Blackstone (BX) 8-K Blackstone Reports Second Quarter 2012 Results

Second Quarter 2012 Earnings

July 19, 2012

Exhibit 99.2

Blackstone

1

Blackstone’s Second Quarter 2012 Earnings

Economic Net Income (“ENI”) was $212 million for the second quarter, down from $804 million in the same

period a year ago, as difficult public markets impacted Performance Fees and Investment Income particularly in

our public and non-dollar denominated investments.

•

Blackstone earned $704 million of ENI year-to-date in challenging markets which reflects the continued strong

growth in AUM and Fee Related Earnings, the resiliency of our highly diversified earnings streams and the

positive year-to-date contributions across our businesses.

Fee-Earning

AUM

reached

a

record

$158

billion

in

the

second

quarter,

up

22%

over

the

same

period

last

year,

as

$44 billion of gross inflows (including $10 billion from the Harbourmaster acquisition) more than offset $13 billion

of capital returned to investors over the same period.

Gross fee-earning inflows for the quarter were $5.8 billion, including fundraising for our latest global real estate

fund, new private equity energy fund (“BEP”) and strong inflows in Credit Businesses and Hedge Fund Solutions.

Distributable Earnings for the second quarter of $188 million were roughly flat from the year ago period.

GAAP Revenues of $627 million led to a Net Loss of $75 million after IPO and acquisition-related charges.

Note: Prior periods amounts on all pages have been adjusted to conform to  the current period presentation and definitions.

(1)

Economic Net Income has been redefined as Economic Income after current taxes (“Taxes”); it no longer deducts the implied provision for income taxes.

(2)

ENI per Unit is based on the Weighted-Average ENI Adjusted Units. 

(3)

DE per Common Unit equals Pre-Tax DE allocated to Common Unitholders less Other Payables to Common Unitholders divided by Total GAAP Common Units Outstanding.

% Change

(Dollars in Thousands, Except per Unit Data)

2Q'11

1Q'12

2Q'12

vs. 2Q'11

vs. 1Q'12

GAAP Net Income (Loss)

86,237

$           

58,325

$           

(74,964)

$          

n/m

n/m

Economic Net Income ("ENI")

(1)

804,181

$         

491,217

$         

212,349

$         

(74)%

(57)%

ENI per Unit

(2)

0.73

$               

0.44

$               

0.19

$               

(74)%

(57)%

Fee Related Earnings ("FRE")

156,297

146,928

145,729

(7)%

(1)%

Distributable Earnings ("DE")

190,878

$         

162,121

$         

188,404

$         

(1)%

16%

DE per Common Unit

(3)

0.16

$               

0.15

$               

0.16

$               

0%

7%

Total Assets Under Management

158,703,173

190,074,167

190,267,831

20%

0%

Fee-Earning Assets Under Management

129,001,206

156,261,446

157,646,521

22%

1%

Blackstone

Walkdown of Financial Metrics

2Q'12

Year-to-Date

(Dollars in Thousands, Except per Unit Data)

Results

Per Unit

(1)

Results

Per Unit

(1)

Base Management Fees

381,344

$      

776,850

$      

Transaction and Other Fees, Net

49,453

87,924

Advisory Fees

93,372

169,218

Management Fee Offsets

(7,973)

(21,023)

Interest Income and Other Revenue

11,455

25,903

Compensation

(268,884)

(523,656)

Other Operating Expenses

(113,038)

(222,559)

Fee Related Earnings

145,729

$      

0.13

$            

292,657

$      

0.26

$            

Net Realized Incentive Fees

6,117

7,144

Net Realized Carried Interest

48,030

53,652

Realized Investment Income

8,080

25,675

Taxes and Related Payables

(19,552)

(28,603)

Distributable Earnings

188,404

$      

0.16

$            

350,525

$      

0.31

$            

Net Unrealized Incentive Fees

(7,478)

47,864

Net Unrealized Carried Interest

47,475

261,728

Unrealized Investment Income

(26,236)

33,265

Add Back: Related Payables

10,184

10,184

Economic Net Income

212,349

$      

0.19

$            

703,566

$      

0.63

$            

2

See Appendix - Calculation of Certain Non-GAAP Financial Metric Components for the calculation of the amounts presented herein which are not the respective captions from the Total 

Segment information.

(1)

Fee Related Earnings per Unit is based on DE Units Outstanding; DE per Unit equals DE per Common Unit; and ENI per Unit is based on Weighted-Average ENI Adjusted Units (See

Appendix - Unit Rollforward).

Blackstone

Private Equity

Revenues were impacted by a sharp decline in Performance Fees and Investment Income as the carrying value of

assets overall was down 4.2% for the quarter.

•

Negative markets particularly impacted the segment’s public holdings and non-dollar denominated investments

while private holdings remained largely flat for the quarter.  The overall portfolio is up slightly year-to-date.

Private Equity had $533 million of net accrued Performance Fees at the end of the quarter substantially related to

BCP IV, which is in full cash carry at a 37% net IRR.  During the quarter, BCP IV contributed $28 million in net

realized performance fees.

Returned

$403

million

of

capital

to

investors

during

the

quarter

at

an

average

2.1x

Multiple

of

Invested

Capital

(“MOIC”) and invested $109 million of total capital with an additional $1.2 billion committed but not yet deployed,

bringing year-to-date total capital deployed and committed to $2.0 billion.

Fundraising continues for our new energy fund (“BEP”) with an additional $500 million of new commitments

bringing the total fund size to over $2 billion to date.

(1)

Economic Income is pre-tax Economic Net Income.

(4.2)%

2Q’12 Decrease in Fund Carrying Value

$533 million

Net Accrued Performance Fees at 2Q’12

4%

Increase in Fee-Earning AUM since 2Q’11

(Dollars in Thousands)

2Q'11

1Q'12

2Q'12

vs. 2Q'11

vs. 1Q'12

Fee Revenues

130,883

$       

102,309

$       

105,430

$       

(19)%

3%

Performance Fees

188,552

37,984

(59,112)

n/m

n/m

Investment Income (Loss)

79,968

30,380

(34,532)

n/m

n/m

Total Revenues

399,403

170,673

11,786

(97)%

(93)%

Compensation

64,633

52,547

53,775

(17)%

2%

Performance Fee Compensation

29,358

(732)

(7,455)

n/m

n/m

Other Operating Expenses

30,124

28,881

30,521

1%

6%

Total Expenses

124,115

80,696

76,841

(38)%

(5)%

Economic Income (Loss) ("EI")

(1)

275,288

$       

89,977

$         

(65,055)

$        

n/m

n/m

Total AUM

46,728,301

47,624,013

46,633,552

(0)%

(2)%

Fee-Earning AUM

35,778,240

37,323,635

37,159,452

4%

(0)%

% Change

3

Blackstone

Real Estate

Revenues

were

down

from

the

prior

year

due

to

smaller

appreciation

gains

in

the

funds

and

the

“catch-up”

of

Performance Fees in the year-earlier period which negatively impacted year-over-year comparisons.

Carrying

value

of

assets

overall

was

up

2.9%

for

the

quarter

and

up

6.7%

year-to-date.

•

Portfolio appreciation was driven by continued strengthening of operating fundamentals, particularly in our

hospitality, office and retail holdings where occupancy rose during the quarter and over the last year.

During

the

quarter,

Real

Estate

distributed

$800

million

of

cash

to

investors,

which

includes

$422

million

of

sale

proceeds from dispositions of BREP investments at an average 2.0x MOIC.

Investment activity remained robust with $2.0 billion of total capital invested and an additional $1.6 billion

committed but not yet deployed during the quarter, bringing year-to-date total capital deployed and committed to

$4.7 billion.

Fundraising continues for our most recent global real estate fund, with $2 billion in additional commitments in the

second quarter bringing the total fund size to over $12 billion.

2.9%

2Q’12 Increase in Fund Carrying Value

$1 billion

Net Accrued Performance Fees at 2Q’12

(1)

Base Management Fees up 31% over the same quarter last year; transaction fees down over the same period due to a significant transaction fee related to the Centro

acquisition in 2Q’11.  (See Appendix for segment detail.)

38 %

Increase in Fee-Earning AUM since 2Q’11

(Dollars in Thousands)

2Q'11

1Q'12

2Q'12

vs. 2Q'11

vs. 1Q'12

Fee Revenues

(1)

149,514

$        

155,430

$        

150,298

$        

1%

(3)%

Performance Fees

450,290

238,030

164,289

(64)%

(31)%

Investment Income

48,726

33,724

24,011

(51)%

(29)%

Total Revenues

648,530

427,184

338,598

(48)%

(21)%

Compensation

70,651

68,889

76,576

8%

11%

Performance Fee Compensation

100,403

62,122

38,320

(62)%

(38)%

Other Operating Expenses

22,971

28,924

26,560

16%

(8)%

Total Expenses

194,025

159,935

141,456

(27)%

(12)%

Economic Income

454,505

$        

267,249

$        

197,142

$        

(57)%

(26)%

Total AUM

37,605,560

48,322,760

50,225,950

34%

4%

Fee-Earning AUM

27,919,000

36,647,462

38,476,123

38%

5%

% Change

4

Blackstone

5

Hedge Fund Solutions

Total Revenues

were

down

15%

year-over-year

despite

AUM

growth,

reflecting

negative

Performance

Fees

in

the

quarter, which more than offset Fee Revenue growth of 5% over the year ago period.

