Exhibit 99.1

 

Blackstone Reports First Quarter 2012 Results

Economic Net Income was $432 million for the first quarter of 2012, driven by strong growth and appreciation across Blackstone’s funds. Distributable Earnings were $162 million for the first quarter of 2012.

GAAP Results Attributable to The Blackstone Group L.P. were net income of $58 million in the first quarter of 2012, which includes net IPO and acquisition-related charges.

Total Assets Under Management increased 27% to $190 billion at March 31, 2012 from $150 billion at March 31, 2011, while Fee-Earning Assets Under Management increased 26% to a record $156 billion at March 31, 2012, from $124 billion at March 31, 2011.

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

New York, April 19, 2012: The Blackstone Group L.P. (NYSE: BX) today reported its first quarter 2012 results.

Economic Net Income (“ENI”) was $432.3 million for the first quarter of 2012, a decrease of $138.7 million compared to ENI of $571.0 million for the first quarter of 2011. The decrease in ENI was principally due to a lower rate of increase in the carrying value of assets in the first quarter of 2012 compared to the first quarter of 2011, partially offset by an increase of $71.1 million, or 17%, in Management and Advisory Fees to $496.8 million.

Blackstone’s managed assets demonstrated consistently strong growth with Fee-Earning Assets Under Management and Total Assets Under Management rising to a record $156.3 billion and $190.1 billion, respectively, at March 31, 2012, driven both by inflows and investment appreciation during the quarter. The Blackstone funds had $37.8 billion of committed but uninvested capital, or “dry powder”, at the end of the first quarter of 2012.

For the first quarter of 2012, Total Segment Revenues were $974.1 million, down from $1.2 billion for the first quarter of 2011 due to lower Performance Fees and lower Investment Income. Total Management Fees increased to $496.8 million, up 17% from $425.7 million for the first quarter of 2011, principally due to the increase in Fee-Earning Assets Under Management. Performance Fees decreased 36% to $385.8 million for the first quarter of 2012 driven by decreases in the Real Estate and Private Equity segments. The decreases in Performance Fees and Investment Income in the Real Estate and Private Equity segments were due to a slowing in the appreciation in the carrying value of assets compared to the prior year quarter.

Total Segment Expenses were $473.8 million for the first quarter of 2012, a decrease from $504.6 million for the first quarter of 2011, primarily due to the decrease of $67.6 million in Performance Fee Compensation. Compensation was up 13% to $254.8 million, principally as a result of increased

 

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investment across Blackstone supporting its continued strong growth in assets under management. Blackstone’s non-compensation expenses were up 6% from the first quarter of 2011 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 first quarter of 2012 included Revenues of $952.0 million, compared to $1.2 billion for the first quarter of 2011, and Net Income Attributable to The Blackstone Group L.P. of $58.3 million, compared to a net income of $42.7 million for the first quarter of 2011.

Stephen A. Schwarzman, Chairman and Chief Executive Officer, said, “Blackstone’s first-quarter results demonstrate our ability to generate strong returns for our investors through market cycles and across asset classes, and attract new capital. Every one of our investing businesses experienced both net capital inflows as well as value appreciation in the quarter. This resulted in total assets under management of $190 billion, a firm record, up an impressive 27% year over year. We continue to invest in the firm’s ability to identify and source exclusive transactions on a global basis, as well as our operations capabilities, to sustain our outperformance over the long-term. And as markets continue to heal, we are well positioned to take advantage of more opportunities to convert value creation to both returns for our limited partners and cash earnings for our public unit holders.”

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 quarters ended March 31, 2012 and 2011. ENI, Total Segments includes unrealized gains (losses) and the direct compensation impact related to those gains (losses), but excludes IPO and acquisition-related charges.

 

		As of and for the Three Months Ended March 31,								Variance
		2012				2011				$				%
		(Dollars in Thousands, Except per Unit Amounts)
Economic Net Income, Total Segments		$	500,268			$	659,671			$	(159,403	)			-24%
Provision for Income Taxes (a)			67,932				88,631				(20,699	)			-23%
Economic Net Income, After Taxes		$	432,336			$	571,040			$	(138,704	)			-24%
Economic Net Income, After Taxes per Adjusted Unit (b)		$	0.39			$	0.51			$	(0.12	)			-24%
Net Fee Related Earnings from Operations		$	138,025			$	98,546			$	39,479				40%
Distributable Earnings		$	162,121			$	201,915			$	(39,794	)			-20%
Distributable Earnings per Common Unit (c)		$	0.15			$	0.18			$	(0.03	)			-17%
Fee-Earning Assets Under Management
Private Equity		$	37,323,635			$	35,892,804			$	1,430,831				4%
Real Estate			36,647,462				26,454,012				10,193,450				39%
Hedge Fund Solutions			40,543,772				35,847,002				4,696,770				13%
Credit Businesses			41,746,577				25,838,878				15,907,699				62%
Total Fee-Earning Assets Under Management		$	156,261,446			$	124,032,696			$	32,228,750				26%

 

(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.

