise attractive investments.

Some of our Client Companies are SEC registrants and file reports with the SEC as required by

the Exchange Act. A discussion of the businesses and the risks associated with the businesses of
our Client Companies that are SEC registrants is disclosed in the reports filed by our Client
Companies, including in the section captioned ‘‘Risk Factors’’ in each of the Managed REITs’, Five
Star’s and TA’s annual reports on Form 10-K for the year ended December 31, 2015 and RIF’s
applicable filings with the SEC. Copies of these reports are available at the SEC’s website,
www.sec.gov.

A competitor of Five Star and SNH has submitted a purported nomination of an individual

for election as a Five Star director at Five Star’s 2017 annual meeting of stockholders, which
may distract Five Star’s management, create uncertainty and have other effects which may
adversely affect its business and us.

William F. Thomas and Robert D. Thomas, or together, the Thomas Brothers, who have

reported beneficial ownership of 6.3% of Five Star’s common stock and own a business which
competes with Five Star and SNH, submitted a purported nomination of a candidate for election as a
Five Star director at Five Star’s 2017 annual meeting of stockholders. In the past, the Thomas
Brothers have sought to acquire some of Five Star’s senior living communities. The Thomas
Brothers’ actions may create uncertainties as to Five Star’s future business plans, distract Five Star’s
management and create an environment conducive to litigation that gives rise to significant legal
costs.

Risks Related to Our Securities

A trading market that provides adequate liquidity may not be sustained for our Class A
Common Shares and the market price of our Class A Common Shares may fluctuate widely.

The majority of the securities representing the economic interest in our business are currently
held by ABP Trust and the Managed REITs and have not been registered for public sale. Our public

float represents only about 23.0% of the economic interest in RMR LLC, which may adversely
impact trading in our Class A Common Shares. There can be no assurance that an active trading
market for our Class A Common Shares will be sustained in the future.

The market price of our Class A Common Shares may fluctuate widely, depending upon many

factors, some of which are beyond our control, including, but not limited to, the following:

• a relatively thin trading market for our Class A Common Shares could cause trades of small
blocks of shares to have a significant impact on the price of our Class A Common Shares;

• our quarterly or annual earnings, or those of other comparable companies;

• actual or anticipated fluctuations in our operating results;

• changes in accounting standards, policies, guidance, interpretations or principles;

• announcements by us, our Client Companies or our competitors of significant investments,

acquisitions or dispositions;

• the failure of securities analysts to cover our Class A Common Shares;

• changes in earnings estimates by securities analysts or in our ability to meet those estimates;

• the operating and stock price performance of other comparable companies;

• overall market fluctuations; and

• general economic conditions.

Stock markets in general often experience volatility that is unrelated to the operating

performance of a particular company. These broad market fluctuations may adversely affect the
trading price of our Class A Common Shares. Our shareholders may not be able to resell their
Class A Common Shares following periods of volatility because of the market’s adverse reaction to
volatility.

The reduced disclosure requirements applicable to us as an ‘‘emerging growth company’’
may make our Class A Common Shares less attractive to investors.

We are an ‘‘emerging growth company’’ as defined in the JOBS Act, and we may avail

ourselves of certain exemptions from various reporting requirements of public companies that are not
‘‘emerging growth companies,’’ including, but not limited to, an exemption from complying with the
auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act reduced disclosure
obligations regarding executive compensation in our periodic reports and proxy statements and
exemptions from the requirement of holding a nonbinding advisory vote on executive compensation
and shareholder approval of any golden parachute payments not previously approved. We may
remain an emerging growth company until September 30, 2021. If some investors find our Class A
Common Shares less attractive as a result of the exemptions available to us as an emerging growth
company, there may be a less active trading market for our Class A Common Shares, and the
trading price of our Class A Common Shares may be more volatile than that of an otherwise
comparable company that does not avail itself of the same or similar exemptions. We cannot predict
if investors will find our Class A Common Shares less attractive because we rely on the JOBS Act
exemptions.

Section 102(b)(1) of the JOBS Act exempts emerging growth companies from compliance with
new or revised financial accounting standards until private companies (that is, those that have not
had a registration statement under the Securities Act declared effective or do not have a class of
securities registered under the Exchange Act) are required to comply with the new or revised
financial accounting standards. We have elected not to opt out of the extended transition period,

which means that when a financial accounting standard is issued or revised and it has different
application dates for public and private companies, as an emerging growth company, we can adopt
the new or revised standard at the time private companies adopt the new or revised standard. This
transition period may make comparison of our financial statements with those of another public
company which either is not an emerging growth company or is an emerging growth company which
has opted out of using the extended transition period difficult or impossible because of the potential
differences in accounting standards used.

Our shareholders’ percentage ownership in us may be diluted in the future.

Our shareholders’ percentage ownership in us may be diluted in the future because of our future

issuance of equity or equity linked securities and our grant of equity awards to our directors,
executive officers and employees.

Our dividend policy is subject to change.

RMR Inc. currently plans to pay a regular quarterly cash dividend equal to $0.25 per share
($1.00 per share per year) to holders of its Class A Common Shares. However, the amount of
distributions RMR LLC may make in the future is not certain, and there is no assurance that future
distributions will be made. The declaration and payment of dividends to our shareholders will be at
the discretion of our Board of Directors, which may change the distribution policy or discontinue the
payment of dividends at any time. Any change in our dividend policy could have a material adverse
effect on the market price of our Class A Common Shares.

Risks Related to Our Relationships with Our Founders and Our Client Companies

Our Founders control our voting power, and our other shareholders will have less influence
over our business than shareholders of most other publicly owned companies.

Substantially all of the voting power in RMR Inc. and a majority of the economic interest in

RMR LLC is held by ABP Trust, an entity owned by our Founders. Our Founders and ABP Trust
hold a combined 51.9% direct and indirect economic interest in RMR LLC and control 91.5% of
RMR Inc.’s voting power through their beneficial ownership of all of our outstanding Class B-1 and
Class B-2 Common Shares, which entitle holders to ten votes per share. See ‘‘Business—Our
Organizational Structure.’’ RMR Inc. serves as the managing member of RMR LLC. Accordingly, our
Founders, through ABP Trust, hold majority control of RMR Inc.’s voting power and thereby control
RMR LLC.

As a result of their voting control, our Founders and ABP Trust are effectively able to determine

the outcome of all matters requiring shareholder approval, including, but not limited to, election of
our directors. Our Founders and ABP Trust are also able to cause or prevent a change of control of
RMR Inc., and this voting control could preclude any unsolicited acquisition of RMR Inc. The voting
control of our Founders and ABP Trust could deprive our shareholders of an opportunity to receive a
premium for their Class A Common Shares as part of a sale of us and may affect the market price
of our Class A Common Shares.

Our management agreements with the Managed REITs may discourage our change of control.

Each Managed REIT may terminate its management agreements with us if we experience a
change of control, as defined in those agreements, without payment of any termination fee. We may
be unable to duplicate the long term management arrangements we have with each of the Managed
REITs. For these reasons, the management agreements may discourage a change of control of us,
including a change of control which might result in payment of a premium for our Class A Common
Shares.

The registration of two of our subsidiaries under the Investment Advisers Act may
discourage our change of control.

Two of our subsidiaries, RMR Advisors and Tremont Advisors, are registered as investment
advisers under the Investment Advisers Act. Any change in control of RMR Advisors or Tremont
Advisors, as defined in and interpreted pursuant to the Investment Advisers Act, would trigger a
shareholder approval right by RIF shareholders, or other advisory clients of RMR Advisors or
Tremont Advisors as applicable, under that Act. The need for such approval may discourage a
change of control of us, including a change of control which might result in payment of a premium
for our Class A Common Shares.

ABP Trust’s and the Managed REITs’ ability to sell their respective ownership stakes in us
and speculation about such possible sales may adversely affect the market price of our
Class A Common Shares.

ABP Trust and the Managed REITs are not prohibited from selling some or all of our shares and

may do so without approval by other shareholders of RMR Inc. ABP Trust also has the right to
redeem its Class A Units for Class A Common Shares, for which we expect there will be a public
market, or we may elect to pay cash instead of issuing more common shares. Speculation by the
press, stock analysts, our shareholders or others regarding ABP Trust’s or any Managed REIT’s
intention to dispose of our shares could adversely affect the market price of our Class A Common
Shares. As long as a significant portion of our ownership is not trading in the public markets, the
market price of our Class A Common Shares may be adversely impacted. Accordingly, our Class A
Common Shares may be worth less than they would be if the Class A Common Shares owned by
ABP Trust or the Managed REITs or which ABP Trust has a right to acquire were trading in the
public markets.

The Up-C Transaction and the agreements entered into as part of the Up-C Transaction are
among related parties, which increases the risk of allegations of conflicts of interest, and
such allegations may impair our ability to realize the benefits we expect from the Up-C
Transaction.

Because of the relationships among us, our Founders and the Managed REITs, including that

our Founders are the managing trustees of each Managed REIT and are our controlling
shareholders, the executive officers of the Managed REITs are our officers and employees and we
provide management services to the Managed REITs, the Up-C Transaction and the agreements
entered into as part of the Up-C Transaction, including the amendment and extension of the
management agreements to 20 year terms, are among related parties. When our Founders
presented a proposal to the respective boards of trustees of the Managed REITs for a transaction
that led to the Up-C Transaction, the board of trustees of each Managed REIT formed a special
committee comprised of its independent trustees and a joint special committee comprised of the
independent trustees of the Managed REITs to evaluate and respond to the proposal. The joint
special committee was advised by counsel and a financial advisor, and the special committee of
each Managed REIT was also advised by a separate financial advisor to assist in evaluating the
proposal. The Up-C Transaction was unanimously recommended by the joint special committee and
approved by the special committee of each Managed REIT. Nonetheless, the Up-C Transaction may
not be on terms as favorable to us or the Managed REITs as it would have been if it was negotiated
among unrelated parties. We are subject to the risk that our shareholders or the shareholders of the
Managed REITs may challenge the Up-C Transaction and the agreements entered into as part of
the Up-C Transaction. If such a challenge were to be successful, we might not realize the benefits
we expect from the Up-C Transaction. Moreover, any such challenge could result in substantial costs
and a diversion of our management’s attention, could have a material adverse effect on our

reputation, business and growth and could adversely affect our ability to realize the benefits we
expect from the Up-C Transaction, whether or not the allegations have merit or are substantiated.

Our management responsibilities to each of our Client Companies and any future companies
we may manage may give rise to actual, potential or perceived conflicts of interest.

Some of our Client Companies have overlapping investment objectives. Additionally, some of
our Client Companies have material business relationships with each other that could give rise to
conflicting interests. We anticipate that our Client Companies will acquire assets consistent with their
investment objectives and that we identify for them. In so doing, we expect that our Client
Companies may rely primarily on information we provide to them. While we and our Client
Companies have policies and procedures in place that are intended to mitigate the risks of conflicts
of interest, our allocation of investment opportunities, advice and commitments of our management
team across our Client Companies might be perceived to favor one Client Company at the expense
of another.

In addition to serving on our Board of Directors and executive team, at least one of our

Founders also serves on the boards of each of the Managed REITs, Managed Operators, RIF, AIC
and ABP Trust. Many of the executive officers of these Client Companies are also our officers.
These individuals may also hold equity positions in, or other positions with, us and these Client
Companies. In addition, some of our Client Companies participate in a combined insurance program
through AIC and we and the Managed REITs, Five Star and TA participate in a combined directors
and officers insurance program. These multiple responsibilities and varying interests could create
competition for the time and efforts of RMR LLC and our Founders and actual, potential or perceived
conflicts of interest may arise.

In the past, in particular following periods of volatility in the overall market or declines in the

market price of a company’s securities, shareholder litigation, dissident shareholder director
nominations and dissident shareholder proposals have often been instituted against companies
alleging conflicts of interest in business dealings with affiliated and related persons and entities. Our
relationships with our Founders and our Client Companies and the relationships among our Client
Companies may precipitate such activities. In addition, certain proxy advisory firms which have
significant influence over the voting by shareholders of public companies, have, in the past,
recommended that shareholders vote against, or withhold votes for, the election of some board
members of certain of our Client Companies. At HPT’s and SNH’s 2016 annual shareholder
meetings, less than a majority of the votes cast were in favor of the election of the board members
standing for election. These proxy advisory firms may also recommend that shareholders of the
public Client Companies vote against, or withhold votes for, the election of some board members of
those Client Companies at future annual shareholder meetings, which may affect the outcome of
those elections and impact the governance of those Client Companies, which may increase the risk
of shareholder activism and litigation at those Client Companies. These activities could result in
substantial costs and diversion of our management’s attention and could have a material adverse
effect on our reputation and business. See ‘‘—Risks Related to Our Relationships with Our Founders
and Our Client Companies.’’

Risks Related to Our Organization and Structure

The historical consolidated financial information in this Annual Report on Form 10-K may not
permit current or prospective investors to predict our future results of operations.

We are a recently formed company and a new public company. Our historical consolidated
financial information is comprised of our and our subsidiaries’ accounts. Our historical Consolidated
Financial Statements included in Part IV, Item 15 of this Annual Report on Form 10-K are presented

as if these entities were wholly owned, operated and consolidated within a single legal entity, to the
extent we owned or were otherwise affiliated with them as of June 5, 2015, the date the Up-C
Transaction was completed. Accordingly, this financial information may not be representative of the
results we would have achieved as a stand-alone public company and may not be a reliable
indicator of our future results.

In addition, the historical consolidated financial information in this Annual Report on Form 10-K

does not reflect all the added costs we will incur as a public company, including costs related to
public company reporting, investor relations and compliance with the Sarbanes-Oxley Act. As a
result of these matters, among others, it may be difficult for investors to compare our future results
to historical results or to evaluate our relative performance or trends in our business. For more
information on our historical financial information, see ‘‘Management’s Discussion and Analysis of
Financial Condition and Results of Operations’’ and the historical Consolidated Financial Statements
included in Part IV, Item 15 of this Annual Report on Form 10-K.

We are a ‘‘controlled company’’ within the meaning of the Nasdaq listing rules and, as a
result, qualify for, and intend to rely on, exemptions from certain corporate governance
requirements. Our shareholders will not have the same protections afforded to shareholders
of companies that are subject to such requirements.

Our Founders, through their ownership of ABP Trust, hold more than 50.0% of the voting power

of our shares eligible to vote. As a result, we are a ‘‘controlled company’’ under the Nasdaq listing
rules. Under these rules, a company of which more than 50.0% of the voting power in the election of
directors is held by an individual, group or another company is a ‘‘controlled company’’ and may
elect not to comply with certain listed company governance requirements, including the requirements
that the board of directors be majority comprised of independent directors and that we have a
compensation committee and a nominating and corporate governance committee composed entirely
of independent directors. These exemptions do not modify the independence requirements for our
audit committee, and we intend to comply with the applicable requirements of the SEC and Nasdaq
with respect to our audit committee, although we currently only have two independent directors
serving on our audit committee and we are required to add a third independent director to our audit
committee by the earlier of our 2017 annual meeting of stockholders and June 23, 2017, in order to
comply with Nasdaq’s listing standards. Nonetheless, the fact that we intend to avail ourselves of
some or all of these exceptions may cause our Class A Common Shares to trade at a lower price
than if these protections were provided.

If we are unable to satisfy the requirements of Section 404 of the Sarbanes-Oxley Act or our
internal control over financial reporting is not effective, the reliability of our financial
statements may be questioned and the market price of our Class A Common Shares may
suffer.

Section 404 of the Sarbanes-Oxley Act requires any company subject to the reporting

requirements of the U.S. securities laws to do a comprehensive evaluation of its and its consolidated
subsidiaries’ internal control over financial reporting. We are an ‘‘emerging growth company’’ as
defined in the JOBS Act, and therefore we currently may avail ourselves of certain exemptions from
the Sarbanes-Oxley Act. However, we will eventually be required to document and test our internal
control procedures, our management will be required to assess and issue a report concerning our
internal control over financial reporting, and our independent auditors will be required to issue an
opinion on their audit of our internal control over financial reporting. The rules governing the
standards that must be met for management to assess our internal control over financial reporting
are complex and require significant documentation, testing and possible remediation to meet the
detailed standards under the rules. During the course of its testing, our management may identify

material weaknesses or deficiencies which may not be remedied in time to meet the deadline
imposed by the Sarbanes-Oxley Act. If our management cannot favorably assess the effectiveness
of our internal control over financial reporting or our auditors identify material weaknesses in our
internal controls, investors may lose confidence in our reported financial results and the market price
of our Class A Common Shares may decline.

Our rights and the rights of our shareholders to take action against our directors and officers
are limited.

Our governing documents limit the liability of our directors and officers to us and our
shareholders for money damages to the maximum extent permitted under Maryland law. Under
current Maryland law, our directors and officers will not have any liability to us and our shareholders
for money damages other than liability resulting from:

• actual receipt of an improper benefit or profit in money, property or services; or

• active and deliberate dishonesty by the director or officer that was established by a final

judgment as being material to the cause of action adjudicated.

Additionally, our governing documents require us to indemnify, to the maximum extent permitted

by Maryland law, any of our present or former directors or executive officers who is made or
threatened to be made a party to a proceeding by reason of his or her service in that capacity. We
also entered into separate agreements with our directors and executive officers providing for
indemnification and advancement of expenses in addition to any rights such person may have under
our governing documents.

As a result of these limitations on liability and indemnification obligations, we and our

shareholders may have more limited rights against our present and former directors and officers than
might exist with other companies, which could limit shareholder recourse in the event of actions
which some shareholders may not believe are not in our best interest.

Our governing documents currently designate the Circuit Court for Baltimore City, Maryland
or, if that court does not have jurisdiction the United States District Court for the District of
Maryland, Baltimore Division as the sole and exclusive forum for certain types of actions and
proceedings that may be initiated by our shareholders, which could limit our shareholders’
ability to obtain a favorable judicial forum for disputes with us or our directors, officers or
employees.

Our governing documents currently provide that, unless we consent in writing to the selection of

an alternative forum, the Circuit Court for Baltimore City, Maryland, or if that court does not have
jurisdiction the United States District Court for the District of Maryland, Baltimore Division, will be the
sole and exclusive forum for: (i) any derivative action or proceeding brought on our behalf; (ii) any
action asserting a claim for breach of a duty owed by any director, officer, manager or employee of
ours to us or our shareholders; (iii) any action asserting a claim against us or any director, officer,
manager or employee of ours arising pursuant to the Maryland General Corporation Law, our charter
or bylaws brought by or on behalf of a shareholder; or (iv) any action asserting a claim against us or
any director, officer, manager or employee of ours that is governed by the internal affairs doctrine.
This choice of forum provision may limit a shareholder’s ability to bring a claim in a judicial forum
that the shareholder believes is favorable for disputes with us or our directors, officers or other
employees, which may discourage lawsuits against us and our directors, officers and employees.
Any person or entity purchasing or otherwise acquiring or holding any interest in our Class A
Common Shares shall be deemed to have notice of and to have consented to the provisions of our
governing documents described above, as they may be amended from time to time.

Disputes with our Founders and our Client Companies, and shareholder litigation against us
or our directors and officers, may be referred to binding arbitration.

A number of our contracts with our Founders, ABP Trust and our Client Companies provide that
any dispute arising under those contracts may be referred to binding arbitration. As a result, we and
our shareholders may not be able to pursue litigation for these disputes in courts against our
Founders, Client Companies, directors or officers. In addition, the ability to collect attorneys’ fees or
other damages may be limited in the arbitration, which may discourage attorneys from agreeing to
represent parties wishing to commence such a proceeding.

RMR Inc. is required to pay ABP Trust for certain tax benefits it claims as a result of the tax
basis step up we receive as part of the Up-C Transaction and future redemptions by ABP
Trust for Class A Common Shares or for cash. In certain circumstances, payments under the
Tax Receivable Agreement may be accelerated and/or significantly exceed the actual tax
benefits RMR Inc. realizes.

In the Up-C Transaction, RMR Inc. purchased Class A Units from ABP Trust. In the future,
additional Class A Units may be redeemed by ABP Trust for Class A Common Shares or cash. See
‘‘Business—Our Organizational Structure—The LLC Operating Agreement—Redemption rights of
holders of Class A Units.’’ Both the initial purchase and these additional redemptions may result in
increases in our tax basis of our assets that otherwise would not have been available. Such
increases in tax basis are likely to increase (for tax purposes) depreciation and amortization
deductions and therefore reduce the amount of income tax we otherwise would be required to pay in
the future. These increases in tax basis may also decrease gain (or increase loss) on future
dispositions of certain capital assets to the extent the increased tax basis is allocated to those
assets. The IRS may challenge all or part of these tax basis increases, and a court might sustain
such a challenge.

We have entered into the Tax Receivable Agreement with ABP Trust that provides for the
payment by RMR Inc. to ABP Trust of 85.0% of the amount of cash savings, if any, in U.S. federal,
state and local income tax or franchise tax that RMR Inc. actually realizes as a result of (a) the
increases in tax basis attributable to its dealings with ABP Trust and (b) tax benefits related to
imputed interest deemed to be paid by us as a result of the Tax Receivable Agreement. See
‘‘Business—Organizational Structure—Tax Receivable Agreement.’’ While the actual increase in tax
basis, as well as the amount and timing of any payments under the Tax Receivable Agreement, will
vary depending upon a number of factors, including the timing of redemptions, the price of our
Class A Common Shares at the time of the redemption, the extent to which such redemptions are
taxable, and the amount and timing of our income, we expect that, as a result of the size of the
increases in the tax basis of the tangible and intangible assets of RMR LLC attributable to
RMR Inc.’s interests in RMR LLC, during the expected term of the Tax Receivable Agreement, the
payments that RMR Inc. makes to ABP Trust may be substantial.

ABP Trust generally will not reimburse RMR Inc. for any payments that may have been made
under the Tax Receivable Agreement. As a result, in certain circumstances RMR Inc. could make
payments to ABP Trust under the Tax Receivable Agreement in excess of cash tax savings. Our
ability to achieve benefits from any tax basis increase, and the payments to be made under the Tax
Receivable 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 certain changes of control and

certain breaches of the agreement that we fail to cure in accordance with the terms of the
agreement, our obligations with respect to Class A Units will be accelerated. In those circumstances,
our obligations under the Tax Receivable Agreement would be based on certain assumptions,

including that we would have sufficient taxable income to fully utilize the deductions arising from the
increased tax deductions and tax basis and other benefits described in the Tax Receivable
Agreement, and that any Class A Units that have not been redeemed will be deemed redeemed for
the market value of the Class A Common Shares at the time of the change of control or breach, as
applicable. Consequently, it is possible, in these circumstances, that the actual cash tax savings
realized by RMR Inc. may be significantly less than the corresponding Tax Receivable Agreement
payments.

Our governing documents permit our directors and officers, our Client Companies and ABP
Trust to retain corporate opportunities for their own benefit.

Under RMR Inc.’s governing documents and RMR LLC’s operating agreement, no director or
officer of ours who is also serving as an officer, employee or agent of a Client Company or any of
ABP Trust’s affiliates is required to present, communicate or offer any business opportunity to us,
and such person shall have the right to hold any business opportunity for themselves or transfer it to
any other person to the maximum extent permitted by Maryland law. If any of these persons fail to
present an opportunity to us or takes the opportunity for themselves, to the maximum extent
permitted under Maryland law they will not be liable to us. We have renounced all potential interest
or expectation in certain business opportunities which may fit our growth objectives in the future or
otherwise have value to us. These opportunities may be directed to the Client Companies or other
persons or entities with which we have no relationship. Additionally, under our governing documents,
our directors, officers, employees and agents are permitted to engage in other business activities
that are similar to, or even competitive with, our own. If such persons engage in competitive
business activities, we may have no remedy under our governing documents in these circumstances.

Our governing documents do not limit our ability to enter into new lines of businesses and
doing so may result in additional risks and uncertainties in our businesses.

Our governing documents do not limit our business to the management of commercial real
estate assets or businesses related thereto. Accordingly, we may pursue other business initiatives.
To the extent we 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 competently or profitably;
(iii) combining or integrating operational and management systems and controls; and (iv) the
broadening of our geographic footprint, including the risks associated with conducting operations in
non-U.S. jurisdictions. 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 risk. Our strategic initiatives may include joint ventures or
partnerships, in which case we will be subject to additional risks and uncertainties because 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 only material asset is our interest in RMR LLC and we are accordingly dependent upon
distributions from RMR LLC to pay our taxes and expenses.

