Delaware | 6282 | 45-2832612 | ||
(State or other jurisdiction
of
incorporation or organization) |
(Primary Standard Industrial
Classification Code Number) |
(I.R.S. Employer
Identification Number) |
Joshua Ford Bonnie
Simpson Thacher & Bartlett LLP 425 Lexington Avenue New York, NY 10017-3954 Telephone: (212) 455-2000 Facsimile: (212) 455-2502 |
Phyllis G. Korff
David J. Goldschmidt Skadden, Arps, Slate, Meagher & Flom LLP Four Times Square New York, NY 10036-6522 Telephone: (212) 735-3000 Facsimile: (212) 735-2000 |
Large accelerated filer o | Accelerated filer o | Non-accelerated filer þ | Smaller reporting company o |
Proposed Maximum
|
Proposed Maximum
|
Amount of
|
||||||||||
Title of Each Class of
|
Amount to be
|
Offering
|
Aggregate
|
Registration
|
||||||||
Securities to be Registered | to be Registered(1) | Price Per Unit(2) | Offering Price(2) | Fee | ||||||||
Common Units Representing Limited Partner Interests
|
35,075,000
common units |
$25.00 | $876,875,000 | $100,489.88(3) | ||||||||
(1) | Includes 4,575,000 common units subject to the underwriters option to purchase additional common units. |
(2) | Estimated solely for the purpose of determining the amount of the registration fee in accordance with Rule 457(a) under the Securities Act of 1933. |
(3) | $11,610.00 previously paid. |
The
information in this prospectus is not complete and may be
changed. We may not sell these securities until the registration
statement filed with the Securities and Exchange Commission is
effective. This prospectus is not an offer to sell these
securities and it is not soliciting an offer to buy these
securities in any jurisdiction where the offer or sale is not
permitted.
|
| adverse economic and market conditions, which can affect our business and liquidity position in many ways, including by reducing the value or performance of the investments made by our investment funds and reducing the ability of our investment funds to raise or deploy capital; | |
| changes in the debt financing markets, which could negatively impact the ability of our funds and their portfolio companies to obtain attractive financing or refinancing for their investments and operations, and could increase the cost of such financing if it is obtained, leading to lower-yielding investments; | |
| the potential volatility of our revenue, income and cash flow; | |
| our dependence on our founders and other key personnel and our ability to attract, retain and motivate high quality employees who will bring value to our operations; | |
| business and regulatory impediments to our efforts to expand into new investment strategies, markets and businesses; | |
| the fact that most of our investment funds invest in illiquid, long-term investments that are not marketable securities, and such investments may lose significant value during an economic downturn; | |
| the potential for poor performance of our investment funds; and | |
| the possibility that we will not be able to continue to raise capital from third-party investors on advantageous terms. |
Proceeds, Before
|
||||||||||||
Expenses, to The
|
||||||||||||
Price to
|
Underwriting
|
Carlyle
|
||||||||||
Public | Discount | Group L.P. | ||||||||||
Per Common Unit
|
$ | $ | $ | |||||||||
Total
|
$ | $ | $ |
J.P. Morgan | Citigroup | Credit Suisse |
BofA Merrill Lynch
|
Barclays | Deutsche Bank Securities | ||
Goldman, Sachs &
Co.
|
Morgan Stanley | UBS Investment Bank |
ICBC International | Sandler ONeill + Partners, L.P. |
Keefe Bruyette & Woods
|
CIBC | Itaú BBA |
Nomura
|
Ramirez & Co., Inc. | Scotiabank |
Societe Generale | The Williams Capital Group, L.P. |
Mizuho Securities | SMBC Nikko |
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no exercise by the underwriters of the option to purchase up to
an additional 4,575,000 common units from us; and
the common units to be sold in this offering are sold at $24.00
per common unit, which is the midpoint of the price range
indicated on the front cover of this prospectus.
(v)
Table of Contents
(vi)
Table of Contents
3
Excellence in Investing.
Our primary goal is to invest
wisely and create value for our fund investors. We strive to
generate superior investment returns by combining deep industry
expertise, a global network of local investment teams who can
leverage extensive firm-wide resources and a consistent and
disciplined investment process.
Commitment to our Fund Investors.
Our fund investors
come first. This commitment is a core component of our firm
culture and informs every aspect of our business. We believe
this philosophy is in the long-term best interests of Carlyle
and its owners, including our prospective common unitholders.
Investment in the Firm.
We have invested, and intend to
continue to invest, significant resources in hiring and
retaining a deep talent pool of investment professionals and in
building the infrastructure of the firm, including our expansive
local office network and our
1
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comprehensive investor support team, which provides finance,
legal and compliance and tax services in addition to other
corporate services.
Expansion of our Platform.
We innovate
continuously to expand our investment capabilities through the
creation or acquisition of new asset-, sector- and
regionally-focused strategies in order to provide our fund
investors a variety of investment options.
Unified Culture.
We seek to leverage the local
market insights and operational capabilities that we have
developed across our global platform through a unified culture
we call One Carlyle. Our culture emphasizes
collaboration and sharing of knowledge and expertise across the
firm to create value.
2
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For the Year Ended December 31, 2011
Corporate
Private
Global Market
Fund of Funds
Equity
Real Assets
Strategies
Solutions(5)
Total
(In millions)
$
2,845.3
$
1,182.8
$
1,356.9
$
1,498.4
$
1,483.6
$
314.7
$
324.9
$
26.1
$
2,149.3
$
514.1
$
143.9
$
161.5
$
13.6
$
833.1
$
566.0
$
84.8
$
193.4
$
20.2
$
864.4
$
496.3
$
49.7
$
881.6
For the Year Ended December 31, 2010
Corporate
Private
Global Market
Fund of Funds
Equity
Real Assets
Strategies
Solutions
Total
(In millions)
$
2,798.9
$
1,479.7
$
1,525.6
$
787.8
$
1,897.2
$
235.0
$
253.6
n/a
$
2,385.8
$
819.3
$
90.7
$
104.0
n/a
$
1,014.0
$
307.2
$
12.7
$
22.6
n/a
$
342.5
(1)
Cash distributions, net of
compensatory payments, distributions related to co-investments
and distributions related to the Mubadala investment in 2010
were $681.9 million and $105.8 million for the years ended
December 31, 2011 and 2010, respectively. See Cash
Distribution Policy.
(2)
Under GAAP, we are required to
consolidate certain of the investment funds that we advise.
However, for segment reporting purposes, we present revenues and
expenses on a basis that deconsolidates these funds.
(3)
ENI, a non-GAAP measure, represents
segment net income excluding the impact of income taxes,
acquisition-related items including amortization of acquired
intangibles and earn-outs, charges associated with equity-based
compensation issued in this offering or future acquisitions,
corporate actions and infrequently occurring or unusual events
(e.g., acquisition related costs, gains and losses on fair value
adjustments on contingent consideration, gains and losses from
the retirement of our debt, charges associated with lease
terminations and employee severance and settlements of legal
claims). For a further discussion about ENI and a reconciliation
to Income Before Provision for Income Taxes, see
Managements Discussion and Analysis of Financial
Condition and Results of Operations Key Financial
Measures Non-GAAP Financial
Measures Economic Net Income and
Non-GAAP Financial Measures, and
Note 14 to our combined and consolidated financial
statements appearing elsewhere in this prospectus.
(4)
Distributable Earnings, a non-GAAP
measure, is a component of ENI representing total ENI less
unrealized performance fees and unrealized investment income
plus unrealized performance fee compensation expense. For a
further discussion about Distributable Earnings and a
reconciliation to Income Before Provision for Income Taxes, see
Managements Discussion and Analysis of Financial
Condition and Results of Operations Key Financial
Measures Non-GAAP Financial Measures
Distributable Earnings,
Non-GAAP Financial Measures and Note 14 to our
combined and consolidated financial statements appearing
elsewhere in this prospectus. For a discussion of cash
distributions and the difference between Distributable Earnings
and such cash distribution during the historical periods
presented, see Cash Distribution Policy.
(5)
We established our Fund of Funds
Solutions segment on July 1, 2011. These results are for
the period from July 1, 2011 to December 31, 2011.
(6)
Refer to Unaudited Pro Forma
Financial Information.
Table of Contents
Buyout Funds.
Our buyout teams advise a diverse
group of 17 active funds that invest in transactions that focus
either on a particular geography (United States, Europe, Asia,
Japan, South America or the Middle East and North Africa
(MENA)) or a particular industry (e.g., financial
services). As of December 31, 2011, our buyout funds had,
in the aggregate, approximately $47 billion in AUM.
Growth Capital Funds.
Our nine active growth capital
funds are advised by three
regionally-focused
teams in the United States, Europe and Asia, with each team
generally focused on middle-market and growth companies
consistent with specific regional investment considerations. As
of December 31, 2011, our growth capital funds had, in the
aggregate, approximately $4 billion in AUM.
% of
Fee-
Amount
Investments
Total
AUM
Earning
Active
Active
Available
Investment
Invested Since
Since
AUM
CAGR
AUM
Investments
Funds
Capital
Professionals
Inception
Inception
$
51
35
%
22
%
$
38
167
26
$
13
254
$
49
422
Real Estate.
Our 10 active real estate funds
pursue real estate investment opportunities in Asia, Europe and
the United States and generally focus on acquiring
single-property opportunities rather than large-cap companies
with real estate portfolios. As of December 31, 2011, our
real estate funds had, in the aggregate, approximately
$12 billion in AUM.
Infrastructure.
Our infrastructure investment
team focuses on investments in infrastructure companies and
assets. As of December 31, 2011, we advised one
infrastructure fund with approximately $1 billion in AUM.
Energy & Renewable Resources.
Our
energy and renewable resources activities focus on buyouts,
growth capital investments and strategic joint ventures in the
midstream, upstream, power and oilfield services sectors, as
well as the renewable and alternative sectors of the energy
industry. We currently conduct these activities with Riverstone,
jointly advising six funds with approximately $17 billion
in AUM as of December 31, 2011. We and Riverstone have
mutually decided not to pursue additional jointly managed funds
(although we will continue to advise jointly with Riverstone the
six existing energy and renewable resources funds). We are
actively exploring new approaches through which to expand our
energy capabilities and intend to augment our significant
in-house expertise in this sector.
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% of
Fee-
Amount
Investments
Total
AUM
Earning
Active
Active
Available
Investment
Invested Since
Since
AUM
CAGR
AUM
Investments
Funds
Capital
Professionals
Inception
Inception
$
31
21
%
37
%
$
22
330
17
$
8
136
$
26
552
% of Total
Fee-Earning
Active
Investment
AUM
AUM CAGR
AUM
Funds
Professionals(1)
$
24
16
%
33
%
$
23
46
145
(1)
Includes 31 middle office and back
office professionals.
Fund Investments.
AlpInvest fund of funds
vehicles make investment commitments directly to buyout, growth
capital, venture and other alternative asset funds advised by
other general partners (portfolio funds). As of
December 31, 2011, AlpInvest advised 25 fund of funds
vehicles totaling, in the aggregate, approximately
$30 billion in AUM.
Co-investments.
AlpInvest invests alongside
other private equity and mezzanine funds in which it has a fund
investment throughout Europe, North America and Asia. As of
December 31, 2011, AlpInvest co-investments programs were
conducted through 15 fund of funds vehicles totaling, in
the aggregate, approximately $5 billion in AUM.
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Secondary Investments.
AlpInvest also advises
funds that acquire interests in portfolio funds in secondary
market transactions. As of December 31, 2011,
AlpInvests secondary investments program was conducted
through 12 fund of funds vehicles totaling, in the aggregate,
approximately $6 billion in AUM.
% of
Fund of
Amount
Total
Fee-Earning
Funds
Available
Invested
Investment
AUM
AUM
Vehicles
Capital
Since Inception
Professionals(2)
$
41
28
%
$
28
52
$
15
$
38
60
(1)
Under our arrangements with the
historical owners and management team of AlpInvest, such persons
are allocated all carried interest in respect of the historical
investments and commitments to our fund of funds vehicles that
existed as of December 31, 2010, 85% of the carried
interest in respect of commitments from the historical owners of
AlpInvest for the period between 2011 and 2020 and 60% of the
carried interest in respect of all other commitments (including
all future commitments from third parties).
(2)
Includes 24 middle office and back
office professionals.
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7
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As of December 31, 2011
Inception to December 31, 2011
Realized/
Realized/
Partially
Cumulative
Partially
Realized
Invested
Realized
Gross
Net
Gross
Capital(2)
MOIC(3)
MOIC(3)(4)
IRR(5)
IRR(6)
IRR(4)(5)
(Dollars in billions)
$
48.7
1.8
x
2.6x
27
%
18
%
31%
$
26.4
1.5
x
2.0x
17
%
10
%
29%
$
38.3
1.3
x
n/a
10
%
9
%
n/a
As of
December 31,
2011
Inception to December 31, 2011
Net
Net Annualized
Total AUM
Gross IRR(5)
IRR(6)
Return(7)
(Dollars in billions)
$
1.6
15%
10%
n/a
$
4.7
n/a
n/a
11%
$
1.4
n/a
n/a
18%
(1)
For purposes of aggregation, funds
that report in foreign currency have been converted to U.S.
dollars at the reporting period spot rate.
(2)
Represents the original cost of all
capital called for investments since inception.
(3)
Multiple of invested capital
(MOIC) represents total fair value, before
management fees, expenses and carried interest, divided by
cumulative invested capital.
(4)
An investment is considered
realized when the investment fund has completely exited, and
ceases to own an interest in, the investment. An investment is
considered partially realized when the total proceeds received
in respect of such investment, including dividends, interest or
other distributions and/or return of capital represents at least
85% of invested capital and such investment is not yet fully
realized. Because part of our value creation strategy involves
pursuing best exit alternatives, we believe information
regarding Realized/Partially Realized MOIC and Gross IRR, when
considered together with the other investment performance
metrics presented, provides investors with meaningful
information regarding our investment performance by removing the
impact of investments where significant realization activity has
not yet occurred. Realized/Partially Realized MOIC and Gross IRR
have limitations as measures of investment performance, and
should not be considered in isolation. Such limitations include
the fact that these measures do not include the performance of
earlier stage and other investments that do not satisfy the
criteria provided above. The exclusion of such investments will
have a positive impact on Realized/Partially Realized MOIC and
Gross IRR in instances when the MOIC and Gross IRR in respect of
such investments are less than the aggregate MOIC and Gross IRR.
Our measurements of Realized/Partially Realized MOIC and Gross
IRR may not be comparable to those of other companies that use
similarly titled measures.
8
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(5)
Gross Internal Rate of Return
(IRR) represents the annualized IRR for the period
indicated on limited partner invested capital based on
contributions, distributions and unrealized value before
management fees, expenses and carried interest.
(6)
Net IRR represents the annualized
IRR for the period indicated on limited partner invested capital
based on contributions, distributions and unrealized value after
management fees, expenses and carried interest.
(7)
Net Annualized Return is presented
for fee-paying investors on a total return basis, net of all
fees and expenses.
(8)
Due to the disparate nature of the
underlying asset classes in which our Global Market Strategies
funds participate (e.g., syndicated loans, bonds, distressed
securities, mezzanine loans, emerging markets equities,
macroeconomic products) and the inherent difficulties in
aggregating the performance of closed-end and open-end funds,
the presentation of aggregate investment performance across this
segment would not be meaningful.
9
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continue to generate attractive investment returns for our fund
investors across our multi-fund, multi-product global investment
platform, including by increasing the value of our current
portfolio and leveraging the strong capital position of our
investment funds to pursue new investment opportunities;
continue to inspire the confidence and loyalty of our more than
1,400 active carry fund investors, and further expand our
investor base, with a focus on client service and strong
investment performance;
continue to grow our AUM by raising follow-on investment funds
across our four segments and by broadening our platform, through
both organic growth and selective acquisitions, where we believe
we can provide investors with differentiated products to meet
their needs;
further advance our leadership position in core
non-U.S. geographic
markets, including high-growth emerging markets such as China,
Latin America, India, MENA and
Sub-Saharan
Africa; and
continue to demonstrate principled industry leadership and to be
a responsible and respected member of the global community by
demonstrating our commitment to environmental, social and
governance standards in our investment activities.
adverse economic and market conditions, which can affect our
business and liquidity position in many ways, including by
reducing the value or performance of the investments made by our
investment funds and reducing the ability of our investment
funds to raise or deploy capital;
changes in the debt financing markets, which could negatively
impact the ability of our funds and their portfolio companies to
obtain attractive financing or refinancing for their investments
and operations, and could increase the cost of such financing if
it is obtained, leading to lower-yielding investments;
the potential volatility of our revenue, income and cash flow,
which is influenced by:
the fact that carried interest is only received when investments
are realized and achieve a certain specified return;
changes in the carrying values and performance of our
funds investments; and
the life cycle of our carry funds, which influences the timing
of our accrual and realization of carried interest;
the fact that the fees we receive for transaction advisory
services are dependent upon the level of transactional activity
during the period;
our dependence on our founders and other key personnel and our
ability to attract, retain and motivate high quality employees
who will bring value to our operations;
business and regulatory impediments to our efforts to expand
into new investment strategies, markets and businesses;
10
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the fact that most of our investment funds invest in illiquid,
long-term investments that are not marketable securities, and
such investments may lose significant value during an economic
downturn;
the potential for poor performance of our investment
funds; and
the possibility that we will not be able to continue to raise
capital from third-party investors on advantageous terms.
The Carlyle Group L.P. will be treated as a partnership for
U.S. federal income tax purposes, and our common
unitholders therefore will be required to take into account
their allocable share of items of income, gain, loss and
deduction of The Carlyle Group L.P. in computing their
U.S. federal income tax liability;
Although we currently intend to make annual distributions in an
amount sufficient to cover the anticipated U.S. federal,
state and local income tax liabilities of holders of common
units in respect of their allocable share of our net taxable
income, it is possible that such tax liabilities will exceed the
cash distributions that holders of common units receive from
us; and
Although not enacted, the U.S. Congress has considered
legislation that would have precluded us from qualifying as a
partnership for U.S. federal income tax purposes or
required us to hold carried interest through taxable subsidiary
corporations for taxable years after a ten-year transition
period and would have taxed individual holders of common units
with respect to certain income and gains now taxed at capital
gains rates, including gain on disposition of units, at
increased rates. Similar legislation could be enacted in the
future.
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all management fees payable in respect of all current and future
investment funds that we advise, as well as the fees for
transaction advisory and oversight services that may be payable
12
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by these investment funds portfolio companies (subject to
certain third party interests, as described below);
all carried interest earned in respect of all current and future
carry funds that we advise (subject to certain third party
interests, including those described below and to the allocation
to our investment professionals who work in these operations of
a portion of this carried interest as described below);
all incentive fees (subject to certain interests in Claren Road
and ESG and, with respect to other funds earning incentive fees,
any performance-related allocations to investment
professionals); and
all returns on investments of our own balance sheet capital that
we make following this offering (as well as on existing
investments with an aggregate value of approximately
$249.3 million as of December 31, 2011).
13
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(1)
The Carlyle Group L.P. common
unitholders will have only limited voting rights and will have
no right to remove our general partner or, except in limited
circumstances, elect the directors of our general partner. TCG
Carlyle Global Partners L.L.C., an entity wholly-owned by our
senior Carlyle professionals, will hold a special voting unit in
The Carlyle Group L.P. that will entitle it, on those few
matters that may be submitted for a vote of The Carlyle Group
L.P. common unitholders, to participate in the vote on the same
basis as the common unitholders and provide it with a number of
votes that is equal to the aggregate number of vested and
unvested partnership units in Carlyle Holdings held by the
limited partners of Carlyle Holdings on the relevant record
date. See Material Provisions of The Carlyle Group L.P.
Partnership Agreement Withdrawal or Removal of the
General Partner, Meetings; Voting
and Election of Directors of General
Partner.
(2)
Certain individuals engaged in our
business will continue to own interests directly in selected
operating subsidiaries, including, in certain instances,
entities that receive management fees from funds that we advise.
The Carlyle Holdings partnerships will also directly own
interests in selected operating subsidiaries. For additional
information concerning these interests see Organizational
Structure Our Organizational Structure Following
this Offering Certain Non-controlling Interests in
Operating Subsidiaries.
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15
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16
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17
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30,500,000 common units.
30,500,000 common units (or 304,500,000 common units
if all outstanding Carlyle Holdings partnership units held by
our existing owners were exchanged for newly-issued common units
on a
one-for-one
basis).
Use of proceeds
We estimate that the net proceeds to The Carlyle Group L.P. from
this offering, after deducting estimated underwriting discounts,
will be approximately $695,400,000, or $799,710,000 if the
underwriters exercise in full their option to purchase
additional common units.
The Carlyle Group L.P. intends to use all of these proceeds to
purchase newly issued Carlyle Holdings partnership units from
Carlyle Holdings, as described under Organizational
Structure Offering Transactions. We intend to
cause Carlyle Holdings to use approximately $618.1 million
of these proceeds to repay the outstanding indebtedness under
the revolving credit facility of our existing senior secured
credit facility, approximately $40.0 million to repay
indebtedness under a loan agreement we entered into in
connection with the acquisition of Claren Road and the remainder
for general corporate purposes, including general operational
needs, growth initiatives, acquisitions and strategic
investments and to fund capital commitments to, and other
investments in and alongside of, our investment funds. We
anticipate that the acquisitions we may pursue will be those
that would broaden our platform where we believe we can provide
investors with differentiated products to meet their needs.
Carlyle Holdings will also bear or reimburse The Carlyle Group
L.P. for all of the expenses of this offering, which we estimate
will be approximately $19.2 million. See Use of
Proceeds and Capitalization.
Voting rights
Our general partner, Carlyle Group Management L.L.C., will
manage all of our operations and activities. You will not hold
an interest in our general partner, which is wholly-owned by our
senior Carlyle professionals. Unlike the holders of common stock
in a corporation, you will have only limited voting rights and
will have no right to remove our general partner or, except in
limited circumstances, elect the directors of our general
partner.
In addition, TCG Carlyle Global Partners L.L.C., an entity
wholly-owned by our senior Carlyle professionals, will hold a
special voting unit that provides it with a number of votes on
any matter that may be submitted for a vote of our common
unitholders that is equal to the aggregate number of vested and
unvested Carlyle Holdings partnership units held by the limited
partners of Carlyle Holdings. Accordingly, immediately following
this offering our existing owners generally will have sufficient
voting power to determine the
18
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outcome of those few matters that may be submitted for a vote of
the limited partners of The Carlyle Group L.P. Our common
unitholders voting rights will be further restricted by
the provision in our partnership agreement stating that any
common units held by a person that beneficially owns 20% or more
of any class of The Carlyle Group L.P. common units then
outstanding (other than our general partner and its affiliates,
or a direct or subsequently approved transferee of our general
partner or its affiliates) cannot be voted on any matter. See
Material Provisions of The Carlyle Group L.P. Partnership
Agreement Withdrawal or Removal of the General
Partner, Meetings; Voting and
Election of Directors of General Partner.
Cash distribution policy
Our general partner currently intends to cause The Carlyle Group
L.P. to make quarterly distributions to our common unitholders
of its share of distributions from Carlyle Holdings, net of
taxes and amounts payable under the tax receivable agreement as
described below. We currently anticipate that we will cause
Carlyle Holdings to make quarterly distributions to its
partners, including The Carlyle Group L.P.s wholly owned
subsidiaries, that will enable The Carlyle Group L.P. to pay a
quarterly distribution of $0.16 per common unit, with the first
such quarterly distribution being ratably reduced to reflect the
portion of the quarter following the completion of this
offering. In addition, we currently anticipate that we will
cause Carlyle Holdings to make annual distributions to its
partners, including The Carlyle Group L.P.s wholly owned
subsidiaries, in an amount that, taken together with the other
above-described quarterly distributions, represents
substantially all of our Distributable Earnings in excess of the
amount determined by our general partner to be necessary or
appropriate to provide for the conduct of our business, to make
appropriate investments in our business and our funds or to
comply with applicable law or any of our financing agreements.
We anticipate that the aggregate amount of our distributions for
most years will be less than our Distributable Earnings for that
year due to these funding requirements. For a discussion of the
difference between Distributable Earnings and cash distributions
during the historical periods presented, see Cash
Distribution Policy.
Notwithstanding the foregoing, the declaration and payment of
any distributions will be at the sole discretion of our general
partner, which may change our distribution policy at any time.
Our general partner will take into account general economic and
business conditions, our strategic plans and prospects, our
business and investment opportunities, our financial condition
and operating results, working capital requirements and
anticipated cash needs, contractual restrictions and
obligations, legal, tax and regulatory restrictions, other
constraints on the payment of distributions by us to our common
unitholders or by our subsidiaries to us, and such other factors
as our general partner may deem relevant.
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partnership units for The Carlyle Group L.P. common units on a
one-for-one
basis, subject to customary conversion rate adjustments for
splits, unit distributions and reclassifications. In addition,
subject to certain requirements, Mubadala and CalPERS will
generally be permitted to exchange Carlyle Holdings partnership
units for common units from and after the closing of this
offering. Any common units received by Mubadala and CalPERS in
any such exchange during the applicable restricted periods
described in Common Units Eligible For Future
Sale
Lock-Up
Arrangements Mubadala Transfer Restrictions
and Common Units Eligible For Future Sale
Lock-Up Arrangements CalPERS Transfer
Restrictions, respectively, would be subject to the
restrictions described in such sections. A Carlyle Holdings
limited partner must exchange one partnership unit in each of
the three Carlyle Holdings partnerships to effect an exchange
for a common unit. As the number of Carlyle Holdings partnership
units held by the limited partners of the Carlyle Holdings
partnerships declines, the number of votes to which TCG Carlyle
Global Partners L.L.C. is entitled as a result of its ownership
of the special voting unit will be correspondingly reduced. For
information concerning transfer restrictions that will apply to
holders of Carlyle Holdings partnership units, including our
senior Carlyle professionals, see Management
Vesting; Minimum Retained Ownership Requirements and Transfer
Restrictions.
Tax receivable agreement
Future exchanges of Carlyle Holdings partnership units are
expected to result in increases in the tax basis of the tangible
and intangible assets of Carlyle Holdings, primarily
attributable to a portion of the goodwill inherent in our
business. These increases in tax basis will increase (for tax
purposes) depreciation and amortization deductions and therefore
reduce the amount of tax that certain of our subsidiaries,
including Carlyle Holdings I GP Inc., which we refer to as the
corporate taxpayers, would otherwise be required to
pay in the future. This increase in tax basis may also decrease
gain (or increase loss) on future dispositions of certain
capital assets to the extent tax basis is allocated to those
capital assets. We will enter into a tax receivable agreement
with our existing owners whereby the corporate taxpayers will
agree to pay to our existing owners 85% of the amount of cash
tax savings, if any, in U.S. federal, state and local income tax
that they realize as a result of these increases in tax basis.
The corporate taxpayers will have the right to terminate the tax
receivable agreement by making payments to our existing owners
calculated by reference to the value of all future payments that
our existing owners would have been entitled to receive under
the tax receivable agreement using certain valuation
assumptions, including that any Carlyle Holdings partnership
units that have not been exchanged are deemed exchanged for the
market value of the common units at the time of termination, and
that the
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corporate taxpayers will have sufficient taxable income in each
future taxable year to fully realize all potential tax savings.
Based upon certain assumptions described in greater detail under
Certain Relationships and Related Person
Transactions Tax Receivable Agreement, we
estimate that if the corporate taxpayers were to exercise their
termination right immediately following this offering, the
aggregate amount of these termination payments would be
approximately $1,035.6 million. See Certain
Relationships and Related Person Transactions Tax
Receivable Agreement.
Risk factors
See Risk Factors for a discussion of risks you
should carefully consider before deciding to invest in our
common units.
Proposed trading symbol
CG.
4,575,000 common units issuable upon exercise of the
underwriters option to purchase additional common units
from us;
274,000,000 common units issuable upon exchange of
274,000,000 Carlyle Holdings partnership units that will be held
by our existing owners immediately following the offering
transactions;
up to 1,281,249 common units issuable upon exchange of up to
1,281,249 Carlyle Holdings partnership units that may be issued
in connection with the contingently issuable equity interests
received by the sellers as part of our acquisition of Claren
Road, subject to adjustment as described below. See Note 3
to the combined and consolidated financial statements included
elsewhere in this prospectus; or
interests that may be granted under The Carlyle Group L.P. 2012
Equity Incentive Plan, or our Equity Incentive Plan,
consisting of:
deferred restricted common units that we expect to grant to our
employees at the time of this offering with an aggregate value
based on the initial public offering price per common unit in
this offering of approximately $380.9 million
(15,870,755 deferred restricted common units at the
midpoint of the price range indicated on the front cover of this
prospectus);
deferred restricted common units that we expect to grant to our
directors who are not employees of or advisors to Carlyle at the
time of this offering with an aggregate value based on the
initial public offering price per common unit in this offering
of approximately $1.0 million (41,670 deferred restricted
common units at the midpoint of the price range indicated on the
front cover of this prospectus) as described in
Management Director Compensation;
phantom deferred restricted common units that we expect to grant
to our employees at the time of this offering, which are
settleable in cash with an aggregate value based on the initial
public offering price per common unit in this offering of
approximately $8.2 million (340,622 phantom deferred
restricted common units at the midpoint of the price range
indicated on the front cover of this prospectus); and
14,196,953 additional common units or Carlyle Holdings
partnership units available for issuance in connection with
grants that may be made in the future under our Equity Incentive
Plan, which are subject to automatic annual increases.
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Pro
Forma
(4)
for
the Year
Ended
December 31,
Year Ended December 31,
2011
2011
2010
2009
(Dollars in millions)
$
962.2
$
915.5
$
770.3
$
788.1
1,325.6
1,307.4
266.4
11.1
(126.1
)
(185.8
)
1,215.6
485.6
1,199.5
1,121.6
1,482.0
496.7
46.9
78.4
72.6
5.0
17.2
15.8
21.4
27.3
785.9
714.0
452.6
0.7
3,011.7
2,845.3
2,798.9
1,317.8
910.6
374.5
265.2
264.2
663.3
225.7
46.6
1.1
(163.3
)
(122.3
)
117.2
83.1
1,410.6
477.9
429.0
348.4
348.8
323.5
177.2
236.6
26.2
60.6
17.8
30.6
497.0
453.1
233.3
0.7
17.6
32.0
2.5
(10.7
)
214.0
2,300.2
1,347.1
1,073.8
605.6
237.8
(323.3
)
(245.4
)
(33.8
)
7.9
7.9
957.2
1,182.8
1,479.7
678.4
50.8
28.5
20.3
14.8
906.4
1,154.3
1,459.4
663.6
410.1
(202.6
)
(66.2
)
(30.5
)
446.6
$
49.7
$
1,356.9
$
1,525.6
$
694.1
$
914.4
$
833.1
$
1,014.0
$
416.3
$
881.6
$
864.4
$
342.5
$
165.3
$
111,024.6
$
80,776.5
$
75,410.5
$
146,968.6
$
107,511.8
$
89,831.5
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Pro
Forma
(4)
As of
December 31,
As of December 31,
2011
2011
2010
2009
(Dollars in millions)
$
536.9
$
509.6
$
616.9
$
488.1
$
2,579.1
$
2,644.0
$
2,594.3
$
1,279.2
$
19,507.3
$
19,507.3
$
11,864.6
$
163.9
$
24,590.5
$
24,651.7
$
17,062.8
$
2,509.6
$
500.0
$
860.9
$
597.5
$
412.2
$
$
262.5
$
494.0
$
$
9,710.9
$
9,689.9
$
10,433.5
$
$
12,810.4
$
13,561.1
$
14,170.2
$
1,796.0
$
1,923.4
$
1,923.4
$
694.0
$
$
126.7
$
817.3
$
895.2
$
437.5
$
862.7
$
853.7
$
938.5
$
$
7,659.6
$
7,496.2
$
364.9
$
276.1
$
1,207.7
$
$
$
$
9,856.7
$
9,167.2
$
2,198.6
$
713.6
(1)
Under GAAP, we are required to
consolidate certain of the investment funds that we advise.
However, for segment reporting purposes, we present revenues and
expenses on a basis that deconsolidates these investment funds.
(2)
ENI, a non-GAAP measure, represents
segment net income excluding the impact of income taxes,
acquisition-related items including amortization of acquired
intangibles and earn-outs, charges associated with equity-based
compensation issued in this offering or future acquisitions,
corporate actions and infrequently occurring or unusual events
(e.g., acquisition related costs and gains and losses on fair
value adjustments on contingent consideration, gains and losses
from the retirement of our debt, charges associated with lease
terminations and employee severance and settlements of legal
claims). For discussion about the purposes for which our
management uses ENI and the reasons why we believe our
presentation of ENI provides useful information to investors
regarding our results of operations as well as a reconciliation
of Economic Net Income to Income Before Provision for Income
Taxes, see Managements Discussion and Analysis of
Financial Condition and Results of Operations Key
Financial Measures Non-GAAP Financial
Measures Economic Net Income and
Non-GAAP Financial Measures and
Note 14 to our combined and consolidated financial
statements appearing elsewhere in this prospectus.
(3)
Distributable Earnings, a non-GAAP
measure, is a component of ENI representing total ENI less
unrealized performance fees and unrealized investment income
plus unrealized performance fee compensation expense. For a
discussion about the purposes for which our management uses
Distributable Earnings and the reasons why we believe our
presentation of Distributable Earnings provides useful
information to investors regarding our results of operations as
well as a reconciliation of Distributable Earnings to Income
Before Provision for Income Taxes, see Managements
Discussion and Analysis of Financial Condition and Results of
Operations Key Financial Measures
Non-GAAP Financial Measures Distributable
Earnings and Non-GAAP Financial
Measures and Note 14 to our combined and consolidated
financial statements appearing elsewhere in this prospectus.
(4)
Refer to Unaudited Pro Forma
Financial Information.
(5)
The entities comprising our
consolidated funds are not the same entities for all periods
presented. Pursuant to revised consolidation guidance that
became effective January 1, 2010, we consolidated the existing
and any subsequently acquired CLOs where we hold a controlling
financial interest. The consolidation of funds during the
periods presented generally has the effect of grossing up
reported assets, liabilities, and cash flows, and has no effect
on net income attributable to Carlyle Group or members
equity.
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the availability of suitable opportunities;
the level of competition from other companies that may have
greater financial resources;
our ability to value potential development or acquisition
opportunities accurately and negotiate acceptable terms for
those opportunities;
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our ability to obtain requisite approvals and licenses from the
relevant governmental authorities and to comply with applicable
laws and regulations without incurring undue costs and
delays; and
our ability to successfully negotiate and enter into beneficial
arrangements with our counterparties.
the diversion of managements attention to integration
matters;
difficulties and costs associated with the integration of
operations and systems;
difficulties and costs associated with the assimilation of
employees; and
the risk that a change in ownership will negatively impact the
relationship between an acquiree and the investors in its
investment vehicles.
the required investment of capital and other resources;
the possibility that we have insufficient expertise to engage in
such activities profitably or without incurring inappropriate
amounts of risk;
the combination or integration of operational and management
systems and controls; and
the broadening of our geographic footprint, including the risks
associated with conducting operations in certain foreign
jurisdictions where we currently have no presence.
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The Dodd-Frank Act establishes the Financial Stability Oversight
Council (the FSOC), an interagency body acting as
the financial systems systemic risk regulator with the
authority to review the activities of nonbank financial
companies predominantly engaged in financial activities that are
designated as systemically important. Such
designation is applicable to companies where material financial
distress could pose risk to the financial stability of the
United States or if the nature, scope, size, scale,
concentration, interconnectedness or mix of their activities
could pose a threat to U.S. financial stability. On
April 3, 2012, the FSOC issued a final rule and
interpretive guidance regarding the process by which it will
designate nonbank financial companies as systemically important.
The final rule and interpretive guidance detail a three-stage
process, with the level of scrutiny increasing at each stage.
During Stage 1, the FSOC will apply a broad set of uniform
quantitative metrics to screen out financial companies that do
not warrant additional review. The FSOC will consider whether a
company has at least $50 billion in total consolidated
assets and whether it meets other thresholds relating to credit
default swaps outstanding, derivative liabilities, total debt
outstanding, a threshold leverage ratio of total consolidated
assets (excluding separate accounts) to total equity of 15 to 1,
and a short-term debt ratio of debt (with maturities of less
than 12 months) to total consolidated assets (excluding
separate accounts) of 10%. A company that meets or exceeds both
the asset threshold and one of the other thresholds will be
subject to additional review. Although it is unlikely that we
would be designated as systemically important under the process
outlined in the final rule and interpretive guidance, the
designation criteria could, and is expected to, evolve over
time. While the FSOC will use the Stage 1 thresholds in
identifying nonbank financial companies for further evaluation,
it may initially evaluate any nonbank financial company based on
other firm-specific quantitative or qualitative factors,
irrespective of whether such company meets the thresholds in
Stage 1. If the FSOC were to determine that we were a
systemically important nonbank financial company, we would be
subject to a heightened degree of regulation, which could
include a requirement to adopt heightened standards relating to
capital, leverage, liquidity, risk management, credit exposure
reporting and concentration limits, restrictions on acquisitions
and being subject to annual stress tests by the Federal Reserve.
The Dodd-Frank Act, under what has become known as the
Volcker Rule, generally prohibits depository
institution holding companies (including foreign banks with
U.S. branches and insurance companies with U.S. depository
institution subsidiaries), insured depository institutions and
subsidiaries and affiliates of such entities from investing in
or sponsoring private equity funds or hedge funds. The Volcker
Rule will become effective on July 21, 2012 and is subject
to certain transition periods and exceptions for certain
permitted activities that would enable certain
institutions subject to the Volcker Rule to continue investing
in private equity funds under certain conditions. Although we do
not currently anticipate that the Volcker Rule will adversely
affect our fundraising to any significant extent, there is
uncertainty regarding the implementation of the Volcker Rule and
its practical
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implications and there could be adverse implications on our
ability to raise funds from the types of entities mentioned
above as a result of this prohibition. On October 11, 2011, the
Federal Reserve and other federal regulatory agencies issued a
proposed rule implementing the Volcker Rule; a final rule may
not be issued until after the effective date.
The Dodd-Frank Act requires many private equity and hedge fund
advisers to register with the SEC under the Advisers Act, to
maintain extensive records and to file reports with information
that the regulators identify as necessary for monitoring
systemic risk. Although a Carlyle subsidiary has been registered
as an investment adviser for over 15 years, the Dodd-Frank
Act will affect our business and operations, including
increasing regulatory costs, imposing additional burdens on our
staff and potentially requiring the disclosure of sensitive
information.
The Dodd-Frank Act authorizes federal regulatory agencies to
review and, in certain cases, prohibit compensation arrangements
at financial institutions that give employees incentives to
engage in conduct deemed to encourage inappropriate risk taking
by covered financial institutions. Such restrictions could limit
our ability to recruit and retain investment professionals and
senior management executives.
The Dodd-Frank Act requires public companies to adopt and
disclose policies requiring, in the event the company is
required to issue an accounting restatement, the clawback of
related incentive compensation from current and former executive
officers.
The Dodd-Frank Act amends the Exchange Act to compensate and
protect whistleblowers who voluntarily provide original
information to the SEC and establishes a fund to be used to pay
whistleblowers who will be entitled to receive a payment equal
to between 10% and 30% of certain monetary sanctions imposed in
a successful government action resulting from the information
provided by the whistleblower.
