Exhibit 99.1

Blackstone Reports Second Quarter 2011 Results

Economic Net Income increased to $703 million for the second quarter of 2011, up 243% from $205 million for the second quarter of 2010.

Distributable Earnings increased to $185 million for the second quarter of 2011, up 25% from $148 million in the second quarter of 2010.

GAAP Results Attributable to The Blackstone Group L.P. included net income of $86 million in the second quarter of 2011, compared to a net loss of $193 million in the second quarter of 2010, in each case including net IPO and acquisition-related accounting charges.

Fee-Earning Assets Under Management increased 27% to $129 billion at June 30, 2011, from $101 billion at June 30, 2010, while Total Assets Under Management increased 43% to $159 billion at June 30, 2011.

Blackstone declares a quarterly distribution of $0.10 per common unit.

New York, July 21, 2011: The Blackstone Group L.P. (NYSE: BX) today reported its second quarter 2011 results.

Economic Net Income (“ENI”) was $703.3 million for the second quarter of 2011, an increase of $498.0 million compared to ENI for the second quarter of 2010, and an increase of $135.2 million compared to ENI for the first quarter of 2011. The increase in ENI compared to the second quarter of 2010 was driven principally by strong investment performance across Blackstone’s investment segments, which produced $810.6 million in Performance Fees and Investment Income, more than six times the $128.5 million in the second quarter of 2010, and an increase of $96.2 million, or 23%, in Management and Advisory Fees. The increase in ENI compared to the first quarter of 2011 was driven by an increase of $87.9 million in Management and Advisory Fees to $513.6 million, primarily attributable to Advisory and Transaction Fees, and continued strong investment performance. ENI was $1.3 billion for the six months ended June 30, 2011, an increase of $705.7 million compared to ENI for the six months ended June 30, 2010 of $565.6 million, primarily attributable to Performance Fees net of applicable compensation.

Blackstone’s Fee-Earning Assets Under Management and Total Assets Under Management continued to demonstrate consistently strong growth, rising to a record $129.0 billion and $158.7 billion, respectively, driven both by net inflows and investment appreciation. Blackstone funds had $31.4 billion of committed but uninvested capital, or “dry powder”, at the end of the second quarter of 2011, a record level.

 

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For the second quarter of 2011, Total Segment Revenues were $1.3 billion, up 142% from the second quarter of 2010. The increase was driven by higher Performance Fees, particularly in the Real Estate and Private Equity segments, which increased $412.9 million and $211.5 million, respectively. Total Management Fees increased to $513.6 million, up 23% from $417.5 million in the prior year’s second quarter, principally from the increase in Fee-Earning Assets Under Management.

Total Segment Expenses were $523.9 million for the second quarter of 2011, an increase from $330.8 million for the second quarter of 2010, driven largely by increased accruals for Performance Fee Compensation of $145.8 million for the second quarter of 2011. Compensation, excluding Performance Fee Compensation, was up 26% to $278.7 million. Blackstone’s non-compensation expenses were up 13% from the second quarter of 2010 driven mostly by financing activities and occupancy costs including global expansion.

GAAP results for the second quarter of 2011 included Revenues of $1.3 billion, compared to $550.1 million for the second quarter of 2010, and Net Income Attributable to The Blackstone Group L.P. of $86.2 million, compared to a net loss of $193.3 million for the second quarter of 2010.

Stephen A. Schwarzman, Chairman and Chief Executive Officer, said, “Despite the challenges presented by slowing global economic growth, overall our portfolio companies and real estate investments performed well in the second quarter. The carrying values of our investment funds continued to increase, and we once again reported our best quarterly earnings since becoming a public company four years ago. We experienced inflows across all of our businesses as we captured share and deepened relationships with our limited partner investors. We ended the quarter with record total assets under management of $159 billion, up from $111 billion during the same period last year.”

The table below details Blackstone’s ENI, Net Fee Related Earnings from Operations, Distributable Earnings and Fee-Earning Assets Under Management as of, and for, the three and six months ended June 30, 2011 and 2010. ENI, Total Segments includes unrealized gains (losses) and the direct compensation impact related to those gains (losses), but excludes IPO and acquisition-related accounting charges.

 

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		As of and for the Three Months Ended June 30,								Variance								Six Months Ended June 30,								Variance
		2011				2010				$				%				2011				2010				$				%
		(Dollars in Thousands, Except per Unit Amounts)
Economic Net Income, Total Segments		$	810,732			$	221,471			$	589,261				N/M			$	1,465,037			$	606,573			$	858,464				142	%
Provision for Income Taxes (a)			107,468				16,231				91,237				N/M				193,674				40,940				152,734				N/M
Economic Net Income, After Taxes		$	703,264			$	205,240			$	498,024				N/M			$	1,271,363			$	565,633			$	705,730				125	%
Economic Net Income, After Taxes per Adjusted Unit (b)		$	0.63			$	0.18			$	0.45				N/M			$	1.14			$	0.50			$	0.64				128	%
Net Fee Related Earnings from Operations		$	137,217			$	107,915			$	29,302				27	%		$	230,397			$	206,660			$	23,737				11	%
Distributable Earnings		$	184,532			$	147,575			$	36,957				25	%		$	381,081			$	296,271			$	84,810				29	%
Distributable Earnings per Common Unit (c)		$	0.15			$	0.13			$	0.02				15	%		$	0.33			$	0.27			$	0.06				22	%
Fee-Earning Assets Under Management:
Private Equity		$	35,778,240			$	25,190,195			$	10,588,045				42	%
Real Estate			27,919,000				23,841,360				4,077,640				17	%
Hedge Fund Solutions			37,244,509				28,832,317				8,412,192				29	%
Credit Businesses			28,059,457				23,556,109				4,503,348				19	%
Total Fee-Earning Assets Under Management		$	129,001,206			$	101,419,981			$	27,581,225				27	%

 

(a)	Represents the implied provision for income taxes calculated using a similar methodology applied in calculating the tax provision for The Blackstone Group L.P.

(b)	Adjusted Units represents the weighted-average unit count for Economic Net Income purposes. A reconciliation of this item to the comparable GAAP measure is presented in Exhibit 4 to this release.

(c)	See Exhibit 4 for the calculation of Distributable Earnings Units Outstanding.

SEGMENT REVIEW

Private Equity

Private Equity had revenues of $399.4 million for the second quarter of 2011 compared to $83.9 million in 2010. Private Equity had six-month revenues of $673.1 million, compared with revenues of $360.7 million in the same period of 2010. The increase from the second quarter of 2010 was principally due to increases in Performance Fees, Investment Income and Management Fees of $211.5 million, $59.6 million and $43.9 million, respectively.

The appreciation of the underlying assets for Blackstone’s contributed Private Equity funds was approximately 9% for the second quarter of 2011. BCP’s privately held portfolio companies continued to perform well on a revenue and EBITDA basis while its publicly held investments benefited from an increase in public stock markets, as well as public offerings of portfolio companies, Kosmos and Vanguard. As of June 30, 2011, the unrealized value and cumulative realized proceeds, before carried interest, fees and expenses, of Blackstone’s contributed Private Equity funds represented 1.5 times investors’ original investments.

Economic Net Income was $273.2 million for the second quarter of 2011, up from $18.7 million for the second quarter of 2010, primarily a result of higher Performance Fees and Investment Income.