 

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SEGMENT REVIEW

Private Equity

Private Equity had revenues of $170.7 million for the first quarter of 2012, compared to $273.7 million in the first quarter of 2011. The decrease from the first quarter of 2011 was principally due to a $76.9 million decrease in Performance Fees, a $17.2 million decrease in Transaction and Other Fees, and a $16.7 million decrease in Investment Income.

The carrying value of the segment’s investments increased by 4.9% in the first quarter of 2012 due to positive performance from investments in the retail/consumer and industrial sectors in the general Private Equity funds in addition to the positive performance of the segment’s publicly traded companies. The Private Equity portfolio continued to perform well with a majority of the portfolio companies exhibiting year over year revenue and EBITDA growth in 2011 and for the first quarter of 2012. As of March 31, 2012, the unrealized value and cumulative realized proceeds, before carried interest, fees and expenses, for Blackstone’s contributed Private Equity funds was 1.5 times investors’ original investments. On a realized/partially realized basis, this multiple was 2.2 times investors’ original investments.

ENI for the Private Equity segment was $90.0 million for the first quarter of 2012, down from $176.8 million in 2011, principally as a result of lower Performance Fees.

Fee-Earning Assets Under Management were $37.3 billion at March 31, 2012 compared to $35.9 billion at March 31, 2011. The increase was due principally to the commencement of the investment period for the energy-focused fund and the final close of the BCP VI fund.

Limited Partner Capital Invested during the first quarter of 2012 was $643.4 million, essentially flat compared to $652.9 million during the first quarter of 2011. Dry powder for Private Equity was $16.9 billion as of March 31, 2012. Blackstone’s Private Equity segment’s funds had $128.9 million of Limited Partner Capital committed to transactions which had not yet closed as of March 31, 2012.

Real Estate

Real Estate had revenues of $427.2 million for the first quarter of 2012, compared to $555.6 million in 2011. First quarter 2012 revenues decreased $128.5 million from the first quarter of 2011, principally due to declines in Performance Fees and Investment Income, partially offset by a $52.4 million, or 55%, increase in Base Management Fees.

The carrying value of assets in contributed Real Estate funds, including fee-paying co-investments, increased 4.0% for the first quarter of 2012. The continued improvement in operating fundamentals and historically low levels of new supply as well as the strong performance of the segment’s publicly traded retail investments, resulted in increases in the carrying values of assets within the contributed Real Estate funds, including fee-paying co-investments. During the first quarter of 2012, RevPAR (Revenue per Available Room) of Blackstone’s significant hospitality investments increased between 6% and 11% compared to the first quarter of 2011. As of March 31, 2012, Blackstone’s significant office investments have seen occupancy levels increase 3.6% since March 31, 2011. On a trailing twelve month basis through the end of 2011, the latest period for which financial information is available, retail sales in the segment’s mall investments were up approximately 8%. As of March 31, 2012, occupancy levels at the grocery anchored retail centers were in excess of 88%, the highest levels achieved in over 18 months. As of March 31, 2012, 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.

 

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ENI for the Real Estate segment was $267.2 million for the first quarter of 2012, down from $361.9 million in the first quarter of 2011. The decrease was principally due to the revenue decline discussed above.

Fee-Earning Assets Under Management were $36.6 billion at March 31, 2012, compared to $26.5 billion at March 31, 2011. Fee-Earning Assets Under Management increased in 2012 principally due to the commencement of the BREP VII fund investment period.

Limited Partner Capital Invested during the first quarter of 2012 was $1.1 billion, up from $654.4 million during the first quarter of 2011. Dry powder for Real Estate was $13.3 billion as of March 31, 2012. Blackstone’s Real Estate segment’s funds had $654.8 million of Limited Partner Capital committed to transactions which had not yet closed as of March 31, 2012.

Hedge Fund Solutions

Hedge Fund Solutions had revenues of $117.2 million for the first quarter of 2012, compared to $105.4 million in 2011. First quarter 2012 revenues increased $11.8 million from the first quarter of 2011 principally due to increases in Performance Fees and Base Management Fees.

