Exhibit 99.1

 

Blackstone Reports Fourth Quarter and

Full Year 2011 Results

Despite challenging market and economic conditions, Economic Net Income (“ENI”) was $1.4 billion for the full year 2011. ENI was $450 million for the fourth quarter of 2011, compared to $513 million for the fourth quarter of 2010.

Distributable Earnings were $697 million for the full year 2011; Distributable Earnings were $178 million for the fourth quarter of 2011, compared to $239 million in the fourth quarter of 2010.

GAAP Results Attributable to The Blackstone Group L.P. improved in 2011 with a net loss of $269 million, compared to a net loss of $370 million in 2010, in each case including net IPO and acquisition-related charges. GAAP Net Loss Attributable to The Blackstone Group L.P. was $123 million in the fourth quarter of 2011, compared to a net loss of $11 million in the fourth quarter of 2010.

Fee-Earning Assets Under Management increased 25% to a record $137 billion at December 31, 2011, from $110 billion at December 31, 2010, while Total Assets Under Management increased 30% to $166 billion at December 31, 2011.

Blackstone declares a quarterly distribution of $0.22 per common unit which brings full year distributions to $0.52 per common unit.

New York, February 2, 2012: The Blackstone Group L.P. (NYSE: BX) today reported its fourth quarter and full year 2011 results.

Economic Net Income (“ENI”) was $1.389 billion for the full year 2011, slightly lower than $1.418 billion ENI for the full year 2010. The decline in ENI compared to the full year 2010 was driven principally by a slowing in the rate of increase in the carrying value of assets as of December 31, 2011 across Blackstone’s investment segments, offset by an increase of $246.5 million, or 15%, in Total Management and Advisory Fees to $1.878 billion for the full year 2011. ENI was $449.9 million for the three months ended December 31, 2011, a decrease of $62.8 million, compared to ENI of $512.7 million for the three months ended December 31, 2010, primarily attributable to decreases in Performance Fees and Investment Income.

Driven by strong net inflows during the last year, Blackstone’s managed assets demonstrated consistent growth with Fee-Earning Assets Under Management and Total Assets Under Management rising to a record $136.8 billion and $166.2 billion, respectively, at December 31, 2011. The Blackstone funds had $32.9 billion of committed but uninvested capital, or “dry powder”, at the end of 2011.

 

						The Blackstone Group® L.P.
						345 Park Avenue
						New York, NY 10154
						212 583-5000

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For the full year 2011, Total Segment Revenues were $3.3 billion, up 5% from $3.1 billion for the full year 2010 due to higher Management Fees and Performance Fees, offset by a decrease in Investment Income. Total Management Fees increased to $1.9 billion, up 15% from $1.6 billion for the full year 2010, principally due to the increase in Fee-Earning Assets Under Management. Performance Fees increased 27% to $1.2 billion in 2011 driven by increases in the Real Estate segment, which more than offset decreases in the other investment segments. Investment Income was lower across all segments due to a slowing in appreciation over the prior year.

Total Segment Expenses were $1.7 billion for the full year 2011, an increase from $1.6 billion for the full year 2010, primarily due to an increase of $101.5 million in Compensation, excluding Performance Fee Compensation. Compensation was up 12% to $960.6 million for the full year 2011, principally as a result of increased investment across Blackstone supporting its continued strong growth. Blackstone’s non-compensation expenses were up 22% from full year 2010 driven mostly by professional fees, financing activities and occupancy costs related to continuing global expansion and the launch of new products.

GAAP results for the year ended December 31, 2011 included Revenues of $3.3 billion, compared to $3.1 billion for the full year 2010, and Net Loss Attributable to The Blackstone Group L.P. of $269.0 million, compared to a net loss of $370.0 million for the full year 2010. GAAP results for the fourth quarter of 2011 included Revenues of $915.1 million, compared to $1.1 billion for the fourth quarter of 2010, and Net Loss Attributable to The Blackstone Group L.P. of $123.4 million, compared to a net loss of $11.0 million for the fourth quarter of 2010.

Stephen A. Schwarzman, Chairman and Chief Executive Officer, said, “Despite volatile markets and struggling economies, Blackstone had strong performance in 2011. Our investors view us as a critical partner, helping them protect and grow their capital. We again reported net inflows in every one of our businesses with record fee-earning assets under management of $137 billion at year end, up 25% year over year. During 2011, we invested or committed over $16 billion from our drawdown funds, which we believe will yield attractive results for our investors as well as provide capital that is critical to spurring economic growth, supporting job creation and restoring confidence in our nation’s future. We also distributed approximately $9 billion to our drawdown fund investors during the 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 fourth quarters of 2011 and 2010, and for the full years 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 charges.

 

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		Quarter Ended December 31,								Variance								Year Ended December 31,								Variance
		2011				2010				$				%				2011				2010				$				%
		(Unaudited, Dollars in Thousands, Except Per Unit Amounts)
Economic Net Income, Total Segments		$	482,772			$	606,106			$	(123,334)				-20	%		$	1,584,971			$	1,580,770			$	4,201				0	%
Provision for Income Taxes (a)			32,871				93,357				(60,486)				-65	%			196,127				163,109				33,018				20	%
Economic Net Income, After Taxes		$	449,901			$	512,749			$	(62,848)				-12	%		$	1,388,844			$	1,417,661			$	(28,817)				-2	%
Economic Net Income, After Taxes per Adjusted Unit (b)		$	0.40			$	0.46			$	(0.06)				-13	%		$	1.25			$	1.28			$	(0.03)				-2	%
Net Fee Related Earnings from Operations		$	152,344			$	122,740			$	29,604				24	%		$	502,095			$	442,314			$	59,781				14	%
Distributable Earnings		$	178,186			$	239,197			$	(61,011)				-26	%		$	696,724			$	701,784			$	(5,060)				-1	%
Distributable Earnings per Common Unit (c)		$	0.16			$	0.20			$	(0.04)				-20	%		$	0.60			$	0.62			$	(0.02)				-3	%
Fee-Earning Assets Under Management:
Private Equity		$	37,237,791			$	24,188,555			$	13,049,236				54	%
Real Estate			31,236,540				26,814,714				4,421,826				16	%
Hedge Fund Solutions			37,819,636				33,159,795				4,659,841				14	%
Credit Businesses			30,462,786				25,337,158				5,125,628				20	%
Total Fee-Earning Assets Under Management		$	136,756,753			$	109,500,222			$	27,256,531				25	%

 

(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. 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 full year revenues of $578.8 million, compared to revenues of $828.4 million for the full year 2010. The decrease from full year 2010 was principally due to lower Performance Fees and Investment Income, partially offset by an increase in Total Management Fees of $102.6 million due to an increase in Fee-Earning Assets Under Management. Revenues were $190.9 million for the fourth quarter of 2011, compared to $252.8 million in the fourth quarter of 2010. The decrease from the fourth quarter of 2010 was principally due to a $93.9 million decrease in Performance Fees, partially offset by an increase in Total Management Fees of $27.6 million.