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market conditions at times were significantly more favorable for
generating positive performance, particularly in our Corporate
Private Equity and Real Assets businesses, than the market
conditions we experienced in recent years and may continue to
experience for the foreseeable future;
the rates of returns of our carry funds reflect unrealized gains
as of the applicable measurement date that may never be
realized, which may adversely affect the ultimate value realized
from those funds investments;
unitholders will not benefit from any value that was created in
our funds prior to your investment in our common units to the
extent such value has been realized;
in recent years, there has been increased competition for
private equity investment opportunities resulting from the
increased amount of capital invested in alternative investment
funds and high liquidity in debt markets, and the increased
competition for investments may reduce our returns in the future;
the rates of returns of some of our funds in certain years have
been positively influenced by a number of investments that
experienced rapid and substantial increases in value following
the dates on which those investments were made, which may not
occur with respect to future investments;
our investment funds returns in some years have benefited
from investment opportunities and general market conditions that
may not repeat themselves (including, for example, particularly
favorable borrowing conditions in the debt markets during 2005,
2006 and early 2007), and our current or future investment funds
might not be able to avail themselves of comparable investment
opportunities or market conditions; and
we may create new funds in the future that reflect a different
asset mix and different investment strategies, as well as a
varied geographic and industry exposure as compared to our
present funds, and any such new funds could have different
returns than our existing or previous funds.
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subject the entity to a number of restrictive covenants, terms
and conditions, any violation of which could be viewed by
creditors as an event of default and could materially impact our
ability to realize value from the investment;
allow even moderate reductions in operating cash flow to render
the entity unable to service its indebtedness, leading to a
bankruptcy or other reorganization of the entity and a loss of
part or all of the equity investment in it;
give rise to an obligation to make mandatory prepayments of debt
using excess cash flow, which might limit the entitys
ability to respond to changing industry conditions to the extent
additional cash is needed for the response, to make unplanned
but necessary capital expenditures or to take advantage of
growth opportunities;
limit the entitys ability to adjust to changing market
conditions, thereby placing it at a competitive disadvantage
compared to its competitors that have relatively less debt;
limit the entitys ability to engage in strategic
acquisitions that might be necessary to generate attractive
returns or further growth; and
limit the entitys ability to obtain additional financing
or increase the cost of obtaining such financing, including for
capital expenditures, working capital or other general corporate
purposes.
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the inability of our investment professionals to identify
attractive investment opportunities;
competition for such opportunities among other potential
acquirers;
decreased availability of capital on attractive terms; and
our failure to consummate identified investment opportunities
because of business, regulatory or legal complexities and
adverse developments in the U.S. or global economy or
financial markets.
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a number of our competitors in some of our businesses have
greater financial, technical, marketing and other resources and
more personnel than we do;
some of our funds may not perform as well as competitors
funds or other available investment products;
a significant number of investors have materially decreased or
temporarily suspended making new fund investments recently
because of the global economic downturn and poor returns in
their overall investment portfolios in 2008 and 2009;
several of our competitors have significant amounts of capital,
and many of them have similar investment objectives to ours,
which may create additional competition for investment
opportunities and may reduce the size and duration of pricing
inefficiencies that otherwise could be exploited;
some of these competitors may also have a lower cost of capital
and access to funding sources that are not available to us,
which may create competitive disadvantages for us with respect
to investment opportunities;
some of our competitors may have higher risk tolerances,
different risk assessments or lower return thresholds than us,
which could allow them to consider a wider variety of
investments and to bid more aggressively than us for investments
that we want to make;
some of our competitors may be subject to less regulation and
accordingly may have more flexibility to undertake and execute
certain businesses or investments than we do
and/or
bear
less compliance expense than we do;
some of our competitors may have more flexibility than us in
raising certain types of investment funds under the investment
management contracts they have negotiated with their investors;
some of our competitors may have better expertise or be regarded
by investors as having better expertise in a specific asset
class or geographic region than we do;
our competitors that are corporate buyers may be able to achieve
synergistic cost savings in respect of an investment, which may
provide them with a competitive advantage in bidding for an
investment;
there are relatively few barriers to entry impeding the
formation of new alternative asset management firms, and the
successful efforts of new entrants into our various businesses,
including former star portfolio managers at large
diversified financial institutions as well as such institutions
themselves, is expected to continue to result in increased
competition;
some investors may prefer to invest with an asset manager that
is not publicly traded or is smaller with only one or two
investment products that it manages; and
other industry participants may, from time to time, seek to
recruit our investment professionals and other employees away
from us.
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we advise funds that invest in businesses that operate in a
variety of industries that are subject to extensive domestic and
foreign regulation, such as the telecommunications industry, the
aerospace, defense and government services industry and the
healthcare industry (including companies that supply equipment
and services to governmental agencies), that may involve greater
risk due to rapidly changing market and governmental conditions
in those sectors;
significant failures of our portfolio companies to comply with
laws and regulations applicable to them could affect the ability
of our funds to invest in other companies in certain industries
in the future and could harm our reputation;
companies in which private equity investments are made may have
limited financial resources and may be unable to meet their
obligations, which may be accompanied by a deterioration in the
value of their equity securities or any collateral or guarantees
provided with respect to their debt;
companies in which private equity investments are made are more
likely to depend on the management talents and efforts of a
small group of persons and, as a result, the death, disability,
resignation or termination of one or more of those persons could
have a material adverse impact on their business and prospects
and the investment made;
companies in which private equity investments are made may from
time to time be parties to litigation, may be engaged in rapidly
changing businesses with products subject to a
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substantial risk of obsolescence and may require substantial
additional capital to support their operations, finance
expansion or maintain their competitive position;
companies in which private equity investments are made generally
have less predictable operating results;
instances of fraud and other deceptive practices committed by
senior management of portfolio companies in which our funds
invest may undermine our due diligence efforts with respect to
such companies and, upon the discovery of such fraud, negatively
affect the valuation of a funds investments as well as
contribute to overall market volatility that can negatively
impact a funds investment program;
our funds may make investments that they do not advantageously
dispose of prior to the date the applicable fund is dissolved,
either by expiration of such funds term or otherwise,
resulting in a lower than expected return on the investments
and, potentially, on the fund itself;
our funds generally establish the capital structure of portfolio
companies on the basis of the financial projections based
primarily on management judgments and assumptions, and general
economic conditions and other factors may cause actual
performance to fall short of these financial projections, which
could cause a substantial decrease in the value of our equity
holdings in the portfolio company and cause our funds
performance to fall short of our expectations; and
executive officers, directors and employees of an equity sponsor
may be named as defendants in litigation involving a company in
which a private equity investment is made or is being made.
those associated with the burdens of ownership of real property;
general and local economic conditions;
changes in supply of and demand for competing properties in an
area (as a result, for instance, of overbuilding);
fluctuations in the average occupancy and room rates for hotel
properties;
the financial resources of tenants;
changes in building, environmental and other laws;
energy and supply shortages;
various uninsured or uninsurable risks;
natural disasters;
changes in government regulations (such as rent control);
changes in real property tax rates;
changes in interest rates;
the reduced availability of mortgage funds which may render the
sale or refinancing of properties difficult or impracticable;
negative developments in the economy that depress travel
activity;
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environmental liabilities;
contingent liabilities on disposition of assets; and
terrorist attacks, war and other factors that are beyond our
control.
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certain economic and political risks, including potential
exchange control regulations and restrictions on our
non-U.S. investments
and repatriation of profits on investments or of capital
invested, the risks of political, economic or social
instability, the possibility of expropriation or confiscatory
taxation and adverse economic and political developments;
the imposition of
non-U.S. taxes
on gains from the sale of investments by our funds;
the absence of uniform accounting, auditing and financial
reporting standards, practices and disclosure requirements and
less government supervision and regulation;
changes in laws or clarifications to existing laws that could
impact our tax treaty positions, which could adversely impact
the returns on our investments;
differences in the legal and regulatory environment or enhanced
legal and regulatory compliance;
limitations on borrowings to be used to fund acquisitions or
dividends;
political hostility to investments by foreign or private equity
investors;
less liquid markets;
reliance on a more limited number of commodity inputs, service
providers
and/or
distribution mechanisms;
adverse fluctuations in currency exchange rates and costs
associated with conversion of investment principal and income
from one currency into another;
higher rates of inflation;
higher transaction costs;
less government supervision of exchanges, brokers and issuers;
less developed bankruptcy, corporate, partnership and other laws;
difficulty in enforcing contractual obligations;
less stringent requirements relating to fiduciary duties;
fewer investor protections; and
greater price volatility.
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The AlpInvest business is subject to business and other risks
and uncertainties generally consistent with our business as a
whole, including without limitation legal and regulatory risks,
the avoidance or management of conflicts of interest and the
ability to attract and retain investment professionals and other
personnel.
We will restrict our
day-to-day
participation in the AlpInvest business, which may in turn limit
our ability to address risks arising from the AlpInvest business
for so long as AlpInvest maintains separate investment
operations. Although we maintain ultimate control over
AlpInvest, AlpInvests historical management team (who are
our employees) will continue to exercise independent investment
authority without involvement by other Carlyle personnel. For so
long as these arrangements are in place, Carlyle representatives
will serve on the board of AlpInvest but we will observe
substantial restrictions on our ability to access investment
information or engage in
day-to-day
participation in the AlpInvest investment business, including a
restriction that AlpInvest investment decisions are made and
maintained without involvement by other Carlyle personnel and
that no specific investment data, other than data on the
investment performance of its client mandates, will be shared.
As such, we will have a reduced ability to identify or respond
to investment and other operational issues that may arise within
the AlpInvest business, relative to other Carlyle investment
funds.
AlpInvest is currently subject to capital requirements which may
limit our ability to withdraw cash from AlpInvest, or require
additional investments of capital in order for AlpInvest to
maintain certain licenses to operate its business.
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Historically, the main part of AlpInvest capital commitments
have been obtained from its initial co-owners, with such owners
thereby holding highly concentrated voting rights with respect
to potential suspension or termination of investment commitments
made to AlpInvest.
AlpInvest is expected to seek to broaden its client base by
advising separate accounts for investors on an
account-by-account
basis. AlpInvest has only limited experience in attracting new
clients and may not be successful in this strategy.
AlpInvests co-investment business is subject to the risk
that other private equity sponsors, alongside whom AlpInvest has
historically invested in leveraged buyouts and growth capital
transactions throughout Europe, North America and Asia, will no
longer be willing to provide AlpInvest with investment
opportunities as favorable as in the past, if at all, as a
result of our ownership of AlpInvest.
AlpInvests secondary investments business is subject to
the risk that opportunities in the secondary investments market
may not be as favorable as the recent past.
Generally, there are few limitations on the execution of these
hedge funds investment strategies, which are subject to
the sole discretion of the management company or the general
partner of such funds.
These funds may engage in short-selling, which is subject to a
theoretically unlimited risk of loss because there is no limit
on how much the price of a security may appreciate before the
short position is closed out. A fund may be subject to losses if
a security lender demands return of the lent securities and an
alternative lending source cannot be found or if the fund is
otherwise unable to borrow securities that are necessary to
hedge its positions.
These funds may be limited in their ability to engage in short
selling or other activities as a result of regulatory mandates.
Such regulatory actions may limit our ability to engage in
hedging activities and therefore impair our investment
strategies. In addition, these funds may invest in securities
and other assets for which appropriate market hedges do not
exist or cannot be acquired on attractive terms.
These funds are exposed to the risk that a counterparty will not
settle a transaction in accordance with its terms and conditions
because of a dispute over the terms of the contract (whether or
not bona fide) or because of a credit or liquidity problem, thus
causing the fund to suffer a loss.
Credit risk may arise through a default by one of several large
institutions that are dependent on one another to meet their
liquidity or operational needs, so that a default by one
institution causes a series of defaults by the other
institutions. This systemic risk could have a
further material adverse effect on the financial intermediaries
(such as prime brokers, clearing agencies, clearing houses,
banks, securities firms and exchanges) with which these funds
transact on a daily basis.
The efficacy of investment and trading strategies depend largely
on the ability to establish and maintain an overall market
position in a combination of financial instruments, which can be
difficult to execute.
These funds may make investments or hold trading positions in
markets that are volatile and may become illiquid.
These funds investments are subject to risks relating to
investments in commodities, futures, options and other
derivatives, the prices of which are highly volatile and may be
subject to a theoretically unlimited risk of loss in certain
circumstances. In addition, the funds assets are
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subject to the risk of the failure of any of the exchanges on
which their positions trade or of their clearinghouses or
counterparties.
These funds may make investments that they do not advantageously
dispose of prior to the date the applicable fund is dissolved,
either by expiration of such funds term or otherwise.
Although we generally expect that investments will be disposed
of prior to dissolution or be suitable for in-kind distribution
at dissolution, and the general partners of the funds have a
limited ability to extend the term of the fund with the consent
of fund investors or the advisory board of the fund, as
applicable, our funds may have to sell, distribute or otherwise
dispose of investments at a disadvantageous time as a result of
dissolution. This would result in a lower than expected return
on the investments and, perhaps, on the fund itself.
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compensation committees be composed of fully independent
directors, as determined pursuant to new independence
requirements;
compensation committees be explicitly charged with hiring and
overseeing compensation consultants, legal counsel and other
committee advisors; and
compensation committees be required to consider, when engaging
compensation consultants, legal counsel or other advisors,
certain independence factors, including factors that examine the
relationship between the consultant or advisors employer
and the company.
our general partner determines the amount and timing of our
investments and dispositions, indebtedness, issuances of
additional partnership interests and amounts of reserves, each
of which can affect the amount of cash that is available for
distribution to you;
our general partner is allowed to take into account the
interests of parties other than us and the common unitholders in
resolving conflicts of interest, which has the effect of
limiting its duties (including fiduciary duties) to our common
unitholders. For example, our subsidiaries that serve as the
general partners of our investment funds have certain duties and
obligations to those funds and their investors as a result of
which we expect to regularly take actions in a manner consistent
with such duties and obligations but that might adversely affect
our near-term results of operations or cash flow;
because our senior Carlyle professionals hold their Carlyle
Holdings partnership units directly or through entities that are
not subject to corporate income taxation and The Carlyle Group
L.P. holds Carlyle Holdings partnership units through
wholly-owned subsidiaries, some of which are subject to
corporate income taxation, conflicts may arise between our
senior Carlyle professionals and The Carlyle Group L.P. relating
to the selection, structuring and disposition of investments and
other matters. For example, the earlier disposition of assets
following an exchange or acquisition transaction by a senior
Carlyle professional generally will accelerate payments under
the tax receivable agreement and increase the present value of
such payments, and the disposition of assets before an exchange
or acquisition transaction will increase an existing
owners tax liability without giving rise to any rights of
an existing owner to receive payments under the tax receivable
agreement;
our partnership agreement does not prohibit affiliates of the
general partner, including its owners, from engaging in other
businesses or activities, including those that might directly
compete with us;
our general partner has limited its liability and reduced or
eliminated its duties (including fiduciary duties) under the
partnership agreement, while also restricting the remedies
available to our common unitholders for actions that, without
these limitations, might constitute breaches of duty (including
fiduciary duty). In addition, we have agreed to indemnify our
general
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partner and its affiliates to the fullest extent permitted by
law, except with respect to conduct involving bad faith, fraud
or willful misconduct.
By purchasing our common units, you
will have agreed and consented to the provisions set forth in
our partnership agreement, including the provisions regarding
conflicts of interest situations that, in the absence of such
provisions, might constitute a breach of fiduciary or other
duties under applicable state law;
our partnership agreement will not restrict our general partner
from causing us to pay it or its affiliates for any services
rendered, or from entering into additional contractual
arrangements with any of these entities on our behalf, so long
as our general partner agrees to the terms of any such
additional contractual arrangements in good faith as determined
under the partnership agreement;
our general partner determines how much debt we incur and that
decision may adversely affect our credit ratings;
our general partner determines which costs incurred by it and
its affiliates are reimbursable by us;
our general partner controls the enforcement of obligations owed
to us by it and its affiliates; and
our general partner decides whether to retain separate counsel,
accountants or others to perform services for us.
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it is or holds itself out as being engaged primarily, or
proposes to engage primarily, in the business of investing,
reinvesting or trading in securities; or
absent an applicable exemption, it owns or proposes to acquire
investment securities having a value exceeding 40% of the value
of its total assets (exclusive of U.S. government
securities and cash items) on an unconsolidated basis.
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Units Passive Foreign Investment Companies and
Consequences to U.S. Holders of Common Units
Controlled Foreign Companies for additional information
regarding such consequences.
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(1)
Certain individuals engaged in our
business own interests directly in selected subsidiaries of the
Parent Entities.
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(1)
The Carlyle Group L.P. common
unitholders will have only limited voting rights and will have
no right to remove our general partner or, except in limited
circumstances, elect the directors of our general partner. TCG
Carlyle Global Partners L.L.C., an entity wholly-owned by our
senior Carlyle professionals, will hold a special voting unit in
The Carlyle Group L.P. that will entitle it, on those few
matters that may be submitted for a vote of The Carlyle Group
L.P. common unitholders, to participate in the vote on the same
basis as the common unitholders and provide it with a number of
votes that is equal to the aggregate number of vested and
unvested partnership units in Carlyle Holdings held by the
limited partners of Carlyle Holdings on the relevant record
date. See Material Provisions of The Carlyle Group L.P.
Partnership Agreement Withdrawal or Removal of the
General Partner, Meetings; Voting
and Election of Directors of General
Partner.
(2)
Certain individuals engaged in our
business will continue to own interests directly in selected
operating subsidiaries including, in certain instances, entities
that receive management fees from funds that we advise. The
Carlyle Holdings partnerships will also directly own interests
in selected operating subsidiaries. For additional information
concerning these interests see Our Organizational
Structure Following this Offering Certain
Non-controlling Interests in Operating Subsidiaries.
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all management fees payable in respect of all current and future
investment funds that we advise, as well as the fees for
transaction advisory and oversight services that may be payable
by these investment funds portfolio companies (subject to
certain third-party interests, as described below);
all carried interest earned in respect of all current and future
carry funds that we advise (subject to certain third-party
interests, including those described below and to the allocation
to our investment professionals who work in these operations of
a portion of this carried interest as described below);
all incentive fees (subject to certain interests in Claren Road
and ESG and, with respect to other funds earning incentive fees,
any performance-related allocations to investment
professionals); and
all returns on investments of our own balance sheet capital that
we make following this offering (as well as on existing
investments with an aggregate value of approximately
$249.3 million as of December 31, 2011).
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our senior Carlyle professionals, Mubadala and CalPERS will
contribute all of their interests in:
TC Group, L.L.C. to Carlyle Holdings I L.P.;
TC Group Investment Holdings, L.P. and TC Group Cayman
Investment Holdings, L.P. to Carlyle Holdings II
L.P.; and
TC Group Cayman, L.P. to Carlyle Holdings III L.P.; and
our senior Carlyle professionals and other individuals engaged
in our business will contribute to the Carlyle Holdings
partnerships a portion of the equity interests they own in the
general partners of our existing carry funds.
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The Carlyle Group L.P., through its wholly-owned subsidiaries,
will hold 30,500,000 partnership units in Carlyle Holdings (or
35,075,000 partnership units if the underwriters exercise in
full their option to purchase additional common units) and will,
through its wholly-owned subsidiaries, be the sole general
partner of each of the Carlyle Holdings partnerships and,
through Carlyle Holdings and its subsidiaries, operate the
Contributed Businesses;
our existing owners will hold 217,239,664 vested partnership
units and 56,760,336 unvested partnership units in Carlyle
Holdings, and more specifically:
our founders, CalPERS and Mubadala will hold 177,238,323 vested
partnership units; and
our other existing owners will hold 40,001,341 vested
partnership units and 56,760,336 unvested partnership units;
investors in this offering will hold 30,500,000 common units (or
35,075,000 common units if the underwriters exercise in full
their option to purchase additional common units); and
on those few matters that may be submitted for a vote of the
limited partners of The Carlyle Group L.P., such as the approval
of amendments to the limited partnership agreement of The
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Carlyle Group L.P. that the limited partnership agreement does
not authorize our general partner to approve without the consent
of the limited partners and the approval of certain mergers or
sales of all or substantially all of our assets:
investors in this offering will collectively have 10.0% of the
voting power of The Carlyle Group L.P. limited partners (or
11.3% if the underwriters exercise in full their option to
purchase additional common units) and
our existing owners will collectively have 90.0% of the voting
power of The Carlyle Group L.P. limited partners (or 88.7% if
the underwriters exercise in full their option to purchase
additional common units).
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general economic and business conditions;
our strategic plans and prospects;
our business and investment opportunities;
our financial condition and operating results, including our
cash position, our net income and our realizations on
investments made by our investment funds;
working capital requirements and anticipated cash needs;
contractual restrictions and obligations, including payment
obligations pursuant to the tax receivable agreement and
restrictions pursuant to our credit facility;
legal, tax and regulatory restrictions;
other constraints on the payment of distributions by us to our
common unitholders or by our subsidiaries to us; and
such other factors as our general partner may deem relevant.
first, we will cause Carlyle Holdings to make distributions to
its partners, including The Carlyle Group L.P.s
wholly-owned subsidiaries. If Carlyle Holdings makes such
distributions, the limited partners of Carlyle Holdings will be
entitled to receive equivalent distributions pro rata based on
their partnership interests in Carlyle Holdings;
second, we will cause The Carlyle Group L.P.s wholly-owned
subsidiaries to distribute to The Carlyle Group L.P. their share
of such distributions, net of taxes and amounts payable under
the tax receivable agreement by such wholly-owned
subsidiaries; and
third, The Carlyle Group L.P. will distribute its net share of
such distributions to our common unitholders on a pro rata basis.
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Year Ended December 31,
2011
2010
2009
$
1,498.4
$
787.8
$
215.6
(740.5
)
(258.7
)
(179.1
)
(76.0
)
(24.8
)
(9.5
)
(398.5
)
$
681.9
$
105.8
$
27.0
$
864.4
$
342.5
$
165.3
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on a historical basis; and
on a pro forma basis for The Carlyle Group L.P. giving effect to
the transactions described under Unaudited Pro Forma
Financial Information, including the repayment of
indebtedness with a portion of the proceeds from this offering
as described in Use of Proceeds.
December 31, 2011
Actual
Pro Forma
(Dollars in millions)
$
509.6
$
536.9
$
566.6
$
566.6
$
860.9
$
500.0
262.5
9,689.9
9,710.9
1,923.4
1,923.4
817.3
126.7
853.7
862.7
7,496.2
7,659.6
1,207.7
$
21,903.9
$
21,991.0
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$
24.00
$
0.30
$
2.07
$
2.37
$
21.63
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Common Units
Total
Average
Purchased
Consideration
Price per
Number
Percent
Amount
Percent
Common Unit
(Dollars in millions)
274,000,000
90.0
%
$
0
%
$
30,500,000
10.0
%
$
732,000,000
100
%
$
24.00
304,500,000
100.0
%
$
732,000,000
100
%
$
2.40
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100
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Pro
Forma
(2)
for
the Year
Ended
December 31,
Year Ended December 31,
2011
2011
2010
2009
2008
2007
(Dollars in millions)
$
962.2
$
915.5
$
770.3
$
788.1
$
811.4
$
668.9
1,325.6
1,307.4
266.4
11.1
59.3
1,013.1
(126.1
)
(185.8
)
1,215.6
485.6
(944.0
)
376.7
1,199.5
1,121.6
1,482.0
496.7
(884.7
)
1,389.8
46.9
78.4
72.6
5.0
(104.9
)
75.6
17.2
15.8
21.4
27.3
38.2
36.3
785.9
714.0
452.6
0.7
18.7
51.9
3,011.7
2,845.3
2,798.9
1,317.8
(121.3
)
2,222.5
1,410.6
477.9
429.0
348.4
97.4
775.5
348.8
323.5
177.2
236.6
245.1
234.3
26.2
60.6
17.8
30.6
46.1
15.9
497.0
453.1
233.3
0.7
6.8
38.8
17.6
32.0
2.5
(10.7
)
214.0
147.0
2,300.2
1,347.1
1,073.8
605.6
542.4
1,064.5
237.8
(323.3
)
(245.4
)
(33.8
)
162.5
300.4
7.9
7.9
957.2
1,182.8
1,479.7
678.4
(501.2
)
1,458.4
50.8
28.5
20.3
14.8
12.5
15.2
906.4
1,154.3
1,459.4
663.6
(513.7
)
1,443.2
410.1
(202.6
)
(66.2
)
(30.5
)
94.5
182.4
446.6
$
49.7
$
1,356.9
$
1,525.6
$
694.1
$
(608.2
)
$
1,260.8
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Pro
Forma
(2)
As of
December 31,
As of December 31,
2011
2011
2010
2009
2008
2007
(Dollars in millions)
$
536.9
$
509.6
$
616.9
$
488.1
$
680.8
$
1,115.0
$
2,579.1
$
2,644.0
$
2,594.3
$
1,279.2
$
702.4
$
2,150.6
$
19,507.3
$
19,507.3
$
11,864.6
$
163.9
$
187.0
$
1,629.3
$
24,590.5
$
24,651.7
$
17,062.8
$
2,509.6
$
2,095.8
$
5,788.3
$
500.0
$
860.9
$
597.5
$
412.2
$
765.5
$
691.4
$
$
262.5
$
494.0
$
$
$
$
9,710.9
$
9,689.9
$
10,433.5
$
$
$
1,007.3
$
12,810.4
$
13,561.1
$
14,170.2
$
1,796.0
$
1,733.3
$
3,429.1
$
1,923.4
$
1,923.4
$
694.0
$
$
$
$
126.7
$
817.3
$
895.2
$
437.5
$
59.6
$
1,256.1
$
862.7
$
853.7
$
938.5
$
$
$
$
7,659.6
$
7,496.2
$
364.9
$
276.1
$
302.9
$
1,103.1
$
1,207.7
$
$
$
$
$
$
9,856.7
$
9,167.2
$
2,198.6
$
713.6
$
362.5
$
2,359.2
(1)
The entities comprising our
Consolidated Funds are not the same entities for all periods
presented. In February 2007, we formed a hedge fund which we
consolidated into our financial statements and included in our
Consolidated Funds prospectively from that date. In December
2007, we amended most of the co-investment entities so that the
presumption of control by the general partner had been overcome,
and therefore we ceased to consolidate those entities
prospectively from that date. In 2008, the hedge fund that we
had formed in February 2007 began an orderly liquidation and
ceased operations. Pursuant to revised consolidation guidance
that became effective January 1, 2010, we consolidated the
existing and any subsequently acquired CLOs where we hold a
controlling financial interest. The consolidation or
deconsolidation of funds generally has the effect of grossing up
or down, respectively, reported assets, liabilities, and cash
flows, and has no effect on net income attributable to Carlyle
Group or members equity.
(2)
Refer to Unaudited Pro Forma
Financial Information.
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154
158
203
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Corporate Private Equity
Our Corporate
Private Equity segment advises our buyout and growth capital
funds, which seek a wide variety of investments of different
sizes and growth potentials. As of December 31, 2011, our
Corporate Private Equity segment had approximately
$51 billion in AUM and approximately $38 billion in
fee-earning AUM.
Real Assets
Our Real Assets segment advises
our U.S. and internationally focused real estate and
infrastructure funds, as well as our energy and renewable
resources funds. As of December 31, 2011, our Real Assets
segment had approximately $31 billion in AUM and
approximately $22 billion in fee-earning AUM.
Global Market Strategies
Our Global Market
Strategies segment advises a group of funds that pursue
investment opportunities across various types of credit,
equities and alternative instruments, and (as regards to certain
macroeconomic strategies) currencies, commodities and interest
rate products and their derivatives. As of December 31,
2011, our Global Market Strategies segment had approximately
$24 billion in AUM and approximately $23 billion in
fee-earning AUM.
Fund of Funds Solutions
Our Fund of Funds
Solutions segment was launched upon our acquisition of a 60%
equity interest in AlpInvest on July 1, 2011 and advises a
global private equity fund of funds program and related
co-investment and secondary activities. As of December 31,
2011, AlpInvest had approximately $41 billion in AUM and
approximately $28 billion in fee-earning AUM.
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The attractiveness of the alternative asset management
industry
. Our ability to attract new capital and
investors is driven in part by the extent to which investors
continue to see the alternative asset management industry as an
attractive vehicle for capital preservation and growth. While
our recent fundraising has resulted in new capital commitments
at levels that remain below the historically high volume
achieved during 2007 and early 2008, we believe our fundraising
efforts will benefit from certain fundamental trends that
include: (i) institutional investors pursuit of
higher relative investment returns which have historically been
provided by top quartile alternative asset management funds;
(ii) distributions to existing investors from historical
commitments which could be used to fund new allocations;
(iii) the entrance of new institutional investors from
developing markets, including sovereign wealth funds and other
entities; and (iv) increasing interest from high net worth
individuals.
Our ability to generate strong returns.
The
strength of our investment performance affects investors
willingness to commit capital to our funds. The capital we are
able to attract drives the growth of our AUM and the management
fees we earn. During the years ended December 31, 2010 and
December 31, 2011, we have distributed approximately
$27 billion from our carry funds to our investors. Although
we have recently exited several investments at attractive
returns and the fair value of our funds net assets has
increased significantly with the economic recovery, there can be
no assurance that these trends will continue. In addition,
valuations in many of our funds experienced volatility during
2011, a trend which could occur again in the near- to
medium-term.
During 2008 and 2009, many economies around the world, including
the U.S. economy, experienced significant declines in
employment, household wealth and lending. Those events led to a
significantly diminished availability of credit and an increase
in the cost of financing.
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The lack of credit in 2008 and 2009 materially hindered the
initiation of new, large-sized transactions for our Corporate
Private Equity and Real Assets segments and adversely impacted
our operating results in those periods. While we continued to
experience some capital markets volatility in 2011, in contrast
to 2008 and 2009 credit remains available selectively for high
quality corporate transactions, though financing costs remain
elevated from pre-recession levels. Finally, a significant
portion of our revenues are derived from performance fees, the
size of which is dependent on the success of our fund
investments. A decrease in valuations of our fund investments
will result in a reduction of accrued performance fees which we
would expect to be most significant in Corporate Private Equity,
our largest business segment.
Our successful deployment of capital.
Our
ability to maintain and grow our revenue base is dependent upon
our ability to successfully deploy the capital that our
investors have committed to our funds. During the years ended
December 31, 2010 and December 31, 2011, we have
invested more than $21 billion in new and existing
investments representing an investment pace that is comparable
to our investment pace during the peak of private equity capital
deployment during 2006 through 2008. As of December 31,
2011, we had approximately $37 billion in capital available
for investment. We believe that this puts us in a position to
grow our revenues over time. Our ability to identify and execute
investments which our investment professionals determine to be
attractive continues to depend on a number of factors, including
competition, valuation, credit availability and pricing and
other general market conditions.
Our ability to meet evolving investor
requirements.
We believe that investors will seek
to deploy their investment capital in a variety of different
ways, including fund investments, separate accounts and direct
co-investments. We anticipate that this trend will result in a
bifurcation within the global alternative asset management
industry, with a limited number of large global market
participants joined by numerous smaller and more specialized
funds, providing investors with greater flexibility when
allocating their investment capital. In addition, we expect that
certain larger investors will seek to allocate more resources to
managed accounts through which they can directly hold title to
assets and better control their investments.
103
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104
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105
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our senior Carlyle professionals, Mubadala and CalPERS will
contribute all of their interests in:
TC Group, L.L.C. to Carlyle Holdings I L.P.;
TC Group Investment Holdings, L.P. and TC Group Cayman
Investment Holdings, L.P. to Carlyle Holdings II
L.P.; and
TC Group Cayman, L.P. to Carlyle Holdings III L.P.; and
senior Carlyle professionals and other individuals engaged in
our business will contribute to the Carlyle Holdings
partnerships a portion of the equity interests they own in the
general partners of our existing carry funds.
106
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107
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108
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109
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110
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111
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112
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113
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As of December 31,
2011
2010
2009
(Dollars in millions)
$
51,059
$
44,498
$
46,460
19,942
19,364
18,456
12,436
11,377
9,379
7,858
4,782
298
19,730
755
818
$
111,025
$
80,776
$
75,411
(1)
Reflects limited partner capital
commitments where the investment period has not expired.
(2)
Reflects limited partner invested
capital and includes amounts committed to or reserved for
investments for certain real assets funds.
(3)
Reflects the gross amount of
aggregate collateral balances, at par, for our CLOs.
(4)
Reflects the net asset value of our
hedge funds (pre-redemptions and subscriptions).
(5)
Includes funds with fees based on
notional value and gross asset value.
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Twelve Months Ended December 31,
2011
2010
2009
(Dollars in millions)
$
80,776
$
75,411
$
76,326
34,204
9,604
6,228
3,030
1,488
(7,660
)
(3,436
)
(1,681
)
1,207
(88
)
32
(584
)
(2,534
)
(1,140
)
450
38
129
(3,596
)
(1,249
)
257
$
111,025
$
80,776
$
75,411
(1)
Inflows represent limited partner
capital raised by our carry funds and fund of funds vehicles and
capital invested by our carry funds and fund of funds vehicles
outside the investment period.
(2)
Outflows represent limited partner
distributions from our carry funds and fund of funds vehicles
and changes in basis for our carry funds and fund of funds
vehicles where the investment period has expired.
(3)
Represents the net result of
subscriptions to and redemptions from our hedge funds and
open-end structured credit funds.
(4)
Market Appreciation/(Depreciation)
represents changes in the net asset value of our hedge funds.
(5)
Represents the impact of foreign
exchange rate fluctuations on the translation of our non-U.S.
dollar denominated funds. Activity during the period is
translated at the average rate for the period. Ending balances
are translated at the spot rate as of the period end.
115
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116
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Available
Fair Value
Capital
of Capital
Total AUM
(Dollars in millions)
$
37,182
$
49,157
$
86,339
969
969
(5,812
)
5,041
(771
)
1,225
(2,259
)
(1,034
)
32
32
(1,171
)
(1,171
)
5,135
5,135
84
249
333
$
33,648
$
56,184
$
89,832
10,463
10,463
3,944
3,944
(14,819
)
14,312
(507
)
2,151
(8,391
)
(6,240
)
(140
)
(140
)
(3,119
)
(3,119
)
14,524
14,524
(508
)
(737
)
(1,245
)
$
24,416
$
83,096
$
107,512
16,926
31,300
48,226
5,405
5,405
(12,066
)
11,281
(785
)
3,784
(22,597
)
(18,813
)
1,338
1,338
(1,116
)
(1,116
)
7,702
7,702
(940
)
(1,560
)
(2,500
)
$
37,525
$
109,444
$
146,969
(1)
Represents capital raised by our
carry funds and fund of funds vehicles, net of expired available
capital.
(2)
Represents capital called by our
carry funds and fund of funds vehicles, net of fund fees and
expenses.
(3)
Represents distributions from our
carry funds and fund of funds vehicles, net of amounts recycled.
(4)
Represents the net result of
subscriptions to and redemptions from our hedge funds and
open-end structured credit funds.
(5)
Market Appreciation/(Depreciation)
represents realized and unrealized gains (losses) on portfolio
investments and changes in the net asset value of our hedge
funds.
(6)
Represents the impact of foreign
exchange rate fluctuations on the translation of our non-U.S.
dollar denominated funds. Activity during the period is
translated at the average rate for the period. Ending balances
are translated at the spot rate as of the period end.
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Year Ended December 31,
2011
2010
2009
(Dollars in millions)
$
915.5
$
770.3
$
788.1
1,307.4
266.4
11.1
(185.8
)
1,215.6
485.6
1,121.6
1,482.0
496.7
65.1
11.9
(5.2
)
13.3
60.7
10.2
78.4
72.6
5.0
15.8
21.4
27.3
714.0
452.6
0.7
2,845.3
2,798.9
1,317.8
374.5
265.2
264.2
225.7
46.6
1.1
(122.3
)
117.2
83.1
477.9
429.0
348.4
323.5
177.2
236.6
60.6
17.8
30.6
453.1
233.3
0.7
2.5
(10.7
)
214.0
32.0
1,347.1
1,073.8
605.6
(323.3
)
(245.4
)
(33.8
)
7.9
1,182.8
1,479.7
678.4
28.5
20.3
14.8
1,154.3
1,459.4
663.6
(202.6
)
(66.2
)
(30.5
)
$
1,356.9
$
1,525.6
$
694.1
118
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119
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120
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Year Ended December 31,
2011
2010
(Dollars in millions)
$
658.8
$
74.1
(919.6
)
427.9
(260.8
)
502.0
(64.2
)
(752.4
)
1.7
5.0
$
(323.3
)
$
(245.4
)
121
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122
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123
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124
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Year Ended December 31,
2010
2009
(Dollars in millions)
$
74.1
$
(6.4
)
427.9
(27.4
)
502.0
(33.8
)
(752.4
)
5.0
$
(245.4
)
$
(33.8
)
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Year Ended December 31,
2011
2010
2009
(Dollars in millions)
$
870.5
$
763.5
$
755.2
37.5
19.8
18.2
38.2
30.2
14.7
946.2
813.5
788.1
1,301.3
274.2
11.0
(195.1
)
1,204.1
479.7
1,106.2
1,478.3
490.7
65.6
10.4
(1.7
)
15.8
61.2
9.4
81.4
71.6
7.7
15.5
22.4
27.3
2,149.3
2,385.8
1,313.8
404.4
350.1
340.4
623.8
140.7
3.6
(148.0
)
593.8
238.1
880.2
1,084.6
582.1
376.8
269.4
284.8
59.2
17.8
30.6
1,316.2
1,371.8
897.5
$
833.1
$
1,014.0
$
416.3
$
121.3
$
198.6
$
159.6
$
630.4
$
743.8
$
249.0
$
81.4
$
71.6
$
7.7
$
864.4
$
342.5
$
165.3
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Year Ended December 31,
2011
2010
2009
(Dollars in millions)
$
1,182.8
$
1,479.7
$
678.4
(671.5
)
(768.2
)
(339.7
)
91.5
11.0
(7.9
)
214.0
32.0
20.0
2.5
(10.7
)
202.6
66.2
30.5
4.5
8.5
29.0
(0.9
)
0.3
8.8
$
833.1
$
1,014.0
$
416.3
630.4
743.8
249.0
81.4
71.6
7.7
$
121.3
$
198.6
$
159.6
677.5
133.5
7.4
65.6
10.4
(1.7
)
$
864.4
$
342.5
$
165.3
(1)
Adjustments for partner
compensation reflect amounts due to senior Carlyle professionals
for compensation and carried interest allocated to them, which
amounts were classified as distributions from equity in our
financial statements.
(2)
See reconciliation to most directly
comparable U.S. GAAP measure below:
Year Ended December 31, 2011
Total
Carlyle
Reportable
Consolidated
Adjustments(3)
Segments
(Dollars in millions)
$
1,307.4
$
(6.1
)
$
1,301.3
(185.8
)
(9.3
)
(195.1
)
1,121.6
(15.4
)
1,106.2
225.7
398.1
623.8
(122.3
)
(25.7
)
(148.0
)
103.4
372.4
475.8
1,081.7
(404.2
)
677.5
(63.5
)
16.4
(47.1
)
$
1,018.2
$
(387.8
)
$
630.4
$
65.1
$
0.5
$
65.6
13.3
2.5
15.8
$
78.4
$
3.0
$
81.4
(3)
Adjustments to performance fees and
investment income relate to amounts earned from the Consolidated
Funds, which were eliminated in the U.S. GAAP consolidation
but were included in the segment results, and amounts
attributable to non-controlling interests in consolidated
entities, which were excluded from the segment results.
Adjustments to performance fee related compensation expense
relate to the inclusion of partner compensation in the segment
results. Adjustments are also included in these financial
statement captions to reflect Carlyles 55% economic
interest in Claren Road and ESG and Carlyles 60% interest
in AlpInvest in the segment results.