The returns for the underlying assets for Blackstone’s Hedge Fund Solutions’ funds were 4.0% for the first quarter of 2012.

ENI for the Hedge Fund Solutions segment was $66.4 million for the first quarter of 2012, up from $58.7 million in the first quarter of 2011. The quarterly increase was driven principally by the revenue increases discussed above.

Fee-Earning Assets Under Management for the segment grew 13% to a record $40.5 billion at March 31, 2012, compared to $35.8 billion at March 31, 2011. Net inflows for Blackstone’s Hedge Fund Solutions business came primarily from its customized and commingled investment products. Hedge Fund Solutions had $1.1 billion of net inflows of Fee-Earning Assets Under Management for the first quarter of 2012.

Credit Businesses

Credit Businesses had revenues of $180.9 million for the first quarter of 2012, compared to $156.7 million for the first quarter of 2011. The increase from the first quarter of 2011 was principally due to an increase in Base Management Fees, partially offset by a decrease in Performance Fees.

The returns of the underlying assets for Blackstone’s Credit Businesses for the first quarter of 2012 were 4.6% for the hedge funds, 7.5% for the rescue lending funds, and 6.5% for the mezzanine funds.

ENI for the Credit Businesses segment increased by 42% to $87.2 million for the first quarter of 2012 compared to $61.3 million for the first quarter of 2011. The first quarter 2012 increase in ENI was attributable principally to the higher Base Management Fees mentioned above.

Fee-Earning Assets Under Management for the segment increased $15.9 billion, or 62%, to $41.7 billion at March 31, 2012 from $25.8 billion at March 31, 2011. Acquisitions of Harbourmaster in January 2012 and the Allied Irish Banks’ CLOs during the second quarter of 2011 added $11.9 billion as of March 31, 2012. Capital returned to investors from realizations during the twelve months ended March 31, 2012 amounted to $4.0 billion. Net of these amounts and market appreciation, growth of the segment’s Fee-Earning Assets Under Management was $7.8 billion.

 

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Dry powder of drawdown funds for the Credit Businesses segment was $6.1 billion as of March 31, 2012.

Financial Advisory

Financial Advisory had revenues of $78.2 million for the first quarter of 2012 compared to $72.8 million in 2011. The increase from first quarter 2011 was principally due to increases in Blackstone’s restructuring and reorganization business and in Blackstone Advisory Partners’ business, partially offset by a decrease in Blackstone’s fund placement business.

ENI for the Financial Advisory segment decreased $11.4 million from the first quarter of 2011 to a loss of $10.5 million primarily due to expense accruals which are calculated on a full year basis and fees related to deals that are announced but not yet closed.

CAPITAL AND LIQUIDITY

As of March 31, 2012, Blackstone had $1.1 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 $0.10 per common unit to record holders of common units at the close of business on May 15, 2012. This distribution will be paid on May 31, 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 or 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.

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 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. 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 remain unchanged at $0.10 per unit. 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.

 

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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 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 April 19, 2012 at 11:00 a.m. ET to discuss first quarter 2012 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), pass code 89888968, beginning approximately two hours after the event.

Blackstone expects to host conference calls to report its 2012 results as follows: 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

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

 

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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, 2011, as such factors may be updated from time to time in its periodic filings with the Securities and Exchange Commission, which are accessible on the SEC’s website at www.sec.gov. These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included in this 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 1. Consolidated Statements of Operations

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

 

		Quarter Ended March 31,
		2012				2011
Revenues
Management and Advisory Fees, Net		$	471,676			$	412,738
Performance Fees
Realized			18,839				96,203
Unrealized			365,931				512,401
Total Performance Fees			384,770				608,604
Investment Income
Realized			16,335				12,783
Unrealized			72,826				107,395
Total Investment Income			89,161				120,178
Interest and Dividend Revenue			7,636				9,490
Other			(1,207	)			2,259
Total Revenues			952,036				1,153,269
Expenses
Compensation and Benefits
Compensation			495,255				659,483
Performance Fee Compensation
Realized			12,190				14,543
Unrealized			97,322				162,525
Total Compensation and Benefits			604,767				836,551
General, Administrative and Other			142,766				129,386
Interest Expense			14,518				13,803
Fund Expenses			21,742				11,124
Total Expenses			783,793				990,864
Other Income
Net Gains (Losses) from Fund Investment Activities			288,142				(45,191	)
Income Before Provision for Taxes			456,385				117,214
Provision for Taxes			38,753				38,850
Net Income			417,632				78,364
Net Income Attributable to Redeemable     Non-Controlling Interests in Consolidated Entities			39,609				22,025
Net Income (Loss) Attributable to Non-Controlling Interests     in Consolidated Entities			212,293				(93,081	)
Net Income Attributable to Non-Controlling Interests     in Blackstone Holdings			107,405				106,716
Net Income Attributable to The Blackstone Group L.P.		$	58,325			$	42,704
Net Income per Common Unit, Basic		$	0.12			$	0.10
Net Income per Common Unit, Diluted		$	0.11			$	0.09