 

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Fee-Earning Assets Under Management were $35.8 billion compared to $25.2 billion in the second quarter of 2010 principally due to the commencement of BCP VI’s investment period.

Dry powder for Private Equity, which is inclusive of amounts related to BCP VI, was $17.3 billion as of June 30, 2011. Limited Partner Capital Invested during the second quarter of 2011 totaled $667.3 million, an increase from $469.8 million invested during the second quarter of 2010. Blackstone’s Private Equity segment’s funds had $560.7 million of Limited Partner Capital committed to transactions which had not yet closed as of June 30, 2011.

Real Estate

Real Estate had revenues of $648.5 million for the second quarter of 2011, compared with revenues of $208.5 million for the second quarter of 2010. Real Estate had six-month revenues of $1.2 billion, compared with revenues of $360.7 million in the same period of 2010. A material portion of the increase in revenues was due to the impact of the “catch-up” provisions of the Real Estate funds’ profit allocations, which specify that once a fund’s preferred return hurdle has been reached, Blackstone is entitled to a disproportionately greater share of the profits until it effectively reaches its full share of performance fees. Improved operating performance, projected cash flows and exit multiples led to an increase in the real estate investments’ carrying values, which drove an increase in Performance Fees. Increased investment activity in the segment led to an increase in Transaction and Other Fees, primarily resulting from the acquisition of the U.S. assets of Centro, one of the leading shopping center owners in the country.

As of June 30, 2011, the unrealized value and cumulative realized proceeds, before carried interest, fees and expenses, of the Real Estate segment’s contributed carry funds represented 1.4 times investors’ original investment.

The appreciation of the underlying assets for Blackstone’s contributed Real Estate carry funds was approximately 6.7% for the second quarter of 2011.

ENI for the Real Estate segment was $453.5 million for the second quarter of 2011 compared to $121.4 million for the second quarter of 2010, driven principally by the increase in Performance Fees noted above.

Fee-Earning Assets Under Management were $27.9 billion compared to $23.8 billion for the second quarter of 2010. Fee-Earning Assets Under Management increased principally due to the commencement of Blackstone’s management of the Bank of America Merrill Lynch Asia assets which added $2.1 billion in Fee-Earning Assets Under Management in the fourth quarter of 2010 and $1.1 billion of fee-earning co-investment capital related to the acquisition of the U.S. assets of Centro in the second quarter of 2011.

Dry powder for Real Estate was $7.4 billion as of June 30, 2011. Limited Partner Capital Invested during the second quarter of 2011 was $2.8 billion, up from $643.8 million during the second quarter of 2010. Blackstone’s Real Estate segment’s funds had $592.0 million of Limited Partner Capital committed to transactions which had not yet closed as of June 30, 2011. The BREP VI fund reached approximately 87% invested or committed capital as of the end of the second quarter of 2011 and Blackstone has commenced fund-raising for its next major real estate fund, BREP VII.

Hedge Fund Solutions

Hedge Fund Solutions had revenues of $84.5 million for the second quarter of 2011, compared with revenues of $63.8 million for the second quarter of 2010. The increase from the second quarter of 2010 was principally due to an increase in Total Management Fees of 21% to $80.0 million for the second quarter of 2011. Hedge Fund Solutions had six-month revenues of $189.9 million, compared with revenues of $153.0 million in the same period of 2010.

 

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Despite turbulent markets, the returns for the underlying assets for Blackstone’s Hedge Fund Solutions’ funds were relatively flat for the second quarter of 2011.

ENI for the Hedge Funds Solutions segment was up 28% to $32.9 million for the second quarter of 2011 compared to $25.6 million for the second quarter of 2010 as higher Fee-Earning Assets Under Management drove increases in Management Fees.

Fee-Earning Assets Under Management for the segment grew 29% to $37.2 billion from $28.8 billion at the end of the second quarter of 2010. The increase from the prior year period was principally due to net inflows and market appreciation across the segment. Net inflows for Blackstone’s Hedge Fund Solutions business came primarily from its commingled and customized investment products, hedge fund manager seeding platform and long only solutions business. Hedge Fund Solutions had $1.6 billion of net inflows of Fee-Earning Assets Under Management for the second quarter of 2011 and $1.3 billion of inflows in July 2011, bringing year to date net fee-earning inflows to $5.0 billion.

As of June 30, 2011, 69% of the Fee-Earnings Assets Under Management in Blackstone’s Hedge Fund Solutions products which were eligible to earn performance fees were above their respective high water marks and / or hurdles.

Credit Businesses

Credit Businesses had revenues of $97.8 million for the second quarter of 2011, compared with revenues of $60.6 million for the second quarter of 2010. The increase from the second quarter of 2010 was due to an increase in Performance Fees of 137% to $30.1 million for the second quarter of 2011, resulting from strong fund performance across the segment, and an increase in Total Management Fees of 21% to $58.2 million driven by the increase in Fee-Earning Assets Under Management. Credit Businesses had six-month revenues of $254.5 million, compared with revenues of $175.9 million in the same period of 2010.

The appreciation of the underlying assets for Blackstone’s credit-oriented business was 1.8% for the flagship hedge funds, 4.3% for the mezzanine funds and 2.0% for the rescue lending funds for the second quarter of 2011.

ENI for the Credit Businesses segment was up 199% to $40.6 million for the second quarter of 2011 compared to $13.5 million for the second quarter of 2010 as higher Fee-Earning Assets Under Management and favorable market conditions drove increases in Management and Performance Fees.

Fee-Earning Assets Under Management for the segment increased 19% to $28.1 billion from $23.6 billion for the second quarter of 2010. The long only platform had particularly strong year over year growth in Fee-Earning Assets Under Management, increasing to $21.9 billion, up $4.2 billion, or 24%, from the second quarter of last year as the segment continued to launch new products and strategies. Of the $4.2 billion increase in long only Fee-Earning Assets Under Management, $2.1 billion was related to the acquisition of management agreements of CLO vehicles previously owned by Allied Irish Banks. The acquisition closed in the second quarter of 2011.

As of June 30, 2011, 98% of the Fee-Earning Assets Under Management in Blackstone’s credit-oriented hedge funds which were eligible to earn performance fees were above their respective high water marks compared to 89% as of June 30, 2010.

Dry powder of drawdown funds for the Credit Businesses segment was $4.7 billion as of June 30, 2011.

 

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Financial Advisory

Revenues were $104.4 million for the second quarter of 2011, a decrease from $135.6 million for the second quarter of 2010. The decrease in segment revenues was primarily driven by a decrease in the restructuring and reorganization business due to a decline from near-peak revenue levels in the second quarter of 2010, amid an improving economy and continued strength in the credit markets. This decrease was partially offset by an increase in fees earned by Blackstone’s fund placement business and an increase in the Blackstone Advisory Partners’ business driven by an increase in the size of transactions completed compared to the prior year period. Revenues were $177.2 million for the six months ended June 30, 2011, a decrease from $213.1 million in the same period of 2010.

ENI was $10.5 million for the second quarter of 2011 compared to $42.2 million for the second quarter of 2010.

CAPITAL AND LIQUIDITY

As of June 30, 2011, Blackstone had $1.8 billion in cash, Treasury cash management strategies and liquid Blackstone funds. Long-term debt totaled $1.0 billion in borrowings from the 2010 and 2009 bond issuances. Blackstone has no borrowings outstanding against its $1 billion revolving credit facility.