127
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(2)
See reconciliation to most directly
comparable U.S. GAAP measure below:
Year Ended December 31, 2010
Total
Carlyle
Reportable
Consolidated
Adjustments(4)
Segments
(Dollars in millions)
$
266.4
$
7.8
$
274.2
1,215.6
(11.5
)
1,204.1
1,482.0
(3.7
)
1,478.3
46.6
94.1
140.7
117.2
476.6
593.8
163.8
570.7
734.5
219.8
(86.3
)
133.5
1,098.4
(488.1
)
610.3
$
1,318.2
$
(574.4
)
$
743.8
$
11.9
$
(1.5
)
$
10.4
60.7
0.5
61.2
$
72.6
$
(1.0
)
$
71.6
Year Ended December 31, 2009
Total
Carlyle
Reportable
Consolidated
Adjustments(4)
Segments
(Dollars in millions)
$
11.1
$
(0.1
)
$
11.0
485.6
(5.9
)
479.7
496.7
(6.0
)
490.7
1.1
2.5
3.6
83.1
155.0
238.1
84.2
157.5
241.7
10.0
(2.6
)
7.4
402.5
(160.9
)
241.6
$
412.5
$
(163.5
)
$
249.0
$
(5.2
)
$
3.5
$
(1.7
)
10.2
(0.8
)
9.4
$
5.0
$
2.7
$
7.7
(4)
Adjustments to performance fees and
investment income (loss) relate to amounts earned from the
Consolidated Funds, which were eliminated in the U.S. GAAP
consolidation but were included in the segment results, and
amounts attributable to non-controlling interests in
consolidated entities, which were excluded from the segment
results. Adjustments to performance fee related compensation
expense relate to the inclusion of partner compensation in the
segment results.
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Year Ended December 31,
2011
2010
2009
(Dollars in millions)
$
514.1
$
819.3
$
400.4
143.9
90.7
16.9
161.5
104.0
(1.0
)
13.6
$
833.1
$
1,014.0
$
416.3
566.0
$
307.2
$
159.7
84.8
12.7
6.9
193.4
22.6
(1.3
)
20.2
$
864.4
$
342.5
$
165.3
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Year Ended December 31,
2011
2010
2009
(Dollars in millions)
$
511.3
$
537.6
$
536.0
31.3
14.9
15.9
34.7
21.5
12.0
577.3
574.0
563.9
952.9
267.3
3.5
(99.3
)
996.3
491.8
853.6
1,263.6
495.3
43.2
4.2
(2.7
)
0.3
40.6
9.5
43.5
44.8
6.8
9.2
14.8
10.8
1,483.6
1,897.2
1,076.8
253.1
237.6
227.4
487.5
136.0
0.6
(47.1
)
524.8
260.6
693.5
898.4
488.6
238.5
168.1
168.0
37.5
11.4
19.8
969.5
1,077.9
676.4
$
514.1
$
819.3
$
400.4
$
57.4
$
171.7
$
159.5
$
413.2
$
602.8
$
234.1
$
43.5
$
44.8
$
6.8
$
566.0
$
307.2
$
159.7
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Year Ended December 31,
2011
2010
(Dollars in millions)
$
847.7
$
1,213.6
5.9
50.0
$
853.6
$
1,263.6
131
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132
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Year Ended December 31,
2010
2009
(Dollars in millions)
$
1,213.6
$
485.4
50.0
9.9
$
1,263.6
$
495.3
As of December 31,
Corporate Private
Equity
2011
2010
2009
Components of Fee-earning
AUM(1)
(Dollars in millions)
$
28,434
$
28,369
$
27,884
9,321
10,267
12,251
241
244
248
$
37,996
$
38,880
$
40,383
1.30%
1.28%
1.32%
1.37%
1.37%
1.43%
(1)
For additional information
concerning the components of fee-earning AUM, please see
Fee-earning Assets under Management.
(2)
Includes certain funds that are
calculated on gross asset value.
(3)
Represents the aggregate effective
management fee rate for each fund in the segment, weighted by
each funds fee-earning AUM, as of the end of each period
presented.
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Twelve Months Ended December 31,
Corporate Private
Equity
2011
2010
2009
Fee-Earning AUM
Rollforward
(Dollars in millions)
$
38,880
$
40,383
$
40,197
979
1,504
907
(1,746
)
(2,502
)
(826
)
(117
)
(505
)
105
$
37,996
$
38,880
$
40,383
(1)
Inflows represent limited partner
capital raised and capital invested by funds outside the
investment period.
(2)
Outflows represent limited partner
distributions from funds outside the investment period and
changes in basis for our carry funds where the investment period
has expired.
(3)
Represents the impact of foreign
exchange rate fluctuations on the translation of our non-USD
funds. Activity during the period is translated at the average
rate for the period. Ending balances are translated at the spot
rate as of the period end.
134
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Available
Fair Value of
Capital
Capital
Total AUM
(Dollars in millions)
$
23,206
$
21,980
$
45,186
89
89
(2,303
)
1,841
(462
)
631
(920
)
(289
)
4,217
4,217
51
51
102
$
21,674
$
27,169
$
48,843
2,258
2,258
(9,163
)
8,830
(333
)
700
(5,350
)
(4,650
)
10,738
10,738
(340
)
(206
)
(546
)
$
15,129
$
41,181
$
56,310
1,604
1,604
(4,980
)
4,662
(318
)
1,532
(12,504
)
(10,972
)
4,604
4,604
43
(206
)
(163
)
$
13,328
$
37,737
$
51,065
(1)
Represents capital raised by our
carry funds, net of expired available capital.
(2)
Represents capital called by our
carry funds, net of fund fees and expenses.
(3)
Represents distributions from our
carry funds, net of amounts recycled.
(4)
Market Appreciation/(Depreciation)
represents realized and unrealized gains (losses) on portfolio
investments.
(5)
Represents the impact of foreign
exchange rate fluctuations on the translation of our non-USD
funds. Activity during the period is translated at the average
rate for the period. Ending balances are translated at the spot
rate as of the period end.
135
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136
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As of December 31, 2011
Total Investments
Realized/Partially Realized Investments(5)
Fund
Cumulative
Total
Cumulative
Total
Inception
Committed
Invested
Fair
Invested
Fair
Date(1)
Capital
Capital(2)
Value(3)
MOIC(4)
Capital(2)
Value(3)
MOIC(4)
(Reported in Local Currency, in Millions)
10/1994
$
1,331.1
$
1,362.4
$
4,064.8
3.0
x
$
1,362.4
$
4,064.8
3.0
x
2/2000
$
3,912.7
$
4,031.7
$
10,042.4
2.5
x
$
3,851.7
$
9,898.0
2.6
x
12/2004
$
7,850.0
$
7,612.6
$
14,021.2
1.8
x
$
3,569.1
$
8,848.0
2.5
x
12/1997
1,003.6
972.0
2,119.5
2.2
x
972.0
2,119.5
2.2
x
9/2003
1,805.4
2,045.4
3,675.7
1.8
x
1,016.5
2,737.4
2.7
x
12/1998
$
750.0
$
627.7
$
2,426.0
3.9
x
$
627.7
$
2,426.0
3.9
x
2/2006
$
1,810.0
$
1,599.1
$
2,352.7
1.5
x
$
305.1
$
1,105.0
3.6
x
10/2001
¥
50,000.0
¥
47,291.4
¥
118,317.0
2.5
x
¥
30,009.4
¥
104,486.3
3.5
x
Various
$
2,838.2
$
4,134.5
1.5
x
$
1,969.8
$
3,288.7
1.7
x
Various
$
6,413.0
$
15,658.4
2.4
x
$
4,095.8
$
12,886.7
3.1
x
$
28,991.4
$
61,709.0
2.1
x
$
18,736.7
$
50,136.0
2.7
x
5/2007
$
13,719.7
$
9,294.4
$
12,593.2
1.4
x
12/2006
5,294.9
3,902.6
4,221.0
1.1
x
5/2008
$
2,551.6
$
1,328.0
$
1,349.9
1.0
x
7/2006
¥
165,600.0
¥
119,539.7
¥
112,152.7
0.9
x
9/2008
$
1,100.2
$
782.7
$
987.0
1.3
x
6/2008
$
1,041.4
$
393.2
$
442.3
1.1
x
Various
$
1,371.1
$
1,753.8
1.3
x
Investment Period
$
19,748.7
$
24,021.8
1.2
x
PRIVATE EQUITY(10)
$
48,740.1
$
85,730.8
1.8
x
$
20,933.9
$
53,660.8
2.6
x
The returns presented herein
represent those of the applicable Carlyle funds and not those of
The Carlyle Group L.P.
(1)
The data presented herein that
provides inception to date performance results of
our segments relates to the period following the formation of
the first fund within each segment. For our Corporate Private
Equity segment our first fund was formed in 1990.
(2)
Represents the original cost of all
capital called for investments since inception of the fund.
(3)
Represents all realized proceeds
combined with remaining fair value, before management fees,
expenses and carried interest. Please see note 4 to the
combined and consolidated financial statements for the years
ended December 31, 2010 and December 31, 2011
appearing elsewhere in this prospectus for further information
regarding managements determination of fair value.
(4)
Multiple of invested capital
(MOIC) represents total fair value, before
management fees, expenses and carried interest, divided by
cumulative invested capital.
(5)
An investment is considered
realized when the investment fund has completely exited, and
ceases to own an interest in, the investment. An investment is
considered partially realized when the total proceeds received
in respect of such investment, including dividends, interest or
other distributions and/or return of capital, represents at
least 85% of invested capital and such investment is not yet
fully realized. Because part of our value creation strategy
involves pursuing best exit alternatives, we believe information
regarding Realized/Partially Realized MOIC, when considered
together with the other investment performance metrics
presented, provides investors with meaningful information
regarding our investment performance by removing the impact of
investments where significant realization activity has not yet
occurred. Realized/Partially Realized MOIC have limitations as
measures of investment performance, and should not be considered
in isolation. Such limitations include the fact that these
measures do not include the performance of earlier stage and
other investments that do not satisfy the criteria provided
above. The exclusion of such investments will have a positive
impact on Realized/Partially Realized MOIC in instances when the
MOIC in respect of such investments are less than the aggregate
MOIC. Our measurements of Realized/Partially Realized MOIC may
not be comparable to those of other companies that use similarly
titled measures. We do not present Realized/Partially Realized
performance information separately for funds that are still in
the investment period because of the relatively insignificant
level of realizations for funds of this type. However, to the
extent such funds have had realizations, they are included in
the Realized/Partially Realized performance information
presented for Total Corporate Private Equity.
137
Table of Contents
(6)
Fully invested funds are past the
expiration date of the investment period as defined in the
respective limited partnership agreement. In instances where a
successor fund has had its first capital call, the predecessor
fund is categorized as fully invested.
(7)
Includes the following funds:
CP I, CMG, CVP I, CVP II, CEVP I, CETP I, CAVP I,
CAVP II, CAGP III and Mexico I.
(8)
Includes co-investments and certain
other stand-alone investments arranged by us.
(9)
Includes the following funds:
MENA I, CSABF I, CUSGF III, CETP II, CBPF, and CEOF.
(10)
For purposes of aggregation, funds
that report in foreign currency have been converted to U.S.
dollars at the spot rate as of the end of the reporting period.
Committed
Capital
Inception to December 31, 2011
Fund
As of
Realized/Partially
Inception
December 31,
Gross
Net
Realized Gross
Date(1)
2011
IRR(2)
IRR(3)
IRR(4)
(Reported in Local Currency, in Millions)
Fully Invested Funds(5)
10/1994
$
1,331.1
34
%
25
%
34
%
2/2000
$
3,912.7
27
%
21
%
27
%
12/2004
$
7,850.0
15
%
12
%
24
%
12/1997
1,003.6
18
%
11
%
18
%
9/2003
1,805.4
40
%
22
%
72
%
12/1998
$
750.0
25
%
18
%
25
%
2/2006
$
1,810.0
10
%
7
%
39
%
10/2001
¥
50,000.0
61
%
37
%
72
%
Various
18
%
7
%
22
%
Various
36
%
32
%
36
%
28
%
21
%
31
%
Period(5)
5/2007
$
13,719.7
15
%
10
%
12/2006
5,294.9
4
%
0
%
5/2008
$
2,551.6
1
%
(7
)%
7/2006
¥
165,600.0
(3
)%
(8
)%
9/2008
$
1,100.2
16
%
9
%
6/2008
$
1,041.4
10
%
(5
)%
Various
13
%
3
%
Investment Period
10
%
4
%
PRIVATE EQUITY(9)
27
%
18
%
31
%
The returns presented herein
represent those of the applicable Carlyle funds and not those of
The Carlyle Group L.P.
(1)
The data presented herein that
provides inception to date performance results of
our segments relates to the period following the formation of
the first fund within each segment. For our Corporate Private
Equity segment, our first fund was formed in 1990.
(2)
Gross Internal Rate of Return
(IRR) represents the annualized IRR for the period
indicated on limited partner invested capital based on
contributions, distributions and unrealized value before
management fees, expenses and carried interest.
(3)
Net IRR represents the annualized
IRR for the period indicated on limited partner invested capital
based on contributions, distributions and unrealized value after
management fees, expenses and carried interest.
(4)
An investment is considered
realized when the investment fund has completely exited, and
ceases to own an interest in, the investment. An investment is
considered partially realized when the total proceeds received
in respect of such investment, including dividends, interest or
other distributions and/or return of capital, represents at
least 85% of invested capital and such investment is not yet
fully realized. Because part of our value creation strategy
involves pursuing best exit alternatives, we believe information
regarding Realized/Partially Realized Gross IRR, when considered
together with the other investment performance metrics
presented, provides investors with meaningful information
regarding our investment performance by removing the impact of
investments where significant realization activity has not yet
occurred. Realized/Partially Realized Gross IRR have limitations
as measures of investment performance, and should not be
considered in isolation. Such limitations include the fact that
these measures do not include the performance of earlier stage
and other investments that do not satisfy the criteria provided
above. The exclusion of such investments will have a positive
impact on Realized/Partially Realized Gross IRR in instances
when the Gross IRR in respect of such investments are less than
the aggregate Gross IRR. Our measurements of Realized/Partially
Realized Gross IRR may not be comparable to those of other
companies that use similarly titled measures. We do not present
Realized/Partially Realized performance information separately
for funds that are still in the investment period because of the
relatively
138
Table of Contents
insignificant level of realizations
for funds of this type. However, to the extent such funds have
had realizations, they are included in the Realized/Partially
Realized performance information presented for Total Corporate
Private Equity.
(5)
Fully invested funds are past the
expiration date of the investment period as defined in the
respective limited partnership agreement. In instances where a
successor fund has had its first capital call, the predecessor
fund is categorized as fully invested.
(6)
Includes the following funds:
CP I, CMG, CVP I, CVP II, CEVP I, CETP I, CAVP I,
CAVP II, CAGP III and Mexico I.
(7)
Includes co-investments and certain
other stand-alone investments arranged by us.
(8)
Includes the following funds:
MENA I, CUSGF III, CETP II, CSABF I, CBPF and CEOF.
(9)
For purposes of aggregation, funds
that report in foreign currency have been converted to U.S.
dollars at the spot rate as of the end of the reporting period.
Year Ended December 31,
2011
2010
2009
(Dollars in millions)
$
150.7
$
144.0
$
150.4
3.2
2.6
1.6
3.5
8.6
1.8
157.4
155.2
153.8
98.0
(2.9
)
5.9
52.5
72.7
(13.6
)
150.5
69.8
(7.7
)
2.1
1.4
0.8
2.7
3.7
0.1
4.8
5.1
0.9
2.0
4.9
14.3
314.7
235.0
161.3
75.3
72.4
74.2
8.4
0.5
2.8
(3.9
)
(1.6
)
(23.5
)
79.8
71.3
53.5
79.8
69.2
84.2
11.2
3.8
6.7
170.8
144.3
144.4
$
143.9
$
90.7
$
16.9
$
(6.9
)
$
14.7
$
3.0
$
146.0
$
70.9
$
13.0
$
4.8
$
5.1
$
0.9
$
84.8
$
12.7
$
6.9
139
Table of Contents
Year Ended
December 31,
2011
2010
(Dollars in millions)
$
146.1
$
82.8
4.4
(13.0
)
$
150.5
$
69.8
140
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141
Table of Contents
Year Ended December 31,
2010
2009
(Dollars in millions)
$
82.8
$
39.2
(13.0
)
(46.9
)
$
69.8
$
(7.7
)
As of December 31,
Real Assets
2011
2010
2009
Components of Fee-earning AUM
(1)
(Dollars in millions)
$
13,005
$
14,155
$
16,750
9,167
8,782
5,796
$
22,172
$
22,937
$
22,546
1.22%
1.28%
1.37%
1.26%
1.35%
1.35%
(1)
For additional information
concerning the components of fee-earning AUM, please see
Fee-earning Assets under Management.
(2)
Includes amounts committed to or
reserved for investments for certain real estate funds.
(3)
Carlyle/Riverstone Global Energy
and Power, L.P., Carlyle/Riverstone Global Energy and Power II,
L.P. Carlyle/Riverstone Global Energy and Power III, L.P.,
Riverstone/Carlyle Global Energy and Power IV, L.P.,
Carlyle/Riverstone Renewable Energy Infrastructure, L.P. and
Riverstone/Carlyle Renewable Energy Infrastructure II, L.P.
(collectively, the Energy Funds), are managed with
Riverstone Holdings LLC and its affiliates. Affiliates of both
Carlyle and Riverstone act as investment advisers to each of the
Energy Funds. With the exception of Riverstone/Carlyle Global
Energy and Power IV, L.P. and Riverstone/Carlyle Renewable
Energy Infrastructure II, L.P., where Carlyle has a minority
representation on the funds management committees,
management of each of the Energy Funds is vested in committees
with equal representation by Carlyle and Riverstone, and the
consent of representatives of both Carlyle and Riverstone are
required for investment decisions. As of December 31, 2011, the
Energy Funds had, in the aggregate, approximately
$17 billion in AUM and $12 billion in fee-earning AUM.
(4)
Represents the aggregate effective
management fee rate for each fund in the segment, weighted by
each funds fee-earning AUM, as of the end of each period
presented.
142
Table of Contents
Twelve Months Ended December 31,
Real Assets
2011
2010
2009
Fee-earning AUM
Rollforward
(Dollars in millions)
$
22,937
$
22,546
$
22,757
2,319
1,375
542
(3,086
)
(788
)
(811
)
2
(196
)
58
$
22,172
$
22,937
$
22,546
(1)
Inflows represent limited partner
capital raised and capital invested by funds outside the
investment period.
(2)
Outflows represent limited partner
distributions from funds outside the investment period and
changes in basis for our carry funds where the investment period
has expired.
(3)
Represents the impact of foreign
exchange rate fluctuations on the translation of our non-U.S.
dollar denominated funds. Activity during the period is
translated at the average rate for the period. Ending balances
are translated at the spot rate as of the period end.
143
Table of Contents
Available
Fair Value of
Capital
Capital
Total AUM
(Dollars in millions)
$
12,914
$
14,364
$
27,278
880
880
(2,992
)
2,791
(201
)
439
(1,089
)
(650
)
276
276
33
100
133
$
11,274
$
16,442
$
27,716
1,400
1,400
(4,955
)
4,745
(210
)
811
(2,136
)
(1,325
)
3,235
3,235
(168
)
(32
)
(200
)
$
8,362
$
22,254
$
30,616
2,075
2,075
(3,519
)
3,301
(218
)
1,407
(5,458
)
(4,051
)
2,386
2,386
(47
)
(89
)
(136
)
$
8,278
$
22,394
$
30,672
(1)
Represents capital raised by our
carry funds, net of expired available capital.
(2)
Represents capital called by our
carry funds, net of fund fees and expenses.
(3)
Represents distributions from our
carry funds, net of amounts recycled.
(4)
Market Appreciation/(Depreciation)
represents realized and unrealized gains (losses) on portfolio
investments.
(5)
Represents the impact of foreign
exchange rate fluctuations on the translation of our non-U.S.
dollar denominated funds. Activity during the period is
translated at the average rate for the period. Ending balances
are translated at the spot rate as of the period end.
144
Table of Contents
145
Table of Contents
As of December 31, 2011
As of December 31, 2011
Total Investments
Realized/Partially Realized Investments(5)
Fund
Cumulative
Total
Cumulative
Total
Inception
Committed
Invested
Fair
Invested
Fair
Date(1)
Capital
Capital(2)
Value(3)
MOIC(4)
Capital(2)
Value(3)
MOIC(4)
(Reported in Local Currency, in Millions)
Fully Invested Funds(6)
11/2000
$
564.1
$
522.5
$
1,269.8
2.4
x
$
451.3
$
1,195.7
2.6
x
12/2004
$
950.0
$
1,186.1
$
1,035.7
0.9
x
$
360.7
$
505.2
1.4
x
11/2006
$
3,000.0
$
3,016.6
$
3,537.6
1.2
x
$
1,353.6
$
1,657.0
1.2
x
3/2002
426.6
517.0
741.5
1.4
x
441.1
745.5
1.7
x
4/2005
762.7
826.9
408.2
0.5
x
296.5
148.9
0.5
x
7/2002
$
1,100.0
$
1,311.9
$
3,368.2
2.6
x
$
681.7
$
2,587.2
3.8
x
10/2005
$
3,800.0
$
3,449.6
$
6,223.7
1.8
x
$
1,275.3
$
3,080.8
2.4
x
Various
$
1,723.7
$
1,761.6
1.0
x
$
905.1
$
1,437.8
1.6
x
Various
$
3,799.6
$
6,478.6
1.7
x
$
1,426.2
$
3,684.5
2.6
x
$
16,746.4
$
25,160.8
1.5
x
$
7,406.9
$
15,303.9
2.1
x
9/2010
$
2,340.0
$
320.5
$
312.0
1.0
x
9/2006
$
1,143.7
$
710.2
$
718.3
1.0
x
5/2007
2,229.5
1,218.1
1,406.2
1.2
x
12/2007
$
5,979.1
$
4,456.5
$
7,099.8
1.6
x
3/2008
$
3,417.5
$
2,219.4
$
2,973.2
1.3
x
Various
$
361.9
$
327.2
0.9
x
$
9,642.5
$
13,247.5
1.4
x
$
26,388.9
$
38,408.3
1.5
x
$
8,687.3
$
17,385.0
2.0
x
The returns presented herein
represent those of the applicable Carlyle funds and not those of
The Carlyle Group L.P.
(1)
The data presented herein that
provides inception to date performance results of
our segments relates to the period following the formation of
the first fund within each segment. For our Real Assets segment,
our first fund was formed in 1997.
146
Table of Contents
(2)
Represents the original cost of all
capital called for investments since inception of the fund.
(3)
Represents all realized proceeds
combined with remaining fair value, before management fees,
expenses and carried interest. Please see Note 4 to the
combined and consolidated financial statements for the years
ended December 31, 2010 and December 31, 2011
appearing elsewhere in this prospectus for further information
regarding managements determination of fair value.
(4)
Multiple of invested capital
(MOIC) represents total fair value, before
management fees, expenses and carried interest, divided by
cumulative invested capital.
(5)
An investment is considered
realized when the investment fund has completely exited, and
ceases to own an interest in, the investment. An investment is
considered partially realized when the total proceeds received
in respect of such investment, including dividends, interest or
other distributions and/or return of capital represents at least
85% of invested capital and such investment is not yet fully
realized. Because part of our value creation strategy involves
pursuing best exit alternatives, we believe information
regarding Realized/Partially Realized MOIC, when considered
together with the other investment performance metrics
presented, provides investors with meaningful information
regarding our investment performance by removing the impact of
investments where significant realization activity has not yet
occurred. Realized/Partially Realized MOIC have limitations as
measures of investment performance, and should not be considered
in isolation. Such limitations include the fact that these
measures do not include the performance of earlier stage and
other investments that do not satisfy the criteria provided
above. The exclusion of such investments will have a positive
impact on Realized/Partially Realized MOIC in instances when the
MOIC in respect of such investments are less than the aggregate
MOIC. Our measurements of Realized/Partially Realized MOIC may
not be comparable to those of other companies that use similarly
titled measures. We do not present Realized/Partially Realized
performance information separately for funds that are still in
the investment period because of the relatively insignificant
level of realizations for funds of this type. However, to the
extent such funds have had realizations, they are included in
the Realized/Partially Realized performance information
presented for Total Real Assets.
(6)
Fully Invested funds are past the
expiration date of the investment period as defined in the
respective limited partnership agreement. In instances where a
successor fund has had its first capital call, the predecessor
fund is categorized as fully invested.
(7)
Includes the following funds:
CRP I, CRP II, CAREP I, ENERGY I and RENEW I.
(8)
Includes Co-Investments, prefund
investments and certain other stand-alone investments arranged
by us.
(9)
Includes the following fund: CAREP
II.
(10)
For purposes of aggregation, funds
that report in foreign currency have been converted to U.S.
dollars at the spot rate as of the end of the reporting period.
Committed
Capital
Inception to December 31, 2011
Fund
As of
Realized/
Inception
December 31,
Gross
Net
Partially Realized
Date(1)
2011
IRR(2)
IRR(3)
Gross IRR(4)
(Reported in Local Currency, in Millions)
11/2000
$
564.1
44
%
30
%
50
%
12/2004
$
950.0
(4
)%
(9
)%
23
%
11/2006
$
3,000.0
6
%
3
%
9
%
3/2002
426.6
14
%
7
%
18
%
4/2005
762.7
(18
)%
(19
)%
(17
)%
7/2002
$
1,100.0
82
%
55
%
111
%
10/2005
$
3,800.0
16
%
12
%
27
%
Various
2
%
(6
)%
18
%
Other(7)
Various
22
%
17
%
32
%
Funds
17
%
10
%
31
%
Investment Period(5)
9/2010
$
2,340.0
n/m
n/m
9/2006
$
1,143.7
10
%
(6
)%
5/2007
2,229.5
6
%
0
%
12/2007
$
5,979.1
29
%
19
%
3/2008
$
3,417.5
21
%
10
%
Various
(6
)%
(11
)%
Investment Period
20
%
10
%
ASSETS(10)
17
%
10
%
29
%
147
Table of Contents
The returns presented herein
represent those of the applicable Carlyle funds and not those of
The Carlyle Group L.P.
(1)
The data presented herein that
provides inception to date performance results of
our segments relates to the period following the formation of
the first fund within each segment. For our Real Assets segment,
our first fund was formed in 1997.
(2)
Gross Internal Rate of Return
(IRR) represents the annualized IRR for the period
indicated on limited partner invested capital based on
contributions, distributions and unrealized value before
management fees, expenses and carried interest.
(3)
Net IRR represents the annualized
IRR for the period indicated on limited partner invested capital
based on contributions, distributions and unrealized value after
management fees, expenses and carried interest.
(4)
An investment is considered
realized when the investment fund has completely exited, and
ceases to own an interest in, the investment. An investment is
considered partially realized when the total proceeds received
in respect of such investment, including dividends, interest or
other distributions and/or return of capital, represents at
least 85% of invested capital and such investment is not yet
fully realized. Because part of our value creation strategy
involves pursuing best exit alternatives, we believe information
regarding Realized/Partially Realized Gross IRR, when considered
together with the other investment performance metrics
presented, provides investors with meaningful information
regarding our investment performance by removing the impact of
investments where significant realization activity has not yet
occurred. Realized/Partially Realized Gross IRR have limitations
as measures of investment performance, and should not be
considered in isolation. Such limitations include the fact that
these measures do not include the performance of earlier stage
and other investments that do not satisfy the criteria provided
above. The exclusion of such investments will have a positive
impact on Realized/Partially Realized Gross IRR in instances
when the Gross IRR in respect of such investments are less than
the aggregate Gross IRR. Our measurements of Realized/Partially
Realized Gross IRR may not be comparable to those of other
companies that use similarly titled measures. We do not present
Realized/Partially Realized performance information separately
for funds that are still in the investment period because of the
relatively insignificant level of realizations for funds of this
type. However, to the extent such funds have had realizations,
they are included in the Realized/Partially Realized performance
information presented for Total Real Assets.
(5)
Fully invested funds are past the
expiration date of the investment period as defined in the
respective limited partnership agreement. In instances where a
successor fund has had its first capital call, the predecessor
fund is categorized as fully invested.
(6)
Includes the following funds:
CRP I, CRP II, CAREP I, ENERGY I and RENEW I.
(7)
Includes co-investments, prefund
investments and certain other stand-alone investments arranged
by us.
(8)
Gross IRR and Net IRR for
CRP VI are not meaningful as the investment period
commenced in September 2010.
(9)
Includes the following fund: CAREP
II.
(10)
For purposes of aggregation, funds
that report in foreign currency have been converted to U.S.
dollars at the spot rate as of the end of the reporting period.
148
Table of Contents
Year Ended December 31,
2011
2010
2009
(Dollars in millions)
$
173.5
$
81.9
$
68.8
3.0
2.3
0.7
0.1
0.9
176.5
84.3
70.4
204.2
9.8
1.6
(92.9
)
135.1
1.5
111.3
144.9
3.1
20.3
4.8
0.2
12.8
16.9
(0.2
)
33.1
21.7
4.0
2.7
2.2
324.9
253.6
75.7
61.7
40.1
38.8
88.4
4.2
0.2
(48.2
)
70.6
1.0
101.9
114.9
40.0
51.0
32.1
32.6
10.5
2.6
4.1
163.4
149.6
76.7
$
161.5
$
104.0
$
(1.0
)
$
57.3
$
12.2
$
(2.9
)
$
71.1
$
70.1
$
1.9
$
33.1
$
21.7
$
$
193.4
$
22.6
$
(1.3
)
149
Table of Contents
Year Ended December 31,
2011
2010
(Dollars in millions)
$
23.7
$
110.8
70.2
17.4
34.1
$
111.3
$
144.9
150
Table of Contents
Year Ended December 31,
2010
2009
(Dollars in millions)
$
110.8
$
2.2
34.1
0.9
$
144.9
$
3.1
151
Table of Contents
As of December 31,
2011
2010
2009
(Dollars in millions)
$
927
$
1,974
$
1,826
1,454
315
409
12,436
11,377
9,379
7,858
4,782
298
511
511
570
$
23,186
$
18,959
$
12,482
1.77%
1.88%
1.60%
(1)
For additional information
concerning the components of fee-earning AUM, please see
Fee-earning Assets under Management.
(2)
Includes funds with fees based on
notional value.
(3)
Represents the aggregate effective
management fee rate for carry funds and hedge funds, weighted by
each funds fee-earning AUM, as of the end of each period
presented. Management fees for CLOs are based on the total par
amount of the assets (collateral) in the fund and are not
calculated as a percentage of equity and are therefore not
included.
Twelve Months Ended December 31,
2011
2010
2009
(Dollars in millions)
$
18,959
$
12,482
$
13,372
3,248
9,604
466
151
39
(448
)
(146
)
(44
)
1,207
(88
)
32
(584
)
(2,534
)
(1,140
)
416
38
129
(78
)
(548
)
94
$
23,186
$
18,959
$
12,482
(1)
Inflows represent limited partner
capital raised by our carry funds and capital invested by our
carry funds outside the investment period.
(2)
Outflows represent limited partner
distributions from our carry funds and changes in basis for our
carry funds where the investment period has expired.
(3)
Represents the net result of
subscriptions to and redemptions from our hedge funds and
open-end structured credit funds.
(4)
Market Appreciation/(Depreciation)
represents changes in the net asset value of our hedge funds and
open-end structured credit funds.
152
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(5)
Represents the impact of foreign
exchange rate fluctuations on the translation of our non-U.S.
dollar denominated funds. Activity during the period is
translated at the average rate for the period. Ending balances
are translated at the spot rate as of the period end.
Available
Fair Value of
Capital
Capital
Total AUM
(Dollars in millions)
$
1,062
$
12,813
$
13,875
(517
)
409
(108
)
155
(250
)
(95
)
32
32
(1,171
)
(1,171
)
642
642
98
98
$
700
$
12,573
$
13,273
10,463
10,463
286
286
(701
)
737
36
640
(905
)
(265
)
(140
)
(140
)
(3,119
)
(3,119
)
551
551
(499
)
(499
)
153
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Available
Fair Value of
Capital
Capital
Total AUM
(Dollars in millions)
$
925
$
19,661
$
20,586
3,374
3,374
436
436
(966
)
928
(38
)
684
(1,314
)
(630
)
1,338
1,338
(1,116
)
(1,116
)
649
649
(86
)
(86
)
$
1,079
$
23,434
$
24,513
(1)
Represents capital raised by our
carry funds, net of expired available capital.
(2)
Represents capital called by our
carry funds, net of fund fees and expenses.
(3)
Represents distributions from our
carry funds, net of amounts recycled.
(4)
Represents the net result of
subscriptions to and redemptions from our hedge funds and
open-end structured credit funds.
(5)
Market Appreciation/(Depreciation)
represents realized and unrealized gains (losses) on portfolio
investments and changes in the net asset value of our hedge
funds.
(6)
Represents the impact of foreign
exchange rate fluctuations on the translation of our non-U.S.
dollar denominated funds. Activity during the period is
translated at the average rate for the period. Ending balances
are translated at the spot rate as of the period end.
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The returns presented herein
represent those of the applicable Carlyle funds and not those of
The Carlyle Group L.P.
(1)
The data presented herein that
provides inception to December 31, 2011
performance results for CSP II relates to the period
following the formation of the fund in June 2007.
(2)
Represents the original cost of
investments net of investment level recallable proceeds which is
adjusted to reflect recyclability of invested capital for the
purpose of calculating the fund MOIC.
(3)
Represents all realized proceeds
combined with remaining fair value, before management fees,
expenses and carried interest. Please see Note 4 to the combined
and consolidated financial statements for the years ended
December 31, 2010 and December 31, 2011 appearing
elsewhere in this prospectus for further information regarding
managements determination of fair value.
(4)
Multiple of invested capital
(MOIC) represents total fair value, before
management fees, expenses and carried interest, divided by
cumulative invested capital.
(5)
Gross Internal Rate of Return
(IRR) represents the annualized IRR for the period
indicated on limited partner invested capital based on
contributions, distributions and unrealized value before
management fees, expenses and carried interest.
(6)
Net IRR represents the annualized
IRR for the period indicated on limited partner invested capital
based on contributions, distributions and unrealized value after
management fees, expenses and carried interest.
1 Year(2)
3-Year(2)
5-Year(2)
Inception(3)
7%
12%
11%
11%
13%
19%
n/a
18%
8%
7%
7%
6%
3%
5%
4%
4%
5%
8%
n/a
8%
2%
3%
4%
3%
1.97
2.41
2.17
2.27
2.52
2.29
n/a
2.15
3.23
2.30
1.33
1.11
The returns presented herein
represent those of the applicable Carlyle funds and not those of
The Carlyle Group L.P.
(1)
Net annualized return is presented
for fee-paying investors only on a total return basis, net of
all fees and expenses.
(2)
As of December 31, 2011.
(3)
The Claren Road Master Fund was
established in January 2006. The Claren Road Opportunities Fund
was established in April 2008. Performance is from
inception through December 31, 2011.
155
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(4)
Volatility is the annualized
standard deviation of monthly net investment returns.
(5)
The Sharpe Ratio compares the
historical excess return on an investment over the risk free
rate of return with its historical annualized volatility.
Period from
July 1, 2011
through
December 31,
2011
$
35.0
35.0
46.2
(55.4
)
(9.2
)
0.3
26.1
14.3
39.5
(48.8
)
5.0
7.5
12.5
$
13.6
$
13.5
$
0.1
$
$
20.2
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As of
December 31,
Fund of Funds
Solutions
2011
Components of Fee-earning
AUM(1)
(Dollars in millions)
$
8,693
18,978
$
27,671
(1)
For additional information
concerning the components of fee-earning AUM, please see
Fee-earning Assets under Management.
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Six Months Ended
December 31,
Fund of Funds
Solutions
2011
Fee-earning AUM
Rollforward
(Dollars in millions)
$
30,956
2,464
(2,380
)
34
(3,403
)
$
27,671
(1)
Inflows represent capital raised
and capital invested by funds outside the investment period.
(2)
Outflows represent distributions
from funds outside the investment period and changes in basis
for our fund of funds vehicles where the investment period has
expired.
(3)
Market Appreciation/(Depreciation)
represents changes in the fair market value of our fund of funds
vehicles.
(4)
Represents the impact of foreign
exchange rate fluctuations on the translation of our non-U.S.
dollar denominated funds. Activity during the period is
translated at the average rate for the period. Ending balances
are translated at the spot rate as of the period end.
Available
Fair Value of
Capital
Capital
Total AUM
(Dollars in millions)
$
$
$
16,926
27,926
44,852
1,290
1,290
(2,601
)
2,390
(211
)
161
(3,321
)
(3,160
)
63
63
(936
)
(1,179
)
(2,115
)
$
14,840
$
25,879
$
40,719
(1)
Represents new active mandates, net
of expired commitments.
(2)
Represents capital called by our
fund investments, secondary investments and co-investments.
(3)
Represents distributions from our
fund investments, secondary investments and co-investments, net
of amounts recycled.
(4)
Market Appreciation/(Depreciation)
represents realized and unrealized gains (losses) on fund
investments, secondary investments and
co-investments.
Fair market values for AlpInvest primary fund investments and
secondary investments are based on the latest available
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valuations of the underlying
limited partnership interests (in most cases as of
September 30, 2011), as provided by their general partners,
plus the net cash flow since the latest valuation, up to and
including December 31, 2011.
(5)
Represents the impact of foreign
exchange rate fluctuations on the translation of our non-U.S.
dollar denominated funds. Activity during the period is
translated at the average rate for the period. Ending balances
are translated at the spot rate as of the period end.
Total Investments
As of December 31, 2011
Cumulative
Vintage
Fund
Invested
Total
Year
Size
Capital(2)
Value(2),(3)
MOIC (2),(4)
2000
5,174.6
3,920.7
6,212.4
1.6
x
2003
4,545.0
4,339.7
5,820.3
1.3
x
2006
11,500.0
8,677.0
9,173.4
1.1
x
2002
519.4
461.5
864.5
1.9
x
2003
998.4
922.9
1,614.7
1.7
x
2006
2,250.0
2,013.8
2,475.5
1.2
x
2003
1,090.0
871.5
2,212.6
2.5
x
2006
2,760.0
2,465.4
1,885.6
0.8
x
2005
700.0
695.9
865.2
1.2
x
Various
1,196.3
1,778.0
1.5
x
25,564.7
32,902.2
1.3
x
2009
4,880.0
685.3
660.2
1.0
x
2010
1,856.4
1,372.9
1,631.4
1.2
x
2010
1,575.0
781.4
718.1
0.9
x
2007
2,000.0
1,265.2
1,520.7
1.2
x
Various
2.0
2.0
1.0
x
4,106.8
4,532.4
1.1
x
29,671.5
37,434.6
1.3
x
$
38,338.5
$
48,369.2
1.3
x
(1)
Includes private equity and
mezzanine primary fund investments, secondary fund investments
and co-investments originated by the AlpInvest team. Excluded
from the performance information shown are a) investments that
were not originated by AlpInvest and b) Direct Investments,
which was spun off from AlpInvest in 2005. As of
December 31, 2011, these excluded investments represent
$0.8 billion of AUM.
159
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(2)
To exclude the impact of foreign
exchange, all foreign currency cash flows have been converted to
Euro at the reporting period spot rate.
(3)
Represents all realized proceeds
combined with remaining fair value, before management fees,
expenses and carried interest. To exclude the impact of foreign
exchange, all foreign currency cash flows have been converted to
Euro at the reporting period spot rate.
(4)
Multiple of invested capital
(MOIC) represents total fair value, before AlpInvest
management fees, fund expenses and AlpInvest carried interest,
divided by cumulative invested capital.
(5)
Fully Committed funds are past the
expiration date of the commitment period as defined in the
respective limited partnership agreement.
(6)
Includes Main
Fund I Secondary Investments, Main
Fund I Co-Investments, Main
Fund I Mezzanine Investments, Main
Fund II Mezzanine Investments, Main Fund
V Secondary Investments, AlpInvest CleanTech Funds
and Funds with private equity fund investments, secondary
investments and co-investments made on behalf of other investors
than AlpInvests two anchor clients.