Composite

returns

were

down

1.2%

net

for

the

quarter

and

up

2.7%

net

year-to-date.

•

The composite return outperformed the MSCI

(1)

, which was down 5.8% for the quarter.

Fee-Earning AUM for the segment grew 8% to $40.2 billion over the last twelve months.

•

$4.2 billion of fee-earning net inflows primarily in customized and commingled investment products.

•

July 1

st

subscriptions of $921 million are not included in the quarter-end Fee-Earning AUM.

$9 billion or 41% of Incentive Fee-Earning AUM were estimated above their respective High Water Mark and/or

Hurdle

as

of

June

30,

2012

and

another

$7

billion

of

assets

were

within

2%

of

earning

Performance

Fees.

$22 billion

2Q’12

Incentive

Fee-Earning

AUM

(2)

Above

HWM /

Hurdle

0-2%

Below

> 5%

Below

2-5%

Below

(Dollars in Thousands)

2Q'11

1Q'12

2Q'12

vs. 2Q'11

vs. 1Q'12

Fee Revenues

80,389

$          

81,837

$          

84,490

$          

5%

3%

Performance Fees

4,108

26,485

(9,806)

n/m

n/m

Investment Loss

(9)

8,874

(2,707)

n/m

n/m

Total Revenues

84,488

117,196

71,977

(15)%

(39)%

Compensation

31,674

28,233

34,559

9%

22%

Performance Fee Compensation

3,208

8,672

(3,165)

n/m

n/m

Other Operating Expenses

16,075

13,934

14,506

(10)%

4%

Total Expenses

50,957

50,839

45,900

(10)%

(10)%

Economic Income

33,531

$          

66,357

$          

26,077

$          

(22)%

(61)%

Total AUM

40,578,219

43,351,275

42,888,946

6%

(1)%

Fee-Earning AUM

37,244,509

40,543,772

40,161,179

8%

(1)%

% Change

$3B / 14%

$3B / 15%

$7B / 31%

$9B / 41%

(1)

The MSCI World Index is a world stock market index with over 1,600 world stocks.

(2)

Represents incentive fee eligible AUM above or below High Water Mark or Relevant Benchmark. Totals may not add due to rounding.

Blackstone

Credit Businesses

Fee Revenues grew 53% from the prior year driven by continued growth in AUM, strong fund performance and the

impact of the Harbourmaster acquisition.

Net accrued Performance Fees grew to $176 million at the end of 2Q’12 with strong performance in the quarter.

Fee-Earning AUM was essentially flat from 1Q’12 as $1.8 billion of inflows were largely offset by foreign currency

translation from our euro denominated CLOs, as well as the deleveraging of certain CLO vehicles.

Fund returns remained solid despite volatile markets:

•

Hedge Funds

(1)

were down 0.8% net for the quarter and up 2.8% net year-to-date.

•

Mezzanine Funds

(1)

were up 4.2% net for the quarter and up 9.5% net year-to-date.

•

Rescue Lending Funds

(1)

were up 2.3% net for the quarter and up 7.3% net year-to-date.

Deployed $260 million of LP capital in our Mezzanine Funds and $177 million in our Rescue Lending Funds.

$51 billion

2Q’12 Total AUM

Customized Credit

Strategies

(3)

Rescue

Lending

Mezzanine

Funds

Hedge Fund

Strategies

(1)

Represents weighted average returns for the respective flagship funds.

(2)

2Q’12 includes $9.6 billion of Total AUM and $9.4 billion of Fee-Earning AUM from the January 5, 2012 acquisition of Harbourmaster.

(3)

Includes CLOs, permanent capital vehicles, commingled funds and separately managed accounts.

(Dollars in Thousands)

2Q'11

1Q'12

2Q'12

vs. 2Q'11

vs. 1Q'12

Fee Revenues

59,019

$          

87,700

$          

90,354

$          

53%

3%

Performance Fees

30,108

83,257

39,466

31%

(53)%

Investment Income (Loss)

8,673

9,894

(3,518)

n/m

n/m

Total Revenues

97,800

180,851

126,302

29%

(30)%

Compensation

33,071

37,143

42,845

30%

15%

Performance Fee Compensation

12,839

39,450

12,993

1%

(67)%

Other Operating Expenses

10,226

17,096

15,749

54%

(8)%

Total Expenses

56,136

93,689

71,587

28%

(24)%

Economic Income

41,664

$          

87,162

$          

54,715

$          

31%

(37)%

Total AUM

(2)

33,791,093

50,776,119

50,519,383

50%

(1)%

Fee-Earning AUM

(2)

28,059,457

41,746,577

41,849,767

49%

0%

% Change

6

Blackstone

Financial Advisory

Fee Revenues of $95 million were up 23% from the first quarter of this year as both our strategic advisory and

restructuring businesses experienced increases in closed deals in contrast to the markets in general and a relative

slow first quarter of this year.

•

Revenues

were

down

year-over-year

largely

due

to

a

very

strong

quarter

for

strategic

advisory

in

the

second

quarter of 2011.

The Restructuring group has had a strong 2012 as evidenced by its #1 ranking for worldwide completed

restructurings in the Thomson Reuters league tables for the first half of 2012.

While the M&A environment generally remains weak, Blackstone’s 2012 backlog is healthy, with deal activity in

line with the same period last year.

Park Hill’s pipeline is robust as fundraising market conditions are challenged and placement services are in high

demand; the softness this quarter reflected more timing than recurring activity levels.

(Dollars in Thousands)

2Q'11

1Q'12

2Q'12

vs. 2Q'11

vs. 1Q'12

Fee Revenues

104,209

$        

77,635

$          

95,187

$          

(9)%

23%

Investment Income

211

534

482

n/m

(10)%

Total Revenues

104,420

78,169

95,669

(8)%

22%

Compensation

72,363

67,960

61,129

(16)%

(10)%

Other Operating Expenses

19,967

20,686

25,702

29%

24%

Total Expenses

92,330

88,646

86,831

(6)%

(2)%

Economic Income (Loss)

12,090

$          

(10,477)

$         

8,838

$             

(27)%

n/m

% Change

7

Blackstone

Assets Under Management

Fee-Earning

AUM

reached

a

record

$158

billion

in

the

second

quarter,

up 22% over the same period last year, as

$44 billion of gross inflows (including $10 billion from the Harbourmaster acquisition) more than offset $13 billion

of capital returned to investors over the same period.

•

Including commitments, not yet earning fees, Blackstone’s Fee-Earning AUM would have been $169 billion.

Total Assets Under Management increased 20% year-over-year to $190 billion up slightly from last quarter.

Fee-Earning AUM by Segment

(Dollars in Billions)

$129.0

$156.3

$157.6

Total AUM by Segment

(Dollars in Billions)

$158.7

$190.1

$190.3

Credit

Businesses

Hedge Fund

Solutions

Real

Estate

Private

Equity

Credit

Businesses

Hedge Fund

Solutions

Real

Estate

Private

Equity

Totals may not add due to rounding.

$35.8

$37.3

$37.2

$27.9

$36.6

$38.5

$37.2

$40.5

$40.2

$28.1

$41.7

$41.8

2Q'11

1Q'12

2Q'12

$46.7

$47.6

$46.6

$37.6

$48.3

$50.2

$40.6

$43.4

$42.9

$33.8

$50.8

$50.5

2Q'11

1Q'12

2Q'12

8

Blackstone

2Q’12 Available Capital Summary

$36 billion Dry Powder

(1)

Credit

Businesses

Hedge Fund

Solutions

Private

Equity

Real

Estate

Currently Earning

Performance Fees

Invested/Committed Not Yet

Earning Performance Fees

To Be Invested

(3)

$12 billion Not Yet Earning

Base Management Fees

(2)

$121 billion Performance

Fee Eligible AUM

Substantial levels of Dry Powder with $36 billion at the end of the second quarter.

$12 billion of Total AUM was not yet earning base management fees at the end of the quarter due largely to fund

structures where fees are triggered by the deployment of capital.

$121 billion of Performance Fee Eligible AUM, including $49 billion currently earning Performance Fees.

(1)

Represents illiquid drawdown funds only; excludes marketable vehicles; includes both Fee-Earning (third party) capital and GP/employee commitments which do not earn fees.  Amounts reduced by outstanding

commitments to invest, but for which capital has not been called.

(2)

Represents

(i)

committed

uninvested

capital

of

our

Private

Equity

and

Real

Estate

drawdown

funds

with

closed

investment

periods,

and (ii) committed uninvested capital for our Real Estate debt strategies

drawdown funds, our Credit Businesses Mezzanine and Rescue Lending funds and our Hedge Fund Solutions Strategic Alliance Fund.

(3)

Represents performance fee eligible Dry Powder.

