Blackstone Group Inc (Form: 10-Q, Received: 08/08/2019 16:08:20)

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false2019Q20001393818--12-311000.81.14.94.9Blackstone Group IncDiversified Instruments include investments in funds that invest across multiple strategies. Investments representing 3% of the fair value of the investments in this category may not be redeemed at, or within three months of, the reporting date. The remaining 97% of investments in this category are redeemable as of the reporting date.The Credit Driven category includes investments in hedge funds that invest primarily in domestic and international bonds. Investments representing 29% of the fair value of the investments in this category may not be redeemed at, or within three months of, the reporting date. The remaining 71% of investments in this category are redeemable as of the reporting date.The Equity category includes investments in hedge funds that invest primarily in domestic and international equity securities. Investments representing 100% of the fair value of the investments in this category may not be redeemed at, or within three months of, the reporting date. As of the reporting date, the investee fund manager had elected to side-pocket 12% of Blackstone’s investments in the category.The Commodities category includes investments in commodities-focused funds that primarily invest in futures and physical-based commodity driven strategies. Investments representing 100% of the fair value of the investments in this category may not be redeemed at, or within three months of, the reporting date.Pursuant to GAAP consolidation guidance, Blackstone is required to consolidate all VIEs in which it has been identified as the primary beneficiary, including certain CLO vehicles and other funds in which a consolidated entity of Blackstone, such as the general partner of the fund, has a controlling financial interest. While Blackstone is required to consolidate certain funds, including CLO vehicles, for GAAP purposes, Blackstone has no ability to utilize the assets of these funds and there is no recourse to Blackstone for their liabilities since these are client assets and liabilities.Senior and subordinated notes issued by CLO vehicles are classified based on the more observable fair value of CLO assets less (1) the fair value of any beneficial interests held by Blackstone, and (2) the carrying value of any beneficial interests that represent compensation for services. Fair value is determined by broker quote and these notes would be classified as Level II within the fair value hierarchy. Straight-line lease cost includes short-term leases, which are immaterial.Excludes $113.3 million of lease payments for signed leases that have not yet commenced.Distributions declared reflects the calendar date of the declaration for each distribution.The split of clawback between Blackstone Holdings and Current and Former Personnel is based on the performance of individual investments held by a fund rather than on a fund by fund basis.This adjustment removes Unrealized Performance Revenues on a segment basis.This adjustment removes Interest and Dividend Revenue on a segment basis.This adjustment removes Other Revenue on a segment basis.This adjustment reverses the effect of consolidating Blackstone Funds, which are excluded from Blackstone’s segment presentation. This adjustment includes the elimination of Blackstone’s interest in these funds, the removal of revenue from the reimbursement of certain expenses by the Blackstone Funds, which are presented gross under GAAP but netted against Management and Advisory Fees, Net in the Total Segment measures, and the removal of amounts associated with the ownership of Blackstone consolidated operating partnerships held by non-controlling interests.This adjustment removes the amortization of transaction-related intangibles, which are excluded from Blackstone’s segment presentation. This amount includes amortization of intangibles associated with Blackstone’s investment in Pátria, which is accounted for under the equity method.This adjustment removes Transaction-Related Charges, which are excluded from Blackstone’s segment presentation. Transaction-Related Charges arise from corporate actions including acquisitions, divestitures, and Blackstone’s initial public offering. They consist primarily of equity-based compensation charges, gains and losses on contingent consideration arrangements, changes in the balance of the Tax Receivable Agreement resulting from a change in tax law or similar event, transaction costs and any gains or losses associated with these corporate actions.This adjustment removes Unrealized Performance Allocations Compensation.This adjustment removes Equity-Based Compensation on a segment basis.This adjustment removes Interest Expense, excluding interest expense related to the Tax Receivable Agreement.This adjustment removes Unrealized Principal Investment Income on a segment basis.Total Segment Revenues is comprised of the following: Three Months Ended June 30 , 2019 2018 Six Months Ended June 30, 2019 2018 Total Segment Management and Advisory Fees, Net $ 844,156 $722,994 $1,658,218 $ 1,459,038 Total Segment Fee Related Performance Revenues 13,624 45,515 21,403 49,352 Total Segment Realized Performance Revenues 341,386 477,544 588,155 755,915 Total Segment Realized Principal Investment Income 123,557 94,647 149,465 123,340 Total Segment Revenues $1,322,723 $1,340,700 $ 2,417,241 $2,387,645 Total Segment Expenses is comprised of the following: Three Months Ended June 30 , 2019 2018 Six Months Ended June 30, 2019 2018 Total Segment Expenses is comprised of the following: Total Segment Fee Related Compensation $293,834 $ 306,243 $ 617,865 $602,317 Total Segment Realized Performance Compensation 125,466 172,894 210,706 287,723 Total Segment Other Operating Expenses 142,121 122,466 265,432 229,558 Total Segment Expenses $561,421 $601,603 $1,094,003 $1,119,598 Represents (1) the add back of net management fees earned from consolidated Blackstone Funds which have been eliminated in consolidation, and (2) the removal of revenue from the reimbursement of certain expenses by the Blackstone Funds, which are presented gross under GAAP but netted against Management and Advisory Fees, Net in the Total Segment measures.Represents the add back of Performance Revenues earned from consolidated Blackstone Funds which have been eliminated in consolidation.Represents the removal of Transaction-Related Charges that are not recorded in the Total Segment measures.Represents the removal of (1) the amortization of transaction-related intangibles, and (2) certain expenses reimbursed by the Blackstone Funds, which are presented gross under GAAP but netted against Management and Advisory Fees, Net in the Total Segment measures.Represents (1) the add back of Principal Investment Income, including general partner income, earned from consolidated Blackstone Funds which have been eliminated in consolidation, and (2) the removal of amounts associated with the ownership of Blackstone consolidated operating partnerships held by non-controlling interests.The Subordinated Notes do not have contractual interest rates but instead receive distributions from the excess cash flows of the CLO vehicles. 0001393818 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Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM

10-Q

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2019

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO

Commission File Number:

001-33551

The Blackstone Group Inc.

(Exact name of Registrant as specified in its charter)


Delaware (State or other jurisdiction of incorporation or organization)		20-8875684 (I.R.S. Employer Identification No.)

345 Park Avenue

New York, New York 10154

(Address of principal executive offices)(Zip Code)

(

212

)

583-5000

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Class A Common Stock	BX	New York Stock Exchange

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes

☒

☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation

S-T

(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes

☒

☐

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a

non-accelerated

filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule

12b-2

of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

☐

Indicate by check mark whether the Registrant is a shell company (as defined in Rule

12b-2

of the Exchange Act). Yes

☐

☒

The number of the Registrant’s voting Class A Common Stock outstanding as of August 2, 2019 was

661,410,926

Table of Contents


		Page
Part I.	Financial Information

Item 1.	Financial Statements		5

	Unaudited Condensed Consolidated Financial Statements:

	Condensed Consolidated Statements of Financial Condition as of June 30, 2019 and December 31, 2018		5

	Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2019 and 2018		7

	Condensed Consolidated Statements of Comprehensive Income for the Three and Six Months Ended June 30, 2019 and 2018		8

	Condensed Consolidated Statements of Changes in Partners’ Capital for the Three and Six Months Ended June 30, 2019 and 2018		9

	Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2019 and 2018		13

	Notes to Condensed Consolidated Financial Statements		15

Item 1A.	Unaudited Supplemental Presentation of Statements of Financial Condition		66

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		68

Item 3.	Quantitative and Qualitative Disclosures About Market Risk		131

Item 4.	Controls and Procedures		135

Part II.	Other Information

Item 1.	Legal Proceedings		136

Item 1A.	Risk Factors		137

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		137

Item 3.	Defaults Upon Senior Securities		138

Item 4.	Mine Safety Disclosures		138

Item 5.	Other Information		138

Item 6.	Exhibits		138

Signatures			140

Table of Contents

Forward-Looking Statements

This report may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 which reflect our current views with respect to, among other things, our operations, taxes, earnings and financial performance, share repurchases and dividends. You can identify these forward-looking statements by the use of words such as “outlook,” “indicator,” “believes,” “expects,” “potential,” “continues,” “may,” “will,” “should,” “seeks,” “approximately,” “predicts,” “intends,” “plans,” “estimates,” “anticipates” or the negative version of these words or other comparable words. Such forward-looking statements are subject to various risks and uncertainties. Accordingly, there are or will be important factors that could cause actual outcomes or results to differ materially from those indicated in these statements. We believe these factors include but are not limited to those described under the section entitled “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2018, in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2019 and in this report, as such factors may be updated from time to time in our periodic filings with the United States Securities and Exchange Commission (“SEC”), which are accessible on the SEC’s website at www.sec.gov. These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included in this report and in our other periodic filings. The forward-looking statements speak only as of the date of this report, and we undertake no obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise.