 

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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
		Mar 31, 2011				Jun 30, 2011				Sep 30, 2011				Dec 31, 2011				Mar 31, 2012				Mar 31, 2012 vs. Mar 31, 2011
																						$				%
Economic Net Income,     Total Segments
Revenues
Management and Advisory Fees
Base Management Fees		$	305,587			$	316,474			$	322,371			$	336,753			$	395,506			$	89,919				29%
Advisory Fees			70,252				102,243				86,178				123,567				75,846				5,594				8%
Transaction and Other Fees,     Net *			58,363				103,561				41,793				43,796				38,471				(19,892	)			-34%
Management Fee Offsets **			(8,536	)			(8,675	)			(7,703	)			(8,479	)			(13,050	)			(4,514	)			-53%
Total Management and Advisory Fees			425,666				513,603				442,639				495,637				496,773				71,107				17%
Performance Fees
Realized			95,600				60,215				7,897				64,224				18,839				(76,761	)			-80%
Unrealized			505,197				612,843				(465,176	)			293,726				366,917				(138,280	)			-27%
Total Performance Fees			600,797				673,058				(457,279	)			357,950				385,756				(215,041	)			-36%
Investment Income (Loss)
Realized			23,499				30,732				31,647				16,697				23,492				(7	)			0%
Unrealized			102,577				106,837				(165,753	)			39,028				59,914				(42,663	)			-42%
Total Investment Income (Loss)			126,076				137,569				(134,106	)			55,725				83,406				(42,670	)			-34%
Interest Income and Dividend     Revenue			9,448				9,283				10,110				10,003				9,345				(103	)			-1%
Other			2,259				1,128				(1,667	)			5,695				(1,207	)			(3,466	)			N/M
Total Revenues			1,164,246				1,334,641				(140,303	)			925,010				974,073				(190,173	)			-16%
Expenses
Compensation and Benefits
Compensation			224,532				272,392				238,207				225,438				254,772				30,240				13%
Performance Fee Compensation
Realized			14,543				27,711				10,543				46,730				12,190				(2,353	)			-16%
Unrealized			162,525				118,097				(111,435	)			47,998				97,322				(65,203	)			-40%
Total Compensation and Benefits			401,600				418,200				137,315				320,166				364,284				(37,316	)			-9%
Other Operating Expenses			102,975				99,363				96,932				122,072				109,521				6,546				6%
Total Expenses			504,575				517,563				234,247				442,238				473,805				(30,770	)			-6%
Total Economic Net Income     (Loss)		$	659,671			$	817,078			$	(374,550	)		$	482,772			$	500,268			$	(159,403	)			-24%
Total Net Fee Related Earnings     from Operations		$	98,546			$	143,563			$	107,642			$	152,344			$	138,025			$	39,479				40%

 

*	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…

 

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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
		Mar 31, 2011				Jun 30, 2011				Sep 30, 2011				Dec 31, 2011				Mar 31, 2012				Mar 31, 2012 vs. Mar 31, 2011
																						$				%
Private Equity
Revenues
Management Fees
Base Management Fees		$	79,935			$	82,297			$	85,534			$	84,231			$	85,789			$	5,854				7%
Transaction and Other Fees,     Net *			35,342				52,353				21,430				23,879				18,097				(17,245	)			-49%
Management Fee Offsets **			(7,889	)			(7,629	)			(6,498	)			(5,057	)			(3,782	)			4,107				52%
Total Management Fees			107,388				127,021				100,466				103,053				100,104				(7,284	)			-7%
Performance Fees
Realized			82,389				1,362				(17,966	)			(28,392	)			3,933				(78,456	)			-95%
Unrealized			32,537				187,190				(270,014	)			83,777				34,051				1,514				5%
Total Performance Fees			114,926				188,552				(287,980	)			55,385				37,984				(76,942	)			-67%
Investment Income (Loss)
Realized			17,907				3,021				20,548				3,512				13,911				(3,996	)			-22%
Unrealized			29,126				76,947				(121,688	)			25,091				16,469				(12,657	)			-43%
Total Investment Income (Loss)			47,033				79,968				(101,140	)			28,603				30,380				(16,653	)			-35%
Interest Income and Dividend Revenue			3,505				3,197				3,396				3,651				2,420				(1,085	)			-31%
Other			811				665				141				193				(215	)			(1,026	)			N/M
Total Revenues			273,663				399,403				(285,117	)			190,885				170,673				(102,990	)			-38%
Expenses
Compensation and Benefits
Compensation			54,924				64,633				52,388				45,611				52,547				(2,377	)			-4%
Performance Fee Compensation
Realized			7,718				49				(2,443	)			(3,859	)			320				(7,398	)			-96%
Unrealized			5,464				29,309				(44,955	)			7,953				(1,052	)			(6,516	)			N/M
Total Compensation and Benefits			68,106				93,991				4,990				49,705				51,815				(16,291	)			-24%
Other Operating Expenses			28,713				30,124				27,588				34,493				28,881				168				1%
Total Expenses			96,819				124,115				32,578				84,198				80,696				(16,123	)			-17%
Total Economic Net Income     (Loss)		$	176,844			$	275,288			$	(317,695	)		$	106,687			$	89,977			$	(86,867	)			-49%