Credit

Businesses

Hedge Fund

Solutions

Real

Estate

Private

Equity

$16.4

$12.3

$1.5

$5.6

$2.9

$2.0

$1.4

$5.4

$49.1

$37.7

$34.0

9

Blackstone

Distribution Calculation

Declared a quarterly distribution of $0.10 per common unit to record holders at the close of business on August

15, 2012; payable on August 31, 2012.

Generated $0.26 per common unit in the first two quarters of 2012 after retained capital relating to gains on

Blackstone’s own balance sheet investments.

Blackstone currently pays $0.10 per unit for the first three quarters of the year and any excess net of retained

capital for the fourth quarter.

10

(1)

Pre-Tax DE represents Distributable Earnings before the deduction for Payable under the Tax Receivable Agreement and tax expense (benefit) of wholly-owned subsidiaries.

(2)

Per Unit calculations are based Total Common Units Outstanding (see Appendix – Unit Rollforward); actual distributions are paid to applicable unitholders as of the record date.

(Dollars in Thousands, Except per Unit Data)

2Q'11

3Q'11

4Q'11

1Q'12

2Q'12

YTD

Distributable Earnings ("DE")

190,878

$   

125,745

$   

178,186

$   

162,121

$   

188,404

$   

350,525

$   

Add: Other Payables Attributable to Common Unitholders

13,564

10,581

5,859

100

10,284

10,384

Pre-Tax DE

(1)

204,442

136,326

184,045

162,221

198,688

360,909

Less: Retained Capital

(29,321)

(29,129)

(15,501)

(29,833)

(26,691)

(56,524)

Pre-Tax DE Available for Distribution

175,121

107,197

168,544

132,388

171,997

304,385

% to Common Unitholders

44%

44%

45%

46%

47%

47%

Pre-Tax DE Available for Distribution to Common Unitholders

76,838

47,430

75,640

61,017

81,365

142,382

Less: Other Payables Attributable to Common Unitholders

(13,564)

(10,581)

(5,859)

(100)

(10,284)

(10,384)

Net Cash Available for Distribution to Common Unitholders

63,274

$     

36,849

$     

69,781

$     

60,917

$     

71,081

$     

131,998

$   

Per Common Unit

(2)

0.13

$        

0.08

$        

0.14

$        

0.12

$        

0.14

$        

0.26

$        

Actual Distribution per Common Unit

0.10

$        

0.10

$        

0.22

$        

0.10

$        

0.10

$        

0.20

$        

Blackstone

11

Balance Sheet Highlights

(1)

At June 30, 2012, Blackstone had $1.2 billion in cash and treasury cash management strategies.

Long-term debt of $1.0 billion from the 2009 and 2010 bond issuances.

On July 13, 2012, Blackstone amended its credit facility to extend the maturity to July 2017 and increase the

facility size to $1.1 billion from $1.02 billion; there are currently no borrowings outstanding against the facility.

(Dollars in Millions)

2Q’12

Cash and Cash Equivalents

$

413

Treasury Cash Management Strategies

807

Liquid Investments

(2)

132

Illiquid Investments

(3)

2,013

Net Performance Fees

1,756

Total Net Value

$

5,121

Outstanding Bonds (at par)

(4)

$

1,000

A/A+

rated by S&P / Fitch

$1.02 billion

undrawn credit revolver

$1.4 billion

total cash and liquid investments

$4.61

Net Performance

Fees

Treasury Cash

and Liquids

Private Equity

Real Estate

Other

Cash and Investments per Unit

$1.81

Illiquids

$5.1 billion

total net value

$1.22

$0.85

$0.74

$0.22

$1.58

(1) Preliminary.

(2) Primarily Blackstone investments in Hedge Fund Solutions and non-drawdown Credit Businesses.

(3) Illiquids include Blackstone investments in all drawdown funds in Private Equity, Real Estate and Credit Businesses.

(4) $600M Bond issued in August 2009 maturing on August 15, 2019 (6.625% coupon) and $400M Bond issued in September 2010 maturing on March 15, 2021 (5.875% coupon).

Blackstone

12

GAAP Statement of Operations

(Dollars in Thousands, Except per Unit Data) (Unaudited)

2Q'11

2Q'12

% Change

Revenues

Management and Advisory Fees, Net

498,040

$         

488,048

$         

(2)%

Performance Fees

Realized Carried Interest

42,750

55,929

31%

Realized Incentive Fees

19,012

11,631

(39)%

Unrealized Carried Interest

611,159

84,290

(86)%

Unrealized Incentive Fees

(670)

(16,436)

n/m

Total Performance Fees

672,251

135,414

(80)%

Investment Income (Loss)

Realized

19,303

5,758

(70)%

Unrealized

108,711

(10,519)

n/m

Total Investment Income (Loss)

128,014

(4,761)

n/m

Interest and Dividend Revenue

8,848

9,267

5%

Other

1,128

(765)

n/m

Total Revenues

1,308,281

627,203

(52)%

Expenses

Compensation and Benefits

Compensation

699,432

533,367

(24)%

Performance Fee Compensation

Realized Carried Interest

18,676

7,898

(58)%

Realized Incentive Fees

9,036

5,576

(38)%

Unrealized Carried Interest

123,714

36,815

(70)%

Unrealized Incentive Fees

(5,616)

(9,595)

(71)%

Total Compensation and Benefits

845,242

574,061

(32)%

General, Administrative and Other

126,118

135,737

8%

Interest Expense

14,185

13,773

(3)%

Fund Expenses

(714)

16,248

n/m

Total Expenses

984,831

739,819

(25)%

Other Income

Net Gains from Fund Investment Activities

(74,654)

248,230

n/m

Income Before Provision for Taxes

248,796

$         

135,614

$         

(45)%

Provision for Taxes

64,199

41,337

(36)%

Net Income

184,597

$         

94,277

$           

(49)%

Net Loss Attributable to Redeemable Non-Controlling Interests in Consolidated Entities

(140)

(21,071)

n/m

Net Income (Loss) Attributable to Non-Controlling Interests in Consolidated Entities

(92,408)

243,339

n/m

Net Income (Loss) Attributable to Non-Controlling Interests in Blackstone Holdings

190,908

(53,027)

n/m

Net Income (Loss) Attributable to The Blackstone Group L.P.

86,237

$           

(74,964)

$          

n/m

Net Income (Loss) per Common Unit, Basic and Diluted

0.18

$                 

(0.14)

$              

n/m

Appendix

Blackstone

14

Total Segments

(1)

Transaction and Other Fees, Net, are net of amounts, if any, shared with limited partners including, for Private Equity, broken deal expenses.

(2)

Primarily placement fees.

2Q'12 vs. 2Q'11

(Dollars in Thousands)

2Q'11

3Q'11

4Q'11

1Q'12

2Q'12

$

%

Revenues

Management and Advisory Fees, Net

Base Management Fees

316,474

$         

322,371

$         

336,753

$         

395,506

$         

381,344

$         

64,870

$           

20%

Advisory Fees

102,243

86,178

123,567

75,846

93,372

(8,871)

(9)%

Transaction and Other Fees, Net

(1)

103,561

41,793

43,796

38,471

49,453

(54,108)

(52)%

Management Fee Offsets

(2)

(8,675)

(7,703)

(8,479)

(13,050)

(7,973)

702

8%

Total Management and Advisory Fees, Net

513,603

442,639

495,637

496,773

516,196

2,593

1%

Performance Fees

Realized Carried Interest

42,752

(9,633)

12,387

13,560

55,929

13,177

31%

Realized Incentive Fees

17,463

17,530

51,837

5,279

11,692

(5,771)

(33)%

Unrealized Carried Interest

611,157

(382,949)

311,162

298,796

84,290

(526,867)

(86)%

Unrealized Incentive Fees

1,686

(82,227)

(17,436)

68,121

(17,074)

(18,760)

n/m

Total Performance Fees

673,058

(457,279)

357,950

385,756

134,837

(538,221)

(80)%

Investment Income (Loss)

Realized

30,732

31,647

16,697

23,492

9,360

(21,372)

(70)%

Unrealized

106,837

(165,753)

39,028

59,914

(25,624)

(132,461)

n/m

Total Investment Income (Loss)

137,569

(134,106)

55,725

83,406

(16,264)

(153,833)

n/m

Interest Income and Dividend Revenue

9,283

10,110

10,003

9,345

10,391

1,108

12%

Other

1,128

(1,667)

5,695

(1,207)

(828)

(1,956)

n/m

Total Revenues

1,334,641

(140,303)

925,010

974,073

644,332

(690,309)

(52)%

Expenses

Compensation

272,392

238,207

225,438

254,772

268,884

(3,508)

(1)%

Performance Fee Compensation

Realized Carried Interest

18,675

(1,835)

13,206

7,938

7,899

(10,776)

(58)%

Realized Incentive Fees

9,036

12,378

33,524

4,252

5,575

(3,461)

(38)%

Unrealized Carried Interest

123,713

(74,123)

62,399

84,543

36,815

(86,898)

(70)%

Unrealized Incentive Fees

(5,616)

(37,312)

(14,401)

12,779

(9,596)

(3,980)