(7)
For purposes of aggregation, funds
that report in foreign currency have been converted to U.S.
Dollars at the spot rate as of the end of the reporting period.
Inception to
Vintage
December 31, 2011
Year
Fund Size
Gross IRR(2)
Net IRR(3)
2000
5,174.6
13
%
12
%
2003
4,545.0
9
%
9
%
2006
11,500.0
2
%
2
%
2002
519.4
55
%
51
%
2003
998.4
28
%
27
%
2006
2,250.0
8
%
8
%
2003
1,090.0
45
%
42
%
2006
2,760.0
(7
)%
(8
)%
2005
700.0
7
%
7
%
Various
19
%
15
%
10
%
9
%
2009
4,880.0
(6
)%
(10
)%
2010
1,856.4
27
%
26
%
2010
1,575.0
(9
)%
(11
)%
2,000.0
9
%
7
%
Various
(6
)%
(16
)%
9
%
6
%
10
%
9
%
(1)
Includes private equity and
mezzanine primary fund investments, secondary fund investments
and co-investments originated by the AlpInvest team. Excluded
from the performance information shown are a) investments that
were not originated by AlpInvest and b) Direct Investments,
which was spun off from AlpInvest in 2005. As of
December 31, 2011, these excluded investments represent
$0.8 billion of AUM.
(2)
Gross Internal Rate of Return
(IRR) represents the annualized IRR for the period
indicated taking into account investments, divestments
unrealized value before management fees, expenses and carried
interest.
(3)
Net Internal Rate of Return
(IRR) represents the annualized IRR for the period
indicated taking into account investments, divestments and
unrealized value after management fees, expenses and carried
interest.
(4)
Fully Committed funds are past the
expiration date of the commitment period as defined in the
respective limited partnership agreement.
(5)
Includes Main
Fund I Secondary Investments, Main
Fund I Co-Investments, Main
Fund I Mezzanine Investments, Main
Fund II Mezzanine Investments, Main
Fund V Secondary Investments, AlpInvest
CleanTech Funds and Funds with private equity fund investments,
secondary investments and co-investments made on behalf of other
investors than AlpInvests two anchor clients.
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Year Ended December 31,
2011
2010
2009
(Dollars in millions)
$
2,678.0
$
2,877.0
$
418.7
(104.8
)
(185.6
)
(27.5
)
(2,679.0
)
(2,533.4
)
(587.3
)
(1.5
)
(29.2
)
3.4
$
(107.3
)
$
128.8
$
(192.7
)
161
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provide capital to facilitate the growth of our existing
business lines;
provide capital to facilitate our expansion into new,
complementary business lines, including acquisitions;
pay operating expenses, including compensation and other
obligations as they arise;
fund capital expenditures;
repay borrowings and related interest costs and expenses;
pay income taxes;
make distributions to Carlyle Holdings unit holders; and
fund the capital investments of Carlyle in our funds.
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Total Current Equity
Current Equity
Unfunded
Invested and
Invested
Commitment
Unfunded Commitment
(Dollars in millions)
$
1,363.7
$
977.5
$
2,341.2
493.1
259.0
752.1
408.3
161.7
570.0
$
2,265.1
$
1,398.2
$
3,663.3
Accrued
Accrued
Net Accrued
Performance
Giveback
Performance
Fees
Obligation
Fees
(Dollars in millions)
$
1,599.2
$
77.8
$
1,521.4
270.9
57.5
213.4
170.0
1.2
168.8
149.0
149.0
$
2,189.1
$
136.5
$
2,052.6
163
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164
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165
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Weighted
Average
Weighted
Remaining
Borrowing
Average
Maturity
Outstanding
Interest Rate
in Years
(Dollars in millions)
$
10,291.2
1.44%
8.85
417.3
N/A
(1
)
8.54
9.9
N/A
(2
)
9.92
$
10,718.4
(1)
The subordinated notes, income
notes and preferred shares do not have contractual interest
rates, but instead receive distributions from the excess cash
flows of the CLOs.
(2)
The combination notes do not have
contractual interest rates and have recourse only to U.S.
Treasury securities and OATS specifically held to collateralize
such combination notes.
166
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167
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2012
2013-2014
2015-2016
Thereafter
Total
(Dollars in millions)
$
17.5
$
90.0
$
753.4
$
$
860.9
27.5
49.6
35.3
112.4
32.2
43.9
34.0
110.1
43.1
82.2
59.8
133.7
318.8
1,398.2
1,398.2
5.1
541.7
10,171.6
10,718.4
148.3
295.7
289.4
625.6
1,359.0
1,596.5
1,596.5
131.1
131.1
3,394.4
566.5
1,713.6
10,930.9
16,605.4
(5.1
)
(541.7
)
(10,171.6
)
(10,718.4
)
(148.3
)
(295.7
)
(289.4
)
(625.6
)
(1,359.0
)
(1,596.5
)
(1,596.5
)
(131.1
)
(131.1
)
$
1,518.5
$
265.7
$
882.5
$
133.7
$
2,800.4
(a)
These obligations exclude the
$250 million aggregate principal amount of subordinated
notes payable to Mubadala as of December 31, 2011, as these
notes were fully redeemed in March 2012 and, if not
redeemed, would have been converted into additional equity
interests upon consummation of this offering. These obligations
assume that no prepayments are made on outstanding loans, except
for the $10 million outstanding Claren Road loan balance as
of December 31, 2011, which was prepaid in 2012.
(b)
These obligations exclude interest
on the subordinated notes payable to Mubadala. Borrowings on our
revolving credit facility accrue interest at LIBOR plus 1.75%
per annum (2.05% as of December 31, 2011). The interest
rate on the term loan, including the impact of the interest rate
swaps, ranges from 2.83% to 3.50%. Interest payments on
fixed-rate loans are based on rates ranging from 6.0% to 8.0%.
Interest payments assume that no prepayments are made and loans
are held until maturity, except for the interest on the $10
million outstanding Claren Road loan balance as of December 31,
2011, which was prepaid in 2012.
(c)
These obligations represent our
probability-weighted estimate of probable amounts to be paid on
the performance-based contingent consideration obligations
associated with our business acquisitions. The actual amounts to
be paid under these agreements will not be determined until the
specific performance conditions are met. See Note 3 to our
combined and consolidated financial statements included
elsewhere in this prospectus.
(d)
We lease office space in various
countries around the world and maintain our headquarters in
Washington, D.C., where we lease our primary office space
under a non-cancelable lease agreement expiring on July 31,
2026. Our office leases in other locations expire in various
years from 2012 through 2020. The amounts in this table
represent the minimum lease payments required over the term of
the lease.
(e)
These obligations represent
commitments by us to fund a portion of the purchase price paid
for each investment made by our funds. These amounts are
generally due on demand and are therefore presented in the less
than one year category. A substantial majority of these
investments is expected to be funded by senior Carlyle
professionals and other professionals through our internal
co-investment program. Of the remaining $1.4 billion of
commitments, approximately $1.3 billion is expected to be
funded individually by senior Carlyle professionals, operating
executives and other professionals, with the balance funded
directly by the firm.
(f)
These obligations represent amounts
due to holders of debt securities issued by the consolidated CLO
vehicles.
(g)
These obligations represent
interest to be paid on debt securities issued by the
consolidated CLO vehicles. Interest payments assume that no
prepayments are made and loans are held until maturity. For debt
securities with rights only to the residual value of the CLO and
no stated interest, no interest payments were included in this
calculation. Interest payments on variable-rate debt securities
are based on interest rates in effect as of December 31,
2011, at spreads to market rates pursuant to the debt
agreements, and range from 0.02% to 12.65%.
(h)
These obligations represent
commitments of the CLOs and Consolidated Funds to fund certain
investments. These amounts are generally due on demand and are
therefore presented in the less than one year category.
168
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(i)
Our consolidated hedge funds are
subject to quarterly or monthly redemption by investors in these
funds. These obligations represent the amount of redemptions
where the amount requested in the redemption notice has become
fixed and payable.
169
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170
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171
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172
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173
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174
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175
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As of December 31, 2011
Corporate Private
Global Market
Fund of Funds
Equity
Real Assets
Strategies(1)
Solutions
Total
(Dollars, in millions)
$
12,342
$
4,270
$
2,426
$
20
$
19,058
251
287
(1,618
)
777
(303
)
24,173
18,753
13,332
25,082
81,340
$
36,766
$
23,310
$
14,140
$
25,879
$
100,095
971
(916
)
9,294
9,349
37,737
22,394
23,434
25,879
109,444
13,328
8,278
1,079
14,840
37,525
$
51,065
$
30,672
$
24,513
$
40,719
$
146,969
(1)
Negative Fair Value amounts relate
to shorts and derivative instruments in our hedge funds.
Corresponding cash collateral amounts have been included in
Other Net Asset Value.
176
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177
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178
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179
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10% Increase in Total
10% Decrease in Total
Remaining Fair Value
Remaining Fair Value
(Dollars in Millions)
$
490.8
$
(746.4
)
75.7
(89.9
)
66.8
(30.6
)
75.2
(43.7
)
$
708.5
$
(910.6
)
10% Increase in Level III
10% Decrease in Level III
Remaining Fair Value
Remaining Fair Value
(Dollars in Millions)
$
265.3
$
(483.5
)
57.3
(71.4
)
57.0
(7.2
)
75.1
(43.6
)
$
454.7
$
(605.7
)
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Total Assets Under Management,
Percentage Amount
Excluding Available Capital
Classified as Level
Commitments
III Investments
(Dollars in millions)
$
37,737
64
%
$
22,394
84
%
$
23,434
57
%
$
25,879
97
%
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The acquisition by Carlyle Group in July 2011 of a 60% equity
interest in AlpInvest, one of the worlds largest investors
in private equity which advises a global private equity and
mezzanine fund of funds program and related co-investment and
secondary activities.
The acquisition by Carlyle Group in July 2011 of a 55% interest
in ESG, an emerging markets equities and macroeconomic
strategies investment manager.
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the restructuring of certain beneficial interests in investments
in or alongside our funds that were funded by certain existing
and former owners of the Parent Entities indirectly through the
Parent Entities, such that the Parent Entities will
(i) distribute a portion of these interests so that they
are held directly by such persons and are no longer consolidated
in our financial statements, and (ii) restructure the
remainder of these interests so that they are reflected as
non-controlling interests in our financial statements;
the redemption in March 2012 using borrowings on the revolving
credit facility of our existing senior secured credit facility
of the remaining $250 million aggregate principal amount of
the subordinated notes. As a result of this redemption and the
preceding redemption in October 2011 of $250 million
aggregate principal amount of the subordinated notes, all of the
subordinated notes have been fully redeemed;
the restructuring of certain carried interest rights allocated
to retired senior Carlyle professionals so that such carried
interest rights will be reflected as non-controlling interests
in our financial statements. Our retired senior Carlyle
professionals who have existing carried interests rights through
their ownership in the Parent Entities will not participate in
the transactions described in Reorganization and Offering
Transactions under Organizational Structure. The
carried interest rights held by these individuals will be
restructured such that they will exchange their existing carried
interest rights (through their ownership interests in the Parent
Entities) for an equivalent amount of carried interest rights in
the general partners of our funds. The individuals maintain the
same carried interest rights before and after this
restructuring, and no consideration in any form is being
provided to them;
the reallocation of carried interest to senior Carlyle
professionals and other individuals who manage our carry funds,
such that the allocation to these individuals will be
approximately 45% of all carried interest on a blended average
basis, with the exception of the Riverstone funds, where Carlyle
will retain essentially all of the carry to which we are
entitled under our arrangements for those funds;
an adjustment to reflect compensation attributable to our senior
Carlyle professionals as compensation expense rather than as
distributions from equity, as well as an adjustment to
reclassify the liability for amounts owed to our senior Carlyle
professionals from due to Carlyle partners to accrued
compensation and benefits; and
a provision for corporate income taxes on the income of The
Carlyle Group L.P.s wholly-owned subsidiaries that will be
taxable for U.S. income tax purposes, which we refer to as
the corporate taxpayers.
a distribution that our Parent Entities will make to their
owners of previously undistributed earnings totaling
$28.0 million;
an adjustment to reflect compensation expense related to the
issuance and vesting of Carlyle Holdings partnership units as
part of the Carlyle Holdings formation;
an adjustment to reflect compensation expense related to the
grant and vesting of the deferred restricted common units of The
Carlyle Group L.P. and the phantom deferred restricted common
units, which will be granted to our employees at the time of
this offering;
183
Table of Contents
the issuance of 30,500,000 common units in this offering at an
assumed initial public offering price of $24.00 per common unit,
less estimated underwriting discounts and the payment of
offering expenses by Carlyle Holdings;
the purchase by The Carlyle Group L.P.s wholly-owned
subsidiaries of newly-issued Carlyle Holdings partnership units
for cash with the proceeds from this offering; and
the application by Carlyle Holdings of a portion of the proceeds
from this offering to repay outstanding indebtedness, as
described in Use of Proceeds.
184
Table of Contents
As of December 31, 2011
Carlyle
Holdings
Pro Forma
Adjustments
The Carlyle
Carlyle Group
Reorganization
Carlyle
As Adjusted
for Non-
Group L.P.
Combined
and Other
Holdings
Offering
for the
Controlling
Consolidated
Historical
Adjustments(1)
Pro Forma
Adjustments(2)
Offering
Interests(3)
Pro Forma
(Dollars in millions)
$
509.6
$
509.6
$
676.2
(a)
$
536.9
$
536.9
(28.0
)(c)
(620.9
)(d)
566.6
566.6
566.6
566.6
24.6
24.6
24.6
24.6
89.2
89.2
89.2
89.2
2,644.0
$
(64.9
)
(a
)
2,579.1
2,579.1
2,579.1
19,507.3
19,507.3
19,507.3
19,507.3
287.0
(23.6
)
(a
)
263.4
263.4
263.4
287.6
287.6
287.6
287.6
52.7
52.7
52.7
52.7
70.2
70.2
70.2
70.2
594.9
594.9
594.9
594.9
18.0
18.0
(b)
18.0
18.0
$
24,651.7
$
(88.5
)
$
24,563.2
$
27.3
$
24,590.5
$
$
24,590.5
$
860.9
$
260.0
(b
)
$
1,120.9
$
(620.9
)(d)
$
500.0
$
500.0
262.5
(262.5
)
(b
)
9,689.9
21.0
(a
)
9,710.9
9,710.9
9,710.9
203.4
203.4
203.4
203.4
577.9
1,015.9
(c
)
1,435.6
1,435.6
1,435.6
(158.2
)
(d
)
1,015.9
(1,015.9
)
(c
)
108.5
108.5
108.5
108.5
89.2
89.2
89.2
89.2
48.3
48.3
9.9
(b)
58.2
58.2
568.1
568.1
568.1
568.1
136.5
136.5
136.5
136.5
13,561.1
(139.7
)
13,421.4
(611.0
)
12,810.4
12,810.4
1,923.4
1,923.4
1,923.4
1,923.4
873.1
(203.3
)
(a
)
751.9
676.2
(a)
1,390.2
$
(1,207.7
)(a)
182.5
2.5
(b
)
(9.9
)(b)
266.0
(d
)
(28.0
)(c)
(107.8
)
(d
)
(78.6
)
(e
)
(55.8
)
(55.8
)
(55.8
)
(55.8
)
817.3
(121.2
)
696.1
638.3
1,334.4
(1,207.7
)
126.7
853.7
9.0
(a
)
862.7
862.7
862.7
7,496.2
84.8
(a
)
7,659.6
7,659.6
7,659.6
78.6
(e
)
1,207.7
(a)
1,207.7
9,167.2
51.2
9,218.4
638.3
9,856.7
9,856.7
$
24,651.7
$
(88.5
)
$
24,563.2
$
27.3
$
29,590.5
$
$
24,590.5
185
Table of Contents
as of December 31, 2011
1.
Reorganization
and Other Adjustments
(a)
Reflects the restructuring of certain beneficial interests in
investments in or alongside our funds (including a note
receivable), that were funded by certain existing and former
owners of the Parent Entities indirectly through the Parent
Entities. As part of the Reorganization, approximately $118.5
million of these interests at December 31, 2011 will be
distributed so that they are held directly by such persons and
are no longer consolidated in our financial statements, and
approximately $84.8 million of these interests at December 31,
2011 will be restructured so that they will be reported as
non-controlling interests in our financial statements. The
combined effect is a $203.3 million reduction to our
members equity.
Historically, these beneficial interests were funded through
capital contributions to the Parent Entities, which were then
invested into the respective fund. Accordingly, in the
historical financial statements of Carlyle Group, these
beneficial interests were included in the captions
investments and accrued performance fees, due
from affiliates and other receivables, net and
members equity on the Carlyle Group balance
sheet, and investment income/losses on such interests were
included in investment income (loss), interest
and other income and net income attributable to
Carlyle Group on the Carlyle Group statement of operations.
For the beneficial interests to be distributed that will be held
directly by such persons, a pro forma adjustment has been
recorded to decrease investments, due from affiliates, and
members equity, as such interests will be distributed from
the Parent Entities to the beneficial owners. Included in the
distributed beneficial interests were $30.0 million of
interests in our CLOs that are included in our Consolidated
Funds; in the Carlyle Group historical combined and consolidated
financial statements, these investments (in the form of debt
securities issued by the CLO or equity interests in the CLO) had
been eliminated against the related liability or equity recorded
by the consolidated CLO. For these interests in consolidated
CLOs, the pro forma adjustment results in increases to loans
payable of Consolidated Funds and equity appropriated for
Consolidated Funds (as the aforementioned elimination is no
longer applicable after the debt securities or equity interests
are held directly by the beneficial owner) and a decrease to
members equity to reflect the distribution of the interest.
For the restructured beneficial interests that will be reflected
as non-controlling interests totaling $84.8 million at
December 31, 2011, a pro forma adjustment has been recorded
to decrease members equity and increase non-controlling
interests in consolidated entities, as such interests have been
distributed from the Parent Entities to a legal entity that is
not consolidated by Carlyle Holdings. The underlying investment
(asset) related to those interests continues to be held by a
consolidated subsidiary of Carlyle Holdings and the beneficial
interests held by the non-consolidated legal entity are
interests directly in the consolidated subsidiary.
186
Table of Contents
The pro forma adjustments are based on the carrying amounts of
these beneficial interests in the historical financial
statements. The following table summarizes the pro forma impact
for the restructured beneficial interests (amounts in millions):
Non-controlling
Due from
Equity appropriated
interests in
affiliates and other
Loans payable of
for Consolidated
consolidated
Investments
receivables, net
Consolidated Funds
Members equity
Funds
entities
$
$
$
21.0
$
(30.0
)
$
9.0
$
(64.9
)
(23.6
)
(88.5
)
(84.8
)
84.8
$
(64.9
)
$
(23.6
)
$
21.0
$
(203.3
)
$
9.0
$
84.8
(b)
Reflects the redemption in March 2012 of the remaining $250
million aggregate principal amount of the subordinated loan
payable to affiliate for a redemption price of
$260.0 million. There was no accrued interest liability at
December 31, 2011 on the subordinated loan payable to affiliate.
The redemption was funded through borrowings on the revolving
credit facility of Carlyle Groups existing senior secured
credit facility. This transaction resulted in a non-recurring
gain of $2.5 million, representing the difference between the
fair value of the subordinated notes at December 31, 2011 of
$262.5 million and the redemption value of $260.0 million. As a
result of this redemption and the preceding redemption in
October 2011 of $250 million aggregate principal amount of the
subordinated notes, all of the subordinated notes have been
fully redeemed.
(c)
Reflects the reclassification of amounts owed to senior Carlyle
professionals to accrued compensation and benefits. Prior to the
Reorganization and this offering, the entities that comprise
Carlyle Group have been partnerships or limited liability
companies, and our senior Carlyle professionals were part of the
ownership group of those entities. In the historical financial
statements, the liability to senior Carlyle professionals for
amounts owed to them (primarily compensation and performance fee
related compensation) was reported separately from compensation
amounts owed to other Carlyle employees. Subsequent to the
Reorganization, the liability for compensation amounts owed to
senior Carlyle professionals and other Carlyle employees will be
aggregated on our balance sheet.
(d)
Reflects the reallocation of carried interest to senior Carlyle
professionals and other individuals who manage our carry funds,
such that the allocation to these individuals will be
approximately 45% of all carried interest on a blended average
basis, with the exception of the Riverstone funds, where Carlyle
will retain essentially all of the carry to which we are
entitled under our arrangements for those funds. As part of the
Reorganization, our senior Carlyle professionals and other
individuals who manage our carry funds will contribute to
Carlyle
187
Table of Contents
Holdings a portion of the equity interests they own in the
general partners of our existing carry funds in exchange for an
equivalent fair value of Carlyle Holdings partnership units.
Historically, these allocations of carried interest were
accounted for as compensatory profit sharing arrangements. This
adjustment reduces accrued compensation as of December 31,
2011 and increases members equity, to reflect the
elimination of the compensation liability through the issuance
of Carlyle Holdings partnership units in the exchange. As of
December 31, 2011, the compensation liability related to
this exchange was $158.2 million. The fair value of the
Carlyle Holdings partnership units issued in this transaction
will exceed the carrying value of the liability, resulting in a
loss on the exchange of $107.8 million. As the loss on the
exchange represents a material non-recurring charge, it has been
excluded from the unaudited condensed combined and consolidated
pro forma statement of operations for the year ended December
31, 2011. The pro forma increase to members equity related
to the issuance of the Carlyle Holdings partnership units less
the decrease to members equity for the loss on the
exchange results in a net pro forma increase to members
equity of $158.2 million. The amounts for this adjustment have
been derived from our historical results.
(e)
Reflects the restructuring of ownership of certain carried
interest rights allocated to retired senior Carlyle
professionals so that such carried interest rights will be
reflected as non-controlling interests. Our retired senior
Carlyle professionals who have existing carried interests rights
through their ownership in the Parent Entities will not
participate in the transactions described in Reorganization and
Offering Transactions under Organizational
Structure. The carried interest rights held by these
individuals will be restructured such that they will exchange
their existing carried interest rights (through their ownership
interests in the Parent Entities) for an equivalent amount of
carried interest rights directly in the consolidated general
partners of our funds. The individuals maintain the same carried
interest rights before and after this restructuring, and no
consideration in any form is being provided to them.
Historically, these interests were reflected within
members equity on the Carlyle Group balance
sheet, as these interests existed through the individuals
ownership interests in the Parent Entities, and the income
attributable to these carried interest rights was included in
net income attributable to Carlyle Group on the
Carlyle Group statement of operations because their interests
were part of the controlling interest in Carlyle Group. The
amounts for this adjustment have been derived from our
historical results. At December 31, 2011, the carrying
value of these restructured carried interest rights was
approximately $78.6 million. This adjustment has been
recorded to reclassify this balance from members equity to
non-controlling interests in consolidated entities.
2.
Offering
Adjustments
(a)
Reflects net proceeds of $676.2 million from this offering
through the issuance of 30,500,000 common units at an
assumed initial public offering price of $24.00 per common unit
(the midpoint of the range indicated on the front cover of this
prospectus), less estimated underwriting discounts of
$36.6 million, with a corresponding increase to
members equity. The net cash proceeds reflect a reduction
of $19.2 million for expenses of the offering that Carlyle
Holdings will bear or reimburse to The Carlyle Group L.P. See
note 3(a).
(b)
Reflects an adjustment to record deferred tax assets
(liabilities) for outside tax basis differences created as a
result of Carlyle Holdings I GP Inc.s investment in
Carlyle Holdings I L.P. In connection with the offering, Carlyle
Holdings I GP Inc. will use offering
188
Table of Contents
proceeds to purchase its interest in Carlyle Holdings I L.P. As
a result of the dilution that will occur from the purchase of
interests in Carlyle Holdings I L.P. at a valuation in excess of
the proportion of the book value of net assets acquired, there
will be a tax basis difference associated with this investment.
This adjustment is recorded to recognize the deferred tax assets
(liabilities) for the difference between Carlyle Holdings I GP
Inc.s tax basis and its GAAP basis related to its
investment to the extent such differences are expected to
reverse in the foreseeable future. The following table
summarizes the pro forma adjustment as of December 31, 2011
(Dollars in millions):
(1
)
$
250.7
(2
)
24.8
225.9
(252.0
)
(3
)
(26.1
)
37.8
%
$
(9.9
)
(1)
Tax-basis of investment is assumed
to equal the offering proceeds used by Carlyle Holdings I GP
Inc. to purchase its interests in Carlyle Holdings I L.P.
(2)
The GAAP-basis of Carlyle Holdings
I GP Inc.s investment in Carlyle Holdings I L.P. will be
adjusted for the immediate dilution that occurs as a result of
Carlyle Holdings I GP Inc.s purchase of interests in
Carlyle Holdings I L.P. at a valuation in excess of the
proportion of the book value of net assets acquired.
(3)
A deferred tax asset (liability)
will only be provided for those differences that are expected to
reverse in the foreseeable future.
(c)
Reflects the effect of a distribution to our existing owners of
cash representing undistributed earnings generated by the Parent
Entities prior to the date of the offering in an aggregate
amount of $28.0 million.
(d)
Reflects the use of a portion of the proceeds from this offering
to: (i) repay the outstanding principal amount of the loans
associated with the Claren Road acquisition of
$40.0 million and $10.0 million as of
December 31, 2011, which mature on December 31, 2015
and January 3, 2017 and bear interest at 6.0% and 8.0%,
respectively, and (ii) repay $570.9 million of the
outstanding indebtedness under the revolving credit facility of
Carlyle Groups existing senior secured credit facility
(representing the pro forma outstanding balance as of
December 31, 2011), which matures on September 30,
2016 and currently bears interest at a rate equal to, at our
option, either (a) at an alternate base rate plus an
applicable margin not to exceed 0.75%, or (b) at LIBOR plus
an applicable margin not to exceed 1.75% (2.05% at
December 31, 2011).
3.
Adjustments
for Non-Controlling Interests
(a)
Our existing owners will contribute to Carlyle Holdings their
interests in the Parent Entities and a portion of the equity
interests they own in the general partners of our existing
investment funds and other entities that have invested in or
alongside our funds in exchange for partnership units in Carlyle
Holdings. The exchange is structured as a fair value exchange
where the existing owners will exchange their interests in the
Parent Entities and general partners for an equivalent fair
value of Carlyle Holdings partnership units. Each existing owner
will receive a number of Carlyle Holdings partnership units that
is based on his/her individual interest in the Parent Entities
and general partners, but in each case the individual will
receive an equal number of partnership units in each of the
three Carlyle Holdings partnerships.
189
Table of Contents
We will operate and control all of the business and affairs of
Carlyle Holdings and will consolidate the financial results of
Carlyle Holdings and its subsidiaries. The ownership interests
of the existing owners in Carlyle Holdings will be reflected as
a non-controlling interest in our financial statements. The
following table summarizes the pro forma adjustment for
non-controlling interests in Carlyle Holdings as of
December 31, 2011 (Dollars in millions):
(1
)
$
696.1
(2
)
(28.0
)
(3
)
(136.6
)
(4
)
695.4
(5
)
(19.2
)
$
1,207.7
(1)
Represents the pro forma total
members equity for Carlyle Holdings prior to the impact of
the Offering Adjustments. Prior to the offering transactions,
all of the members equity of Carlyle Holdings is owned by
the existing owners and would be classified as non-controlling
interests in The Carlyle Group L.P. consolidated financial
statements.
(2)
See note 2(c).
(3)
Reflects our use of the assumed net
proceeds from the issuance of the common units in this offering
to purchase newly issued Carlyle Holdings partnership units.
Assuming the underwriters do not exercise their option to
purchase additional common units from us, we will directly and
indirectly own 10.0% of the outstanding Carlyle Holdings
partnership units upon the completion of this offering and the
balance of the outstanding Carlyle Holdings partnership units
will be owned by the existing owners.
We account for this portion of the
Reorganization as a change in a parents ownership interest
while retaining control; accordingly, we account for the cost of
the Carlyle Holdings interests purchased as a reduction of
non-controlling interests in Carlyle Holdings. The cost of
interests purchased is $136.6 million, which is calculated
as our share of the Carlyle Holdings pro forma members
equity as adjusted for the offering of $1,334.4 million.
(4)
Reflects the proceeds from the
issuance of the common units in this offering of
$732.0 million, less estimated underwriting discounts of
$36.6 million, which will be used to purchase the newly
issued Carlyle Holdings partnership units. Because we will
purchase the interests in Carlyle Holdings at a valuation in
excess of the proportion of the book value of net assets
acquired, we will incur an immediate dilution of approximately
$558.8 million, which is calculated as the net proceeds
used by us to purchase the newly issued Carlyle Holdings
partnership units of $695.4 million less the book value of
such interests of $136.6 million. This dilution (the net
impact of (3) and (4) herein) is reflected within
members equity as a reallocation from members equity
to non-controlling interests in Carlyle Holdings. See
Organizational Structure Offering
Transactions and Use of Proceeds.
In connection with the
Reorganization, we will enter into an exchange agreement with
the limited partners of the Carlyle Holdings partnerships. Under
the exchange agreement, subject to the applicable vesting and
minimum retained ownership requirements and transfer
restrictions, each holder of Carlyle Holdings partnership units
(and certain transferees thereof), other than the subsidiaries
of The Carlyle Group L.P., may up to four times a year, from and
after the first anniversary of the date of the closing of this
offering (subject to the terms of the exchange agreement),
exchange these partnership units for The Carlyle Group L.P.
common units on a
one-for-one
basis, subject to customary conversion rate adjustments for
splits, unit distributions and reclassifications. In addition,
subject to certain requirements, Mubadala and CalPERS will
generally be permitted to exchange Carlyle Holdings partnership
units for common units from and after the closing of this
offering. Any common units received by Mubadala and CalPERS in
any such exchange during the applicable restricted periods
described in Common Units Eligible For Future
Sale
Lock-Up
Arrangements Mubadala Transfer Restrictions
and Common Units Eligible For Future Sale
Lock-Up Arrangements CalPERS Transfer
Restrictions, respectively, would be subject to the
restrictions described in such sections. Under the exchange
agreement, to effect an exchange a holder of partnership units
in Carlyle Holdings must simultaneously exchange one partnership
unit in each of the Carlyle Holdings partnerships. No such
exchanges have been assumed in the calculation of the pro forma
adjustment for non-controlling interests.
(5)
See note 2(a).
190
Table of Contents
For the Year Ended December 31, 2011
Carlyle
Carlyle
Holdings
Carlyle
Group
Pro Forma
Adjustments
The Carlyle
Group
Including
Reorganization
Carlyle
As Adjusted
for Non-
Group L.P.
Combined
Business
the Business
and Other
Holdings
Offering
for the
Controlling
Consolidated
Historical
Acquisitions(1)
Acquisitions
Adjustments(2)
Pro Forma
Adjustments(3)
Offering
Interests(4)
Pro Forma
(Dollars in millions, except per unit data)
$
915.5
$
46.7
$
962.2
$
962.2
$
962.2
$
962.2
1,307.4
18.2
1,325.6
1,325.6
1,325.6
1,325.6
(185.8
)
59.7
(126.1
)
(126.1
)
(126.1
)
(126.1
)
1,121.6
77.9
1,199.5
1,199.5
1,199.5
1,199.5
65.1
65.1
$
(29.1
)(a)
36.0
36.0
36.0
13.3
0.4
13.7
(2.8
)(a)
10.9
10.9
10.9
78.4
0.4
78.8
(31.9
)
46.9
46.9
46.9
15.8
1.8
17.6
(0.4
)(a)
17.2
17.2
17.2
714.0
71.9
785.9
785.9
785.9
785.9
2,845.3
198.7
3,044.0
(32.3
)
3,011.7
3,011.7
3,011.7
Base compensation
374.5
28.2
402.7
234.5
(b)
637.2
$
273.4
(a)
910.6
910.6
225.7
7.9
233.6
429.7
(b)
663.3
663.3
663.3
(122.3
)
34.0
(88.3
)
(75.0
)(b)
(163.3
)
(163.3
)
(163.3
)
477.9
70.1
548.0
589.2
1,137.2
273.4
1,410.6
1,410.6
240.4
14.9
255.3
255.3
255.3
255.3
83.1
10.4
93.5
93.5
93.5
93.5
60.6
3.4
64.0
(22.9
)(c)
41.1
(14.9
)(b)
26.2
26.2
453.1
43.9
497.0
497.0
497.0
497.0
32.0
32.0
14.1
(b)
17.6
17.6
17.6
(28.5
)(c)
1,347.1
142.7
1,489.8
551.9
2,041.7
258.5
2,300.2
2,300.2
(323.3
)
560.7
237.4
0.4
(a)
237.8
237.8
237.8
7.9
7.9
7.9
7.9
7.9
1,182.8
616.7
1,799.5
(583.8
)
1,215.7
(258.5
)
957.2
957.2
28.5
15.8
44.3
6.5
(d)
50.8
50.8
50.8
1,154.3
600.9
1,755.2
(590.3
)
1,164.9
(258.5
)
906.4
906.4
(202.6
)
568.1
365.5
44.6
(f)
410.1
410.1
410.1
754.8
(258.5
)
496.3
496.3
$
446.6
(a)
446.6
$
1,356.9
$
32.8
$
1,389.7
$
(634.9
)(f)
$
754.8
$
(258.5
)
$
496.3
$
(446.6
)(a)
$
49.7
$
1.63
(5a)
$
1.50
(5a)
30,500,000
(5a)
33,054,472
(5a)
191
Table of Contents
1.
Business
Acquisitions
192
Table of Contents
AlpInvest
ESG
Pro Forma
Consolidated
Consolidated
Acquisition
Total Business
Historical
Historical
Adjustments
Acquisitions
(Dollars in millions)
$
37.9
$
8.8
$
$
46.7
18.1
0.1
18.2
40.4
19.3
59.7
58.5
19.4
77.9
0.4
0.4
0.4
0.4
1.5
0.2
0.1
(a)
1.8
69.6
2.3
71.9
167.5
31.1
0.1
198.7
26.0
4.6
(2.4
)(b)
28.2
12.0
0.1
(4.2
)(b)
7.9
43.8
2.4
(12.2
)(b)
34.0
81.8
7.1
(18.8
)
70.1
9.1
5.8
14.9
0.4
10.0
(c)
10.4
1.5
1.9
(d)
3.4
36.6
7.3
43.9
129.4
20.2
(6.9
)
142.7
525.5
35.2
560.7
563.6
46.1
7.0
616.7
16.4
0.4
(1.0
)(e)
15.8
547.2
45.7
8.0
600.9
529.5
22.6
16.0
(f)
568.1
$
17.7
$
23.1
$
(8.0
)
$
32.8
(a)
This adjustment reflects interest income on loans issued by
Carlyle Group in conjunction with the AlpInvest acquisition of
$1.7 million at its contractual annual interest rate of 7%.
(b)
In conjunction with the Business Acquisitions, certain employees
were admitted as senior Carlyle professionals. The entities that
comprise Carlyle Group are partnerships or limited liability
companies. Accordingly, all payments to our senior Carlyle
professionals have been accounted for as distributions from
members equity rather than as compensation expenses in the
historical Carlyle Group financial statements. Accordingly, this
adjustment reduces the historical compensation expenses of the
Business Acquisitions for the amounts associated with those
employees who are senior Carlyle professionals. Following this
offering, we intend to account for compensation payments to our
senior Carlyle professionals as compensation expenses. The
amounts in this pro forma acquisition adjustment are included in
that compensation pro forma adjustment (See note 2(b)).
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Table of Contents
(c)
This adjustment reflects the amortization expense associated
with intangible assets acquired from the Business Acquisitions.
The acquisition of AlpInvest included approximately
$72.0 million of intangible assets with an estimated useful
life of ten years. Amortization of the AlpInvest intangible
assets of $3.6 million for the six months ended
June 30, 2011 has been included in the pro forma adjustment.
The acquisition of ESG included approximately $89 million
of intangible assets with an estimated useful life of seven
years. Amortization of the ESG intangible assets of
$6.4 million for the six months ended June 30, 2011
has been included in the pro forma adjustment.
(d)
This adjustment reflects interest expense on Carlyle
Groups borrowing of 81.0 million
($116.6 million) on the revolving credit facility of its
existing senior secured credit facility to finance the AlpInvest
acquisition. The variable interest rate applied to the borrowing
during the period presented ranged from 3.05% to 3.48%.
(e)
This adjustment reflects the expected reduction of the deferred
tax liabilities associated with the amortization of identifiable
intangible assets arising from the AlpInvest and ESG
acquisitions. The deferred tax liabilities will be reduced over
the same period as the related identifiable intangible assets
(see note (c) above) are amortized. The pro forma reduction
of the AlpInvest deferred tax liabilities was $0.8 million
for the six months ended June 30, 2011. The pro forma
reduction of the ESG deferred tax liabilities was
$0.2 million for the six months ended June 30, 2011.
(f)
This adjustment reflects the allocation of the pro-forma net
income for the periods presented to the 40% non-controlling
interests in AlpInvest. This adjustment allocates to the
non-controlling interests 40% of the historical income
attributable to the controlling interest for AlpInvest, 40% of
the pro forma acquisition adjustments attributable to AlpInvest,
and 100% of all carried interest income in respect of the
historical investments and commitments to the AlpInvest fund of
funds vehicles that existed as of December 31, 2010. The
table below summarizes the components of this adjustment
(Dollars in millions):
$
17.7
(4.5
)
18.3
(3.6
)
0.8
28.7
40
%
11.5
4.5
$
16.0
(g)
The controlling interest represents AlpInvest for the AlpInvest
consolidated historical financial statements and ESG for the ESG
consolidated historical financial statements.
2.
Reorganization
and Other Adjustments
(a)
This adjustment reflects the restructuring of certain beneficial
interests in investments in or alongside our funds (including a
note receivable) that were funded by certain existing and
formers owners of the Parent Entities indirectly through the
Parent Entities. As part of the Reorganization, certain
interests will be distributed so that they are held directly by
such persons and are no longer consolidated in our financial
statements, and certain other interests will be restructured so
that they will be reported as non-controlling interests.
194
Table of Contents
Historically, these beneficial interests were funded through
capital contributions to the Parent Entities, which were then
invested into the respective fund. Accordingly, in the
historical financial statements of Carlyle Group, these
beneficial interests were included in the captions
investments and accrued performance fees, due
from affiliates and other receivables, net and
members equity on the Carlyle Group balance
sheet, and investment income/losses on such interests were
included in investment income (loss), interest
and other income and net income attributable to
Carlyle Group on the Carlyle Group statement of operations.
For the beneficial interests to be distributed so that will be
held directly by such persons, a pro forma adjustment has been
recorded to eliminate the historical investment income
associated with the investments with a corresponding decrease to
net income attributable to Carlyle Group as they are no longer
investments of Carlyle Holdings. Included in the distributed
beneficial interests were certain interests in our CLOs that are
included in our Consolidated Funds; in the Carlyle Group
historical combined and consolidated financial statements, the
investment income/loss on those interests had been eliminated
against the related gain/loss recorded by the Consolidated Fund.
For these interests in consolidated CLOs, the pro forma
adjustment results in an adjustment to net investment gains
(losses) of Consolidated Funds (as the aforementioned
elimination is no longer applicable after the interest is held
directly by the beneficial owner).
For the beneficial interests that will be reflected as
non-controlling interests, a pro forma adjustment has been
recorded to reclassify the income attributable to the
restructured interests to income attributable to non-controlling
interests in consolidated entities from income attributable to
Carlyle Group. The underlying investment related to those
interests continues to be held by a consolidated subsidiary of
Carlyle Holdings and the beneficial interests are interests
directly in the consolidated subsidiary.