RMR Inc. is organized as a holding company of RMR LLC and its only material assets are its

limited liability company membership units of RMR LLC. RMR Inc. has no independent means of
generating revenue. Pursuant to the agreements RMR Inc. entered into with RMR LLC in the Up-C
Transaction, RMR Inc., as the managing member of RMR LLC, intends to cause RMR LLC to make
distributions in an amount that is at least sufficient to cover applicable taxes payable by its
members, other expenses and dividends, if any, declared by us.

Deterioration in the financial condition, earnings or cash flow of RMR LLC for any reason could

limit or impair its ability to pay such distributions to us. Additionally, to the extent that RMR Inc.
requires funds and RMR LLC is restricted from making such distributions under applicable law or
regulation or under the terms of financing or other arrangements, or is otherwise unable to provide
such funds, our liquidity and financial condition could be materially adversely affected.

Item 1B. Unresolved Staff Comments

None.

Item 2. Properties

Our principal executive offices are located at Two Newton Place, 255 Washington Street,
Newton, MA 02458-1634. These offices are leased from an affiliate of ABP Trust pursuant to a ten
year lease agreement. A copy of the lease is incorporated by reference as an exhibit to this Annual
Report on Form 10-K.

We also lease other ancillary and local office space from ABP Trust, from certain Managed
REITs and from third parties. We consider these leased premises suitable and adequate for our
business. For more information about our leased facilities, please see ‘‘Management’s Discussion
and Analysis of Financial Condition and Results of Operations—Contractual Obligations’’ and Note 6,
Related Person Transactions, to our Consolidated Financial Statements included in Part IV, Item 15
of this Annual Report on Form 10-K.

Item 3. Legal Proceedings

From time to time, we may become involved in litigation matters incidental to the ordinary
course of our business. Although we are unable to predict with certainty the eventual outcome of
any litigation, we are currently not a party to any litigation which we expect to have a material
adverse effect on our business.

Item 4. Mine Safety Disclosures

Not applicable.

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer

Purchases of Equity Securities

Our Class A Common Shares are traded on the Nasdaq (symbol: RMR). There is no publicly
traded market for our Class B-1 Common Shares or our Class B-2 Common Shares, all of which are
held by ABP Trust. The following table sets forth for the periods indicated the high and low sale
prices for our Class A Common Shares as reported by the Nasdaq composite transaction reports:

Fiscal 2016

December 14, 2015 to December 31, 2015 . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Second Fiscal Quarter
Third Fiscal Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fourth Fiscal Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$16.76
25.04
30.97
40.40

$11.89
15.67
24.01
31.13

High

Low

The closing price of our Class A Common Shares on the Nasdaq on December 13, 2016 was

$43.65 per Class A Common Share.

As of December 13, 2016 there were 3,335 shareholders of record of our Class A Common

Shares.

Information about cash distributions declared on our Class A Common Shares and Class B-1

Common Shares is summarized in the table below.

Fiscal 2016

First Fiscal Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Second Fiscal Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Third Fiscal Quarter
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fourth Fiscal Quarter

Cash
Distributions
Per Common Share

$0.5260(1)

—
0.2993(2)
0.2500(3)

$1.0753

(1) This dividend was paid on December 15, 2015. The amount of this dividend was

calculated at a rate of $0.25 per share per quarter pro rata for the period June 5, 2015,
the date the Managed REITs acquired an interest in us, to December 14, 2015, the
date the Managed REITs completed the distribution of approximately half of the
15,000,000 Class A Common Shares they acquired in the Up-C Transaction.

(2) This dividend was paid on May 19, 2016. The amount of this dividend was calculated
as $0.25 per share for the quarter ended March 31, 2016, plus a pro rata dividend in
respect of the period from December 14, 2015 through and including December 31,
2015.

(3) This dividend was paid on August 18, 2016. The amount of this dividend was

calculated as $0.25 per share for the quarter ended June 30, 2016.

All common share distributions shown in the table above have been paid. We currently intend to

pay a quarterly cash dividend equal to $0.25 per Class A Common Share ($1.00 per share per
year). Common share cash distributions are generally declared and paid in the quarter following the
quarter to which they relate. We expect that any dividends we pay will be funded by distributions
made to us by RMR LLC.

Holders of our outstanding Class B-1 Common Shares are entitled to receive the same

dividends per Class B-1 Common Share as are declared per outstanding Class A Common Share.

The declaration and payment of any dividends will be at the discretion of our Board of Directors,

which may change our distribution policy or discontinue the payment of dividends at any time. The
declaration of dividends by our Board of Directors will depend upon many factors, including our
financial condition, earnings, cash flows, cash and capital requirements, level of indebtedness,
statutory and contractual restrictions applicable to the payment of dividends, the payment of
distributions to us by RMR LLC, applicable law and other considerations that our Board of Directors
deems relevant. We are a holding company and our only material assets are our membership
interests in RMR LLC. We intend to cause RMR LLC to make distributions to us in an amount that
will be sufficient to cover dividends, if any, we declare. When RMR LLC makes such distributions,
each other holder of Class A Units will be entitled to receive pro rata distributions from RMR LLC on
its Class A Units.

Issuer purchases of equity securities.

The following table provides information about our purchases of our equity securities during the

quarter ended September 30, 2016:

Calendar Month

Number of
Shares
Purchased(1)

Average Price
Paid per Share

Maximum
Approximate Dollar
Value of Shares that

Total Number of
Shares Purchased
as Part of Publicly May Yet Be Purchased
Announced Plans
or Programs

Under the Plans or
Programs

September 2016 . . . . . . . . . .

Total . . . . . . . . . . . . . . . . . . .

2,268

$40.25

$—

(1) During September 2016, all these Class A Common Share purchases were made to satisfy our
officers’ and other RMR LLC employees’ tax withholding and payment obligations in connection
with the vesting of awards of our Class A Common Shares. We repurchased these shares at
their fair market value based upon the trading price of our Class A Common Shares on the
repurchase date.

Item 6. Selected Financial Data (dollar amounts in thousands)

The following table sets forth selected financial data for the periods and dates indicated. These

data should be read in conjunction with, and are qualified in their entirety by reference to,
‘‘Management’s Discussion and Analysis of Financial Condition and Results of Operations’’ and the
Consolidated Financial Statements and accompanying Notes included in Part IV, Item 15 of this
Annual Report on Form 10-K. The selected historical consolidated financial information and other
data includes the accounts of RMR Inc. or its predecessors. Information for periods prior to the Up-C
Transaction are presented as if our predecessor entities, which were not then owned by a single
entity, were wholly owned within a single legal entity.

The selected historical consolidated financial information as of September 30, 2016 and 2015

and for each of the three years in the period ended September 30, 2016 has been derived from the
Consolidated Financial Statements included in Part IV, Item 15 of this Annual Report on Form 10-K.
We derived the selected historical financial data as of and for the year ended September 30, 2013
from our audited consolidated financial statements and selected historical financial data as of and for
the year ended September 30, 2012 from our unaudited consolidated financial statements which are
not included in this Annual Report on Form 10-K. The unaudited consolidated financial statements
have been prepared on substantially the same basis as the audited consolidated financial

statements and include all normal and recurring adjustments that we consider necessary for a fair
presentation of the financial position and operating results for this period.

The selected historical consolidated financial information below do not reflect what our results of

operations and financial position would have been if we had operated as a stand alone company
during periods prior to June 5, 2015. In addition, this historical information should not be relied upon
as an indicator of future performance. Amounts are in thousands, except per share data.

Fiscal Year Ended September 30,

2016

2015

2014

2013

2012

Operating and other information:
Revenues:

Management services . . . . . . . . . . . .
Reimbursable payroll and related costs
Advisory services . . . . . . . . . . . . . . . .

$226,660
37,660
2,620

$162,326
28,230
2,380

$218,753
64,049
2,244

$197,504
60,398
2,086

$181,692
55,630
—

Total revenues . . . . . . . . . . . . . . . . . . .

266,940

192,936

285,046

259,988

237,322

Expenses:

Compensation and benefits . . . . . . . .
Members profit sharing . . . . . . . . . . . .
Separation costs . . . . . . . . . . . . . . . .
General and administrative . . . . . . . . .
Depreciation and amortization . . . . . . .

91,985
—
1,358
25,129
1,768

83,456

127,841
— 116,000
2,330
21,957
2,446

116
26,535
2,117

123,608
146,000
—
20,141
2,403

104,822
110,000
—
16,003
2,086

Total expenses . . . . . . . . . . . . . . . . . . .

120,240

112,224

270,574

292,152

232,911

Operating income (loss) . . . . . . . . . . . . .
Interest and other income . . . . . . . . . . .
Unrealized gains (losses) attributable to
changes in fair value of investments
accounted for under the fair value
option . . . . . . . . . . . . . . . . . . . . . . . .

Income (loss) before income tax expense
and equity in earnings of investee . . . .
Income tax expense . . . . . . . . . . . . . . .
Equity in earnings of investee . . . . . . . .

146,700
234

80,712
1,732

14,472
497

(32,164)
139

4,411
125

—

(290)

(4,556)

(19)

120

146,934
(24,573)
—

82,154
(4,848)
115

10,413
(280)
160

(32,044)
(80)
299

4,656
—
212

Net income (loss) . . . . . . . . . . . . . . . . .

122,361

77,421

$ 10,293

$ (31,825) $

4,868

Net income attributable to noncontrolling

interest . . . . . . . . . . . . . . . . . . . . . . .

(85,121)

(70,118)

Net income attributable to RMR

Group Inc.

. . . . . . . . . . . . . . . . . . . .

$ 37,240

7,303

2016

2015

2014

2013

2012

As of September 30,

Operating and other information:
Total assets . . . . . . . . . . . . . . . . . . . . .
Total liabilities . . . . . . . . . . . . . . . . . . . .
Total equity . . . . . . . . . . . . . . . . . . . . .

$337,531
91,140
246,391

$303,892
90,240
213,652

$287,223
56,979
230,244

$190,909
81,397
109,512

$220,393
83,610
136,783

2016

2015

2014

2013

2012

Fiscal Year Ended September 30,

Operating and other

information
(unaudited):

Assets under

management(1) . . . . . .
Adjusted EBITDA(2) . . . .

$26,858,438
100,112

$25,539,125
92,291

$27,538,146
136,049

$26,179,819
116,729

$24,301,810
116,937

(1) Starting with the fiscal year ended September 30, 2016, in addition to presenting a calculation of
assets under management of the Managed REITs according to the method used to determine
fees pursuant to the terms of the business management agreements as presented in Item 7,
Management’s Discussion and Analysis of Financial Condition and Results of Operations, of this
Annual Report on Form 10-K, we have determined to also present total assets under
management for all of our Client Companies in a manner that we believe more clearly reflects
the size of our business. The calculation of our assets under management for all of our Client
Companies as of the dates indicated includes; (i) the gross book value of real estate and related
assets, excluding depreciation, amortization, impairment charges or other non-cash reserves, of
the REITs we managed, plus (ii) the gross book value of real estate assets, property and
equipment of the Managed Operators, plus (iii) the fair value of investments of AIC and RIF,
plus (iv) the contributed capital and outstanding principal of loans serviced for certain private
clients of the Tremont business. This calculation of assets under management may include
amounts in respect of the REITs we managed that are higher than the calculations of assets
under management used for purposes of calculating fees under the terms of the business
management agreements.

(2) EBITDA and Adjusted EBITDA are non-GAAP financial measures calculated as presented in the

table below. We consider EBITDA and Adjusted EBITDA to be appropriate supplemental
measures of our operating performance, along with net income, net income attributable to
RMR Inc. and operating income. RMR Inc. believes that EBITDA and Adjusted EBITDA provide
useful information to investors because by excluding the effects of certain historical amounts,
such as members profit sharing, income tax, interest, depreciation and amortization expenses,
incentive business management fees, other asset amortization, transaction and acquisition
related costs, operating expenses paid in RMR Inc. common shares, certain separation costs,
unrealized gains or losses attributable to changes in fair value of stock accounted for under the
fair value option, and certain one time adjustments, EBITDA and Adjusted EBITDA may facilitate
a comparison of current operating performance with our past operating performance and with
the performance of other asset management businesses. EBITDA and Adjusted EBITDA do not
represent cash generated by operating activities in accordance with GAAP and should not be
considered as alternatives to net income (loss), net income attributable to RMR Inc. or operating
income as an indicator of our financial performance or as a measure of our liquidity. These
measures should be considered in conjunction with net income (loss), net income attributable to
RMR Inc. and operating income as presented in our consolidated statements of comprehensive
income. Also, other asset management businesses may calculate EBITDA and Adjusted

EBITDA differently than we do. The following table is a reconciliation of net income (loss) to
EBITDA and Adjusted EBITDA:

Net income (loss) . . . . . . . . . . . .
Plus: interest expense . . . . . . . .
Plus: income tax expense . . . . . .
Plus: depreciation and

Fiscal Year Ended September 30,

2016

2015

2014

2013

2012

$122,361
—
24,573

$77,421
—
4,848

$ 10,293
144
280

$ (31,825) $

52
80

4,868
103
—

amortization . . . . . . . . . . . . . .

1,768

2,117

2,446

2,403

2,086

EBITDA . . . . . . . . . . . . . . . . . .
Plus: other asset amortization . . .
Plus: members profit sharing . . . .
Plus: operating expenses paid in

RMR Inc. common shares . . . .
Plus: separation costs . . . . . . . .
Plus: transaction and acquisition

148,702
9,416
—

84,386
2,999

13,163
—
— 116,000

(29,290)
—
146,000

7,057
—
110,000

933
1,358

—
116

—
2,330

related costs . . . . . . . . . . . . .

1,966

5,454

Less: incentive business

management fees earned . . . .

(62,263)

—

Less: unrealized (gains) losses
attributable to changes in fair
value of stock accounted for
under the fair value option . . . .

Less: certain one time

adjustments . . . . . . . . . . . . . .

—

290

4,556

(954)

—

—
—

—

—
—

—

(120)

—

Adjusted EBITDA . . . . . . . . . . . .

$100,112

$92,291

$136,049

$116,729

$116,937

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of

Operations

The following information should be read in conjunction with our Consolidated Financial
Statements and accompanying Notes included in Part IV, Item 15 of this Annual Report on
Form 10-K.

OVERVIEW (dollar amounts in thousands)

RMR Inc. was incorporated in Maryland on May 28, 2015 in contemplation of the Up-C Transaction.

For more information about the Up-C Transaction, please see Note 6, Related Person Transactions, to
our Consolidated Financial Statements included in Part IV, Item 15 of this Annual Report on Form 10-K.

RMR Inc. is a holding company; substantially all of its business is conducted by RMR LLC.
RMR Inc. has no employees, and the personnel and various services it requires to operate are
provided by RMR LLC. As of September 30, 2016, the over 1,400 properties which RMR LLC
manages are located in 48 states, Washington, DC, Puerto Rico and Canada and they are
principally owned by the Managed REITs.

The consolidated financial information in this section include accounts of RMR Inc. or its

predecessors, and periods presented in these statements prior to the Up-C Transaction are
presented as if our predecessor entities, which were not then owned by a single entity, were wholly
owned within a single legal entity.

Substantially all of our revenues are derived from providing business and property management
services to our Client Companies. We also earn revenue from advisory and other services to RIF, a
registered investment company, private funds and separately managed accounts.

Managed REITs

The base business management fees we earn from the Managed REITs are principally based

upon the lower of (i) the historical cost of each REIT’s properties or (ii) each REIT’s total market
capitalization. The property management fees we earn from the Managed REITs are principally
based upon the gross rents collected at certain managed properties owned by the REITs, excluding
rents or other revenues from hotels, travel centers, senior living properties and wellness centers. The
following table presents for each Managed REIT: a summary of its primary strategy and the lesser of
the historical cost of its assets under management or its total market capitalization as of
September 30, 2016, 2015 and 2014, as applicable:

REIT

Primary Strategy

2016

2015

2014

Historical Cost of Assets Under Management
or Total Market Capitalization
As of September 30,

GOV . Office buildings majority leased to government tenants $ 2,071,050 $ 1,959,664 $ 2,000,973
7,386,040
HPT . . Hotels and travel centers
1,954,473
SIR . . Lands and properties primarily leased to single tenants
6,497,019
SNH . Healthcare, senior living and medical office buildings

8,330,553
4,743,774
8,142,327

7,452,330
4,068,360
7,226,944

$23,287,704 $20,707,298 $17,838,505

Base business management fees payable to us by the Managed REITs are calculated monthly

based upon the lesser of the average historical cost of each Managed REIT’s assets under
management or its average total market capitalization, as calculated in accordance with the
applicable business management agreement, for each month. A Managed REIT’s historical cost of
assets under management includes the real estate it owns and its consolidated assets invested
directly or indirectly in equity interests in or loans secured by real estate and personal property
owned in connection with such real estate (including acquisition related costs which may be
allocated to intangibles or are unallocated), all before reserves for depreciation, amortization,
impairment charges or bad debts or other similar non-cash reserves. A Managed REIT’s historical
cost of assets under management does not include the cost of shares it owns of another Client
Company. A Managed REIT’s average total market capitalization includes the average value of the
Managed REIT’s outstanding common equity value during the period, plus the daily weighted
average of each of the aggregate liquidation preference of preferred shares and the principal amount
of consolidated indebtedness. As of September 30, 2016 the market capitalization was lower than
the historical costs of assets under management for HPT. As of September 30, 2016, the historical
cost of assets under management for HPT was $9,142,998. For each of the other Managed REITs,
its average historical costs of assets under management were lower than market capitalization as of
September 30, 2016.

The revenues we earned from the Managed REITs for the years ended September 30, 2016,

2015 and 2014 are set forth in the following tables:

Fiscal Year Ended September 30, 2016(1)

REIT

GOV . . . . . . . . . . . . . . . . . .
HPT . . . . . . . . . . . . . . . . . . .
SIR . . . . . . . . . . . . . . . . . . .
SNH . . . . . . . . . . . . . . . . . . .

REIT

GOV . . . . . . . . . . . . . . . . . .
HPT . . . . . . . . . . . . . . . . . . .
SIR . . . . . . . . . . . . . . . . . . .
SNH . . . . . . . . . . . . . . . . . . .

REIT

GOV . . . . . . . . . . . . . . . . . .
HPT . . . . . . . . . . . . . . . . . . .
SIR . . . . . . . . . . . . . . . . . . .
SNH . . . . . . . . . . . . . . . . . . .

Base
Business

Incentive
Business
Management Management Management
Revenues

Revenues

Property

$ 10,368
36,821
21,582
36,053

$104,824

—
62,263
—
—

$62,263

$ 8,806
48
12,761
11,103

Total

$ 19,174
99,132
34,343
47,156

$32,718

$199,805

Fiscal Year Ended September 30, 2015(1)

Base
Business

Incentive
Business
Management Management Management
Revenues

Revenues

Property

$ 10,451
38,558
17,759
35,410

$102,178

$—
—
—
—

$—

$ 8,130
35
10,033
9,828

Total

$ 18,581
38,593
27,792
45,238

$28,026

$130,204

Fiscal Year Ended September 30, 2014(1)

Base
Business

Incentive
Business
Management Management Management
Revenues

Revenues

Property

$10,269
40,874
10,992
29,690

$91,825

$—
—
—
—

$—

$ 8,070
15
6,257
7,536

Total

$ 18,339
40,889
17,249
37,226

$21,878

$113,703

(1)

Includes base and incentive business management revenues and property
management revenues, including construction supervision fees, if any, earned during
the applicable period and excludes reimbursable payroll and related costs. Incentive
business management fees from the Managed REITs are contingent performance
based fees which are only recognized when earned at the end of each respective
measurement period. We earned $62,263 of incentive business management fees from
HPT for the calendar year ending on December 31, 2015. We record incentive
business management fee revenue only when earned, which is determined at the end
of the measurement period specified by the applicable business management
agreement. The next measurement period under our business management agreement
with each Managed REIT ends on December 31, 2016. We estimate that we would
have earned aggregate incentive business management fees from one of the Managed
REITs in the amount of $75,030 as of September 30, 2016 if that date had been the
end of the next measurement period; however, there can be no assurance that we will
in fact earn an incentive fee from that Managed REIT when measured as of

December 31, 2016, the end of the next measurement period. As a result, this
estimated amount of incentive business management fees, which would have been
earned if the measurement period ended on September 30, 2016, is not included in the
fees listed in the tables above or in our Consolidated Financial Statements included in
Part IV, Item 15 of this Annual Report as it may not reflect the incentive business
management fees which will be earned as of the end of the measurement period, if
any.

Managed Operators, AIC and ABP Trust

In addition to the business and property management services we provide to the Managed
REITs, we provide business management services to the Managed Operators. Five Star operates
senior living and healthcare facilities throughout the United States, many of which are owned by and
leased from, or managed for, SNH. Sonesta manages and franchises hotels, resorts and cruise
ships in the United States, Latin America, the Caribbean and the Middle East; some of Sonesta’s
U.S. hotels are owned by HPT. TA operates travel centers along the U.S. interstate highway system,
many of which are owned by and leased from HPT, as well as convenience stores, gas stations and
restaurants. In addition, we provide management services to certain other businesses, including ABP
Trust and AIC. Generally our fees earned from business management services to companies other
than the Managed REITs are based on a percentage of certain revenues of the managed
businesses. We also earn fees based upon rents collected for managing rental properties owned by
ABP Trust and for managing TA’s headquarters building. Our revenues from services to the
Managed Operators, AIC and ABP Trust were as follows(1):

Company

Fiscal Year Ended September 30,

2016

2015

2014

Five Star . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sonesta . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
TA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
AIC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ABP Trust

$ 9,177
2,020
14,281
240
1,025

$ 8,917
1,848
13,570
247
1,260

$ 8,221
1,501
11,954
337
1,405

$26,743

$25,842

$23,418

(1)

Includes business management fees and property management fees, including
construction supervision fees, if any, earned during the applicable period and excludes
reimbursable payroll and related costs.

RMR Advisors and Tremont Advisors

RMR Advisors provides advisory services to RIF, a registered closed end investment company,

and earns fees based upon the fair market value of the gross assets owned by RIF, including assets
acquired with the use of debt or other leverage. The value of RIF’s assets, as defined by the
investment advisory agreement, managed by RMR Advisors was $281,526, $246,935 and $247,250
at September 30, 2016, 2015 and 2014, respectively. The advisory fees earned by RMR Advisors
included in our revenue were $2,370, $2,380 and $2,244 for the fiscal years ended September 30,
2016, 2015 and 2014, respectively.

On August 5, 2016, we acquired the Tremont business, which specializes in commercial real
estate finance, principally providing capital to commercial real estate owners and developers and
serving as an advisor to private funds and separately managed accounts that principally make
commercial real estate debt investments. As part of this transaction, our wholly owned subsidiary,

Tremont Advisors, an investment advisor registered with the SEC, was assigned the investment
management contracts with investment advisory clients of the Tremont business. The Tremont
business provides investment advisory services to, and may act as transaction originator for, its
clients. We earned management services revenue of $54 and advisory services revenue of $250 for
the fiscal year ended September 30, 2016 from these services.

EQC

EQC is a publicly traded REIT that primarily owns office properties. For the fiscal year ended

September 30, 2014, we earned management fees from EQC under a business management
agreement and a property management agreement with EQC, which had terms similar to our
agreements with the Managed REITs, except that the EQC agreements were for one year terms.
RMR LLC and EQC entered into a Termination and Cooperation Agreement that terminated their
business and property management agreements on September 30, 2014. RMR LLC provided certain
transition services to EQC through February 28, 2015, and thereafter certain additional services for
EQC in Australia until October 31, 2015. Fees earned pursuant to these agreements totaled $58,
$6,280, and $81,632 for the fiscal years ended September 30, 2016, 2015 and 2014, respectively.

RMR Intl

RMR Intl is a wholly owned subsidiary of RMR LLC whose sole business is holding the equity

interests of RMR Australia, a company founded in 2012 to manage certain investments of a
company then managed by RMR LLC in Australia. RMR Australia continues to hold an Australian
financial services license granted by the Australian Securities & Investments Commission yet has
ceased operations subsequent to the termination of services being provided to EQC as of
October 31, 2015.