(71)%

Total Compensation and Benefits

418,200

137,315

320,166

364,284

309,577

(108,623)

(26)%

Other Operating Expenses

99,363

96,932

122,072

109,521

113,038

13,675

14%

Total Expenses

517,563

234,247

442,238

473,805

422,615

(94,948)

(18)%

Economic Income (Loss)

817,078

$         

(374,550)

$        

482,772

$         

500,268

$         

221,717

$         

(595,361)

$        

(73)%

Economic Net Income

804,181

$         

(379,999)

$        

468,154

$         

491,217

$         

212,349

$         

(591,832)

$        

(74)%

Fee Related Earnings

156,297

$         

112,932

$         

166,096

$         

146,928

$         

145,729

$         

(10,568)

$          

(7)%

Distributable Earnings

190,878

$         

125,745

$         

178,186

$         

162,121

$         

188,404

$         

(2,474)

$            

(1)%

Total Assets Under Management

158,703,173

157,698,448

166,228,504

190,074,167

190,267,831

31,564,658

20%

Fee-Earning Assets Under Management

129,001,206

132,934,377

136,756,753

156,261,446

157,646,521

28,645,315

22%

Weighted Average Fee-Earning AUM

126,636,310

131,458,996

136,876,758

154,354,070

156,426,744

29,790,434

24%

LP Capital Invested

3,654,820

4,753,161

3,406,264

2,719,433

2,403,624

(1,251,196)

(34)%

Total Capital Invested

3,856,171

5,012,262

3,992,488

2,806,886

2,525,648

(1,330,523)

(35)%

Blackstone

15

Private Equity 

(1)

Transaction and Other Fees, Net, are net of amounts, if any, shared with limited partners including, for Private Equity, broken deal expenses.

(2)

Primarily placement fees.

2Q'12 vs. 2Q'11

(Dollars in Thousands)

2Q'11

3Q'11

4Q'11

1Q'12

2Q'12

$

%

Revenues

Management Fees, Net

Base Management Fees

82,297

$        

85,534

$        

84,231

$        

85,789

$        

87,475

$        

5,178

$          

6%

Transaction

and

Other

Fees,

Net

(1)

52,353

21,430

23,879

18,097

14,951

(37,402)

(71)%

(7,629)

(6,498)

(5,057)

(3,782)

(672)

6,957

91%

Total Management Fees, Net

127,021

100,466

103,053

100,104

101,754

(25,267)

(20)%

Performance Fees

Realized Carried Interest

1,362

(17,966)

(28,392)

3,933

28,781

27,419

n/m

Unrealized Carried Interest

187,190

(270,014)

83,777

34,051

(87,893)

(275,083)

n/m

Total Performance Fees

188,552

(287,980)

55,385

37,984

(59,112)

(247,664)

n/m

Investment Income (Loss)

Realized

3,021

20,548

3,512

13,911

(6,195)

(9,216)

n/m

Unrealized

76,947

(121,688)

25,091

16,469

(28,337)

(105,284)

n/m

Total Investment Income (Loss)

79,968

(101,140)

28,603

30,380

(34,532)

(114,500)

n/m

Interest Income and Dividend Revenue

3,197

3,396

3,651

2,420

3,114

(83)

(3)%

Other

665

141

193

(215)

562

(103)

(15)%

Total Revenues

399,403

(285,117)

190,885

170,673

11,786

(387,617)

(97)%

Expenses

Compensation

64,633

52,388

45,611

52,547

53,775

(10,858)

(17)%

Performance Fee Compensation

Realized Carried Interest

49

(2,443)

(3,859)

320

804

755

n/m

Unrealized Carried Interest

29,309

(44,955)

7,953

(1,052)

(8,259)

(37,568)

n/m

Total Compensation and Benefits

93,991

4,990

49,705

51,815

46,320

(47,671)

(51)%

Other Operating Expenses

30,124

27,588

34,493

28,881

30,521

397

1%

Total Expenses

124,115

32,578

84,198

80,696

76,841

(47,274)

(38)%

Economic Income (Loss)

275,288

$      

(317,695)

$    

106,687

$      

89,977

$        

(65,055)

$       

(340,343)

$    

n/m

Total Assets Under Management

46,728,301

42,967,159

45,863,673

47,624,013

46,633,552

(94,749)

(0)%

Fee-Earning Assets Under Management

35,778,240

37,006,024

37,237,791

37,323,635

37,159,452

1,381,212

4%

Weighted Average Fee-Earning AUM

35,734,164

36,670,087

37,147,118

37,491,735

37,434,520

1,700,356

5%

LP Capital Invested

667,341

1,377,715

1,093,745

643,044

102,899

(564,442)

(85)%

Total Capital Invested

697,543

1,458,103

1,563,912

680,035

108,977

(588,566)

(84)%

Management

Fee

Offsets

(2)

Blackstone

16

Real Estate

(1)

Transaction and Other Fees, Net, are net of amounts, if any, shared with limited partners.

(2)

Primarily placement fees.

2Q'12 vs. 2Q'11

(Dollars in Thousands)

2Q'11

3Q'11

4Q'11

1Q'12

2Q'12

$

%

Revenues

Management Fees, Net

Base Management Fees

97,467

$        

97,925

$        

103,947

$      

147,802

$      

127,817

$      

30,350

$        

31%

49,288

19,551

19,128

14,412

25,151

(24,137)

(49)%

(745)

(880)

(2,820)

(8,627)

(5,357)

(4,612)

n/m

Total Management Fees, Net

146,010

116,596

120,255

153,587

147,611

1,601

1%

Performance Fees

Realized Carried Interest

11,798

5,137

3,538

8,617

13,539

1,741

15%

Realized Incentive Fees

9,034

171

202

(1)

7,766

(1,268)

(14)%

Unrealized Carried Interest

433,280

(119,192)

237,884

221,500

144,510

(288,770)

(67)%

Unrealized Incentive Fees

(3,822)

(984)

1,806

7,914

(1,526)

2,296

60%

Total Performance Fees

450,290

(114,868)

243,430

238,030

164,289

(286,001)

(64)%

Investment Income (Loss)

Realized

11,394

7,313

6,346

7,812

9,067

(2,327)

(20)%

Unrealized

37,332

(26,060)

19,970

25,912

14,944

(22,388)

(60)%

Total Investment Income (Loss)

48,726

(18,747)

26,316

33,724

24,011

(24,715)

(51)%

Interest Income and Dividend Revenue

2,989

3,195

3,430

2,552

3,277

288

10%

Other

515

(1,390)

(1,046)

(709)

(590)

(1,105)

n/m

Total Revenues

648,530

(15,214)

392,385

427,184

338,598

(309,932)

(48)%

Expenses

Compensation

70,651

54,986

53,507

68,889

76,576

5,925

8%

Performance Fee Compensation

Realized Carried Interest

5,095

2,169

1,713

4,077

3,401

(1,694)

(33)%

Realized Incentive Fees

4,287

82

91

2

3,871

(416)

(10)%

Unrealized Carried Interest

92,392

(30,076)

57,866

54,275

31,677

(60,715)

(66)%

Unrealized Incentive Fees

(1,371)

(434)

(632)

3,768

(629)

742

54%

Total Compensation and Benefits

171,054

26,727

112,545

131,011

114,896

(56,158)

(33)%

Other Operating Expenses

22,971

23,495

29,027

28,924

26,560

3,589

16%

Total Expenses

194,025

50,222

141,572

159,935

141,456

(52,569)

(27)%

Economic Income (Loss)

454,505

$      

(65,436)

$       

250,813

$      

267,249

$      

197,142

$      

(257,363)

$    

(57)%

Total Assets Under Management

37,605,560

40,709,500

42,852,669

48,322,760

50,225,950

12,620,390

34%

Fee-Earning Assets Under Management

27,919,000

29,981,920

31,236,540

36,647,462

38,476,123

10,557,123

38%

Weighted Average Fee-Earning AUM

26,747,354

28,701,420

31,474,333

35,983,336

36,882,087

10,134,733

38%

LP Capital Invested

2,785,188

1,706,157

995,643

1,143,555

1,855,109

(930,079)

(33)%

Total Capital Invested

2,938,859

1,805,654

1,064,690

1,172,883

1,954,731

(984,128)

(33)%

Transaction

and

Other

Fees,

Net

(1)

Management

Fee

Offsets

(2)

Blackstone

17

Hedge Fund Solutions

2Q'12 vs. 2Q'11

(Dollars in Thousands)

2Q'11

3Q'11

4Q'11

1Q'12

2Q'12

$

%

Revenues

Management Fees, Net

Base Management Fees

79,290

$        

79,355

$        

81,606

$        

81,821

$        

84,278

$        

4,988

$          

6%

Transaction and Other Fees, Net

(1)

861

740

470

92

65

(796)

(92)%

Management Fee Offsets

(2)

(196)

(258)

(402)

(335)

(375)

(179)

(91)%

Total Management Fees, Net

79,955

79,837

81,674

81,578

83,968

4,013

5%

Performance Fees

Realized Incentive Fees

667

5,764

4,148

3,298

1,175

508

76%

Unrealized Incentive Fees

3,441

(19,861)