 

*	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…

 

10

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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
		Mar 31, 2011				Jun 30, 2011				Sep 30, 2011				Dec 31, 2011				Mar 31, 2012				Mar 31, 2012 vs. Mar 31, 2011
																						$				%
Real Estate
Revenues
Management Fees
Base Management Fees		$	95,439			$	97,467			$	97,925			$	103,947			$	147,802			$	52,363				55%
Transaction and Other Fees,     Net *			21,543				49,288				19,551				19,128				14,412				(7,131	)			-33%
Management Fee Offsets **			(505	)			(745	)			(880	)			(2,820	)			(8,627	)			(8,122	)			N/M
Total Management Fees			116,477				146,010				116,596				120,255				153,587				37,110				32%
Performance Fees
Realized			2,593				20,832				5,308				3,740				8,616				6,023				N/M
Unrealized			368,104				429,458				(120,176	)			239,690				229,414				(138,690	)			-38%
Total Performance Fees			370,697				450,290				(114,868	)			243,430				238,030				(132,667	)			-36%
Investment Income (Loss)
Realized			2,919				11,394				7,313				6,346				7,812				4,893				168%
Unrealized			61,406				37,332				(26,060	)			19,970				25,912				(35,494	)			-58%
Total Investment Income (Loss)			64,325				48,726				(18,747	)			26,316				33,724				(30,601	)			-48%
Interest Income and Dividend Revenue			3,288				2,989				3,195				3,430				2,552				(736	)			-22%
Other			860				515				(1,390	)			(1,046	)			(709	)			(1,569	)			N/M
Total Revenues			555,647				648,530				(15,214	)			392,385				427,184				(128,463	)			-23%
Expenses
Compensation and Benefits
Compensation			57,627				70,651				54,986				53,507				68,889				11,262				20%
Performance Fee Compensation
Realized			1,230				9,382				2,251				1,804				4,079				2,849				N/M
Unrealized			106,501				91,021				(30,510	)			57,234				58,043				(48,458	)			-46%
Total Compensation and Benefits			165,358				171,054				26,727				112,545				131,011				(34,347	)			-21%
Other Operating Expenses			28,366				22,971				23,495				29,027				28,924				558				2%
Total Expenses			193,724				194,025				50,222				141,572				159,935				(33,789	)			-17%
Total Economic Net Income     (Loss)		$	361,923			$	454,505			$	(65,436	)		$	250,813			$	267,249			$	(94,674	)			-26%

 

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

**	Primarily placement fees.

continued…

 