DISTRIBUTION

The Blackstone Group L.P. has declared a quarterly distribution of $0.10 per common unit to record holders of common units at the close of business on August 15, 2011. This distribution will be paid on August 31, 2011.

Blackstone’s general partner maintains the right to determine the amount to be distributed from The Blackstone Group L.P.’s net after-tax share of its annual Distributable Earnings. Distributable Earnings will only be a starting point for the determination of the amount to be distributed to unitholders because in determining the amount to be distributed Blackstone will subtract from Distributable Earnings any 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. The aggregate amounts of Blackstone’s distributions to unitholders will typically be less than its Distributable Earnings for that year.

Although for calendar 2010 Blackstone distributed substantially all of its net after-tax annual Distributable Earnings, Blackstone’s current intention is to distribute to its common unitholders substantially all of The Blackstone Group L.P.’s net after-tax share of annual Distributable Earnings less the amount of its realized investment gains. This determination was made based on the continued pace of organic and inorganic growth and the potential for further strategic initiatives and the retained amount will be used for those purposes. The retained cash will be deducted from the fourth quarter distribution which is made in the first quarter of the ensuing calendar year. Distributions for the first three quarters will remain unchanged at $0.10 per unit. All distributions are subject to Blackstone’s discretion to retain additional amounts from the amount of annual Distributable Earnings to be distributed as described above.

 

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Because Blackstone will not know what its Distributable Earnings will be for any fiscal year until the end of such year, Blackstone expects that its first three quarterly distributions in respect of any given year will be based on its anticipated annualized Net Fee Related Earnings. As such, the distributions for the first three quarters are expected to be smaller than the final quarterly distribution in respect of such year. For the fourth quarter of 2011 Blackstone expects to pay the remaining amount of the year’s Distributable Earnings less realized investment gains.

All of the foregoing is subject to the qualification that the declaration and payment of any distributions are at the sole discretion of Blackstone’s general partner and the general partner may change its distribution policy at any time.

Because the wholly-owned subsidiaries of The Blackstone Group L.P. must pay taxes and make payments under the tax receivable agreements described in Blackstone’s Annual Report on Form 10-K, the amounts ultimately distributed by The Blackstone Group L.P. to its common unitholders in respect of fiscal 2011 and subsequent years are expected to be different, on a per unit basis, than the amounts distributed by the Blackstone Holdings partnerships to the Blackstone personnel and others who are limited partners of the Blackstone Holdings partnerships in respect of their Blackstone Holdings partnership units.

# # #

Blackstone will host a conference call on July 21, 2011 at 11:00 a.m. ET to discuss second quarter 2011 results. The conference call can be accessed by dialing (877) 391-6747 (U.S. domestic) or +1 (617) 597-9291 (international) pass code 14994355. Additionally, the conference call will be broadcast live over the internet and can be accessed by all interested parties through the Investor Relations section of The Blackstone Group’s website http://ir.blackstone.com. For those unable to listen to the live broadcast, a replay will be available on Blackstone’s website or by dialing (888) 286-8010 (U.S. domestic) or +1 (617) 801-6888 (international) conference ID number 97437596, beginning approximately two hours after the event.

Blackstone expects to host conference calls to report its 2011 results as follows: third quarter results, October 20, 2011 and fourth quarter and full year results, February 2, 2012.

Investor Relations Contacts:

Joan Solotar

The Blackstone Group

Tel: +1 (212) 583-5068

solotar@blackstone.com

Weston Tucker

The Blackstone Group

Tel: +1 (212) 583-5231

tucker@blackstone.com

Media Relations Contact:

Peter Rose

The Blackstone Group

Tel: +1 (212) 583-5871

rose@blackstone.com

 

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About The Blackstone Group

Blackstone is one of the world’s leading investment and advisory firms. We seek to create positive economic impact and long-term value for our investors, the companies we invest in, the companies we advise and the broader global economy. We do this through the commitment of our extraordinary people and flexible capital. Our alternative asset management businesses include the management of private equity funds, real estate funds, hedge fund solutions, credit-oriented funds and closed-end mutual funds. The Blackstone Group also provides various financial advisory services, including financial and strategic advisory, restructuring and reorganization advisory and fund placement services. Further information is available at www.blackstone.com.

Forward-Looking Statements

This release 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, 2010, as such factors may be updated from time to time in its periodic filings with the SEC, 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 release 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 release does not constitute an offer of any Blackstone Fund.

 

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THE BLACKSTONE GROUP L.P.

Exhibit 1a. Consolidated Statements of Operations

(Dollars in Thousands, Except Per Unit Data)

 

 

		Quarter Ended June 30,
		2011				2010
Revenues
Management and Advisory Fees		$	498,040			$	406,062
Performance Fees
Realized			61,763				51,750
Unrealized			610,488				(19,299	)
Total Performance Fees			672,251				32,451
Investment Income
Realized			19,303				10,225
Unrealized			108,711				95,043
Total Investment Income			128,014				105,268
Interest and Dividend Revenue			8,848				6,952
Other			1,128				(645	)
Total Revenues			1,308,281				550,088
Expenses
Compensation and Benefits
Compensation			699,432				967,711
Performance Fee Compensation
Realized			27,712				22,879
Unrealized			118,098				(892	)
Total Compensation and Benefits			845,242				989,698
General, Administrative and Other			126,118				121,183
Interest Expense			14,185				7,682
Fund Expenses			(714	)			9,203
Total Expenses			984,831				1,127,766
Other Income
Net Gains (Losses) from Fund Investment Activities			(74,654	)			(59,250	)
Income (Loss) Before Provision for Taxes			248,796				(636,928	)
Provision for Taxes			64,199				19,392
Net Income (Loss)			184,597				(656,320	)
Net Income (Loss) Attributable to Redeemable Non-Controlling Interests in Consolidated Entities			(140	)			(421	)
Net Income (Loss) Attributable to Non-Controlling Interests in Consolidated Entities			(92,408	)			(57,873	)
Net Income (Loss) Attributable to Non-Controlling Interests in Blackstone Holdings			190,908				(404,706	)
Net Income (Loss) Attributable to The Blackstone Group L.P.		$	86,237			$	(193,320	)
Net Income (Loss) per Common Unit, Basic and Diluted		$	0.18			$	(0.55	)

 

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THE BLACKSTONE GROUP L.P.

Exhibit 1b. Consolidated Statements of Operations

(Dollars in Thousands, Except Per Unit Data)

 

 

		Six Months Ended June 30,
		2011				2010
Revenues
Management and Advisory Fees		$	910,778			$	760,882
Performance Fees
Realized			157,966				105,799
Unrealized			1,122,889				112,480
Total Performance Fees			1,280,855				218,279
Investment Income
Realized			32,086				15,951
Unrealized			216,106				244,263
Total Investment Income			248,192				260,214
Interest and Dividend Revenue			18,338				15,847
Other			3,387				(3,895	)
Total Revenues			2,461,550				1,251,327
Expenses
Compensation and Benefits
Compensation			1,358,915				1,892,661
Performance Fee Compensation
Realized			42,255				30,620
Unrealized			280,623				53,708
Total Compensation and Benefits			1,681,793				1,976,989
General, Administrative and Other			255,504				227,562
Interest Expense			27,988				14,867
Fund Expenses			10,410				9,062
Total Expenses			1,975,695				2,228,480
Other Income
Net Gains (Losses) from Fund Investment Activities			(119,845	)			112,554
Income (Loss) Before Provision for Taxes			366,010				(864,599	)
Provision for Taxes			103,049				29,027
Net Income (Loss)			262,961				(893,626	)
Net Income Attributable to Redeemable Non-Controlling Interests in Consolidated Entities			21,885				23,548
Net Income (Loss) Attributable to Non-Controlling Interests in Consolidated Entities			(185,489	)			78,093
Net Income (Loss) Attributable to Non-Controlling Interests in Blackstone Holdings			297,624				(680,570	)
Net Income (Loss) Attributable to The Blackstone Group L.P.		$	128,941			$	(314,697	)
Net Income (Loss) per Common Unit, Basic and Diluted		$	0.28			$	(0.91	)

 

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THE BLACKSTONE GROUP L.P.