(2,059)

23,187

(10,981)

(14,422)

n/m

Total Performance Fees

4,108

(14,097)

2,089

26,485

(9,806)

(13,914)

n/m

Investment Income (Loss)

Realized

12,855

1,023

2,503

503

929

(11,926)

(93)%

Unrealized

(12,864)

(10,034)

(3,253)

8,371

(3,636)

9,228

72%

Total Investment Income (Loss)

(9)

(9,011)

(750)

8,874

(2,707)

(2,698)

n/m

Interest Income and Dividend Revenue

472

500

537

386

495

23

5%

Other

(38)

18

7,818

(127)

27

65

n/m

Total Revenues

84,488

57,247

91,368

117,196

71,977

(12,511)

(15)%

Expenses

Compensation

31,674

30,667

38,525

28,233

34,559

2,885

9%

Performance Fee Compensation

Realized Incentive Fees

253

2,257

688

1,378

(345)

(598)

n/m

Unrealized Incentive Fees

2,955

(7,214)

(865)

7,294

(2,820)

(5,775)

n/m

Total Compensation and Benefits

34,882

25,710

38,348

36,905

31,394

(3,488)

(10)%

Other Operating Expenses

16,075

14,421

21,568

13,934

14,506

(1,569)

(10)%

Total Expenses

50,957

40,131

59,916

50,839

45,900

(5,057)

(10)%

Economic Income

33,531

$        

17,116

$        

31,452

$        

66,357

$        

26,077

$        

(7,454)

$         

(22)%

Total Assets Under Management

40,578,219

40,373,092

40,534,768

43,351,275

42,888,946

2,310,727

6%

Fee-Earning Assets Under Management

37,244,509

37,231,013

37,819,636

40,543,772

40,161,179

2,916,670

8%

Weighted Average Fee-Earning AUM

36,993,058

37,658,240

38,452,740

39,904,474

40,528,701

3,535,643

10%

LP Capital Invested

49,409

354,971

288,237

4,661

-

(49,409)

(100)%

Total Capital Invested

55,393

375,000

304,500

5,502

-

(55,393)

(100)%

(1)

(2)

Transaction and Other Fees, Net, are net of amounts, if any, shared with limited partners.

Primarily placement fees.

Blackstone

18

Credit Businesses

(1)

Transaction and Other Fees, Net, are net of amounts, if any, shared with limited partners.

(2)

Primarily placement fees.

2Q'12 vs. 2Q'11

(Dollars in Thousands)

2Q'11

3Q'11

4Q'11

1Q'12

2Q'12

$

%

Revenues

Management Fees, Net

Base Management Fees

57,420

$        

59,557

$        

66,969

$        

80,094

$        

81,774

$        

24,354

$        

42%

Transaction

and

Other

Fees,

Net

(1)

849

(26)

312

5,725

9,184

8,335

n/m

Management

Fee

Offsets

(2)

(105)

(67)

(200)

(306)

(1,569)

(1,464)

n/m

Total Management Fees, Net

58,164

59,464

67,081

85,513

89,389

31,225

54%

Performance Fees

Realized Carried Interest

29,592

3,196

37,241

1,010

13,609

(15,983)

(54)%

Realized Incentive Fees

7,762

11,595

47,487

1,982

2,751

(5,011)

(65)%

Unrealized Carried Interest

(9,313)

6,257

(10,499)

43,245

27,673

36,986

n/m

Unrealized Incentive Fees

2,067

(61,382)

(17,183)

37,020

(4,567)

(6,634)

n/m

Total Performance Fees

30,108

(40,334)

57,046

83,257

39,466

9,358

31%

Investment Income (Loss)

Realized

3,236

2,807

4,021

683

5,638

2,402

74%

Unrealized

5,437

(7,800)

(2,877)

9,211

(9,156)

(14,593)

n/m

Total Investment Income (Loss)

8,673

(4,993)

1,144

9,894

(3,518)

(12,191)

n/m

Interest Income and Dividend Revenue

902

1,404

610

2,425

1,752

850

94%

Other

(47)

(132)

(772)

(238)

(787)

(740)

n/m

Total Revenues

97,800

15,409

125,109

180,851

126,302

28,502

29%

Expenses

Compensation

33,071

40,533

25,435

37,143

42,845

9,774

30%

Performance Fee Compensation

Realized Carried Interest

13,531

(1,561)

15,352

3,541

3,694

(9,837)

(73)%

Realized Incentive Fees

4,496

10,039

32,745

2,872

2,049

(2,447)

(54)%

Unrealized Carried Interest

2,012

908

(3,420)

31,320

13,397

11,385

n/m

Unrealized Incentive Fees

(7,200)

(29,664)

(12,904)

1,717

(6,147)

1,053

15%

Total Compensation and Benefits

45,910

20,255

57,208

76,593

55,838

9,928

22%

Other Operating Expenses

10,226

11,210

13,162

17,096

15,749

5,523

54%

Total Expenses

56,136

31,465

70,370

93,689

71,587

15,451

28%

Economic Income (Loss)

41,664

$        

(16,056)

$       

54,739

$        

87,162

$        

54,715

$        

13,051

$        

31%

Total Assets Under Management

33,791,093

33,648,697

36,977,394

50,776,119

50,519,383

16,728,290

50%

Fee-Earning Assets Under Management

28,059,457

28,715,420

30,462,786

41,746,577

41,849,767

13,790,310

49%

Weighted Average Fee-Earning AUM

27,161,734

28,429,249

29,802,567

40,974,525

41,581,436

14,419,702

53%

LP Capital Invested

152,882

1,314,318

1,028,639

928,173

445,616

292,734

n/m

Total Capital Invested

164,376

1,373,505

1,059,386

948,466

461,940

297,564

n/m

Blackstone

19

Financial Advisory

2Q'12 vs. 2Q'11

(Dollars in Thousands)

2Q'11

3Q'11

4Q'11

1Q'12

2Q'12

$

%

Revenues

Advisory Fees

102,243

$       

86,178

$         

123,567

$       

75,846

$         

93,372

$         

(8,871)

$          

(9)%

Transaction and Other Fees, Net

210

98

7

145

102

(108)

(51)%

Total Advisory and Transaction Fees

102,453

86,276

123,574

75,991

93,474

(8,979)

(9)%

Investment Income (Loss)

Realized

226

(44)

315

583

(79)

(305)

n/m

Unrealized

(15)

(171)

97

(49)

561

576

n/m

Total Investment Income (Loss)

211

(215)

412

534

482

271

n/m

Interest Income and Dividend Revenue

1,723

1,615

1,775

1,562

1,753

30

2%

Other

33

(304)

(498)

82

(40)

(73)

n/m

Total Revenues

104,420

87,372

125,263

78,169

95,669

(8,751)

(8)%

Expenses

Compensation

72,363

59,633

62,360

67,960

61,129

(11,234)

(16)%

Total Compensation and Benefits

72,363

59,633

62,360

67,960

61,129

(11,234)

(16)%

Other Operating Expenses

19,967

20,218

23,822

20,686

25,702

5,735

29%

Total Expenses

92,330

79,851

86,182

88,646

86,831

(5,499)

(6)%

Economic Income (Loss)

12,090

$         

7,521

$           

39,081

$         

(10,477)

$        

8,838

$           

(3,252)

$          

(27)%

Blackstone

20

Fee-Earning AUM Net Flows

Fee-Earning AUM was up $1.4 billion from last quarter and up $28.6 billion or 22% from last year despite market

losses and the negative impact of foreign currency translation.

Real Estate up 38% over the last year, including capital committed to our latest global buyout fund.

Hedge Fund Solutions continued its solid growth with just under $8 billion of gross inflows over the last twelve

months.

Credit

Businesses’

strong

growth

continued,

up

49%

from

the

same

period

last

year,

including

$9.4

billion

related

to

the first quarter 2012 acquisition of Harbourmaster.

2Q’12 Fee-Earning AUM Rollforward

(Dollars in Millions)

LTM Fee-Earning AUM Rollforward

(Dollars in Millions)

(1)

Inflows: include contributions, capital raised, other increases in available capital, purchases and acquisitions

(2)

Outflows: represent redemptions, client withdrawals and decreases in available capital

(3)

Realizations: represent realizations from the disposition of assets

(4)

Market Activity: gains/(losses) on portfolio investments and impact of foreign exchange rate fluctuations

Private

Real

Hedge Fund

Credit

Private

Real

Hedge Fund

Credit

Equity

Estate

Solutions

Businesses

Total

Equity

Estate

Solutions

Businesses

Total

1Q'12

37,324

$      

36,647

$      

40,544

$      

41,747

$      

156,261

$    

2Q'11

35,778

$      

27,919

$      

37,245

$      

28,059

$      

129,001

$    

Inflows

(1)

299

2,499

1,219

1,760

5,777

Inflows

(1)

2,807

14,471

7,689

18,904

43,871

Outflows

(2)

-

(61)

(775)

(825)

(1,662)

Outflows

(2)

(320)

(1,895)

(3,466)

(3,495)

(9,175)

Realizations

(3)

(456)

(447)

n/a

(133)

(1,036)

Realizations

(3)

(1,069)

(1,532)

n/a

(1,092)

(3,693)

Net Inflows / (Outflows)

(157)

1,991

444

801

3,079

Net Inflows

1,418

11,044

4,223

14,318

31,003

Market

Activity

(4)

(7)

(162)

(826)

(698)

(1,694)

Market

Activity

(4)

(37)

(487)

(1,306)

(527)

(2,358)

2Q'12

37,159

$      

38,476

$      

40,161

$      

41,850

$      

157,647

$    

2Q'12

37,159

$      

38,476

$      

40,161

$      

41,850

$      

157,647

$    

QoQ Inc / (Dec)

(0)%

5%

(1)%

0%

1%

YoY Inc

4%

38%

8%

49%

22%

Blackstone

21

Total AUM Net Flows

Total AUM roughly flat from last quarter and up $31.6 billion or

20% from last year despite the negative impact of foreign

currency translation.