The carrying value of assets in the contributed Private Equity funds increased by 5.3% for the full year 2011 driven by an increase in the carrying value of our energy holdings as well as positive performance of our publicly traded investments, particularly those that had initial public offerings in 2011. The carrying value of the segment’s investments increased by 3.3% in the fourth quarter of 2011 due to stronger public markets and increases in the carrying value of the segment’s privately held investments in the energy and retail/consumer sectors, partially offset by foreign currency losses. Annual growth in EBITDA of the private equity portfolio companies averaged approximately 8% to 10%, compared to the prior year. As of December 31, 2011, the unrealized value and cumulative realized proceeds, before carried interest, fees and expenses, for Blackstone’s contributed Private Equity funds was 1.4 times investors’ original investments. On a realized/partially realized basis, this multiple was 2.3 times investors’ original investments.

 

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ENI was $241.1 million for the full year 2011, down from $485.5 million for the full year 2010, a result of lower Performance Fees and Investment Income. ENI was $106.7 million for the fourth quarter of 2011, down from $161.7 million in 2010, principally a result of lower Performance Fees.

Fee-Earning Assets Under Management were $37.2 billion at December 31, 2011 compared to $24.2 billion at December 31, 2010, due to the commencement of the investment period for the BCP VI, Energy and China funds.

Limited Partner Capital Invested during the full year 2011 totaled $3.8 billion, an increase from $1.7 billion invested during the full year 2010. Limited Partner Capital Invested during the fourth quarter of 2011 was $1.1 billion, up significantly from $116.9 million during the fourth quarter of 2010. Dry powder for Private Equity was $16.3 billion as of December 31, 2011. Blackstone’s Private Equity segment’s funds had $286.7 million of Limited Partner Capital committed to transactions which had not yet closed as of December 31, 2011.

Real Estate

Real Estate had full year revenues of $1.6 billion, compared to revenues of $1.0 billion for the full year 2010. Revenues were $392.4 million for the fourth quarter of 2011, compared to $417.2 million in 2010. The increase from full year 2010 was principally due to a year over year increase in Performance Fees of $652.3 million. Fourth quarter 2011 revenues decreased $24.8 million from the fourth quarter of 2010, principally due to declines in Investment Income and Transaction and Other Fees, partially offset by an increase in Performance Fees.

The carrying value of assets in contributed Real Estate funds, including fee-paying co-investments, increased 16.7% and 3.3% for the full year 2011 and for the fourth quarter of 2011, respectively. Similar to prior quarters, and despite the continued volatility in the global economy and public equity markets, operating fundamentals remained healthy across all of the segment’s properties. For 2011, RevPAR (Revenue per Available Room) of Blackstone’s significant hospitality investments increased between 6% and 8% for 2011 over 2010. During the fourth quarter of 2011, occupancy levels and market rental rates within Blackstone’s significant office investments increased over 3% and approximately 5%, respectively, compared to the same period in 2010. On a trailing twelve month basis through the third quarter of 2011, the latest available financial information, retail sales in the mall investments were up approximately 8%. At December 31, 2011, occupancy levels at the grocery anchored retail centers were in excess of 88%, the highest occupancy levels achieved by Blackstone’s properties in over 18 months. The increase in Performance Fees was primarily related to the strong performance of the funds’ office, hospitality and retail investments with a portion of the increase due to the impact of the “catch-up” provisions of the funds. As of December 31, 2011, the unrealized value and cumulative realized proceeds, before carried interest, fees and expenses, of Blackstone’s contributed Real Estate funds, including fee-paying co-investments, represented 1.4 times investors’ original investment. On a realized/partially realized basis, this multiple was 2.1 times investors’ original investments.

ENI for the Real Estate segment was $1.0 billion for the full year 2011 compared to $639.5 million for 2010, driven principally by the increase in Performance Fees. ENI was $250.8 million for the fourth quarter of 2011, down from $280.8 million in the fourth quarter of 2010. The decrease was due to the revenue decline discussed above.

Fee-Earning Assets Under Management were $31.2 billion at December 31, 2011, compared to $26.8 billion at December 31, 2010. Fee-Earning Assets Under Management increased in 2011 principally due to the commencement of the investment period of the BREP VII fund.

 

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Limited Partner Capital Invested during 2011 was $6.1 billion, up from $4.1 billion in 2010. Limited Partner Capital Invested during the fourth quarter of 2011 was $995.6 million, down from $2.3 billion during the fourth quarter of 2010. Dry powder for Real Estate was $10.0 billion as of December 31, 2011. Blackstone’s Real Estate segment’s funds had $939.7 million of Limited Partner Capital committed to transactions which had not yet closed as of December 31, 2011.

Hedge Fund Solutions

Hedge Fund Solutions had full year revenues of $338.5 million compared to revenues of $366.8 million for the full year 2010. Revenues were $91.4 million for the fourth quarter of 2011, compared to $119.1 million in 2010. The decrease from full year 2010 was principally due to decreases in Performance Fees and Investment Income of $47.4 million and $30.5 million, respectively, partially offset by an increase in Total Management Fees of 15% to $317.7 million for the full year 2011. Fourth quarter 2011 revenues decreased $27.8 million from the fourth quarter of 2010 principally due to declines in Performance Fees and Investment Income.

The returns for the underlying assets for Blackstone’s Hedge Fund Solutions’ funds were 1.6% for the fourth quarter of 2011 and (1.0)% for the full year 2011.

ENI for the Hedge Fund Solutions segment declined 29% to $140.8 million for the full year 2011 compared to $198.3 million for the full year 2010. ENI was $31.5 million for the fourth quarter of 2011, down from $70.7 million in the fourth quarter of 2010. The full year and quarterly decreases were driven principally by the decreases in Performance Fees and Investment Income mentioned above.

Fee-Earning Assets Under Management for the segment grew 14% to a record $37.8 billion at December 31, 2011, compared to $33.2 billion at December 31, 2010. Net inflows for Blackstone’s Hedge Fund Solutions business came primarily from its commingled and customized investment products and its long only solutions business. Hedge Fund Solutions had $271.5 million of net inflows of Fee-Earning Assets Under Management for the fourth quarter of 2011, bringing year to date net fee-earning inflows to $6.4 billion.

Credit Businesses

Credit Businesses had full year revenues of $395.0 million in 2011 compared to revenues of $478.7 million for the full year 2010. The decrease from full year 2010 to full year 2011 was principally due to Performance Fees of $141.8 million, compared to $261.1 million in 2010. This was partially offset by an increase in Total Management Fees of 23% or $44.1 million. Revenues were $125.1 million for the fourth quarter of 2011, compared to $165.6 million for the fourth quarter of 2010. The decrease from the fourth quarter of 2010 was also principally due to declines in Performance Fees and Investment Income.