Website and Social Media Disclosure

We use our website (www.blackstone.com), Facebook page (www.facebook.com/blackstone), Twitter (www.twitter.com/blackstone), LinkedIn (www.linkedin.com/company/blackstonegroup), Instagram (www.instagram.com/blackstone), SoundCloud (www.soundcloud.com/blackstone-300250613), PodBean (www.blackstone.podbean.com), Spotify (https://open.spotify.com/show/1PqaIgd12KgRN8rlijBhE7) and YouTube (www.youtube.com/user/blackstonegroup) accounts as channels of distribution of company information. The information we post through these channels may be deemed material. Accordingly, investors should monitor these channels, in addition to following our press releases, SEC filings and public conference calls and webcasts. In addition, you may automatically receive email alerts and other information about Blackstone when you enroll your email address by visiting the “Contact Us/Email Alerts” section of our website at http://ir.blackstone.com. The contents of our website, any alerts and social media channels are not, however, a part of this report.

Effective July 1, 2019, The Blackstone Group L.P. converted from a Delaware limited partnership to a Delaware corporation, The Blackstone Group Inc. (the “Conversion”). This report includes the results for The Blackstone Group L.P. prior to the Conversion and for the quarter ended June 30, 2019. In this report, references to “Blackstone,” the “Corporation,” the “Partnership,” “we,” “us” or “our” refer to (a) The Blackstone Group Inc. and its consolidated subsidiaries following the Conversion and (b) The Blackstone Group L.P. and its consolidated subsidiaries prior to the Conversion. Unless the context otherwise requires, references in this report to the ownership of Mr. Stephen A. Schwarzman, our founder, and other Blackstone personnel include the ownership of personal planning vehicles and family members of these individuals. All references to shares or per share amounts prior to the Conversion refer to units or per unit amounts. See “Part I. Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Conversion to a Corporation.”

“Blackstone Funds,” “our funds” and “our investment funds” refer to the private equity funds, real estate funds, funds of hedge funds, hedge funds, credit-focused funds, collateralized loan obligations (“CLO”), real estate investment trusts and registered investment companies that are managed by Blackstone. “Our carry funds” refers to the private equity funds, real estate funds and certain of the hedge fund solutions and credit-focused funds (with multi-year drawdown, commitment-based structures that only pay carry on the realization of an investment) that are managed by Blackstone. We refer to our general corporate private equity funds as Blackstone Capital Partners (“BCP”) funds, our energy-focused private equity funds as Blackstone Energy Partners (“BEP”) funds, our core private equity fund as Blackstone Core Equity Partners (“BCEP”), our opportunistic investment platform that

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invests globally across asset classes, industries and geographies as Blackstone Tactical Opportunities (“Tactical Opportunities”), our secondary fund of funds business as Strategic Partners Fund Solutions (“Strategic Partners”), our infrastructure-focused funds as Blackstone Infrastructure Partners (“BIP”), our life sciences private investment platform, Blackstone Life Sciences (“BXLS”), our multi-asset investment program for eligible high net worth investors offering exposure to certain of our key illiquid investment strategies through a single commitment as Blackstone Total Alternatives Solution (“BTAS”) and our capital markets services business as Blackstone Capital Markets (“BXCM”). We refer to our real estate opportunistic funds as Blackstone Real Estate Partners (“BREP”) funds and our real estate debt investment funds as Blackstone Real Estate Debt Strategies (“BREDS”) funds. We refer to our core+ real estate funds, which target substantially stabilized assets in prime markets, as Blackstone Property Partners (“BPP”) funds. We refer to our real estate investment trusts as “REITs”, to Blackstone Mortgage Trust, Inc., our NYSE-listed REIT, as “BXMT”, and to Blackstone Real Estate Income Trust, Inc., our non-exchange traded REIT, as “BREIT”. “Our hedge funds” refers to our funds of hedge funds, hedge funds, certain of our real estate debt investment funds, including a registered investment company, and certain other credit-focused funds which are managed by Blackstone. “BIS” refers to Blackstone Insurance Solutions, which partners with insurers to deliver bespoke, capital-efficient investments tailored to each insurer’s needs and risk profile.

“Assets Under Management” refers to the assets we manage. Our Assets Under Management equals the sum of:

(a)

the fair value of the investments held by our carry funds and our side-by-side and co-investment entities managed by us, plus (1) the capital that we are entitled to call from investors in those funds and entities pursuant to the terms of their respective capital commitments, including capital commitments to funds that have yet to commence their investment periods, or (2) for certain credit-focused funds the amounts available to be borrowed under asset based credit facilities,

(b)

the net asset value of (1) our hedge funds and real estate debt carry funds, BPP, certain co-investments managed by us, and our Hedge Fund Solutions and certain credit-focused carry and drawdown funds (plus, in each case, the capital that we are entitled to call from investors in those funds, including commitments yet to commence their investment periods), and (2) our funds of hedge funds, our Hedge Fund Solutions registered investment companies, and BREIT,

(c)

the invested capital, fair value or net asset value of assets we manage pursuant to separately managed accounts,

(d)

the amount of debt and equity outstanding for our CLOs during the reinvestment period,

(e)

the aggregate par amount of collateral assets, including principal cash, for our CLOs after the reinvestment period,

(f)

the gross or net amount of assets (including leverage where applicable) for our credit-focused registered investment companies, and

(g)

the fair value of common stock, preferred stock, convertible debt, or similar instruments issued by BXMT.

Our carry funds are commitment-based drawdown structured funds that do not permit investors to redeem their interests at their election. Our funds of hedge funds, hedge funds, funds structured like hedge funds and other open ended funds in our Hedge Fund Solutions, Credit and Real Estate segments generally have structures that afford an investor the right to withdraw or redeem their interests on a periodic basis (for example, annually or quarterly), typically with 30 to 95 days’ notice, depending on the fund and the liquidity profile of the underlying assets. Investment advisory agreements related to certain separately managed accounts in our Hedge Fund Solutions and Credit segments, excluding our BIS separately managed accounts, may generally be terminated by an investor on 30 to 90 days’ notice.

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“Fee-Earning Assets Under Management” refers to the assets we manage on which we derive management fees and/or performance revenues. Our Fee-Earning Assets Under Management equals the sum of:

(a)

for our Private Equity segment funds and Real Estate segment carry funds including certain BREDS and Hedge Fund Solutions funds, the amount of capital commitments, remaining invested capital, fair value, net asset value or par value of assets held, depending on the fee terms of the fund,

(b)

for our credit-focused carry funds, the amount of remaining invested capital (which may include leverage) or net asset value, depending on the fee terms of the fund,

(c)

the remaining invested capital or fair value of assets held in co-investment vehicles managed by us on which we receive fees,

(d)

the net asset value of our funds of hedge funds, hedge funds, BPP, certain co-investments managed by us, certain registered investment companies, BREIT, and certain of our Hedge Fund Solutions drawdown funds,

(e)

the invested capital, fair value of assets or the net asset value we manage pursuant to separately managed accounts,

(f)

the net proceeds received from equity offerings and accumulated core earnings of BXMT, subject to certain adjustments,

(g)

the aggregate par amount of collateral assets, including principal cash, of our CLOs, and

(h)

the gross amount of assets (including leverage) or the net assets (plus leverage where applicable) for certain of our credit-focused registered investment companies.

Each of our segments may include certain Fee-Earning Assets Under Management on which we earn performance revenues but not management fees.

Our calculations of assets under management and fee-earning assets under management may differ from the calculations of other asset managers, and as a result this measure may not be comparable to similar measures presented by other asset managers. In addition, our calculation of assets under management includes commitments to, and the fair value of, invested capital in our funds from Blackstone and our personnel, regardless of whether such commitments or invested capital are subject to fees. Our definitions of assets under management and fee-earning assets under management are not based on any definition of assets under management and fee-earning assets under management that is set forth in the agreements governing the investment funds that we manage.

For our carry funds, total assets under management includes the fair value of the investments held and uncalled capital commitments, whereas fee-earning assets under management includes the total amount of capital commitments or the remaining amount of invested capital at cost depending on whether the investment period has expired or as specified by the fee terms of the fund. As such, fee-earning assets under management may be greater than total assets under management when the aggregate fair value of the remaining investments is less than the cost of those investments.

“Perpetual Capital” refers to the component of assets under management with an indefinite term, that is not in liquidation, and for which there is no requirement to return capital to investors through redemption requests in the ordinary course of business, except where funded by new capital inflows. Perpetual Capital includes co-investment capital with an investor right to convert into Perpetual Capital.

This report does not constitute an offer of any Blackstone Fund.