Business Environment and Outlook

The continuation and growth of our business depends upon our ability to operate the Managed

REITs so as to maintain and increase the value of their businesses and to assist our Managed
Operators to grow their businesses. Our business and the businesses of our Client Companies
generally follow the business cycle of the U.S. real estate industry, but with certain property type and
regional geographic variations. As the general U.S. economy expands, commercial real estate
occupancies increase and new real estate development occurs; new development frequently leads to
increased real estate supply and reduced occupancies; and then the cycle repeats. These general
trends can be impacted by property type characteristics or regional factors; for example,
demographic factors such as the aging U.S. population or net in migration or out migration in
different geographic regions can slow, accelerate, overwhelm or otherwise impact general cyclical
trends. Because of such multiple factors, we believe it is often possible to grow real estate based
businesses in selected property types or geographic areas despite general national trends. We also
believe that these regional or special factors can be reinforced or sometimes overwhelmed by
general economic factors; for example, the expectation that U.S. interest rates may soon increase
appears to be causing a general decrease in the value of securities of real estate businesses,
including those real estate businesses that use large amounts of debt and that attract equity
investors by paying dividends such as REITs. We try to take account of industry and general
economic factors as well as specific property and regional geographic considerations when providing
services to our Client Companies.

At present we believe that the current low interest rates available for real estate purchase
financing may be causing real estate valuations to exceed replacement cost for some properties in
some markets and property acquisitions should be undertaken on a selective basis. We also believe
that because of the diversity of properties which our Client Companies own and operate there should
be opportunities for growth in selected property types and locations and that we and our Client
Companies should maintain financial flexibility using only reasonable amounts of debt so we and
they will be able to take advantage of growth opportunities which come to our and their attention.

Please see elsewhere in this Annual Report on Form 10-K, including ‘‘Warning Concerning
Forward Looking Statements’’, Part 1, Item 1 ‘‘Business’’ and Part I, Item 1A ‘‘Risk Factors’’ for
discussion of some of the circumstances that may adversely affect our performance and the
performance of our Client Companies.

Acquisitions

On August 5, 2016, RMR LLC acquired the Tremont business, a business that principally raises
debt and equity for owners of commercial real estate and serves as a manager of private funds and
separately managed accounts invested in commercial real estate, for total consideration of $2,466,
excluding transaction costs. We believe that the Tremont business represents a new platform that
may provide a growth opportunity and diversification of our operations, as the commercial real estate
finance business represents an appropriate extension of our existing operations.

The sellers of the Tremont business, pursuant to our asset purchase agreement with them, also

have the right to receive an ‘‘earn out’’ over the two year period ending August 5, 2018, based on
payments that we receive from a specified part of the historical Tremont business. We have
recorded estimated contingent consideration of $1,270 for this earn out.

RESULTS OF OPERATIONS (dollars in thousands)

When considering the financial data for the fiscal year ended September 30, 2016 compared to

the fiscal year ended September 30, 2015, readers should note that RMR Inc. began conducting
business on June 5, 2015 and did not become a publicly owned company until December 14, 2015
when the Managed REITs distributed approximately half of our Class A Common Shares to their
shareholders. Prior to June 5, 2015 and December 14, 2015 our assets, structure and operations
differed in several respects from those subsequent to these dates, and such differences impact the
period to period comparisons.

Fiscal Year Ended September 30, 2016, Compared to the Fiscal Year Ended September 30,

2015

The following table presents the changes in our operating results for the fiscal year ended

September 30, 2016 compared to the fiscal year ended September 30, 2015:

Fiscal Year Ended September 30,

2016

2015

$ Change % Change

Revenues:

Management services . . . . . . . . . . . . . . . . . . . . . .
Reimbursable payroll and related costs . . . . . . . . .
Advisory services . . . . . . . . . . . . . . . . . . . . . . . . .

$226,660
37,660
2,620

$162,326
28,230
2,380

$ 64,334
9,430
240

Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . .

266,940

192,936

74,004

39.6%
33.4%
10.1%

38.4%

8,529
1,242
(1,406)
(349)

8,016

65,988
(1,498)

10.2%
1,070.7%
(5.3)%
(16.5)%

7.1%

81.8%
(86.5)%

Expenses:

Compensation and benefits . . . . . . . . . . . . . . . . . .
Separation costs . . . . . . . . . . . . . . . . . . . . . . . . .
General and administrative . . . . . . . . . . . . . . . . . .
Depreciation and amortization . . . . . . . . . . . . . . . .

91,985
1,358
25,129
1,768

83,456
116
26,535
2,117

Total expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . .

120,240

112,224

Operating income . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest and other income . . . . . . . . . . . . . . . . . . . . .
Unrealized losses attributable to changes in fair value
of stock accounted for under the fair value option . .

Income before income tax expense and equity in

earnings of investee . . . . . . . . . . . . . . . . . . . . . . .
Income tax expense . . . . . . . . . . . . . . . . . . . . . . . .
Equity in earnings of investee . . . . . . . . . . . . . . . . . .

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . .
Net income attributable to noncontrolling interest

146,700
234

80,712
1,732

—

(290)

290

100.0%

146,934
(24,573)
—

122,361
(85,121)

82,154
(4,848)
115

77,421
(70,118)

64,780
(19,725)
(115)

44,940
(15,003)

78.9%
(406.9)%
(100.0)%

58.0%
(21.4)%

Net income attributable to RMR Group Inc.

. . . . . . . .

$ 37,240

7,303

$ 29,937

409.9%

References to changes in the income and expense categories below relate to the comparison of

consolidated results for the fiscal year ended September 30, 2016, compared to the fiscal year
ended September 30, 2015.

Management services revenue. For the fiscal years ended September 30, 2016 and 2015 we

earned business and property management services revenue from the following sources:

Source

Fiscal Year Ended
September 30,

2016

2015

Change

Managed REITs . . . . . . . . . . . . . . . . . . . . . . .
Managed Operators . . . . . . . . . . . . . . . . . . . . .
Other Client Companies . . . . . . . . . . . . . . . . . .
EQC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$199,805
25,478
1,319
58

$130,204
24,335
1,507
6,280

$69,601
1,143
(188)
(6,222)

Total

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$226,660

$162,326

$64,334

Management services revenue increased $64,334 primarily due to a $62,263 annual incentive
business management fee earned on December 31, 2015, an increase of $7,829 in base business

management fees at the Managed REITs associated primarily with growth in the market
capitalization of SIR and SNH, and an increase of $5,926 in property management fees due to
increases in the number of properties to which we provide property management services. These
increases were partially offset by the impact of the $9,416 in other asset amortization recorded in
the fiscal year ended September 30, 2016, compared to $2,999 in other asset amortization recorded
in the fiscal year ended September 30, 2015 and the termination of our services to EQC. Other
asset amortization results from the Up-C Transaction discussed in Note 6, Related Person
Transactions, to our Consolidated Financial Statements included in Part IV, Item 15 of this Annual
Report on Form 10-K.

Reimbursable payroll and related costs revenue. Reimbursable payroll and related costs
revenue primarily includes amounts reimbursed to us by the Managed REITs for certain property
related employee compensation and benefits expenses incurred in the ordinary course of business in
our capacity as property manager, at cost. A significant portion of these reimbursable payroll and
related costs arises from services we provide that are paid or reimbursed to the Managed REITs by
their tenants. Reimbursable payroll and related costs revenue for the years ended September 30,
2016 and 2015 includes recognition of non-cash share based compensation granted to some of our
employees by certain of our Client Companies of $7,997 and $5,931, respectively. Reimbursable
payroll and related costs revenue increased $9,430 due primarily to increases in value of share
grants to some of our employees by certain of our Client Companies, increases in the number of
properties we manage for the Managed REITs since October 1, 2014, and the related increase in
the number of employees since that date and their associated compensation and benefits as well as
regular increases in employee compensation and benefits for which we receive reimbursement.

Advisory services revenue. Advisory services revenue includes the fees RMR Advisors earns

for managing RIF as well as the advisory services revenue the Tremont business earns from its
clients. These fees increased by $240, primarily due to $250 of revenue earned by the Tremont
business subsequent to our August 2016 acquisition.

Compensation and benefits. Compensation and benefits consist of employee salaries and

other employment related costs, including health insurance expenses, contributions related to our
employee retirement plan, and in fiscal 2016, the value of vested shares granted to certain of our
employees under our 2016 Omnibus Equity Plan. Compensation and benefits expense for the years
ended September 30, 2016 and 2015 includes $7,997 and $5,931, respectively, of non-cash share
based compensation granted to some of our employees by certain of our Client Companies.
Compensation and benefits expense increased $8,529 primarily due to increases in value of share
grants to some of our employees by certain of our Client Companies, compensation expenses
related to Class A Common Shares we awarded to certain of our officers and employees in fiscal
year 2016, increased staffing as a result of increases in the number of properties we manage for the
Managed REITs and the business growth of certain of our Managed Operators since October 1,
2014, as well as annual employee salary increases. These increases were partially offset by a
decrease in our corporate office staffing due to the wind down of our business management and
property management services to EQC in the fiscal year ended September 30, 2015.

Separation costs. Separation costs consists of employment termination costs.

General and administrative. General and administrative expenses consist of office related
expenses, information technology related expenses, employee training, travel, professional services
expenses and other administrative expenses. General and administrative expenses decreased
$1,406 primarily due to $5,454 of transaction related costs associated with the Up-C Transaction in
fiscal year 2015, compared to $1,966 of transaction and acquisition related costs in fiscal year 2016.
These decreases were partially offset by increases in recurring costs related to our becoming a
publicly traded company in fiscal year 2016, as well as increases in property management expenses

related to the increase in the number of properties we manage for the Managed REITs since
October 1, 2014.

Depreciation and amortization. Depreciation and amortization expense decreased $349
primarily as a result of certain equipment and capitalized software becoming fully depreciated
subsequent to October 1, 2015, partially offset by amortization of intangible assets related to our
2016 Tremont business acquisition.

Interest and other income.

Interest and other income decreased $1,498 primarily due to the

loss of dividend income derived in fiscal year 2015 from common shares of the Managed REITs that
were transferred to ABP Trust prior to Up-C Transaction.

Unrealized losses attributable to changes in fair value of stock accounted for under the fair
value option. Unrealized losses attributable to changes in fair value of stock accounted for under
the fair value option in fiscal year 2015 consists of net unrealized losses on the common shares of
the Managed REITs we owned before the Up-C Transaction based on changes in quoted market
prices between the beginning and end of the applicable period. Prior to the Up-C Transaction,
RMR LLC transferred all the Managed REITs shares it owned to ABP Trust.

Income tax expense. The change in income tax expense is primarily attributable to RMR Inc.
becoming a corporation as part of the Up-C Transaction and thus subject to U.S. federal and state
income tax with respect to RMR Inc.’s allocable share of any taxable income of RMR LLC for all of
fiscal year 2016 compared with only the period June 5, 2015 to September 30, 2015 for the prior
fiscal year.

Equity in earnings of investee. Equity in earnings of investee represents our proportionate

share of earnings from our prior investment in AIC for fiscal year 2015. Prior to the Up-C
Transaction, RMR LLC transferred its ownership interest in AIC to ABP Trust.

Net income attributable to noncontrolling interest. Net income attributable to noncontrolling
interest represents the portion of consolidated net income that is attributable to ABP Trust after the
Up-C Transaction. Net income attributable to noncontrolling interest for fiscal year 2016 includes
$26,611 of the annual incentive business management fee allocated solely to ABP Trust after the
Up-C Transaction discussed in Note 6, Related Person Transactions, to our Consolidated Financial
Statements in Part IV, Item 15 of this Annual Report on Form 10-K.

Fiscal Year Ended September 30, 2015, Compared to the Fiscal Year Ended September 30,

2014

The following table presents the changes in our operating results for the fiscal year ended

September 30, 2015 compared to the fiscal year ended September 30, 2014:

Fiscal Year Ended September 30,

2015

2014

$ Change

% Change

Revenues:

Management services . . . . . . . . . . . . . . . . . . . . .
Reimbursable payroll and related costs . . . . . . . .
Advisory services . . . . . . . . . . . . . . . . . . . . . . . .

$162,326
28,230
2,380

$218,753
64,049
2,244

$ (56,427)
(35,819)
136

Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . .

192,936

285,046

(92,110)

Expenses:

Compensation and benefits . . . . . . . . . . . . . . . . .
Members profit sharing . . . . . . . . . . . . . . . . . . . .
Separation costs . . . . . . . . . . . . . . . . . . . . . . . .
General and administrative . . . . . . . . . . . . . . . . .
Depreciation expense . . . . . . . . . . . . . . . . . . . . .

83,456

127,841
— 116,000
2,330
21,957
2,446

116
26,535
2,117

(44,385)
(116,000)
(2,214)
4,578
(329)

(25.8)%
(55.9)%
6.1%

(32.3)%

(34.7)%
(100.0)%
(95.0)%
20.8%
(13.5)%

Total expenses . . . . . . . . . . . . . . . . . . . . . . . . . . .

112,224

270,574

(158,350)

(58.5)%

Operating income . . . . . . . . . . . . . . . . . . . . . . . . .
Interest and other income . . . . . . . . . . . . . . . . . . . .
Unrealized losses attributable to changes in fair

value of stock accounted for under the fair value
option . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Income before income tax expense and equity in

earnings of investee . . . . . . . . . . . . . . . . . . . . . .
Income tax expense . . . . . . . . . . . . . . . . . . . . . . . .
Equity in earnings of investee . . . . . . . . . . . . . . . . .

80,712
1,732

14,472
497

66,240
1,235

457.7%
248.5%

(290)

(4,556)

4,266

93.6%

82,154
(4,848)
115

10,413
(280)
160

71,741
(4,568)
(45)

67,128

689.0%
(1,631.4)%
(28.1)%

652.2%

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

77,421

$ 10,293

Net income attributable to noncontrolling interest

. . .

(70,118)

Net income attributable to RMR Group Inc.

. . . . . . .

7,303

(70,118)

7,303

Management services revenue. For the fiscal years ended September 30, 2015 and 2014 we

earned business and property management services revenue from the following sources:

Source

Fiscal Year Ended
September 30,

2015

2014

Change

Managed REITs . . . . . . . . . . . . . . . . . . . . . . .
Managed Operators . . . . . . . . . . . . . . . . . . . .
Other Client Companies . . . . . . . . . . . . . . . . .
EQC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$130,204
24,335
1,507
6,280

$113,703
21,676
1,742
81,632

$ 16,501
2,659
(235)
(75,352)

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$162,326

$218,753

$(56,427)

Management services revenue decreased $56,427 due to the termination of our management
agreements with EQC effective September 30, 2014, partially offset by increases in revenues from
the Managed REITs arising from net property acquisitions in excess of dispositions completed after
October 1, 2013 and to a lesser extent as a result of increased management fees from the Managed
Operators as a result of increases in the amount of the Managed Operators’ revenues since
October 1, 2013.

Reimbursable payroll and related costs revenue. Reimbursable payroll and related costs

revenue decreased $35,819 due primarily to a decrease in the number of property management
personnel after our property management services to EQC ended on September 30, 2014.
Reimbursable payroll and related costs revenue for the fiscal years ended September 30, 2015 and
2014 also includes non-cash share based payments made by certain of our Client Companies and
EQC to our employees of $5,931 and $11,444, respectively, including the accelerated vesting of
certain EQC share grants in March 2014.

Advisory services revenue. Advisory services revenue increased by $136 for the fiscal year

ended September 30, 2015 compared to the fiscal year ended September 30, 2014 because of the
increase in the average value of RIF’s assets between these periods.

Compensation and benefits. Compensation and benefits expense for the fiscal years ended
September 30, 2015 and 2014 includes $5,931 and $11,444, respectively, of non-cash share based
compensation granted to some of our employees by certain of our Client Companies and EQC.
Compensation and benefits expense decreased $44,385 primarily due to a decrease in the number
of property management personnel after our property management services to EQC ended on
September 30, 2014 and a decrease in the value of certain shares granted to our employees by
certain of our Client Companies and EQC, partially offset by the accelerated vesting of certain EQC
share grants in March 2014.

Members profit sharing. Members profit sharing was historically determined based on federal

income tax concepts, including our historical cash method of accounting for tax purposes. The
amount is separately stated for fiscal year 2014 because of its significance and because they are no
longer to be paid after the Up-C Transaction.

Separation costs. Separation costs consists of costs related to one time employee termination

payments incurred as part of the termination of our business management and property
management agreements with EQC.

General and administrative. General and administrative expenses for fiscal year ended

September 30, 2015 includes $5,454 of transaction related costs associated with the Up-C
Transaction in 2015, partially offset by costs related to information technology and process
improvement initiatives implemented during 2014, as well as lower costs incurred for travel,
temporary staffing and other costs as a result of the termination of our management agreements
with EQC effective September 30, 2014.

Depreciation expense. Depreciation expense decreased $329 as a result of certain equipment

and capitalized software additions becoming fully depreciated subsequent to October 1, 2013 and
the disposal, at book value, of $1,335 of property and equipment in 2015.

Interest and other income.

Interest and other income increased $1,235 primarily due to

increased dividends received from the Managed REITs and EQC on common shares of the
Managed REITs and EQC we owned, as well as interest on a larger amount of investable cash we
had during the fiscal year ended September 30, 2015 when compared to the fiscal year ended
September 30, 2014.

Unrealized losses attributable to changes in fair value of stock accounted for under the fair
value option. Unrealized losses attributable to changes in fair value of stock accounted for under
the fair value option consists of unrealized gains or losses on our common shares of the Managed
REITs based on changes in quoted market prices between the periods presented. Prior to the Up-C
transaction RMR LLC transferred all the Managed REITs shares it owned to ABP Trust.

Income tax expense. For periods prior to the Up-C Transaction, income tax expense for the
fiscal year ended September 30, 2014 primarily represents taxes incurred in Australia on income
earned by the Australian subsidiary of RMR Intl, compared to the fiscal year ended September 30,
2015 when our Australian operations did not generate taxable income. Income tax expense in 2015
is primarily attributable to RMR Inc. becoming a corporation as part of the Up-C Transaction and
thus subject to U.S. federal and state income tax with respect to RMR Inc.’s allocable share of any
taxable income of RMR LLC and its wholly owned subsidiaries.

Equity in earnings of investee. Equity in earnings of investee represents our proportionate

share of earnings from our investment in AIC for the fiscal years ended September 30, 2015 and
2014, and the change represents the decrease in AIC’s profits in fiscal year 2015 compared to 2014.

LIQUIDITY AND CAPITAL RESOURCES (dollar amounts in thousands, except per share

amounts)

We regularly monitor our liquidity position, including cash and cash equivalents, working capital,
outstanding commitments and other liquidity sources and requirements. Cash and cash equivalents
include all short term, highly liquid investments that are readily convertible to known amounts of cash
and also have original maturities of three months or less from the date of purchase. We currently
intend to use cash and cash equivalents to fund our working capital needs, to pay the regular
quarterly cash dividend and to fund possible new business ventures.

Our current assets have historically been comprised predominantly of cash, cash equivalents
and receivables for business management and property management and advisory services fees.
We have historically paid a significant portion of employee compensation as annual cash bonuses
during the last quarter of our fiscal year. Therefore, our cash balances generally have been at their
lowest near the end of our fiscal year fourth quarter after cash bonuses were paid to our employees.
Our cash balances then typically increase over the remainder of the next fiscal year. Our current
liabilities have historically included accounts payable, accrued expenses and deposits, including
accrued employee compensation.

As of September 30, 2016 and 2015, we had cash and cash equivalents of $65,833 and

$34,497, respectively, of which $6,012 and $206, respectively, was held by RMR Inc., with the
remainder being held at RMR LLC. As of September 30, 2016 and 2015, $57,741 and $33,241,
respectively, of our cash and cash equivalents were invested in money market funds. The increase
in cash and cash equivalents principally reflects cash generated from operations for the fiscal year
ended September 30, 2016, including RMR LLC’s portion of the calendar year 2015 incentive
business management fee that it received in January 2016.

Our liquidity is highly dependent upon our receipt of fees from the businesses that we manage.

Historically we have funded our working capital needs with cash generated from our operating
activities, and we currently do not maintain any credit facilities under which borrowings are available
to us. We expect that our future working capital needs will relate largely to our operating expenses,
primarily consisting of employee compensation and benefits costs, our obligation to make quarterly
tax distributions to the members of RMR LLC, our obligation to make payments to ABP Trust under
the Tax Receivable Agreement, our plan to make quarterly distributions on our Class A Common
Shares and Class B-1 Common Shares and our plan to pay quarterly distributions to the members
of RMR LLC in connection with the quarterly dividend to RMR Inc. shareholders. Our management

fees are typically payable to us within 30 days of the end of each month or, in the case of annual
incentive business management fees, within 30 days following each calendar year end as specified
in our management agreements. Historically, we have not experienced losses on collection of our
fees and have not recorded any allowances for bad debts.

We believe that our operating cash flow will be sufficient to meet our operating needs and

commitments for the next 12 months and for the reasonably foreseeable future. During the fiscal
year ended September 30, 2016, we paid cash distributions to the holders of our Class A Common
Shares and Class B-1 Common Shares aggregating $17,209. These dividends were funded by
distributions from RMR LLC to holders of its membership units aggregating $33,338, of which
$17,209 was distributed to us based on our aggregate ownership membership units of RMR LLC
and $16,129 was distributed to ABP Trust based on its ownership of membership units of RMR LLC.
See Note 7, Shareholders’ Equity, to our Consolidated Financial Statements included in Part IV,
Item 15 of this Annual Report on Form 10-K for more information regarding these distributions.

On November 17, 2016, we paid a dividend on our Class A Common Shares and Class B-1

Common Shares in the amount of $0.25 per Class A Common Share and Class B-1 Common
Share, or $4,021. This dividend was paid to our shareholders of record as of the close of business
on October 21, 2016. The amount of this dividend was calculated as $0.25 per share for the quarter
ended September 30, 2016. This dividend was funded by a distribution from RMR LLC to holders of
its membership units in the amount of $0.25 per unit, or $7,771, of which $4,021 was distributed to
us based on our aggregate ownership of 16,082,432 membership units of RMR LLC and $3,750 was
distributed to ABP Trust based on its ownership of 15,000,000 membership units of RMR LLC.

On August 5, 2016, RMR LLC acquired the Tremont business for total consideration of $2,466,

excluding transaction costs. The sellers of the Tremont business also have the right to receive an
‘‘earn out’’ over the two year period ending August 5, 2018, based on a portion of payments that
RMR LLC receives from a specified part of the historical Tremont business. We funded this
acquisition with cash on hand.

For the fiscal year ended September 30, 2016, pursuant to the RMR LLC Operating Agreement,

RMR LLC made required quarterly tax distributions to its holders of its membership units totaling
$63,095 of which $32,562 was distributed to us and $30,533 was distributed to ABP Trust, based on
each membership unit holder’s respective ownership percentage in RMR LLC. The $32,562
distributed to us was eliminated in our Consolidated Financial Statements included in Part IV,
Item 15 of this Annual Report on Form 10-K, and the $30,533 distributed to ABP Trust was recorded
as a reduction of their noncontrolling interest. We expect to use these funds distributed to us to fund
our tax liabilities and our obligations under the Tax Receivable Agreement described in Note 6,
Related Person Transactions, to our Consolidated Financial Statements included in Part IV, Item 15
of this Annual Report on Form 10-K.

Cash Flows

Fiscal year ended September 30, 2016 compared to the fiscal year ended September 30, 2015

Our changes in cash flows for the fiscal year ended September 30, 2016 compared to the
comparable prior year period were as follows: (i) cash provided from operating activities decreased
from $102,080 in fiscal year 2015 to $98,824 in fiscal year 2016; (ii) cash used in investing activities
decreased from $42,849 in fiscal 2015 to $3,549 in fiscal year 2016; and (iii) cash used in financing
activities decreased from $166,430 in fiscal 2015 to $63,962 in fiscal 2016. Exchange rate
fluctuations in connection with our Australian business activities resulted in a decrease of $35 and
an increase of $23 in cash in fiscal years 2015 and 2016, respectively.

The increase in cash provided by operating activities for the fiscal year ended September 30,
2016, compared to the prior fiscal year primarily reflects increased operating income generated in
fiscal year 2016 primarily offset by the net effect of changes in our working capital activities between
the two periods, including the collection of accounts receivable from EQC during the fiscal year 2015
period and the payment of amounts due to related parties during the fiscal year 2016. The decrease
in cash used by investing activities for fiscal year 2016 as compared to fiscal year 2015 was due
primarily to the acquisition of our investment in RMR LLC during the 2015 period. The decrease in
cash used in financing activities for fiscal year 2016 as compared to fiscal 2015 was primarily due to
members’ distributions to ABP Trust in 2015 period, partially offset by the issuance of our common
shares in connection with the Up-C Transaction.