The amounts for these adjustments were derived based on
historical financial results. The following table summarizes the
pro forma impact for the restructured beneficial interests:
Net income (loss)
attributable to
non-controlling
Interest
Net investment
interests in
Net income
Investment
and other
gains (losses) of
consolidated
attributable to
Income
income
Consolidated Funds
entities
Carlyle Group
(Amounts in millions)
$
$
$
0.4
$
$
0.4
(31.9
)
(0.4
)
(32.3
)
9.7
(9.7
)
$
(31.9
)
$
(0.4
)
$
0.4
$
9.7
$
(41.6
)
(b)
This adjustment reflects changes to compensation and benefits
expenses associated with historical payments to our senior
Carlyle professionals attributable to compensation and benefits
and the reallocation of carried interest in our carry funds that
are currently held by our senior Carlyle professionals and other
Carlyle employees. Also included in this
195
Table of Contents
adjustment is the change in the fair value of the liability
associated with acquisition-related contingent consideration
that is payable to senior Carlyle professionals based on the
fulfillment of performance conditions. The effects of these
items on our unaudited condensed combined and consolidated pro
forma statement of operations is as follows (Dollars in
millions):
$
234.5
453.2
14.1
(98.5
)
$
603.3
(1)
Reflects an adjustment to record
base salary, annual bonus, and benefit expenses attributable to
our senior Carlyle professionals as compensation expense.
Additionally, performance fee related compensation attributable
to our senior Carlyle professionals is included in this pro
forma adjustment. Prior to the Reorganization and this offering,
the entities that comprise Carlyle Group have been partnerships
or limited liability companies. Accordingly, all payments to our
senior Carlyle professionals generally have been accounted for
as distributions from members equity rather than as
compensation expenses. Following this offering, we intend to
account for compensation payments to our senior Carlyle
professionals as compensation expenses. Amounts have been
derived based upon our historical results and the pro forma
adjustments for the Business Acquisitions and do not reflect the
assumed acquisition by Carlyle Holdings of the additional
allocations of carried interest in our carry funds that are
currently held by our senior Carlyle professionals (see
(3) below).
(2)
Reflects an adjustment to record
the change in the fair value of the liability associated with
contingent consideration related to the ESG and Claren Road
acquisitions that is payable to senior Carlyle professionals
based on the fulfillment of performance conditions. These
payments are not contingent upon the senior Carlyle professional
being employed by Carlyle at the time that the performance
conditions are met. Historically, the change in the fair value
of this liability was recorded within members equity, as
the amounts are obligations payable to senior Carlyle
professionals. Following this offering, we intend to account for
this liability in a manner similar to all other
acquisition-related contingent consideration; the change in fair
value of this liability will be recorded within other
non-operating expenses. The fair value of the contingent
consideration was based on probability-weighted discounted cash
flow models.
(3)
In order to better align the
interests of our senior Carlyle professionals and the other
individuals who manage our carry funds with our own interests
and with those of the investors in these funds, such individuals
are allocated directly a portion of the carried interest in our
carry funds. Prior to the Reorganization, the level of such
allocations vary by fund, but generally are at least 50% of the
carried interests in the fund. As part of the Reorganization,
there will be a reallocation of carried interest to senior
Carlyle professionals and other individuals who manage our carry
funds, such that the allocation to these individuals will be
approximately 45% of all carried interest on a blended average
basis, with the exception of the Riverstone funds, where Carlyle
will retain essentially all of the carry to which we are
entitled under our arrangements for those funds. Our senior
Carlyle professionals and other individuals who manage our carry
funds will contribute to Carlyle Holdings a portion of the
equity interests they own in the general partners of our
existing carry funds in exchange for an equivalent fair value of
Carlyle Holdings partnership units. No compensation is
associated with this exchange as the individuals are receiving
an equivalent fair value of Carlyle Holdings partnership units
for the fair value of the carried interest rights that they are
contributing.
Historically, these allocations of
carried interest were accounted for as performance fee
compensation expense for our Carlyle employees and as
distributions from members equity for our senior Carlyle
professionals. This adjustment reduces the performance fee
related compensation expense associated with the reallocation of
carried interest. The amounts have been derived from our
historical results.
Excluded from this pro forma
adjustment is a nonrecurring charge of approximately
$107.8 million. The fair value of the Carlyle Holdings
interests issued in this transaction exceeds the carrying value
of the compensation liability, resulting in a nonrecurring
charge of $107.8 million associated with this transaction.
Subsequent to the completion of the
Reorganization and this offering, we will account for the
remaining equity interests that our senior Carlyle professionals
and other individuals who manage our carry funds own in the
general partners of our existing carry funds as performance fee
compensation expense.
(c)
Reflects the elimination of all interest expense and fair value
adjustments associated with the subordinated loan payable to
affiliate. In October 2011, the Parent Entities redeemed
$250 million aggregate principal amount of the subordinated
loan payable to affiliate. In March 2012, the Parent Entities
redeemed the remaining $250 million aggregate principal
amount of the subordinated loan payable to affiliate for
$260 million. As a result of the redemptions in October
2011 and March 2012, all of the subordinated notes have been
fully redeemed. Accordingly, interest expense of
$33.6 million and fair value adjustments of
$28.5 million for the year ended December 31, 2011
have been eliminated from the condensed combined and
consolidated pro forma statement of operations.
This adjustment also reflects pro forma interest expense of
$10.7 million for the year ended December 31, 2011
related to the borrowings on the revolving credit facility of
Carlyle
196
Table of Contents
Groups existing senior secured credit facility totaling
$520 million related to the October 2011 and March 2012
redemptions, at an average interest rate of 2.05%.
(d)
We have historically operated as a group of partnerships for
U.S. federal income tax purposes and, for certain entities
located outside the United States, corporate entities for
foreign income tax purposes. Because most of the entities in our
consolidated group are pass-through entities for
U.S. federal income tax purposes, our profits and losses
are generally allocated to the partners who are individually
responsible for reporting such amounts and we are not taxed at
the entity level. Based on applicable foreign, state, and local
tax laws, we record a provision for income taxes for certain
entities. Accordingly, the income tax provisions shown on
Carlyle Groups historical combined and consolidated
statement of operations of $28.5 million for the year ended
December 31, 2011 primarily consisted of the District of
Columbia and foreign corporate income taxes.
$
1,215.7
(832.0
)
383.7
(345.3
)
38.4
(17.6
)
$
20.8
$
5.6
0.9
$
6.5
(1)
Income was attributed to these
entities based on income or losses of the subsidiaries of the
entities. Please see Material U.S. Federal Tax
Considerations for a discussion of the different tax
requirements of the subsidiaries of The Carlyle Group L.P.
(2)
Assumes existing owners own
approximately 90% of Carlyle Holdings I L.P.
(3)
Includes interest expense and
accrued state taxes on income allocated from Carlyle Holdings I
L.P.
(4)
State and local tax expense was
determined at a blended rate of 4.3%.
197
Table of Contents
(e)
Reflects the historical basis of partnership interests in
subsidiaries of the Parent Entities that the existing owners are
retaining. Certain retired senior Carlyle professionals will
retain their interests in our carried interest entities. For
these individuals, their carried interests rights will be
restructured such that they will exchange their pre-existing
carried interest rights (through their ownership interests in
the Parent Entities) for an equivalent amount of carried
interest rights directly in the consolidated general partners of
our funds. Historically, these interests were reflected within
members equity on the Carlyle Group balance
sheet, as these interests existed through the individuals
ownership interests in the Parent Entities, and the income
attributable to these carried interests rights were included in
net income attributable to Carlyle Group on the
Carlyle Group statement of operations because their interests
were part of the controlling interest in Carlyle Group. As their
carried interest rights will no longer be held through a parent
of Carlyle Group directly or indirectly after this exchange,
this adjustment reclassifies the income attributable to those
interests totaling $42.3 million as net income attributable
to non-controlling interests in consolidated entities from net
income attributable to Carlyle Group (see adjustment 2(f)). This
amount was derived based on historical financial results as well
as the ownership of the individuals.
(f)
Reflects the allocation of the pro forma Reorganization and
Other Adjustments to net income attributable to Carlyle Group or
net income (loss) attributable to non-controlling interests in
consolidated entities, as follows (Dollars in millions):
Net income (loss)
attributable to
non-controlling
Net income
interests in
attributable to
consolidated
Carlyle Group
entities
$
(41.6
)
$
9.7
(595.9
)
(7.4
)
51.4
(6.5
)
(42.3
)
42.3
$
(634.9
)
$
44.6
(1)
See adjustment 2(a).
(2)
See adjustment 2(b).
(3)
See adjustment 2(c).
(4)
See adjustment 2(d).
(5)
See adjustment 2(e).
3.
Offering
Adjustments
(a)
This adjustment reflects additional compensation and benefits
expenses associated with (1) the issuance of unvested
Carlyle Holdings partnership units as part of the Carlyle
Holdings formation, (2) the grant of unvested deferred
restricted common units of The Carlyle Group L.P., and
(3) the grant of unvested phantom deferred restricted
common units. The effects of these items on our unaudited
condensed combined and consolidated
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Table of Contents
pro forma statement of operations for the year ended
December 31, 2011 is as follows (Dollars in millions):
(1)
As part of the Reorganization, our
existing owners will receive 274,000,000 Carlyle Holdings
partnership units, of which 217,239,664 will be vested and
56,760,336 will be unvested.
We intend to reflect the unvested
Carlyle Holdings partnership units as compensation expense in
accordance with Accounting Standards Codification Topic 718,
Compensation Stock Compensation
(ASC
718). The unvested Carlyle Holdings partnership units will
be charged to expense as the Carlyle Holdings partnership units
vest over the service period on a straight-line basis. See
Certain Relationships and Related Person
Transactions Carlyle Holdings Partnership
Agreements. Amounts have been derived assuming a fair
value of $24.00 per partnership unit (based on the assumed
initial public offering price per common unit in this offering,
determined as the midpoint of the range indicated on the front
cover of this prospectus), multiplied by the number of unvested
units, expensed over the assumed service period of six years.
Additionally, the calculation of the expense assumes a
forfeiture rate of up to 7.5%. This expense is derived from
awards with a total service period of greater than five years of
$210.0 million. The total compensation expense expected to
be recognized in all future periods associated with the Carlyle
Holdings partnership units, considering estimated forfeitures,
is $1,260.0 million.
(2)
At the time of the offering, we
intend to grant deferred restricted common units of The Carlyle
Group L.P. with an aggregate value based on the initial public
offering price per common unit in this offering of approximately
$381.9 million (15,912,425 deferred restricted common units
at the midpoint of the price range indicated on the front cover
of this prospectus) to our employees and directors who are not
employees of or advisors to Carlyle. The deferred restricted
common units will be unvested when granted and will vest over a
service period. The grant-date fair value of the units will be
charged to compensation expense over the vesting period. The
amount in the adjustment has been derived assuming an offering
price of $24.00 per unit, multiplied by the number of unvested
units, expensed over the assumed service period, which ranges
from one to six years. Additionally, the calculation of the
expense assumes a forfeiture rate up to 15.0%. This expense is
derived from awards with a total service period of five years or
less of $4.6 million and a total service period of greater
than five years of $56.5 million. The total compensation
expense expected to be recognized in all future periods
associated with the deferred restricted common units,
considering estimated forfeitures, is $349.6 million.
(3)
At the time of the offering, we
intend to grant phantom deferred restricted common units to our
employees with an aggregate value based on the initial public
offering price per common unit in this offering of approximately
$8.2 million (340,622 phantom deferred restricted common
units at the midpoint of the price range indicated on the front
cover of this prospectus). The phantom deferred restricted
common units will be unvested when granted and will vest over a
service period. Upon vesting, the units will be settled in cash.
Because the awards are subject to vesting, no liability will be
recorded upon grant and thus no pro forma adjustment is
reflected in our unaudited condensed combined and consolidated
pro forma balance sheet. The fair value of the units will be
re-measured each reporting period until settlement and charged
to compensation expense over the vesting period. The amount in
the adjustment has been derived assuming an offering price of
$24.00 per unit (the assumed initial fair value of the phantom
deferred restricted common units), multiplied by the number of
unvested units, expensed over the assumed service period of
three years. No change to the fair value of the liability is
assumed over the periods presented. Additionally, the
calculation of the expense assumes a forfeiture rate of up to
15.0%. The total compensation expense expected to be recognized
in all future periods associated with the phantom deferred
restricted common units, considering estimated forfeitures, is
$6.9 million.
(b)
Reflects a reduction of pro forma interest expense of
$14.9 million for the year ended December 31, 2011
associated with the assumed repayment using the proceeds of this
offering of (i) the outstanding principal amount of the
loans associated with the Claren Road acquisition of
$40.0 million and $10.0 million at a fixed annual
interest rate of 6.0% and 8.0%, respectively, and
(ii) $570.9 million of the outstanding indebtedness
under the revolving credit facility of Carlyle Groups
existing senior secured credit facility at an assumed interest
rate of 2.05%, representing the variable interest rate in effect
on the revolving credit facility as of December 31, 2011
(LIBOR plus an applicable margin not to exceed 1.75%). See
Use of Proceeds.
4.
Adjustments
for Non-Controlling Interests
(a)
In order to reflect the Reorganization and offering transaction
as if they occurred on January 1, 2011, an adjustment has
been made to reflect the inclusion of non-controlling interests
in consolidated entities representing Carlyle Holdings
partnership units that are held by the existing owners after
this offering. Such Carlyle Holdings partnership units represent
90.0% of all Carlyle Holdings partnership units outstanding
immediately following this offering.
199
Table of Contents
$
906.4
410.1
496.3
89.98
%
$
446.6
5.
Calculation
of Earnings per Common Unit
(a)
For purposes of calculating the pro forma net income per common
unit, the number of common units of The Carlyle Group L.P.
outstanding are calculated as follows:
25,870,833
4,629,167
30,500,000
(1)
Represents additional common units
related to the distribution to our existing owners of cash
representing undistributed earnings (refer to note 2(c) to the
unaudited condensed combined and consolidated pro forma balance
sheet) and previous distributions which exceeded earnings for
the previous twelve months. This amount is limited to the number
of additional common units such that the total pro forma common
units do not exceed the number of common units to be issued in
this offering.
200
Table of Contents
Basic
Diluted
30,500,000
30,500,000
1,273,223
1,281,249
30,500,000
33,054,472
(1)
We apply the treasury stock method
to determine the dilutive weighted-average common units
represented by our unvested deferred restricted common units.
(2)
Included in dilutive
weighted-average common units are contingently issuable Carlyle
Holdings partnership units associated with the Claren Road
acquisition. For purposes of determining the dilutive
weighted-average common units, it is assumed that
December 31, 2011 represents the end of the contingency
period and the if-converted method is applied to the
Carlyle Holdings partnership units issuable therefrom.
(3)
In connection with the
Reorganization, we will enter into an exchange agreement with
the limited partners of the Carlyle Holdings partnerships. Under
the exchange agreement, subject to the applicable vesting and
minimum retained ownership requirements and transfer
restrictions, each holder of Carlyle Holdings partnership units
(and certain transferees thereof), other than the subsidiaries
of The Carlyle Group L.P., may up to four times a year, from and
after the first anniversary of the date of the closing of this
offering (subject to the terms of the exchange agreement),
exchange these partnership units for The Carlyle Group L.P.
common units on a
one-for-one
basis, subject to customary conversion rate adjustments for
splits, unit distributions and reclassifications. In addition,
subject to certain requirements, Mubadala and CalPERS will
generally be permitted to exchange Carlyle Holdings partnership
units for common units from and after the closing of this
offering. Any common units received by Mubadala and CalPERS in
any such exchange during the applicable restricted periods
described in Common Units Eligible For Future
Sale Lock-Up
Arrangements Mubadala Transfer Restrictions
and Common Units Eligible For Future Sale
Lock-Up Arrangements CalPERS Transfer
Restrictions, respectively, would be subject to the
restrictions described in such sections. Under the exchange
agreement, to effect an exchange a holder of partnership units
in Carlyle Holdings must simultaneously exchange one partnership
unit in each of the Carlyle Holdings partnerships.
We apply the
if-converted method to the vested Carlyle Holdings
partnership units to determine the dilutive weighted-average
common units outstanding. We apply the treasury stock method to
our unvested Carlyle Holdings partnership units and the
if-converted method on the resulting number of
additional Carlyle Holdings partnership units to determine the
dilutive weighted-average common units represented by our
unvested Carlyle Holdings partnership units.
In computing the dilutive effect
that the exchange of Carlyle Holdings partnership units would
have on earnings per common unit, we considered that net income
available to holders of common units would increase due to the
elimination of non-controlling interests in consolidated
entities associated with the Carlyle Holdings partnership units
(including any tax impact). Based on these calculations, the
incremental 221,614,940 Carlyle Holdings partnership units were
antidilutive, and therefore have been excluded.
The pro forma basic and diluted net income per common unit are
calculated as follows (Dollars in millions, except per unit
data):
Basic
Diluted
$
49.7
$
49.7
30,500,000
33,054,472
$
1.63
$
1.50
(1)
In computing the dilutive effect
that the exchange of Carlyle Holdings partnership units would
have on earnings per common unit, we considered that net income
attributable to The Carlyle Group L.P. would increase due to the
elimination of non-controlling interests in consolidated
entities associated with the Carlyle Holdings partnership units
(including any tax impact).
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$
957.2
271.1
82.9
(7.9
)
17.6
(410.1
)
4.5
(0.9
)
$
914.4
690.1
40.8
$
183.5
677.8
20.3
$
881.6
(1)
See reconciliation to most directly comparable pro forma U.S.
GAAP measure below:
202
Table of Contents
Year Ended December 31, 2011
Carlyle
Total
Pro Forma
Carlyle
Consolidated
Pro Forma
U.S. GAAP
Adjustments(2)
Non-GAAP
(Dollars in millions)
$
1,325.6
$
(77.0
)
$
1,248.6
(126.1
)
0.8
(125.3
)
1,199.5
(76.2
)
1,123.3
663.3
(92.5
)
570.8
(163.3
)
25.7
(137.6
)
500.0
(66.8
)
433.2
662.3
15.5
677.8
37.2
(24.9
)
12.3
$
699.5
$
(9.4
)
$
690.1
$
36.0
$
(15.7
)
$
20.3
10.9
9.6
20.5
$
46.9
$
(6.1
)
$
40.8
(2)
Adjustments to performance fees and
investment income relate to amounts earned from the Consolidated
Funds, which were eliminated in the U.S. GAAP consolidation
but were included in the Non-GAAP results, and amounts
attributable to non-controlling interests in consolidated
entities, which were excluded from the Non-GAAP results.
Adjustments are also included in these financial statement
captions to reflect Carlyles 55% economic interest in
Claren Road and ESG and Carlyles 60% interest in AlpInvest
in the Non-GAAP results.
Table of Contents
Excellence in Investing.
Our primary goal is to
invest wisely and create value for our fund investors. We strive
to generate superior investment returns by combining deep
industry expertise, a global network of local investment teams
who can leverage extensive firm-wide resources and a consistent
and disciplined investment process.
Commitment to our Fund Investors.
Our fund
investors come first. This commitment is a core component of our
firm culture and informs every aspect of our business. We
believe this philosophy is in the long-term best interests of
Carlyle and its owners, including our prospective common
unitholders.
Investment in the Firm.
We have invested, and intend
to continue to invest, significant resources in hiring and
retaining a deep talent pool of investment professionals and in
building the infrastructure of the firm, including our expansive
local office network and our comprehensive investor support
team, which provides finance, legal and compliance and tax
services in addition to other services.
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Expansion of our Platform.
We innovate
continuously to expand our investment capabilities through the
creation or acquisition of new asset-, sector- and
regional-focused strategies in order to provide our fund
investors a variety of investment options.
Unified Culture.
We seek to leverage the local
market insights and operational capabilities that we have
developed across our global platform through a unified culture
we call One Carlyle. Our culture emphasizes
collaboration and sharing of knowledge and expertise across the
firm to create value. We believe our collaborative approach
enhances our ability to analyze investments, deploy capital and
improve the performance of our portfolio companies.
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As of December 31, 2011
Inception to December 31, 2011
Realized/
Realized/
Partially
Cumulative
Partially
Realized
Invested
Realized
Gross
Net
Gross
Capital(2)
MOIC(3)
MOIC(3)(4)
IRR(5)
IRR(6)
IRR(4)(5)
(Dollars in billions)
$
48.7
1.8
x
2.6x
27%
18%
31%
$
26.4
1.5
x
2.0x
17%
10%
29%
$
38.3
1.3
x
n/a
10%
9%
n/a
As of
December 31,
2011
Inception to December 31, 2011
Net
Gross
Net
Annualized
Total AUM
IRR(5)
IRR(6)
Return(7)
(Dollars in billions)
$
1.6
15%
10%
n/a
$
4.7
n/a
n/a
11%
$
1.4
n/a
n/a
18%
The returns presented herein represent those of the
applicable Carlyle funds and not those of The Carlyle Group L.P.
See Risk Factors Risks Related to Our
Business Operations The historical returns
attributable to our funds, including those presented in this
prospectus, should not be considered as indicative of the future
results of our funds or of our future results or of any returns
expected on an investment in our common units.
(1)
For purposes of aggregation, funds
that report in foreign currency have been converted to U.S.
dollars at the reporting period spot rate.
(2)
Represents the original cost of all
capital called for investments since inception.
(3)
Multiple of invested capital
(MOIC) represents total fair value, before
management fees, expenses and carried interest, divided by
cumulative invested capital.
(4)
An investment is considered
realized when the investment fund has completely exited, and
ceases to own an interest in, the investment. An investment is
considered partially realized when the total proceeds received
in respect of such investment, including dividends, interest or
other distributions and/or return of capital, represents at
least 85% of invested capital and such investment is not yet
fully realized. Because part of our value creation strategy
involves pursuing best exit alternatives, we believe information
regarding Realized/Partially Realized MOIC and Gross IRR, when
considered together with the other investment performance
metrics presented, provides investors with meaningful
information regarding our investment performance by removing the
impact of investments where significant realization activity has
not yet occurred. Realized/Partially Realized MOIC and Gross IRR
have limitations as measures of investment performance, and
should not be considered in isolation. Such limitations include
the fact that these measures do not include the performance of
earlier stage and
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other investments that do not
satisfy the criteria provided above. The exclusion of such
investments will have a positive impact on Realized/Partially
Realized MOIC and Gross IRR in instances when the MOIC and Gross
IRR in respect of such investments are less than the aggregate
MOIC and Gross IRR. Our measurements of Realized/Partially
Realized MOIC and Gross IRR may not be comparable to those of
other companies that use similarly titled measures.
(5)
Gross Internal Rate of Return
(IRR) represents the annualized IRR for the period
indicated on limited partner invested capital based on
contributions, distributions and unrealized value before
management fees, expenses and carried interest.
(6)
Net IRR represents the annualized
IRR for the period indicated on limited partner invested capital
based on contributions, distributions and unrealized value after
management fees, expenses and carried interest.
(7)
Net Annualized Return is presented
for fee-paying investors on a total return basis, net of all
fees and expenses.
(8)
Due to the disparate nature of the
underlying asset classes in which our Global Market Strategies
funds participate (e.g., syndicated loans, bonds, distressed
securities, mezzanine loans, emerging markets equities,
macroeconomic products) and the inherent difficulties in
aggregating the performance of closed-end and open-end funds,
the presentation of aggregate investment performance across this
segment would not be meaningful.
Cumulative
and Annual Investments(1)
Cumulative and Annual
Distributions(1)
(1)
Funds with a functional currency
other than U.S. dollars have been converted at the average rate
for each period indicated.
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continue to generate attractive investment returns for our fund
investors across our
multi-fund,
multi-product global investment platform, including by
increasing the value of our current portfolio and leveraging the
strong capital position of our investment funds to pursue new
investment opportunities;
continue to inspire the confidence and loyalty of our more than
1,400 active carry fund investors, and further expand our
investor base, with a focus on client service and strong
investment performance;
continue to grow our AUM by raising follow-on investment funds
across our four segments and by broadening our platform through
both organic growth and selective acquisitions, where we believe
we can provide investors with differentiated products to meet
their needs;
further advance our leadership position in core
non-U.S. geographic
markets, including
high-growth
emerging markets such as China, Latin America, India, MENA and
Sub-Saharan
Africa; and
continue to demonstrate principled industry leadership and be a
responsible and respected member of the global community by
demonstrating our commitment to environmental, social and
governance standards in our investment activities.
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Buyout Funds.
Our buyout teams advise a
diverse group of 17 active funds that invest in transactions
that focus either on a particular geography (United States,
Europe, Asia, Japan, South America or MENA) or a particular
industry (e.g., financial services). In addition, we continually
seek to expand and diversify our buyout portfolio into new areas
where we see opportunity for future growth. In 2010, we launched
a new operation to target opportunities in middle-market private
equity in North America across the nine industry sectors of our
Corporate Private Equity business. In early 2011, we formed a
team to focus on the emerging market of
Sub-Saharan
Africa. As of December 31, 2011, our buyout funds had, in
the aggregate, approximately $47 billion in AUM.
Growth Capital Funds.
Our nine active
growth capital funds are advised by three
regionally-focused
teams in the United States, Europe and Asia, with each team
generally focused on middle-market and growth companies
consistent with specific regional investment considerations. The
investment mandate for our growth capital funds is to seek out
companies with the potential for growth, strategic redirection
and operational improvements. These funds typically do not
invest in early stage or venture-type investments. As of
December 31, 2011, our growth capital funds had, in the
aggregate, approximately $4 billion in AUM.
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Amount
% of
Fee-
Invested
Investments
Total
AUM
Earning
Active
Active
Available
Investment
Since
Since
AUM
CAGR
AUM
Investments
Funds
Capital
Professionals
Inception
Inception
$
51
35
%
22
%
$
38
167
26
$
13
254
$
49
422
Real Estate.
Our 10 active real estate funds
pursue real estate investment opportunities in Asia, Europe and
the United States and generally focus on acquiring
single-property opportunities rather than large-cap companies
with real estate portfolios. Our team of more than 120 real
estate investment professionals has made approximately 475
investments in over 120 cities/metropolitan statistical
areas around the world as of December 31, 2011, including
office buildings, hotels, retail properties, residential
properties, industrial properties and senior living facilities.
As of December 31, 2011, our real estate funds had, in the
aggregate, approximately $12 billion in AUM.
Infrastructure.
Our infrastructure investment
team focuses on investments in infrastructure companies and
assets. The team comprises 10 investment professionals and works
in conjunction with the public sector to find cooperative
methods of managing and investing in infrastructure assets. As
of December 31, 2011, we advised one infrastructure fund
with approximately $1 billion in AUM.
Energy & Renewable Resources.
Our
energy and renewable resources activities focus on buyouts,
growth capital investments and strategic joint ventures in the
midstream, upstream, power and oilfield services sectors, as
well as the renewable and alternative sectors of the energy
industry. We currently conduct these activities with Riverstone,
jointly advising six funds with approximately $17 billion
in AUM as of December 31, 2011. We and Riverstone have
mutually decided not to pursue additional jointly managed funds
(although we will continue to advise jointly with Riverstone the
six existing energy and renewable resources funds). We are
actively
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exploring new approaches through which to expand our energy
capabilities and intend to augment our significant in-house
expertise in this sector.
Amount
% of
Fee-
Invested
Investments
Total
AUM
Earning
Active
Active
Available
Investment
Since
Since
AUM
CAGR
AUM
Investments
Funds
Capital
Professionals
Inception
Inception
$
31
21
%
37
%
$
22
330
17
$
8
136
$
26
552
Structured Credit Funds.
Our structured credit
funds invest primarily in performing senior secured bank loans
through structured vehicles and other investment vehicles. In
2011, we acquired Churchill Financial, the collateral manager
for a CLO with $1.25 billion in commitments that invests in
performing senior loans to middle-market companies, to augment
the product breadth of our platform. In 2010, we acquired CLO
management contracts from Mizuho Alternative Investments LLC and
Stanfield Capital Partners LLC aggregating approximately
$5 billion of AUM. As of December 31, 2011, our
structured credit team advised 32 collateral loan funds in the
United States and Europe totaling, in the aggregate,
approximately $13 billion in AUM.
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Distressed and Corporate Opportunities.
Our
distressed and corporate opportunities funds generally invest in
liquid and illiquid securities and obligations, including
secured debt, senior and subordinated unsecured debt,
convertible debt obligations, preferred stock and public and
private equity of financially distressed companies in defensive
and asset-rich industries. In certain investments, our funds may
seek to restructure pre-reorganization debt claims into
controlling positions in the equity of reorganized companies. As
of December 31, 2011, our distressed and corporate
opportunities team advised three funds, totaling in the
aggregate, approximately $2 billion in AUM.
Corporate Mezzanine.
Our corporate mezzanine
investment team advises funds that invest in mezzanine loans of
middle-market companies, typically defined as companies with
annual EBITDA ranging from $10 million to $50 million
that lack access to the broadly syndicated loan and bond
markets. Our corporate mezzanine business focuses on leveraged
buyouts, recapitalizations, acquisitions and growth financings.
As of December 31, 2011, our corporate mezzanine team
advised two funds totaling, in the aggregate, approximately
$700 million in AUM.
Energy Mezzanine Opportunities.
Our energy
mezzanine opportunities team was organized in 2010 and advises a
fund that invests primarily in privately negotiated mezzanine
debt investments in North American energy and power projects and
companies. As of December 31, 2011, our energy mezzanine
opportunities team advised one fund with approximately
$400 million in AUM.
Long/Short Credit.
On December 31, 2010,
we acquired a 55% stake in Claren Road Asset Management, LLC
(Claren Road). As of December 31, 2011, Claren
Road advised two long/short credit hedge funds focusing on the
global high grade and high yield markets totaling, in the
aggregate, approximately $6 billion in AUM. Claren Road
seeks to profit from market mispricing of long
and/or
short
positions in corporate bonds and loans, and their derivatives,
across investment grade, high yield, or distressed companies.
Emerging Market Equity and Macroeconomic
Strategies.
On July 1, 2011, we acquired a
55% stake in Emerging Sovereign Group LLC (ESG). ESG
advises six emerging markets equities and macroeconomic hedge
funds with approximately $2 billion of AUM. ESGs
emerging markets equities funds invest in publicly-traded
equities across a range of developing countries. ESGs
macroeconomic funds pursue investment strategies in developed
and developing countries, and opportunities resulting from
changes in the global economic environment.
% of
Total
AUM
Fee-Earning
Active
Investment
AUM
CAGR
AUM
Funds
Professionals(1)
$
24
16
%
33
%
$
23
46
145
(1)
Includes 31 middle office and
back office professionals.
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Fund Investments.
AlpInvest fund of funds
vehicles make investment commitments directly to buyout, growth
capital, venture and other alternative asset funds advised by
other general partners (portfolio funds). As of
December 31, 2011, AlpInvest advised 25 fund of funds
vehicles totaling, in the aggregate, approximately
$30 billion in AUM.
Co-investments.
AlpInvest invests alongside
other private equity and mezzanine funds in which it has a fund
investment throughout Europe, North America and Asia (for
example, when an investment opportunity is too large for a
particular fund, the adviser of the fund may seek to raise
additional co-investment capital from sources such
as AlpInvest for that one large transaction). As of
December 31, 2011, AlpInvest co-investments programs were
conducted through 15 fund of funds vehicles totaling, in the
aggregate, approximately $5 billion in AUM.
Secondary Investments.
AlpInvest also advises
funds that acquire interests in portfolio funds in secondary
market transactions. Private equity investors who desire to sell
or restructure their pre-existing investment commitments to a
fund may negotiate to sell the fund interests to AlpInvest. In
this manner, AlpInvests secondary investments team
provides liquidity and restructuring alternatives for
third-party private equity investors. As of December 31,
2011, AlpInvests secondary investments program was
conducted through 12 fund of funds vehicles totaling, in
the aggregate, approximately $6 billion in AUM.
% of
Fund of
Amount
Total
Fee-Earning
Funds
Available
Invested
Investment
AUM
AUM
Vehicles
Capital
Since Inception
Professionals(2)
$
41
28
%
$
28
52
$
15
$
38
60
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(1)
Under our arrangements with the
historical owners and management team of AlpInvest, such persons
are allocated all carried interest in respect of the historical
investments and commitments to our fund of funds vehicles that
existed as of December 31, 2010, 85% of the carried
interest in respect of commitments from the historical owners of
AlpInvest for the period between 2011 and 2020 and 60% of the
carried interest in respect of all other commitments (including
all future commitments from third parties).
(2)
Includes 24 middle office and back
office professionals.
Consistent and Disciplined Investment
Process.
We believe our successful investment
track record is the result in part of a consistent and
disciplined application of our investment process. Investment
opportunities for our Corporate Private Equity funds are
initially sourced and evaluated by one or more of our deal
teams. Each investment opportunity of our private equity funds
must first pass an approval process that involves initial
approvals from a fund head (or co-fund heads), interim update
meetings that frequently include operating executives as well as
our Chief Investment Officer, William E. Conway, Jr., and a
due diligence review. Our due diligence approach typically
incorporates meetings with management, company facility visits,
discussions with industry analysts and consultants and an
in-depth examination of financial results and projections. This
transaction review process places a special emphasis on, among
other considerations, the reputation of a target companys
shareholders and management, the companys size and
sensitivity of cash flow generation, the business sector and
competitive risks, the portfolio fit, exit risks and other key
factors highlighted by the deal team. An investment opportunity
must secure final approval from the investment committee of the
applicable investment fund. The investment committee approval
process involves a detailed overview of the transaction and
investment thesis, business, risk factors and diligence issues,
as well as financial models.
Industry-Focused.
We have adopted an
industry-focused approach to investing. We have particular
industry expertise in aerospace, defense and government
services, consumer and retail, financial services, healthcare,
industrial, technology and business services, telecommunications
and media and transportation. As a result, we believe that our
in-depth knowledge of specific industries improves our ability
to source and create transactions, conduct effective and more
informed due diligence, develop strong relationships with
management teams and use contacts and relationships within such
industries to identify potential buyers as part of a coherent
exit strategy. As the firm has expanded to include teams in
Europe, Asia, Japan, South America,
Sub-Saharan
Africa and MENA, the industry groups have also grown and reach
across even more geographies, disciplines and funds.
Variable Deal Sizes.
Our teams are staffed not
only to effectively pursue large transactions, but also other
transactions of varying sizes. We often invest in smaller
companies and this has allowed us to obtain greater diversity
across our entire portfolio. On an overall basis, we believe
that having the resources to complete investments of varying
sizes provides our funds
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with the ability to enhance their investment returns while
providing for prudent industry, geographic and size
diversification.
Control and Influence Oriented.
Our Corporate
Private Equity funds, other than our growth funds and our funds
focused on emerging markets, typically acquire, either alone or
as part of a consortium, control of companies in leveraged
buyout transactions. Additionally, we seek to obtain board
representation and typically appoint our investment
professionals and operating executives to represent us on the
board of a company in which we invest. Where our funds, either
alone or as part of a consortium, are not the controlling
investor, we typically, subject to applicable regulatory
requirements, acquire significant voting and other rights with a
view to securing influence over conduct of the business.
Driving Value Creation.
Our Corporate Private
Equity teams seek to make investments in portfolio companies in
which our particular strengths and resources, including industry
expertise, extensive local presence across the globe and deep
business relationships, may be employed to their best advantage.
Typically, as part of a Corporate Private Equity investment,
Carlyles investment teams will develop and execute a
customized, value creation thesis that underpins the projected
investment return for the company. The value creation plan is
developed during a thorough due diligence effort and draws on
the deep resources available across our global platform,
specifically relying on:
Reach:
Our global team and global presence
that enables us to support international expansion efforts and
global supply chain initiatives.
Expertise:
Our investment professionals and
our specialists dedicated to nine industry sectors, who provide
extensive sector-specific knowledge and local market expertise.
Insight:
Our 27 operating executives,
primarily deeply experienced former CEOs, who work with our
investment teams during due diligence, provide board-level
governance and support and advise our portfolio company CEOs and
our extensive pool of consultants and advisors who provide
specialist expertise to support specific value creation
initiatives.
Data:
Our investment portfolio, which includes
over 200 active portfolio companies that range across diverse
industries, geographies, asset classes and investment
strategies, serves as an economic leading indicator and provides
us with advanced market intelligence.
Pursuing Best Exit Alternatives.
In
determining when to exit an investment, our private equity teams
consider whether a portfolio company has achieved its
objectives, the financial returns and the appropriate timing in
industry cycles and company development to strive for the
optimal value. Senior members of the funds investment
committee must approve all exit decisions. From inception
through December 31, 2011, our Corporate Private Equity
funds have invested approximately $49 billion in 422
transactions, and we have fully realized 255 of these
investments.
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Pursue an Opportunistic Strategy.
In general,
our real estate funds have focused on single asset transactions,
using an opportunistic real estate investment strategy. We
follow this approach because we believe that pursuing single
assets enables us to better underwrite the factors that
contribute to the fundamental value of each property; mitigate
concentration risk; establish appropriate
asset-by-asset
capital structures; and maintain governance over major
property-level decisions. In addition, direct ownership of
assets typically enables us to effectively employ an active
asset management approach and reduce financing and operating
risk, while increasing the visibility of factors that affect the
overall returns of the investment. We evaluate the risk and
return factors that are inherent in each specific property
situation. We believe we have an in-depth understanding of the
key factors affecting real property markets, flows of domestic
and cross-border capital and macroeconomic trends, which allow
us to identify, analyze and evaluate potential investments
quickly and creatively, often in connection with complex
transactions.
Seek out Strong Joint Venture Partners or
Managers.
Where appropriate, we seek out joint
venture partners or managers with significant operational
expertise. For each joint venture, we design structures and
terms that provide situationally appropriate incentives, often
including, for example, the subordination of the joint venture
partners equity and profits interest to that of a fund,
claw back provisions
and/or
profits escrow accounts in favor of a fund, and exclusivity. We
also typically structure positions with control or veto rights
over major decisions.
Source Deals Directly.
Our teams endeavor to
establish market presence in our target geographies
where we have a history of operating in our local markets and
benefit from extensive long-term relationships with developers,
corporate real estate owners, institutional investors and
private owners. Such relationships have resulted in our ability
to source investments on a direct negotiated basis. We generally
seek to avoid situations in which there are a large number of
competitive bidders and prioritize situations that offer the
opportunity to negotiate with owners directly in non-bid
processes.
Focus on Sector-Specific Strategies.
Our real
estate funds focus on specific sectors and markets in areas
where we believe the fundamentals are sound and dynamic capital
markets allow for identification of assets whose value is not
fully recognized. The real estate funds we advise have invested
according to strategies established in several main sectors:
office, hotel, retail, industrial, for-sale residential,
apartment and senior living.
Actively Manage our Real Estate
Investments.
Our real estate investments often
require active management to uncover and create value.
Accordingly, we have put in place experienced local asset
management teams. These teams add value through analysis and
execution of capital expenditure programs, development projects,
lease negotiations, operating cost reduction programs and asset
dispositions. The asset management teams work closely with the
other real estate professionals to effectively formulate and
implement strategic management plans.
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Manage the Exit of Investments.
We believe
that exit management is as important as traditional
asset management in order to take full advantage of the
typically short windows of opportunity created by temporary
imbalances in capital market forces that affect real estate. In
determining when to exit an investment, our real estate teams
consider whether an investment has fulfilled its strategic plan,
the depth of the market and generally prevailing industry
conditions.
Source Investment Opportunities.
Our Global
Market Strategies teams source investment opportunities through
our global network and strong relationships with the financial
community. The teams source assets from both the primary and
secondary markets. All of our closed-end Global Market
Strategies funds focus on sourcing investment opportunities that
are consistent with their respective return objectives. We
typically target portfolio companies that have a demonstrated
track record of profitability, market leadership in their
respective niche, predictability of cash flow, a definable
competitive advantage and products or services that are value
added to its customer base.