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Part I. Financial Information

Item 1.

Financial Statements

The Blackstone Group L.P.

Condensed Consolidated Statements of Financial Condition (Unaudited)

(Dollars in Thousands, Except Unit Data)


	June 30,			December 31,
	2019			2018
Assets
Cash and Cash Equivalents	$	1,484,444		$	2,207,841
Cash Held by Blackstone Funds and Other		324,609			337,320
Investments (including assets pledged of $267,910 and $279,502 at June 30, 2019 and December 31, 2018, respectively)		22,242,040			20,377,031
Accounts Receivable		802,066			636,238
Due from Affiliates		2,211,737			1,994,123
Intangible Assets, Net		433,007			468,507
Goodwill		1,869,860			1,869,860
Other Assets		354,253			294,248
Right-of-Use Assets		507,065			—
Deferred Tax Assets		743,132			739,482

Total Assets	$	30,972,213		$	28,924,650


Liabilities and Partners’ Capital
Loans Payable	$	10,676,138		$	9,951,862
Due to Affiliates		1,081,899			1,035,776
Accrued Compensation and Benefits		3,308,595			2,942,128
Securities Sold, Not Yet Purchased		128,512			142,617
Repurchase Agreements		207,676			222,202
Operating Lease Liabilities		574,619			—
Accounts Payable, Accrued Expenses and Other Liabilities		929,688			875,979

Total Liabilities		16,907,127			15,170,564


Commitments and Contingencies

Redeemable Non-Controlling Interests in Consolidated Entities		101,310			141,779


Partners’ Capital
The Blackstone Group L.P. Partners’ Capital
Partners’ Capital (common units: 660,588,369 issued and outstanding as of June 30, 2019; 663,212,830 issued and outstanding as of December 31, 2018)		6,335,897			6,415,700
Accumulated Other Comprehensive Loss		(27,542	)		(36,476	)

Total The Blackstone Group L.P. Partners’ Capital		6,308,355			6,379,224
Non-Controlling Interests in Consolidated Entities		3,869,303			3,648,766
Non-Controlling Interests in Blackstone Holdings		3,786,118			3,584,317

Total Partners’ Capital		13,963,776			13,612,307

Total Liabilities and Partners’ Capital	$	30,972,213		$	28,924,650

continued...

See notes to condensed consolidated financial statements.

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The Blackstone Group L.P.

Condensed Consolidated Statements of Financial Condition (Unaudited)

(Dollars in Thousands)

The following presents the portion of the consolidated balances presented above attributable to consolidated Blackstone Funds which are variable interest entities. The following assets may only be used to settle obligations of these consolidated Blackstone Funds and these liabilities are only the obligations of these consolidated Blackstone Funds and they do not have recourse to the general credit of Blackstone.


	June 30,		December 31,
	2019		2018
Assets
Cash Held by Blackstone Funds and Other	$	324,609	$	337,030
Investments		8,623,436		8,363,669
Accounts Receivable		369,978		179,863
Due from Affiliates		16,774		6,303
Other Assets		599		3,880

Total Assets	$	9,335,396	$	8,890,745


Liabilities
Loans Payable	$	6,536,220	$	6,480,711
Due to Affiliates		173,544		129,370
Securities Sold, Not Yet Purchased		82,174		92,603
Repurchase Agreements		207,676		222,202
Accounts Payable, Accrued Expenses and Other Liabilities		410,715		252,176

Total Liabilities	$	7,410,329	$	7,177,062

See notes to condensed consolidated financial statements.

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The Blackstone Group L.P.

Condensed Consolidated Statements of Operations (Unaudited)

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


	Three Months Ended					Six Months Ended
	June 30,					June 30,
	2019			2018		2019			2018
Revenues
Management and Advisory Fees, Net	$	840,378		$	721,384	$	1,650,104		$	1,450,233

Incentive Fees		21,915			19,378		34,047			31,944

Investment Income (Loss)
Performance Allocations
Realized		332,520			503,376		574,895			773,016
Unrealized		157,732			440,351		821,731			1,068,440
Principal Investments
Realized		145,040			129,197		218,301			171,342
Unrealized		(37,345	)		103,468		131,699			215,242

Total Investment Income		597,947			1,176,392		1,746,626			2,228,040

Interest and Dividend Revenue		43,686			40,073		87,770			75,458
Other		(17,120	)		675,343		(6,870	)		616,026

Total Revenues		1,486,806			2,632,570		3,511,677			4,401,701

Expenses
Compensation and Benefits
Compensation		438,521			427,479		909,918			816,882
Incentive Fee Compensation		8,886			9,743		14,292			16,405
Performance Allocations Compensation
Realized		125,825			186,398		212,220			298,460
Unrealized		64,518			189,991		351,533			444,426

Total Compensation and Benefits		637,750			813,611		1,487,963			1,576,173
General, Administrative and Other		175,308			145,828		321,370			272,541
Interest Expense		43,596			39,320		85,598			77,991
Fund Expenses		5,586			17,622		8,473			72,607

Total Expenses		862,240			1,016,381		1,903,404			1,999,312

Other Income
Net Gains from Fund Investment Activities		61,131			73,519		191,456			184,118

Income Before Provision for Taxes		685,697			1,689,708		1,799,729			2,586,507
Provision for Taxes		38,736			138,731		79,891			193,226

Net Income		646,961			1,550,977		1,719,838			2,393,281
Net Income (Loss) Attributable to Redeemable Non-Controlling Interests in Consolidated Entities		1,095			905		3,575			(370	)
Net Income Attributable to Non-Controlling Interests in Consolidated Entities		80,744			129,078		267,577			284,577
Net Income Attributable to Non-Controlling Interests in Blackstone Holdings		259,330			678,952		661,590			999,160

Net Income Attributable to The Blackstone Group L.P.	$	305,792		$	742,042	$	787,096		$	1,109,914


Net Income Per Common Unit
Common Units, Basic	$	0.45		$	1.09	$	1.17		$	1.64

Common Units, Diluted	$	0.45		$	1.09	$	1.16		$	1.63


Weighted-Average Common Units Outstanding
Common Units, Basic		673,655,305			681,794,492		674,079,074			678,156,936

Common Units, Diluted		673,985,944			682,010,610		1,200,592,276			1,210,727,948

See notes to condensed consolidated financial statements.

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The Blackstone Group L.P.

Condensed Consolidated Statements of Comprehensive Income (Unaudited)

(Dollars in Thousands)


	Three Months Ended June 30,					Six Months Ended June 30,
	2019		2018			2019		2018
Net Income	$	646,961	$	1,550,977		$	1,719,838	$	2,393,281
Other Comprehensive Income (Loss), Net of Tax - Currency Translation Adjustment		8,753		(30,674	)		15,936		(26,248	)

Comprehensive Income		655,714		1,520,303			1,735,774		2,367,033
Less:
Comprehensive Income (Loss) Attributable to Redeemable Non-Controlling Interests in Consolidated Entities		1,095		905			3,575		(370	)
Comprehensive Income Attributable to Non-Controlling Interests in Consolidated Entities		80,744		129,077			267,577		282,187
Comprehensive Income Attributable to Non-Controlling Interests in Blackstone Holdings		263,195		678,952			668,592		999,160

Comprehensive Income Attributable to The Blackstone Group L.P.	$	310,680	$	711,369		$	796,030	$	1,086,056

See notes to condensed consolidated financial statements.

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The Blackstone Group L.P.

Condensed Consolidated Statements of Changes in Partners’ Capital (Unaudited)

(Dollars in Thousands, Except Unit Data)


				The Blackstone Group L.P.
							Accumulated															Redeemable
							Other						Non-			Non-						Non-
							Compre-						Controlling			Controlling						Controlling
							hensive						Interests in			Interests in			Total			Interests in
	Common			Partners’			Income						Consolidated			Blackstone			Partners’			Consolidated
	Units			Capital			(Loss)			Total			Entities			Holdings			Capital			Entities
Balance at March 31, 2019		665,331,887		$	6,501,072		$	(32,430	)	$	6,468,642		$	3,852,346		$	3,688,772		$	14,009,760		$	136,941
Net Income		—			305,792			—			305,792			80,744			259,330			645,866			1,095
Currency Translation Adjustment		—			—			4,888			4,888			—			3,865			8,753			—
Capital Contributions		—			—			—			—			129,771			—			129,771			—
Capital Distributions		—			(248,947	)		—			(248,947	)		(193,522	)		(204,430	)		(646,899	)		(36,726	)
Transfer of Non-Controlling Interests in Consolidated Entities		—			—			—			—			(36	)		—			(36	)		—
Deferred Tax Effects Resulting from Acquisition of Ownership Interests from Non-Controlling Interest Holders		—			2,849			—			2,849			—			—			2,849			—
Equity-Based Compensation		—			49,341			—			49,341			—			38,801			88,142			—
Net Delivery of Vested Blackstone Holdings Partnership Units and Blackstone Common Units		41,256			(1,362	)		—			(1,362	)		—			(3	)		(1,365	)		—
Repurchase of Common Units and Blackstone Holdings Partnership Units		(6,555,885	)		(273,065	)		—			(273,065	)		—			—			(273,065	)		—
Change in The Blackstone Group L.P.’s Ownership Interest		—			(12,305	)		—			(12,305	)		—			12,305			—			—
Conversion of Blackstone Holdings Partnership Units to Blackstone Common Units		1,771,111			12,522			—			12,522			—			(12,522	)		—			—

Balance at June 30, 2019		660,588,369		$	6,335,897		$	(27,542	)	$	6,308,355		$	3,869,303		$	3,786,118		$	13,963,776		$	101,310

continued...