Fiscal year ended September 30, 2015 compared to the fiscal year ended September 30, 2014

Our changes in cash flows for the fiscal year ended September 30, 2015 compared to the

comparable prior year period were as follows: (i) cash provided by operating activities increased
from $31,681 in fiscal year 2014 to $102,080 in fiscal 2015; (ii) cash used in investing activities
increased from $14,960 in fiscal year 2014 to $42,849 in fiscal year 2015; and (iii) cash from
financing activities changed from $110,577 of cash provided by financing activities in fiscal year
2014 to $166,430 of cash used in financing activities in fiscal year 2015. Exchange rate fluctuations
in connection with our Australian business activities resulted in a decrease of $35 and $132 in cash
in fiscal years 2015 and fiscal 2014, respectively.

The increase in cash provided by operating activities for the fiscal year ended September 30,

2015, compared to the prior fiscal year primarily reflects changes in our working capital accounts in
fiscal year 2015, including the collection of accounts receivable from an unrelated party (i.e., from
EQC, which ceased to be a related party to us after it experienced a change of control in March
2014). The increase in cash used in investing activities for the fiscal year 2015 as compared to the
prior fiscal year was due primarily to RMR Inc.’s investment in RMR LLC as part of the Up-C
Transaction. The change in cash from financing activities for the fiscal year 2015 as compared to the
prior fiscal year was primarily due to our making of a distribution to ABP Trust in fiscal year 2015 as
opposed to our receipt of an advance from ABP Trust in fiscal year 2014.

Off Balance Sheet Arrangements

As of September 30, 2016 and 2015, we had no off balance sheet arrangements that have had

or that we expect would be reasonably likely to have a future material effect on our financial
condition, changes in financial condition, revenues or expenses, results of operations, liquidity,
capital expenditures or capital resources.

Tax Receivable Agreement

We have entered into the Tax Receivable Agreement that provides for the payment by RMR Inc.

to ABP Trust of 85.0% of the amount of savings, if any, in U.S. federal, state and local income tax
or franchise tax that RMR Inc. realizes as a result of (a) the increases in tax basis attributable to
RMR Inc.’s dealings with ABP Trust and (b) tax benefits related to imputed interest deemed to be
paid by it as a result of the Tax Receivable Agreement. See Note 6, Related Person Transactions,
to our Consolidated Financial Statements included in Part IV, Item 15 of this Annual Report on
Form 10-K and ‘‘Business—Our Organizational Structure—Tax Receivable Agreement’’ included in
Part 1, Item 1 of this Annual Report on Form 10-K. As of September 30, 2016, our consolidated
balance sheet reflects a liability related to the Tax Receivable Agreement of $64,929, of which we
expect to pay $2,900 to ABP Trust during the fourth quarter of fiscal 2017.

Market Risk and Credit Risk

We historically have not invested in derivative instruments, borrowed through issuing debt
securities or transacted a significant part of our businesses in foreign currencies. As a result, we are
not now subject to significant market risk related to interest rate changes, commodity price changes
or credit risks; however, if any of these risks were to negatively impact our Client Companies’
businesses or market capitalization, our revenues would likely decline. To the extent we change our
approach on the foregoing activities, or engage in other activities, our market and credit risks could
change.

Risks Related to Cash and Short Term Investments

Our cash and cash equivalents include short term, highly liquid investments readily convertible

to known amounts of cash that have original maturities of three months or less from the date of
purchase. We invest a substantial amount of our cash in money market funds. The majority of our
cash is maintained in U.S. bank accounts. Some U.S. bank account balances exceed the FDIC
coverage limit. We believe our cash and short term investments are not subject to any material
interest rate risk, equity price risk, credit risk or other market risk.

Exchange Rate Risk

During the periods presented in this Annual Report on Form 10-K we were exposed to the risk

that the exchange rate of the U.S. dollar relative to other currencies could have an adverse effect on
the reported value of our non U.S. dollar denominated or based assets and liabilities. In addition, in
the 2015 period, certain reported amounts of our management and advisory revenue were affected
by movements in the rate of exchange between the Australian dollar, based on which certain of our
revenues were calculated, and the U.S. dollar, in which our financial statements are denominated.
For the fiscal years ended September 30, 2016 and 2015, the net impacts of the fluctuation of
foreign currencies included in other comprehensive income on our consolidated statements of
comprehensive income were income of $19 and expense of $252, respectively. We did not enter into
any transactions to hedge our exposure to these foreign currency fluctuations through the use of
derivative instruments or other methods. We do not believe these risks are material to us at this
time, but they could become material if we significantly expand our non-U.S. dollar business
activities in the future.

Contractual Obligations

The following table sets forth information relating to our contractual obligations as of

September 30, 2016:

Contractual obligations

Payments due by period

Total

Less than
1 year

1 - 3 years

3 - 5 years

More
than
5 years

Operating leases . . . . . . . . . . . . . . . . . . . .
Tax receivable agreement . . . . . . . . . . . . . .

$30,309
64,929

$3,957
2,900

$ 7,674
5,951

$ 6,361
6,416

$12,317
49,662

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

98,075

6,759

13,335

12,989

64,992

The commitment table above excludes amounts due to the sellers of the Tremont business
because the ultimate amounts and timing of such amounts due are not presently known. As of
September 30, 2016, a payable of $1,257 relating to the ‘‘earn out’’ of our acquisition of the Tremont
business has been recorded in our Consolidated Financial Statements included in Part IV, Item 15 of

this Annual Report on Form 10-K, which represents our best estimate of the amount we currently
expect to owe under our asset purchase agreement for the acquisition of the Tremont business.

Related Person Transactions

We have relationships and historical and continuing transactions with our Founders and certain

of our Client Companies, our Founders have historical and continuing relationships with certain of
our Client Companies and several of our Client Companies have material historical and ongoing
relationships with other Client Companies. For example, our Founders are our controlling
shareholders and hold membership units of our subsidiary, RMR LLC, through ABP Trust; our
Founders serve as managing trustees of each Managed REIT and own and are directors of
Sonesta; Barry M. Portnoy serves as a managing director of Five Star and TA; as of November 14,
2016, ABP Trust, which is owned by our Founders, and our Founders together owned approximately
36.8% of Five Star’s outstanding common stock; we are a party to the Tax Receivable Agreement
with ABP Trust; all of the executive officers of the Managed REITs and many of the executive
officers of the Managed Operators are our officers and employees. As of September 30, 2016: the
Managed REITs owned a majority of our outstanding Class A Common Shares; HPT is TA’s
principal landlord, and TA is HPT’s largest tenant, operating travel center locations owned by HPT
pursuant to long term leases; SNH is Five Star’s principal landlord and Five Star is SNH’s largest
tenant and manager of senior living communities, operating senior living communities owned by SNH
pursuant to long term agreements; and Sonesta manages 33 of HPT’s hotels pursuant to long term
management agreements. For further information about these and other such relationships and
related person transactions, please see Note 6, Related Person Transactions, to our Consolidated
Financial Statements included in Part IV, Item 15 of this Annual Report on Form 10-K, which is
incorporated herein by reference, the section captioned ‘‘Business’’ above in Part I, Item 1 of this
Annual Report on Form 10-K, our other filings with the SEC and our definitive Proxy Statement for
our 2017 Annual Meeting of Shareholders, or the 2017 Proxy Statement, to be filed within 120 days
after the close of the fiscal year ended September 30, 2016. In addition, for more information about
these transactions and relationships and about the risks that may arise as a result of these and
other related person transactions and relationships, please see elsewhere in this Annual Report on
Form 10-K, including ‘‘Warning Concerning Forward Looking Statements’’ and Part I, Item 1A ‘‘Risk
Factors.’’

Critical Accounting Policies

An understanding of our accounting policies is necessary for a complete analysis of our results,

financial position, liquidity and trends. The preparation of our financial statements requires our
management to make certain critical accounting estimates and judgments that impact (i) the revenue
recognized during the reporting periods and (ii) our principles of consolidation. These accounting
estimates are based on our management’s judgment. We consider them to be critical because of
their significance to our financial statements and the possibility that future events may cause
differences from current judgments or because the use of different assumptions could result in
materially different estimates. We review these estimates on a periodic basis to test their
reasonableness. Although actual amounts likely differ from such estimated amounts, we believe such
differences are not likely to be material.

Revenue Recognition. Our principal sources of revenue are:

• business management fees, including base and incentive business management fees; and

• property management fees, including construction supervision fees and reimbursement for

certain payroll and related expenses.

We recognize revenue from business management and property management fees as earned in

accordance with our management agreements. We consider the incentive business management
fees earned from the REITs that we manage to be contingent performance based fees, which we
recognize as revenue when earned at the end of each measurement period. We also recognize as
revenue certain payroll reimbursements in our capacity as property manager, at cost, when we incur
the related reimbursable payroll and related costs on behalf of our Client Companies. See the
‘‘Revenue Recognition’’ section of Note 2, Summary of Significant Accounting Policies, to our
Consolidated Financial Statements included in Part IV, Item 15 of this Annual Report on Form 10-K
for a detailed discussion of our revenue recognition policies and our contractual arrangements.

Consolidation. Our Consolidated Financial Statements included in Part IV, Item 15 of this

Annual Report on Form 10-K include only the accounts of the entities we control. We continually
assesses whether our existing contractual rights give us the ability to direct the activities of the
entities we manage that most significantly affect the results of that entity. The activities and factors
we consider include, but are not limited to:

• our representation on the entity’s governing body;

• the size of our ownership in the entities we manage compared to the size of the entity and

the size of other investors’ interests; and

• our contractual authority to make policy and strategic decisions without further approval or

oversight of the entity’s governing body.

Based on our historical assessments, we have not consolidated the entities we manage. We will

reassess these conclusions if and when facts and circumstances indicate that there are changes to
the elements evidencing control.

JOBS Act. We are an ‘‘emerging growth company’’ under the JOBS Act and are permitted to
comply with new or revised accounting pronouncements based on the effective date for private (not
publicly traded) companies. We have elected to delay the adoption of new or revised accounting
standards, and, as a result, we may not comply with new or revised accounting standards on the
relevant dates on which adoption of such standards is required for non-emerging growth companies.
As a result, our financial statements may not be comparable to companies that comply with new or
revised accounting pronouncements.

Recent Accounting Developments. For a discussion of recently issued accounting

pronouncements and their impact or potential impact on our consolidated financial statements, see
Note 3, Recent Accounting Pronouncements, to our Consolidated Financial Statements included in
Part IV, Item 15 of this Annual Report on Form 10-K.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Quantitative and Qualitative disclosures about market risk are set forth above in
‘‘Item 7—Management’s Discussion and Analysis of Financial Condition and Results of
Operation—Market Risk and Credit Risk.’’

Item 8. Financial Statements and Supplementary Data

The information required by this item is included in Item 15 of this Annual Report on Form 10-K.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial

Disclosure

None.

Item 9A. Controls and Procedures

As of the end of the period covered by this report, our management carried out an evaluation,

under the supervision and with the participation of our Managing Directors, our Chief Executive
Officer and our Chief Financial Officer, of the effectiveness of our disclosure controls and procedures
pursuant to Exchange Act Rules 13a-15 and 15d-15. Based upon that evaluation, our Managing
Directors, our Chief Executive Officer and our Chief Financial Officer concluded that our disclosure
controls and procedures are effective.

There have been no changes in our internal control over financial reporting during the quarter
ended September 30, 2016 that have materially affected, or are reasonably likely to materially affect,
our internal control over financial reporting.

Management Report on Assessment of Internal Control Over Financial Reporting

We are responsible for establishing and maintaining adequate internal control over financial

reporting. Our internal control system is designed to provide reasonable assurance to our
management and Board of Directors regarding the preparation and fair presentation of published
financial statements. All internal control systems, no matter how well designed, have inherent
limitations. Therefore, even those systems determined to be effective can provide only reasonable
assurance with respect to financial statement preparation and presentation.

Our management assessed the effectiveness of our internal control over financial reporting as of

September 30, 2016. In making this assessment, it used the criteria set forth by the Committee of
Sponsoring Organizations of the Treadway Commission (2013 Framework). Based on our
assessment, we believe that, as of September 30, 2016, our internal control over financial reporting
is effective.

This Annual Report on Form 10-K does not include an attestation report from our registered

public accounting firm on our internal control over financial reporting due to the exemption for
emerging growth companies created by the JOBS Act.

Item 9B. Other Information

None.

PART III

Item 10. Directors, Executive Officers and Corporate Governance

The information required by this Item 10 of Form 10-K will be included in the 2017 Proxy

Statement and is incorporated herein by reference.

Item 11. Executive Compensation

The information required by this Item 11 of Form 10-K will be included in the 2017 Proxy

Statement and is incorporated herein by reference.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related

Stockholder Matters

Equity Compensation Plan Information. We may grant our Class A Common Shares to our
officers and employees under 2016 Omnibus Equity Plan adopted in 2016, or our 2016 Plan. In
addition, each of our Directors receives Class A Common Shares under the 2016 Plan as part of his
or her annual compensation for serving as a Director. The terms of grants made under the 2016
Plan are determined by the Equity Plan Subcommittee of our Board of Directors, at the time of the
grant. The following table is as of September 30, 2016.

Plan category

Equity compensation plans
approved by security
holders—2016 Plan . . . . . . . .

Equity compensation plans not

approved by security holders .
. . . . . . . . . . . . . . . . . .
Total

Number of securities
to be issued upon
exercise of
outstanding options,
warrants and rights

Weighted-average
exercise price of
outstanding options,
warrants and rights

Number of securities
remaining available for
future issuance under equity
compensation plans
(excluding securities
reflected in column (a))

(a)

(b)

(c)

None.

None.
None.

None.

None.
None.

517,568(1)

None.
517,568(1)

(1) Consists of shares available for issuance pursuant to the terms of the 2016 Plan. Share awards

that are forfeited will be added to the shares available for issuance under 2016 Plan.

The information required by this Item 12 of Form 10-K will be included in the 2017 Proxy

Statement and is incorporated herein by reference.

Item 13. Certain Relationships and Related Person Transactions, and Director Independence

The information required by this Item 13 of Form 10-K will be included in the 2017 Proxy

Statement and is incorporated herein by reference.

Item 14. Principal Accountant Fees and Services

The information required by this Item 14 of Form 10-K will be included in the 2017 Proxy

Statement and is incorporated herein by reference.

Item 15. Exhibits and Financial Statement Schedules

(a)

Index to Financial Statements and Financial Statement Schedules

PART IV

The following consolidated financial statements of The RMR Group, Inc. are included on the

pages indicated:

Report of Independent Registered Public Accounting Firm . . . . . . . . . . . . . . . . . . . . . . . . . . . F-1
Consolidated Balance Sheets as of September 30, 2016 and 2015 . . . . . . . . . . . . . . . . . . . . F-2
Consolidated Statements of Comprehensive Income for the fiscal years ended September 30,

2016, 2015 and 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-3

Consolidated Statements of Shareholders’ and Members’ Equity for the fiscal years ended

September 30, 2016, 2015 and 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-4

Consolidated Statements of Cash Flows for the fiscal years ended September 30, 2016, 2015

and 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-5
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-6

All other schedules for which provision is made in the applicable accounting regulations of the

SEC are not required under the related instructions, or are inapplicable, and therefore have been
omitted.

(b) Exhibits

Exhibits to our Annual Report on Form 10-K for the fiscal year ended September 30, 2016 have

been included only with the version of that Annual Report on Form 10-K filed with the SEC.

A copy of our Annual Report on Form 10-K for the fiscal year ended September 30, 2016,
including a list of exhibits, is available free of charge upon written request to: Investor Relations, The
RMR Group Inc., Two Newton Place, 255 Washington Street, Suite 300, Newton, MA 02458-1634,
telephone (617) 796-8230.

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of The RMR Group Inc.:

We have audited the accompanying consolidated balance sheets of The RMR Group Inc. as of
September 30, 2016 and 2015, and the related consolidated statements of comprehensive income,
shareholders’ and members’ equity and cash flows for each of the three fiscal years in the period
ended September 30, 2016. These financial statements are the responsibility of the Company’s
management. Our responsibility is to express an opinion on these financial statements based on our
audits.

We conducted our audits in accordance with the standards of the Public Company Accounting

Oversight Board (United States). Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of material
misstatement. We were not engaged to perform an audit of the Company’s internal control over
financial reporting. Our audits included consideration of internal control over financial reporting as a
basis for designing audit procedures that are appropriate in the circumstances, but not for the
purpose of expressing an opinion on the effectiveness of the Company’s internal control over
financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and evaluating the
overall financial statement presentation. We believe that our audits provide a reasonable basis for
our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects,

the consolidated financial position of The RMR Group Inc. at September 30, 2016 and 2015, and the
consolidated results of their operations and their cash flows for each of the three fiscal years in the
period ended September 30, 2016, in conformity with U.S. generally accepted accounting principles.

Boston, Massachusetts
December 15, 2016

/s/ Ernst & Young LLP

F-1

The RMR Group Inc.

Consolidated Balance Sheets

(dollars in thousands, except share amounts)

September 30,
2016

September 30,
2015

Assets
Current assets:

Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Due from related parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid and other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 65,833
24,862
4,690

Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

95,385

Furniture and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Leasehold improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Capitalized software costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total property and equipment
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Due from related parties, net of current portion . . . . . . . . . . . . . . . . . . . . . .
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Intangible assets, net of amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred tax asset . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets, net of amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5,024
1,077
4,250

10,351
(6,549)

3,802
7,754
2,295
1,085
45,819
181,391

$ 34,497
17,986
2,863

55,346

5,307
852
4,292

10,451
(5,772)

4,679
6,446
—
—
46,614
190,807

Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$337,531

$303,892

Liabilities and Equity
Current liabilities:

Accounts payable, accrued expenses and deposits . . . . . . . . . . . . . . . . . .

$ 20,579

$ 18,439

Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long term portion of deferred rent payable, net of current portion . . . . . . . . . .
Amounts due pursuant to tax receivable agreement, net of current portion . . . .
Employer compensation liability, net of current portion . . . . . . . . . . . . . . . . .

Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

20,579
778
62,029
7,754

91,140

Commitments and contingencies

Equity:

Class A common stock, $0.001 par value; 31,600,000 and 31,000,000
shares authorized; 15,082,432 and 15,000,000 shares issued and
outstanding at September 30, 2016 and 2015, respectively . . . . . . . . . . .

Class B-1 common stock, $0.001 par value; 1,000,000 shares authorized,

issued and outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Class B-2 common stock, $0.001 par value; 15,000,000 shares authorized,

issued and outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additional paid in capital
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cumulative other comprehensive income . . . . . . . . . . . . . . . . . . . . . . . .
Cumulative common distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Noncontrolling interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

15
94,266
44,543
83
(17,209)

121,714
124,677

246,391

18,439
450
64,905
6,446

90,240

15
93,425
7,303
73
—

100,832
112,820

213,652

Total liabilities and equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$337,531

$303,892

See accompanying notes.

F-2

The RMR Group Inc.

Consolidated Statements of Comprehensive Income

(dollars in thousands, except per share amounts)

Revenues

Management services . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reimbursable payroll and related costs . . . . . . . . . . . . . . . .
Advisory services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$226,660
37,660
2,620

$162,326
28,230
2,380

$218,753
64,049
2,244

Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

266,940

192,936

285,046

Fiscal Year Ended September 30,

2016

2015

2014

Expenses

Compensation and benefits . . . . . . . . . . . . . . . . . . . . . . . .
Members profit sharing . . . . . . . . . . . . . . . . . . . . . . . . . . .
Separation costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
General and administrative . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . .

91,985
—
1,358
25,129
1,768

83,456

127,841
— 116,000
2,330
21,957
2,446

116
26,535
2,117

Total expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

120,240

112,224

270,574

Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest and other income . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unrealized losses attributable to changes in fair value of stock
accounted for under the fair value option . . . . . . . . . . . . . .

Income before income tax expense and equity in earnings of

146,700
234

80,712
1,732

14,472
497

—

(290)

(4,556)

investee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity in earnings of investee . . . . . . . . . . . . . . . . . . . . . . . .

146,934
(24,573)
—

82,154
(4,848)
115

10,413
(280)
160

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

122,361

77,421

$ 10,293

Net income attributable to noncontrolling interest

. . . . . . . . . .

(85,121)

(70,118)

Net income attributable to RMR Inc.

. . . . . . . . . . . . . . . . . . .

$ 37,240

7,303

Other comprehensive income (loss):

Foreign currency translation adjustments . . . . . . . . . . . . . .
Unrealized loss in investment in available for sale securities .
Equity interest in investee’s unrealized gains . . . . . . . . . . . .

Other comprehensive income (loss) . . . . . . . . . . . . . . . . . . . .

19
—
—

(252)
(54)
35

(271)

(125)
(37)
24

(138)

Comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . . .

122,380

77,150

$ 10,155

Comprehensive income attributable to noncontrolling interest . .

(85,130)

(69,774)

Comprehensive income attributable to RMR Inc.

. . . . . . . . . .

$ 37,250

7,376

Weighted average common shares outstanding—basic and

diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

16,005

16,000

Net income attributable to RMR Inc. per common shares—basic

and diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2.33

0.46

See accompanying notes.

F-3

The RMR Group Inc.

Consolidated Statements of Shareholders’ and Members’ Equity

(dollars in thousands)

Class A Class B-1 Class B-2 Additional

Members’ Common Common Common

Equity

Stock

Paid In
Capital

Cumulative
Other

Retained Comprehensive
Earnings

Income (Loss) Distributions

Cumulative
Common

Balance at September 30, 2013 . . . . . . $ 109,560
110,577
10,293

Members’ contribution . . . . . . . . . .
Net income . . . . . . . . . . . . . . . .
Foreign currency translation

$ —
—
—

$—
—
—

$ —
—
—

— $
—
—

F
-
4

adjustments . . . . . . . . . . . . . . .

Unrealized losses on available for sale

securities . . . . . . . . . . . . . . . .

Increase in share of investee’s other

comprehensive income . . . . . . . .

—

Balance at September 30, 2014 . . . . . .
Net income . . . . . . . . . . . . . . . .
Net cash distributions to Member . . . .
Non-cash distributions to Member . . . .
Other comprehensive loss . . . . . . . .

230,430
58,580
(224,139)
(60,143)
—

Balance at June 5, 2015 . . . . . . . . . .
Issuance of Class A common shares . .
Issuance of Class B-1 common shares .
Receipt of Class A membership units

from ABP Trust . . . . . . . . . . . . .
Issuance of Class B-2 common shares .
Establishment of deferred tax asset, net

of amounts payable under tax
receivable agreement

. . . . . . . . .
Net income . . . . . . . . . . . . . . . .
Tax distributions to Members . . . . . .
Other comprehensive income . . . . . .
Reorganization of equity structure . . . .

Balance at September 30, 2015 . . . . . .
Share grants, net
. . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . .
Incentive fee allocable to ABP Trust
. .
Tax distributions to Member . . . . . . .
Common share distributions . . . . . . .
Other comprehensive income . . . . . .

Balance at September 30, 2016 . . . . . . $

4,728
—
—

—
—

—
—
—
—
(4,728)

—
—
—
—
—
—
—

—

—
—
—
—
—

—
15
—

—
—

—
—
—
—
—

15
—
—
—
—
—
—

—

—
—
—
—
—

—
—
1

—
—

—
—
—
—
—

1
—
—
—
—
—
—

—

—
—
—
—
—

—
—
—

—
15

—
—
—
—
—

15
—
—
—
—
—
—

Total
Shareholders’
and
Members’
Equity

Noncontrolling
Interest

Total
Equity

$ 109,512
110,577
10,293

(125)

(37)

230,244
58,580
(224,139)
(60,143)
(460)

4,082
361,585
11,520

(165,781)
—

(14,607)
7,303
—
73
(103,343)

100,832
841
37,240
—
—
(17,209)
10

—
—
—

—

—
—
—
—
—

—
—
—

$ 109,512
110,577
10,293

(125)

(37)

230,244
58,580
(224,139)
(60,143)
(460)

4,082
361,585
11,520

(1,983)
—

(167,764)
—

—
11,538
(194)
116
103,343

112,820
—
85,121
(26,611)
(30,533)
(16,129)
9

(14,607)
18,841
(194)
189
—

213,652
841
122,361
(26,611)
(30,533)
(33,338)
19

$ (48)
—
—

(125)

(37)

(186)
—
—
—
(460)

(646)
—
—

—
—

—
—
—
73
646

73
—
—
—
—
—
10

—
—
—

—

—
—
—
—
—

—
—
—

—
—

—
—
—
—
—

—
—
—
—
—
(17,209)
—

—
—
—

—

—
—
—
—
—

—
—
—

—
—

—

—
—
—
—
—

—
361,570
11,519

(165,781)
(15)

(14,607)
—
—
—
(99,261)

—
7,303
—
—
—

93,425
841

7,303
—
— 37,240
—
—
—
—
—
—
—
—

$15

$ 1

$15

$ 94,266

$44,543

$ 83

$(17,209)

$ 121,714

$124,677

$ 246,391

See accompanying notes.