Private Equity market appreciation down $1.9 billion over the last year, driven by negative performance of our public

portfolio.

Real Estate market appreciation up $2.9 billion over the last year as fundamentals continue to improve.

Credit Businesses’

strong growth continued, up 50% from the same period last year including the final closing of its latest

$4 billion Mezzanine fund and $9.6 billion related to the first quarter 2012 acquisition of Harbourmaster.

(1)

Inflows: include contributions, capital raised, other increases in available capital, purchases and acquisitions

(2)

Outflows: represent redemptions, client withdrawals and decreases in available capital

(3)

Realizations: represent realizations from the disposition of assets

(4)

Market Activity: gains/(losses) on portfolio investments and impact of foreign exchange rate fluctuations

2Q’12 Total AUM Rollforward

(Dollars in Millions)

LTM Total AUM Rollforward

(Dollars in Millions)

Private

Real

Hedge Fund

Credit

Private

Real

Hedge Fund

Credit

Equity

Estate

Solutions

Businesses

Total

Equity

Estate

Solutions

Businesses

Total

1Q'12

47,624

$      

48,323

$      

43,351

$      

50,776

$      

190,074

$    

2Q'11

46,728

$      

37,606

$      

40,578

$      

33,791

$      

158,703

$    

Inflows

860

1,946

1,231

1,621

5,658

Inflows

5,457

12,656

7,360

22,608

48,080

Outflows

(2)

(69)

(823)

(1,170)

(2,064)

Outflows

(15)

(269)

(3,720)

(4,290)

(8,294)

Realizations

(403)

(861)

n/a

(188)

(1,452)

Realizations

(3,589)

(2,626)

n/a

(1,394)

(7,609)

Net Inflows

455

1,016

407

264

2,142

Net Inflows

1,853

9,760

3,640

16,923

32,177

Market

Activity

(1,445)

887

(870)

(520)

(1,948)

(1,948)

2,860

(1,329)

(195)

(612)

2Q'12

46,634

$      

50,226

$      

42,889

$      

50,519

$      

190,268

$    

2Q'12

46,634

$      

50,226

$      

42,889

$      

50,519

$      

190,268

$    

QoQ Inc / (Dec)

(2)%

4%

(1)%

(1)%

0%

YoY Inc / (Dec)

(0)%

34%

6%

50%

20%

Market

Activity

(1)

(2)

(3)

(4)

(1)

(2)

(3)

(4)

Blackstone

22

Net Accrued Performance Fees

(1)

Blackstone had $1.8 billion of accrued performance fees, net of compensation, as of the end of the second quarter.

Net Accrued Performance Fees

(2) (3)

(Dollars in Millions, Except per Unit Data)

1Q'12

2Q'12

Per Unit

(4)

Change vs. 1Q'12

Private Equity

BCP IV Carried Interest

586

$                          

532

$                          

0.48

$                         

(54)

$                           

Other Carried Interest

-

1

0.00

1

Total Private Equity

586

533

0.48

(53)

Real Estate

BREP V Carried Interest

314

377

0.34

63

BREP VI Carried Interest

496

530

0.48

34

BREP VII Carried Interest

15

22

0.02

7

BREP Int'l I Carried Interest

9

7

0.01

(2)

BREP EU III Carried Interest

39

53

0.05

14

BREDS Carried Interest

17

15

0.01

(2)

BREDS Incentive Fees

4

4

0.00

-

Asia Platform Incentive Fees

24

27

0.02

3

Total Real Estate

918

1,035

0.93

117

Hedge Fund Solutions

Incentive Fees

21

12

0.01

(9)

Total Hedge Fund Solutions

21

12

0.01

(9)

Credit Businesses

Carried Interest

95

106

0.10

11

Incentive Fees

74

70

0.06

(4)

Total Credit Businesses

169

176

0.16

7

Total Blackstone

Carried Interest

1,571

1,643

1.48

72

Incentive Fees

123

113

0.10

(10)

Performance Fees

1,694

$                       

1,756

$                       

1.58

$                         

62

$                            

(1)

Preliminary.

(2)

Net Accrued Performance Fees are presented net  of compensation and do not include clawback amounts, if any, which are disclosed in the 10-Q/K.

(3)

Private Equity and Real Estate include Co-Investments.

(4)

Per Unit calculations are based on quarter-end Distributable Earnings Units Outstanding (see Appendix – Unit Rollforward).

Blackstone

23

Investment

Records

as

of

June

30,

2012

(1)

Notes on next page.

Committed

Available

Unrealized Investments

Realized Investments

Total Investments

Net IRRs

(4)

(Dollars in Thousands, Except Where Noted)

Capital

Capital

(2)

Value

MOIC

(3)

% Public

Value

MOIC

(3)

Value

MOIC

(3)

Realized

Total

Private Equity

BCP I (Oct 1987 / Oct 1993)

859,081

$      

-

$               

-

$               

n/a

-

1,741,738

$   

2.6x

1,741,738

$   

2.6x

19%

19%

BCP II (Oct 1993 / Aug 1997)

1,361,100

-

-

n/a

-

3,256,351

2.5x

3,256,351

2.5x

32%

32%

BCP III (Aug 1997 / Nov 2002)

3,973,378

167,776

20,150

0.5x

100%

9,160,904

2.3x

9,181,054

2.3x

14%

14%

Non-Contributed Funds

6,193,559

167,776

20,150

0.5x

100%

14,158,993

2.4x

14,179,143

2.4x

19%

19%

BCOM (Jun 2000 / Jun 2006)

2,137,330

202,433

420,861

0.5x

49%

2,407,519

1.8x

2,828,380

1.3x

18%

6%

BCP IV (Nov 2002 / Dec 2005)

6,773,138

293,165

4,966,740

1.7x

62%

14,253,335

3.1x

19,220,075

2.6x

60%

37%

BCP V (Dec 2005 / Jan 2011)

20,995,132

1,249,114

17,791,758

1.0x

16%

3,481,145

1.7x

21,272,904

1.1x

31%

1%

BCP

VI

(Jan2011

/

Jan

2016)

(5)

15,219,872

12,273,206

1,738,542

1.0x

2%

n/a

n/a

1,738,542

1.0x

n/a

n/m

BEP (Aug 2011 / Aug 2017)

(5)

1,493,971

595,115

349,006

1.0x

-

n/a

n/a

349,006

1.0x

n/a

n/m

Contributed Funds

46,619,443

14,613,033

25,266,907

1.1x

24%

20,141,999

2.5x

45,408,907

1.4x

44%

10%

Total Private Equity

52,813,002

$

14,780,809

$

25,287,057

$

1.1x

24%

34,300,992

$

2.5x

59,588,050

$

1.6x

23%

14%

Real Estate

Dollar

Pre-BREP

140,714

$      

-

$               

-

$               

n/m

-

345,190

$      

2.5x

345,190

$      

2.5x

33%

33%

BREP I (Sep 1994 / Oct 1996)

380,708

-

-

n/m

-

1,327,708

2.8x

1,327,708

2.8x

40%

40%

BREP II (Oct 1996 / Mar 1999)

1,198,339

-

-

n/m

-

2,524,866

2.1x

2,524,866

2.1x

19%

19%

BREP III (Apr 1999 / Apr 2003)

1,522,708

-

2,161

0.1x

-

3,323,362

2.4x

3,325,523

2.3x

22%

21%

Non-Contributed Funds

3,242,469

-

2,161

0.1x

7,521,126

2.3x

7,523,287

2.3x

25%

25%

BREP IV (Apr 2003 / Dec 2005)

2,198,694

-

1,336,058

0.8x

6%

2,856,053

2.5x

4,192,111

1.5x

82%

14%

BREP V (Dec 2005 / Feb 2007)

5,538,579

243,769

6,967,522

1.5x

-

2,013,265

1.8x

8,980,787

1.6x

90%

9%

BREP VI (Feb 2007 / Aug 2011)

11,055,826

863,812

14,483,754

1.4x

5%

839,657

2.0x

15,323,411

1.4x

42%

9%

BREP VII (Aug 2011 / Feb 2017)

(6)