See notes to condensed consolidated financial statements.

Table of Contents

The Blackstone Group L.P.

Condensed Consolidated Statements of Changes in Partners’ Capital (Unaudited)

(Dollars in Thousands, Except Unit Data)


				The Blackstone Group L.P.
							Accumulated															Redeemable
							Other						Non-			Non-						Non-
							Compre-						Controlling			Controlling						Controlling
							hensive						Interests in			Interests in			Total			Interests in
	Common			Partners’			Income						Consolidated			Blackstone			Partners’			Consolidated
	Units			Capital			(Loss)			Total			Entities			Holdings			Capital			Entities
Balance at March 31, 2018		666,812,752		$	6,541,409		$	(27,203	)	$	6,514,206		$	3,333,954		$	3,467,639		$	13,315,799		$	209,010
Net Income		—			742,042			—			742,042			129,078			678,952			1,550,072			905
Currency Translation Adjustment		—			—			(30,673	)		(30,673	)		(1	)		—			(30,674	)		—
Capital Contributions		—			—			—			—			200,623			—			200,623			—
Capital Distributions		—			(236,200	)		—			(236,200	)		(170,252	)		(190,405	)		(596,857	)		(51,116	)
Transfer of Non-Controlling Interests in Consolidated Entities		—			—			—			—			(781	)		—			(781	)		—
Deferred Tax Effects Resulting from Acquisition of Ownership Interests from Non-Controlling Interest Holders		—			7,402			—			7,402			—			—			7,402			—
Equity-Based Compensation		—			59,080			—			59,080			—			46,798			105,878			—
Net Delivery of Vested Blackstone Holdings Partnership Units and Blackstone Common Units		(45,059	)		(2,626	)		—			(2,626	)		—			(354	)		(2,980	)		—
Repurchase of Common Units and Blackstone Holdings Partnership Units		(2,200,000	)		(71,685	)		—			(71,685	)		—			—			(71,685	)		—
Change in The Blackstone Group L.P.’s Ownership Interest		—			6,959			—			6,959			—			(6,959	)		—			—
Conversion of Blackstone Holdings Partnership Units to Blackstone Common Units		8,976,389			58,844			—			58,844			—			(58,844	)		—			—

Balance at June 30, 2018		673,544,082		$	7,105,225		$	(57,876	)	$	7,047,349		$	3,492,621		$	3,936,827		$	14,476,797		$	158,799

continued...

See notes to condensed consolidated financial statements.

Table of Contents

The Blackstone Group L.P.

Condensed Consolidated Statements of Changes in Partners’ Capital (Unaudited)

(Dollars in Thousands, Except Unit Data)


				The Blackstone Group L.P.
							Accumulated															Redeemable
							Other						Non-			Non-						Non-
							Compre-						Controlling			Controlling						Controlling
							hensive						Interests in			Interests in			Total			Interests in
	Common			Partners’			Income						Consolidated			Blackstone			Partners’			Consolidated
	Units			Capital			(Loss)			Total			Entities			Holdings			Capital			Entities
Balance at December 31, 2018		663,212,830		$	6,415,700		$	(36,476	)	$	6,379,224		$	3,648,766		$	3,584,317		$	13,612,307		$	141,779
Net Income		—			787,096			—			787,096			267,577			661,590			1,716,263			3,575
Currency Translation Adjustment		—			—			8,934			8,934			—			7,002			15,936			—
Capital Contributions		—			—			—			—			289,276			—			289,276			—
Capital Distributions		—			(639,210	)		—			(639,210	)		(335,020	)		(544,476	)		(1,518,706	)		(44,044	)
Transfer of Non-Controlling Interests in Consolidated Entities		—			—			—			—			(1,296	)		—			(1,296	)		—
Deferred Tax Effects Resulting from Acquisition of Ownership Interests from Non-Controlling Interest Holders		—			5,016			—			5,016			—			—			5,016			—
Equity-Based Compensation		—			101,200			—			101,200			—			79,613			180,813			—
Net Delivery of Vested Blackstone Holdings Partnership Units and Blackstone Common Units		1,853,730			(10,613	)		—			(10,613	)		—			(6	)		(10,619	)		—
Repurchase of Common Units and Blackstone Holdings Partnership Units		(8,100,000	)		(325,214	)		—			(325,214	)		—			—			(325,214	)		—
Change in The Blackstone Group L.P.’s Ownership Interest		—			(23,270	)		—			(23,270	)		—			23,270			—			—
Conversion of Blackstone Holdings Partnership Units to Blackstone Common Units		3,621,809			25,192			—			25,192			—			(25,192	)		—			—

Balance at June 30, 2019		660,588,369		$	6,335,897		$	(27,542	)	$	6,308,355		$	3,869,303		$	3,786,118		$	13,963,776		$	101,310

continued...

See notes to condensed consolidated financial statements.

Table of Contents

The Blackstone Group L.P.

Condensed Consolidated Statements of Changes in Partners’ Capital (Unaudited)

(Dollars in Thousands, Except Unit Data)


				The Blackstone Group L.P.
							Accumulated															Redeemable
							Other						Non-			Non-						Non-
							Compre-						Controlling			Controlling						Controlling
							hensive						Interests in			Interests in			Total			Interests in
	Common			Partners’			Income						Consolidated			Blackstone			Partners’			Consolidated
	Units			Capital			(Loss)			Total			Entities			Holdings			Capital			Entities
Balance at December 31, 2017		659,526,093		$	6,668,511		$	(34,018	)	$	6,634,493		$	3,253,148		$	3,624,506		$	13,512,147		$	210,944
Transfer Out Due to Deconsolidation of Fund Entities		—			—			—			—			(197,091	)		—			(197,091	)		—
Net Income (Loss)		—			1,109,914			—			1,109,914			284,577			999,160			2,393,651			(370	)
Currency Translation Adjustment		—			—			(23,858	)		(23,858	)		(2,390	)		—			(26,248	)		—
Capital Contributions		—			—			—			—			424,132			—			424,132			1,100
Capital Distributions		—			(806,770	)		—			(806,770	)		(291,963	)		(682,564	)		(1,781,297	)		(52,875	)
Transfer of Non-Controlling Interests in Consolidated Entities		—			—			—			—			22,208			—			22,208			—
Deferred Tax Effects Resulting from Acquisition of Ownership Interests from Non-Controlling Interest Holders		—			10,922			—			10,922			—			—			10,922			—
Equity-Based Compensation		—			100,519			—			100,519			—			79,900			180,419			—
Net Delivery of Vested Blackstone Holdings Partnership Units and Blackstone Common Units		3,032,372			(14,496	)		—			(14,496	)		—			(835	)		(15,331	)		—
Repurchase of Blackstone Common Units and Blackstone Holdings Partnership Units		(2,200,000	)		(71,685	)		—			(71,685	)		—			—			(71,685	)		—
Change in The Blackstone Group L.P.’s Ownership Interest		—			835			—			835			—			(835	)		—			—
Conversion of Blackstone Holdings Partnership Units to Blackstone Common Units		12,434,878			82,505			—			82,505			—			(82,505	)		—			—
Issuance of Blackstone Common Units		750,739			24,970			—			24,970			—			—			24,970			—

Balance at June 30, 2018		673,544,082		$	7,105,225		$	(57,876	)	$	7,047,349		$	3,492,621		$	3,936,827		$	14,476,797		$	158,799

See notes to condensed consolidated financial statements.

Table of Contents

The Blackstone Group L.P.