Exhibit 2a. Economic Net Income and Net Fee Related Earnings from Operations

(Dollars in Thousands)

 

The tables below detail Blackstone’s Economic Net Income and Net Fee Related Earnings from Operations. Net Fee Related Earnings from Operations is a supplemental measure of after tax performance used to highlight earnings from operations excluding the income from and related profit sharing expenses of Blackstone’s performance fees and investment income, except for interest income. The reconciliation of Economic Net Income to Net Fee Related Earnings from Operations is presented in Exhibit 2b to this release.

 

		Three Months Ended																																Six Months Ended
		Mar 31, 2010				Jun 30, 2010				Sep 30, 2010				Dec 31, 2010				Mar 31, 2011				Jun 30, 2011				Jun 30, 2011 vs. Jun 30, 2010								Jun 30, 2010				Jun 30, 2011
																										$				%
Economic Net Income, Total Segments
Revenues
Management and Advisory Fees
Base Management Fees		$	251,971			$	262,914			$	269,434			$	285,152			$	305,587			$	316,474			$	53,560				20	%		$	514,885			$	622,061
Advisory Fees			76,568				134,099				84,541				130,932				70,252				102,243				(31,856	)			-24	%			210,667				172,495
Transaction and Other Fees, Net *			35,260				20,617				22,948				58,923				58,363				103,561				82,944				N/M				55,877				161,924
Management Fee Offsets **			(1,178	)			(179	)			(674	)			(282	)			(8,536	)			(8,675	)			(8,496	)			N/M				(1,357	)			(17,211	)
Total Management and Advisory Fees			362,621				417,451				376,249				474,725				425,666				513,603				96,152				23	%			780,072				939,269
Performance Fees
Realized			53,881				46,374				66,039				195,369				95,600				60,215				13,841				30	%			100,255				155,815
Unrealized			132,333				(20,738	)			192,745				260,286				505,197				612,843				633,581				N/M				111,595				1,118,040
Total Performance Fees			186,214				25,636				258,784				455,655				600,797				673,058				647,422				N/M				211,850				1,273,855
Investment Income
Realized			5,307				15,721				14,276				11,611				23,499				30,732				15,011				95	%			21,028				54,231
Unrealized			151,521				87,186				128,247				134,680				102,577				106,837				19,651				23	%			238,707				209,414
Total Investment Income			156,828				102,907				142,523				146,291				126,076				137,569				34,662				34	%			259,735				263,645
Interest Income and Dividend Revenue			8,690				6,930				10,187				10,289				9,448				9,283				2,353				34	%			15,620				18,731
Other			(3,250	)			(644	)			4,468				(1,192	)			2,259				1,128				1,772				N/M				(3,894	)			3,387
Total Revenues			711,103				552,280				792,211				1,085,768				1,164,246				1,334,641				782,361				142	%			1,263,383				2,498,887
Expenses
Compensation and Benefits Compensation			190,637				220,662				210,582				237,233				229,898				278,738				58,076				26	%			411,299				508,636
Performance Fee Compensation
Realized			7,741				22,879				24,962				72,734				14,543				27,711				4,832				21	%			30,620				42,254
Unrealized			54,600				(892	)			104,323				70,615				162,525				118,097				118,989				N/M				53,708				280,622
Total Compensation and Benefits			252,978				242,649				339,867				380,582				406,966				424,546				181,897				75	%			495,627				831,512
Other Operating Expenses			73,023				88,160				84,253				99,080				102,975				99,363				11,203				13	%			161,183				202,338
Total Expenses			326,001				330,809				424,120				479,662				509,941				523,909				193,100				58	%			656,810				1,033,850
Total Economic Net Income		$	385,102			$	221,471			$	368,091			$	606,106			$	654,305			$	810,732			$	589,261				N/M			$	606,573			$	1,465,037
Total Net Fee Related Earnings from Operations		$	98,745			$	107,915			$	112,914			$	122,740			$	93,180			$	137,217			$	29,302				27	%		$	206,660			$	230,397

 

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

**	Primarily placement fees.

continued…

 

11

---

THE BLACKSTONE GROUP L.P.

Exhibit 2a. Economic Net Income and Net Fee Related Earnings from Operations - Continued

(Dollars in Thousands)

 

 

		Three Months Ended																																Six Months Ended
		Mar 31, 2010				Jun 30, 2010				Sep 30, 2010				Dec 31, 2010				Mar 31, 2011				Jun 30, 2011				Jun 30, 2011 vs. Jun 30, 2010								Jun 30, 2010				Jun 30, 2011
																										$				%
Private Equity
Revenues
Management Fees
Base Management Fees		$	65,432			$	66,795			$	66,077			$	65,003			$	79,935			$	82,297			$	15,502				23	%		$	132,227			$	162,232
Transaction and Other Fees, Net *			31,972				16,367				13,348				10,556				35,342				52,353				35,986				N/M				48,339				87,695
Management Fee Offsets **			—				—				(91	)			(97	)			(7,889	)			(7,629	)			(7,629	)			N/M				—				(15,518	)
Total Management Fees			97,404				83,162				79,334				75,462				107,388				127,021				43,859				53	%			180,566				234,409
Performance Fees
Realized			46,175				1,106				44,814				64,774				82,389				1,362				256				23	%			47,281				83,751
Unrealized			45,549				(24,020	)			45,499				84,466				32,537				187,190				211,210				N/M				21,529				219,727
Total Performance Fees			91,724				(22,914	)			90,313				149,240				114,926				188,552				211,466				N/M				68,810				303,478
Investment Income (Loss)
Realized			(495	)			3,141				9,940				2,746				17,907				3,021				(120	)			-4	%			2,646				20,928
Unrealized			84,684				17,275				30,491				20,838				29,126				76,947				59,672				N/M				101,959				106,073
Total Investment Income (Loss)			84,189				20,416				40,431				23,584				47,033				79,968				59,552				N/M				104,605				127,001
Interest Income and Dividend Revenue			3,428				2,728				3,802				4,086				3,505				3,197				469				17	%			6,156				6,702
Other			100				460				1,061				400				811				665				205				45	%			560				1,476
Total Revenues			276,845				83,852				214,941				252,772				273,663				399,403				315,551				N/M				360,697				673,066
Expenses
Compensation and Benefits Compensation			46,910				46,612				47,552				38,271				56,254				66,694				20,082				43	%			93,522				122,948
Performance Fee Compensation
Realized			6,005				128				10,783				15,711				7,718				49				(79	)			-62	%			6,133				7,767
Unrealized			6,344				(10,296	)			18,306				6,966				5,464				29,309				39,605				N/M				(3,952	)			34,773
Total Compensation and Benefits			59,259				36,444				76,641				60,948				69,436				96,052				59,608				164	%			95,703				165,488
Other Operating Expenses			24,431				28,677				26,359				30,122				28,713				30,124				1,447				5	%			53,108				58,837
Total Expenses			83,690				65,121				103,000				91,070				98,149				126,176				61,055				94	%			148,811				224,325
Economic Net Income		$	193,155			$	18,731			$	111,941			$	161,702			$	175,514			$	273,227			$	254,496				N/M			$	211,886			$	448,741

 

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

**	Primarily placement fees.

continued…

 

12

---

THE BLACKSTONE GROUP L.P.