11,095,933

9,024,471

2,510,074

1.1x

-

122,580

1.2x

2,632,654

1.1x

81%

33%

BREDS Drawdown (Various)

2,707,949

736,212

2,220,735

1.1x

-

807,258

1.3x

3,027,993

1.2x

23%

13%

BREP

Co-Investment

(Various)

(7)

-

-

3,782,359

1.4x

1%

424,343

1.3x

4,206,702

1.4x

10%

11%

Contributed Funds

32,596,981

10,868,264

31,300,502

1.3x

2%

7,063,156

1.9x

38,363,658

1.4x

34%

10%

Total Dollar

35,839,450

$

10,868,264

$

31,302,663

$

1.3x

2%

14,584,282

$

2.1x

45,886,945

$

1.5x

27%

15%

Euro

BREP Int'l (Jan 2001 / Sep 2005)

824,172

€

-

€

106,093

€

1.1x

-

1,223,776

€

2.2x

1,329,869

€

2.0x

26%

23%

BREP Int'l II (Sep 2005 / Jun 2008)

1,626,942

82,162

1,150,816

0.9x

-

172,038

1.5x

1,322,854

1.0x

16%

(3)%

BREP Europe III (Jun 2008 / Dec 2013)

3,194,504

2,165,390

1,620,362

1.5x

-

15,712

2.8x

1,636,074

1.5x

49%

22%

Total Euro

5,645,618

€

2,247,552

€

2,877,271

€

1.2x

-

1,411,526

€

2.1x

4,288,797

€

1.4x

25%

8%

Total Real Estate

42,958,303

$

13,720,124

$

34,924,920

$

1.3x

2%

16,325,236

$

2.1x

51,250,156

$

1.5x

27%

14%

Credit Businesses

Mezzanine (Jul 2007 / Jul 2012)

6,120,000

$   

3,264,616

$   

3,759,438

$   

1.2x

-

1,433,168

$   

1.6x

5,192,605

$   

1.3x

n/a

17%

Rescue Lending (May 2009 / May 2013)

3,253,143

1,325,640

2,519,227

1.2x

-

1,079,902

1.1x

3,599,129

1.2x

n/a

13%

Total Credit Businesses

9,373,143

$   

4,590,256

$   

6,278,665

$   

1.2x

-

2,513,070

$   

1.4x

8,791,734

$   

1.2x

n/a

n/a

Blackstone

Investment

Records

as

of

June

30,

2012

–

Notes

The returns presented herein represent those of the applicable Blackstone Funds and not those of The Blackstone Group L.P.

n/m

n/a

(1)

Preliminary.

(2) 

Available Capital represents total investable capital commitments, including side-by-side, adjusted for certain expenses and

expired or recallable capital, less invested capital.  This amount is not reduced by outstanding commitments to investments. 

Additionally, the Real Estate segment has $1.2 billion of Available Capital that has been reserved for add-on investments in

funds that are fully invested.

(3)

Multiple of Invested Capital (“MOIC”) represents carrying value, before management fees, expenses and Carried Interest,

divided by invested capital.

(4)

Net Internal Rate of Return (“IRR”) represents the annualized inception to June 30, 2012 IRR on total invested capital based

on realized proceeds and unrealized value, as applicable, after management fees, expenses and Carried Interest.

(5)

Returns for BCP VI and BEP are not meaningful as their initial investments occurred in May 2011 and August 2011,

respectively.

(6)

BREP VII commenced its investment period in August 2011 and as of July 19, 2012 continues to raise capital.

(7)

BREP Co-Investment represents co-investment capital raised for various BREP investments.  The Net IRR reflected is calculated

by aggregating each co-investment’s realized proceeds and unrealized value, as applicable, after management fees, expenses

and Carried Interest.

24

Not applicable.

Not meaningful.

Blackstone

Reconciliation of GAAP to Non-GAAP Measures

Notes on next page.

(Dollars in Thousands)

2Q'11

3Q'11

4Q'11

1Q'12

2Q'12

Net Income (Loss) Attributable to The Blackstone Group L.P.

86,237

$        

(274,567)

$    

(22,677)

$       

58,325

$        

(74,964)

$       

Net Income (Loss) Attributable to Non-Controlling Interests in Blackstone Holdings

190,908

(402,079)

21,220

107,405

(53,027)

Net Income (Loss) Attributable to Non-Controlling Interests in Consolidated Entities

(92,408)

(265,353)

466,452

212,293

243,339

Net Income Attributable to Redeemable Non-Controlling

Interests in Consolidated Entities

(140)

(44,776)

(9,634)

39,609

(21,071)

Net Income (Loss)

184,597

$      

(986,775)

$    

455,361

$      

417,632

$      

94,277

$        

Provision for Taxes

64,199

(7,637)

250,299

38,753

41,337

Income (Loss) Before Provision (Benefit) for Taxes

248,796

$      

(994,412)

$    

705,660

$      

456,385

$      

135,614

$      

IPO and Acquisition-Related Charges

(1)

430,829

264,068

147,808

244,897

268,936

Amortization of Intangibles

(2)

44,905

45,665

86,121

50,888

39,435

Income (Loss) Associated with Non-Controlling Interests in (Income) Loss of

Consolidated Entities

(3)

92,548

310,129

(456,817)

(251,902)

(222,268)

Economic Income (Loss)

817,078

$      

(374,550)

$    

482,772

$      

500,268

$      

221,717

$      

Taxes

(4)

(12,897)

(5,449)

(14,618)

(9,051)

(9,368)

Economic Net Income (Loss)

804,181

$      

(379,999)

$    

468,154

$      

491,217

$      

212,349

$      

Taxes

(4)

12,897

5,449

14,618

9,051

9,368

Performance Fee Adjustment

(5)

(673,058)

457,279

(357,950)

(385,756)

(134,837)

Investment Income (Loss) Adjustment

(6)

(137,569)

134,106

(55,725)

(83,406)

16,264

Investment Income (Loss) -

Blackstone's Treasury Cash Management Strategies

(7)

4,038

(3,011)

2,271

6,310

1,892

Performance Fee Compensation and Benefits Adjustment

(8)

145,808

(100,892)

94,728

109,512

40,693

Fee Related Earnings

156,297

$      

112,932

$      

166,096

$      

146,928

$      

145,729

$      

Realized Performance Fees

(9)

32,504

(2,646)

17,494

6,649

54,147

Realized Investment Income

(10)

30,732

31,647

16,697

23,492

9,360

Adjustment Related to Realized Investment Income -

Blackstone's Treasury Cash Management Strategies

(11)

(2,343)

(309)

(2,395)

(5,897)

(1,280)

Taxes and Related Payables Including Payable Under Tax Receivable Agreement

(12)

(26,312)

(15,879)

(19,706)

(9,051)

(19,552)

Distributable Earnings

190,878

$      

125,745

$      

178,186

$      

162,121

$      

188,404

$      

Interest

13,068

12,577

14,843

13,554

12,850

Taxes and Related Payables Including Payable Under Tax Receivable Agreement

(12)

26,312

15,879

19,706

9,051

19,552

Depreciation and Amortization

7,837

8,325

8,451

10,268

10,391

Adjusted EBITDA

238,095

$      

162,526

$      

221,186

$      

194,994

$      

231,197

$      

25

Blackstone

Reconciliation

of

GAAP

to

Non-GAAP

Measures

–

Notes

Note: Prior period amounts have been adjusted to conform to the current period presentation and definitions.  See also Appendix -

Definitions.

(1)   This adjustment adds back to Income (Loss) Before Provision (Benefit) for Taxes amounts for Transaction-Related Charges which

include principally equity-based compensation charges associated with Blackstone’s initial public offering and long-term retention

programs outside of annual deferred compensation and other corporate actions.

(2)

This adjustment adds back to Income (Loss) Before Provision (Benefit) for Taxes amounts for the Amortization of Intangibles which

are associated with Blackstone’s initial public offering and other corporate actions.

(3)

This adjustment adds back to Income (Loss) Before Provision (Benefit) for Taxes the amount of (Income) Loss Associated with Non-

Controlling Interests in (Income) Loss of Consolidated Entities and includes the amount of Management Fee Revenues associated

with Consolidated CLO Entities.

(4)

Taxes represent the current tax provision (benefit) calculated on Income (Loss) Before Provision for Taxes.

(5)

This adjustment removes from EI the total segment amount of Performance Fees.

(6)

This adjustment removes from EI the total segment amount of Investment Income (Loss).

(7)

This adjustment represents the realized and unrealized gain on Blackstone’s Treasury cash management strategies which are a

component of Investment Income (Loss) but included in Fee Related Earnings.

(8)

This adjustment removes from expenses the compensation and benefit amounts related to Blackstone’s profit sharing plans related

to Performance Fees.

(9)

Represents the adjustment for realized Performance Fees net of corresponding actual amounts due under Blackstone’s profit sharing

plans related thereto.

(10)

Represents the adjustment for Blackstone’s Investment Income (Loss) -

Realized.

(11)

Represents the elimination of Realized Investment Income attributable to Blackstone’s Treasury cash management strategies which

is a component of both Fee Related Earnings from Operations and Realized Investment Income (Loss).