The RMR Group Inc.

Consolidated Statements of Cash Flows

(dollars in thousands)

Fiscal Year Ended September 30,

2016

2015

2014

Cash Flows from Operating Activities

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustments to reconcile net income to net cash from operating activities:

$122,361

$ 77,421

$ 10,293

Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Straight line office rent amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization expense related to other asset . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unrealized losses attributable to changes in fair value of stock accounted for under the fair value option . . . .
Dividend income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Revenues paid in common shares of Managed REITs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gain on sale of shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity in earnings of investee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss on disposition of assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating expenses paid in RMR Inc. common shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Changes in assets and liabilities:

Due from related parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid and other current assets
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts payable, accrued expenses and deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Incentive fee allocable to ABP Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Due to related parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1,768
328
9,416
795
—
—
—
—
—
—
933

(6,298)
—
(1,401)
(2,467)
(26,611)
—

2,117
48
2,999
—
290
(1,259)
(6,564)
(15)
(115)
—
—

29,166
26,229
3,755
287
—
(32,279)

2,446
70
—
—
4,556
(421)
(11,809)
(123)
(160)
136
—

70,098
(19,486)
(951)
5,483
—
(28,451)

Net cash from operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

98,824

102,080

31,681

Cash Flows from Investing Activities
Purchase of property and equipment
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchase of SIR shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisitions
Purchase of equity investment interest
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from sale of shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from disposal of assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dividends received from investment in REITs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchase of investment in RMR LLC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Net cash used in investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Cash Flows from Financing Activities
Loan from Member . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payments to Member
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from issuance of common shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Repurchase of Common Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Distribution to noncontrolling interest
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Members contribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Members distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Distribution to common shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(1,070)
—
(2,479)
—
—
—
—
—

(3,549)

—
—
—
(91)
(46,662)
—
—
(17,209)

(1,404)
—
—
—
2,369
1,335
1,237
(46,386)

(1,417)
(16,018)
—
(825)
2,895
25
380
—

(42,849)

(14,960)

—
—
57,906
—
—
—
(224,336)
—

57,000
(57,000)
—
—
—
110,577
—
—

Net cash (used in) provided by financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(63,962)

(166,430)

110,577

Effect of exchange rate fluctuations on cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . .

Increase (decrease) in cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Cash and cash equivalents at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

31,336

34,497

(35)

(132)

(107,234)

127,166

141,731

14,565

Cash and cash equivalents at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 65,833

$ 34,497

$141,731

Supplemental cash flow information
Interest paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

— $

217

144

104

5,931

$ 11,444

Income taxes paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 25,811

Supplemental schedule of non-cash activities
Fair value of share based payments recorded . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 7,997

Establishment of deferred taxes, net of amounts payable under tax receivable agreement

. . . . . . . . . . . . .

Non-cash equity activity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Establishment of other asset

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Proceeds from the issuance of common shares received in Managed REIT shares . . . . . . . . . . . . . . . . .

Purchase of investment in RMR LLC in Managed REIT shares . . . . . . . . . . . . . . . . . . . . . . . . . . . .

— $ 14,407

— $ 60,343

— $ 193,806

— $ 121,378

— $(121,378)

—

See accompanying notes.

F-5

The RMR Group Inc.

Notes to Consolidated Financial Statements

(dollars in thousands)

Note 1. Organization

The RMR Group Inc., or RMR Inc., a Maryland corporation, is a holding company, and

substantially all of its business is conducted by its majority owned subsidiary The RMR Group LLC,
or RMR LLC, historically a Delaware limited liability company and, as of June 5, 2015, a Maryland
limited liability company. In these financial statements, unless otherwise indicated, ‘‘we,’’ us’’ and
‘‘our’’ refer to RMR Inc. and its direct and indirect subsidiaries, including RMR LLC. RMR Inc. serves
as the sole managing member of RMR LLC and, in that capacity, operates and controls the
business and affairs of RMR LLC. RMR Inc. was incorporated in Maryland on May 28, 2015 in
contemplation of the June 5, 2015 transaction described in Note 6, Related Person Transactions, or
the Up-C Transaction. Prior to the Up-C Transaction, RMR Inc. had not engaged in any business or
other activities, except in connection with its incorporation.

The Up-C Transaction and preceding reorganization transactions resulted in a change in the
reporting entity for periods prior to June 5, 2015 due to the contribution to RMR LLC of operating
entities under common control as described in Note 6, Related Person Transactions. These
operating entities were then wholly owned by ABP Trust (formerly known as Reit Management &
Research Trust), historically a Massachusetts business trust, and as of January 20, 2016, a
Maryland statutory trust, or by Barry M. Portnoy and Adam D. Portnoy, our Founders, who are the
beneficial owners of ABP Trust. ABP Trust and its beneficial owners are referred to herein
collectively as the Members. The operating entities include RMR Advisors LLC, a Maryland limited
liability company which was formerly a Massachusetts corporation named RMR Advisors, Inc., or
RMR Advisors, and RMR Intl LLC, a Maryland limited liability company, or RMR Intl. These
transactions among entities under common control have been accounted for using the pooling
method of accounting as if the operations of RMR Advisors and RMR Intl were consolidated as of
the beginning of the earliest period presented in our consolidated financial statements and the
ownership structure as of June 5, 2015 had been in existence throughout the periods covered by our
consolidated financial statements. The contribution of RMR Advisors and RMR Intl increased net
income by $245 and $927, and increased other comprehensive income (loss) by $440 and ($125) in
the period October 1, 2014 to June 4, 2015 and the fiscal year ended September 30, 2014,
respectively.

As of September 30, 2016, RMR Inc. owns 15,082,432 class A membership units of RMR LLC,

or Class A Units, and 1,000,000 class B membership units of RMR LLC, or Class B Units. The
aggregate RMR LLC membership units RMR Inc. owns represent 51.7% of the economic interest of
RMR LLC. We refer to economic interest as the right of a holder of a Class A Unit or Class B Unit to
share in distributions made by RMR LLC and, upon liquidation, dissolution or winding up of
RMR LLC, to share in the assets of RMR LLC after payments to creditors. ABP Trust owns
15,000,000 redeemable Class A Units, representing 48.3% of the economic interest of RMR LLC,
which is presented as a noncontrolling interest within the consolidated financial statements.

RMR LLC was founded in 1986 to manage public investments in real estate and, as of
September 30, 2016, managed a diverse portfolio of publicly owned real estate and real estate
related businesses. RMR LLC manages: Government Properties Income Trust, or GOV, a publicly
traded real estate investment trust, or REIT, that primarily owns properties that are majority leased to
the U.S. government and state governments; Hospitality Properties Trust, or HPT, a publicly traded
REIT that primarily owns hotel and travel center properties; Select Income REIT, or SIR, a publicly

F-6

The RMR Group Inc.

Notes to Consolidated Financial Statements (Continued)

(dollars in thousands)

Note 1. Organization (Continued)

traded REIT that primarily owns properties that are net leased to single tenants; and Senior Housing
Properties Trust, or SNH, a publicly traded REIT that primarily owns healthcare senior living and
medical office buildings. Hereinafter, GOV, HPT, SIR and SNH are collectively referred to as the
Managed REITs. RMR LLC also provides management services to other publicly traded and private
businesses, including: Five Star Quality Care, Inc., or Five Star, a publicly traded operator of senior
living communities, many of which are owned by SNH; Sonesta International Hotels Corporation, or
Sonesta, a privately owned franchisor and operator of hotels, resorts and cruise ships in the United
States, Latin America, the Caribbean and the Middle East, some of whose U.S. hotels are owned by
HPT; and TravelCenters of America LLC, or TA, an operator of travel centers along the U.S.
Interstate Highway System, many of which are owned by HPT, convenience stores with retail gas
stations and restaurants. Hereinafter, Five Star, Sonesta and TA are collectively referred to as the
Managed Operators. In addition, RMR LLC also provides management services to certain related
private companies, including Affiliates Insurance Company, or AIC, an Indiana insurance company,
and ABP Trust and its subsidiaries. During the periods presented until September 30, 2014,
RMR LLC provided business and property management services to Equity Commonwealth, or EQC,
a publicly traded REIT that primarily owns office properties, and thereafter RMR LLC provided
certain transition services to EQC through October 31, 2015. For periods prior to June 5, 2015, no
historical member of RMR LLC was obligated personally for any debts, obligations or liabilities of
RMR LLC solely by reason of being a member.

RMR Advisors was founded in 2002. RMR Advisors is the advisor to RMR Real Estate Income

Fund, or RIF. RIF is a closed end investment company focused on investing in real estate securities,
including REITs and other dividend paying securities, but excluding our Client Companies, as
defined below.

On August 5, 2016, we acquired certain assets of Tremont Realty Capital LLC, or the Tremont
business, which specializes in commercial real estate finance, principally capital for commercial real
estate sponsors and serving as advisor to private funds and separately managed accounts that
principally make commercial real estate debt investments. As part of this transaction, our wholly
owned subsidiary, Tremont Realty Advisors LLC, or Tremont Advisors, an investment advisor
registered with the SEC, was assigned the investment management contracts of investment advisory
clients of the Tremont business. Tremont Advisors advises private funds and separately managed
accounts that invest in commercial real estate debt, including secured mortgage debt and mezzanine
financings. Tremont Advisors may also provide advice with respect to commercial real estate that
may become owned by its clients.

RMR Intl was founded in 2012 and is the owner of RMR Australia Asset Management Pty Ltd,

or RMR Australia, a company founded in 2012 to manage properties owned by EQC located in
Australia. RMR Australia holds an Australian financial services license granted by the Australian
Securities & Investments Commission.

In these financial statements, we refer to the Managed REITs, the Managed Operators, RIF,

AIC, ABP Trust and the clients of the Tremont business as our Client Companies.

F-7

The RMR Group Inc.

Notes to Consolidated Financial Statements (Continued)

(dollars in thousands)

Note 2. Summary of Significant Accounting Policies

Basis of Presentation. All intercompany transactions and balances with or among the

consolidated entities have been eliminated.

Equity Method Investments. We accounted for our investments in the Managed REITs and RIF
under the equity method of accounting. We used the equity method to account for these investments
because our Founders are the managing trustees of the Managed REITs and RIF. We elected to
adopt the fair value measurement option in accordance with Financial Accounting Standards Board,
or FASB, Accounting Standards Codification, or ASC, 825-10, Financial Instruments Equity Method
Investments, to record changes in fair value of our holdings in the Managed REITs and RIF as
unrealized in the consolidated statements of comprehensive income. Dividends received in
conjunction with these investments were recorded in our earnings as a component of interest and
other income in the consolidated statements of comprehensive income for the period in which they
were received.

We also accounted for our investment in AIC using the equity method of accounting. We used

the equity method to account for this investment as we believed that we had significant influence
over AIC because our Founders are directors of AIC. Under the equity method, our percentage
share of net earnings or loss and other comprehensive income or loss from AIC was recorded in the
consolidated statements of comprehensive income as equity in earnings of an investee.

Prior to the Up-C Transaction described in Note 6, Related Person Transactions, we distributed

our investments in the Managed REITs, RIF and AIC to ABP Trust at these investments’ book
values of $24,255, $651 and $6,931, respectively. This transfer, totaling $31,837 in the aggregate,
was treated as a non-cash distribution to ABP Trust.

We regularly evaluate our relationships and investments to determine if they constitute variable

interests. A variable interest is an investment or interest that will absorb portions of an entity’s
expected losses or receive portions of an entity’s expected returns. If we determine we have a
variable interest in an entity, we evaluate whether such interest is in a variable interest entity, or VIE.
Under the VIE model, we would be required to consolidate the entities we manage if (i) the entity is
considered to be a VIE and (ii) we are determined to be the primary beneficiary of the entity. We
qualitatively assessed whether we must consolidate any of the entities we manage. Consideration of
factors included, but was not limited to, our representation on the entity’s governing body, the size of
our investment in each entity compared to the size of the entity and the size of other investors’
interests, our ability and the rights of other persons to participate in policy making decisions and to
replace the manager of those entities. Based on this assessment, we concluded that we are not
required to consolidate any of our managed entities. The relationships and investments related to
entities in which we have a variable interest are summarized in Note 6, Related Person
Transactions.

Available for Sale Securities. Our investment in EQC shares was accounted for as available
for sale securities based on their quoted market price at the end of the reporting period. Realized
gains and losses on sales of available for sale securities were based on the average cost method,
adjusted for any other than temporary declines in fair value. Unrealized gains and losses were
recorded as a component of other comprehensive income. We received 90,135 shares of EQC as
partial payment of fees earned under our then existing business management agreement with EQC

F-8

The RMR Group Inc.

Notes to Consolidated Financial Statements (Continued)

(dollars in thousands)

Note 2. Summary of Significant Accounting Policies (Continued)

for the fiscal year ended September 30, 2014. Those shares had a historical cost of $2,354 and a
market value, based on the closing price of EQC shares on the New York Stock Exchange, or the
NYSE, on September 30, 2014, of $2,317. We sold all of those EQC shares in May 2015 and
realized a gain on sale of $15. For the fiscal years ended September 30, 2015 and 2014 we
recorded unrealized losses of $54 and $37, respectively, in other comprehensive income (loss) on
these available for sale EQC shares. No shares of EQC were received for the fiscal years ended
September 30, 2016 or 2015.

Cash and Cash Equivalents. We consider highly liquid investments with original maturities of

three months or less on the date of purchase to be cash equivalents.

Property and Equipment. Property and equipment are stated at cost. Depreciation of furniture
and equipment is computed using the straight line method over estimated useful lives ranging from
three to ten years. Depreciation for leasehold improvements is computed using the straight line
method over the term of the lesser of their useful lives or related lease agreements. Depreciation
expense related to property and equipment for the fiscal years ended September 30, 2016, 2015
and 2014 was $1,105, $1,155 and $1,452 respectively.

Capitalized Software Costs. We capitalize costs associated with the development and
implementation of software created or obtained for internal use in accordance with ASC 340-50,
Internal Use Software. Capitalized costs are depreciated using the straight line method over useful
lives ranging between three and five years. Depreciation expense related to capitalized software
costs for the fiscal years ended September 30, 2016, 2015 and 2014 were $598, $962 and $994,
respectively.

Equity-Based Compensation. The awards made under our share award plan to our directors

and employees to date have been Class A Common Shares. Shares issued to directors vest
immediately. Shares issued to employees vest in five equal, consecutive, annual installments, with
the first installment vesting on the date of grant. Compensation expense related to share grants is
determined based on the market value of our shares on the date of grant, with the aggregate value
of the granted shares amortized to expense over the related vesting period. Shares granted to
directors are included in general and administrative expenses and shares granted to employees are
included in compensation and benefits in our consolidated statements of comprehensive income.

Revenue Recognition. Revenues from services that we provide are recognized as earned in

accordance with contractual agreements. In the periods presented, management and advisory
services revenue consists principally of business management fees, property management fees and
advisory fees earned from our Client Companies, EQC and any clients of the Tremont business.

Business Management and Incentive Fees—Managed REITs and EQC

Prior to January 1, 2014, we earned annual base business management fees from the Managed
REITs and EQC pursuant to business management agreements equal to the sum of (a) 0.5% of the
historical cost of transferred real estate assets, if any, as defined in the applicable business
management agreement, plus (b) 0.7% of the average invested capital (exclusive of the transferred
real estate assets), as defined in the applicable business management agreement, up to $250,000,

F-9

The RMR Group Inc.

Notes to Consolidated Financial Statements (Continued)

(dollars in thousands)

Note 2. Summary of Significant Accounting Policies (Continued)

plus (c) 0.5% of the average invested capital exceeding $250,000. Prior to January 1, 2014 the base
business management fee was paid 100.0% in cash.

These business management agreements were amended such that starting January 1, 2014 we

earned annual base business management fees from the Managed REITs and EQC equal to the
lesser of:

• the sum of (a) 0.5% of the historical cost of transferred real estate assets, if any, as defined
in the applicable business management agreement, plus (b) 0.7% of the average invested
capital (exclusive of the transferred real estate assets), as defined in the applicable business
management agreement, up to $250,000, plus (c) 0.5% of the average invested capital
exceeding $250,000; and

• the sum of (a) 0.7% of the average market capitalization, as defined in the applicable

business management agreement, up to $250,000, plus (b) 0.5% of the average market
capitalization exceeding $250,000.

The foregoing base business management fees are paid monthly in arrears, based on the

REIT’s monthly average historical costs of assets under management and average market
capitalization during the month. For purposes of these fees, a Managed REIT or EQC’s costs of
assets under management did not include shares it owns of another Client Company.

As part of the Up-C Transaction, which is more fully described in Note 6, Related Person
Transactions below, RMR LLC and each of the Managed REITs entered into amended and restated
business management agreements and amended and restated property management agreements.
Each of those amended management agreements has a term that ends on December 31, 2036, and
automatically extends on December 31st of each year so that the terms of the agreements thereafter
end on the 20th anniversary of the date of the extension. Each of the Managed REITs has the right
to terminate each amended management agreement: (i) at any time on 60 days’ written notice for
convenience, (ii) immediately upon written notice for cause, as defined therein, (iii) on 60 days’
written notice given within 60 days after the end of an applicable calendar year for a performance
reason, as defined therein, and (iv) by written notice during the 12 months following a change of
control of RMR LLC, as defined therein. We have the right to terminate the amended management
agreements for good reason, as defined therein.

Under our amended management agreements with the Managed REITs, if a Managed REIT

terminates one or both of our amended management agreements with that Managed REIT for
convenience, or if we terminate one or both of our amended management agreements with a
Managed REIT for good reason, the Managed REIT is obligated to pay us a termination fee in an
amount equal to the sum of the present values of the Managed REIT’s monthly future fees, as
defined therein, for the terminated amended management agreement(s) for the remaining term,
assuming it had not been terminated. If a Managed REIT terminates one or both of our amended
management agreements for a performance reason, as defined therein, the Managed REIT has
agreed to pay to us the termination fee calculated as described above, but assuming a remaining
term of 10 years. No termination fee is payable by a Managed REIT if it terminates one or both of
our amended management agreements for cause or as a result of a change of control of us, as
defined in the applicable management agreement.

F-10

The RMR Group Inc.

Notes to Consolidated Financial Statements (Continued)

(dollars in thousands)

Note 2. Summary of Significant Accounting Policies (Continued)

During the period January 1, 2014 until June 5, 2015, the base business management fee was

paid 90.0% in cash and 10.0% in the applicable REIT’s common shares, which were fully vested
when issued. The number of the REIT’s common shares issued in payment of the base business
management fee for each month equaled 10.0% of the total base management fee for the REIT for
that month divided by the average daily closing price on the New York Stock Exchange of its
common shares during that month. The amended management agreements require that all of the
management fees payable from the Managed REITs to us after June 5, 2015 be paid in cash.

Under the business management agreements, we also had and have the ability to earn annual

incentive business management fees from the Managed REITs and EQC. The incentive business
management fees were and are contingent performance based fees which were and are only
recognized when earned at the end of each respective measurement period. Prior to January 1,
2014, the incentive fee was calculated as 15.0% of the product of (i) the weighted average of the
respective REIT’s common shares outstanding on a fully diluted basis during a calendar year and
(ii) the excess, if any, of the funds from operations, or FFO, per share or cash available for
distribution, as calculated in accordance with the applicable business management agreement, for
such calendar year over the FFO per share or cash available for distribution, as applicable, for the
preceding calendar year, subject to caps on the values of the incentive fees. Starting January 1,
2014 the incentive fees are calculated for each REIT as 12.0% of the product of (a) the equity
market capitalization of the REIT, as defined in the applicable business management agreement,
and (b) the amount, expressed as a percentage, by which the REIT’s total return per share, as
defined in the applicable business management agreement, exceeded the benchmark total return
per share, as defined in the applicable business management agreement, of a specified REIT index
identified in the applicable business management agreement for the measurement period, subject to
caps on the values of the incentive fees. The measurement period for the annual incentive fee in
respect of calendar year 2015 is the two year period that ended on December 31, 2015 and for
calendar years thereafter, the three year period ended on December 31 of each calendar year. The
amended management agreements require that any incentive fee payable by the Managed REITs to
us after June 5, 2015 be paid in cash.

We earned aggregate annual base business management fees for the fiscal years ended
September 30, 2016, 2015 and 2014, of $104,824, $108,035 and $126,525, respectively, from the
REITs then managed of which zero, $6,564 and $8,146, respectively, were paid in common shares
of those REITs. We earned aggregate incentive business management fees from the Managed
REITs for the fiscal years ended September 30, 2016, 2015 and 2014, of $62,263, zero and $3,663,
respectively. Incentive business management fees earned from the Managed REITs for the fiscal
year ended September 30, 2016 were paid in cash. Incentive business management fees earned
from the Managed REITs for the fiscal year ended September 30, 2014 were paid in common
shares of the applicable Managed REITs. Incentive business management fees recognized as
earned in the fiscal year ended September 30, 2016 and 2014 were earned in respect of the 2015
and 2013 calendar years, respectively. We also earned an incentive business management fee for
the fiscal year ended September 30, 2014 from EQC of $15,349 which was paid in cash.

Under the agreements entered into as part of the Up-C Transaction, ABP Trust was entitled to

receive a pro rata share of any incentive business management fee earned for the 2015 calendar

F-11

The RMR Group Inc.

Notes to Consolidated Financial Statements (Continued)

(dollars in thousands)

Note 2. Summary of Significant Accounting Policies (Continued)

year, based on the number of days in 2015 to June 5, 2015, the effective date of the Up-C
Transaction. Accordingly, $26,611of the incentive business management fee earned for the fiscal
year ended September 30, 2016 was allocated to ABP Trust. See Note 6, Related Person
Transactions below.

Business Management Fees—Managed Operators, ABP Trust and AIC

We earn business management fees from the Managed Operators and ABP Trust pursuant to

business management agreements equal to 0.6% of: (i) in the case of Five Star, Five Star’s
revenues from all sources reportable under U.S. generally accepted accounting principles, or GAAP,
less any revenues reportable by Five Star with respect to properties for which it provides
management services, plus the gross revenues at those properties determined in accordance with
GAAP, (ii) in the case of Sonesta, Sonesta’s revenues from all sources reportable under GAAP, less
any revenues reportable by Sonesta with respect to hotels for which it provides management
services, plus the gross revenues at those hotels determined in accordance with GAAP, (iii) in the
case of TA, the sum of TA’s gross fuel margin, as defined in the applicable agreement, plus TA’s
total nonfuel revenues and (iv) in the case of ABP Trust, revenues from all sources reportable under
GAAP. These fees are estimated and payable monthly in advance. We earn business management
fees from AIC pursuant to a management agreement equal to 3.0% of its total premiums paid under
active insurance underwritten or arranged by AIC. We earned aggregate annual business
management fees from the Managed Operators, ABP Trust and AIC for the fiscal years ended
September 30, 2016, 2015 and 2014, of $25,846, $24,606 and $21,983, respectively.

Property Management Fees

We earned property management fees pursuant to property management agreements with
certain Client Companies and EQC. We generally earn fees under these agreements for property
management services equal to 3.0% of gross collected rents. Also, under the terms of the property
management agreements, we receive additional property management fees for construction
supervision in connection with certain construction activities undertaken at the managed properties
equal to 5.0% of the cost of such construction. We earned aggregate property management fees for
the fiscal years ended September 30, 2016, 2015 and 2014, of $33,615, $29,685 and $51,233,
respectively.

Reimbursable Payroll and Related Costs

Pursuant to certain of our management agreements, the companies to which we provide

management services pay or reimburse us for expenses incurred on their behalf. In accordance with
FASB Accounting Standards Codification, or ASC, 605 Revenue Recognition, we present certain
payroll and related cost reimbursements we receive as revenue. A significant portion of these
reimbursable payroll and related costs arises from services we provide pursuant to our property
management agreements that are charged or passed through to and were paid by tenants of our
Client Companies and EQC. We realized reimbursable payroll and related costs for the fiscal years
ended September 30, 2016, 2015 and 2014, of $37,660, $28,230 and $64,049, respectively.

F-12

The RMR Group Inc.