Condensed Consolidated Statements of Cash Flows (Unaudited)

(Dollars in Thousands)


	Six Months Ended June 30,
	2019			2018
Operating Activities
Net Income	$	1,719,838		$	2,393,281
Adjustments to Reconcile Net Income to Net Cash Provided by (Used in) Operating Activities
Blackstone Funds Related
Net Realized Gains on Investments		(817,759	)		(995,992	)
Changes in Unrealized Gains on Investments		(243,959	)		(290,232	)
Non-Cash Performance Allocations		(821,731	)		(1,068,440	)
Non-Cash Performance Allocations and Incentive Fee Compensation		574,630			757,064
Equity-Based Compensation Expense		223,979			208,994
Amortization of Intangibles		35,500			28,984
Other Non-Cash Amounts Included in Net Income		2,332			172,435
Cash Flows Due to Changes in Operating Assets and Liabilities
Cash Acquired with Consolidation of Fund Entity		—			31,422
Cash Relinquished with Deconsolidation of Fund Entities		—			(899,959	)
Accounts Receivable		(23,512	)		(8,030	)
Due from Affiliates		(198,164	)		(330,468	)
Other Assets		(37,961	)		(29,640	)
Accrued Compensation and Benefits		(251,331	)		(417,051	)
Securities Sold, Not Yet Purchased		(18,851	)		5,005
Accounts Payable, Accrued Expenses and Other Liabilities		(271,284	)		(476,348	)
Repurchase Agreements		(14,526	)		63,649
Due to Affiliates		19,638			31,306
Investments Purchased		(4,208,546	)		(9,706,998	)
Cash Proceeds from Sale of Investments		4,626,572			7,870,341

Net Cash Provided by (Used in) Operating Activities		294,865			(2,660,677	)

Investing Activities
Purchase of Furniture, Equipment and Leasehold Improvements		(33,524	)		(8,898	)

Net Cash Used in Investing Activities		(33,524	)		(8,898	)

Financing Activities
Distributions to Non-Controlling Interest Holders in Consolidated Entities		(347,836	)		(338,849	)
Contributions from Non-Controlling Interest Holders in Consolidated Entities		288,119			421,801
Payments Under Tax Receivable Agreement		(84,640	)		—
Net Settlement of Vested Common Units and Repurchase of Common and Blackstone Holdings Partnership Units		(335,833	)		(87,016	)
Proceeds from Loans Payable		668,640			3,218,399

continued...

See notes to condensed consolidated financial statements.

Table of Contents

The Blackstone Group L.P.

Condensed Consolidated Statements of Cash Flows (Unaudited)

(Dollars in Thousands)


	Six Months Ended June 30,
	2019			2018
Financing Activities (Continued)
Repayment and Repurchase of Loans Payable	$	(1,886	)	$	(1,004,660	)
Distributions to Unitholders		(1,183,686	)		(1,489,334	)

Net Cash Provided by (Used in) Financing Activities		(997,122	)		720,341

Effect of Exchange Rate Changes on Cash and Cash Equivalents and Cash Held by Blackstone Funds and Other		(327	)		11,671

Cash and Cash Equivalents and Cash Held by Blackstone Funds and Other
Net Decrease		(736,108	)		(1,937,563	)
Beginning of Period		2,545,161			3,936,489

End of Period	$	1,809,053		$	1,998,926


Supplemental Disclosure of Cash Flows Information
Payments for Interest	$	86,095		$	84,040

Payments for Income Taxes	$	45,966		$	109,944

Supplemental Disclosure of Non-Cash Investing and Financing Activities
Non-Cash Contributions from Non-Controlling Interest Holders	$	233		$	—

Non-Cash Distributions to Non-Controlling Interest Holders	$	(31,228	)	$	(5,924	)
Notes Issuance Costs	$	5,409		$	—

Transfer of Interests to Non-Controlling Interest Holders	$	(1,296	)	$	22,208

Change in The Blackstone Group L.P.’s Ownership Interest	$	(23,270	)	$	835

Net Settlement of Vested Common Units	$	59,302		$	100,861

Conversion of Blackstone Holdings Units to Common Units	$	25,192		$	82,505

Acquisition of Ownership Interests from Non-Controlling Interest Holders
Deferred Tax Asset	$	(31,248	)	$	(74,130	)

Due to Affiliates	$	26,232		$	63,208

Partners’ Capital	$	5,016		$	10,922

Issuance of New Units	$	—		$	24,970


The following table provides a reconciliation of Cash and Cash Equivalents and Cash Held by Blackstone Funds and Other reported within the Condensed Consolidated Statements of Financial Condition:

	June 30,			December 31,
	2019			2018
Cash and Cash Equivalents	$	1,484,444		$	2,207,841
Cash Held by Blackstone Funds and Other		324,609			337,320

	$	1,809,053		$	2,545,161

See notes to condensed consolidated financial statements.

Table of Contents

The Blackstone Group L.P.

Notes to Condensed Consolidated Financial Statements (Unaudited)

(All Dollars Are in Thousands, Except Unit and Per Unit Data, Except Where Noted)

1. Organization

Blackstone, together with its subsidiaries, is a leading global manager of private capital. The alternative asset management business includes the management of private equity funds, real estate funds, real estate investment trusts (“REITs”), funds of hedge funds, hedge funds, credit-focused funds, collateralized loan obligation (“CLO”) vehicles, separately managed accounts and registered investment companies (collectively referred to as the “Blackstone Funds”). Blackstone’s business is organized into four segments: Real Estate, Private Equity, Hedge Fund Solutions and Credit.

Blackstone was formed on March 12, 2007, and, until the Conversion, was managed and operated by Blackstone Group Management L.L.C., which is in turn wholly owned by Blackstone’s senior managing directors and controlled by one of Blackstone’s founders, Stephen A. Schwarzman (the “Founder”). The activities of Blackstone are conducted through its holding partnerships: Blackstone Holdings I L.P., Blackstone Holdings AI L.P., Blackstone Holdings II L.P., Blackstone Holdings III L.P. and Blackstone Holdings IV L.P. (collectively, “Blackstone Holdings”, “Blackstone Holdings Partnerships” or the “Holding Partnerships”). Blackstone, through its wholly owned subsidiaries, is the sole general partner in each of these Holding Partnerships.

Generally, holders of the limited partner interests in the Holding Partnerships may, four times each year, exchange their limited partnership interests (“Partnership Units”) for Blackstone common units, on a

one-to-one

basis, exchanging one Partnership Unit from each of the Holding Partnerships for one Blackstone common unit.

2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of Blackstone have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and the instructions to Form

10-Q.

The condensed consolidated financial statements, including these notes, are unaudited and exclude some of the disclosures required in audited financial statements. Management believes it has made all necessary adjustments (consisting of only normal recurring items) so that the condensed consolidated financial statements are presented fairly and that estimates made in preparing its condensed consolidated financial statements are reasonable and prudent. The operating results presented for interim periods are not necessarily indicative of the results that may be expected for any other interim period or for the entire year. These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements included in Blackstone

’s Annual Report on Form

10-K

for the year ended December

2018

filed with the Securities and Exchange Commission.

The condensed consolidated financial statements include the accounts of

Blackstone

, its wholly owned or majority-owned subsidiaries, the consolidated entities which are considered to be variable interest entities and for which

Blackstone

is considered the primary beneficiary, and certain partnerships or similar entities which are not considered variable interest entities but in which the general partner is

determined

to have control.

All intercompany balances and transactions have been eliminated in consolidation.

Restructurings within consolidated CLOs are treated as investment purchases or sales, as applicable, in the Condensed Consolidated Statements of Cash Flows.

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The Blackstone Group L.P.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

- Continued

(All Dollars Are in Thousands, Except Unit and Per Unit Data, Except Where Noted)

Consolidation

Blackstone consolidates all entities that it controls through a majority voting interest or otherwise, including those Blackstone Funds in which the general partner has a controlling financial interest. Blackstone has a controlling financial interest in Blackstone Holdings because the limited partners do not have the right to dissolve the partnerships or have substantive

kick-out

rights or participating rights that would overcome the control held by Blackstone. Accordingly, Blackstone consolidates Blackstone Holdings and records

non-controlling

interests to reflect the economic interests of the limited partners of Blackstone Holdings.

In addition,

Blackstone

consolidates all variable interest entities (“VIE”) in which it is the primary beneficiary. An enterprise is determined to be the primary beneficiary if it holds a controlling financial interest. A controlling financial interest is defined as (a) the power to direct the activities of a VIE that most significantly impact the entity’s economic performance and (b) the obligation to absorb losses of the entity or the right to receive benefits from the entity that could potentially be significant to the VIE. The consolidation guidance requires an analysis to determine (a) whether an entity in which

Blackstone

holds a variable interest is a VIE and (b) whether

Blackstone

’s involvement, through holding interests directly or indirectly in the entity or contractually through other variable interests, would give it a controlling financial interest. Performance of that analysis requires the exercise of judgment.