Conduct Fundamental Due Diligence and Perform Capital
Structure Analysis
. After an opportunity is identified, our
Global Market Strategies teams conduct fundamental due diligence
to determine the relative value of the potential investment and
capital structure analyses to determine the credit worthiness.
Our due diligence approach typically incorporates meetings with
management, company facility visits, discussions with industry
analysts and consultants and an in-depth examination of
financial results and projections. Our structured credit team
adheres to strict credit approval processes to ensure that every
investment brought into a funds portfolio is first
reviewed by experienced senior investment professionals and then
presented to a credit committee, which approves or declines the
investment.
Evaluation of Macroeconomic Factors.
Our
Global Market Strategies teams evaluate technical factors such
as supply and demand, the markets expectations surrounding
an issuer and the existence of short- and long-term value
creation or destruction catalysts. Inherent in all stages of
credit evaluation is a determination of the likelihood of
potential catalysts emerging, such as corporate reorganizations,
recapitalizations, asset sales, changes in a companys
liquidity and mergers and acquisitions. Our Global Market
Strategies teams constantly evaluate the overall investment
climate given their assessment of the economic outlook, changes
in industry fundamentals, market changes, redemption risk,
financial market liquidity and valuation levels.
Risk Minimization.
Our Global Market
Strategies teams seek to make investments in capital structures
to enable companies to both expand and weather downturns
and/or
below-plan performance. Our Global Market Strategies teams seek
to structure investments with strong financial covenants,
frequent reporting requirements and board representation if
possible. Through board observation rights or a board seat, our
Global Market Strategies teams have historically provided a
consultative, interactive approach to equity sponsors and
management partners as part of the overall portfolio management
process.
Premium on Liquidity.
Our hedge funds
generally run liquid portfolios that place an emphasis on
maintaining tradable assets in their respective funds.
Additionally, they generally employ long and short positions and
construct their portfolios to produce returns absent broad
market movements.
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Unique, Actionable Idea Generation.
The public
markets are thoroughly analyzed by the numerous competitors in
asset management. However, due to technical factors or general
investor sentiment, securities can become over or undervalued
quickly relative to their intrinsic value. Our hedge fund
managers separate their research teams into industry and
geography specific analysts in order to develop in-depth
coverage on companies and sectors to generate proprietary
research with actionable alpha-generating ideas as prices evolve.
Strong Risk Management Oversight.
A
well-controlled risk profile is an important part of our Global
Market Strategies investment methodology. Our risk officers
constantly assess the portfolios of our hedge funds in light of
market movements. In addition, Global Market Strategies has a
separate team which has developed a rigorous risk management
system whereby we analyze the concentration risk, liquidity
risk, historical scenario risk analysis, counterparty risk and
value at risk of our various funds on a daily basis.
Depth of Investment Expertise.
AlpInvest has
dedicated teams for each area of focus, allowing it to attract
and retain talent with the required skill-set for each strategy.
AlpInvest professionals have trading, operational, portfolio and
risk management expertise. From a
top-down
perspective, AlpInvest investment professionals seek to position
the Fund of Funds Solutions to capitalize on market
opportunities through focused research and allocation of
resources. From a
bottom-up
perspective, they seek to build deep relationships with
underlying fund managers that are strengthened by the investment
professionals relevant experience in the broader financial
markets. AlpInvest investment professionals hold advisory board
positions in the vast majority of the active funds in which it
has invested.
Discipline.
AlpInvest professionals focus on
diversification, risk management and downside protection. Its
processes include the analysis and interpretation of
macro-developments in the global economy and the assessment of a
wide variety of issues which can influence the emphasis placed
on sectors, geographies and asset classes when constructing
investment portfolios. A team of AlpInvest investment
professionals performs investment analysis of each proposed
investment with an underlying fund manager or company that
includes due diligence and market analysis, considering both
financial and non-financial issues. All investment decisions
must ultimately be approved by a majority of the members of
AlpInvests Investment Committee, which is comprised of
five AlpInvest managing partners. After making an investment
commitment, the investment portfolios are subject to at least
semi-annual reviews comprising both quantitative and qualitative
performance evaluations conducted by the respective investment
team responsible for each investment as well as AlpInvests
chief financial officer and chief operating officer.
Innovation.
AlpInvest professionals seek to
leverage the intellectual capital within its organization and
strategy-focused investment teams to take advantage of synergies
that exist within other areas of the firm to identify emerging
trends, market anomalies and new investment technologies to
facilitate the formation of new strategies, as well as to set
the direction for exiting strategies. This market intelligence
provides them with an additional feedback channel for the
development of new investment products.
Corporate Social Responsibility
(CSR).
AlpInvest has adopted the UN
Global Compact as a CSR framework to evaluate fund managers and
portfolio companies. AlpInvest has fully integrated CSR into its
investment process and actively engages with fund managers and
other stakeholders in the private equity markets to promote
sustainability and improved corporate governance. In addition,
the firm seeks opportunities to invest in sustainability
solutions.
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F-31
F-36
F-37
F-45
F-65
F-66
F-69
F-70
F-72
A-ii
A-iii
II-2
II-3
62
Director of Carlyle Group Management L.L.C., Founder and
Co-Chief Executive Officer
65
Director of Carlyle Group Management L.L.C., Founder and Chairman
62
Director of Carlyle Group Management L.L.C., Founder and
Co-Chief Executive Officer
59
Director Nominee of Carlyle Group Management L.L.C.
58
Director Nominee of Carlyle Group Management L.L.C.
67
Director Nominee of Carlyle Group Management L.L.C., Operating
Executive
64
Director Nominee of Carlyle Group Management L.L.C.
70
Director Nominee of Carlyle Group Management L.L.C., Managing
Director
69
Director Nominee of Carlyle Group Management L.L.C.
66
Director Nominee of Carlyle Group Management L.L.C.
45
Chief Operating Officer
42
Chief Financial Officer
46
General Counsel
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Messrs. Conway, DAniello and Rubenstein
we considered that these three individuals are the original
founders of our firm, that each has played an integral role in
our firms successful growth since its founding in 1987,
and that each has developed a unique and unparalleled
understanding of our business. Finally, we also noted that these
three individuals are our largest equity owners and, as a
consequence of such alignment of interest with our other equity
owners, each has additional motivation to diligently fulfill his
oversight responsibilities as a member of the board of directors
of our general partner.
Mr. Fishman we considered his knowledge and
expertise in the financial services industry as Chairman and
Chief Executive Officer of The Travelers Companies, as well as
his familiarity with board responsibilities, oversight and
control resulting from his extensive public company operating
and management experience.
Ms. Fitt we considered her extensive financial
background and experience in a distinguished career at Goldman,
Sachs in the areas of investment banking and risk analysis,
including her unique insights into the operation of global
capital markets.
Mr. Hance we considered his invaluable
perspective owing to his experience in various senior leadership
roles in the financial services industry, including his role as
the Chief Financial Officer of Bank of America Corporation,
which included responsibility for financial and accounting
matters, as well as his familiarity with our business and
operations as an Operating Executive of Carlyle.
Ms. Hill we considered her insights into the
operations of public companies owing to her experience as a
consultant, as well as her familiarity with board
responsibilities, oversight and control resulting from her
significant experience serving on the boards of directors of
various public companies.
Mr. Mathias we considered his extensive
knowledge and expertise in the investment management business,
as well as his knowledge of and familiarity with our business
and operations.
Dr. Robertson we considered his distinguished
career as a professor and Dean of the Wharton School at the
University of Pennsylvania and his extensive knowledge and
expertise in finance and business administration.
Mr. Shaw we considered his extensive financial
background and public company operating and management
experience resulting from his distinguished career in various
senior leadership roles at Marriott.
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All Other
Salary
Bonus
Compensation
Total
Year
($)
($)
($)(1)
($)
2011
275,000
3,545,850
6,125
(2)
3,826,975
(co-principal executive officer)
2010
275,000
3,401,750
6,125
(2)
3,682,875
2011
275,000
3,545,850
6,125
(2)
3,826,975
(co-principal executive officer)
2010
275,000
3,401,750
6,125
(2)
3,682,875
2011
275,000
3,545,850
6,125
(2)
3,826,975
(co-principal executive officer)
2010
275,000
3,401,750
6,125
(2)
3,682,875
2011
275,000
3,000,000
26,575,403
(4)
29,850,403
(former interim principal financial officer)(3)
2010
275,000
2,750,000
27,932,765
(4)
30,957,765
2011
200,961
1,900,000
2,100,961
(principal financial officer)(3)
2010
2011
275,000
1,100,000
3,045,071
(5)
4,420,071
2010
262,500
1,000,000
3,929,277
(5)
5,191,777
(1)
As discussed above, pursuant to
commitments we made to CalPERS and Mubadala at the times of
those institutions investments in our firm, our founders
own all of their equity interests in our firm through their
ownership interests in the Parent Entities and, accordingly, do
not directly own carried interest at the fund level, but instead
benefit, together with our other equity owners, from the carried
interest and other income that is retained by the firm through
our founders ownership interests in the Parent Entities.
Accordingly, we have not historically recorded, and following
this offering do not anticipate that we will record,
compensation expense (positive or negative) in respect of our
founders indirect ownership of carried interest.
(2)
This amount represents our 401(k)
matching contribution.
(3)
Mr. Youngkin served as our
interim principal financial officer from October 2010 until
Ms. Friedman became our principal financial officer
effective on March 28, 2011.
(4)
The amounts of compensation expense
that would have been recorded on an accrual basis in respect of
direct carried interest allocations to Mr. Youngkin for
2011 and 2010 was $24,520,556, and $27,709,970, respectively.
These amounts do not reflect actual cash distributions to
Mr. Youngkin in respect of direct carried interest
allocations during such periods, which were $16,034,593 and
$409,508, respectively. For financial statement reporting
purposes, compensation expense is equal to the sum of the
carried interest distributions during the year and the change in
the value of carried interest during the year related to
unrealized investments. Such expense could also turn negative in
the event of a reduction of previously accrued allocation of
carried interest due to negative adjustments in the fair value
of fund investments. The ultimate amount of actual carried
interest that may be realized and received by our named
executive officers may be more or less than the amounts
indicated and is unknown at this time. The amounts for 2011 and
2010 in the table also include $2,048,722 and $216,670,
respectively, representing the portion of the carried
interest-related distributions received by Mr. Youngkin
from the Parent Entities that were subject to forfeiture as
described above under Compensation Discussion
and Analysis Compensation Elements
Carried Interest, as well as $6,125 and $6,125,
respectively, representing our 401(k) matching contributions for
such periods.
(5)
The amounts of compensation expense
that would have been recorded on an accrual basis in respect of
direct carried interest allocations to Mr. Ferguson in respect
of carried interest allocations for 2011 and 2010 was $3,018,182
and $3,922,014, respectively. These amounts do not reflect
actual cash distributions to Mr. Ferguson in respect of direct
carried interest allocations during such periods, which were
$2,185,306 and $1,204, respectively. For financial statement
reporting purposes, compensation expense is equal to the sum of
the carried interest distributions during the year and the
change in the value of carried interest during the year related
to unrealized investments. Such expense could also turn negative
in the event of a reduction of previously accrued allocation of
carried interest due to negative adjustments in the fair value
of fund investments. The ultimate amounts of actual carried
interest that may be realized and received by our named
executive officers may be more or less than the amounts
indicated and is unknown at this time. The amounts for 2011 and
2010 in the table also include $20,764 and $1,138,
respectively, representing the portion of the carried
interest-related distributions from the Parent Entities received
by Mr. Ferguson that were subject to forfeiture as
described above under Compensation Discussion
and Analysis Compensation Elements
Carried Interest, as well as $6,125 and $6,125,
respectively, representing our 401(k) matching contributions for
such periods.
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the timing of exchanges
for instance, the
increase in any tax deductions will vary depending on the fair
value, which may fluctuate over time, of the depreciable or
amortizable assets of Carlyle Holdings at the time of each
exchange;
the price of our common units at the time of the
exchange
the increase in any tax deductions, as
well as the tax basis increase in other assets, of Carlyle
Holdings, is directly proportional to the price of our common
units at the time of the exchange;
the extent to which such exchanges are
taxable
if an exchange is not taxable for any
reason, increased deductions will not be available; and
the amount and timing of our income
the
corporate taxpayers will be required to pay 85% of the cash tax
savings as and when realized, if any. If the corporate taxpayers
do not have taxable income, the corporate taxpayers are not
required (absent a change of control or other circumstances
requiring an early termination payment) to make payments under
the tax receivable agreement for that taxable year because no
cash tax savings will have been realized. However, any cash tax
savings that do not result in realized benefits in a given tax
year will likely generate tax attributes that may be utilized to
generate benefits in previous or future tax years. The
utilization of such tax attributes will result in payments under
the tax receivables agreement.
we will record an increase in deferred tax assets for the
estimated income tax effects of the increases in tax basis based
on enacted federal and state tax rates at the date of the
exchange;
to the extent we estimate that we will not realize the full
benefit represented by the deferred tax asset, based on an
analysis that will consider, among other things, our expectation
of future earnings, we will reduce the deferred tax asset with a
valuation allowance; and
we will record 85% of the estimated realizable tax benefit
(which is the recorded deferred tax asset less any recorded
valuation allowance) as an increase to the liability due under
the tax receivable agreement and the remaining 15% of the
estimated realizable tax benefit as an increase to
partners capital.
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Carlyle Holdings Partnership Units
Common Units Beneficially Owned(1)(2)
Beneficially Owned(1)(2)
% After
% After
% After
% After
the Offering
the Offering
the Offering
the Offering
Transactions
Transactions
Transactions
Transactions
Assuming the
Assuming the
Assuming the
Assuming the
% Prior
Underwriters
Underwriters
% Prior
Underwriters
Underwriters
to the
Option
Option is
to the
Option
Option is
Offering
is Not
Exercised
Offering
is Not
Exercised
Number
Transactions
Exercised
in Full
Number
Transactions
Exercised
in Full
46,999,644
17.2
%
15.4
%
15.2
%
46,999,644
17.2
%
15.4
%
15.2
%
46,999,644
17.2
%
15.4
%
15.2
%
251,380
0.1
%
0.1
%
0.1
%
668,302
0.2
%
0.2
%
0.2
%
5,671,088
2.1
%
1.9
%
1.8
%
705,113
0.3
%
0.2
%
0.2
%
742,073
0.3
%
0.2
%
0.2
%
148,117,206
54.1
%
48.6
%
47.9
%
(1)
Subject to certain requirements and
restrictions, the partnership units of Carlyle Holdings are
exchangeable for common units of The Carlyle Group L.P. on a
one-for-one
basis, from and after the first anniversary date of the closing
of this offering (subject to the terms of the exchange
agreement). See Certain Relationships and Related Person
Transactions Exchange Agreement. Beneficial
ownership of Carlyle Holdings partnership units reflected in
this table is presented separately from the beneficial ownership
of the common units of The Carlyle Group L.P. for which such
partnership units may be exchanged.
(2)
TCG Carlyle Global Partners L.L.C.,
an entity wholly-owned by our senior Carlyle professionals, will
hold a special voting unit in The Carlyle Group L.P. that will
entitle it, on those few matters that may be submitted for a
vote of The Carlyle Group L.P. common unitholders, to
participate in the vote on the same basis as the common
unitholders and provide it with a number of votes that is equal
to the aggregate number of vested and unvested partnership units
in Carlyle Holdings held by the limited partners of Carlyle
Holdings on the relevant record date. See Material
Provisions of The Carlyle Group L.P. Partnership
Agreement Withdrawal or Removal of the General
Partner, Meetings; Voting and
Election of Directors of General Partner.
(3)
See Management
Director Compensation for a discussion of grants of
deferred restricted common units to certain nominees to the
board of directors of our general partner at the time of this
offering.
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Initial Public Offering Price per Common Unit
$23.00
$24.00
$25.00
(Dollars in millions, except per unit data)
$
666.4
$
695.4
$
724.4
(19.2
)
(19.2
)
(19.2
)
$
647.2
$
676.2
$
705.2
$
507.9
$
536.9
$
565.9
$
566.6
$
566.6
$
566.6
$
500.0
$
500.0
$
500.0
9,710.9
9,710.9
9,710.9
1,923.4
1,923.4
1,923.4
123.8
126.7
129.6
862.7
862.7
862.7
7,659.6
7,659.6
7,659.6
1,181.6
1,207.7
1,233.8
$
21,962.0
$
21,991.0
$
22,020.0
$
2.27
$
2.37
$
2.46
$
20.73
$
21.63
$
22.54
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Initial Public Offering Price per Common Unit
$23.00
$24.00
$25.00
(Dollars in millions, except per unit data)
$
766.4
$
799.7
$
833.0
(19.2
)
(19.2
)
(19.2
)
$
747.2
$
780.5
$
813.8
$
607.9
$
641.2
$
674.5
$
566.6
$
566.6
$
566.6
$
500.0
$
500.0
$
500.0
9,710.9
9,710.9
9,710.9
1,923.4
1,923.4
1,923.4
151.6
155.4
159.2
862.7
862.7
862.7
7,659.6
7,659.6
7,659.6
1,252.5
1,282.0
1,311.5
$
22,060.7
$
22,094.0
$
22,127.3
$
2.56
$
2.67
$
2.78
$
20.44
$
21.33
$
22.22
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approved by the conflicts committee, although our general
partner is not obligated to seek such approval;
approved by the vote of a majority of the voting power of our
voting units, excluding any voting units owned by our general
partner and any of its affiliates, although our general partner
is not obligated to seek such approval; or
approved by our general partner in good faith as determined
under the partnership agreement.
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the amount and timing of cash expenditures, including those
relating to compensation;
the amount and timing of investments and dispositions;
levels of indebtedness;
tax matters;
levels of reserves; and
issuances of additional partnership securities.
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Fiduciary duties are generally considered to include an
obligation to act in good faith and with due care and loyalty.
In the absence of a provision in a partnership agreement
providing otherwise, the duty of care would generally require a
general partner to inform itself prior to making a business
decision of all material information reasonably available to it.
In the absence of a provision in a partnership agreement
providing otherwise, the duty of loyalty would generally
prohibit a general partner of a Delaware limited partnership
from taking any action or engaging in any transaction that is
not fair to and in the best interests of the partnership where a
conflict of interest is present.
General.
Our partnership agreement contains
provisions that waive duties of or consent to conduct by our
general partner and its affiliates that might otherwise raise
issues about compliance with fiduciary duties or applicable law.
For example, our partnership agreement provides that when our
general partner, in its capacity as our general partner, is
permitted to or required to make a decision in its sole
discretion or pursuant to any provision of our
partnership agreement not subject to an express standard of
good faith then our general partner will not be
subject to any fiduciary duty and will be entitled to consider
only such interests and factors as it desires, including its own
interests, and will have no duty or obligation (fiduciary or
otherwise) to give any consideration to any factors affecting us
or any limited partners, including our common unitholders, and
will not be subject to any different standards imposed by the
partnership agreement or otherwise existing of law, in equity or
otherwise. In addition, when our general partner is acting in
its individual capacity, as opposed to in its capacity as our
general partner, it may act without any fiduciary obligation to
us or the common unitholders whatsoever. These standards reduce
the obligations to which our general partner would otherwise be
held.
In addition to the other more specific provisions limiting the
obligations of our general partner, our partnership agreement
further provides that our general partner and its officers and
directors will not be liable to us, our limited partners,
including our common unitholders, or assignees for errors of
judgment or for any acts or omissions unless there has been a
final and non-appealable judgment by a court of competent
jurisdiction determining that our general partner or its
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officers and directors acted in bad faith or engaged in fraud or
willful misconduct.
Special Provisions Regarding Affiliated
Transactions.
Our partnership agreement generally
provides that affiliated transactions and resolutions of
conflicts of interest not approved by a vote of holders of
voting units (excluding voting units owned by the general
partner and its affiliates) and that are not approved by the
conflicts committee of the board of directors of our general
partner will conclusively be deemed approved by the partnership
and all partners, and will not constitute a breach of our
partnership agreement or of any duty (including any fiduciary
duty) existing at law, in equity or otherwise, unless our
general Partner subjectively believes that the resolution or
course of action in respect of such conflict of interest is
opposed to the best interests of the partnership.
In any proceeding brought by or on behalf of any limited
partner, including our common unitholders, or our partnership or
any other person bound by our partnership agreement, the person
bringing or prosecuting such proceeding will have the burden of
proving that the general Partner subjectively believed that such
resolution or course of action was opposed to the best interests
of the partnership. These standards reduce the obligations to
which our general partner would otherwise be held.
The Delaware Limited Partnership Act generally provides that a
limited partner may institute legal action on behalf of the
partnership to recover damages from a third-party where a
general partner has refused to institute the action or where an
effort to cause a general partner to do so is not likely to
succeed. In addition, the statutory or case law of some
jurisdictions may permit a limited partner to institute legal
action on behalf of himself and all other similarly situated
limited partners to recover damages from a general partner for
violations of its fiduciary duties to the limited partners.
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represents that the transferee has the capacity, power and
authority to enter into our partnership agreement;
will become bound by the terms of, and will be deemed to have
agreed to be bound by, our partnership agreement;
gives the consents, approvals, acknowledgements and waivers set
forth in our partnership agreement, such as the approval of all
transactions and agreements that we are entering into in
connection with our formation and this offering.
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THE CARLYLE GROUP L.P. PARTNERSHIP AGREEMENT
270
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to elect the directors of our general partner in limited
circumstances,
to approve some amendments to our partnership agreement, or
to take other action under our partnership agreement,
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273
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274
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275
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276
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our general partner;
any departing general partner;
any person who is or was a tax matters partner, officer or
director of our general partner or any departing general partner;
any officer or director of our general partner or any departing
general partner who is or was serving at the request of our
general partner or any departing general partner as an officer,
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director, employee, member, partner, tax matters partner, agent,
fiduciary or trustee of another person;
any person who controls a general partner or departing general
partner;
any person who is named in the registration statement of which
this prospectus forms a part as being or about to become a
director of our general partner; or
any person designated by our general partner in its sole
discretion.
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promptly after becoming available, a copy of our
U.S. federal income tax returns (excluding for the
avoidance of doubt, information that is specific to another
partner);
a current list of the name and last known business, residence or
mailing address of each record holder; and
copies of our partnership agreement, the certificate of limited
partnership of the partnership, related amendments and powers of
attorney under which they have been executed.
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offer, pledge, sell, contract to sell, sell any option or
contract to purchase, purchase any option or contract to sell,
grant any option, right or warrant to purchase, lend or
otherwise transfer or dispose of, directly or indirectly, any
common units or any securities convertible into or exercisable
or exchangeable for common units; or
enter into any swap or other arrangement that transfers to
another, in whole or in part, any of the economic consequences
of ownership of the common units;
during the last 17 days of the
180-day
restricted period we issue an earnings release or material news
or a material event relating to Carlyle occurs; or
prior to the expiration of the
180-day
restricted period, we announce that we will release earnings
results during the
16-day
period beginning on the last day of the
180-day
period,
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Maximum
Number
up to 18,566,902 Units
up to 21,042,420 Units
up to 23,517,939 Units
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292
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Number of
Common Units
Incorporated
30,500,000
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Paid by Us
No Exercise
Full Exercise
$
$
$
$
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our future prospects and those of our industry in general;
our revenues, earnings and other financial operating information
in recent periods;
the general condition of the securities markets at the time of
this offering;
an assessment of our management;
the price-earnings ratios, price revenues ratios, market prices
of securities and financial and operating information of
companies engaged in activities similar to ours; and
other factors deemed relevant by the underwriters and us.
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to legal entities which are authorized or regulated to operate
in the financial markets or, if not so authorized or regulated,
whose corporate purpose is solely to invest in securities;
to any legal entity which has two or more of (1) an average
of at least 250 employees during the last financial year;
(2) a total balance sheet of more than 43,000,000 and
(3) an annual net turnover of more than 50,000,000,
as shown in its last annual or consolidated accounts;
to fewer than 100 natural or legal persons (other than qualified
investors as defined in the EU Prospectus Directive) subject to
obtaining the prior consent of the book-running mangers for any
such offer; or
in any other circumstances which do not require the publication
by the Issuer of a prospectus pursuant to Article 3 of the
Prospectus Directive.
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F-3
F-4
F-5
F-6
F-7
F-8
F-9
F-10
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1
$
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1.
ORGANIZATION
2.
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
3.
PARTNERS
CAPITAL
F-4
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F-5
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December 31,
2011
2010
(Dollars in millions)
$
509.6
$
616.9
566.6
729.5
24.6
16.5
89.2
135.5
2,644.0
2,594.3
19,507.3
11,864.6
287.0
325.8
287.6
239.6
52.7
39.6
70.2
41.3
594.9
448.4
18.0
10.8
$
24,651.7
$
17,062.8
$
860.9
$
597.5
262.5
494.0
9,689.9
10,433.5
203.4
211.6
577.9
520.9
1,015.9
948.6
108.5
23.6
89.2
202.2
48.3
0.2
568.1
618.5
136.5
119.6
13,561.1
14,170.2
1,923.4
694.0
873.1
929.7
(55.8
)
(34.5
)
817.3
895.2
853.7
938.5
7,496.2
364.9
9,167.2
2,198.6
$
24,651.7
$
17,062.8
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Year Ended December 31,
2011
2010
2009
(Dollars in millions)
$
915.5
$
770.3
$
788.1
1,307.4
266.4
11.1
(185.8
)
1,215.6
485.6
1,121.6
1,482.0
496.7
65.1
11.9
(5.2
)
13.3
60.7
10.2
78.4
72.6
5.0
15.8
21.4
27.3
714.0
452.6
0.7
2,845.3
2,798.9
1,317.8
374.5
265.2
264.2
225.7
46.6
1.1
(122.3
)
117.2
83.1
477.9
429.0
348.4
323.5
177.2
236.6
60.6
17.8
30.6
453.1
233.3
0.7
2.5
(10.7
)
214.0
32.0
1,347.1
1,073.8
605.6
(323.3
)
(245.4
)
(33.8
)
7.9
1,182.8
1,479.7
678.4
28.5
20.3
14.8
1,154.3
1,459.4
663.6
(202.6
)
(66.2
)
(30.5
)
$
1,356.9
$
1,525.6
$
694.1
F-7
Table of Contents
Redeemable
Accumulated
Equity
Non-controlling
Non-controlling
Other
Appropriated for
Interests in
Interests in
Members
Comprehensive
Consolidated
Consolidated
Total
Consolidated
Comprehensive
Equity
Income (Loss)
Funds
Entities
Equity
Entities
Income
(Dollars in millions)
$
82.8
$
(23.2
)
$
$
302.9
$
362.5
$
8.7
8.7
43.5
14.0
57.5
(371.9
)
(24.4
)
(396.3
)
694.1
(30.5
)
663.6
$
663.6
9.1
5.4
14.5
14.5
3.1
3.1
3.1
448.5
(11.0
)
276.1
713.6
$
681.2
1,213.3
1,213.3
694.0
214.0
214.0
51.7
53.1
104.8
(1,310.1
)
(157.4
)
(1,467.5
)
1,525.6
(256.6
)
190.4
1,459.4
$
1,459.4
(22.7
)
(18.2
)
2.7
(38.2
)
(38.2
)
(0.8
)
(0.8
)
(0.8
)
929.7
(34.5
)
938.5
364.9
2,198.6
694.0
$
1,420.4
46.7
46.7
8,476.5
8,476.5
516.8
18.3
18.3
15.1
383.8
398.9
962.5
(1,446.9
)
(1,095.9
)
(2,542.8
)
(335.3
)
1,356.9
(126.4
)
(161.6
)
1,068.9
85.4
$
1,154.3
(22.6
)
(5.1
)
(471.5
)
(499.2
)
(499.2
)
1.3
1.3
1.3
$
873.1
$
(55.8
)
$
853.7
$
7,496.2
$
9,167.2
$
1,923.4
$
656.4
F-8
Table of Contents
Year Ended December 31,
2011
2010
2009
(Dollars in millions)
$
1,154.3
$
1,459.4
$
663.6
83.1
24.5
28.6
1.1
1.6
2.8
214.0
62.6
(1,344.4
)
(485.6
)
2.5
(10.7
)
31.5
(25.9
)
17.6
284.4
(502.0
)
30.2
56.7
752.4
(6,818.9
)
(3,254.3
)
(0.9
)
7,970.8
5,432.6
2.5
(96.0
)
(113.7
)
243.7
149.8
18.9
8.5
(58.5
)
(142.8
)
126.7
(82.8
)
(69.0
)
(0.9
)
(135.1
)
(114.8
)
(24.3
)
300.9
41.9
24.8
0.2
7.9
(19.8
)
2.0
16.3
14.5
(11.7
)
(16.5
)
(20.7
)
(2.1
)
(51.6
)
41.9
12.3
(91.7
)
121.8
91.7
29.8
(5.9
)
17.8
(110.7
)
(7.3
)
44.1
2,678.0
2,877.0
418.7
(8.6
)
(0.3
)
(34.2
)
(21.2
)
(27.5
)
(8.1
)
(58.5
)
(53.9
)
(105.6
)
(104.8
)
(185.6
)
(27.5
)
520.5
(209.7
)
994.0
6.7
(307.5
)
(411.9
)
(303.6
)
(1,204.7
)
(2,280.5
)
15.1
46.1
43.5
(1,498.4
)
(787.8
)
(215.6
)
1,251.1
48.4
14.0
(1,312.0
)
(157.4
)
(24.4
)
39.0
16.4
(105.3
)
27.6
(0.7
)
(2.6
)
(2,679.0
)
(2,533.4
)
(587.3
)
(1.5
)
(29.2
)
3.4
(107.3
)
128.8
(192.7
)
616.9
488.1
680.8
$
509.6
$
616.9
$
488.1
$
59.2
$
15.8
$
27.7
$
30.0
$
24.0
$
11.9
$
8,434.7
$
$
$
510.1
$
$
$
46.7
$
1,213.3
$
$
$
694.0
$
$
$
5.6
$
$
(51.5
)
$
522.3
$
156.3
$
95.2
$
4.7
$
8.7
$
119.2
$
$
F-9
Table of Contents
1.
Organization
and Basis of Presentation
F-10
Table of Contents
2.
Summary
of Significant Accounting Policies
F-11
Table of Contents
As of December 31,
2011
2010
(Dollars in millions)
$
2.3
$
1.1
100.0
73.8
$
102.3
$
74.9
F-12
Table of Contents
F-13
Table of Contents
F-14
Table of Contents
F-15
Table of Contents
F-16
Table of Contents
F-17
Table of Contents
F-18
Table of Contents
F-19
Table of Contents
3.
Acquisitions
and Acquired Intangible Assets
F-20
Table of Contents
AlpInvest
ESG
(Dollars in millions)
$
183.8
$
45.0
15.5
67.4
$
199.3
$
112.4
$
169.0
$
11.3
216.6
25.0
9.6
0.1
70.6
88.0
1.4
1.5
9.8
28.0
8,555.5
398.1
(233.3
)
(11.7
)
(60.6
)
(1.1
)
(62.8
)
(36.3
)
(23.6
)
(366.9
)
(8,476.5
)
$
199.3
$
112.4
(1)
Goodwill recognized in connection
with the acquisitions reflects the excess of the purchase price
over the fair value of the tangible and specifically
identifiable intangible assets acquired and liabilities assumed
and is not deductible for tax purposes. The goodwill arising
from the AlpInvest and ESG acquisitions is included in the
Companys Fund of Funds Solutions and Global Market
Strategies segments, respectively.
F-21
Table of Contents
Year Ended December 31,
2011(1)
2010
(Dollars in millions)
$
3,044.0
$
3,284.1
$
1,389.7
$
1,550.0
(1)
Total revenues and net income
attributable to Carlyle include $101.2 million and
$53.3 million, respectively, from AlpInvest and ESG since
the acquisition dates.
F-22
Table of Contents
$
157.8
97.5
51.3
141.0
$
447.6
$
112.4
2.3
389.6
4.0
767.9
(65.1
)
(69.5
)
(694.0
)
$
447.6
F-23
Table of Contents
As of December 31,
2011
2010
(Dollars in millions)
$
615.8
$
448.0
6.8
4.0
(64.5
)
(3.6
)
558.1
448.4
36.8
$
594.9
$
448.4
(1)
Included in this balance is
goodwill of 6.8 million as of December 31, 2011,
related to the acquisition of AlpInvest.
F-24
Table of Contents
Global
Fund of
Market
Funds
Strategies
Solutions
Total
(Dollars in millions)
$
$
$
28.0
9.8
37.8
(1.0
)
(1.0
)
$
28.0
$
8.8
$
36.8
$
72.5
72.5
72.2
69.6
63.6
207.7
$
558.1
4.
Fair
Value Measurement
F-25
Table of Contents
F-26
Table of Contents
F-27
Table of Contents
Level I
Level II
Level III
Total
(Dollars in millions)
$
61.9
$
718.4
$
1,666.3
$
2,446.6
557.0
557.0
10,355.2
10,355.2
4,198.6
4,198.6
1,929.1
1,929.1
20.8
20.8
$
61.9
$
2,647.5
$
16,797.9
$
19,507.3
35.0
35.0
57.5
57.5
$
119.4
$
2,647.5
$
16,832.9
$
19,599.8
$
$
$
9,689.9
$
9,689.9
7.3
7.3
262.5
262.5
132.3
132.3
36.9
36.9
$
$
7.3
$
10,121.6
$
10,128.9
(1)
Balance represents
Fund Investments that the Company consolidates one fiscal
quarter in arrears.
(2)
Related to the acquisitions of
Claren Road, AlpInvest and ESG (see Note 3).
(3)
Related to the acquisition of
Claren Road (see Note 3).
F-28
Table of Contents
Level I
Level II
Level III
Total
(Dollars in millions)
$
9.5
$
166.0
$
36.8
$
212.3
460.3
460.3
10,433.5
10,433.5
5.7
14.8
20.5
698.5
698.5
5.6
33.9
39.5
$
9.5
$
875.8
$
10,979.3
$
11,864.6
21.8
21.8
100.7
100.7
$
110.2
$
875.8
$
11,001.1
$
11,987.1
$
$
$
10,418.5
$
10,418.5
8.5
8.5
1.9
1.9
494.0
494.0
43.7
43.7
51.3
51.3
$
$
8.5
$
11,009.4
$
11,017.9
(1)
Related to the acquisition of
Claren Road (see Note 3).
F-29
Table of Contents
Financial Assets Year Ended December 31, 2011
Investments of Consolidated Funds
Partnership
Trading
Equity
and LLC
Securities and
Securities
Bonds
Loans
Interests
Other
Other
Total
$
36.8
$
460.3
$
10,433.5
$
14.8
$
33.9
$
21.8
$
11,001.1
2,347.8
13.6
1,286.9
4,378.4
0.2
8,026.9
(7.1
)
(7.1
)
77.5
431.6
5,292.9
215.5
9.2
6,026.7
(48.9
)
(322.7
)
(2,300.9
)
(159.5
)
(20.6
)
(0.2
)
(2,852.8
)
(10.7
)
(2.8
)
(4,151.1
)
(4,164.6
)
(729.1
)
(23.0
)
(206.1
)
(250.6
)
7.5
4.0
(1,197.3
)
$
1,666.3
$
557.0
$
10,355.2
$
4,198.6
$
20.8
$
35.0
$
16,832.9
$
(220.2
)
$
(27.1
)
$
(264.9
)
$
76.7
$
5.3
$
4.0
$
(426.2
)
Financial Assets Year Ended December 31, 2010
Investments of Consolidated Funds
Partnership
Trading
Equity
and LLC
Securities and
Securities
Bonds
Loans
Interests
Other
Other
Total
$
98.9
$
$
$
50.5
$
14.5
$
43.9
$
207.8
25.5
592.0
12,282.4
113.4
(24.2
)
12,989.1
(208.1
)
(10.6
)
(10.5
)
(229.2
)
4.6
165.7
3,080.0
6.9
3,257.2
(34.1
)
(319.1
)
(4,886.7
)
(10.5
)
(22.3
)
(5,272.7
)
150.0
21.7
(42.2
)
(21.5
)
(61.2
)
2.1
48.9
$
36.8
$
460.3
$
10,433.5
$
14.8
$
33.9
$
21.8
$
11,001.1
$
13.5
$
35.7
$
230.9
$
(19.1
)
$
(14.3
)
$
(0.7
)
$
246.0
1)
Transfers out of Level III
financial assets were due to changes in the observability of
market inputs used in the valuation of such assets. Transfers
are measured as of the beginning of the quarter in which the
transfer occurs.
2)
Beginning January 1, 2010, the
Company consolidated the CLOs (excluding certain CLOs that were
consolidated beginning in August 2010 and December 2010 upon
their acquisition). The Companys investment in these CLOs
of $24.2 million has been eliminated in the combined and
consolidated balance sheets on January 1, 2010.
F-30
Table of Contents
Financial Liabilities Year Ended December 31, 2011
Derivative
Subordinated
Contingent
Loans Payable
Instruments of
Loan Payable
Cash
Contingent
of the CLOs
the CLOs
to Affiliate
Consideration
Equity
Total
$
10,418.5
$
1.9
$
494.0
$
43.7
$
51.3
$
11,009.4
453.0
453.0
75.9
75.9
(11.3
)
(11.3
)
510.4
510.4
(1,699.0
)
(0.1
)
(260.0
)
(6.4
)
(1,965.5
)
(3.2
)
(3.2
)
7.0
1.4
28.5
19.1
(3.1
)
52.9
$
9,689.9
$
$
262.5
$
132.3
$
36.9
$
10,121.6
$
(44.9
)
$
$
15.5
$
3.5
$
$
(25.9
)
Financial Liabilities Year Ended December 31, 2010
Derivative
Subordinated
Contingent
Loans Payable
Instruments of
Loan Payable
Cash
Contingent
of the CLOs
the CLOs
to Affiliate
Consideration
Equity
Total
$
$
$
$
$
$
12,410.5
12,410.5
2.8
494.0
496.8
(2,275.2
)
(0.1
)
(2,275.3
)
43.7
51.3
95.0
280.4
2.0
282.4
$
10,418.5
$
1.9
$
494.0
$
43.7
$
51.3
$
11,009.4
$
579.6
$
(2.5
)
$
$
$
$
577.1
Table of Contents
5.