11

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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
		Mar 31, 2011				Jun 30, 2011				Sep 30, 2011				Dec 31, 2011				Mar 31, 2012				Mar 31, 2012 vs. Mar 31, 2011
																						$				%
Hedge Fund Solutions
Revenues
Management Fees
Base Management Fees		$	75,612			$	79,290			$	79,355			$	81,606			$	81,821			$	6,209				8%
Transaction and Other Fees,     Net *			727				861				740				470				92				(635	)			-87%
Management Fee Offsets **			(124	)			(196	)			(258	)			(402	)			(335	)			(211	)			-170%
Total Management Fees			76,215				79,955				79,837				81,674				81,578				5,363				7%
Performance Fees
Realized			893				667				5,764				4,148				3,298				2,405				N/M
Unrealized			19,253				3,441				(19,861	)			(2,059	)			23,187				3,934				20%
Total Performance Fees			20,146				4,108				(14,097	)			2,089				26,485				6,339				31%
Investment Income (Loss)
Realized			1,341				12,855				1,023				2,503				503				(838	)			-62%
Unrealized			7,120				(12,864	)			(10,034	)			(3,253	)			8,371				1,251				18%
Total Investment Income (Loss)			8,461				(9	)			(9,011	)			(750	)			8,874				413				5%
Interest Income and Dividend     Revenue			516				472				500				537				386				(130	)			-25%
Other			104				(38	)			18				7,818				(127	)			(231	)			N/M
Total Revenues			105,442				84,488				57,247				91,368				117,196				11,754				11%
Expenses
Compensation and Benefits
Compensation			28,093				31,674				30,667				38,525				28,233				140				0%
Performance Fee Compensation
Realized			300				253				2,257				688				1,378				1,078				N/M
Unrealized			5,358				2,955				(7,214	)			(865	)			7,294				1,936				36%
Total Compensation and Benefits			33,751				34,882				25,710				38,348				36,905				3,154				9%
Other Operating Expenses			13,008				16,075				14,421				21,568				13,934				926				7%
Total Expenses			46,759				50,957				40,131				59,916				50,839				4,080				9%
Total Economic Net Income		$	58,683			$	33,531			$	17,116			$	31,452			$	66,357			$	7,674				13%

 

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

**	Primarily placement fees.

continued…

 

12

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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
		Mar 31, 2011				Jun 30, 2011				Sep 30, 2011				Dec 31, 2011				Mar 31, 2012				Mar 31, 2012 vs. Mar 31, 2011
																						$				%
Credit Businesses
Revenues
Management Fees
Base Management Fees		$	54,601			$	57,420			$	59,557			$	66,969			$	80,094			$	25,493				47%
Transaction and Other Fees,     Net *			745				849				(26	)			312				5,725				4,980				N/M
Management Fee Offsets **			(18	)			(105	)			(67	)			(200	)			(306	)			(288	)			N/M
Total Management Fees			55,328				58,164				59,464				67,081				85,513				30,185				55%
Performance Fees
Realized			9,725				37,354				14,791				84,728				2,992				(6,733	)			-69%
Unrealized			85,303				(7,246	)			(55,125	)			(27,682	)			80,265				(5,038	)			-6%
Total Performance Fees			95,028				30,108				(40,334	)			57,046				83,257				(11,771	)			-12%
Investment Income (Loss)
Realized			1,235				3,236				2,807				4,021				683				(552	)			-45%
Unrealized			4,532				5,437				(7,800	)			(2,877	)			9,211				4,679				103%
Total Investment Income (Loss)			5,767				8,673				(4,993	)			1,144				9,894				4,127				72%
Interest Income and Dividend     Revenue			453				902				1,404				610				2,425				1,972				N/M
Other			98				(47	)			(132	)			(772	)			(238	)			(336	)			N/M
Total Revenues			156,674				97,800				15,409				125,109				180,851				24,177				15%
Expenses
Compensation and Benefits
Compensation			29,549				33,071				40,533				25,435				37,143				7,594				26%
Performance Fee Compensation
Realized			5,295				18,027				8,478				48,097				6,413				1,118				21%
Unrealized			45,202				(5,188	)			(28,756	)			(16,324	)			33,037				(12,165	)			-27%
Total Compensation and Benefits			80,046				45,910				20,255				57,208				76,593				(3,453	)			-4%
Other Operating Expenses			15,357				10,226				11,210				13,162				17,096				1,739				11%
Total Expenses			95,403				56,136				31,465				70,370				93,689				(1,714	)			-2%
Total Economic Net Income     (Loss)		$	61,271			$	41,664			$	(16,056	)		$	54,739			$	87,162			$	25,891				42%

 