Exhibit 2a. Economic Net Income and Net Fee Related Earnings from Operations - Continued

(Dollars in Thousands)

 

 

		Three Months Ended																																Six Months Ended
		Mar  31, 2010				Jun 30, 2010				Sep 30, 2010				Dec 31, 2010				Mar  31, 2011				Jun 30, 2011				Jun 30, 2011 vs. Jun 30, 2010								Jun 30, 2010				Jun 30, 2011
																										$				%
Real Estate
Revenues
Management Fees
Base Management Fees		$	83,060			$	82,916			$	83,232			$	89,220			$	95,439			$	97,467			$	14,551				18	%		$	165,976			$	192,906
Transaction and Other Fees, Net *			1,942				2,979				8,538				46,455				21,543				49,288				46,309				N/M				4,921				70,831
Management Fee Offsets **			(489	)			(110	)			(401	)			(71	)			(505	)			(745	)			(635	)			N/M				(599	)			(1,250	)
Total Management Fees			84,513				85,785				91,369				135,604				116,477				146,010				60,225				70	%			170,298				262,487
Performance Fees
Realized			5,948				16,319				5,010				13,011				2,593				20,832				4,513				28	%			22,267				23,425
Unrealized			11,391				21,117				69,910				154,553				368,104				429,458				408,341				N/M				32,508				797,562
Total Performance Fees			17,339				37,436				74,920				167,564				370,697				450,290				412,854				N/M				54,775				820,987
Investment Income
Realized			2,632				3,900				2,159				2,560				2,919				11,394				7,494				192	%			6,532				14,313
Unrealized			46,892				79,543				83,968				108,576				61,406				37,332				(42,211	)			-53	%			126,435				98,738
Total Investment Income			49,524				83,443				86,127				111,136				64,325				48,726				(34,717	)			-42	%			132,967				113,051
Interest Income and Dividend Revenue			2,718				2,178				3,026				3,251				3,288				2,989				811				37	%			4,896				6,277
Other			(1,876	)			(390	)			2,330				(400	)			860				515				905				N/M				(2,266	)			1,375
Total Revenues			152,218				208,452				257,772				417,155				555,647				648,530				440,078				N/M				360,670				1,204,177
Expenses
Compensation and Benefits Compensation			40,150				44,528				43,219				55,280				58,501				71,618				27,090				61	%			84,678				130,119
Performance Fee Compensation
Realized			1,524				8,895				1,806				3,619				1,230				9,382				487				5	%			10,419				10,612
Unrealized			6,937				15,999				46,182				53,746				106,501				91,021				75,022				N/M				22,936				197,522
Total Compensation and Benefits			48,611				69,422				91,207				112,645				166,232				172,021				102,599				148	%			118,033				338,253
Other Operating Expenses			14,290				17,647				18,584				23,668				28,366				22,971				5,324				30	%			31,937				51,337
Total Expenses			62,901				87,069				109,791				136,313				194,598				194,992				107,923				124	%			149,970				389,590
Economic Net Income		$	89,317			$	121,383			$	147,981			$	280,842			$	361,049			$	453,538			$	332,155				N/M			$	210,700			$	814,587

 

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

**	Primarily placement fees.

continued…

 

13

---

THE BLACKSTONE GROUP L.P.

Exhibit 2a. Economic Net Income and Net Fee Related Earnings from Operations - Continued

(Dollars in Thousands)

 

 

		Three Months Ended																																Six Months Ended
		Mar 31, 2010				Jun 30, 2010				Sep 30, 2010				Dec 31, 2010				Mar 31, 2011				Jun 30, 2011				Jun 30, 2011 vs. Jun  30, 2010								Jun 30, 2010				Jun 30, 2011
																										$				%
Hedge Fund Solutions
Revenues
Management Fees
Base Management Fees		$	63,866			$	65,533			$	69,305			$	74,069			$	75,612			$	79,290			$	13,757				21	%		$	129,399			$	154,902
Transaction and Other Fees, Net *			809				870				846				1,047				727				861				(9	)			-1	%			1,679				1,588
Management Fee Offsets **			—				(72	)			(163	)			(95	)			(124	)			(196	)			(124	)			-172	%			(72	)			(320	)
Total Management Fees			64,675				66,331				69,988				75,021				76,215				79,955				13,624				21	%			131,006				156,170
Performance Fees
Realized			2,117				1,021				872				52,616				893				667				(354	)			-35	%			3,138				1,560
Unrealized			10,413				(2,596	)			14,137				(18,972	)			19,253				3,441				6,037				N/M				7,817				22,694
Total Performance Fees			12,530				(1,575	)			15,009				33,644				20,146				4,108				5,683				N/M				10,955				24,254
Investment Income (Loss)
Realized			(250	)			5,438				1,050				3,580				1,341				12,855				7,417				136	%			5,188				14,196
Unrealized			11,880				(6,749	)			7,831				6,399				7,120				(12,864	)			(6,115	)			-91	%			5,131				(5,744	)
Total Investment Income (Loss)			11,630				(1,311	)			8,881				9,979				8,461				(9	)			1,302				99	%			10,319				8,452
Interest Income and Dividend Revenue			475				353				498				543				516				472				119				34	%			828				988
Other			(83	)			(40	)			270				(50	)			104				(38	)			2				5	%			(123	)			66
Total Revenues			89,227				63,758				94,646				119,137				105,442				84,488				20,730				33	%			152,985				189,930
Expenses
Compensation and Benefits Compensation			20,742				26,388				24,506				23,750				28,657				32,288				5,900				22	%			47,130				60,945
Performance Fee Compensation
Realized			771				356				3,313				16,193				300				253				(103	)			-29	%			1,127				553
Unrealized			3,783				(977	)			5,075				(6,814	)			5,358				2,955				3,932				N/M				2,806				8,313
Total Compensation and Benefits			25,296				25,767				32,894				33,129				34,315				35,496				9,729				38	%			51,063				69,811
Other Operating Expenses			11,285				12,353				12,388				15,334				13,008				16,075				3,722				30	%			23,638				29,083
Total Expenses			36,581				38,120				45,282				48,463				47,323				51,571				13,451				35	%			74,701				98,894
Economic Net Income		$	52,646			$	25,638			$	49,364			$	70,674			$	58,119			$	32,917			$	7,279				28	%		$	78,284			$	91,036

 

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

**	Primarily placement fees.

continued…

 

14

---

THE BLACKSTONE GROUP L.P.