Blackstone

determines whether it is the primary beneficiary of a VIE at the time it becomes involved with a variable interest entity and continuously reconsiders that conclusion. In determining whether

Blackstone

is the primary beneficiary, Blackstone evaluates its control rights as well as economic interests in the entity held either directly or indirectly by

Blackstone

. The consolidation analysis can generally be performed qualitatively; however, if it is not readily apparent that

Blackstone

is not the primary beneficiary, a quantitative analysis may also be performed. Investments and redemptions (either by

Blackstone

, affiliates of

Blackstone

or third parties) or amendments to the governing documents of the respective Blackstone Funds could affect an entity’s status as a VIE or the determination of the primary beneficiary. At each reporting date,

Blackstone

assesses whether it is the primary beneficiary and will consolidate or deconsolidate accordingly.

Assets of consolidated VIEs that can only be used to settle obligations of the consolidated VIE and liabilities of a consolidated VIE for which creditors (or beneficial interest holders) do not have recourse to the general credit of Blackstone are presented in a separate section in the Condensed Consolidated Statements of Financial Condition.

Blackstone’s other disclosures regarding VIEs are discussed in Note 9. “Variable Interest Entities”.

Revenue Recognition

Revenues primarily consist of management and advisory fees, incentive fees, investment income, interest and dividend revenue and other.

Management and advisory fees and incentive fees are accounted for as contracts with customers. Under the guidance for contracts with customers, an entity is required to (a) identify the contract(s) with a customer, (b) identify the performance obligations in the contract, (c) determine the transaction price, (d) allocate the transaction price to the performance obligations in the contract, and (e) recognize revenue when (or as) the entity satisfies a performance obligation. In determining the transaction price, an entity may include variable consideration only to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized would not occur when the uncertainty associated with the variable consideration is resolved. See Note 19. “Segment Reporting” for a disaggregated presentation of revenues from contracts with customers.

Investment Income represents the unrealized and realized gains and losses on

Blackstone

’s Performance Allocations and Principal Investments. Interest and Dividend Revenue comprises primarily interest and dividend income earned on principal investments held by

Blackstone

. Other Revenue consists of miscellaneous income and foreign exchange gains and losses arising on transactions denominated in currencies other than U.S. dollars.

Table of Contents

The Blackstone Group L.P.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

- Continued

(All Dollars Are in Thousands, Except Unit and Per Unit Data, Except Where Noted)

Management and Advisory Fees, Net

— Management and Advisory Fees, Net are comprised of management fees, including base management fees, transaction and other fees and advisory fees net of management fee reductions and offsets.

Blackstone earns base management fees from limited partners of funds in each of its managed funds, at a fixed percentage of assets under management, net asset value, total assets, committed capital or invested capital. These customer contracts require Blackstone to provide investment management services, which represents a performance obligation that Blackstone satisfies over time. Management fees are a form of variable consideration because the fees Blackstone is entitled to vary based on fluctuations in the basis for the management fee. The amount recorded as revenue is generally determined at the end of the period because these management fees are payable on a regular basis (typically quarterly) and are not subject to clawback once paid.

Transaction, advisory and other fees (including monitoring fees) are principally fees charged to the limited partners of funds indirectly through the managed funds and portfolio companies. The investment advisory agreements generally require that the investment adviser reduce the amount of management fees payable by the limited partners to Blackstone (“management fee reductions”) by an amount equal to a portion of the transaction and other fees paid to Blackstone by the portfolio companies. The amount of the reduction varies by fund, the type of fee paid by the portfolio company and the previously incurred expenses of the fund. These fees and associated management fee reductions are a component of the transaction price for Blackstone’s performance obligation to provide investment management services to the limited partners of funds and are recognized as changes to the transaction price in the period in which they are charged and the services are performed.

Management fee offsets are reductions to management fees payable by the limited partners of the Blackstone Funds, which are based on the amount such limited partners reimburse the Blackstone Funds or Blackstone primarily for placement fees. Providing investment management services requires Blackstone to arrange for services on behalf of its customers. In those situations where Blackstone is acting as an agent on behalf of the limited partners of funds, it presents the cost of services as net against management fee revenue. In all other situations, Blackstone is primarily responsible for fulfilling the services and is therefore acting as a principal for those arrangements. As a result, the cost of those services is presented gross as Compensation or General, Administrative and Other expense, as appropriate, with any reimbursement from the limited partners of the funds recorded as Management and Advisory Fees, Net.

Accrued but unpaid Management and Advisory Fees, net of management fee reductions and management fee offsets, as of the reporting date are included in Accounts Receivable or Due from Affiliates in the Condensed Consolidated Statements of Financial Condition.

Incentive Fees

— Contractual fees earned based on the performance of Blackstone Funds (“Incentive Fees”) are a form of variable consideration in Blackstone’s contracts with customers to provide investment management services. Incentive Fees are earned based on fund performance during the period, subject to the achievement of minimum return levels, or high water marks, in accordance with the respective terms set out in each fund’s governing agreements. Incentive Fees will not be recognized as revenue until (a) it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur, or (b) the uncertainty associated with the variable consideration is subsequently resolved. Incentive Fees are typically recognized as revenue when realized at the end of the measurement period. Once realized, such fees are not subject to clawback or reversal. Accrued but unpaid Incentive Fees charged directly to investors in Blackstone Funds as of the reporting date are recorded within Due from Affiliates in the Condensed Consolidated Statements of Financial Condition.

Investment Income (Loss)

— Investment Income (Loss) represents the unrealized and realized gains and losses on Blackstone’s Performance Allocations and Principal Investments.

In certain fund structures across private equity, real estate, hedge fund solutions and credit-focused funds (“carry funds”), Blackstone, through its subsidiaries, invests alongside its limited partners in a partnership and is entitled to its pro-rata share of the results of the fund (a “pro-rata allocation”). In addition to a pro-rata allocation,

Table of Contents

The Blackstone Group L.P.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

- Continued

(All Dollars Are in Thousands, Except Unit and Per Unit Data, Except Where Noted)

and assuming certain investment returns are achieved, Blackstone is entitled to a disproportionate allocation of the income otherwise allocable to the limited partners, commonly referred to as carried interest (“Performance Allocations”).

Performance Allocations are made to the general partner based on cumulative fund performance to date, subject to a preferred return to limited partners. At the end of each reporting period, Blackstone calculates the balance of accrued Performance Allocations (“Accrued Performance Allocations”) that would be due to Blackstone for each fund, pursuant to the fund agreements, as if the fair value of the underlying investments were realized as of such date, irrespective of whether such amounts have been realized. As the fair value of underlying investments varies between reporting periods, it is necessary to make adjustments to amounts recorded as Accrued Performance Allocations to reflect either (a) positive performance resulting in an increase in the Accrued Performance Allocation to the general partner or (b) negative performance that would cause the amount due to Blackstone to be less than the amount previously recognized as revenue, resulting in a negative adjustment to the Accrued Performance Allocation to the general partner. In each scenario, it is necessary to calculate the Accrued Performance Allocation on cumulative results compared to the Accrued Performance Allocation recorded to date and make the required positive or negative adjustments. Blackstone ceases to record negative Performance Allocations once previously Accrued Performance Allocations for such fund have been fully reversed. Blackstone is not obligated to pay guaranteed returns or hurdles, and therefore, cannot have negative Performance Allocations over the life of a fund. Accrued Performance Allocations as of the reporting date are reflected in Investments in the Condensed Consolidated Statements of Financial Condition.

Performance Allocations are realized when an underlying investment is profitably disposed of and the fund’s cumulative returns are in excess of the preferred return or, in limited instances, after certain thresholds for return of capital are met. Performance Allocations are subject to clawback to the extent that the Performance Allocation received to date exceeds the amount due to Blackstone based on cumulative results. As such, the accrual for potential repayment of previously received Performance Allocations, which is a component of Due to Affiliates, represents all amounts previously distributed to Blackstone Holdings and non-controlling interest holders that would need to be repaid to the Blackstone carry funds if the Blackstone carry funds were to be liquidated based on the current fair value of the underlying funds’ investments as of the reporting date. The actual clawback liability, however, generally does not become realized until the end of a fund’s life except for certain funds, including certain Blackstone real estate funds, multi-asset class investment funds and credit-focused funds, which may have an interim clawback liability.

Principal Investments include the unrealized and realized gains and losses on Blackstone’s principal investments, including its investments in Blackstone Funds that are not consolidated and receive pro-rata allocations, its equity method investments, and other principal investments. Income (Loss) on Principal Investments is realized when Blackstone redeems all or a portion of its investment or when Blackstone receives cash income, such as dividends or distributions. Unrealized Income (Loss) on Principal Investments results from changes in the fair value of the underlying investment as well as the reversal of unrealized gain (loss) at the time an investment is realized.