The returns of the underlying assets for Blackstone’s Credit Businesses for the fourth quarter of 2011 were 4.3% for the hedge funds, 2.1% for the rescue lending funds, and 4.9% for the mezzanine funds. For the full year 2011, the returns of the underlying assets for Blackstone’s credit-oriented businesses were 8.9% for the hedge funds, 4.4% for the rescue lending funds, and 28.1% for the mezzanine funds.

ENI for the Credit Businesses segment decreased by 18% to $141.6 million for the full year 2011 compared to $173.7 million for the full year 2010. ENI decreased by 14% to $54.7 million for the fourth quarter of 2011 compared to $63.5 million for the fourth quarter of 2010. The full year and fourth quarter 2011 declines in ENI were attributable to the lower Performance Fees and Investment Income mentioned above.

 

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Fee-Earning Assets Under Management for the segment increased 20% to $30.5 billion at December 31, 2011 from $25.3 billion at December 31, 2010. The $5.1 billion increase was due to drawdowns of Limited Partner Capital in the mezzanine funds and rescue lending funds which trigger the commencement of management fees. In addition, there was strong year over year growth in the long-only platform, including the acquisition of the Allied Irish Banks CLOs during the second quarter of 2011.

Dry powder of drawdown funds for the Credit Businesses segment was $5.1 billion as of December 31, 2011.

On January 5, 2012, the Credit Businesses completed the acquisition of Harbourmaster Capital, a leading European leveraged loan manager and adviser with €7.5 billion ($9.8 billion) of Assets Under Management as of December 31, 2011.

Financial Advisory

Financial Advisory had full year revenues of $389.9 million compared to revenues of $431.9 million for the full year 2010. Revenues were $125.3 million for the fourth quarter of 2011 compared to $131.1 million in 2010. The decrease from full year 2010 was principally due to decreases in fees from Blackstone’s restructuring and reorganization business, partially offset by an increase from Blackstone’s fund placement business.

ENI was $59.6 million for the full year 2011 compared to $83.7 million for the full year 2010. Fourth quarter 2011 ENI increased $9.7 million to $39.1 million from the fourth quarter of 2010.

CAPITAL AND LIQUIDITY

As of December 31, 2011, Blackstone had $1.6 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, which expires in April 2016.

DISTRIBUTION

The Blackstone Group L.P. has declared a quarterly distribution of $0.22 per common unit to record holders of common units at the close of business on March 15, 2012. This distribution will be paid on March 30, 2012.

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.

As was the case for 2011, 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 and returns of capital from investments and acquisitions. This determination has been 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

 

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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.

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. For the fourth quarter of each year Blackstone expects to pay the remaining amount of the year’s Distributable Earnings less realized investment gains and returns of capital from investments and acquisitions. As such, the distributions for the first three quarters are expected to be smaller than the final quarterly distribution in respect of such year.

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 each fiscal year 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 February 2, 2012 at 11:00 a.m. ET to discuss 2011 results. The conference call can be accessed by dialing (877) 391-6747 (U.S. domestic) or +1 (617) 597-9291 (international), pass code 31241240. 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 73697179, beginning approximately two hours after the event.

Blackstone expects to host conference calls to report its 2012 results as follows: first quarter results, April 19, 2012; second quarter results, July 19, 2012; third quarter results, October 18, 2012 and fourth quarter and full year results, January 31, 2013.

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

 

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Media Relations Contact:

Peter Rose

The Blackstone Group

Tel: +1 (212) 583-5871

rose@blackstone.com

About The Blackstone Group

Blackstone (NYSE:BX) is one of the world’s leading investment and advisory firms. Blackstone seeks to create positive economic impact and long-term value for its investors, the companies invested in, the companies advised and the broader global economy. Blackstone does this through the commitment of its extraordinary people and flexible capital. Blackstone’s 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. Blackstone 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. Follow Blackstone on Twitter @Blackstone.

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

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

 

		Quarter Ended December 31,
		2011				2010
Revenues
Management and Advisory Fees		$	475,779			$	461,345
Performance Fees
Realized			64,435				194,780
Unrealized			293,667				258,809
Total Performance Fees			358,102				453,589
Investment Income
Realized			9,860				(336	)
Unrealized			55,665				160,313
Total Investment Income			65,525				159,977
Interest and Dividend Revenue			10,004				10,296
Other			5,695				(1,192	)
Total Revenues			915,105				1,084,015
Expenses
Compensation and Benefits
Compensation			568,319				696,561
Performance Fee Compensation
Realized			46,730				72,734
Unrealized			47,998				70,615
Total Compensation and Benefits			663,047				839,910
General, Administrative and Other			150,937				124,505
Interest Expense			16,051				14,596
Fund Expenses			6,462				10,730
Total Expenses			836,497				989,741
Other Income
Reversal of Tax Receivable Agreement Liability			197,816				—
Net Gains from Fund Investment Activities			464,179				104,369
Total Other Income			661,995				104,369
Income Before Provision for Taxes			740,603				198,643
Provision for Taxes			251,644				59,867
Net Income			488,959				138,776
Net Income (Loss) Attributable to Redeemable Non-Controlling Interests in Consolidated Entities			(9,635	)			37,666
Net Income Attributable to Non-Controlling Interests in Consolidated Entities			466,452				25,496
Net Income Attributable to Non-Controlling Interests in Blackstone Holdings			155,547				86,587
Net Loss Attributable to The Blackstone Group L.P.		$	(123,405	)		$	(10,973	)
Net Loss per Common Unit, Basic and Diluted		$	(0.25	)		$	(0.03	)

 

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THE BLACKSTONE GROUP L.P.

Exhibit 1b. Consolidated Statements of Operations

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

 

		Year Ended December 31,
		2011				2010
Revenues
Management and Advisory Fees		$	1,811,750			$	1,584,748
Performance Fees
Realized			229,006				366,721
Unrealized			953,654				571,113
Total Performance Fees			1,182,660				937,834
Investment Income
Realized			87,542				29,157
Unrealized			125,781				532,004
Total Investment Income			213,323				561,161
Interest and Dividend Revenue			37,427				36,218
Other			7,416				(619	)
Total Revenues			3,252,576				3,119,342
Expenses
Compensation and Benefits
Compensation			2,421,712				3,253,226
Performance Fee Compensation
Realized			99,527				128,316
Unrealized			217,186				228,647
Total Compensation and Benefits			2,738,425				3,610,189
General, Administrative and Other			531,370				466,358
Interest Expense			57,824				41,229
Fund Expenses			25,507				26,214
Total Expenses			3,353,126				4,143,990
Other Income
Reversal of Tax Receivable Agreement Liability			197,816				—
Net Gains from Fund Investment Activities			14,935				501,994
Total Other Income			212,751				501,994
Income (Loss) Before Provision for Taxes			112,201				(522,654	)
Provision for Taxes			347,056				84,669
Net Loss			(234,855	)			(607,323	)
Net Income (Loss) Attributable to Redeemable Non-Controlling Interests in Consolidated Entities			(32,526	)			84,837
Net Income Attributable to Non-Controlling Interests in Consolidated Entities			15,610				346,312
Net Income (Loss) Attributable to Non-Controlling Interests in Blackstone Holdings			51,092				(668,444	)
Net Loss Attributable to The Blackstone Group L.P.		$	(269,031	)		$	(370,028	)
Net Loss per Common Unit, Basic and Diluted		$	(0.57	)		$	(1.02	)

 

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THE BLACKSTONE GROUP L.P.