Exhibit 2a. Economic Net Income and Net Fee Related Earnings from Operations - Continued

(Dollars in Thousands)

 

 

		Three Months Ended																																Six Months Ended
		Mar 31, 2010				Jun 30, 2010				Sep 30, 2010				Dec 31, 2010				Mar 31, 2011				Jun 30, 2011				Jun 30, 2011 vs. Jun 30, 2010								Jun 30, 2010				Jun 30, 2011
																										$				%
Credit Businesses
Revenues
Management Fees
Base Management Fees		$	39,613			$	47,670			$	50,820			$	56,860			$	54,601			$	57,420			$	9,750				20	%		$	87,283			$	112,021
Transaction and Other Fees, Net *			536				299				216				606				745				849				550				184	%			835				1,594
Management Fee Offsets **			(689	)			3				(19	)			(19	)			(18	)			(105	)			(108	)			N/M				(686	)			(123	)
Total Management Fees			39,460				47,972				51,017				57,447				55,328				58,164				10,192				21	%			87,432				113,492
Performance Fees
Realized			(359	)			27,928				15,343				64,968				9,725				37,354				9,426				34	%			27,569				47,079
Unrealized			64,980				(15,239	)			63,199				40,239				85,303				(7,246	)			7,993				52	%			49,741				78,057
Total Performance Fees			64,621				12,689				78,542				105,207				95,028				30,108				17,419				137	%			77,310				125,136
Investment Income (Loss)
Realized			3,233				3,291				658				2,518				1,235				3,236				(55	)			-2	%			6,524				4,471
Unrealized			7,835				(3,444	)			5,350				(269	)			4,532				5,437				8,881				N/M				4,391				9,969
Total Investment Income (Loss)			11,068				(153	)			6,008				2,249				5,767				8,673				8,826				N/M				10,915				14,440
Interest Income and Dividend Revenue			673				403				1,252				710				453				902				499				124	%			1,076				1,355
Other			(459	)			(332	)			330				(27	)			98				(47	)			285				86	%			(791	)			51
Total Revenues			115,363				60,579				137,149				165,586				156,674				97,800				37,221				61	%			175,942				254,474
Expenses
Compensation and Benefits Compensation			28,343				26,982				28,774				39,158				30,325				34,170				7,188				27	%			55,325				64,495
Performance Fee Compensation
Realized			(559	)			13,500				9,060				37,211				5,295				18,027				4,527				34	%			12,941				23,322
Unrealized			37,536				(5,618	)			34,760				16,717				45,202				(5,188	)			430				8	%			31,918				40,014
Total Compensation and Benefits			65,320				34,864				72,594				93,086				80,822				47,009				12,145				35	%			100,184				127,831
Other Operating Expenses			8,290				12,167				9,669				8,980				15,357				10,226				(1,941	)			-16	%			20,457				25,583
Total Expenses			73,610				47,031				82,263				102,066				96,179				57,235				10,204				22	%			120,641				153,414
Economic Net Income		$	41,753			$	13,548			$	54,886			$	63,520			$	60,495			$	40,565			$	27,017				199	%		$	55,301			$	101,060

 

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

**	Primarily placement fees.

continued…

 

15

---

THE BLACKSTONE GROUP L.P.

Exhibit 2a. Economic Net Income and Net Fee Related Earnings from Operations - Continued

(Dollars in Thousands)

 

 

		Three Months Ended																																Six Months Ended
		Mar  31, 2010				Jun  30, 2010				Sep  30, 2010				Dec  31, 2010				Mar  31, 2011				Jun  30, 2011				Jun 30, 2011 vs. Jun  30, 2010								Jun  30, 2010				Jun  30, 2011
																										$				%
Financial Advisory
Revenues
Advisory Fees		$	76,568			$	134,099			$	84,541			$	130,932			$	70,252			$	102,243			$	(31,856	)			-24	%		$	210,667			$	172,495
Transaction and Other Fees, Net			1				102				—				259				6				210				108				106	%			103				216
Total Advisory and Transaction Fees			76,569				134,201				84,541				131,191				70,258				102,453				(31,748	)			-24	%			210,770				172,711
Investment Income (Loss)
Realized			187				(49	)			469				207				97				226				275				N/M				138				323
Unrealized			230				561				607				(864	)			393				(15	)			(576	)			N/M				791				378
Total Investment Income (Loss)			417				512				1,076				(657	)			490				211				(301	)			-59	%			929				701
Interest Income and Dividend Revenue			1,396				1,268				1,609				1,699				1,686				1,723				455				36	%			2,664				3,409
Other			(932	)			(342	)			477				(1,115	)			386				33				375				N/M				(1,274	)			419
Total Revenues			77,450				135,639				87,703				131,118				72,820				104,420				(31,219	)			-23	%			213,089				177,240
Expenses
Compensation and Benefits Compensation			54,492				76,152				66,531				80,774				56,161				73,968				(2,184	)			-3	%			130,644				130,129
Total Compensation and Benefits			54,492				76,152				66,531				80,774				56,161				73,968				(2,184	)			-3	%			130,644				130,129
Other Operating Expenses			14,727				17,316				17,253				20,976				17,531				19,967				2,651				15	%			32,043				37,498
Total Expenses			69,219				93,468				83,784				101,750				73,692				93,935				467				0	%			162,687				167,627
Economic Net Income (Loss)		$	8,231			$	42,171			$	3,919			$	29,368			$	(872	)		$	10,485			$	(31,686	)			-75	%		$	50,402			$	9,613

 

16

---

THE BLACKSTONE GROUP L.P.

Exhibit 2b. Reconciliation of Income (Loss) Before Provision (Benefit) for Taxes to Total Segments Economic Net Income, of Total Segments, Economic Net Income to Net Fee Related Earnings from Operations, of Net Fee Related Earnings from Operations to Distributable Earnings and of Earnings Before Interest, Taxes and Depreciation and Amortization from Net Fee Related Earnings from Operations to Net Fee Related Earnings from Operations

(Dollars in Thousands)

 

 

		Three Months Ended																								Six Months Ended
		March 31, 2010				June 30, 2010				September 30, 2010				December 31, 2010				March 31, 2011				June 30, 2011				June 30, 2010				June 30, 2011
Income (Loss) Before Provision (Benefit) for Taxes		$	(227,671	)		$	(636,928	)		$	143,302			$	198,643			$	117,214			$	248,796			$	(864,599	)		$	366,010
IPO and Acquisition-Related Charges (a)			726,722				749,930				438,568				453,975				421,861				424,483				1,476,652				846,344
Amortization of Intangibles (b)			39,512				40,822				40,872				44,172				44,174				44,905				80,334				89,079
(Income) Loss Associated with Non-Controlling Interests in (Income) Loss of Consolidated Entities (c)			(153,461	)			67,647				(254,651	)			(90,684	)			71,056				92,548				(85,814	)			163,604
Total Segments
Total Segments, Economic Net Income (Loss)			385,102				221,471				368,091				606,106				654,305				810,732				606,573				1,465,037
Performance Fees Adjustment (d)			(186,214	)			(25,636	)			(258,784	)			(455,655	)			(600,797	)			(673,058	)			(211,850	)			(1,273,855	)
Investment Income (Loss) Adjustment (e)			(156,828	)			(102,907	)			(142,523	)			(146,291	)			(126,076	)			(137,569	)			(259,735	)			(263,645	)
Investment Income - Blackstone’s Treasury Cash Management Strategies (f)			3,665				5,062				11,226				(4,676	)			1,302				4,038				8,727				5,340
Performance Fee Compensation and Benefits Adjustment (g)			62,341				21,987				129,285				143,349				177,068				145,808				84,328				322,876
Taxes Payable (h)			(9,321	)			(12,062	)			5,619				(20,093	)			(12,622	)			(12,734	)			(21,383	)			(25,356	)
Net Fee Related Earnings from Operations			98,745				107,915				112,914				122,740				93,180				137,217				206,660				230,397
Realized Performance Fees (i)			46,140				23,495				41,077				122,635				81,057				32,504				69,635				113,561
Realized Investment Income (Loss) (j)			5,307				15,721				14,276				11,611				23,499				30,732				21,028				54,231
Adjustment Related to Realized Investment Income - Blackstone’s Treasury Cash Management Strategies (k)			(1,264	)			512				(4,874	)			(2,156	)			(1,010	)			(2,343	)			(752	)			(3,353	)
Other Payables Including Payable Under Tax Receivable Agreement			(232	)			(68	)			2,923				(15,633	)			(177	)			(13,578	)			(300	)			(13,755	)
Distributable Earnings		$	148,696			$	147,575			$	166,316			$	239,197			$	196,549			$	184,532			$	296,271			$	381,081
Earnings Before Interest, Taxes and Depreciation and Amortization from Net Fee Related Earnings from Operations (l)		$	120,805			$	132,866			$	124,195			$	163,600			$	126,666			$	170,856			$	253,671			$	297,522