Interest and Dividend Revenue

— Interest and Dividend Revenue comprises primarily interest and dividend income earned on principal investments not accounted for under the equity method held by Blackstone.

Other Revenue

— Other Revenue consists of miscellaneous income and foreign exchange gains and losses arising on transactions denominated in currencies other than U.S. dollars.

Fair Value of Financial Instruments

GAAP establishes a hierarchical disclosure framework which prioritizes and ranks the level of market price observability used in measuring financial instruments at fair value. Market price observability is affected by a number of factors, including the type of financial instrument, the characteristics specific to the financial instrument and the state of the marketplace, including the existence and transparency of transactions between market

Table of Contents

The Blackstone Group L.P.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

- Continued

(All Dollars Are in Thousands, Except Unit and Per Unit Data, Except Where Noted)

participants. Financial instruments with readily available quoted prices in active markets generally will have a higher degree of market price observability and a lesser degree of judgment used in measuring fair value.

Financial instruments measured and reported at fair value are classified and disclosed based on the observability of inputs used in the determination of fair values, as follows:

●

Level I – Quoted prices are available in active markets for identical financial instruments as of the reporting date. The types of financial instruments in Level I include listed equities, listed derivatives and mutual funds with quoted prices. Blackstone does not adjust the quoted price for these investments, even in situations where Blackstone holds a large position and a sale could reasonably impact the quoted price.

●

Level II – Pricing inputs are other than quoted prices in active markets, which are either directly or indirectly observable as of the reporting date, and fair value is determined through the use of models or other valuation methodologies. Financial instruments which are generally included in this category include corporate bonds and loans, including corporate bonds and loans held within CLO vehicles, government and agency securities, less liquid and restricted equity securities, and certain over-the-counter derivatives where the fair value is based on observable inputs. Senior and subordinated notes issued by CLO vehicles are classified within Level II of the fair value hierarchy.

●

Level III – Pricing inputs are unobservable for the financial instruments and includes situations where there is little, if any, market activity for the financial instrument. The inputs into the determination of fair value require significant management judgment or estimation. Financial instruments that are included in this category generally include general and limited partnership interests in private equity and real estate funds, credit-focused funds, distressed debt and non-investment grade residual interests in securitizations, certain corporate bonds and loans held within CLO vehicles, and certain over-the-counter derivatives where the fair value is based on unobservable inputs.

In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the determination of which category within the fair value hierarchy is appropriate for any given financial instrument is based on the lowest level of input that is significant to the fair value measurement. Blackstone’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the financial instrument.

Level II Valuation Techniques

Financial instruments classified within Level II of the fair value hierarchy comprise debt instruments, including certain corporate loans and bonds held by Blackstone’s consolidated CLO vehicles and debt securities sold, not yet purchased. Certain equity securities and derivative instruments valued using observable inputs are also classified as Level II.

The valuation techniques used to value financial instruments classified within Level II of the fair value hierarchy are as follows:

●

Debt Instruments and Equity Securities are valued on the basis of prices from an orderly transaction between market participants provided by reputable dealers or pricing services. In determining the value of a particular investment, pricing services may use certain information with respect to transactions in such investments, quotations from dealers, pricing matrices and market transactions in comparable investments and various relationships between investments. The valuation of certain equity securities is based on an observable price for an identical security adjusted for the effect of a restriction.

●

Freestanding Derivatives are valued using contractual cash flows and observable inputs comprising yield curves, foreign currency rates and credit spreads.

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The Blackstone Group L.P.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

- Continued

(All Dollars Are in Thousands, Except Unit and Per Unit Data, Except Where Noted)

●

Senior and subordinate notes issued by CLO vehicles are classified based on the more observable fair value of CLO assets less (a) the fair value of any beneficial interests held by Blackstone, and (b) the carrying value of any beneficial interests that represent compensation for services.

Level III Valuation Techniques

In the absence of observable market prices, Blackstone values its investments using valuation methodologies applied on a consistent basis. For some investments little market activity may exist; management’s determination of fair value is then based on the best information available in the circumstances, and may incorporate management’s own assumptions and involves a significant degree of judgment, taking into consideration a combination of internal and external factors, including the appropriate risk adjustments for

non-performance

and liquidity risks. Investments for which market prices are not observable include private investments in the equity of operating companies, real estate properties, certain funds of hedge funds and credit-focused investments.

Real Estate Investments –

The fair values of real estate investments are determined by considering projected operating cash flows, sales of comparable assets, if any, and replacement costs, among other measures. The methods used to estimate the fair value of real estate investments include the discounted cash flow method and/or capitalization rates (“cap rates”) analysis. Valuations may be derived by reference to observable valuation measures for comparable companies or assets (for example, multiplying a key performance metric of the investee company or asset, such as EBITDA, by a relevant valuation multiple observed in the range of comparable companies or transactions), adjusted by management for differences between the investment and the referenced comparables, and in some instances by reference to option pricing models or other similar methods. Where a discounted cash flow method is used, a terminal value is derived by reference to an exit EBITDA multiple or capitalization rate. Additionally, where applicable, projected distributable cash flow-through debt maturity will be considered in support of the investment’s fair value.

Private Equity Investments –

The fair values of private equity investments are determined by reference to projected net earnings, earnings before interest, taxes, depreciation and amortization (“EBITDA”), the discounted cash flow method, public market or private transactions, valuations for comparable companies and other measures which, in many cases, are based on unaudited information at the time received. Valuations may be derived by reference to observable valuation measures for comparable companies or transactions (for example, multiplying a key performance metric of the investee company, such as EBITDA, by a relevant valuation multiple observed in the range of comparable companies or transactions), adjusted by management for differences between the investment and the referenced comparables, and in some instances by reference to option pricing models or other similar methods. Where a discounted cash flow method is used, a terminal value is derived by reference to EBITDA or price/earnings exit multiples.

Credit-Focused Investments

– The fair values of credit-focused investments are generally determined on the basis of prices between market participants provided by reputable dealers or pricing services. For credit-focused investments that are not publicly traded or whose market prices are not readily available, Blackstone may utilize other valuation techniques, including the discounted cash flow method or a market approach. The discounted cash flow method projects the expected cash flows of the debt instrument based on contractual terms, and discounts such cash flows back to the valuation date using a market-based yield. The market-based yield is estimated using yields of publicly traded debt instruments issued by companies operating in similar industries as the subject investment, with similar leverage statistics and time to maturity.

The market approach is generally used to determine the enterprise value of the issuer of a credit investment, and considers valuation multiples of comparable companies or transactions. The resulting enterprise value will dictate whether or not such credit investment has adequate enterprise value coverage. In cases of distressed credit instruments, the market approach may be used to estimate a recovery value in the event of a restructuring.

Table of Contents

The Blackstone Group L.P.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

- Continued

(All Dollars Are in Thousands, Except Unit and Per Unit Data, Except Where Noted)

Investments, at Fair Value

The Blackstone Funds are accounted for as investment companies under the American Institute of Certified Public Accountants Accounting and Auditing Guide,

Investment Companies

, and in accordance with the GAAP guidance on investment companies and reflect their investments, including majority-owned and controlled investments (the “Portfolio Companies”), at fair value. Such consolidated funds’ investments are reflected in Investments on the Condensed Consolidated Statements of Financial Condition at fair value, with unrealized gains and losses resulting from changes in fair value reflected as a component of Net Gains from Fund Investment Activities in the Condensed Consolidated Statements of Operations. Fair value is the amount that would be received to sell an asset or paid to transfer a liability, in an orderly transaction between market participants at the measurement date, at current market conditions (i.e., the exit price).

Blackstone’s principal investments are presented at fair value with unrealized appreciation or depreciation and realized gains and losses recognized in the Condensed Consolidated Statements of Operations within Investment Income (Loss).

For certain instruments, Blackstone has elected the fair value option. Such election is irrevocable and is applied on an investment by investment basis at initial recognition. Blackstone has applied the fair value option for certain loans and receivables and certain investments in private debt securities that otherwise would not have been carried at fair value with gains and losses recorded in net income. The methodology for measuring the fair value of such investments is consistent with the methodology applied to private equity, real estate, credit-focused and funds of hedge funds investments. Changes in the fair value of such instruments are recognized in Investment Income (Loss) in the Condensed Consolidated Statements of Operations. Interest income on interest bearing loans and receivables and debt securities on which the fair value option has been elected is based on stated coupon rates adjusted for the accretion of purchase discounts and the amortization of purchase premiums. This interest income is recorded within Interest and Dividend Revenue.