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

(Unaudited, 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																																Twelve Months Ended
																																										Dec 31, 2011 vs.
		Mar 31,				Jun 30,				Sep 30,				Dec 31,				Mar 31,				Jun 30,				Sep 30,				Dec 31,				Dec 31,				Dec 31,				Dec 31, 2010
		2010				2010				2010				2010				2011				2011				2011				2011				2010				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			$	322,371			$	336,753			$	1,069,471			$	1,281,185			$	211,714				20	%
Advisory Fees			76,568				134,099				84,541				130,932				70,252				102,243				86,178				123,567				426,140				382,240				(43,900	)			-10	%
Transaction and Other Fees, Net *			35,260				20,617				22,948				58,923				58,363				103,561				41,793				43,796				137,748				247,513				109,765				80	%
Management Fee Offsets **			(1,178	)			(179	)			(674	)			(282	)			(8,536	)			(8,675	)			(7,703	)			(8,479	)			(2,313	)			(33,393	)			(31,080	)			N/M
Total Management and Advisory Fees			362,621				417,451				376,249				474,725				425,666				513,603				442,639				495,637				1,631,046				1,877,545				246,499				15	%
Performance Fees
Realized			53,881				46,374				66,039				195,369				95,600				60,215				7,897				64,224				361,663				227,936				(133,727	)			-37	%
Unrealized			132,333				(20,738	)			192,745				260,286				505,197				612,843				(465,176	)			293,726				564,626				946,590				381,964				68	%
Total Performance Fees			186,214				25,636				258,784				455,655				600,797				673,058				(457,279	)			357,950				926,289				1,174,526				248,237				27	%
Investment Income (Loss)
Realized			5,307				15,721				14,276				11,611				23,499				30,732				31,647				16,697				46,915				102,575				55,660				119	%
Unrealized			151,521				87,186				128,247				134,680				102,577				106,837				(165,753	)			39,028				501,634				82,689				(418,945	)			-84	%
Total Investment Income (Loss)			156,828				102,907				142,523				146,291				126,076				137,569				(134,106	)			55,725				548,549				185,264				(363,285	)			-66	%
Interest Income and Dividend Revenue			8,690				6,930				10,187				10,289				9,448				9,283				10,110				10,003				36,096				38,844				2,748				8	%
Other			(3,250	)			(644	)			4,468				(1,192	)			2,259				1,128				(1,667	)			5,695				(618	)			7,415				8,033				N/M
Total Revenues			711,103				552,280				792,211				1,085,768				1,164,246				1,334,641				(140,303	)			925,010				3,141,362				3,283,594				142,232				5	%
Expenses
Compensation and Benefits
Compensation			190,637				220,662				210,582				237,233				224,532				272,392				238,207				225,438				859,114				960,569				101,455				12	%
Performance Fee Compensation
Realized			7,741				22,879				24,962				72,734				14,543				27,711				10,543				46,730				128,316				99,527				(28,789	)			-22	%
Unrealized			54,600				(892	)			104,323				70,615				162,525				118,097				(111,435	)			47,998				228,646				217,185				(11,461	)			-5	%
Total Compensation and Benefits			252,978				242,649				339,867				380,582				401,600				418,200				137,315				320,166				1,216,076				1,277,281				61,205				5	%
Other Operating Expenses			73,023				88,160				84,253				99,080				102,975				99,363				96,932				122,072				344,516				421,342				76,826				22	%
Total Expenses			326,001				330,809				424,120				479,662				504,575				517,563				234,247				442,238				1,560,592				1,698,623				138,031				9	%
Total Economic Net Income (Loss)		$	385,102			$	221,471			$	368,091			$	606,106			$	659,671			$	817,078			$	(374,550	)		$	482,772			$	1,580,770			$	1,584,971			$	4,201				0	%
Total Net Fee Related Earnings from Operations		$	98,745			$	107,915			$	112,914			$	122,740			$	98,546			$	143,563			$	107,642			$	152,344			$	442,314			$	502,095			$	59,781				14	%

 

*	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

(Unaudited, Dollars in Thousands)

 

		Three Months Ended																																Twelve Months Ended
																																										Dec 31, 2011 vs.
		Mar 31,				Jun 30,				Sep 30,				Dec 31,				Mar 31,				Jun 30,				Sep 30,				Dec 31,				Dec 31,				Dec 31,				Dec 31, 2010
		2010				2010				2010				2010				2011				2011				2011				2011				2010				2011				$				%
Private Equity
Revenues
Management Fees
Base Management Fees		$	65,432			$	66,795			$	66,077			$	65,003			$	79,935			$	82,297			$	85,534			$	84,231			$	263,307			$	331,997			$	68,690				26	%
Transaction and Other Fees, Net *			31,972				16,367				13,348				10,556				35,342				52,353				21,430				23,879				72,243				133,004				60,761				84	%
Management Fee Offsets **			—				—				(91	)			(97	)			(7,889	)			(7,629	)			(6,498	)			(5,057	)			(188	)			(27,073	)			(26,885	)			N/M
Total Management Fees			97,404				83,162				79,334				75,462				107,388				127,021				100,466				103,053				335,362				437,928				102,566				31	%
Performance Fees
Realized			46,175				1,106				44,814				64,774				82,389				1,362				(17,966	)			(28,392	)			156,869				37,393				(119,476	)			-76	%
Unrealized			45,549				(24,020	)			45,499				84,466				32,537				187,190				(270,014	)			83,777				151,494				33,490				(118,004	)			-78	%
Total Performance Fees			91,724				(22,914	)			90,313				149,240				114,926				188,552				(287,980	)			55,385				308,363				70,883				(237,480	)			-77	%
Investment Income (Loss)
Realized			(495	)			3,141				9,940				2,746				17,907				3,021				20,548				3,512				15,332				44,988				29,656				193	%
Unrealized			84,684				17,275				30,491				20,838				29,126				76,947				(121,688	)			25,091				153,288				9,476				(143,812	)			-94	%
Total Investment Income (Loss)			84,189				20,416				40,431				23,584				47,033				79,968				(101,140	)			28,603				168,620				54,464				(114,156	)			-68	%
Interest Income and Dividend Revenue			3,428				2,728				3,802				4,086				3,505				3,197				3,396				3,651				14,044				13,749				(295	)			-2	%
Other			100				460				1,061				400				811				665				141				193				2,021				1,810				(211	)			-10	%
Total Revenues			276,845				83,852				214,941				252,772				273,663				399,403				(285,117	)			190,885				828,410				578,834				(249,576	)			-30	%
Expenses
Compensation and Benefits
Compensation			46,910				46,612				47,552				38,271				54,924				64,633				52,388				45,611				179,345				217,556				38,211				21	%
Performance Fee Compensation
Realized			6,005				128				10,783				15,711				7,718				49				(2,443	)			(3,859	)			32,627				1,465				(31,162	)			-96	%
Unrealized			6,344				(10,296	)			18,306				6,966				5,464				29,309				(44,955	)			7,953				21,320				(2,229	)			(23,549	)			N/M
Total Compensation and Benefits			59,259				36,444				76,641				60,948				68,106				93,991				4,990				49,705				233,292				216,792				(16,500	)			-7	%
Other Operating Expenses			24,431				28,677				26,359				30,122				28,713				30,124				27,588				34,493				109,589				120,918				11,329				10	%
Total Expenses			83,690				65,121				103,000				91,070				96,819				124,115				32,578				84,198				342,881				337,710				(5,171	)			-2	%
Total Economic Net Income (Loss)		$	193,155			$	18,731			$	111,941			$	161,702			$	176,844			$	275,288			$	(317,695	)		$	106,687			$	485,529			$	241,124			$	(244,405	)			-50	%