Investments
As of December 31,
2011
2010
(Dollars in millions)
$
2,189.1
$
2,216.6
419.9
355.9
35.0
21.8
$
2,644.0
$
2,594.3
As of December 31,
2011
2010
(Dollars in millions)
$
1,599.2
$
1,823.8
270.9
208.3
170.0
184.5
149.0
$
2,189.1
$
2,216.6
As of December 31,
2011
2010
(Dollars in millions)
$
(77.8
)
$
(70.2
)
(57.5
)
(48.2
)
(1.2
)
(1.2
)
$
(136.5
)
$
(119.6
)
F-32
Table of Contents
Year Ended December 31,
2011
2010
2009
(Dollars in millions)
$
845.8
$
1,259.0
$
499.3
150.4
78.4
(5.7
)
145.9
144.6
3.1
(20.5
)
$
1,121.6
$
1,482.0
$
496.7
As of December 31,
2011
2010
(Dollars in millions)
$
238.5
$
228.9
169.5
117.5
11.9
9.5
$
419.9
$
355.9
F-33
Table of Contents
Global
Corporate Private Equity
Real Assets
Market Strategies
For the Years Ended
For the Years Ended
For the Years Ended
Aggregate Totals
December 31,
December 31,
December 31,
For the Years Ended December 31,
2011
2010
2009
2011
2010
2009
2011
2010
2009
2011
2010
2009
$
496.7
$
733.2
$
181.5
$
436.2
$
354.7
$
341.5
$
127.5
$
266.3
$
172.9
$
1,060.4
$
1,354.2
$
695.9
(497.7
)
(582.8
)
(573.1
)
(402.9
)
(435.2
)
(420.9
)
(37.5
)
(42.3
)
(42.1
)
(938.1
)
(1,060.3
)
(1,036.1
)
(1.0
)
150.4
(391.6
)
33.3
(80.5
)
(79.4
)
90.0
224.0
130.8
122.3
293.9
(340.2
)
4,320.7
9,911.3
4,185.3
2,231.7
2,364.2
2,196.3
79.3
529.1
477.8
6,631.7
12,804.6
6,859.4
$
4,319.7
$
10,061.7
$
3,793.7
$
2,265.0
$
2,283.7
$
2,116.9
$
169.3
$
753.1
$
608.6
$
6,754.0
$
13,098.5
$
6,519.2
Corporate
Global
Aggregate
Private Equity
Real Assets
Market Strategies
Totals
As of December 31,
As of December 31,
As of December 31,
As of December 31,
2011
2010
2011
2010
2011
2010
2011
2010
$
36,517.6
$
35,697.6
$
20,952.4
$
19,665.7
$
1,936.2
$
2,357.7
$
59,406.2
$
57,721.0
$
37,729.7
$
41,232.6
$
21,860.3
$
20,535.5
$
2,224.3
$
2,554.4
$
61,814.3
$
64,322.5
$
79.9
$
115.1
$
1,978.1
$
867.9
$
64.0
$
$
2,122.0
$
983.0
$
278.7
$
444.3
$
260.9
$
504.3
$
116.0
$
43.9
$
655.6
$
992.5
$
358.6
$
559.4
$
2,239.0
$
1,372.2
$
180.0
$
43.9
$
2,777.6
$
1,975.5
$
37,371.1
$
40,673.2
$
19,621.3
$
19,163.3
$
2,044.3
$
2,510.5
$
59,036.7
$
62,347.0
Year Ended December 31,
2011
2010
2009
(Dollars in millions)
$
70.5
$
66.3
$
5.3
8.4
2.6
(4.4
)
(0.5
)
3.7
4.1
$
78.4
$
72.6
$
5.0
Year Ended December 31,
2011
2010
2009
(Dollars in millions)
$
57.3
$
49.0
$
10.4
12.3
8.0
(7.4
)
0.9
9.3
2.3
$
70.5
$
66.3
$
5.3
F-34
Table of Contents
Percentage of Investments of
Fair Value
Consolidated Funds
Geographic Region/Instrument Type/Industry
December 31,
December 31,
2011
2010
2011
2010
(Dollars in millions)
$
106.1
$
0.54
%
0.00
%
53.2
166.0
0.27
%
1.40
%
0.1
0.00
%
0.00
%
412.7
2.12
%
0.00
%
500.0
2.56
%
0.00
%
147.1
0.75
%
0.00
%
263.2
1.35
%
0.00
%
1,482.3
166.1
7.59
%
1.40
%
20.5
0.00
%
0.17
%
2,701.0
13.85
%
0.00
%
2,701.0
20.5
13.85
%
0.17
%
60.6
0.31
%
0.00
%
65.0
0.33
%
0.00
%
81.1
0.42
%
0.00
%
129.9
0.67
%
0.00
%
336.6
1.73
%
0.00
%
5.6
0.00
%
0.05
%
5.6
0.00
%
0.05
%
1,929.1
698.5
9.89
%
5.89
%
247.7
242.1
1.27
%
2.04
%
25.3
37.3
0.13
%
0.31
%
6,911.6
7,636.0
35.43
%
64.36
%
0.1
0.2
0.00
%
0.00
%
7,184.7
7,915.6
36.83
%
66.71
%
$
13,633.7
$
8,806.3
69.89
%
74.22
%
F-35
Table of Contents
Percentage of Investments of
Fair Value
Consolidated Funds
Geographic Region/Instrument Type/Industry
December 31,
December 31,
2011
2010
2011
2010
(Dollars in millions)
$
5.8
$
0.03
%
0.00
%
5.8
0.03
%
0.00
%
45.0
0.23
%
0.00
%
45.0
0.23
%
0.00
%
8.0
0.04
%
0.00
%
8.0
0.04
%
0.00
%
15.8
8.0
0.08
%
0.07
%
228.5
51.3
1.17
%
0.43
%
244.3
59.3
1.25
%
0.50
%
$
303.1
$
59.3
1.55
%
0.50
%
$
104.4
$
0.54
%
0.00
%
88.1
0.45
%
0.00
%
389.2
1.99
%
0.00
%
95.4
0.49
%
0.00
%
62.8
0.32
%
0.00
%
106.9
0.55
%
0.00
%
846.8
4.34
%
0.00
%
976.9
5.01
%
0.00
%
$
976.9
$
5.01
%
0.00
%
Table of Contents
Percentage of Investments of
Fair Value
Consolidated Funds
Geographic Region/Instrument Type/Industry
December 31,
December 31,
2011
2010
2011
2010
(Dollars in millions)
$
158.2
$
0.81
%
0.00
%
135.1
0.69
%
0.00
%
293.3
1.50
%
0.00
%
288.6
210.1
1.48
%
1.77
%
12.5
9.0
0.06
%
0.08
%
2,577.2
2,746.2
13.21
%
23.15
%
20.7
33.7
0.11
%
0.28
%
2,899.0
2,999.0
14.86
%
25.28
%
$
5,016.0
$
2,999.0
25.71
%
25.28
%
$
4.9
$
0.03
%
0.00
%
4.9
0.03
%
0.00
%
$
4.9
$
0.03
%
0.00
%
$
73.9
$
0.38
%
0.00
%
73.9
0.38
%
0.00
%
475.7
2.44
%
0.00
%
475.7
2.44
%
0.00
%
$
549.6
$
2.82
%
0.00
%
$
19,507.3
$
11,864.6
100.00
%
100.00
%
Table of Contents
Year Ended December 31,
2011
2010
2009
(Dollars in millions)
$
605.7
$
435.5
$
0.1
108.3
17.1
0.6
$
714.0
$
452.6
$
0.7
Year Ended December 31,
2011
2010
2009
(Dollars in millions)
$
(260.8
)
$
502.0
$
(33.8
)
(64.2
)
(752.4
)
1.7
5.0
$
(323.3
)
$
(245.4
)
$
(33.8
)
Year Ended December 31,
2011
2010
2009
(Dollars in millions)
$
658.8
$
74.1
$
(6.4
)
(919.6
)
427.9
(27.4
)
$
(260.8
)
$
502.0
$
(33.8
)
6.
Non-controlling
Interests in Consolidated Entities
As of December 31,
2011
2010
(Dollars in millions)
$
7,290.6
$
218.9
195.6
137.0
10.0
9.0
$
7,496.2
$
364.9
F-38
Table of Contents
Year Ended December 31,
2011
2010
2009
(Dollars in millions)
$
(189.8
)
$
163.8
$
(25.5
)
20.2
20.0
(4.3
)
8.0
6.6
(0.7
)
(161.6
)
190.4
(30.5
)
(126.4
)
(256.6
)
85.4
$
(202.6
)
$
(66.2
)
$
(30.5
)
7.
Comprehensive
Income (Loss)
Year Ended December 31,
2011
2010
2009
(Dollars in millions)
$
1,154.3
$
1,459.4
$
663.6
1.3
(0.8
)
3.1
(499.2
)
(38.2
)
14.5
(497.9
)
(39.0
)
17.6
656.4
1,420.4
681.2
131.5
274.8
633.1
(193.1
)
25.1
(85.4
)
$
1,335.6
$
1,502.1
$
706.3
F-39
Table of Contents
As of December 31,
2011
2010
(Dollars in millions)
$
(7.3
)
$
(8.6
)
(48.5
)
(25.9
)
$
(55.8
)
$
(34.5
)
8.
Fixed
Assets, Net
As of December 31,
2011
2010
(Dollars in millions)
$
37.4
$
34.4
94.8
68.7
49.1
44.2
181.3
147.3
(128.6
)
(107.7
)
$
52.7
$
39.6
9.
Loans
Payable
F-40
Table of Contents
$
75.0
175.0
250.0
$
500.0
F-41
Table of Contents
$
7.5
7.5
7.5
17.5
$
40.0
F-42
Table of Contents
F-43
Table of Contents
As of December 31, 2011
Weighted
Average
Weighted
Remaining
Borrowing
Average
Maturity in
Outstanding
Fair Value
Interest Rate
Years
$
10,291.2
$
9,010.7
1.44
%
8.85
417.3
670.7
n/a
(a)
8.54
9.9
8.5
n/a
(b)
9.92
$
10,718.4
$
9,689.9
F-44
Table of Contents
As of December 31, 2010
Weighted
Average
Weighted
Remaining
Borrowing
Average
Maturity in
Outstanding
Fair Value
Interest Rate
Years
$
11,037.1
$
9,772.2
1.20
%
9.36
440.7
636.4
n/a
(a)
9.22
11.7
9.9
n/a
(b)
10.72
$
11,489.5
$
10,418.5
(a)
The subordinated notes, income
notes and preferred shares do not have contractual interest
rates, but instead receive distributions from the excess cash
flows of the CLOs.
(b)
The combination notes do not have
contractual interest rates and have recourse only to U.S.
Treasury securities and OATS specifically held to collateralize
such combination notes.
Table of Contents
10.
Commitments
and Contingencies
Unfunded
Commitments
$
977.5
259.0
161.7
$
1,398.2
F-46
Table of Contents
$
43.1
42.5
39.7
35.7
24.1
133.7
$
318.8
F-47
Table of Contents
F-48
Table of Contents
F-49
Table of Contents
F-50
Table of Contents
Year Ended December 31,
2011
2010
2009
(Dollars in millions)
$
23.1
$
29.6
$
40.9
2.8
6.8
12.5
1.7
1.7
16.5
(12.4
)
(15.0
)
(40.3
)
$
15.2
$
23.1
$
29.6
F-51
Table of Contents
11.
Related
Party Transactions
As of December 31,
2011
2010
(Dollars in millions)
$
14.9
$
12.7
41.6
26.1
56.8
106.7
173.7
180.3
$
287.0
$
325.8
As of December 31,
2011
2010
(Dollars in millions)
$
37.3
$
1.2
44.4
13.1
26.8
9.3
$
108.5
$
23.6
F-52
Table of Contents
12.
Derivative
Instruments in the CLOs
F-53
Table of Contents
December 31, 2011
Notional
Fair Value
Fair Value
Amount
Assets
Liabilities
$
272.7
$
16.6
$
(5.9
)
181.3
10.0
32.0
0.1
$
26.7
$
(5.9
)
December 31, 2010
Notional
Fair Value
Fair Value
Amount
Assets
Liabilities
$
354.4
$
25.9
$
(5.6
)
102.0
11.4
9.3
0.1
28.0
0.2
$
37.6
$
(5.6
)
F-54
Table of Contents
Year Ended December 31, 2011
Realized
Change in
Appreciation
Unrealized
(Depreciation)
Depreciation
Total
$
17.5
$
(9.4
)
$
8.1
(0.1
)
(1.2
)
(1.3
)
(0.1
)
(0.1
)
(0.1
)
(0.1
)
$
17.4
$
(10.8
)
$
6.6
Year Ended December 31, 2010
Change in
Realized
Unrealized
Appreciation
Appreciation
(Depreciation)
(Depreciation)
Total
$
22.3
$
(75.5
)
$
(53.2
)
(0.1
)
4.4
4.3
(1.2
)
(1.2
)
0.1
0.1
$
22.2
$
(72.2
)
$
(50.0
)
F-55
Table of Contents
13.
Income
Taxes
Year Ended December 31,
2011
2010
2009
(Dollars in millions)
$
27.8
$
15.4
$
17.2
7.2
6.0
3.0
35.0
21.4
20.2
(4.0
)
(1.1
)
(5.5
)
(2.5
)
0.1
(6.5
)
(1.1
)
(5.4
)
$
28.5
$
20.3
$
14.8
As of December 31,
2011
2010
(Dollars in millions)
$
0.4
$
0.4
3.0
1.2
10.3
6.7
4.3
2.5
$
18.0
$
10.8
$
15.1
$
33.0
0.2
0.2
$
48.3
$
0.2
$
(30.3
)
$
10.6
F-56
Table of Contents
Year Ended December 31,
2011
2010
2009
35.00
%
35.00
%
35.00
%
(32.72
)%
(33.89
)%
(33.00
)%
(0.27
)%
(0.15
)%
(0.27
)%
0.40
%
0.41
%
0.46
%
2.41
%
1.37
%
2.19
%
14.
Segment
Reporting
F-57
Table of Contents
F-58
Table of Contents
December 31, 2011 and the Year Then Ended
Corporate
Global
Fund of
Private
Market
Funds
Equity
Real Assets
Strategies
Solutions
Total
(Dollars in millions)
$
511.3
$
150.7
$
173.5
$
35.0
$
870.5
31.3
3.2
3.0
37.5
34.7
3.5
38.2
577.3
157.4
176.5
35.0
946.2
952.9
98.0
204.2
46.2
1,301.3
(99.3
)
52.5
(92.9
)
(55.4
)
(195.1
)
853.6
150.5
111.3
(9.2
)
1,106.2
43.2
2.1
20.3
65.6
0.3
2.7
12.8
15.8
43.5
4.8
33.1
81.4
9.2
2.0
4.0
0.3
15.5
1,483.6
314.7
324.9
26.1
2,149.3
253.1
75.3
61.7
14.3
404.4
487.5
8.4
88.4
39.5
623.8
(47.1
)
(3.9
)
(48.2
)
(48.8
)
(148.0
)
693.5
79.8
101.9
5.0
880.2
238.5
79.8
51.0
7.5
376.8
37.5
11.2
10.5
59.2
969.5
170.8
163.4
12.5
1,316.2
$
514.1
$
143.9
$
161.5
$
13.6
$
833.1
$
57.4
$
(6.9
)
$
57.3
$
13.5
$
121.3
$
413.2
$
146.0
$
71.1
$
0.1
$
630.4
$
43.5
$
4.8
$
33.1
$
$
81.4
$
566.0
$
84.8
$
193.4
$
20.2
$
864.4
$
2,315.2
$
566.4
$
1,060.2
$
353.1
$
4,294.9
F-59
Table of Contents
December 31, 2010 and the Year Then Ended
Corporate
Global
Private
Market
Equity
Real Assets
Strategies
Total
(Dollars in millions)
$
537.6
$
144.0
$
81.9
$
763.5
14.9
2.6
2.3
19.8
21.5
8.6
0.1
30.2
574.0
155.2
84.3
813.5
267.3
(2.9
)
9.8
274.2
996.3
72.7
135.1
1,204.1
1,263.6
69.8
144.9
1,478.3
4.2
1.4
4.8
10.4
40.6
3.7
16.9
61.2
44.8
5.1
21.7
71.6
14.8
4.9
2.7
22.4
1,897.2
235.0
253.6
2,385.8
237.6
72.4
40.1
350.1
136.0
0.5
4.2
140.7
524.8
(1.6
)
70.6
593.8
898.4
71.3
114.9
1,084.6
168.1
69.2
32.1
269.4
11.4
3.8
2.6
17.8
1,077.9
144.3
149.6
1,371.8
$
819.3
$
90.7
$
104.0
$
1,014.0
$
171.7
$
14.7
$
12.2
$
198.6
$
602.8
$
70.9
$
70.1
$
743.8
$
44.8
$
5.1
$
21.7
$
71.6
$
307.2
$
12.7
$
22.6
$
342.5
$
2,483.8
$
738.3
$
943.8
$
4,165.9
F-60
Table of Contents
Year Ended December 31, 2009
Corporate
Global
Private
Market
Equity
Real Assets
Strategies
Total
(Dollars in millions)
$
536.0
$
150.4
$
68.8
$
755.2
15.9
1.6
0.7
18.2
12.0
1.8
0.9
14.7
563.9
153.8
70.4
788.1
3.5
5.9
1.6
11.0
491.8
(13.6
)
1.5
479.7
495.3
(7.7
)
3.1
490.7
(2.7
)
0.8
0.2
(1.7
)
9.5
0.1
(0.2
)
9.4
6.8
0.9
7.7
10.8
14.3
2.2
27.3
1,076.8
161.3
75.7
1,313.8
227.4
74.2
38.8
340.4
0.6
2.8
0.2
3.6
260.6
(23.5
)
1.0
238.1
488.6
53.5
40.0
582.1
168.0
84.2
32.6
284.8
19.8
6.7
4.1
30.6
676.4
144.4
76.7
897.5
$
400.4
$
16.9
$
(1.0
)
$
416.3
$
159.5
$
3.0
$
(2.9
)
$
159.6
$
234.1
$
13.0
$
1.9
$
249.0
$
6.8
$
0.9
$
$
7.7
$
159.7
$
6.9
$
(1.3
)
$
165.3
F-61
Table of Contents
Year Ended December 31, 2011
Total
Reportable
Consolidated
Carlyle
Segments
Funds
Reconciling Items
Consolidated
(Dollars in millions)
$
2,149.3
$
714.0
$
(18.0
)(a)
$
2,845.3
$
1,316.2
$
592.2
$
(561.3
)(b)
$
1,347.1
$
$
(330.6
)
$
15.2
(c)
$
(315.4
)
$
833.1
$
(208.8
)
$
558.5
(d)
$
1,182.8
$
4,294.9
$
20,460.3
$
(103.5
)
$
24,651.7
Year Ended December 31, 2010
Total
Reportable
Consolidated
Carlyle
Segments
Funds
Reconciling Items
Consolidated
(Dollars in millions)
$
2,385.8
$
452.6
$
(39.5
)(a)
$
2,798.9
$
1,371.8
$
278.0
$
(576.0
)(b)
$
1,073.8
$
$
(251.5
)
$
6.1
(c)
$
(245.4
)
$
1,014.0
$
(76.9
)
$
542.6
(d)
$
1,479.7
$
4,165.9
$
12,982.0
$
(85.1
)
$
17,062.8
Year Ended December 31, 2009
Total
Reportable
Consolidated
Carlyle
Segments
Funds
Reconciling Items
Consolidated
(Dollars in millions)
$
1,313.8
$
0.7
$
3.3
(a)
$
1,317.8
$
897.5
$
0.7
$
(292.6
)(b)
$
605.6
$
$
(33.8
)
$
(c)
$
(33.8
)
$
416.3
$
(33.8
)
$
295.9
(d)
$
678.4
(a)
The Revenues adjustment principally represents fund management
and performance fees earned from the Consolidated Funds which
were eliminated in consolidation to arrive at the Companys
total revenues, adjustments for amounts attributable to
non-controlling interests in consolidated entities and, for
2011, adjustments to reflect the Companys ownership
interests in Claren Road, ESG and AlpInvest which were included
in Revenues in the Companys segment reporting.
(b)
The Expenses adjustment represents the elimination of
intercompany expenses of the Consolidated Funds payable to the
Company, adjustments for partner compensation, charges and
credits associated with Carlyle corporate actions and
non-recurring items, and, for 2011,
F-62
Table of Contents
adjustments to reflect the Companys economic interests in
Claren Road, ESG and AlpInvest as detailed below (Dollars in
millions):
Year Ended December 31,
2011
2010
2009
$
(671.5
)
$
(768.2
)
$
(339.7
)
91.5
11.0
214.0
20.0
2.5
(10.7
)
32.0
4.5
8.5
29.0
121.9
(0.9
)
0.3
8.8
(138.8
)
(44.1
)
$
(561.3
)
$
(576.0
)
$
(292.6
)
(c)
The Other Income (Loss) adjustment results from the Consolidated
Funds which were eliminated in consolidation to arrive at the
Companys total Other Income (Loss). For the year ended
December 31, 2011, this adjustment also includes the gain
on business acquisition.
(d)
The following table is a reconciliation of Income Before
Provision for Income Taxes to Economic Net Income, to Fee
Related Earnings, and to Distributable Earnings:
Year Ended December 31,
2011
2010
2009
(Dollars in millions)
$
1,182.8
$
1,479.7
$
678.4
(671.5
)
(768.2
)
(339.7
)
91.5
11.0
(7.9
)
214.0
32.0
20.0
2.5
(10.7
)
202.6
66.2
30.5
4.5
8.5
29.0
(0.9
)
0.3
8.8
$
833.1
$
1,014.0
$
416.3
630.4
743.8
249.0
81.4
71.6
7.7
$
121.3
$
198.6
$
159.6
677.5
133.5
7.4
65.6
10.4
(1.7
)
$
864.4
$
342.5
$
165.3
(1)
Adjustments for partner compensation reflect amounts due to
Carlyle partners for compensation and carried interest allocated
to them, which amounts were classified as partnership
distributions in the combined and consolidated financial
statements.
F-63
Table of Contents
(2)
See reconciliation to most directly comparable U.S. GAAP measure
below:
Year Ended December 31, 2011
Total
Carlyle
Reportable
Consolidated
Adjustments(3)
Segments
(Dollars in millions)
$
1,307.4
$
(6.1
)
$
1,301.3
(185.8
)
(9.3
)
(195.1
)
1,121.6
(15.4
)
1,106.2
225.7
398.1
623.8
(122.3
)
(25.7
)
(148.0
)
103.4
372.4
475.8
1,081.7
(404.2
)
677.5
(63.5
)
16.4
(47.1
)
$
1,018.2
$
(387.8
)
$
630.4
$
65.1
$
0.5
$
65.6
13.3
2.5
15.8
$
78.4
$
3.0
$
81.4
Year Ended December 31, 2010
Total
Carlyle
Reportable
Consolidated
Adjustments(3)
Segments
(Dollars in millions)
$
266.4
$
7.8
$
274.2
1,215.6
(11.5
)
1,204.1
1,482.0
(3.7
)
1,478.3
46.6
94.1
140.7
117.2
476.6
593.8
163.8
570.7
734.5
219.8
(86.3
)
133.5
1,098.4
(488.1
)
610.3
$
1,318.2
$
(574.4
)
$
743.8
$
11.9
$
(1.5
)
$
10.4
60.7
0.5
61.2
$
72.6
$
(1.0
)
$
71.6
F-64
Table of Contents
Year Ended December 31, 2009
Total
Carlyle
Reportable
Consolidated
Adjustments(3)
Segments
(Dollars in millions)
$
11.1
$
(0.1
)
$
11.0
485.6
(5.9
)
479.7
496.7
(6.0
)
490.7
1.1
2.5
3.6
83.1
155.0
238.1
84.2
157.5
241.7
10.0
(2.6
)
7.4
402.5
(160.9
)
241.6
$
412.5
$
(163.5
)
$
249.0
$
(5.2
)
$
3.5
$
(1.7
)
10.2
(0.8
)
9.4
$
5.0
$
2.7
$
7.7
(3)
Adjustments to performance fees and
investment income (loss) relate to amounts earned from the
Consolidated Funds, which were eliminated in the U.S. GAAP
consolidation but were included in the segment results, and
amounts attributable to non-controlling interests in
consolidated entities, which were excluded from the segment
results. Adjustments to performance fee related compensation
expense relate to the inclusion of partner compensation in the
segment results. Adjustments are also included in these
financial statement captions for the year ended
December 31, 2011 to reflect the Companys 55%
economic interest in Claren Road and ESG and the Companys
60% interest in AlpInvest in the segment results.
(e)
The Total Assets adjustment represents the addition of the
assets of the Consolidated Funds which were eliminated in
consolidation to arrive at the Companys total assets.
Total Revenues
Total Assets
Share
%
Share
%
(Dollars in millions)
$
2,416.6
85
%
$
12,784.4
52
%
503.0
18
%
11,342.9
46
%
(74.3
)
(3
)%
524.4
2
%
$
2,845.3
100
%
$
24,651.7
100
%
Table of Contents
Total Revenues
Total Assets
Share
%
Share
%
(Dollars in millions)
$
1,724.2
62
%
$
11,551.6
68
%
586.1
21
%
4,264.5
25
%
488.6
17
%
1,246.7
7
%
$
2,798.9
100
%
$
17,062.8
100
%
Total Revenues
Total Assets
Share
%
Share
%
(Dollars in millions)
$
377.7
29
%
$
1,027.1
41
%
208.3
16
%
357.4
14
%
731.8
55
%
1,125.1
45
%
$
1,317.8
100
%
$
2,509.6
100
%
(1)
Relates to investment vehicles
whose primary focus is the United States, Mexico or South
America.
(2)
Relates to investment vehicles
whose primary focus is Europe, the Middle East, and Africa.
(3)
Relates to investment vehicles
whose primary focus is Asia, including China, Japan, India and
Australia.
15.
Subsequent
Events
Table of Contents
16.
Supplemental
Financial Information
As of December 31, 2011
Consolidated
Operating
Consolidated
Entities
Funds
Eliminations
Consolidated
(Dollars in millions)
$
509.6
$
$
$
509.6
566.6
566.6
24.6
24.6
89.2
89.2
2,737.2
(93.2
)
2,644.0
19,507.3
19,507.3
297.2
(10.2
)
287.0
287.7
(0.1
)
287.6
52.7
52.7
60.7
9.5
70.2
594.9
594.9
18.0
18.0
$
4,294.9
$
20,460.3
$
(103.5
)
$
24,651.7
$
860.9
$
$
$
860.9
262.5
262.5
9,738.9
(49.0
)
9,689.9
203.4
203.4
577.9
577.9
1,015.9
1,015.9
71.3
37.3
(0.1
)
108.5
87.3
1.9
89.2
48.3
48.3
589.7
(21.6
)
568.1
136.5
136.5
3,264.0
10,367.8
(70.7
)
13,561.1
8.0
1,915.4
1,923.4
879.1
22.9
(28.9
)
873.1
(61.8
)
6.0
(55.8
)
817.3
22.9
(22.9
)
817.3
863.6
(9.9
)
853.7
205.6
7,290.6
7,496.2
1,022.9
8,177.1
(32.8
)
9,167.2
$
4,294.9
$
20,460.3
$
(103.5
)
$
24,651.7
F-67
Table of Contents
As of December 31, 2010
Consolidated
Operating
Consolidated
Entities
Funds
Eliminations
Consolidated
(Dollars in millions)
$
616.9
$
$
$
616.9
729.5
729.5
16.5
16.5
135.5
135.5
2,669.9
(75.6
)
2,594.3
11,864.6
11,864.6
329.7
(3.9
)
325.8
245.2
(5.6
)
239.6
39.6
39.6
34.1
7.2
41.3
448.4
448.4
10.8
10.8
$
4,165.9
$
12,982.0
$
(85.1
)
$
17,062.8
$
597.5
$
$
$
597.5
494.0
494.0
10,475.9
(42.4
)
10,433.5
211.6
211.6
520.9
520.9
953.1
(4.5
)
948.6
27.7
1.5
(5.6
)
23.6
200.1
2.1
202.2
0.2
0.2
622.4
(3.9
)
618.5
119.6
119.6
3,124.7
11,101.9
(56.4
)
14,170.2
694.0
694.0
929.7
929.7
(34.5
)
(34.5
)
895.2
895.2
946.5
(8.0
)
938.5
146.0
239.6
(20.7
)
364.9
1,041.2
1,186.1
(28.7
)
2,198.6
$
4,165.9
$
12,982.0
$
(85.1
)
$
17,062.8
F-68
Table of Contents
Year Ended December 31, 2011
Consolidated
Operating
Consolidated
Entities
Funds
Eliminations
Consolidated
(Dollars in millions)
$
1,020.4
$
$
(104.9
)
$
915.5
1,399.0
(91.6
)
1,307.4
(237.6
)
51.8
(185.8
)
1,161.4
(39.8
)
1,121.6
82.7
(17.6
)
65.1
20.4
(7.1
)
13.3
103.1
(24.7
)
78.4
15.6
0.2
15.8
714.0
714.0
2,300.5
714.0
(169.2
)
2,845.3
374.5
374.5
225.7
225.7
(122.3
)
(122.3
)
477.9
477.9
323.2
0.3
323.5
60.6
60.6
592.2
(139.1
)
453.1
32.0
32.0
893.7
592.2
(138.8
)
1,347.1
(330.6
)
7.3
(323.3
)
7.9
7.9
1,414.7
(208.8
)
(23.1
)
1,182.8
28.5
28.5
1,386.2
(208.8
)
(23.1
)
1,154.3
29.3
(231.9
)
(202.6
)
$
1,356.9
$
(208.8
)
$
208.8
$
1,356.9
Table of Contents
Year Ended December 31, 2010
Consolidated
Operating
Consolidated
Entities
Funds
Eliminations
Consolidated
(Dollars in millions)
$
813.6
$
$
(43.3
)
$
770.3
275.1
(8.7
)
266.4
1,209.7
5.9
1,215.6
1,484.8
(2.8
)
1,482.0
13.6
(1.7
)
11.9
78.0
(17.3
)
60.7
91.6
(19.0
)
72.6
22.4
(1.0
)
21.4
452.6
452.6
2,412.4
452.6
(66.1
)
2,798.9
265.2
265.2
46.6
46.6
117.2
117.2
429.0
429.0
176.6
0.6
177.2
17.8
17.8
278.0
(44.7
)
233.3
2.5
2.5
214.0
214.0
839.9
278.0
(44.1
)
1,073.8
(251.5
)
6.1
(245.4
)
1,572.5
(76.9
)
(15.9
)
1,479.7
20.3
20.3
1,552.2
(76.9
)
(15.9
)
1,459.4
26.6
(92.8
)
(66.2
)
$
1,525.6
$
(76.9
)
$
76.9
$
1,525.6
Table of Contents
Year Ended December 31, 2009
Consolidated
Operating
Consolidated
Entities
Funds
Eliminations
Consolidated
(Dollars in millions)
$
788.1
$
$
$
788.1
11.1
11.1
478.9
6.7
485.6
490.0
6.7
496.7
(6.7
)
1.5
(5.2
)
10.1
0.1
10.2
3.4
1.6
5.0
27.3
27.3
0.7
0.7
1,308.8
0.7
8.3
1,317.8
264.2
264.2
1.1
1.1
83.1
83.1
348.4
348.4
236.6
236.6
30.6
30.6
0.7
0.7
(10.7
)
(10.7
)
604.9
0.7
605.6
(33.8
)
(33.8
)
703.9
(33.8
)
8.3
678.4
14.8
14.8
689.1
(33.8
)
8.3
663.6
(5.0
)
(25.5
)
(30.5
)
$
694.1
$
(33.8
)
$
33.8
$
694.1
F-71
Table of Contents
Year Ended December 31,
2011
2010
2009
(Dollars in millions)
$
1,386.2
$
1,552.2
$
689.1
83.1
24.5
28.6
1.1
1.6
2.8
214.0
114.4
(1,338.5
)
(478.9
)
2.5
(10.7
)
32.0
(25.9
)
17.6
(84.2
)
(87.9
)
0.8
(135.1
)
(114.8
)
(24.3
)
300.9
46.9
27.0
0.2
7.9
(19.8
)
2.0
26.1
14.5
(11.7
)
(21.9
)
(16.2
)
(3.2
)
(51.6
)
41.9
12.4
(91.7
)
121.8
91.7
31.3
(5.9
)
17.8
(110.7
)
(7.3
)
43.8
1,460.3
433.3
402.8
(8.6
)
(0.3
)
(34.2
)
(21.2
)
(27.5
)
(8.1
)
(58.5
)
(53.9
)
(105.6
)
(104.8
)
(185.6
)
(27.5
)
520.5
(209.7
)
994.0
6.7
(307.5
)
(411.9
)
(303.6
)
15.1
46.1
43.5
(1,498.4
)
(787.8
)
(215.6
)
30.7
48.1
13.9
(38.8
)
(25.2
)
(10.3
)
32.9
19.0
(105.3
)
(1,455.2
)
(117.7
)
(570.7
)
(7.6
)
(1.2
)
2.7
(107.3
)
128.8
(192.7
)
616.9
488.1
680.8
$
509.6
$
616.9
$
488.1
Table of Contents
Table of Contents
Page
A-1
Definitions.
A-1
Construction
A-9
A-9
Formation
.
A-9
Name.
A-10
Registered Office; Registered Agent; Principal Office; Other
Offices.
A-10
Purpose and Business.
A-10
Powers.
A-10
Power of Attorney.
A-10
Term.
A-12
Title to Partnership Assets
.
A-12
Certain Undertakings Relating to the Separateness of the
Partnership
.
A-12
A-12
Limitation of Liability.
A-12
Management of Business
.
A-13
Outside Activities of the Limited Partners
.
A-13
Rights of Limited Partners
.
A-13
A-14
Certificates
.
A-14
Mutilated, Destroyed, Lost or Stolen Certificates.
A-14
Record Holders
.
A-15
Transfer Generally
.
A-15
Registration and Transfer of Limited Partner Interests
.
A-15
Transfer of the General Partners General Partner
Interest
.
A-16
Restrictions on Transfers
.
A-16
Citizenship Certificates; Non-citizen Assignees.
A-17
Redemption of Partnership Interests of Non-citizen
Assignees.
A-17
A-19
Organizational Issuances
.
A-19
Contributions by the General Partner and its Affiliates
.
A-19
Issuances and Cancellations of Special Voting Units
.
A-19
Contributions by the Underwriters
.
A-19
Interest and Withdrawal
.
A-20
Issuances of Additional Partnership Securities
.
A-20
Preemptive Rights
.
A-21
Splits and Combinations
.
A-21
Fully Paid and Non-Assessable Nature of Limited Partner
Interests
.
A-21
A-22
Establishment and Maintenance of Capital Accounts
.
A-22
Allocations.
A-22
Requirement and Characterization of Distributions;
Distributions to Record Holders
.
A-23
A-i
Table of Contents
Page
A-23
Management
.
A-23
Certificate of Limited Partnership
.
A-25
Partnership Group Assets; General Partners
Authority
.
A-25
Reimbursement of the General Partner
.
A-26
Outside Activities
.
A-27
Loans from the General Partner; Loans or Contributions from
the Partnership; Contracts with the General Partner and its
Affiliates; Certain Restrictions on the General Partner
.
A-28
Indemnification
.
A-28
Liability of Indemnitees
.
A-30
Modification of Duties; Standards of Conduct; Resolution of
Conflicts of Interest
A-31
Other Matters Concerning the General Partner
.
A-33
Purchase or Sale of Partnership Securities.
A-33
Reliance by Third Parties
.
A-34
Board of Directors
A-34
A-34
Records and Accounting.
A-34
Fiscal Year
.
A-35
A-35
Tax Returns and Information.
A-35
Tax Elections.
A-35
Tax Controversies
.
A-35
Withholding
.
A-35
Election to be Treated as a Corporation
.
A-36
A-36
Admission of Initial Limited Partners
.
A-36
Admission of Additional Limited Partners
.
A-36
Admission of Successor General Partner
.
A-37
Amendment of Agreement and Certificate of Limited Partnership
to Reflect the Admission of Partners.
A-37
A-37
Withdrawal of the General Partner
.
A-37
No Removal of the General Partner
.
A-38
Interest of Departing General Partner and Successor General
Partner
.
A-38
Withdrawal of Limited Partners
.
A-39
A-39
Dissolution.
A-39
Continuation of the Business of the Partnership After Event
of Withdrawal
.
A-40
Liquidator.
A-40
Liquidation.
A-41
Cancellation of Certificate of Limited Partnership
.
A-41
Return of Contributions
.
A-42
Waiver of Partition
.
A-42
Capital Account Restoration.
A-42
Table of Contents
Page
A-42
Amendments to be Adopted Solely by the General Partner
.
A-42
Amendment Procedures
.
A-43
Amendment Requirements.
A-44
Meetings
.
A-44
Notice of a Meeting.
A-49
Record Date
.
A-49
Adjournment.
A-50
Waiver of Notice; Approval of Meeting; Approval of
Minutes
.
A-50
Quorum
.
A-50
Conduct of a Meeting
.
A-51
Action Without a Meeting
.
A-51
Voting and Other Rights
.
A-51
Participation of Special Voting Units in All Actions
Participated in by Common Units
.
A-52
A-53
Authority.
A-53
Procedure for Merger, Consolidation or Other Business
Combination
.
A-53
Approval by Limited Partners of Merger, Consolidation or
Other Business Combination; Conversion of the Partnership into
another Limited Liability Entity.
A-54
Certificate of Merger or Consolidation.
A-55
Amendment of Partnership Agreement
.
A-55
Effect of Merger
.
A-55
Merger of Subsidiaries
A-55
A-56
Right to Acquire Limited Partner Interests
.
A-56
A-57
Addresses and Notices
.
A-57
Further Action
.
A-58
Binding Effect
.
A-58
Integration
.
A-58
Creditors.
A-58
Waiver.
A-58
Counterparts.
A-58
Applicable Law
.
A-58
Forum Selection
A-58
Invalidity of Provisions
.
A-59
Consent of Partners.
A-60
Facsimile Signatures.
A-60
Table of Contents
OF
THE CARLYLE GROUP L.P.
A-1
Table of Contents
A-2
Table of Contents
A-3
Table of Contents
A-4
Table of Contents
A-5
Table of Contents
A-6
Table of Contents
A-7
Table of Contents
A-8
Table of Contents
A-9
Table of Contents
A-10
Table of Contents
A-11
Table of Contents
A-12
Table of Contents
A-13
Table of Contents
A-14
Table of Contents
A-15
Table of Contents
A-16
Table of Contents
A-17
Table of Contents
A-18
Table of Contents
A-19
Table of Contents
A-20
Table of Contents
A-21
Table of Contents
A-22
Table of Contents
A-23
Table of Contents
A-24
Table of Contents
A-25
Table of Contents
A-26
Table of Contents
A-27
Table of Contents
A-28
Table of Contents
A-29
Table of Contents
A-30
Table of Contents
A-31
Table of Contents
A-32
Table of Contents
A-33
Table of Contents
A-34
Table of Contents
A-35
Table of Contents
A-36
Table of Contents
A-37
Table of Contents
A-38
Table of Contents
A-39
Table of Contents
A-40
Table of Contents
A-41
Table of Contents
A-42
Table of Contents
A-43
Table of Contents
A-44
Table of Contents
A-45
Table of Contents
A-46
Table of Contents
A-47
Table of Contents
A-48
Table of Contents
A-49
Table of Contents
A-50
Table of Contents
A-51
Table of Contents
A-52
Table of Contents
A-53
Table of Contents
A-54
Table of Contents
A-55
Table of Contents
A-56
Table of Contents
A-57
Table of Contents
A-58
Table of Contents
A-59
Table of Contents
A-60
Table of Contents
By:
Title:
By:
Title:
By:
Title:
A-61
Table of Contents
Table of Contents
ITEM 13.
OTHER
EXPENSES OF ISSUANCE AND DISTRIBUTION.
$
100,490
75,500
150,000
10,500,000
1,200,000
5,000,000
150,000
2,000,000
$
19,175,990
ITEM 14.
INDEMNIFICATION
OF DIRECTORS AND OFFICERS.
ITEM 15.
RECENT
SALES OF UNREGISTERED SECURITIES.
ITEM 16.
EXHIBITS AND
FINANCIAL STATEMENT SCHEDULES.
1
.1
Underwriting Agreement.
3
.1
Certificate of Limited Partnership of the Registrant.**
3
.2
Form of Amended and Restated Agreement of Limited Partnership of
the Registrant (included as Appendix A to the prospectus).
5
.1
Opinion of Simpson Thacher & Bartlett LLP regarding
validity of the common units registered.
8
.1
Opinion of Simpson Thacher & Bartlett LLP regarding
certain tax matters.
10
.1
Form of Limited Partnership Agreement of Carlyle Holdings I L.P.
10
.2
Form of Limited Partnership Agreement of Carlyle
Holdings II L.P.
10
.3
Form of Limited Partnership Agreement of Carlyle
Holdings III L.P.
10
.4
Form of Tax Receivable Agreement.
II-1
Table of Contents
10
.5
Form of Exchange Agreement.