*	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
		Mar 31, 2011				Jun 30, 2011				Sep 30, 2011				Dec 31, 2011				Mar 31, 2012				Mar 31, 2012 vs. Mar 31, 2011
																						$				%
Financial Advisory
Revenues
Advisory Fees		$	70,252			$	102,243			$	86,178			$	123,567			$	75,846			$	5,594				8%
Transaction and Other Fees, Net			6				210				98				7				145				139				N/M
Total Advisory and Transaction Fees			70,258				102,453				86,276				123,574				75,991				5,733				8%
Investment Income (Loss)
Realized			97				226				(44	)			315				583				486				N/M
Unrealized			393				(15	)			(171	)			97				(49	)			(442	)			N/M
Total Investment Income     (Loss)			490				211				(215	)			412				534				44				9%
Interest Income and Dividend Revenue			1,686				1,723				1,615				1,775				1,562				(124	)			-7%
Other			386				33				(304	)			(498	)			82				(304	)			-79%
Total Revenues			72,820				104,420				87,372				125,263				78,169				5,349				7%
Expenses
Compensation and Benefits
Compensation			54,339				72,363				59,633				62,360				67,960				13,621				25%
Total Compensation and Benefits			54,339				72,363				59,633				62,360				67,960				13,621				25%
Other Operating Expenses			17,531				19,967				20,218				23,822				20,686				3,155				18%
Total Expenses			71,870				92,330				79,851				86,182				88,646				16,776				23%
Total Economic Net Income     (Loss)		$	950			$	12,090			$	7,521			$	39,081			$	(10,477	)		$	(11,427	)			N/M

 

14

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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
		March 31,				June 30,				September 30,				December 31,				March 31,
		2011				2011				2011				2011				2012
Income (Loss) Before Provision (Benefit)     for Taxes		$	117,214			$	248,796			$	(994,412	)		$	740,603			$	456,385
IPO and Acquisition-Related Charges (a)			427,227				430,829				264,068				147,808				244,897
Amortization of Intangibles (b)			44,174				44,905				45,665				51,178				50,888
(Income) Loss Associated with Non-     Controlling Interests in (Income) Loss of     Consolidated Entities (c)			71,056				92,548				310,129				(456,817	)			(251,902	)
Total Segments
Total Segments, Economic Net Income     (Loss)			659,671				817,078				(374,550	)			482,772				500,268
Performance Fees Adjustment (d)			(600,797	)			(673,058	)			457,279				(357,950	)			(385,756	)
Investment Income (Loss) Adjustment (e)			(126,076	)			(137,569	)			134,106				(55,725	)			(83,406	)
Investment Income (Loss) — Blackstone’s     Treasury Cash Management Strategies (f)			1,302				4,038				(3,011	)			2,271				6,310
Performance Fee Compensation and     Benefits Adjustment (g)			177,068				145,808				(100,892	)			94,728				109,512
Taxes Payable (h)			(12,622	)			(12,734	)			(5,290	)			(13,752	)			(8,903	)
Net Fee Related Earnings from Operations			98,546				143,563				107,642				152,344				138,025
Realized Performance Fees (i)			81,057				32,504				(2,646	)			17,494				6,649
Realized Investment Income (j)			23,499				30,732				31,647				16,697				23,492
Adjustment Related to Realized Investment     Income —  Blackstone’s Treasury Cash     Management Strategies (k)			(1,010	)			(2,343	)			(309	)			(2,395	)			(5,897	)
Other Payables Including Payable Under     Tax Receivable Agreement			(177	)			(13,578	)			(10,589	)			(5,954	)			(148	)
Distributable Earnings		$	201,915			$	190,878			$	125,745			$	178,186			$	162,121
Earnings Before Interest, Taxes and     Depreciation and Amortization from     Net Fee Related Earnings from     Operations (l)		$	137,423			$	183,770			$	140,190			$	255,702			$	178,596

 

(a)

This adjustment adds back to Income (Loss) Before Provision (Benefit) for Taxes amounts for Transaction-Related Charges which include principally equity-based compensation charges associated with Blackstone’s initial public offering and long-term retention programs outside of annual deferred compensation and other corporate actions.

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

(c)	This adjustment adds back to Income (Loss) Before Provision (Benefit) for Taxes the amount of (Income) Loss Associated with Non-Controlling Interests in (Income) Loss of Consolidated Entities and includes the amount of Management Fee Revenues associated with Consolidated CLO Entities.

continued...

 

15

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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 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 $12.6 million, $12.7 million, $5.3 million, $13.8 million and $8.9 million for the three months ended March 31, 2011, June 30, 2011, September 30, 2011, December 31, 2011, and March 31, 2012, respectively. Interest was $12.7 million, $13.1 million, $12.6 million, $14.8 million and $13.6 million for the three months ended March 31, 2011, June 30, 2011, September 30, 2011, December 31, 2011, and March 31, 2012, respectively. Depreciation and amortization was $8.2 million, $7.8 million, $8.3 million, $8.5 million and $10.3 million for the three months ended March 31, 2011, June 30, 2011, September 30, 2011, December 31, 2011, and March 31, 2012, respectively. Amortization of non-cash deferred compensation was $5.4 million, $6.6 million, $6.4 million, $66.3 million and $7.8 million for the three months ended March 31, 2011, June 30, 2011, September 30, 2011, December 31, 2011, and March 31, 2012, respectively.