 

*	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

(Unaudited, Dollars in Thousands)

 

		Three Months Ended																																Twelve Months Ended
																																										Dec 31, 2011 vs.
		Mar 31,				Jun 30,				Sep 30,				Dec 31,				Mar 31,				Jun 30,				Sep 30,				Dec 31,				Dec 31,				Dec 31,				Dec 31, 2010
		2010				2010				2010				2010				2011				2011				2011				2011				2010				2011				$				%
Real Estate
Revenues
Management Fees
Base Management Fees		$	83,060			$	82,916			$	83,232			$	89,220			$	95,439			$	97,467			$	97,925			$	103,947			$	338,428			$	394,778			$	56,350				17	%
Transaction and Other Fees, Net *			1,942				2,979				8,538				46,455				21,543				49,288				19,551				19,128				59,914				109,510				49,596				83	%
Management Fee Offsets **			(489	)			(110	)			(401	)			(71	)			(505	)			(745	)			(880	)			(2,820	)			(1,071	)			(4,950	)			(3,879	)			N/M
Total Management Fees			84,513				85,785				91,369				135,604				116,477				146,010				116,596				120,255				397,271				499,338				102,067				26	%
Performance Fees
Realized			5,948				16,319				5,010				13,011				2,593				20,832				5,308				3,740				40,288				32,473				(7,815	)			-19	%
Unrealized			11,391				21,117				69,910				154,553				368,104				429,458				(120,176	)			239,690				256,971				917,076				660,105				N/M
Total Performance Fees			17,339				37,436				74,920				167,564				370,697				450,290				(114,868	)			243,430				297,259				949,549				652,290				N/M
Investment Income (Loss)
Realized			2,632				3,900				2,159				2,560				2,919				11,394				7,313				6,346				11,251				27,972				16,721				149	%
Unrealized			46,892				79,543				83,968				108,576				61,406				37,332				(26,060	)			19,970				318,979				92,648				(226,331	)			-71	%
Total Investment Income (Loss)			49,524				83,443				86,127				111,136				64,325				48,726				(18,747	)			26,316				330,230				120,620				(209,610	)			-63	%
Interest Income and Dividend Revenue			2,718				2,178				3,026				3,251				3,288				2,989				3,195				3,430				11,173				12,902				1,729				15	%
Other			(1,876	)			(390	)			2,330				(400	)			860				515				(1,390	)			(1,046	)			(336	)			(1,061	)			(725	)			N/M
Total Revenues			152,218				208,452				257,772				417,155				555,647				648,530				(15,214	)			392,385				1,035,597				1,581,348				545,751				53	%
Expenses
Compensation and Benefits
Compensation			40,150				44,528				43,219				55,280				57,627				70,651				54,986				53,507				183,177				236,771				53,594				29	%
Performance Fee Compensation
Realized			1,524				8,895				1,806				3,619				1,230				9,382				2,251				1,804				15,844				14,667				(1,177	)			-7	%
Unrealized			6,937				15,999				46,182				53,746				106,501				91,021				(30,510	)			57,234				122,864				224,246				101,382				83	%
Total Compensation and Benefits			48,611				69,422				91,207				112,645				165,358				171,054				26,727				112,545				321,885				475,684				153,799				48	%
Other Operating Expenses			14,290				17,647				18,584				23,668				28,366				22,971				23,495				29,027				74,189				103,859				29,670				40	%
Total Expenses			62,901				87,069				109,791				136,313				193,724				194,025				50,222				141,572				396,074				579,543				183,469				46	%
Total Economic Net Income (Loss)		$	89,317			$	121,383			$	147,981			$	280,842			$	361,923			$	454,505			$	(65,436	)		$	250,813			$	639,523			$	1,001,805			$	362,282				57	%

 

*	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

(Unaudited, Dollars in Thousands)

 