(12)

Taxes and Related Payables Including Payable Under Tax Receivable Agreement represent the current tax provision (benefit)

calculated on Income (Loss) Before Provision for Taxes and the payable under the Tax Receivable Agreement.

26

Blackstone

27

Calculation of Certain Non-GAAP Financial Metric Components

Unless otherwise noted, all amounts are the respective captions from the Total Segment information.

(Dollars in Thousands)

2Q'12

Year-to-Date

Interest Income and Dividend Revenue

10,391

$       

19,736

$       

Other Revenue

(828)

(2,035)

Investment Income (Loss) - Blackstone's Treasury Cash Management Strategies

(1)

1,892

8,202

Interest Income and Other Revenue

11,455

$       

25,903

$       

Realized Incentive Fees

11,692

16,971

Less: Realized Incentive Fee Compensation

(5,575)

(9,827)

Net Realized Incentive Fees

6,117

$         

7,144

$         

Realized Carried Interest

55,929

69,489

Less: Realized Carried Interest Compensation

(7,899)

(15,837)

Net Realized Carried Interest

48,030

$       

53,652

$       

Realized Investment Income

9,360

32,852

Adjustment Related to Realized Investment Income - Blackstone's Treasury Cash Management Strategies

(1)

(1,280)

(7,177)

Realized Investment Income

8,080

$         

25,675

$       

Unrealized Incentive Fees

(17,074)

51,047

Less: Unrealized Incentive Fee Compensation

9,596

(3,183)

Net Unrealized Incentive Fees

(7,478)

$        

47,864

$       

Unrealized Carried Interest

84,290

383,086

Less: Unrealized Carried Interest Compensation

(36,815)

(121,358)

Net Unrealized Carried Interest

47,475

$       

261,728

$     

Unrealized Investment Income

(25,624)

34,290

Less: Investment Income (Loss) - Blackstone's Treasury Cash Management Strategies

(1)

(1,892)

(8,202)

Less: Adjustment Related to Realized Investment Income - Blackstone's Treasury Cash Management Strategies

(1)

1,280

7,177

Unrealized Investment Income

(26,236)

$      

33,265

$       

Related Payables

(2)

10,184

$       

10,184

$       

(1)

See Appendix - Reconciliation of GAAP to Non-GAAP Measures for this adjustment.

(2)

Represents tax related payables including the payable under the tax receivable agreement.

Blackstone

Unit Rollforward

2Q'11

3Q'11

4Q'11

1Q'12

2Q'12

YTD

Total

GAAP

Weighted-Average

Common

Units

Outstanding

-

Basic

476,289,647

487,189,657

490,511,637

506,985,529

528,778,977

517,882,253

Adjustments:

Weighted-Average Unvested Deferred Restricted Common Units

7,353,999

-

-

10,404,029

-

-

Total

GAAP

Weighted-Average

Common

Units

Outstanding -

Diluted

483,643,646

487,189,657

490,511,637

517,389,558

528,778,977

517,882,253

Adjustments:

Weighted-Average Blackstone Holdings Partnership Units

625,526,089

616,168,175

613,105,891

602,817,069

591,155,160

596,986,114

Weighted-Average Unvested Deferred Restricted Common Units

-

7,243,768

12,469,282

-

4,820,609

7,612,319

Weighted-Average Economic Net Income Adjusted Units

1,109,169,735

1,110,601,600

1,116,086,810

1,120,206,627

1,124,754,746

1,122,480,686

Economic Net Income Adjusted Units, End of Period

1,110,129,505

1,110,027,706

1,108,034,890

1,119,829,138

1,122,067,386

1,122,067,386

Total

Common

Units

Outstanding

(1)

483,765,891

488,178,170

495,599,976

510,868,415

525,464,110

525,464,110

Adjustments:

Blackstone Holdings Partnership Units

618,779,283

615,164,340

608,718,156

597,566,417

585,315,742

585,315,742

Distributable

Earnings

Units

Outstanding

(2)

1,102,545,174

1,103,342,510

1,104,318,132

1,108,434,832

1,110,779,852

1,110,779,852

28

(1)

Common Unitholders receive Tax Benefits from deductions taken by Blackstone’s corporate tax paying subsidiaries and bear responsibility for the deduction from 

Distributable Earnings of the Payable under the Tax Receivable Agreement and certain other tax-related payables.

(2)

Excludes units which are not entitled to distributions.

Blackstone

Definitions

•

Blackstone uses Economic Income, or “EI”, as a key measure of value creation, a benchmark of its performance and in making resource

deployment and compensation decisions across its five segments.  EI represents segment net income before taxes excluding transaction-

related charges.  Transaction-related charges arise from Blackstone’s initial public offering (“IPO”) and long-term retention programs outside

of annual deferred compensation and other corporate actions, including acquisitions.  Transaction-related charges include equity-based

compensation charges, the amortization of intangible assets and contingent consideration associated with acquisitions.  EI presents

revenues and expenses on a basis that deconsolidates the investment funds Blackstone manages.

•

Economic Net Income, or “ENI”, represents EI adjusted to include current period taxes.  Taxes represent the current tax provision (benefit)

calculated on Income (Loss) Before Provision for Taxes.

•

Blackstone uses Fee Related Earnings, or “FRE”, as a key measure to highlight earnings from operations excluding:  (a) the income related to

performance fees and related carry plan costs, (b) income earned from Blackstone’s investments in the Blackstone Funds, and (c) realized

and unrealized gains (losses) from other investments except for such gains (losses) from Blackstone’s Treasury cash management strategies. 

Blackstone uses FRE as a measure to assess whether recurring revenue from its businesses is sufficient to adequately cover all of its

operating expenses and generate profits.  FRE equals contractual fee revenues, investment income from Blackstone’s Treasury cash

management strategies and interest income, less (a) compensation expenses (which includes amortization of non-IPO and non-acquisition-

related equity-based awards, but excludes amortization of IPO and acquisition-related equity-based awards, carried interest and incentive

fee compensation), and (b) other operating expenses.

•

Distributable Earnings, or “DE”, which is derived from Blackstone’s segment reported results, is a supplemental measure to assess

performance and amounts available for distributions to Blackstone unitholders, including Blackstone personnel and others who are limited

partners of the Blackstone Holdings partnerships.  DE is intended to show the amount of net realized earnings without the effects of the

consolidation of the Blackstone Funds.

Blackstone discloses the following financial measures that are calculated and presented on the basis of methodologies other than in accordance

with generally accepted accounting principles in the United States of America (“non-GAAP”) in this presentation:

•

Blackstone uses Adjusted Earnings Before Interest, Taxes and Depreciation and Amortization, or “Adjusted EBITDA”, as a measure of segment

performance and an indicator of its ability to cover recurring operating expenses.  Adjusted EBITDA equals DE before segment interest expense,

segment depreciation and amortization, and the taxes and related payables including the payable under the tax receivable agreement.

DE, which is a component of ENI, is the sum across all segments of:  (a) Total Management and Advisory Fees, (b) Interest and Dividend Revenue,

(c) Other Revenue, (d) Realized Performance Fees, and (e) Realized Investment Income (Loss); less (a) Compensation, (b) Realized Performance

Fee Compensation, (c) Other Operating Expenses, and (d) Taxes and Related Payables Including the Payable Under the Tax Receivable

Agreement.  DE is reconciled to Blackstone’s Consolidated Statement of Operations.  It is Blackstone’s current intention that on an annual basis

it will distribute to unitholders all of its DE, less realized investment gains and returns of capital from investments and acquisitions, in excess of

amounts determined by its general partner to be necessary or appropriate to provide for the conduct of its business, to make appropriate

investments in its business and funds, to comply with applicable law, any of its debt instruments or other agreements, or to provide for future

distributions to its unitholders for any ensuing quarter.

29

Blackstone

Forward-Looking Statements

This presentation may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and

Section 21E of the Securities Exchange Act of 1934 which reflect

Blackstone’s current views with respect to, among other things,

Blackstone’s operations and financial performance. You can identify these forward-looking statements by the use of words such as

“outlook,”

“believes,”

“expects,”

“potential,”

“continues,”

“may,”

“will,”

“should,”

“seeks,”

“approximately,”

“predicts,”

“intends,”

“plans,”

“estimates,”

“anticipates”

or the negative version of these words or other comparable words. Such forward-looking

statements are subject to various risks and uncertainties. Accordingly, there are or will be important factors that could cause actual

outcomes

or

results

to

differ

materially

from

those

indicated

in

these

statements.

Blackstone

believes

these

factors

include

but

are

not limited to those described under the section entitled “Risk Factors”

in its Annual Report on Form 10-K for the fiscal year ended

December 31, 2011, as such factors may be updated from time to time in its periodic filings with the Securities and Exchange

Commission, which are accessible on the SEC’s website at www.sec.gov. These factors should not be construed as exhaustive and

should be read in conjunction with the other cautionary statements that are included in this presentation and in the filings.

Blackstone undertakes no obligation to publicly update or review

any forward-looking statement, whether as a result of new

information, future developments or otherwise.

This presentation does not constitute an offer of any Blackstone

Fund.

30