 

16

---

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 March 31,
		2012				2011
Fee Related Earnings
Revenues
Total Management and Advisory Fees (a)		$	496,773			$	425,666
Interest and Dividend Revenue (a)			9,345				9,448
Other (a)			(1,207	)			2,259
Investment Income — Blackstone’s Treasury Cash Management Strategies (b)			6,310				1,302
Total Revenues			511,221				438,675
Expenses
Compensation and Benefits — Compensation (a)			254,772				224,532
Other Operating Expenses (a)			109,521				102,975
Cash Taxes (c)			8,903				12,622
Total Expenses			373,196				340,129
Net Fee Related Earnings from Operations			138,025				98,546
Performance Fees, Net of Related Compensation
Performance Fees — Realized (a)			18,839				95,600
Compensation and Benefits — Performance Fee Compensation — Realized (a)			(12,190	)			(14,543	)
Total Performance Fees, Net of Related Compensation			6,649				81,057
Investment Income and Other
Investment Income — Realized (a)			23,492				23,499
Adjustment Related to Realized Investment Income —     Blackstone’s Treasury Cash Management Strategies (d)			(5,897	)			(1,010	)
Other Payables Including Payable Under Tax Receivable Agreement			(148	)			(177	)
Total Investment Income and Other			17,447				22,312
Distributable Earnings		$	162,121			$	201,915

 

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

(b)	Represents the inclusion of Investment Income (Loss) 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.

 

17

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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 — 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
		March 31,
		2012				2011
Total GAAP Weighted-Average Common Units Outstanding —      Basic			506,985,529				447,742,389
Adjustments:
Weighted-Average Unvested Deferred Restricted Common Units			10,404,029				9,910,527
Total GAAP Weighted-Average Common Units Outstanding —      Diluted			517,389,558				457,652,916

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

 

		March 31,
		2012				2011
Total GAAP Weighted-Average Common Units Outstanding — Diluted			517,389,558				457,652,916
Adjustments:
Weighted-Average Blackstone Holdings Partnership Units			602,817,069				658,290,684
Weighted-Average Economic Net Income Adjusted Units			1,120,206,627				1,115,943,600
Economic Net Income Adjusted Units, End of Period			1,119,829,138				1,113,420,282

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

 

		March 31,
		2012				2011
Total GAAP Common Units Outstanding (a)			510,868,415				464,502,284
Adjustment:
Blackstone Holdings Partnership Units			597,566,417				639,228,191
Distributable Earnings Units Outstanding (b)			1,108,434,832				1,103,730,475

 

(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.

 

18

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THE BLACKSTONE GROUP L.P.

Exhibit 5.  Assets Under Management

(Dollars in Thousands)

 

		As of and for the Periods Ended March 31,
		2012				2011
Total Assets Under Management
(End of Period)
Private Equity		$	47,624,013			$	43,955,392
Real Estate			48,322,760				34,990,590
Hedge Fund Solutions			43,351,275				39,542,086
Credit Businesses			50,776,119				31,475,397
		$	190,074,167			$	149,963,465
Fee-Earning Assets Under Management
(End of Period)
Private Equity		$	37,323,635			$	35,892,804
Real Estate			36,647,462				26,454,012
Hedge Fund Solutions			40,543,772				35,847,002
Credit Businesses			41,746,577				25,838,878
		$	156,261,446			$	124,032,696
Weighted-Average Fee-Earning
Assets Under Management
(For the Three Months Ended)
Private Equity		$	37,491,735			$	35,775,826
Real Estate			35,983,336				26,454,180
Hedge Fund Solutions			39,904,474				35,320,896
Credit Businesses			40,974,525				25,482,707
		$	154,354,070			$	123,033,609

 

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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 March 31,
		2012				2011
Limited Partner Capital Invested     (For the Three Months Ended)
Private Equity		$	643,383			$	652,947
Real Estate			1,143,555				654,428
Hedge Fund Solutions			4,661				196,642
Credit Businesses			928,173				154,298
		$	2,719,772			$	1,658,315
Fund Level Unrealized Value (a)     (End of Period)
Private Equity
Cost		$	22,582,054			$	20,262,265
Unrealized Value		$	25,625,328			$	22,646,168
Real Estate
Cost		$	22,115,141			$	16,637,075
Unrealized Value		$	29,148,492			$	20,805,296
Credit Businesses
Cost		$	5,715,164			$	3,668,448
Unrealized Value		$	6,219,299			$	4,418,781

 

(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.

 

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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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