		Three Months Ended																																Twelve Months Ended
																																										Dec 31, 2011 vs.
		Mar 31,				Jun 30,				Sep 30,				Dec 31,				Mar 31,				Jun 30,				Sep 30,				Dec 31,				Dec 31,				Dec 31,				Dec 31, 2010
		2010				2010				2010				2010				2011				2011				2011				2011				2010				2011				$				%
Hedge Fund Solutions
Revenues
Management Fees
Base Management Fees		$	63,866			$	65,533			$	69,305			$	74,069			$	75,612			$	79,290			$	79,355			$	81,606			$	272,773			$	315,863			$	43,090				16	%
Transaction and Other Fees, Net *			809				870				846				1,047				727				861				740				470				3,572				2,798				(774	)			-22	%
Management Fee Offsets **			—				(72	)			(163	)			(95	)			(124	)			(196	)			(258	)			(402	)			(330	)			(980	)			(650	)			-197	%
Total Management Fees			64,675				66,331				69,988				75,021				76,215				79,955				79,837				81,674				276,015				317,681				41,666				15	%
Performance Fees
Realized			2,117				1,021				872				52,616				893				667				5,764				4,148				56,626				11,472				(45,154	)			-80	%
Unrealized			10,413				(2,596	)			14,137				(18,972	)			19,253				3,441				(19,861	)			(2,059	)			2,982				774				(2,208	)			-74	%
Total Performance Fees			12,530				(1,575	)			15,009				33,644				20,146				4,108				(14,097	)			2,089				59,608				12,246				(47,362	)			-79	%
Investment Income (Loss)
Realized			(250	)			5,438				1,050				3,580				1,341				12,855				1,023				2,503				9,818				17,722				7,904				81	%
Unrealized			11,880				(6,749	)			7,831				6,399				7,120				(12,864	)			(10,034	)			(3,253	)			19,361				(19,031	)			(38,392	)			N/M
Total Investment Income (Loss)			11,630				(1,311	)			8,881				9,979				8,461				(9	)			(9,011	)			(750	)			29,179				(1,309	)			(30,488	)			N/M
Interest Income and Dividend Revenue			475				353				498				543				516				472				500				537				1,869				2,025				156				8	%
Other			(83	)			(40	)			270				(50	)			104				(38	)			18				7,818				97				7,902				7,805				N/M
Total Revenues			89,227				63,758				94,646				119,137				105,442				84,488				57,247				91,368				366,768				338,545				(28,223	)			-8	%
Expenses
Compensation and Benefits
Compensation			20,742				26,388				24,506				23,750				28,093				31,674				30,667				38,525				95,386				128,959				33,573				35	%
Performance Fee Compensation
Realized			771				356				3,313				16,193				300				253				2,257				688				20,633				3,498				(17,135	)			-83	%
Unrealized			3,783				(977	)			5,075				(6,814	)			5,358				2,955				(7,214	)			(865	)			1,067				234				(833	)			-78	%
Total Compensation and Benefits			25,296				25,767				32,894				33,129				33,751				34,882				25,710				38,348				117,086				132,691				15,605				13	%
Other Operating Expenses			11,285				12,353				12,388				15,334				13,008				16,075				14,421				21,568				51,360				65,072				13,712				27	%
Total Expenses			36,581				38,120				45,282				48,463				46,759				50,957				40,131				59,916				168,446				197,763				29,317				17	%
Total Economic Net Income		$	52,646			$	25,638			$	49,364			$	70,674			$	58,683			$	33,531			$	17,116			$	31,452			$	198,322			$	140,782			$	(57,540	)			-29	%

 

*	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

(Unaudited, Dollars in Thousands)

 

 

		Three Months Ended																																Twelve Months Ended
																																										Dec 31, 2011 vs.
		Mar 31,				Jun 30,				Sep 30,				Dec 31,				Mar 31,				Jun 30,				Sep 30,				Dec 31,				Dec 31,				Dec 31,				Dec 31, 2010
		2010				2010				2010				2010				2011				2011				2011				2011				2010				2011				$				%
Credit Businesses
Revenues
Management Fees
Base Management Fees		$	39,613			$	47,670			$	50,820			$	56,860			$	54,601			$	57,420			$	59,557			$	66,969			$	194,963			$	238,547			$	43,584				22	%
Transaction and Other Fees, Net *			536				299				216				606				745				849				(26	)			312				1,657				1,880				223				13	%
Management Fee Offsets **			(689	)			3				(19	)			(19	)			(18	)			(105	)			(67	)			(200	)			(724	)			(390	)			334				46	%
Total Management Fees			39,460				47,972				51,017				57,447				55,328				58,164				59,464				67,081				195,896				240,037				44,141				23	%
Performance Fees
Realized			(359	)			27,928				15,343				64,968				9,725				37,354				14,791				84,728				107,880				146,598				38,718				36	%
Unrealized			64,980				(15,239	)			63,199				40,239				85,303				(7,246	)			(55,125	)			(27,682	)			153,179				(4,750	)			(157,929	)			N/M
Total Performance Fees			64,621				12,689				78,542				105,207				95,028				30,108				(40,334	)			57,046				261,059				141,848				(119,211	)			-46	%
Investment Income (Loss)
Realized			3,233				3,291				658				2,518				1,235				3,236				2,807				4,021				9,700				11,299				1,599				16	%
Unrealized			7,835				(3,444	)			5,350				(269	)			4,532				5,437				(7,800	)			(2,877	)			9,472				(708	)			(10,180	)			N/M
Total Investment Income (Loss)			11,068				(153	)			6,008				2,249				5,767				8,673				(4,993	)			1,144				19,172				10,591				(8,581	)			-45	%
Interest Income and Dividend Revenue			673				403				1,252				710				453				902				1,404				610				3,038				3,369				331				11	%
Other			(459	)			(332	)			330				(27	)			98				(47	)			(132	)			(772	)			(488	)			(853	)			(365	)			-75	%
Total Revenues			115,363				60,579				137,149				165,586				156,674				97,800				15,409				125,109				478,677				394,992				(83,685	)			-17	%
Expenses
Compensation and Benefits
Compensation			28,343				26,982				28,774				39,158				29,549				33,071				40,533				25,435				123,257				128,588				5,331				4	%
Performance Fee Compensation
Realized			(559	)			13,500				9,060				37,211				5,295				18,027				8,478				48,097				59,212				79,897				20,685				35	%
Unrealized			37,536				(5,618	)			34,760				16,717				45,202				(5,188	)			(28,756	)			(16,324	)			83,395				(5,066	)			(88,461	)			N/M
Total Compensation and Benefits			65,320				34,864				72,594				93,086				80,046				45,910				20,255				57,208				265,864				203,419				(62,445	)			-23	%
Other Operating Expenses			8,290				12,167				9,669				8,980				15,357				10,226				11,210				13,162				39,106				49,955				10,849				28	%
Total Expenses			73,610				47,031				82,263				102,066				95,403				56,136				31,465				70,370				304,970				253,374				(51,596	)			-17	%
Total Economic Net Income (Loss)		$	41,753			$	13,548			$	54,886			$	63,520			$	61,271			$	41,664			$	(16,056	)		$	54,739			$	173,707			$	141,618			$	(32,089	)			-18	%

 

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

**	Primarily placement fees.

 

continued...

 

15

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THE BLACKSTONE GROUP L.P.