Notes to Consolidated Financial Statements (Continued)

(dollars in thousands)

Note 2. Summary of Significant Accounting Policies (Continued)

Our reimbursable payroll and related costs include grants of common shares from Client
Companies and EQC directly to certain of our officers and employees in connection with the
provision of management services to those companies. The revenue in respect of each grant is
based on the fair value as of the grant date for those shares that have vested, with subsequent
changes in the fair value of the unvested grants being recognized in the consolidated statements of
comprehensive income over the requisite service period. We record an equal offsetting amount as
compensation and benefits expense for all of our payroll and related cost revenues. We realized
equity based compensation expense and related reimbursements for the fiscal years ended
September 30, 2016, 2015 and 2014, of $7,997, $5,931 and $11,444, respectively.

We report all other expenses we incur on behalf of our Client Companies and EQC on a net
basis as the management agreements provide that reimbursable expenses are to be billed directly to
the client. This net basis accounting method is supported by some or all of the following factors,
which we have determined defines us as an agent rather than a principal with respect to these
matters:

• reimbursement to us is generally completed prior to payment of the related expenses;

• the property owner is contractually obligated to fund such operating costs of the property from
existing cash flow or direct funding from its building operating account and we bear little or no
credit risk;

• our clients are the primary obligor in relationships with the affected suppliers and service

providers; and

• we earn no margin on the reimbursement aspect of the arrangement, obtaining

reimbursement only for actual costs incurred.

Advisory Agreements and Other Services to Advisory Clients

RMR Advisors is party to an investment advisory agreement with RIF, and Tremont Advisors is

party to an investment advisory agreement with a private fund. Pursuant to each agreement, RMR
Advisors and Tremont Advisors provide RIF and the private fund, respectively, with a continuous
investment program, make day to day investment decisions and generally manage the business
affairs of RIF and the private fund, respectively, in accordance with such funds’ investment
objectives and policies.

RMR Advisors is compensated pursuant to its agreement with RIF at an annual rate of 0.85% of

RIF’s average daily managed assets, as defined in the agreement. Average daily managed assets
includes the net asset value attributable to RIF’s outstanding common shares, plus the liquidation
preference of RIF’s outstanding preferred shares plus the principal amount of any borrowings,
including from banks or evidenced by notes, commercial paper or other similar instruments issued by
RIF. RMR Advisors earned advisory fees for the fiscal years ended September 30, 2016, 2015 and
2014 of $2,370, $2,380 and $2,244, respectively.

Tremont Advisors is compensated pursuant to its agreement with the private fund at an annual

rate of 1.35% of the weighted average outstanding balance of all strategic investments, as defined in
the agreement, of the private fund. Strategic investments include any direct or indirect participating

F-13

The RMR Group Inc.

Notes to Consolidated Financial Statements (Continued)

(dollars in thousands)

Note 2. Summary of Significant Accounting Policies (Continued)

or non-participating debt investment in certain real estate. Tremont Advisors is also party to loan
servicing agreements with its separately managed account clients. Under such agreements, Tremont
Advisors is compensated at an annual rate of 0.50% of the outstanding principal balance of the
outstanding loans. In certain circumstances, Tremont Advisors is also entitled to performance fees
based on exceeding certain performance targets. Performance fees are realized when a separately
managed account client’s cumulative returns are in excess of the preferred return. Tremont Advisors
did not earn any such performance fees in the period subsequent to our acquisition of the Tremont
business in August 2016 through September 30, 2016. The Tremont business also acts as
transaction originators for non-investment advisory clients for negotiated fees. For the fiscal year
ended September 30, 2016, the Tremont business earned between 0.50% and 0.75% of the
aggregate principal amounts of any loans so originated. We earned management services revenue
of $54 and advisory services revenue of $250 for the fiscal year ended September 30, 2016.

Foreign Operations. The U.S. dollar is the functional currency of our U.S. operations. The

functional currency of the subsidiary of RMR Intl that operated in Australia during the periods
presented was the Australian dollar, as that was the principal currency in which the entity’s assets,
liabilities, income and expenses were denominated. We translated that subsidiary’s financial
statements into U.S. dollars when we combined that subsidiary’s financial statements with our U.S.
operations. Generally, we translated assets and liabilities at the exchange rate in effect as of the
balance sheet date. The accumulation of the resulting translation adjustments is included in
cumulative other comprehensive income in our consolidated balance sheets. We translated income
statement accounts using the average exchange rate for the period and for income statement
accounts that include significant non-recurring transactions at the rate in effect as of the date of the
transaction. We were subject to foreign currency risk due to potential fluctuations in exchange rates
between Australian and U.S. currencies, as a change in the value of Australian currency compared
to U.S. currency has an effect on our reported results of operations and financial position. As of
September 30, 2016, 2015 and 2014, cumulative foreign currency translation adjustment gains
(losses) for the fiscal years then ended were $208, $189, and ($205), respectively.

Cumulative Other Comprehensive Income (Loss). Cumulative other comprehensive income
(loss) represents our share of the comprehensive income (loss) of AIC, our unrealized loss from our
available for sale securities and foreign currency translation adjustments.

Use of Estimates. Preparation of these financial statements in conformity with GAAP requires
our management to make certain estimates and assumptions that may affect the amounts reported
in these financial statements and related notes. The actual results could differ from these estimates.

Concentration of Credit Risk. Financial instruments which potentially subject us to

concentrations of credit risk are primarily cash accounts and amounts due from related parties.
Historically, we have not experienced losses related to our cash accounts or to the credit of our
Clients whose receivables are listed on our balance sheet as due from related parties .

Note 3. Recent Accounting Pronouncements

In May 2014, the FASB issued Accounting Standards Update, or ASU, No. 2014-09, Revenue

from Contracts with Customers. The main provision of ASU No. 2014-09 is to recognize revenue

F-14

The RMR Group Inc.

Notes to Consolidated Financial Statements (Continued)

(dollars in thousands)

Note 3. Recent Accounting Pronouncements (Continued)

when control of the goods or services transfers to the customer, as opposed to the existing guidance
of recognizing revenue when the risk and rewards transfer to the customer. In July 2015, the FASB
approved a one year deferral of the effective date for this ASU to interim and annual reporting
periods beginning after December 15, 2017. We have not yet determined the effects, if any, that the
adoption of ASU 2014-09 may have on our financial position, results of operations, cash flows or
disclosures.

In November 2015, the FASB issued ASU No. 2015-17, Income Taxes: Balance Sheet

Classification of Deferred Taxes, which is intended to improve how deferred taxes are classified on
organizations’ balance sheets by eliminating the current requirement for organizations to present
deferred tax liabilities and assets as current and noncurrent in a classified balance sheet. We
adopted this ASU effective October 1, 2015 and have applied the requirements retrospectively to all
periods presented. The adoption of this standard resulted in the reclassification of $3,398 from
prepaid and other current assets to deferred income tax assets in our consolidated balance sheet as
of September 30, 2015.

In February 2016, the FASB issued ASU No. 2016-02, Leases, which sets out the principles for

the recognition, measurement, presentation and disclosure of leases for both parties to a contract
(i.e., lessees and lessors). ASU No. 2016-02 requires lessees to apply a dual approach, classifying
leases as either finance or operating leases based on the principle of whether or not the lease is
effectively a financed purchase of the leased asset by the lessee. This classification will determine
whether the lease expense is recognized based on an effective interest method or on a straight line
basis over the term of the lease. A lessee is also required to record a right of use asset and a lease
liability for all leases with a term of greater than 12 months regardless of their classification. Leases
with a term of 12 months or less will be accounted for similar to existing guidance for operating
leases today. The new standard requires lessors to account for leases using an approach that is
substantially equivalent to existing guidance for sales type leases, direct financing leases and
operating leases. ASU No. 2016-02 is effective for reporting periods beginning after December 15,
2018, with early adoption permitted. We are currently assessing the potential impact the adoption of
ASU No. 2016-02 will have on our consolidated financial statements.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic

326): Measurement of Credit Losses on Financial Instruments, which requires that entities use a new
forward looking ‘‘expected loss’’ model that generally will result in the earlier recognition of allowance
for credit losses. The measurement of expected credit losses is based upon historical experience,
current conditions, and reasonable and supportable forecasts that affect the collectability of the
reported amount. ASU No. 2016-13 will become effective for fiscal years beginning after
December 15, 2019, including interim periods within those fiscal years. We are currently assessing
the potential impact that adoption of ASU No. 2016-13 will have on our consolidated financial
statements.

In August, 2016 we adopted ASU No. 2015-02, Consolidation (Topic 810): Amendments to the

Consolidation Analysis, which affects the consolidation analysis of reporting entities that are involved
with VIEs, particularly those that have fee arrangements and related party relationships. ASU
2015-02 is effective for fiscal years, and for interim periods within those fiscal years, beginning after

F-15

The RMR Group Inc.

Notes to Consolidated Financial Statements (Continued)

(dollars in thousands)

Note 3. Recent Accounting Pronouncements (Continued)

December 15, 2015, with early adoption permitted. The implementation of this update did not cause
any material changes to our consolidated financial statements.

Note 4. Income Taxes

As a result of the Up-C Transaction, we became the sole managing member of RMR LLC.
RMR LLC is treated as a partnership for U.S. federal and most applicable state and local income tax
purposes. In addition, on June 1, 2015 and June 3, 2015, respectively, RMR Intl and RMR Advisors
became wholly owned disregarded subsidiaries of RMR LLC. As a partnership, RMR LLC is
generally not subject to U.S. federal and most state income taxes. Any taxable income or loss
generated by RMR LLC is passed through to and included in the taxable income or loss of its
members, including RMR Inc. and ABP Trust, based on each member’s respective ownership
percentage. We are a corporation subject to U.S. federal and state income tax with respect to our
allocable share of any taxable income of RMR LLC and its wholly owned subsidiaries.

We had income (loss) before income taxes as follows:

September 30,

2016

2015

2014

United States . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$146,978
(44)

$82,377
(108)

$ 9,308
1,265

Total

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$146,934

$82,269

$10,573

We had a provision for income taxes which consists of the following:

September 30,

2016

2015

2014

Current:

Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$19,332
4,445
—

$ —
$ 250
35
1
— 279

Deferred:

699
97
—

4,051
512
—

—
—
—

Total

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$24,573

$4,848

$280

F-16

The RMR Group Inc.

Notes to Consolidated Financial Statements (Continued)

(dollars in thousands)

Note 4. Income Taxes (Continued)

A reconciliation of the statutory income tax rate to the effective tax rate is as follows:

September 30,

2016

2015

2014

Income taxes computed at the federal statutory rate . . . . . . . . . . . . . .
Permanent items . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income attributable to non-controlling interest
. . . . . . . . . . . . . . . .
Foreign taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State taxes, net of federal benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

35.00% 35.00%

—%
—% 0.10% 0.02%
(21.37)% (29.87)% —%
—% 3.67%
3.09% 0.67% 0.01%
—% (1.01)%

—%

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

16.72% 5.90% 2.69%

For the periods prior to the Up-C Transaction, RMR LLC, RMR Advisors and RMR Intl were not

eligible to file consolidated federal, state, or foreign income tax returns under existing tax law.
Notwithstanding each separate tax filing requirement, the presentation for the periods prior to the
Up-C Transaction represents the combined income tax expense for federal, state and foreign tax
purposes.

For the periods prior to the Up-C Transaction, RMR LLC was a single member limited liability

company, and it was generally disregarded for federal and most state income tax purposes. For the
periods prior to the Up-C Transaction the sole member of RMR LLC was ABP Trust. ABP Trust
elected to be treated as an S corporation for income tax purposes and is generally not subject to
federal and most state income taxes. RMR LLC and ABP Trust, however, are subject to certain state
income taxes. In states where RMR LLC incurs income taxes, it may be subject to audit for tax
years ending September 30, 2012 through its most recent filings. For the period October 1, 2014 to
June 5, 2015, and the fiscal year ended September 30, 2014, RMR LLC had a provision for income
tax expense of $4 and $280, respectively.

For the periods prior to the Up-C Transaction, RMR Advisors elected to be treated as an
S corporation for income tax purposes and was also generally not subject to federal and most state
income taxes. RMR Advisors was, however, subject to certain state income taxes notwithstanding its
S corporation status. RMR Advisors may be subject to audit for tax years ending September 30,
2012 through its most recent filings. For the period ended June 4, 2015 and the fiscal year ended
September 30, 2014, RMR Advisors had no provision for income tax expense.

For the periods prior to the Up-C Transaction, RMR Intl was a partnership for U.S. income tax

purposes and was not subject to federal and state income tax. RMR Intl conducted business in
Australia through a foreign entity that was subject to Australian income tax. RMR Intl, and its foreign
subsidiary, may be subject to audit for tax years ending September 30, 2014 through its most recent
filings. For the period ended June 4, 2015 and the fiscal year ended September 30, 2014, RMR Intl
had no provision for foreign income taxes because RMR Intl has certain offsetting tax losses related
to contract termination fees and other business start-up costs. We have determined that it is likely
that RMR Intl may not realize the benefit of its remaining deferred tax assets and, therefore, we
maintain a full valuation allowance against our deferred tax assets related to RMR Intl.

F-17

The RMR Group Inc.

Notes to Consolidated Financial Statements (Continued)

(dollars in thousands)

Note 4. Income Taxes (Continued)

As of September 30, 2016 and 2015, we had a net deferred tax asset of $45,819 and $46,614,

respectively, which is primarily a result of the Up-C Transaction. For further information about the
Up-C Transaction, please refer to Note 6, Related Person Transactions below. The components of
the deferred tax assets as of September 30, 2016, 2015 and 2014 are as follows:

September 30,

2016

2015

2014

Deferred tax assets:

Termination fee . . . . . . . . . . . . . . . . . . . . . . . . . .
Organization costs . . . . . . . . . . . . . . . . . . . . . . .
Outside basis difference . . . . . . . . . . . . . . . . . . .

190
16
45,819

190
16
46,614

$ 286
23
—

Total deferred tax assets . . . . . . . . . . . . . . . . .

46,025

46,820

309

Valuation allowance . . . . . . . . . . . . . . . . . . . . . . . .

(206)

(309)

Total deferred tax assets . . . . . . . . . . . . . . . . . . . .

$45,819

$46,614

$ —

ASC 740, Income Taxes, provides a model for how a company should recognize, measure and

present in its financial statements uncertain tax positions that have been taken or are expected to be
taken with respect to all open years and in all significant jurisdictions. Pursuant to this topic, we
recognize a tax benefit only if it is ‘‘more likely than not’’ that a particular tax position will be
sustained upon examination or audit. To the extent the ‘‘more likely than not’’ standard has been
satisfied, the benefit associated with a tax position is measured as the largest amount that is greater
than 50.0% likely to be realized upon settlement. As of September 30, 2016, 2015 and 2014, we
have no uncertain tax positions.

Note 5. Fair Value of Financial Instruments

As of September 30, 2016 and 2015, the fair values of our financial instruments, which include

cash and cash equivalents, amounts due from our Client Companies (reported on our balance sheet
as due from related parties) and accounts payable, accrued expenses and deposits, were not
materially different from their carrying values due to the short term nature of these financial
instruments.

Recurring Fair Value Measures

On a recurring basis we measure certain financial assets and financial liabilities at fair value
based upon quoted market prices. ASC 820, Fair Value Measurements, establishes a fair value
hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy
gives the highest priority to unadjusted quoted prices in active markets for identical assets and
liabilities (Level 1), and the lowest priority to unobservable inputs (Level 3). A financial asset’s or
financial liability’s fair value measurement level within the fair value hierarchy is based on the lowest
level of any input that is significant to the fair value measurement. Valuation techniques used need
to maximize the use of observable inputs and minimize the use of unobservable inputs.

F-18

The RMR Group Inc.

Notes to Consolidated Financial Statements (Continued)

(dollars in thousands)

Note 5. Fair Value of Financial Instruments (Continued)

The following are our assets and liabilities that all have been measured at fair value using

Level 1 inputs in the fair value hierarchy as of September 30, 2016 and 2015:

Money market funds included in cash and cash equivalents . . . . . . . . . . . . . .
Current portion of due from related parties related to share based payment

September 30,

2016

2015

$57,741

$33,241

awards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4,977

4,267

Long term portion of due from related parties related to share based payment

awards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current portion of accounts payable, accrued expenses and deposits related to
share based payment awards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Long term portion of employer compensation liability related to share based

7,754

6,446

4,977

4,267

payment awards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

7,754

6,446

Level 3 Estimate

Contingent consideration liabilities are re-measured to fair value each reporting period using
updated probabilities of payment. Projected contingent payment amounts are discounted back to the
current period using a discounted cash flow model. Increases or decreases in probabilities of
payment may result in significant changes in the fair value measurements.

As described in Note 17, Acquisition Activity, in August 2016 we acquired the Tremont business

for total cash consideration of $2,466, plus a potential obligation to pay up to an additional $1,270
over a two year period following the acquisition date based on a portion of the payments that we
receive from a specified part of the historical Tremont business. The contingent consideration was
measured at fair value using an income approach valuation technique, specifically with probability
weighted and discounted cash flows. There was no change in our valuation of the fair value of the
contingent consideration from acquisition date through September 30, 2016.

Note 6. Related Person Transactions

Our Founders are the beneficial owners of ABP Trust, which for the periods prior to June 5,
2015 was the sole owner of RMR LLC. ABP Trust owns all of RMR Inc.’s outstanding Class B-1 and
Class B-2 Common Shares, 90,564 Class A Common Shares and 15,000,000 Class A Units of
RMR LLC. In addition to their beneficial ownership of the shares of RMR Inc. and units of RMR LLC
owned by ABP Trust, as of September 30, 2016, Adam Portnoy and Barry Portnoy owned 20,438
and 29,783 Class A Common Shares, respectively. Our Founders are directors and officers of
RMR Inc. and officers of RMR LLC. For the periods prior to June 5, 2015, our Founders also were
the owners of RMR Advisors and RMR Intl. For the periods presented, our Founders are directors of
AIC and the owners and directors of Sonesta. Since we distributed our interest in AIC to ABP Trust
in anticipation of the Up-C Transaction, ABP Trust has owned 14.3% of AIC. Barry M. Portnoy is a
managing director of Five Star and of TA. Gerard M. Martin, who served as a director of RMR LLC
prior to the Up-C Transaction, is a managing director of Five Star. Our Founders are also managing
trustees of each of the Managed REITs.

F-19

The RMR Group Inc.

Notes to Consolidated Financial Statements (Continued)

(dollars in thousands)

Note 6. Related Person Transactions (Continued)

The Managed REITs and AIC have no employees and no offices separate from RMR LLC.
RMR LLC provides or arranges for all of the personnel, overhead and services required for the
operation of the Managed REITs and AIC pursuant to management agreements with them. All of the
officers of the Managed REITs and AIC are officers or employees of RMR LLC. RIF has no
employees and no office separate from RMR Advisors. All of the officers, overhead and required
office space of RIF are provided or arranged by RMR Advisors and some of these officers also
serve as RMR LLC officers. Some of our executive officers are also directors or trustees of certain
of our Client Companies and executive officers of the Managed Operators. David J. Hegarty, who
served as a director of RMR LLC prior to the Up-C Transaction, is the president and chief operating
officer of SNH.

Until March 25, 2014, our Founders were the managing trustees of EQC, and, until May 23,

2014, Adam D. Portnoy was the President of EQC. RMR LLC provided business and property
management services for EQC until September 30, 2014 and thereafter provided certain transition
management services for EQC through February 28, 2015 pursuant to a termination and cooperation
agreement between RMR LLC and EQC dated as of September 30, 2014. Pursuant to the
termination and cooperation agreement, RMR Intl’s Australian subsidiary continued to provide certain
services for EQC in Australia until October 31, 2015, the effective date of the termination of this
arrangement. We consider that EQC ceased to be our related party on March 25, 2014; however,
the full amount of fees earned from EQC for the periods presented are included in this Note.

F-20

The RMR Group Inc.

Notes to Consolidated Financial Statements (Continued)

(dollars in thousands)

Note 6. Related Person Transactions (Continued)

Revenues from Related Parties. For the fiscal years ended September 30, 2016, 2015 and

2014, we recognized revenues from related parties as set forth in the following table:

For the Fiscal Years Ended September 30,

2016

2015

2014

Managed REITs:

GOV . . . . . . . . . . . . . . . . . . . . . .
HPT . . . . . . . . . . . . . . . . . . . . . .
SIR . . . . . . . . . . . . . . . . . . . . . . .
SNH . . . . . . . . . . . . . . . . . . . . . .

$ 31,919
101,715
42,540
58,401

12.0% $ 28,981
38.1% 40,887
15.9% 32,260
21.9% 53,213

15.0% $ 27,287
21.2% 43,730
16.7% 19,784
27.6% 44,472

234,575

87.9% 155,341

80.5% 135,273

Managed Operators:

Five Star . . . . . . . . . . . . . . . . . . .
Sonesta . . . . . . . . . . . . . . . . . . . .
TA . . . . . . . . . . . . . . . . . . . . . . . .

Other:

AIC . . . . . . . . . . . . . . . . . . . . . . .
RIF . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . .
ABP Trust

Other unrelated parties . . . . . . . . . . .

9,406
2,020
14,936

26,362

240
2,370
3,031

5,641
362

9,169
3.5%
0.8%
1,848
5.6% 14,286

4.7% 12,749
1.0%
1,501
7.4% 12,671

9.9% 25,303

13.1% 26,921

0.1%
0.9%
1.1%

2.1%
0.1%

247
2,380
3,385

6,012
6,280

0.1%
1.2%
1.8%

337
2,244
3,764

3.1%
6,345
3.3% 116,507

9.6%
15.3%
6.9%
15.6%

47.4%

4.5%
0.5%
4.4%

9.4%

0.1%
0.8%
1.3%

2.2%
41.0%

$266,940

100.0% $192,936

100.0% $285,046

100.0%

On December 31, 2015, RMR LLC earned a $62,263 incentive business management fee from

HPT pursuant to our business management agreement with HPT. Pursuant to the RMR LLC
Operating Agreement, ABP Trust was entitled to receive a pro rata share of any incentive business
management fee earned by RMR LLC for the 2015 calendar year based on the number of days in
2015 to June 5, 2015, the effective date of the Up-C Transaction; the pro rata portion of the $62,263
incentive fee allocated solely to ABP Trust was $26,611. In January 2016, HPT paid RMR LLC this
$62,263 incentive fee and RMR LLC paid ABP Trust $26,611.

Investments in Managed REITs, EQC and RIF

For the period January 1, 2014 until June 5, 2015, we were paid a part of our base business
management fees from the Managed REITs in common shares of the respective REIT. After June 5,
2015, our base business management fees from the Managed REITs were paid entirely in cash.

F-21

The RMR Group Inc.

Notes to Consolidated Financial Statements (Continued)

(dollars in thousands)

Note 6. Related Person Transactions (Continued)

During the fiscal years ended September 30, 2015 and 2014, we received shares for such fees as
follows:

REIT

GOV . . . . . . . . . . . . . . . . . . . . . . . . . . .
HPT . . . . . . . . . . . . . . . . . . . . . . . . . . .
SIR . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SNH . . . . . . . . . . . . . . . . . . . . . . . . . . .
EQC . . . . . . . . . . . . . . . . . . . . . . . . . . .

During the Fiscal Year Ended
September 30,

2015

2014

No. of
Shares

30,276
84,810
39,927
103,265
—

Value

No. of
Shares

$ 692
2,605
982
2,285

27,103
86,969
23,136
85,986
— 90,135

$6,564

Value

$ 672
2,474
668
1,978
2,354

$8,146

We did not earn an incentive business management fee from the Managed REITs during the

period ended September 30, 2015. All of the incentive business management fees we earned from
the Managed REITs during the period ended September 30, 2014 were paid in Managed REIT
common shares. During the fiscal year ended September 30, 2014, we received 105,536 common
shares of HPT (valued at $2,772) and 32,865 common shares of SIR (valued at $891) as incentive
business management fees. All of these shares, except the shares of SIR, were transferred to our
Founders on or about the dates of their issuance at their respective market values. We also owned
500,000 common shares of SIR, which we acquired in July 2014 for a cash purchase price of
$16,018 and distributed to our Founders prior to the Up-C Transaction.

Cash dividends that we received on the shares of the Managed REITs and EQC which we

owned during the periods presented totaled $1,237 and $380 for the fiscal years ended
September 30, 2015, and 2014, respectively, and are reported as interest and other income in our
consolidated statements of comprehensive income. All of the shares of the Managed REITs owned
by RMR LLC were distributed by RMR LLC to ABP Trust prior to the Up-C Transaction and,
accordingly, we did not own shares of the Managed REITs during the fiscal year ended
September 30, 2016.