 

(a)	This adjustment adds back to Income (Loss) Before Provision for Taxes amounts for Transaction-Related Charges which include principally equity-based compensation charges associated with Blackstone’s initial public offering and other corporate actions.

(b)	This adjustment adds back to Income (Loss) Before Provision for Taxes amounts for the Amortization of Intangibles which are associated with Blackstone’s initial public offering and other corporate actions.

(c)	This adjustment adds back to Income (Loss) Before Provision 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.

continued....

 

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THE BLACKSTONE GROUP L.P.

Exhibit 2b. Reconciliation of Income (Loss) Before Provision (Benefit) for Taxes to Total Segments Economic Net Income, of Total Segments, Economic Net Income to Net Fee Related Earnings from Operations, of Net Fee Related Earnings from Operations to Distributable Earnings and of Earnings Before Interest, Taxes and Depreciation and Amortization from Net Fee Related Earnings from Operations to Net Fee Related Earnings from Operations

(Dollars in Thousands)

 

 

(d)	This adjustment removes from ENI the total segment amount of Performance Fees.

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

(f)	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 Net Fee Related Earnings.

(g)	This adjustment removes from expenses the compensation and benefit amounts related to Blackstone’s profit sharing plans related to Performance Fees.

(h)	Represents an implied payable for income taxes calculated using a similar methodology applied in calculating the current provision for The Blackstone Group L.P.

(i)	Represents the adjustment for realized Performance Fees net of corresponding actual amounts due under Blackstone’s profit sharing plans related thereto.

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

(k)	Represents the elimination of Realized Investment Income attributable to Blackstone’s Treasury cash management strategies which is a component of both Net Fee Related Earnings from Operations and Realized Investment Income (Loss).

(l)

Earnings Before Interest, Taxes and Depreciation and Amortization from Net Fee Related Earnings from Operations represents Net Fee Related Earnings from Operations adding back the implied cash taxes payable component from the Distributable Earnings reconciliation presented above, which is included in (i), and segment interest and depreciation and amortization. The cash taxes payable component of (i) was $9.3 million, $12.1 million, $(5.6) million, $20.1 million, $12.6 million, and $12.7 million for the three months ended March 31, 2010, June 30, 2010, September 30, 2010, December 31, 2010, March 31, 2011, and June 30, 2011, respectively. The cash taxes payable component of (i) was $25.4 million and $21.4 million for the six months ended June 30, 2011 and 2010, respectively. Interest was $6.3 million, $6.8 million, $10.3 million, $13.2 million, $12.7 million, and $13.1 million for the three months ended March 31, 2010, June 30, 2010, September 30, 2010, December 31, 2010, March 31, 2011, and June 30, 2011, respectively. Interest was $25.8 million and $13.1 million for the six months ended June 30, 2011 and 2010, respectively. Depreciation and amortization was $6.4 million, $6.1 million, $6.6 million, $7.6 million, $8.2 million, and $7.8 million for the three months ended March 31, 2010, June 30, 2010, September 30, 2010, December 31, 2010, March 31, 2011, and June 30, 2011, respectively. Depreciation and amortization was $16.0 million and $12.5 million for the six months ended June 30, 2011 and 2010, respectively.

 

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THE BLACKSTONE GROUP L.P.

Exhibit 3. Distributable Earnings

(Dollars in Thousands)

 

The following table calculates Blackstone’s Distributable Earnings. Distributable Earnings is a supplemental measure of performance to assess amounts available for distributions to Blackstone unitholders, including Blackstone personnel.

 

		Three Months Ended June 30,								Six Months Ended June 30,
		2011				2010				2011				2010
Fee Related Earnings
Revenues
Total Management and Advisory Fees (a)		$	513,603			$	417,451			$	939,269			$	780,072
Interest and Dividend Revenue (a)			9,283				6,930				18,731				15,620
Other (a)			1,128				(644	)			3,387				(3,894	)
Investment Income - Blackstone’s Treasury Cash Management Strategies (b)			4,038				5,062				5,340				8,727
Total Revenues			528,052				428,799				966,727				800,525
Expenses
Compensation and Benefits - Compensation (a)			278,738				220,662				508,636				411,299
Other Operating Expenses (a)			99,363				88,160				202,338				161,183
Cash Taxes (c)			12,734				12,062				25,356				21,383
Total Expenses			390,835				320,884				736,330				593,865
Net Fee Related Earnings from Operations			137,217				107,915				230,397				206,660
Performance Fees, Net of Related Compensation
Performance Fees - Realized (a)			60,215				46,374				155,815				100,255
Compensation and Benefits - Performance Fee Compensation - Realized (a)			(27,711	)			(22,879	)			(42,254	)			(30,620	)
Total Performance Fees, Net of Related Compensation			32,504				23,495				113,561				69,635
Investment Income and Other
Investment Income (Loss) - Realized (a)			30,732				15,721				54,231				21,028
Adjustment Related to Realized Investment Income - Blackstone’s Treasury Cash Management Strategies (d)			(2,343	)			512				(3,353	)			(752	)
Other Payables Including Payable Under Tax Receivable Agreement			(13,578	)			(68	)			(13,755	)			(300	)
Total Investment Income and Other			14,811				16,165				37,123				19,976
Distributable Earnings		$	184,532			$	147,575			$	381,081			$	296,271

 

(a)	Represents the total segment amounts of the respective captions.

(b)	Represents the inclusion of Investment Income from Blackstone’s Treasury cash management strategies.

(c)	Represents the provisions for and/or adjustments to income taxes that were calculated using a similar methodology applied in calculating the current provision for The Blackstone Group L.P.

(d)	Represents the elimination of Realized Investment Income attributable to Blackstone’s Treasury cash management strategies which is a component of Net Fee Related Earnings from Operations.

 

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THE BLACKSTONE GROUP L.P.

Exhibit 4. Reconciliation of Total GAAP Weighted-Average Common Units Outstanding—Basic to Total GAAP Weighted-Average Common Units Outstanding—Diluted and of Total GAAP Weighted-Average Common Units Outstanding—Diluted to Weighted-Average Economic Net Income Adjusted Units with End of Period Economic Net Income Adjusted Units Outstanding and of Total GAAP Common Units Outstanding to Distributable Earnings Units Outstanding

 

The following table provides a reconciliation of Blackstone’s Total GAAP Weighted-Average Common Units Outstanding—Basic to Total GAAP Weighted-Average Common Units Outstanding—Diluted.