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

(Unaudited, Dollars in Thousands)

 

		Three Months Ended																																Twelve Months Ended
																																										Dec 31, 2011 vs.
		Mar 31,				Jun 30,				Sep 30,				Dec 31,				Mar 31,				Jun 30,				Sep 30,				Dec 31,				Dec 31,				Dec 31,				Dec 31, 2010
		2010				2010				2010				2010				2011				2011				2011				2011				2010				2011				$				%
Financial Advisory
Revenues
Advisory Fees		$	76,568			$	134,099			$	84,541			$	130,932			$	70,252			$	102,243			$	86,178			$	123,567			$	426,140			$	382,240			$	(43,900	)			-10	%
Transaction and Other Fees, Net			1				102				—				259				6				210				98				7				362				321				(41	)			-11	%
Total Advisory and Transaction Fees			76,569				134,201				84,541				131,191				70,258				102,453				86,276				123,574				426,502				382,561				(43,941	)			-10	%
Investment Income (Loss)
Realized			187				(49	)			469				207				97				226				(44	)			315				814				594				(220	)			-27	%
Unrealized			230				561				607				(864	)			393				(15	)			(171	)			97				534				304				(230	)			N/M
Total Investment Income (Loss)			417				512				1,076				(657	)			490				211				(215	)			412				1,348				898				(450	)			-33	%
Interest Income and Dividend Revenue			1,396				1,268				1,609				1,699				1,686				1,723				1,615				1,775				5,972				6,799				827				14	%
Other			(932	)			(342	)			477				(1,115	)			386				33				(304	)			(498	)			(1,912	)			(383	)			1,529				80	%
Total Revenues			77,450				135,639				87,703				131,118				72,820				104,420				87,372				125,263				431,910				389,875				(42,035	)			-10	%
Expenses
Compensation and Benefits
Compensation			54,492				76,152				66,531				80,774				54,339				72,363				59,633				62,360				277,949				248,695				(29,254	)			-11	%
Total Compensation and Benefits			54,492				76,152				66,531				80,774				54,339				72,363				59,633				62,360				277,949				248,695				(29,254	)			-11	%
Other Operating Expenses			14,727				17,316				17,253				20,976				17,531				19,967				20,218				23,822				70,272				81,538				11,266				16	%
Total Expenses			69,219				93,468				83,784				101,750				71,870				92,330				79,851				86,182				348,221				330,233				(17,988	)			-5	%
Economic Net Income		$	8,231			$	42,171			$	3,919			$	29,368			$	950			$	12,090			$	7,521			$	39,081			$	83,689			$	59,642			$	(24,047	)			-29	%

 

continued...

 

16

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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 (Loss), of

Total Segments, Economic Net Income (Loss) 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

(Unaudited, Dollars in Thousands)

 

		Three Months Ended																																Twelve Months Ended
		March 31, 2010				June 30, 2010				September 30, 2010				December 31, 2010				March 31, 2011				June 30, 2011				September 30, 2011				December 31, 2011				December 31, 2010				December 31, 2011
Income (Loss) Before Provision (Benefit) for Taxes		$	(227,671	)		$	(636,928	)		$	143,302			$	198,643			$	117,214			$	248,796			$	(994,412	)		$	740,603			$	(522,654	)		$	112,201
IPO and Acquisition-Related Charges (a)			726,722				749,930				438,568				453,975				427,227				430,829				264,068				147,808				2,369,195				1,269,932
Amortization of Intangibles (b)			39,512				40,822				40,872				44,172				44,174				44,905				45,665				51,178				165,378				185,922
(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				310,129				(456,817	)			(431,149	)			16,916
Total Segments
Total Segments, Economic Net Income (Loss)			385,102				221,471				368,091				606,106				659,671				817,078				(374,550	)			482,772				1,580,770				1,584,971
Performance Fees Adjustment (d)			(186,214	)			(25,636	)			(258,784	)			(455,655	)			(600,797	)			(673,058	)			457,279				(357,950	)			(926,289	)			(1,174,526	)
Investment Income (Loss) Adjustment (e)			(156,828	)			(102,907	)			(142,523	)			(146,291	)			(126,076	)			(137,569	)			134,106				(55,725	)			(548,549	)			(185,264	)
Investment Income—Blackstone’s Treasury Cash Management Strategies (f)			3,665				5,062				11,226				(4,676	)			1,302				4,038				(3,011	)			2,271				15,277				4,600
Performance Fee Compensation and Benefits Adjustment (g)			62,341				21,987				129,285				143,349				177,068				145,808				(100,892	)			94,728				356,962				316,712
Taxes Payable (h)			(9,321	)			(12,062	)			5,619				(20,093	)			(12,622	)			(12,734	)			(5,290	)			(13,752	)			(35,857	)			(44,398	)
Net Fee Related Earnings from Operations			98,745				107,915				112,914				122,740				98,546				143,563				107,642				152,344				442,314				502,095
Realized Performance Fees (i)			46,140				23,495				41,077				122,635				81,057				32,504				(2,646	)			17,494				233,347				128,409
Realized Investment Income (Loss) (j)			5,307				15,721				14,276				11,611				23,499				30,732				31,647				16,697				46,915				102,575
Adjustment Related to Realized Investment Income—Blackstone’s Treasury Cash Management Strategies (k)			(1,264	)			512				(4,874	)			(2,156	)			(1,010	)			(2,343	)			(309	)			(2,395	)			(7,782	)			(6,057	)
Other Payables Including Payable Under Tax Receivable Agreement			(232	)			(68	)			2,923				(15,633	)			(177	)			(13,578	)			(10,589	)			(5,954	)			(13,010	)			(30,298	)
Distributable Earnings		$	148,696			$	147,575			$	166,316			$	239,197			$	201,915			$	190,878			$	125,745			$	178,186			$	701,784			$	696,724
Earnings Before Interest, Taxes and Depreciation and Amortization from Net Fee Related Earnings from Operations (l)		$	115,013			$	138,889			$	129,847			$	226,617			$	137,423			$	183,770			$	140,190			$	255,702			$	610,366			$	717,085

 

(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 long-term retention programs outside of annual deferred compensation 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...

 

17

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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 (Loss), of Total Segments, Economic Net Income (Loss) 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

(Unaudited, 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 (Loss) 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 (h), segment interest and depreciation and amortization, and segment amortization of non-cash deferred compensation awards. The cash taxes payable component of (h) was $9.3 million, $12.1 million, $(5.6) million, $20.1 million, $12.6 million, $12.7 million, $5.3 million and $13.8 million for the three months ended March 31, 2010, June 30, 2010, September 30, 2010, December 31, 2010, March 31, 2011, June 30, 2011, September 30, 2011 and December 31, 2011, respectively. The cash taxes payable component of (h) was $44.4 million and $35.9 million for the years ended December 31, 2011 and 2010, respectively. Interest was $6.3 million, $6.8 million, $10.3 million, $13.2 million, $12.7 million, $13.1 million, $12.6 million and $14.8 million for the three months ended March 31, 2010, June 30, 2010, September 30, 2010, December 31, 2010, March 31, 2011, June 30, 2011, September 30, 2011 and December 31, 2011, respectively. Interest was $53.2 million and $36.7 million for the years ended December 31, 2011 and 2010, respectively. Depreciation and amortization was $6.4 million, $6.1 million, $6.6 million, $7.6 million, $8.2 million, $7.8 million, $8.3 million and $8.5 million for the three months ended March 31, 2010, June 30, 2010, September 30, 2010, December 31, 2010, March 31, 2011, June 30, 2011, September 30, 2011 and December 31, 2011, respectively. Depreciation and amortization was $32.8 million and $26.6 million for the years ended December 31, 2011 and 2010, respectively. Amortization of non-cash deferred compensation was $(5.8) million, $6.0 million, $5.7 million, $63.0 million, $5.4 million, $6.6 million, $6.4 million and $66.3 million for the three months ended March 31, 2010, June 30, 2010, September 30, 2010, December 31, 2010, March 31, 2011, June 30, 2011, September 30, 2011 and December 31, 2011, respectively. Amortization of non-cash deferred compensation was $84.6 million and $68.9 million for the years ended December 31, 2011 and 2010, respectively.