We also historically owned shares of RIF, for which our quarterly dividend distributions were
reinvested in purchasing additional RIF shares. For the fiscal years ended September 30, 2015, and
2014, we purchased 1,068 and 2,223 shares, respectively, for $22, and $41, respectively, pursuant
to this dividend reinvestment program. All of the shares of RIF owned by RMR LLC were distributed
by RMR LLC to ABP Trust prior to the Up-C Transaction and, accordingly, we did not own shares of
RIF during the fiscal year ended September 30, 2016.

Investment in AIC

AIC was formed in 2008 and provides a combined property insurance program for companies
that we manage. Until May 9, 2014, RMR LLC, the Managed REITs, Five Star, TA and EQC each
owned 12.5% of AIC. On May 9, 2014, pursuant to the terms of a shareholders agreement, each of

F-22

The RMR Group Inc.

Notes to Consolidated Financial Statements (Continued)

(dollars in thousands)

Note 6. Related Person Transactions (Continued)

the shareholders of AIC other than EQC purchased a pro rata amount of EQC’s ownership of AIC
for $825 (total purchase price of $5,775), and thereafter RMR LLC, the Managed REITs, Five Star
and TA each owned 14.3% of AIC. As of November 14, 2016, ABP Trust and our Founders together
owned 36.8% of the outstanding common stock of Five Star. RMR LLC distributed its ownership of
AIC to ABP Trust prior to the Up-C Transaction. As of September 30, 2014, the book value of our
ownership of AIC was $6,796 and the historical cost basis of our ownership of AIC was $6,034. For
the fiscal years ended September 30, 2015, and 2014, the earnings of AIC attributable to us were
$115 and $160, respectively.

We provide management services to AIC. For the fiscal years ended September 30, 2016, 2015

and 2014, our management fees earned from AIC were $240, $247 and $337, respectively. We
recognized unrealized gains of $35, and $24 related to investments in available for sale securities
owned by AIC in the fiscal years ended September 30, 2015, and 2014, respectively.

Amounts due from related parties

The following table represents amounts due from related parties as of the dates listed:

Managed REITs:

GOV . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
HPT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SIR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SNH . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 6,165
7,800
7,190
9,733

$ 3,506
6,990
4,741
6,853

As of September 30,

2016

2015

Managed Operators:

Five Star . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sonesta . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
TA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Other Client Companies:

AIC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
RIF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ABP Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

30,888

22,090

291
5
711

1,007

21
17
683

721

1,361
16
821

2,198

22
—
122

144

$32,616

$24,432

The non-cash distribution to ABP Trust prior to the Up-C Transaction included $28,306 of

amounts due from related parties as of that date.

As noted above, EQC ceased to be a related party to us as of March 25, 2014. There were no

amounts due to us from EQC as of September 30, 2016 and 2015, respectively.

F-23

The RMR Group Inc.

Notes to Consolidated Financial Statements (Continued)

(dollars in thousands)

Note 6. Related Person Transactions (Continued)

Leases

As of September 30, 2016, we leased from ABP Trust and certain Managed REITs office space

for use as our headquarters and local offices under 22 different leases. During the fiscal years
ended September 30, 2016, 2015 and 2014, we incurred rental expense under related party leases
aggregating $4,213, $4,120 and $3,866, respectively. Our related party leases have various
termination dates and many have renewal options. Some of our related party leases are terminable
on 30 days’ notice and many allow us to terminate early if our management agreements for the
buildings in which we lease space are terminated.

In addition to the related party leases described in the preceding paragraph, we leased office

space from EQC during the fiscal year ended September 30, 2014. During the fiscal year ended
September 30, 2014, we incurred rental expense under the EQC leases aggregating approximately
$618.

The Up-C Transaction.

On June 5, 2015, we were a party to a transaction with ABP Trust and the Managed REITs, or

the Up-C Transaction.

In anticipation of the Up-C Transaction, the Members and RMR LLC transferred certain assets

and made certain adjustments to their businesses as follows: (i) our Founders contributed their
100.0% ownership of RMR Advisors and RMR Intl to ABP Trust, and ABP Trust contributed these
ownership interests to RMR LLC; (ii) all of the shares of the Managed REITs, RIF and AIC owned by
RMR LLC were distributed by RMR LLC to ABP Trust; (iii) certain cash and cash equivalents,
including cash that had been paid or contributed to RMR LLC by ABP Trust in 2014, were
distributed to ABP Trust; (iv) RMR LLC entered into a new business management agreement and an
amended property management agreement with ABP Trust and an amended business management
agreement with Sonesta; (v) in connection with these new and amended management agreements,
certain employees of RMR LLC and personal property (including property used by the transferred
employees) which RMR LLC determined would not be required for its continuing business were
transferred to ABP Trust and sold to Sonesta for proceeds of $1,335; and (vi) all intercompany
advances between ABP Trust and RMR LLC were settled in cash in advance of the Up-C
Transaction.

In the Up-C Transaction: (a) ABP Trust contributed $11,520 in cash to RMR Inc. which

RMR Inc. subsequently contributed to RMR LLC; (b) GOV contributed 700,000 of its common shares
and $3,917 in cash to RMR Inc., HPT contributed 1,490,000 of its common shares and $12,622 in
cash to RMR Inc., SIR contributed 880,000 of its common shares and $15,880 in cash to RMR Inc.
and SNH contributed 2,345,000 of its common shares and $13,967 in cash to RMR Inc.;
(c) RMR Inc. issued 1,000,000 Class B-1 Common Shares and 15,000,000 Class B-2 Common
Shares to ABP Trust; (d) RMR Inc. issued 1,541,201 Class A Common Shares to GOV, 5,019,121
Class A Common Shares to HPT, 3,166,891 Class A Common Shares to SIR and 5,272,787
Class A Common Shares to SNH; (e) ABP Trust delivered to RMR Inc. 15,000,000 of the
30,000,000 Class A Units of RMR LLC it then owned; and (f) RMR Inc. delivered to ABP Trust the
shares and cash which had been contributed to RMR Inc. by the Managed REITs. Pursuant to the

F-24

The RMR Group Inc.

Notes to Consolidated Financial Statements (Continued)

(dollars in thousands)

Note 6. Related Person Transactions (Continued)

transaction agreements, the Managed REITs agreed to distribute approximately half of our Class A
Common Shares they acquired in the Up-C Transaction to their respective shareholders as a special
distribution, and we agreed to facilitate this distribution by filing a registration statement with the
Securities and Exchange Commission, or SEC, to register those Class A Common Shares to be
distributed and by seeking a listing of those shares on a national stock exchange. During the period
June 5 to September 30, 2015, RMR LLC incurred $5,454 of general and administrative expenses
related to the Up-C Transaction.

As part of the Up-C Transaction and concurrently with entering into the transaction agreements,

on June 5, 2015, the following additional agreements were entered into:

• Amendment and Restatement of Managed REIT Management Agreements. RMR LLC and
each of the Managed REITs entered into an amended and restated business management
agreement and an amended and restated property management agreement, which amended
and restated their preexisting business and property management agreements and extended
them for renewing 20 year terms.

• ABP Trust Registration Rights Agreements. RMR Inc. entered into a registration rights

agreement with ABP Trust pursuant to which ABP Trust received demand and piggyback
registration rights, subject to certain limitations, covering the Class A Common Shares,
including the shares received on conversion of Class B-1 Common Shares or redemption of
the paired Class B-2 Common Shares and Class A Units of RMR LLC.

• Managed REIT Registration Rights Agreements. RMR Inc. entered into a registration rights

agreement with each Managed REIT covering the Class A Common Shares that it received in
the Up-C Transaction, pursuant to which the Managed REIT received demand and piggyback
registration rights, subject to certain limitations.

• Founders Registration Rights and Lock-Up Agreements. Our Founders and ABP Trust

entered into a Registration Rights and Lock-Up Agreement with each Managed REIT with
respect to each Managed REITs’ common shares pursuant to which ABP Trust and our
Founders each agreed not to transfer the Managed REITs’ common shares acquired in the
Up-C Transaction for a period of ten years, subject to certain exceptions, and ABP Trust and
our Founders received demand and piggyback registration rights from the Managed REITs,
subject to certain limitations.

• Tax Receivable Agreement. RMR Inc. and RMR LLC entered into a tax receivable agreement

with ABP Trust that provides for the payment by RMR Inc. to ABP Trust of 85.0% of the
amount of cash savings, if any, in U.S. federal, state and local income or franchise tax that
RMR Inc. realizes as a result of (a) the increases in tax basis attributable to RMR Inc.’s
dealings with ABP Trust and (b) tax benefits related to imputed interest deemed to be paid by
RMR Inc. as a result of the tax receivable agreement.

As a result of the Up-C Transaction, RMR LLC became a subsidiary of RMR Inc., RMR Inc.

became the Managing Member of RMR LLC and each Managed REIT became the owner of more
than 5.0% of the outstanding Class A Common Shares of RMR Inc.

F-25

The RMR Group Inc.

Notes to Consolidated Financial Statements (Continued)

(dollars in thousands)

Note 6. Related Person Transactions (Continued)

In the Up-C Transaction, the Managed REITs contributed cash and shares of the Managed
REITs with a combined value of $167,764 to RMR Inc. For accounting purposes, these common
shares were valued at the NYSE trading closing price of these shares on the date of the Up-C
Transaction, or $121,378. In addition, for purposes of GAAP, we concluded that the consideration
received from the Managed REITs for our Class A Common Shares represented a discount to the
fair value of RMR Inc.’s Class A Common Shares. As a result, we recorded $193,806 in other
assets under ASC 605-50, Consideration Given to a Customer. The consideration received from the
Managed REITs was allocated to the 15,000,000 Class A Common Shares and the 20 year
management agreements under the relative selling price method in accordance with ASC 605-25,
Multiple Element Arrangements, using our best estimate of selling price for each of the deliverables.
The other assets of $193,806 is being amortized against revenue recognized related to the
management agreements with the Managed REITs using the straight line method through the period
ended December 31, 2035. For the fiscal years ended September 30, 2016 and 2015, we reduced
revenue $9,416 and $2,999, respectively, related to the amortization of these other assets. As of
September 30, 2016, the remaining amount of these other assets to be amortized was $181,391.

We recorded the estimated tax benefits related to the increase in tax basis and imputed interest

as a result of the purchase of the 15,000,000 Class A Units of RMR LLC described above as a
deferred tax asset in the consolidated financial statements. The Tax Receivable Agreement resulted
in an aggregate $65,834 of amounts payable. The amounts we recorded for our obligations under
the Tax Receivable Agreement related to the purchase of the 15,000,000 Class A Units are
estimates. Future redemptions of RMR LLC’s Class A Units, if and when they occur, will be
accounted for in a similar manner. The term of the Tax Receivable Agreement commenced on
June 5, 2015 and will continue until all such tax benefits have been utilized or expired, unless the
Tax Receivable Agreement is terminated upon a change of control or upon certain breaches of the
agreement that we fail to cure in accordance with the terms of the agreement. During the fiscal year
ended September 30, 2016, we paid $905 to ABP Trust pursuant to the Tax Receivable Agreement.
As of September 30, 2016, our consolidated balance sheet reflects a liability related to the tax
receivable agreement of $64,929.

Under the RMR LLC Operating Agreement, RMR LLC is also required to make certain pro rata
distributions to each member of RMR LLC quarterly on the basis of the assumed tax liabilities of its
members. For the fiscal year ended September 30, 2016, pursuant to the RMR LLC Operating
Agreement, RMR LLC made required quarterly tax distributions to holders of its membership units
totaling $63,095, of which $32,562 was distributed to us and $30,533 was distributed to ABP Trust,
based on each membership unit holder’s respective ownership percentage. The $32,562 distributed
to us was eliminated in our consolidated financial statements, and the $30,533 distributed to ABP
Trust was recorded as a reduction of its noncontrolling interest. We used funds from this distribution
for payment of certain U.S. federal and state income tax liabilities. We also expect to use funds from
this distribution to pay our obligations under the Tax Receivable Agreement.

Distribution and Ownership of Our Class A Shares

On December 14, 2015, each of GOV, HPT, SIR and SNH completed the pro rata distribution to

holders of record of its common shares on November 27, 2015, of 768,032, 2,515,344, 1,580,055

F-26

The RMR Group Inc.

Notes to Consolidated Financial Statements (Continued)

(dollars in thousands)

Note 6. Related Person Transactions (Continued)

and 2,635,379 Class A Common Shares, respectively. As a shareholder of SIR, GOV received
441,056 Class A Common Shares in this distribution. As a shareholder of each of the Managed
REITs, ABP Trust received 90,564 Class A Common Shares in this distribution. In addition to their
beneficial ownership of the Class A Common Shares received by ABP Trust in this distribution,
Adam Portnoy and Barry Portnoy also received 9,938 and 19,283 Class A Common Shares,
respectively, in this distribution. As of September 30, 2016, GOV, HPT, SIR and SNH owned
1,214,225, 2,503,777, 1,586,836 and 2,637,408 Class A Common Shares, respectively.

Tender Offer for Shares of Five Star by Certain Related Persons

On November 11, 2016, a subsidiary of ABP Trust, ABP Acquisition LLC, purchased 17,999,999

shares of Five Star common stock at $3.00 per share pursuant to a public tender offer. Following
this purchase, our Founders, ABP Trust and ABP Acquisition LLC collectively own 18,339,621
shares of Five Star common stock, or approximately 36.8% of Five Star’s outstanding common stock
as of such date.

ABP Acquisition LLC, ABP Trust and our Founders obtained conditional consents from Five Star

of certain ownership limitations under Five Star’s organizational documents, and consents were
obtained from SNH under its leases, management or other agreements with Five Star and from
Five Star’s lenders under Five Star’s revolving credit agreement to permit ABP Acquisition LLC’s
purchase of the Five Star common stock in the tender offer.

In connection with ABP Acquisition LLC’s purchase of the Five Star common stock, ABP Trust,

ABP Acquisition LLC and our Founders also entered into a consent, standstill, registration rights and
lock-up agreement with Five Star pursuant to which ABP Trust, ABP Acquisition LLC and our
Founders each agreed not to transfer, except for certain permitted transfers as provided therein, any
shares of Five Star common stock acquired after October 2, 2016, including shares acquired in the
tender offer but not including shares issued to Barry M. Portnoy or Adam D. Portnoy under a
Five Star equity compensation plan, for a lock-up period of up to ten years. They also each agreed,
for a period of ten years, not to engage, and to cause their controlled affiliates (a term which
includes us and our subsidiaries) not to engage, in certain activities involving Five Star without the
approval of the Five Star board of directors, including not to make or seek to effect any tender or
exchange offer, merger or other business combination, or extraordinary transaction involving Five
Star or a sale of all or a substantial portion of Five Star’s consolidated assets or solicit proxies to
vote any voting securities of Five Star or encourage others to take any of the restricted activities.
This consent, standstill, registration rights and lock-up agreement also provides ABP Trust, ABP
Acquisition LLC and our Founders with certain demand and piggy-back registration rights with
respect to certain shares of Five Star common stock, at any time after the lock-up period described
above, subject to specified terms and conditions.

Other

The Managed REITs and Managed Operators award grants of common shares directly to
certain of our officers and employees in connection with the provision of management services to
those companies. For a description of the accounting implications to us of these share awards,
please see Note 2, Summary of Significant Accounting Policies.

F-27

The RMR Group Inc.

Notes to Consolidated Financial Statements (Continued)

(dollars in thousands)

Note 6. Related Person Transactions (Continued)

The compensation of senior executives of the Managed Operators, who are also employees or

officers of RMR LLC, is the sole responsibility of the party to or on behalf of which the individual
renders services. In the past, because at least 80.0% of each of these executives’ business time
was devoted to services to the Managed Operator, 80.0% of their total cash compensation was paid
by the Managed Operator and the remainder was paid by RMR LLC.

We participate in a combined directors’ and officers’ liability insurance policy for primary

coverage, including errors and omissions coverage, with companies to which we provide
management services. We paid premiums of $176, $152 and $147 for this coverage for the policy
years ending September 30, 2016, 2015 and 2014, respectively. We paid a premium of $202 for this
coverage for the policy year ending September 30, 2017. In September 2016, we participated in a
one year extension of this combined directors’ and officers’ insurance policy through September
2018. Our premium for this policy extension was approximately $111.

For the period October 1, 2013 through June 5, 2015, amounts were periodically advanced and
repaid between ABP Trust and its then 100.0% owned subsidiary RMR LLC. These advances were
due on demand without interest. Since June 5, 2015, no advances have been made or were
outstanding between ABP Trust and RMR LLC. During the period October 1, 2013 through June 5,
2015, our Founders periodically made loans for working capital to RMR LLC, which loans were due
on demand and accrued interest at the minimum monthly adjustable federal rate required for tax
reporting. Since June 5, 2015 no such loans have been made by our Founders to RMR LLC or were
outstanding. Loans for $57,000 made by our Founders to RMR LLC were outstanding for limited
periods during the fiscal year ended September 30, 2014; and interest on these loans of $144 was
paid to our Founders during the fiscal year ended September 30, 2014.

Relationships Between Client Companies

Several of our Client Companies have material historical and ongoing relationships with other

Client Companies. As of September 30, 2016: HPT owned 8.8% of the outstanding common shares
of TA; SNH owned 8.6% of the outstanding common stock of Five Star; GOV owned 27.9% of the
outstanding common shares of SIR; and each of ABP Trust, the Managed REITs, Five Star and TA
owned 14.3% of AIC. HPT is TA’s principal landlord and TA is HPT’s largest tenant, operating travel
center locations owned by HPT pursuant to long term leases. SNH is Five Star’s principal landlord
and Five Star is SNH’s largest tenant and manager of senior living communities, operating senior
living communities owned by SNH pursuant to long term agreements. Sonesta managed 33 of HPT’s
U.S. hotels pursuant to long term management agreements. Several of the independent trustees and
independent directors of our publicly owned Client Companies also serve as independent trustees or
independent directors of other publicly owned Client Companies.

Note 7. Shareholders’ Equity

Common Shares

RMR Inc.’s authorized capital stock consists of 31,600,000 shares of Class A Common Shares,

1,000,000 Class B-1 Common Shares and 15,000,000 Class B-2 Common Shares.

F-28

The RMR Group Inc.

Notes to Consolidated Financial Statements (Continued)

(dollars in thousands)

Note 7. Shareholders’ Equity (Continued)

Class A Common Shares—In the Up-C Transaction, the Managed REITs contributed cash and

equity interests in the Managed REITs with a combined fair value of $167,764 and received
15,000,000 shares of RMR Inc.’s Class A Common Shares. We recorded an increase of $15 to the
par value of Class A Common Shares and $361,570 to additional paid in capital. The increase in the
par value and additional paid in capital represents the combination of the cash, the fair value of the
Managed REITs’ shares and the additional consideration received from the Managed REITs as
described above in Note 6, Related Person Transactions. Class A Common Shares entitle holders to
one vote for each share held of record on all matters submitted to a vote of shareholders. The
additional authorized 600,000 Class A Common Shares represent the shares reserved for issuance
under our 2016 Omnibus Equity Plan, or our 2016 Plan.

Class B-1 Common Shares—In the Up-C Transaction, ABP Trust contributed $11,520 in cash to

RMR Inc. and RMR Inc. issued the 1,000,000 Class B-1 Common Shares to ABP Trust. We
recorded an increase of $1 to the par value of Class B-1 Common Shares and $11,519 to additional
paid in capital. Class B-1 Common Shares entitle holders to ten votes for each share on all matters
submitted to a vote of shareholders. Each Class B-1 Common Share may, at the option of its holder,
be converted into a Class A Common Share, on a one for one basis.

Class B-2 Common Shares—In the Up-C Transaction, we issued 15,000,000 Class B-2

Common Shares to ABP Trust, which are paired with the 15,000,000 RMR LLC Class A Units
owned by ABP Trust and have no independent economic interest in RMR Inc. We paid $167,764 to
ABP Trust in exchange for 15,000,000 Class A Units of RMR LLC and recognized a deemed
distribution of $165,796 as a result of recording the 15,000,000 RMR LLC Class A Units at ABP
Trust’s carrying value because this transaction was considered to be between entities under
common control. The deemed distribution represents the consideration of $167,764, the issuance of
the Class B-2 Common Shares ($15 of par value) less the historical basis of $1,983 in the portion of
RMR LLC sold to RMR Inc. Class B-2 Common Shares are entitled to ten votes for each share on
all matters submitted to a vote of shareholders. The Class A Units may, at the option of the holder,
be redeemed for Class A Common Shares on a one to one basis, and upon such redemption our
Class B-2 Common Shares that are paired with the Class A Units are automatically cancelled.
RMR Inc. has the option to settle the redemption in cash. Holders of our Class A Common Shares,
Class B-1 Common Shares and Class B-2 Common Shares vote together as a single class on all
matters submitted to a vote of our common shareholders except as required by law and except for
amendments to our charter that materially and adversely affect a single class of common shares, in
which case, the affected class of shares shall have the right to vote separately on such
amendments.

Issuances

On March 9, 2016, under our 2016 Plan, we granted 2,500 of our Class A Common Shares
valued at $23.27 per share, the closing price of our Class A Common Shares on the Nasdaq Stock
Market LLC, or Nasdaq, on that day, to each of our then three Independent Directors as part of their
annual compensation. These Class A Common Shares awarded to our Independent Directors vested
immediately. In connection with the grant of Class A Common Shares to our Independent Directors,

F-29

The RMR Group Inc.

Notes to Consolidated Financial Statements (Continued)

(dollars in thousands)

Note 7. Shareholders’ Equity (Continued)

and as required by the RMR LLC Operating Agreement, RMR LLC concurrently issued 7,500
Class A Units to RMR Inc.

On September 15, 2016, pursuant to our 2016 Plan, we granted an aggregate of 77,200 of our

Class A Common Shares valued at $37.84 per share, the closing price of our Class A Common
Shares on the Nasdaq on that day, to our Managing Directors and certain of our officers and
employees. The 2,500 Class A Common Shares granted to each of our Managing Directors in their
capacities as Managing Directors vested immediately and the 72,200 Class A Common Shares
awarded to our officers and employees (including the Class A Common Shares granted to our
Managing Directors in their capacities as our officers and employees) vest in five equal annual
installments beginning on the date of the grant. In connection with the grant of Class A Common
Shares to our Managing Directors and our officers and employees, and as required by the RMR LLC
Operating Agreement, RMR LLC concurrently issued 77,200 Class A Units to RMR Inc.

The value of the shares granted to our Managing Directors and Independent Directors are

included in general and administrative expense in our consolidated financial statements. Shares
granted to our officers and employees are included in compensation and benefits expense in our
consolidated financial statements.

In the fiscal year ended September 30, 2016, officers and employees who were recipients of our

share awards were permitted to elect to have us withhold the number of their then vesting common
shares with a fair market value sufficient to fund the minimum required tax withholding obligations
with respect to their vesting share awards in satisfaction of those tax withholding obligations. In
September 2016, we acquired through this share withholding process 2,268 Class A Common
Shares with an aggregate value of $91, which is reflected as a decrease to shareholders’ equity in
our consolidated balance sheets. In connection with the acquisition of 2,268 Class A Common
Shares, and as required by the RMR LLC Operating Agreement, RMR LLC concurrently acquired
2,268 Class A Units from RMR Inc.

A summary of shares granted and vested under the terms of our 2016 Plan for the year ended

September 30, 2016, is as follows:

Weighted
Average

Number of Grant Date
Fair Value

Unvested shares, beginning of year . . . . . . . . . . . . . . . . .
Shares granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Shares repurchased . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Shares vested, net of shares repurchased . . . . . . . . . . . . .

—
84,700
(2,268)
(24,672)

Unvested shares, end of year . . . . . . . . . . . . . . . . . . . . . .

57,760

$ —
36.55
40.25
33.41

$37.84

The 57,760 unvested shares as of September 30, 2016 are scheduled to vest in annual
installments of 14,440 shares in each of fiscal 2017, 2018, 2019 and 2020. As of September 30,
2016, the estimated future compensation expense for the unvested shares was $2,186 based on
grant date fair value of these shares. The weighted average period over which this compensation

F-30

The RMR Group Inc.

Notes to Consolidated Financial Statements (Continued)

(dollars in thousands)

Note 7. Shareholders’ Equity (Continued)

expense will be recorded is approximately 24 months. During the fiscal year ended September 30,
2016, we recorded general and administrative expenses of $364 and compensation and benefits
expenses of $569 related to awards we made under our 2016 Plan. At September 30, 2016,
517,568 of our common shares remained available for issuance under our 2016 Plan.