 

		Three Months Ended June 30,								Six Months Ended June 30,
		2011				2010				2011				2010
Total GAAP Weighted-Average Common Units Outstanding - Basic			476,289,647				354,399,780				462,094,878				344,084,390
Adjustment:
Weighted-Average Unvested Deferred Restricted Common Units			7,353,999				—				6,523,856				—
Total GAAP Weighted-Average Common Units Outstanding - Diluted			483,643,646				354,399,780				468,618,734				344,084,390

The following table provides a reconciliation of Blackstone’s Total GAAP Common Units Outstanding—Diluted to Weighted-Average Economic Net Income Adjusted Units and presents the end of period Economic Net Income Adjusted Units Outstanding.

 

		Three Months Ended June 30,								As of and for the Six Months Ended June 30,
		2011				2010				2011				2010
Total GAAP Weighted-Average Common Units Outstanding - Diluted			483,643,646				354,399,780				468,618,734				344,084,390
Adjustments:
Weighted-Average Blackstone Holdings Partnership Units			625,526,089				743,034,050				641,817,877				753,889,719
Weighted-Average Unvested Deferred Restricted Common Units			—				27,418,933				—				28,019,298
Weighted-Average Economic Net Income Adjusted Units			1,109,169,735				1,124,852,763				1,110,436,611				1,125,993,407
Economic Net Income Adjusted Units, End of Period											1,110,129,505				1,123,902,642

The following table provides a reconciliation of Blackstone’s Total GAAP Common Units Outstanding to Distributable Earnings Units Outstanding.

 

		June 30,
		2011				2010
Total GAAP Common Units Outstanding (a)			483,765,891				359,245,237
Adjustment:
Blackstone Holdings Partnership Units			618,779,283				740,033,677
Distributable Earnings Units Outstanding (b)			1,102,545,174				1,099,278,914

 

(a)	Common unit holders 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.

(b)	Excludes units which are not entitled to distributions.

 

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THE BLACKSTONE GROUP L.P.

Exhibit 5. Assets Under Management

(Dollars in Thousands)

 

 

		As of and for the Periods Ended June 30,
		2011				2010
Total Assets Under Management (End of Period)
Private Equity		$	46,728,301			$	28,360,282
Real Estate			37,605,560				23,922,589
Hedge Fund Solutions			40,578,219				30,176,931
Credit Businesses			33,791,093				28,688,608
		$	158,703,173			$	111,148,410
Fee-Earning Assets Under Management (End of Period)
Private Equity		$	35,778,240			$	25,190,195
Real Estate			27,919,000				23,841,360
Hedge Fund Solutions			37,244,509				28,832,317
Credit Businesses			28,059,457				23,556,109
		$	129,001,206			$	101,419,981
Weighted-Average Fee-Earning Assets Under Management (For the Three Months Ended)
Private Equity		$	35,734,164			$	25,184,621
Real Estate			26,747,354				23,771,825
Hedge Fund Solutions			36,993,058				29,014,171
Credit Businesses			27,161,734				23,382,930
		$	126,636,310			$	101,353,547
Weighted-Average Fee-Earning Assets Under Management (Year to Date Period Ended)
Private Equity		$	36,004,409			$	25,276,377
Real Estate			26,785,526				23,745,556
Hedge Fund Solutions			36,355,679				28,783,876
Credit Businesses			26,323,118				21,845,976
		$	125,468,732			$	99,651,785

 

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THE BLACKSTONE GROUP L.P.

Exhibit 6. Limited Partner Capital Invested Metrics

(Dollars in Thousands)

 

 

		As of and for the Periods
		Ended June 30,
		2011				2010
Limited Partner Capital Invested (For the Three Months Ended)
Private Equity		$	667,341			$	469,808
Real Estate (a)			2,785,188				643,817
Credit Businesses			152,882				264,092
		$	3,605,411			$	1,377,717
Limited Partner Capital Invested (Year to Date Period Ended)
Private Equity		$	1,320,288			$	857,712
Real Estate (a)			3,439,616				1,068,685
Credit Businesses			307,180				421,144
		$	5,067,084			$	2,347,541
Fund Level Unrealized Value (b) (End of Period)
Private Equity
Cost		$	20,581,091			$	20,139,830
Unrealized Value		$	25,078,110			$	20,605,713
Real Estate (a)
Cost		$	19,382,923			$	13,081,763
Unrealized Value		$	24,647,701			$	10,620,256
Credit Businesses
Cost		$	3,355,531			$	3,332,121
Unrealized Value		$	3,991,861			$	3,624,684

 

(a)	Limited Partner Capital Invested and Fund Level Unrealized Value for the Real Estate segment represents activity related to funds raised by Blackstone.

(b)

Cost and unrealized value represent the limited partners’ share, including co-investments arranged by Blackstone, of those fund level investments on which carried interest can be earned, before carried interest allocations to Blackstone, when a fund achieves cumulative investment returns in excess of a specified rate.

 

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THE BLACKSTONE GROUP L.P.

Exhibit 7. Definitions of Non-GAAP Financial Information

 

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 the attached press release:

 

•

Blackstone uses Economic Net Income, or “ENI”, as a key measure of value creation, a benchmark of its performance and in making resource deployment and compensation decisions across its five segments. ENI represents segment net income before taxes excluding transaction-related charges. Transaction-related charges arise from Blackstone’s initial public offering (“IPO”) 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. ENI presents revenues and expenses on a basis that deconsolidates the investment funds Blackstone manages.

 

•

Economic Net Income After Taxes represents ENI adjusted to reflect the implied provision (benefit) for income taxes calculated using a similar methodology as applied in calculating the tax provision (benefit) for The Blackstone Group L.P. but consistent with the ENI concepts as noted above.

 

•

Blackstone uses Net Fee Related Earnings from Operations 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 Net Fee Related Earnings from Operations as a measure to assess whether recurring revenue from its businesses is sufficient to adequately cover all of its operating expenses and generate profits. Net Fee Related Earnings from Operations 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), (b) other operating expenses, and (c) cash taxes due on earnings from operations as calculated using a similar methodology as applied in calculating the current tax provision (benefit) for The Blackstone Group L.P.

 

•

Blackstone uses Earnings Before Interest, Taxes and Depreciation and Amortization from Net Fee Related Earnings from Operations (“EBITDA-NFRE”) as a measure of segment performance and an indicator of its ability to cover recurring operating expenses. EBITDA-NFRE equals Net Fee Related Earnings from Operations before segment interest expense, segment depreciation and amortization and the cash taxes included in Net Fee Related Earnings from Operations.

 

•

Distributable Earnings, 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. Distributable Earnings is intended to show the amount of net realized earnings without the effects of the consolidation of the Blackstone Funds.

Distributable Earnings, which is a component of Economic Net Income, 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) Cash Taxes and Payables Under the Tax Receivable Agreement. Distributable Earnings 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 Distributable Earnings, less realized investment gains, 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.

 

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THE BLACKSTONE GROUP L.P.

Exhibit 7. Definitions of Non-GAAP Financial Information

 

Reconciliations of these non-GAAP financial measures to the most directly comparable financial measures calculated and presented in accordance with GAAP are included within this press release. These non-GAAP financial measures should be considered in addition to and not as a substitute for, or superior to, financial measures presented in accordance with GAAP.

 

24