10
.6
Form of Registration Rights Agreement with Senior Carlyle
Professionals.**
10
.7
Registration Rights Agreement with MDC/TCP Investments
(Cayman) I, Ltd., MDC/TCP Investments (Cayman) II, Ltd.,
MDC/TCP Investments (Cayman) III, Ltd., MDC/TCP Investments
(Cayman) IV, Ltd., MDC/TCP Investments (Cayman) V, Ltd.,
MDC/TCP Investments (Cayman) VI, Ltd., and Five Overseas
Investment L.L.C.
10
.8
Registration Rights Agreement with California Public
Employees Retirement System.
10
.9
Equity Incentive Plan.
10
.10
Noncompetition Agreement with William E. Conway, Jr.**
10
.11
Noncompetition Agreement with Daniel A. DAniello.**
10
.12
Noncompetition Agreement with David M. Rubenstein.**
10
.13
Amended and Restated Employment Agreement with Adena T.
Friedman.**
10
.14
Note And Unit Subscription Agreement, dated as of
December 16, 2010, by and among TC Group, L.L.C., TC Group
Cayman, L.P., TC Group Investment Holdings, L.P., TC Group
Cayman Investment Holdings, L.P., TCG Holdings, L.L.C., TCG
Holdings Cayman, L.P., TCG Holdings II, L.P., TCG Holdings
Cayman II, L.P., Fortieth Investment Company L.L.C., MDC/TCP
Investments (Cayman) I, Ltd., MDC/TCP Investments (Cayman)
II, Ltd., MDC/TCP Investments (Cayman) III, Ltd., MDC/TCP
Investments (Cayman) IV, Ltd., MDC/TCP Investments
(Cayman) V, Ltd., MDC/TCP Investments (Cayman) VI, Ltd.,
and Five Overseas Investment L.L.C.**
10
.15
Lease, dated January 10, 2011, between Commonwealth Tower,
L.P. and Carlyle Investment Management L.L.C.**
10
.16
Lease, dated April 16, 2010, between Teachers Insurance and
Annuity Association of America and Carlyle Investment Management
L.L.C.**
10
.17
First Amendment to Deed of Lease, dated November 8, 2011,
between Commonwealth Tower, L.P. and Carlyle Investment
Management L.L.C.**
10
.18
Non-Exclusive Aircraft Lease Agreement, dated as of June 27,
2011, between Falstaff Partners LLC as Lessor and Carlyle
Investment Management L.L.C. as Lessee.**
10
.19
Non-Exclusive Aircraft Lease Agreement, dated as of February 11,
2011, between Westwind Acquisition Company, L.L.C. as Lessor and
Carlyle Investment Management L.L.C. as Lessee.**
10
.20
Non-Exclusive Aircraft Lease Agreement, dated as of June 30,
2007, between Orange Crimson Aviation, L.L.C. as Lessor and TC
Group, L.L.C. as Lessee, as amended by Amendment No. 1
thereto, dated as of December 30, 2010, between Orange Crimson
Aviation L.L.C. as Lessor and Carlyle Investment Management
L.L.C as Lessee and the Assignment and Consent, dated as of June
30, 2007, by and among TC Group L.L.C. as Assignor, Carlyle
Investment Management L.L.C. as Assignee and Orange Crimson
Aviation L.L.C.**
10
.21
Form of Amended and Restated Limited Partnership Agreement of
Fund General Partner (Delaware).**
10
.22
Form of Amended and Restated Limited Partnership Agreement of
Fund General Partner (Cayman Islands).**
10
.23
Second Amended and Restated Credit Agreement (the Credit
Agreement), dated as of September 30, 2011, among TC
Group Investment Holdings, L.P., TC Group Cayman Investment
Holdings, L.P., TC Group Cayman, L.P., Carlyle Investment
Management L.L.C., as Borrowers ( the Borrowers), TC
Group, L.L.C., as Parent Guarantor (the Parent
Guarantor), the Lenders party hereto (the
Lenders), and Citibank, N.A., as Administrative
Agent (the Administrative Agent), and Citigroup
Global Markets Inc., J.P. Morgan Securities LLC, Credit
Suisse Securities (USA) LLC, as Joint Lead Arrangers and
Bookrunners (the Joint Lead Arrangers and
Bookrunners), and JPMorgan Chase Bank, N.A., Credit Suisse
Securities (USA) LLC, as Syndication Agents (the
Syndication Agents), and Amendment No. 1 to the
Credit Agreement, dated as of December 13, 2011, among each
of the Borrowers, the Parent Guarantor, the Lenders party
thereto, the Administrative Agent, the Joint Lead Arrangers and
Bookrunners, the Syndication Agents, and the other parties
thereto.**
Table of Contents
10
.24
Credit Agreement, dated as of December 13, 2011, among TC
Group Investment Holdings, L.P., TC Group Cayman Investment
Holdings, L.P., TC Group Cayman, L.P., Carlyle Investment
Management L.L.C., as Borrowers, TC Group, L.L.C., as Parent
Guarantor, the Lenders party hereto, and Citibank, N.A., as
Administrative Agent, and Citigroup Global Markets Inc.,
J.P. Morgan Securities LLC, Credit Suisse Securities (USA)
LLC, as Joint Lead Arrangers and Bookrunners, and JPMorgan Chase
Bank, N.A., Credit Suisse Securities (USA) LLC, as Syndication
Agents.**
10
.25
Form of Indemnification Agreement.**
10
.26
Form of Award Agreement.**
10
.27
Senior Advisor Consulting Agreement, dated as of
November 1, 2011, between Carlyle Investment Management
L.L.C. and James H. Hance.**
21
.1
Subsidiaries of the Registrant**
23
.1
Consent of Ernst & Young LLP.
23
.2
Consent of Simpson Thacher & Bartlett LLP (included as
part of Exhibit 5.1).*
23
.3
Consent of Jay S. Fishman to be named as a director nominee.**
23
.4
Consent of Lawton W. Fitt to be named as a director nominee.**
23
.5
Consent of James H. Hance, Jr. to be named as a director
nominee.**
23
.6
Consent of Janet Hill to be named as a director nominee.**
23
.7
Consent of Edward J. Mathias to be named as a director nominee.**
23
.8
Consent of Dr. Thomas S. Robertson to be named as a director
nominee.**
23
.9
Consent of William J. Shaw to be named as a director nominee.**
24
.1
Power of Attorney**
99
.1
Form of Amended and Restated Agreement of Limited Liability
Company of the General Partner of the Registrant.**
**
Previously filed.
ITEM 17.
UNDERTAKINGS
Table of Contents
By:
Carlyle Group Management L.L.C.,
Co-Chief Executive Officer and Director
(co-principal executive officer)
Chairman and Director
(co-principal executive officer)
Co-Chief Executive Officer and Director
(co-principal executive officer)
Chief Financial Officer
(principal financial officer)
Chief Accounting Officer
(principal accounting officer)
* By:
II-4
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
Very truly yours,
CARLYLE GROUP MANAGEMENT L.L.C. |
||||||
|
||||||
|
By: | |||||
|
||||||
|
Name: | |||||
|
Title: | |||||
|
||||||
THE CARLYLE GROUP L.P. | ||||||
|
||||||
|
By: |
Carlyle Group Management L.L.C., its
general partner |
||||
|
||||||
|
By: | |||||
|
||||||
|
Name: | |||||
|
Title: | |||||
|
||||||
CARLYLE HOLDINGS I L.P. | ||||||
|
||||||
|
By: |
Carlyle Holdings I GP Sub L.L.C., its
general partner |
||||
|
||||||
|
By: Carlyle Holdings I GP Inc., its sole
member |
|||||
|
||||||
|
By: | |||||
|
||||||
|
Name: | |||||
|
Title: |
27
CARLYLE HOLDINGS II L.P. | |||||||||||||||
|
|||||||||||||||
By: |
Carlyle Holdings II GP L.L.C., its
general
partner |
||||||||||||||
|
|||||||||||||||
By: |
The Carlyle Group L.P., its sole
member |
||||||||||||||
|
|||||||||||||||
By: |
Carlyle Group Management
L.L.C.,
its general partner |
||||||||||||||
|
|||||||||||||||
|
By: | ||||||||||||||
|
|||||||||||||||
Name: | |||||||||||||||
Title: | |||||||||||||||
|
|||||||||||||||
CARLYLE HOLDINGS III L.P. | |||||||||||||||
|
|||||||||||||||
By: |
Carlyle Holdings III GP Sub L.L.C., its
general partner |
||||||||||||||
|
|||||||||||||||
By: |
Carlyle Holdings III GP L.P., its
sole
member |
||||||||||||||
|
|||||||||||||||
By: |
Carlyle Holdings III GP
Management L.L.C., its general partner |
||||||||||||||
|
|||||||||||||||
By: |
The Carlyle Group L.P.,
its
sole member |
||||||||||||||
|
|||||||||||||||
|
By: |
Carlyle Group
Management L.L.C., its general partner |
|||||||||||||
|
|||||||||||||||
|
By: | ||||||||||||||
|
|||||||||||||||
Name: | |||||||||||||||
Title: |
28
By:
|
||||
|
||||
|
Name: | |||
|
Title: |
By:
|
||||
|
||||
|
Name: | |||
|
Title: |
By:
|
||||
|
||||
|
Name: | |||
|
Title: |
29
|
April 13, 2012 |
The Carlyle Group L.P.
|
2 | April 13, 2012 |
Very truly yours,
/S/ SIMPSON THACHER & BARTLETT LLP |
||||
|
April 13, 2012 |
|
2 |
Very truly yours,
/S/ SIMPSON THACHER & BARTLETT LLP |
||||
Page | ||||
ARTICLE I
|
||||
|
||||
DEFINITIONS
|
||||
|
||||
SECTION 1.01. Definitions
|
1 | |||
|
||||
ARTICLE II
|
||||
|
||||
FORMATION, TERM, PURPOSE AND POWERS
|
||||
|
||||
SECTION 2.01. Formation
|
9 | |||
SECTION 2.02. Name
|
10 | |||
SECTION 2.03. Term
|
10 | |||
SECTION 2.04. Offices
|
10 | |||
SECTION 2.05. Agent for Service of Process; Existence and Good Standing; Foreign Qualification
|
10 | |||
SECTION 2.06. Business Purpose
|
11 | |||
SECTION 2.07. Powers of the Partnership
|
11 | |||
SECTION 2.08. Partners; Admission of New Partners
|
11 | |||
SECTION 2.09. Withdrawal
|
11 | |||
SECTION 2.10. Investment Representations of Partners
|
11 | |||
|
||||
ARTICLE III
|
||||
|
||||
MANAGEMENT
|
||||
|
||||
SECTION 3.01. General Partner
|
11 | |||
SECTION 3.02. Compensation
|
12 | |||
SECTION 3.03. Expenses
|
12 | |||
SECTION 3.04. Officers
|
13 | |||
SECTION 3.05. Authority of Partners
|
13 | |||
SECTION 3.06. Action by Written Consent or Ratification
|
14 | |||
|
||||
ARTICLE IV
|
||||
|
||||
DISTRIBUTIONS
|
||||
|
||||
SECTION 4.01. Distributions
|
14 | |||
SECTION 4.02. Liquidation Distribution
|
15 | |||
SECTION 4.03. Limitations on Distribution
|
15 |
-i-
Page | ||||
ARTICLE V
|
||||
|
||||
CAPITAL CONTRIBUTIONS; CAPITAL ACCOUNTS;
|
||||
TAX ALLOCATIONS; TAX MATTERS
|
||||
|
||||
SECTION 5.01. Initial Capital Contributions
|
15 | |||
SECTION 5.02. No Additional Capital Contributions
|
15 | |||
SECTION 5.03. Capital Accounts
|
15 | |||
SECTION 5.04. Allocations of Profits and Losses
|
16 | |||
SECTION 5.05. Special Allocations
|
16 | |||
SECTION 5.06. Tax Allocations
|
17 | |||
SECTION 5.07. Tax Advances
|
18 | |||
SECTION 5.08. Tax Matters
|
18 | |||
SECTION 5.09. Other Allocation Provisions
|
18 | |||
|
||||
ARTICLE VI
|
||||
|
||||
BOOKS AND RECORDS; REPORTS
|
||||
|
||||
SECTION 6.01. Books and Records
|
19 | |||
|
||||
ARTICLE VII
|
||||
|
||||
PARTNERSHIP UNITS
|
||||
|
||||
SECTION 7.01. Units
|
19 | |||
SECTION 7.02. Register
|
20 | |||
SECTION 7.03. Registered Partners
|
20 | |||
|
||||
ARTICLE VIII
|
||||
|
||||
VESTING; FORFEITURE OF INTERESTS; TRANSFER RESTRICTIONS
|
||||
|
||||
SECTION 8.01. Vesting of Unvested Units
|
20 | |||
SECTION 8.02. Forfeiture of Units
|
21 | |||
SECTION 8.03. Limited Partner Transfers
|
22 | |||
SECTION 8.04. Mandatory Exchanges
|
23 | |||
SECTION 8.05. Encumbrances
|
23 | |||
SECTION 8.06. Further Restrictions
|
23 | |||
SECTION 8.07. Rights of Assignees
|
24 | |||
SECTION 8.08. Admissions, Withdrawals and Removals
|
25 | |||
SECTION 8.09. Admission of Assignees as Substitute Limited Partners
|
25 | |||
SECTION 8.10. Withdrawal and Removal of Limited Partners
|
25 | |||
SECTION 8.11. No Solicitation
|
25 | |||
SECTION 8.12. Minimum Retained Ownership Requirement
|
26 |
-ii-
Page | ||||
ARTICLE IX
|
||||
|
||||
DISSOLUTION, LIQUIDATION AND TERMINATION
|
||||
|
||||
SECTION 9.01. No Dissolution
|
27 | |||
SECTION 9.02. Events Causing Dissolution
|
27 | |||
SECTION 9.03. Distribution upon Dissolution
|
28 | |||
SECTION 9.04. Time for Liquidation
|
28 | |||
SECTION 9.05. Termination
|
28 | |||
SECTION 9.06. Claims of the Partners
|
28 | |||
SECTION 9.07. Survival of Certain Provisions
|
29 | |||
|
||||
ARTICLE X
|
||||
|
||||
LIABILITY AND INDEMNIFICATION
|
||||
|
||||
SECTION 10.01. Liability of Partners
|
29 | |||
SECTION 10.02. Indemnification
|
30 | |||
|
||||
ARTICLE XI
|
||||
|
||||
MISCELLANEOUS
|
||||
|
||||
SECTION 11.01. Severability
|
32 | |||
SECTION 11.02. Notices
|
32 | |||
SECTION 11.03. Cumulative Remedies
|
33 | |||
SECTION 11.04. Binding Effect
|
33 | |||
SECTION 11.05. Interpretation
|
33 | |||
SECTION 11.06. Counterparts
|
34 | |||
SECTION 11.07. Further Assurances
|
34 | |||
SECTION 11.08. Entire Agreement
|
34 | |||
SECTION 11.09. Governing Law
|
34 | |||
SECTION 11.10. Dispute Resolution
|
34 | |||
SECTION 11.11. Expenses
|
36 | |||
SECTION 11.12. Amendments and Waivers
|
37 | |||
SECTION 11.13. No Third Party Beneficiaries
|
38 | |||
SECTION 11.14. Headings
|
38 | |||
SECTION 11.15. Power of Attorney
|
38 | |||
SECTION 11.16. Separate Agreements; Schedules
|
39 | |||
SECTION 11.17. Partnership Status
|
39 | |||
SECTION 11.18. Delivery by Facsimile or Email
|
39 |
-iii-
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
GENERAL PARTNER: | ||||||
|
||||||
CARLYLE HOLDINGS I GP SUB L.L.C. | ||||||
|
||||||
By: Carlyle Holdings I GP Inc., its sole member | ||||||
|
||||||
|
By: | |||||
|
||||||
|
Name: | |||||
|
Title: |
LIMITED PARTNERS | ||||||
|
||||||
|
||||||
|
Name: | |||||
|
||||||
|
||||||
|
Name: | |||||
|
||||||
|
||||||
|
Name: | |||||
|
||||||
|
||||||
|
Name: | |||||
|
||||||
Solely to reflect its withdrawal as a limited partner pursuant to Section 5.01(b): | ||||||
|
||||||
CARLYLE HOLDINGS I LIMITED PARTNER L.L.C. | ||||||
|
||||||
|
By: | |||||
|
||||||
|
Name: | |||||
|
Title: |
Page | ||||
ARTICLE I
|
||||
|
||||
DEFINITIONS
|
||||
|
||||
SECTION 1.01. Definitions
|
1 | |||
|
||||
ARTICLE II
|
||||
|
||||
FORMATION, TERM, PURPOSE AND POWERS
|
||||
|
||||
SECTION 2.01. Formation
|
9 | |||
SECTION 2.02. Name
|
10 | |||
SECTION 2.03. Term
|
10 | |||
SECTION 2.04. Offices
|
10 | |||
SECTION 2.05. Agent for Service of Process; Existence and Good
Standing; Foreign Qualification
|
10 | |||
SECTION 2.06. Business Purpose
|
11 | |||
SECTION 2.07. Powers of the Partnership
|
11 | |||
SECTION 2.08. Partners; Admission of New Partners
|
11 | |||
SECTION 2.09. Withdrawal
|
11 | |||
SECTION 2.10. Investment Representations of Partners
|
11 | |||
|
||||
ARTICLE III
|
||||
|
||||
MANAGEMENT
|
||||
|
||||
SECTION 3.01. General Partner
|
11 | |||
SECTION 3.02. Compensation
|
12 | |||
SECTION 3.03. Expenses
|
12 | |||
SECTION 3.04. Officers
|
13 | |||
SECTION 3.05. Authority of Partners
|
13 | |||
SECTION 3.06. Action by Written Consent or Ratification
|
14 | |||
|
||||
ARTICLE IV
|
||||
|
||||
DISTRIBUTIONS
|
||||
|
||||
SECTION 4.01. Distributions
|
14 | |||
SECTION 4.02. Liquidation Distribution
|
15 | |||
SECTION 4.03. Limitations on Distribution
|
15 |
-i-
Page | ||||
ARTICLE V
|
||||
|
||||
CAPITAL CONTRIBUTIONS; CAPITAL ACCOUNTS;
|
||||
TAX ALLOCATIONS; TAX MATTERS
|
||||
|
||||
SECTION 5.01. Initial Capital Contributions
|
15 | |||
SECTION 5.02. No Additional Capital Contributions
|
15 | |||
SECTION 5.03. Capital Accounts
|
16 | |||
SECTION 5.04. Allocations of Profits and Losses
|
16 | |||
SECTION 5.05. Special Allocations
|
16 | |||
SECTION 5.06. Tax Allocations
|
17 | |||
SECTION 5.07. Tax Advances
|
18 | |||
SECTION 5.08. Tax Matters
|
18 | |||
SECTION 5.09. Other Allocation Provisions
|
19 | |||
|
||||
ARTICLE VI
|
||||
|
||||
BOOKS AND RECORDS; REPORTS
|
||||
|
||||
SECTION 6.01. Books and Records
|
19 | |||
|
||||
ARTICLE VII
|
||||
|
||||
PARTNERSHIP UNITS
|
||||
|
||||
SECTION 7.01. Units
|
19 | |||
SECTION 7.02. Register
|
20 | |||
SECTION 7.03. Registered Partners
|
20 | |||
|
||||
ARTICLE VIII
|
||||
|
||||
VESTING; FORFEITURE OF INTERESTS; TRANSFER RESTRICTIONS
|
||||
|
||||
SECTION 8.01. Vesting of Unvested Units
|
21 | |||
SECTION 8.02. Forfeiture of Units
|
21 | |||
SECTION 8.03. Limited Partner Transfers
|
22 | |||
SECTION 8.04. Mandatory Exchanges
|
23 | |||
SECTION 8.05. Encumbrances
|
23 | |||
SECTION 8.06. Further Restrictions
|
23 | |||
SECTION 8.07. Rights of Assignees
|
24 | |||
SECTION 8.08. Admissions, Withdrawals and Removals
|
25 | |||
SECTION 8.09. Admission of Assignees as Substitute Limited Partners
|
25 | |||
SECTION 8.10. Withdrawal and Removal of Limited Partners
|
25 | |||
SECTION 8.11. No Solicitation
|
26 | |||
SECTION 8.12. Minimum Retained Ownership Requirement
|
26 |
-ii-
Page | ||||
ARTICLE IX
|
||||
|
||||
DISSOLUTION, LIQUIDATION AND TERMINATION
|
||||
|
||||
SECTION 9.01. No Dissolution
|
27 | |||
SECTION 9.02. Events Causing Dissolution
|
27 | |||
SECTION 9.03. Distribution upon Dissolution
|
28 | |||
SECTION 9.04. Time for Liquidation
|
28 | |||
SECTION 9.05. Termination
|
28 | |||
SECTION 9.06. Claims of the Partners
|
28 | |||
SECTION 9.07. Survival of Certain Provisions
|
29 | |||
|
||||
ARTICLE X
|
||||
|
||||
LIABILITY AND INDEMNIFICATION
|
||||
|
||||
SECTION 10.01. Liability of Partners
|
29 | |||
SECTION 10.02. Indemnification
|
30 | |||
|
||||
ARTICLE XI
|
||||
|
||||
MISCELLANEOUS
|
||||
|
||||
SECTION 11.01. Severability
|
32 | |||
SECTION 11.02. Notices
|
32 | |||
SECTION 11.03. Cumulative Remedies
|
33 | |||
SECTION 11.04. Binding Effect
|
33 | |||
SECTION 11.05. Interpretation
|
33 | |||
SECTION 11.06. Counterparts
|
34 | |||
SECTION 11.07. Further Assurances
|
34 | |||
SECTION 11.08. Entire Agreement
|
34 | |||
SECTION 11.09. Governing Law
|
34 | |||
SECTION 11.10. Dispute Resolution
|
34 | |||
SECTION 11.11. Expenses
|
37 | |||
SECTION 11.12. Amendments and Waivers
|
37 | |||
SECTION 11.13. No Third Party Beneficiaries
|
38 | |||
SECTION 11.14. Headings
|
38 | |||
SECTION 11.15. Power of Attorney
|
38 | |||
SECTION 11.16. Separate Agreements; Schedules
|
39 | |||
SECTION 11.17. Partnership Status
|
39 | |||
SECTION 11.18. Delivery by Facsimile or Email
|
39 |
-iii-
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3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
GENERAL PARTNER: | ||||||
|
||||||
CARLYLE HOLDINGS II GP L.L.C. | ||||||
|
||||||
By: The Carlyle Group L.P., its sole member | ||||||
|
||||||
By: Carlyle Group Management L.L.C., its general partner | ||||||
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By: | |||||
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Title: |
LIMITED PARTNERS | ||||||
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Solely to reflect its withdrawal as a limited partner pursuant to Section 5.01(b): | ||||||
|
||||||
CARLYLE HOLDINGS II LIMITED PARTNER L.L.C. | ||||||
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By: | |||||
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Title: |
Page | ||||
ARTICLE I
|
||||
|
||||
DEFINITIONS
|
||||
|
||||
SECTION 1.01. Definitions
|
1 | |||
|
||||
ARTICLE II
|
||||
|
||||
FORMATION, TERM, PURPOSE AND POWERS
|
||||
|
||||
SECTION 2.01. Formation
|
9 | |||
SECTION 2.02. Name
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10 | |||
SECTION 2.03. Term
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10 | |||
SECTION 2.04. Offices
|
10 | |||
SECTION 2.05. Agent for Service of Process; Existence and Good Standing; Foreign Qualification
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10 | |||
SECTION 2.06. Business Purpose
|
11 | |||
SECTION 2.07. Powers of the Partnership
|
11 | |||
SECTION 2.08. Partners; Admission of New Partners
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11 | |||
SECTION 2.09. Withdrawal
|
11 | |||
SECTION 2.10. Investment Representations of Partners
|
11 | |||
|
||||
ARTICLE III
|
||||
|
||||
MANAGEMENT
|
||||
|
||||
SECTION 3.01. General Partner
|
11 | |||
SECTION 3.02. Compensation
|
12 | |||
SECTION 3.03. Expenses
|
12 | |||
SECTION 3.04. Officers
|
13 | |||
SECTION 3.05. Authority of Partners
|
13 | |||
SECTION 3.06. Action by Written Consent or Ratification
|
14 | |||
|
||||
ARTICLE IV
|
||||
|
||||
DISTRIBUTIONS
|
||||
|
||||
SECTION 4.01. Distributions
|
14 | |||
SECTION 4.02. Liquidation Distribution
|
15 | |||
SECTION 4.03. Limitations on Distribution
|
15 |
-i-
Page | ||||
ARTICLE V
|
||||
|
||||
CAPITAL CONTRIBUTIONS; CAPITAL ACCOUNTS;
|
||||
TAX ALLOCATIONS; TAX MATTERS
|
||||
|
||||
SECTION 5.01. Initial Capital Contributions
|
15 | |||
SECTION 5.02. No Additional Capital Contributions
|
15 | |||
SECTION 5.03. Capital Accounts
|
16 | |||
SECTION 5.04. Allocations of Profits and Losses
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16 | |||
SECTION 5.05. Special Allocations
|
16 | |||
SECTION 5.06. Tax Allocations
|
17 | |||
SECTION 5.07. Tax Advances
|
18 | |||
SECTION 5.08. Tax Matters
|
18 | |||
SECTION 5.09. Other Allocation Provisions
|
19 | |||
|
||||
ARTICLE VI
|
||||
|
||||
BOOKS AND RECORDS; REPORTS
|
||||
|
||||
SECTION 6.01. Books and Records
|
19 | |||
|
||||
ARTICLE VII
|
||||
|
||||
PARTNERSHIP UNITS
|
||||
|
||||
SECTION 7.01. Units
|
19 | |||
SECTION 7.02. Register
|
20 | |||
SECTION 7.03. Registered Partners
|
20 | |||
|
||||
ARTICLE VIII
|
||||
|
||||
VESTING; FORFEITURE OF INTERESTS; TRANSFER RESTRICTIONS
|
||||
|
||||
SECTION 8.01. Vesting of Unvested Units
|
21 | |||
SECTION 8.02. Forfeiture of Units
|
21 | |||
SECTION 8.03. Limited Partner Transfers
|
22 | |||
SECTION 8.04. Mandatory Exchanges
|
23 | |||
SECTION 8.05. Encumbrances
|
23 | |||
SECTION 8.06. Further Restrictions
|
23 | |||
SECTION 8.07. Rights of Assignees
|
24 | |||
SECTION 8.08. Admissions, Withdrawals and Removals
|
25 | |||
SECTION 8.09. Admission of Assignees as Substitute Limited Partners
|
25 | |||
SECTION 8.10. Withdrawal and Removal of Limited Partners
|
25 | |||
SECTION 8.11. No Solicitation
|
26 | |||
SECTION 8.12. Minimum Retained Ownership Requirement
|
26 |
-ii-
Page | ||||
ARTICLE IX
|
||||
|
||||
DISSOLUTION, LIQUIDATION AND TERMINATION
|
||||
|
||||
SECTION 9.01. No Dissolution
|
27 | |||
SECTION 9.02. Events Causing Dissolution
|
27 | |||
SECTION 9.03. Distribution upon Dissolution
|
28 | |||
SECTION 9.04. Time for Liquidation
|
28 | |||
SECTION 9.05. Termination
|
28 | |||
SECTION 9.06. Claims of the Partners
|
28 | |||
SECTION 9.07. Survival of Certain Provisions
|
29 | |||
|
||||
ARTICLE X
|
||||
|
||||
LIABILITY AND INDEMNIFICATION
|
||||
|
||||
SECTION 10.01. Liability of Partners
|
29 | |||
SECTION 10.02. Indemnification
|
30 | |||
|
||||
ARTICLE XI
|
||||
|
||||
MISCELLANEOUS
|
||||
|
||||
SECTION 11.01. Severability
|
32 | |||
SECTION 11.02. Notices
|
32 | |||
SECTION 11.03. Cumulative Remedies
|
33 | |||
SECTION 11.04. Binding Effect
|
33 | |||
SECTION 11.05. Interpretation
|
33 | |||
SECTION 11.06. Counterparts
|
34 | |||
SECTION 11.07. Further Assurances
|
34 | |||
SECTION 11.08. Entire Agreement
|
34 | |||
SECTION 11.09. Governing Law
|
34 | |||
SECTION 11.10. Dispute Resolution
|
34 | |||
SECTION 11.11. Expenses
|
37 | |||
SECTION 11.12. Amendments and Waivers
|
37 | |||
SECTION 11.13. No Third Party Beneficiaries
|
38 | |||
SECTION 11.14. Headings
|
38 | |||
SECTION 11.15. Power of Attorney
|
38 | |||
SECTION 11.16. Separate Agreements; Schedules
|
39 | |||
SECTION 11.17. Partnership Status
|
39 | |||
SECTION 11.18. Delivery by Facsimile or Email
|
39 |
-iii-
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GENERAL PARTNER: | ||||||
|
||||||
CARLYLE HOLDINGS III GP SUB L.L.C. | ||||||
|
||||||
By: Carlyle Holdings III GP L.P., its sole member | ||||||
|
||||||
By: Carlyle Holdings III GP Management L.L.C., its general partner | ||||||
|
||||||
By: The Carlyle Group L.P., its sole member | ||||||
|
||||||
By: Carlyle Group Management L.L.C., its general partner | ||||||
|
||||||
|
By: | |||||
|
||||||
|
Name: | |||||
|
Title: |
LIMITED PARTNERS | ||||||
|
||||||
|
||||||
|
Name: | |||||
|
||||||
|
||||||
|
Name: | |||||
|
||||||
|
||||||
|
Name: | |||||
|
||||||
|
||||||
|
Name: | |||||
|
||||||
Solely to reflect its withdrawal as a limited partner pursuant to Section 5.01(b): | ||||||
|
||||||
|
CARLYLE HOLDINGS III LIMITED PARTNER L.L.C. | |||||
|
||||||
|
By: | |||||
|
||||||
|
Name: | |||||
|
Title: |
Page | |||||
|
ARTICLE I | ||||
|
DEFINITIONS | ||||
|
|||||
Section 1.01.
|
Definitions | 2 | |||
|
|||||
|
ARTICLE II | ||||
|
DETERMINATION OF REALIZED TAX BENEFIT | ||||
|
|||||
Section 2.01.
|
Basis Adjustment Principles | 8 | |||
Section 2.02.
|
Exchange Basis Schedule | 9 | |||
Section 2.03.
|
Tax Benefit Schedule | 9 | |||
Section 2.04.
|
Procedures, Amendments | 9 | |||
|
|||||
|
ARTICLE III | ||||
|
TAX BENEFIT PAYMENTS | ||||
|
|||||
Section 3.01.
|
Payments | 10 | |||
Section 3.02.
|
No Duplicative Payments | 11 | |||
Section 3.03.
|
Pro Rata Payments; Coordination of Benefits | 11 | |||
|
|||||
|
ARTICLE IV | ||||
|
TERMINATION | ||||
|
|||||
Section 4.01.
|
Early Termination and Breach of Agreement | 12 | |||
Section 4.02.
|
Early Termination Notice | 13 | |||
Section 4.03.
|
Payment upon Early Termination | 13 | |||
|
|||||
|
ARTICLE V | ||||
|
SUBORDINATION AND LATE PAYMENTS | ||||
|
|||||
Section 5.01.
|
Subordination. | 14 | |||
Section 5.02.
|
Late Payments by a Corporate Holdco | 14 | |||
|
|||||
|
ARTICLE VI | ||||
|
NO DISPUTES; CONSISTENCY; COOPERATION | ||||
|
|||||
Section 6.01.
|
Limited Partner Representative Participation in Corporate Holdcos and Carlyle Holdings Partnerships Tax Matters | 14 | |||
Section 6.02.
|
Consistency | 15 | |||
Section 6.03.
|
Cooperation | 15 |
i
Page | |||||
|
ARTICLE VII | ||||
|
MISCELLANEOUS | ||||
Section 7.01.
|
Notices | 15 | |||
Section 7.02.
|
Counterparts | 16 | |||
Section 7.03.
|
Entire Agreement; No Third Party Beneficiaries | 16 | |||
Section 7.04.
|
Governing Law | 17 | |||
Section 7.05.
|
Severability | 17 | |||
Section 7.06.
|
Successors; Assignment; Amendments; Waivers | 17 | |||
Section 7.07.
|
Titles and Subtitles | 18 | |||
Section 7.08.
|
Dispute Resolution | 18 | |||
Section 7.09.
|
18 | ||||
Section 7.09.
|
Reconciliation | 19 | |||
Section 7.10.
|
Withholding | 20 | |||
Section 7.11.
|
Affiliated Corporations of Parent; Addition of Corporate Holdcos; Admission of a Corporate Holdco into a Consolidated Group; Transfers of Corporate Assets | 20 | |||
Section 7.12.
|
Confidentiality | 21 | |||
Section 7.13.
|
Carlyle Holdings Partnership Agreements | 22 | |||
Section 7.14.
|
Carlyle Holdings Partnerships | 22 | |||
Section 7.15.
|
Termination Election | 22 | |||
Section 7.16.
|
Independent Nature of the Limited Partners | 22 | |||
|
Rights and Obligations | 22 |
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5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
CARLYLE HOLDINGS I GP INC.
|
||||
By: | ||||
Name: | ||||
Title: | ||||
CARLYLE HOLDINGS I L.P.
|
||||||
By: Carlyle Holding I GP Sub L.L.C, its general partner | ||||||
By: Carlyle Holdings I GP Inc., its sole member
| ||||||
By: |
||||||
Name: | ||||||
Title: | ||||||
THE CARLYLE GROUP L.P.
|
||||
By: Carlyle Group Management L.L.C., its general partner | ||||
By: |
||||
Name: | ||||
Title: | ||||
LIMITED PARTNERS
|
|||||
Name: | |||||
Name: | |||||
Name: | |||||
Name: |
[Tax Receivable Agreement]
2
3
4
5
6
7
8
9
10
11
12
13
14
CARLYLE GROUP MANAGEMENT L.L.C.
|
||||
By: | ||||
Name: | ||||
Title: | ||||
THE CARLYLE GROUP L.P.
By: Carlyle Group Management L.L.C., its general partner |
||||
By: | ||||
Name: | ||||
Title: | ||||
CARLYLE HOLDINGS I GP INC.
|
||||
By: | ||||
Name: | ||||
Title: | ||||
CARLYLE HOLDINGS I GP SUB L.L.C.
By: Carlyle Holdings I GP Inc., its sole member |
||||
By: | ||||
Name: | ||||
Title: | ||||
CARLYLE HOLDINGS II GP L.L.C. | ||||||||
|
||||||||
By: | The Carlyle Group L.P., its sole member | |||||||
|
||||||||
By: Carlyle Group Management L.L.C., its general partner | ||||||||
|
||||||||
|
By: | |||||||
|
Name: | |||||||
|
Title: | |||||||
|
||||||||
CARLYLE HOLDINGS III GP L.P. | ||||||||
|
||||||||
By: Carlyle Holdings III GP Management L.L.C., its general partner | ||||||||
|
||||||||
By: The Carlyle Group L.P., its sole member | ||||||||
|
||||||||
By: Carlyle Group Management L.L.C., its general partner | ||||||||
|
||||||||
|
By: | |||||||
|
Name: | |||||||
|
Title: | |||||||
|
||||||||
CARLYLE HOLDINGS III GP SUB L.L.C. | ||||||||
|
||||||||
By: Carlyle Holdings III GP L.P., its sole member | ||||||||
|
||||||||
By: Carlyle Holdings III GP Management L.L.C., its general partner | ||||||||
|
||||||||
By: The Carlyle Group L.P., its sole member | ||||||||
|
||||||||
|
By: Carlyle Group Management L.L.C., its general partner | |||||||
|
||||||||
|
By: | |||||||
|
Name: | |||||||
|
Title: |
CARLYLE HOLDINGS I L.P. | ||||||
|
||||||
By: Carlyle Holdings I GP Sub L.L.C., its general partner | ||||||
|
||||||
By: Carlyle Holdings I GP Inc., its sole member | ||||||
|
||||||
|
By: | |||||
|
Name: | |||||
|
Title: | |||||
|
||||||
CARLYLE HOLDINGS II L.P. | ||||||
|
||||||
By: Carlyle Holdings II GP L.L.C., its general partner | ||||||
|
||||||
By: The Carlyle Group L.P., its sole member | ||||||
|
||||||
|
By: Carlyle Group Management L.L.C., its general partner | |||||
|
||||||
|
By: | |||||
|
Name: | |||||
|
Title: |
CARLYLE HOLDINGS III L.P. | ||||||||||
|
||||||||||
By: Carlyle Holdings III GP Sub L.L.C., its general partner | ||||||||||
|
||||||||||
By: Carlyle Holdings III GP L.P., its sole member | ||||||||||
|
||||||||||
By: Carlyle Holdings III GP Management L.L.C., its general partner | ||||||||||
|
||||||||||
By: The Carlyle Group L.P., its sole member | ||||||||||
|
||||||||||
|
By: Carlyle Group Management L.L.C., its general partner | |||||||||
|
||||||||||
|
By: | |||||||||
|
Name: | |||||||||
|
Title: | |||||||||
|
||||||||||
CARLYLE HOLDINGS II SUB L.L.C. | ||||||||||
|
||||||||||
By: The Carlyle Group L.P., its managing member | ||||||||||
|
||||||||||
By: Carlyle Group Management L.L.C., its general partner | ||||||||||
|
||||||||||
|
By: | |||||||||
|
Name: | |||||||||
|
Title: |
LIMITED PARTNERS | ||||
|
||||
|
Name: | |||
|
||||
|
Name: | |||
|
||||
|
Name: | |||
|
||||
|
Name: | |||
|
||||
|
Name: |
Legal Name of Carlyle Holdings Limited Partner:
|
||
|
Address:
|
||
|
Number of Carlyle Holdings Partnership Units to be exchanged:
|
||
|
|
Name: |
Name:
|
||||||||
|
||||||||
Address for Notices: | With copies to: | |||||||
|
||||||||
|
||||||||
|
||||||||
|
||||||||
Attention:
|
||||||||
THE CARLYLE GROUP L.P.
:
By: CARLYLE GROUP MANAGEMENT L.L.C., its general partner |
||||
By: | ||||
Name: | ||||
Title: | ||||
THE INVESTORS : | ||||||
|
||||||
MDC/TCP INVESTMENTS (CAYMAN) I, LTD. | ||||||
|
||||||
|
By: | |||||
|
Its: |
|
||||
|
||||||
MDC/TCP INVESTMENTS (CAYMAN) II, LTD. | ||||||
|
||||||
|
By: | |||||
|
||||||
|
Its: | |||||
|
||||||
MDC/TCP INVESTMENTS (CAYMAN) III, LTD. | ||||||
|
||||||
|
By: | |||||
|
||||||
|
Its: | |||||
|
||||||
MDC/TCP INVESTMENTS (CAYMAN) IV, LTD. | ||||||
|
||||||
|
By: | |||||
|
||||||
|
Its: | |||||
|
||||||
MDC/TCP INVESTMENTS (CAYMAN) V, LTD. | ||||||
|
||||||
|
By: | |||||
|
||||||
|
Its: |
MDC/TCP INVESTMENTS (CAYMAN) VI, LTD. | ||||||
|
||||||
|
By: | |||||
|
||||||
|
Its: | |||||
|
||||||
FIVE OVERSEAS INVESTMENT L.L.C. | ||||||
|
||||||
|
By: | |||||
|
||||||
|
Its: |
2
3
4
5
6
7
8
9
10
11
12
13
THE CARLYLE GROUP L.P.
By: Carlyle Group Management L.L.C., its general partner |
||||
By: | ||||
Name: | ||||
Title: | ||||
CALIFORNIA PUBLIC EMPLOYEES RETIREMENT SYSTEM
|
||||
By: | ||||
Name: | ||||
Title: | ||||
2
3
4
5
6
7
8
9