Distributions

On December 15, 2015, we paid a dividend on our Class A Common Shares and Class B-1
Common Shares, in the amount of $0.5260 per Class A Common Share and Class B-1 Common
Share, or $8,416. This dividend was paid to our shareholders of record as of the close of business
on November 25, 2015, which included the Managed REITs and ABP Trust. The amount of this
dividend was calculated as $0.25 per share per quarter pro rata for the period June 5, 2015 to
December 14, 2015. This dividend was funded by a distribution from RMR LLC to holders of its
membership units in the amount of $0.5260 per unit, or $16,306, of which $8,416 was distributed to
us based on our then aggregate ownership of 16,000,000 membership units of RMR LLC and
$7,890 was distributed to ABP Trust based on its ownership of 15,000,000 membership units of
RMR LLC.

On May 19, 2016, we paid a dividend on our Class A Common Shares and Class B-1 Common

Shares, in the amount of $0.2993 per Class A Common Share and Class B-1 Common Share, or
$4,791. This dividend was paid to our shareholders of record as of the close of business on April 25,
2016. The amount of this dividend was calculated as $0.25 per share for the quarter ended
March 31, 2016, plus a pro rata dividend in respect of the period from December 14, 2015 through
and including December 31, 2015. This dividend was funded by a distribution from RMR LLC to
holders of its membership units in the amount of $0.2993 per unit, or $9,280, of which $4,791 was
distributed to us based on our then aggregate ownership of 16,007,500 membership units of
RMR LLC and $4,489 was distributed to ABP Trust based on its ownership of 15,000,000
membership units of RMR LLC.

On August 18, 2016, we paid a dividend on our Class A Common Shares and Class B-1

Common Shares, in the amount of $0.25 per Class A Common Share and Class B-1 Common
Share, or $4,002. This dividend was paid to our shareholders of record as of the close of business
on July 22, 2016. The amount of this dividend was calculated as $0.25 per share for the quarter
ended June 30, 2016. This dividend was funded by a distribution from RMR LLC to holders of its
membership units in the amount of $0.25 per unit, or $7,752, of which $4,002 was distributed to us
based on our then aggregate ownership of 16,007,500 membership units of RMR LLC and $3,750
was distributed to ABP Trust based on its ownership of 15,000,000 membership units of RMR LLC.

On November 17, 2016, we paid a dividend on our Class A Common Shares and Class B-1

Common Shares, in the amount of $0.25 per Class A Common Share and Class B-1 Common
Share, or $4,021. This dividend was paid to our shareholders of record as of the close of business
on October 21, 2016. The amount of this dividend was calculated as $0.25 per share for the quarter
ended September 30, 2016. This dividend was funded by a distribution from RMR LLC to holders of
its membership units in the amount of $0.25 per unit, or $7,771, of which $4,021 was distributed to
us based on our aggregate ownership of 16,082,432 membership units of RMR LLC and $3,750 was
distributed to ABP Trust based on its ownership of 15,000,000 membership units of RMR LLC.

F-31

The RMR Group Inc.

Notes to Consolidated Financial Statements (Continued)

(dollars in thousands)

Note 8. Per Common Share Amounts

Earnings per common share reflects net income attributable to RMR Inc. divided by our

weighted average common shares outstanding. Basic and diluted weighted average common shares
outstanding represents our 15,082,432 Class A Common Shares and our 1,000,000 Class B-1
Common Shares. Our Class B-2 Common Shares, which are paired with ABP Trust’s Class A Units,
have no independent economic interest in RMR Inc.

The 15,000,000 Class A Units that we do not own may be redeemed for our Class A Common

Shares on a one for one basis, or upon such redemption, we may elect to pay cash instead of
issuing Class A Common Shares. Upon redemption of a Class A Unit, our Class B-2 Common
Share ‘‘paired’’ with such unit is cancelled for no additional consideration. If all outstanding Class A
Units were redeemed for our Class A Common Shares in the periods presented our Class A
Common Shares outstanding would have been 31,082,432. In computing the dilutive effect, if any,
that the aforementioned redemption would have on earnings per share, we considered that net
income available to holders of our Class A Common Shares would increase due to elimination of the
noncontrolling interest (including any tax impact). For the period presented, such redemption is not
reflected in diluted earnings per share as the assumed redemption would be anti-dilutive.

Note 9. Net Income Attributable to RMR Inc.

Net income attributable to RMR Inc. for the years ended September 30, 2016 and 2015, is

derived as follows:

Year Ended
September 30,

2016

2015

Income before income tax expense and equity in earnings of investee . . . . . .
Add: RMR Inc. franchise tax expense and interest income . . . . . . . . . . . . .
Add: equity in earnings of investee . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: incentive fee allocable to ABP Trust . . . . . . . . . . . . . . . . . . . . . . . .
Less: net income attributable to ABP Trust before June 5, 2015 . . . . . . . .

$146,934
589
—
(26,611)

$ 82,154
147
115
—
— (58,580)

Net income before non-controlling interest . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Less: non-controlling interest

Net income attributable to RMR Inc. before income tax expense . . . . . . . . . .
Less: income tax expense attributable to RMR Inc.
. . . . . . . . . . . . . . . . .
Less: RMR Inc. franchise tax expense and interest income . . . . . . . . . . . .

120,912
(58,510)

62,402
(24,573)
(589)

23,836
(11,538)

12,298
(4,848)
(147)

Net income attributable to RMR Inc.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 37,240

$ 7,303

Net income attributable to the non-controlling interest includes 100.0% of the income earned by

RMR LLC prior to the Up-C Transaction, when RMR LLC was 100.0% owned by ABP Trust.

F-32

The RMR Group Inc.

Notes to Consolidated Financial Statements (Continued)

(dollars in thousands)

Note 10. Cumulative Other Comprehensive Income (Loss)

The following table presents a roll forward of amounts recognized in cumulative other

comprehensive income (loss) by component for the fiscal years ended September 30, 2016, 2015
and 2014:

Balances as of September 30, 2013 . . . . . . . . . . . .
Other comprehensive income (loss) before

Equity in
Unrealized
Gain (Loss)
Unrealized
On Available Gain (Loss)

For Sale
Securities

$ —

of An
Investee

$ 32

Foreign
Currency
Translation
Adjustments

Total

$ (80)

$ (48)

reclassifications . . . . . . . . . . . . . . . . . . . . . . . . .

(37)

Amounts reclassified from cumulative other

comprehensive income (loss) to net income (loss) .

—

Net current period other comprehensive income

(loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Balances as of September 30, 2014 . . . . . . . . . . . .
Other comprehensive income (loss) before

reclassifications . . . . . . . . . . . . . . . . . . . . . . . . .

Net current period other comprehensive income

(loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reorganization of equity structure . . . . . . . . . . . . . .
Reductions for securities sold during the period . . . .
Investments distributed to ABP Trust during the

period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Balances as of September 30, 2015 . . . . . . . . . . . .
Other comprehensive income before reclassifications
Amounts reclassified from cumulative other

comprehensive income to net income . . . . . . . . . .

Net current period other comprehensive income . . . .

(37)

(54)

(54)
—
91

—

$ —
—

—

(32)

35
—
—

(91)

$ —
—

—

(125)

$(106)

—

(32)

(125)

(205)

(138)

(186)

(252)

(271)

(252)
646
—

—

$ 189
19

—

(271)
646
91

(91)

$ 189
19

—

Balances as of September 30, 2016 . . . . . . . . . . . .

$ —

$ 208

Note 11. Employee Benefits

We have established a defined contribution savings plan for eligible employees under the
provisions of U.S. Internal Revenue Code Section 401(k) whereby we contribute 100.0% of the first
3.0% and 50.0% of the next 2.0% of an employee’s cash compensation contributed to the plan up to
stated maximums. All employees are eligible to participate in the plan and are entitled, upon
termination or retirement, to receive their vested portion of the plan assets. Employees’ contributions
and our related matching contributions are fully vested when made. Our plan contributions and
expenses for the fiscal years ended September 30, 2016, 2015 and 2014 were $1,557, $1,326 and
$2,542, respectively.

F-33

The RMR Group Inc.

Notes to Consolidated Financial Statements (Continued)

(dollars in thousands)

Note 12. EQC Termination and Cooperation Agreement

Pursuant to a Termination and Cooperation Agreement dated September 30, 2014, or the
Termination and Cooperation Agreement, EQC and RMR LLC terminated RMR LLC’s business and
property management agreements with EQC. As a result, we incurred termination expenses
associated with the termination of certain employees. Under the terms of the Termination and
Cooperation Agreement, RMR LLC agreed to be financially responsible for certain severance
payments to our former employees and EQC agreed to pay certain accrued benefits for certain
impacted employees. In accordance with ASC 420, Exit or disposal cost obligations, we recorded
one time termination benefits expense for impacted employees through September 30, 2014 of
$2,330. We incurred an additional $116 of costs associated with severance and vacation payouts in
November 2014, which are reflected in our consolidated financial statements for the fiscal year
ended September 30, 2015.

Pursuant to the Termination and Cooperation Agreement, RMR LLC assisted EQC in the

transition of EQC’s management and operations through February 28, 2015, and EQC paid
RMR LLC $1,200 per month for transition services from October 1, 2014 to February 28, 2015. Also,
we continued to provide certain services for EQC in Australia until October 31, 2015 and earned $58
during the fiscal year ended September 30, 2016 for these services.

Note 13. Commitments

We lease office space under operating leases. These leases generally contain fixed contractual

rent changes and certain of the leases provide for operating expense reimbursements. We recognize
rental expense on operating leases that contain fixed contractual rent changes on a straight line
basis over the terms of the respective leases. As of September 30, 2016, we had 33 leases that
expire at various dates through 2025. We incurred rental expense for the fiscal years ended
September 30, 2016, 2015 and 2014 of $4,650, $4,426 and $4,581, respectively, including non-cash
straight line rent expense of $328, $48 and $70, respectively. Rental expense is included in general
and administrative expenses in our consolidated statements of comprehensive income. Certain of
these leases also provide us with options to extend the respective terms of the leases. The future
scheduled minimum lease payments under the terms of these leases as of September 30, 2016 are
as follows (per fiscal year ended September 30):

2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 3,957
4,027
3,647
3,227
3,134
12,317

$30,309

Some of the foregoing leases are with related parties. As of September 30, 2016, $26,499 of

our future scheduled minimum lease payments are for our principal executive offices, which are
leased from an affiliate of ABP Trust pursuant to a ten year lease agreement ending in 2025. For

F-34

The RMR Group Inc.

Notes to Consolidated Financial Statements (Continued)

(dollars in thousands)

Note 13. Commitments (Continued)

more information about these related party leases, see Note 6, Related Person Transactions,
above..

Note 14. Indebtedness

During the fiscal year ended September 30, 2014, RMR LLC had a $2,000 unsecured demand

line of credit with RBS Citizens National Association, or Citizens, that accrued interest on
outstanding balances, if any, at the prime rate, which was renewed periodically and had no stated
maturity. ABP Trust guaranteed the amounts outstanding under this line of credit. There were no
borrowings outstanding for the fiscal year ended September 30, 2014, and this line of credit expired
in July 2014.

During the fiscal years ended September 30, 2015 and 2014, RMR LLC had unconditionally
guaranteed revolving lines of credit to certain subsidiaries of ABP Trust made available by U.S. Bank
National Association, or U.S. Bank, and Citizens for up to $57,500 and $36,650, respectively. As of
September 30, 2014, there were no amounts outstanding under these credit facilities. The credit
facility with Citizens expired in February 2015. Effective May 1, 2015, RMR LLC’s guarantee of the
U.S. Bank credit facility agreement was released. Our financial statements for the fiscal years ended
September 30, 2015 and 2014 do not reflect any amounts in connection with these guarantees.

As reported in Note 6, Related Person Transactions, above, during the periods prior to June 5,

2015, amounts periodically were advanced and repaid between ABP Trust and its then 100.0%
owned subsidiary RMR LLC, and our Founders periodically made loans for working capital to
RMR LLC.

F-35

The RMR Group Inc.

Notes to Consolidated Financial Statements (Continued)

(dollars in thousands)

Note 15. Segment Reporting

We have one reportable business segment, which is RMR LLC. In the table below, All Other
Operations includes the operations of RMR Inc., RMR Advisors, Tremont Advisors and RMR Intl.

Fiscal Year Ended September 30, 2016

All Other
RMR LLC(1) Operations

Total

Revenues

Management services . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reimbursable payroll and related costs . . . . . . . . . . . . . . . .
Advisory services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$226,602
37,660
—

Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

264,262

Expenses

Compensation and benefits . . . . . . . . . . . . . . . . . . . . . . . . .
Separation costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
General and administrative . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . .

90,872
1,358
23,678
1,703

Total expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

117,611

Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest and other income . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Income before income tax expense . . . . . . . . . . . . . . . . . . . . .
Income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

146,651
223

146,874
(1)

58
—
2,620

2,678

1,113
—
1,451
65

2,629

49
11

$226,660
37,660
2,620

266,940

91,985
1,358
25,129
1,768

120,240

146,700
234

60
(24,572)

146,934
(24,573)

Net income (loss)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$146,873

$(24,512) $122,361

Total Assets: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$277,802

$ 59,729

$337,531

(1)

Intersegment revenues of $1,806 recognized by RMR LLC for services provided to the All Other
Operations segment have been eliminated in the consolidated financial statements.

F-36

The RMR Group Inc.

Notes to Consolidated Financial Statements (Continued)

(dollars in thousands)

Note 15. Segment Reporting (Continued)

Fiscal Year Ended September 30, 2015

All Other
RMR LLC(1) Operations

Total

Revenues

$161,903
28,230
—

Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

190,133

Expenses

Compensation and benefits . . . . . . . . . . . . . . . . . . . . . . . . .
Separation costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
General and administrative . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

81,886
116
25,892
2,117

Total expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

110,011

Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest and other income . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unrealized gains (losses) attributable to changes in fair value of
stock accounted for under the fair value option . . . . . . . . . . .

Income before income tax expense and equity in earnings of

investee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity in earnings of investee . . . . . . . . . . . . . . . . . . . . . . . . .

80,122
1,668

(317)

81,473
60
115

423
—
2,380

2,803

1,570
—
643
—

2,213

590
64

681
(4,908)
—

$162,326
28,230
2,380

192,936

83,456
116
26,535
2,117

112,224

80,712
1,732

(290)

82,154
(4,848)
115

Net income (loss)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 81,648

$ (4,227)

$ 77,421

Total Assets: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$255,531

$48,361

$303,892

(1)

Intersegment revenues of $752 recognized by RMR LLC for services provided to the All Other
Operations segment have been eliminated in the consolidated financial statements.

F-37

2,061
—
—
832
—

2,893

1,090
69

127,841
116,000
2,330
21,957
2,446

270,574

14,472
497

The RMR Group Inc.

Notes to Consolidated Financial Statements (Continued)

(dollars in thousands)

Note 15. Segment Reporting (Continued)

Fiscal Year Ended September 30, 2014

All Other
RMR LLC(1) Operations

Total

Revenues

$217,014
64,049
—

$1,739
—
2,244

$218,753
64,049
2,244

Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

281,063

3,983

285,046

Expenses

Compensation and benefits . . . . . . . . . . . . . . . . . . . . . . . . .
Members profit sharing . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Separation costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
General and administrative . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

125,780
116,000
2,330
21,125
2,446

Total expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

267,681

Income before income tax expense and equity in earnings of

13,382
428

(4,603)

(4,556)

9,207
(1)
160

1,206
(279)
—

10,413
(280)
160

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 9,366

$ 927

$ 10,293

Total Assets: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$281,533

$5,690

$287,223

(1)

Intersegment revenues of $1,276 recognized by RMR LLC for services provided to the All Other
Operations segment have been eliminated in the consolidated financial statements.

Note 16. Separation Costs

We recognized separation costs for the fiscal years ended September 30, 2016, 2015 and 2014,

of $1,358, $116 and $2,330, respectively, in connection with employment termination costs.

Note 17. Acquisition Activity

We recognize identifiable assets acquired and liabilities assumed in a business combination at
their estimated fair values at the acquisition date. Other items we evaluate in a business combination
include identifiable intangible assets and goodwill. Contingent consideration obligations are
recognized as of the acquisition date at fair value based on the probability that the contingency will
be realized. Goodwill as of the acquisition date is measured as the excess of consideration
transferred over the net of the acquisition date fair values of the assets acquired and the liabilities

F-38

The RMR Group Inc.

Notes to Consolidated Financial Statements (Continued)

(dollars in thousands)

Note 17. Acquisition Activity (Continued)

assumed. Acquisition related costs in connection with a business combination are expensed as
incurred.

On August 5, 2016, RMR LLC acquired the Tremont business for total cash consideration of

$2,466, excluding transaction costs. For the fiscal year ended September 30, 2016, we recognized
$840 of acquisition related costs in connection with this business combination. We believe that the
Tremont business represents a new platform providing both a growth opportunity and diversification
of our operations, and that the commercial real estate finance business represents an appropriate
expansion of our existing operations. We accounted for this acquisition as a business combination in
accordance with ASC 805.

The sellers of the Tremont business, pursuant to our asset purchase agreement with them, also
have the right to receive an ‘‘earn out’’ over the two year period ending August 5, 2018, based on a
portion of payments that we receive from a specified part of the historical Tremont business, for
which we recorded estimated contingent consideration of $1,270. The maximum value of this
contingency is $3,979. The purchase accounting for this acquisition has been completed.

The following table summarizes the allocation of the purchase price for this acquisition:

Customer relationships . . . . . . . . . . . . . . . . . . . . . .
Goodwill
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Contingent consideration . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . .
Working capital

$ 1,150
2,295
(1,270)
291

9.64
—
—
—

Cash consideration . . . . . . . . . . . . . . . . . . . . . . . . .

$ 2,466

Fair Value

Useful Life (Years)

For the period from August 5, 2016 to September 30, 2016, we made payments of contingent

consideration to the sellers of the Tremont business of $13. The remaining contingent consideration
as of September 30, 2016 was $1,257 and is included in accounts payable, accrued expenses and
deposits on our consolidated balance sheet.

The net carrying amount of intangible assets as of September 30, 2016 was $1,085, net of $65
of amortization expense recognized in fiscal year 2016. Future amortization of our intangible assets
for each of the next five years is as follows:

2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$624
87
51
47
42

The $2,295 of goodwill arising from this acquisition is included within all other operations in our

segment footnote. Goodwill arising from this acquisition is deductible for tax purposes.

F-39

The RMR Group Inc.

Notes to Consolidated Financial Statements (Continued)

(dollars in thousands)

Note 18. Selected Quarterly Financial Data (Unaudited)

The following is a summary of our unaudited quarterly results of operations for our fiscal years

2016 and 2015 (dollars in thousands, except per share amounts):

Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income available for common shareholders . . . .
Net income available for common shareholders per

2016

First
Quarter

Second
Quarter

$110,130(1) $48,333
$15,748
$ 70,379
$ 6,114
$ 17,054

Third
Quarter

$52,211
$17,402
$ 6,698

Fourth
Quarter

$56,266
$18,832
$ 7,374

share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Common distributions declared . . . . . . . . . . . . . . .

$
1.07
$ 0.5260

$
$

0.38

$
0.42
— $0.2993

$
$

0.46
0.25

(1)

Includes incentive business management fee revenue of $62,263.

2015

First
Quarter

Second
Quarter

Third
Quarter

Fourth
Quarter

$46,836
$19,648
$
$
$

— $
— $
— $

$49,810
$25,183

$48,179
$16,273
970
0.06

— $
— $
— $

$48,111
$16,317
$ 6,333
$ 0.40
—

— $

Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income available for common shareholders . . . . . . . .
Net income available for common shareholders per share
Common distributions declared . . . . . . . . . . . . . . . . . . . .

F-40

RMR Performance Chart

The graph below shows the cumulative total shareholder returns on our common shares
(assuming a $100 investment on December 14, 2015) as compared with (a) the Standard & Poor’s
500 Index and (b) a self-constructed peer group composed of the following asset management
companies: Ares Management LP, Ashford Inc., Cohen & Steers Inc., Colony Capital Inc., GAMCO
Investors Inc., Manning & Napier Inc., NorthStar Asset Management Group, Och-Ziff Capital
Management Group, Pzena Investment Management Inc., Virtus Investment Partners Inc. and
WisdomTree Investments Inc. The graph assumes reinvestment of all cash distributions.

Note: Bloomberg is the data source.

$350.00

$300.00

$250.00

$200.00

$150.00

$100.00

$50.00

12/14/2015

12/31/2015

3/31/2016

6/30/2016

9/30/2016

RMR

S&P 500

Peer Group Average

29DEC201619135724

CORPORATE INFORMATION

EXECUTIVE OFFICES

BOARD OF DIRECTORS

ANNUAL MEETING

The RMR Group Inc.
Two Newton Place
255 Washington Street, Suite 300
Newton, MA 02458-1634
(617) 796-8390
www.rmrgroup.com

OFFICERS

Adam D. Portnoy

Managing Director, President and
Chief Executive Officer; and

President and Chief Executive Officer

of RMR LLC
Barry M. Portnoy

Managing Director; and
Chairman of RMR LLC

Jennifer B. Clark

Executive Vice President, General
Counsel and Secretary; and
Executive Vice President, General

Counsel and Secretary of
RMR LLC
Matthew P. Jordan

Treasurer and Chief Financial

Officer; and

Chief Financial Officer, Senior Vice

President and Treasurer of
RMR LLC
David M. Blackman

Executive Vice President of

RMR LLC
David J. Hegarty

Executive Vice President of

RMR LLC

Mark L. Kleifges

Executive Vice President of

RMR LLC
Bruce J. Mackey Jr.

Executive Vice President of

RMR LLC

John G. Murray

Executive Vice President of

RMR LLC
Thomas M. O’Brien

Executive Vice President of

RMR LLC
John C. Popeo

Executive Vice President of

RMR LLC

Ann Logan*

Independent Director;
Chair of the Board of Trustees of
Bryn Mawr College; retired
executive of Fannie Mae

Walter C. Watkins, Jr.*
Independent Director;
Principal of WCW Enterprises, LLC;

retired executive of Bank
One Corporation

Adam D. Portnoy+

Managing Director;
President and Chief Executive Officer

of RMR LLC

Barry M. Portnoy+

Managing Director;
Chairman of RMR LLC

INTERNAL AUDIT
Vern D. Larkin

Director of Internal Audit

INVESTOR RELATIONS
Timothy A. Bonang

Senior Vice President

INDEPENDENT REGISTERED

PUBLIC ACCOUNTING FIRM

Ernst & Young LLP
200 Clarendon Street
Boston, MA 02116

COUNSEL
Skadden, Arps, Slate, Meagher &
Flom LLP
500 Boylston Street
Boston, MA 02116

STOCK TRANSFER AGENT AND

REGISTRAR

Wells Fargo Bank, National Association
Wells Fargo Shareowner Services
1110 Centre Pointe Curve, Suite 101
Mendota Heights, MN 55120-4100
(877) 602-7398
www.shareowneronline.com

Our annual meeting of shareholders will
be held on Wednesday, March 29,
2017 at 9:30 a.m. at Two Newton
Place, 255 Washington Street, Newton,
Massachusetts. All shareholders are
invited to attend.

AVAILABLE INFORMATION

A copy of our 2016 Annual Report
on Form 10-K, including the financial
statements and schedules (excluding
exhibits), as filed with the Securities
and Exchange Commission, can be
obtained without charge through our
website at www.rmrgroup.com or by
writing to Investor Relations at our
executive offices address.

STOCK MARKET DATA

Our common shares of beneficial
interest are traded on the Nasdaq
under the symbol RMR. The following
table sets forth the high and low sales
prices of our common shares in 2015
and 2016 as reported on the Nasdaq:

Quarter Ended

High

Low

December 31,

2015** . . . . . . .
March 31, 2016 . .
June 30, 2016 . . .
September 30,

$17.65
$25.91
$31.49

$11.89
$14.00
$23.79

2016 . . . . . . . .

$40.67

$30.78

Beginning December 15, 2015,
the date our shares began
trading.

As of December 13, 2016, there were
3,335 holders of record of our common
shares.

The closing price of our common
shares as reported on the Nasdaq on
December 13, 2016 was $43.65.

Member of Audit, Compensation and Nominating and Governance Committees

Member of Compensation and Nominating and Governance Committees

The RMR Group Inc.

Two Newton Place

255 Washington Street, Suite 300

Newton, Massachusetts 02458-1634

(617) 796-8390