 

18

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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 December 31,								Year Ended December 31,
		2011				2010				2011				2010
Fee Related Earnings
Revenues
Total Management and Advisory Fees (a)		$	495,637			$	474,725			$	1,877,545			$	1,631,046
Interest and Dividend Revenue (a)			10,003				10,289				38,844				36,096
Other (a)			5,695				(1,192	)			7,415				(618	)
Investment Income—Blackstone’s Treasury Cash Management Strategies (b)			2,271				(4,676	)			4,600				15,277
Total Revenues			513,606				479,146				1,928,404				1,681,801
Expenses
Compensation and Benefits—Compensation (a)			225,438				237,233				960,569				859,114
Other Operating Expenses (a)			122,072				99,080				421,342				344,516
Cash Taxes (c)			13,752				20,093				44,398				35,857
Total Expenses			361,262				356,406				1,426,309				1,239,487
Net Fee Related Earnings from Operations			152,344				122,740				502,095				442,314
Performance Fees, Net of Compensation
Performance Fees—Realized (a)			64,224				195,369				227,936				361,663
Compensation and Benefits—Performance Fee Compensation—Realized (a)			(46,730	)			(72,734	)			(99,527	)			(128,316	)
Total Performance Fees, Net of Compensation			17,494				122,635				128,409				233,347
Investment Income and Other
Investment Income—Realized (a)			16,697				11,611				102,575				46,915
Adjustment Related to Realized Investment Income—Blackstone’s Treasury Cash Management Strategies (d)			(2,395	)			(2,156	)			(6,057	)			(7,782	)
Other Payables Including Payable Under Tax Receivable Agreement			(5,954	)			(15,633	)			(30,298	)			(13,010	)
Total Investment Income and Other			8,348				(6,178	)			66,220				26,123
Distributable Earnings		$	178,186			$	239,197			$	696,724			$	701,784

 

(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.

 

19

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THE BLACKSTONE GROUP L.P.

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

The following table provides Blackstone’s Total GAAP Weighted-Average Common Units Outstanding—Basic and Diluted.

 

		Three Months Ended December 31,								Year Ended December 31,
		2011				2010				2011				2010
Total GAAP Weighted-Average Common Units Outstanding—Basic and Diluted (a)			490,511,637				389,804,253				475,582,718				364,021,369

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

 

		Three Months Ended December 31,								As of and for the Year Ended December 31,
		2011				2010				2011				2010
Total GAAP Weighted-Average Common Units Outstanding—Basic and Diluted			490,511,637				389,804,253				475,582,718				364,021,369
Adjustments:
Weighted-Average Blackstone Holdings Partnership Units			613,105,891				712,339,304				628,115,753				736,772,290
Weighted-Average Unvested Deferred Restricted Common Units			12,469,282				11,146,014				9,244,394				4,366,661
Weighted-Average Economic Net Income Adjusted Units			1,116,086,810				1,113,289,571				1,112,942,865				1,105,160,320
Economic Net Income Adjusted Units, End of Period											1,108,034,890				1,116,771,651

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

 

		December 31,
		2011				2010
Total GAAP Common Units Outstanding (b)			495,599,976				420,631,857
Adjustments:
Blackstone Holdings Partnership Units			608,718,156				681,451,592
Distributable Earnings Units Outstanding (c)			1,104,318,132				1,102,083,449

 

(a)	Unvested Deferred Restricted Common Units and Blackstone Holdings Partnership Units are anti-dilutive for the three and twelve months periods presented due to Net Losses in each of the periods presented.

(b)	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.

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

 

20

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THE BLACKSTONE GROUP L.P.

Exhibit 5. Assets Under Management

(Dollars in Thousands)

 

		As of and for the Periods Ended December 31,
		2011				2010
Total Assets Under Management (End of Period)
Private Equity		$	45,863,673			$	29,319,136
Real Estate			42,852,669				33,165,124
Hedge Fund Solutions			40,534,768				34,587,292
Credit Businesses			36,977,394				31,052,368
		$	166,228,504			$	128,123,920
Fee-Earning Assets Under Management (End of Period)
Private Equity		$	37,237,791			$	24,188,555
Real Estate			31,236,540				26,814,714
Hedge Fund Solutions			37,819,636				33,159,795
Credit Businesses			30,462,786				25,337,158
		$	136,756,753			$	109,500,222
Weighted-Average Fee-Earning Assets Under Management (Three Months Ended)
Private Equity		$	37,147,118			$	24,261,703
Real Estate			31,474,333				25,186,050
Hedge Fund Solutions			38,452,740				32,833,483
Credit Businesses			29,802,567				24,662,395
		$	136,876,758			$	106,943,631
Weighted-Average Fee-Earning Assets Under Management (Year Ended)
Private Equity		$	36,119,173			$	24,402,498
Real Estate			28,377,319				24,155,125
Hedge Fund Solutions			37,372,569				30,464,728
Credit Businesses			27,603,964				23,070,117
		$	129,473,025			$	102,092,468

 

21

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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 December 31,
		2011				2010
Limited Partner Capital Invested (Three Months Ended)
Private Equity		$	1,093,406			$	116,899
Real Estate			995,643				2,314,891
Hedge Fund Solutions			288,237				73,443
Credit Businesses			1,028,639				294,574
		$	3,405,925			$	2,799,807
Limited Partner Capital Invested (Year Ended)
Private Equity		$	3,828,428			$	1,653,493
Real Estate			6,141,416				4,072,527
Hedge Fund Solutions			889,259				223,981
Credit Businesses			2,650,137				1,407,993
		$	13,509,240			$	7,357,994
Fund Level Unrealized Value (a) (End of Period)
Private Equity
Cost		$	22,340,158			$	20,065,870
Unrealized Value		$	24,481,757			$	21,923,177
Real Estate
Cost		$	21,421,451			$	16,121,104
Unrealized Value		$	27,410,054			$	18,698,405
Credit Businesses
Cost		$	5,379,019			$	3,681,137
Unrealized Value		$	5,752,512			$	4,267,377

 

(a)

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.

 

22

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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 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. 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, segment amortization of non-cash deferred compensation 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 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.

 

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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.

 

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