Blackstone has elected the fair value option for the assets of consolidated CLO vehicles. As permitted under GAAP, Blackstone measures the liabilities of consolidated CLO vehicles as (a) the sum of the fair value of the consolidated CLO assets and the carrying value of any non-financial assets held temporarily, less (b) the sum of the fair value of any beneficial interests retained by Blackstone (other than those that represent compensation for services) and Blackstone’s carrying value of any beneficial interests that represent compensation for services. As a result of this measurement alternative, there is no attribution of amounts to Non-Controlling Interests for consolidated CLO vehicles. Assets of the consolidated CLOs are presented within Investments within the Condensed Consolidated Statements of Financial Condition and Liabilities within Loans Payable for the amounts due to unaffiliated third parties and Due to Affiliates for the amounts held by non-consolidated affiliates. Changes in the fair value of consolidated CLO assets and liabilities and related interest, dividend and other income are presented within Net Gains from Fund Investment Activities. Expenses of consolidated CLO vehicles are presented in Fund Expenses.

Blackstone has elected the fair value option for certain proprietary investments that would otherwise have been accounted for using the equity method of accounting. The fair value of such investments is based on quoted prices in an active market or using the discounted cash flow method. Changes in fair value are recognized in Investment Income (Loss) in the Condensed Consolidated Statements of Operations.

Further disclosure on instruments for which the fair value option has been elected is presented in Note 7. “Fair Value Option”.

The investments of consolidated Blackstone Funds in funds of hedge funds (“Investee Funds”) are valued at net asset value (“NAV”) per share of the Investee Fund. In limited circumstances, Blackstone may determine, based on its own due diligence and investment procedures, that NAV per share does not represent fair value. In such circumstances, Blackstone will estimate the fair value in good faith and in a manner that it reasonably chooses, in accordance with the requirements of GAAP.

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Notes to Condensed Consolidated Financial Statements

(Unaudited)

- Continued

(All Dollars Are in Thousands, Except Unit and Per Unit Data, Except Where Noted)

Certain investments of Blackstone and of the consolidated Blackstone funds of hedge funds and credit-focused funds measure their investments in underlying funds at fair value using NAV per share without adjustment. The terms of the investee’s investment generally provide for minimum holding periods or lock-ups, the institution of gates on redemptions or the suspension of redemptions or an ability to side-pocket investments, at the discretion of the investee’s fund manager, and as a result, investments may not be redeemable at, or within three months of, the reporting date. A side-pocket is used by hedge funds and funds of hedge funds to separate investments that may lack a readily ascertainable value, are illiquid or are subject to liquidity restriction. Redemptions are generally not permitted until the investments within a side-pocket are liquidated or it is deemed that the conditions existing at the time that required the investment to be included in the side-pocket no longer exist. As the timing of either of these events is uncertain, the timing at which Blackstone may redeem an investment held in a side-pocket cannot be estimated. Further disclosure on instruments for which fair value is measured using NAV per share is presented in Note 5. “Net Asset Value as Fair Value”.

Security and loan transactions are recorded on a trade date basis.

Equity Method Investments

Investments in which Blackstone is deemed to exert significant influence, but not control, are accounted for using the equity method of accounting except in cases where the fair value option has been elected. Blackstone has significant influence over all Blackstone Funds in which it invests but does not consolidate. Therefore, its investments in such Blackstone Funds, which include both a proportionate and disproportionate allocation of the profits and losses (as is the case with carry funds that include a Performance Allocation), are accounted for under the equity method. Under the equity method of accounting, Blackstone’s share of earnings (losses) from equity method investments is included in Investment Income (Loss) in the Condensed Consolidated Statements of Operations.

In cases where Blackstone’s equity method investments provide for a disproportionate allocation of the profits and losses (as is the case with carry funds that include a Performance Allocation), Blackstone’s share of earnings (losses) from equity method investments is determined using a balance sheet approach referred to as the hypothetical liquidation at book value (“HLBV”) method. Under the HLBV method, at the end of each reporting period, Blackstone calculates the Accrued Performance Allocations that would be due to Blackstone for each fund pursuant to the fund agreements as if the fair value of the underlying investments were realized as of such date, irrespective of whether such amounts have been realized. As the fair value of underlying investments varies between reporting periods, it is necessary to make adjustments to amounts recorded as Accrued Performance Allocations to reflect either (a) positive performance resulting in an increase in the Accrued Performance Allocation to the general partner, or (b) negative performance that would cause the amount due to Blackstone to be less than the amount previously recognized as revenue, resulting in a negative adjustment to the Accrued Performance Allocation to the general partner. In each scenario, it is necessary to calculate the Accrued Performance Allocation on cumulative results compared to the Accrued Performance Allocation recorded to date and make the required positive or negative adjustments. Blackstone ceases to record negative Performance Allocations once previously Accrued Performance Allocations for such fund have been fully reversed. Blackstone is not obligated to pay guaranteed returns or hurdles, and therefore, cannot have negative Performance Allocations over the life of a fund. The carrying amounts of equity method investments are reflected in Investments in the Condensed Consolidated Statements of Financial Condition.

Results from Blackstone’s investments in Strategic Partners funds are reported on a three month lag.

Compensation and Benefits

—

Compensation

— Compensation consists of (a) salary and bonus, and benefits paid and payable to employees and senior managing directors and (b) equity-based compensation associated with the grants of equity-based awards to employees and senior managing directors. Compensation cost relating to the issuance of equity-based awards to senior managing directors and employees is measured at fair value at the grant

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(Unaudited)

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(All Dollars Are in Thousands, Except Unit and Per Unit Data, Except Where Noted)

date, and expensed over the vesting period on a straight-line basis, taking into consideration expected forfeitures, except in the case of (a) equity-based awards that do not require future service, which are expensed immediately, and (b) certain awards to recipients that meet criteria making them eligible for retirement (allowing such recipient to keep a percentage of those awards upon departure from Blackstone after becoming eligible for retirement), for which the expense for the portion of the award that would be retained in the event of retirement is either expensed immediately or amortized to the retirement date. Cash settled equity-based awards are classified as liabilities and are remeasured at the end of each reporting period.

Compensation and Benefits

— Incentive Fee Compensation

—

Incentive Fee Compensation consists of compensation paid based on Incentive Fees.

Compensation and Benefits

— Performance Allocations Compensation

—

Performance Allocation Compensation consists of compensation paid based on Performance Allocations (which may be distributed in cash or in-kind). Such compensation expense is subject to both positive and negative adjustments. Unlike Performance Allocations, compensation expense is based on the performance of individual investments held by a fund rather than on a fund by fund basis. These amounts may also include allocations of investment income from Blackstone’s principal investments, to senior managing directors and employees participating in certain profit sharing initiatives.

Reverse Repurchase and Repurchase Agreements

Securities purchased under agreements to resell (“reverse repurchase agreements”) and securities sold under agreements to repurchase (“repurchase agreements”), comprised primarily of U.S. and non-U.S. government and agency securities, asset-backed securities and corporate debt, represent collateralized financing transactions. Such transactions are recorded in the Condensed Consolidated Statements of Financial Condition at their contractual amounts and include accrued interest. The carrying value of reverse repurchase and repurchase agreements approximates fair value.

Blackstone manages credit exposure arising from reverse repurchase agreements and repurchase agreements by, in appropriate circumstances, entering into master netting agreements and collateral arrangements with counterparties that provide Blackstone, in the event of a counterparty default, the right to liquidate collateral and the right to offset a counterparty’s rights and obligations.

Blackstone takes possession of securities purchased under reverse repurchase agreements and is permitted to repledge, deliver or otherwise use such securities. Blackstone also pledges its financial instruments to counterparties to collateralize repurchase agreements. Financial instruments pledged that can be repledged, delivered or otherwise used by the counterparty are recorded in Investments in the Condensed Consolidated Statements of Financial Condition. Additional disclosures relating to repurchase agreements are discussed in Note 10. “Repurchase Agreements”.

Blackstone does not offset assets and liabilities relating to reverse repurchase agreements and repurchase agreements in its Condensed Consolidated Statements of Financial Condition. Additional disclosures relating to offsetting are discussed in Note 11. “Offsetting of Assets and Liabilities”.

Securities Sold, Not Yet Purchased

Securities Sold, Not Yet Purchased consist of equity and debt securities that Blackstone has borrowed and sold. Blackstone is required to “cover” its short sale in the future by purchasing the security at prevailing market prices and delivering it to the counterparty from which it borrowed the security. Blackstone is exposed to loss in the event that the price at which a security may have to be purchased to cover a short sale exceeds the price at which the borrowed security was sold short.

Securities Sold, Not Yet Purchased are recorded at fair value in the Condensed Consolidated Statements of Financial Condition.

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(Unaudited)

- Continued

(All Dollars Are in Thousands, Except Unit and Per Unit Data, Except Where Noted)

Derivative Instruments

Blackstone recognizes all derivatives as assets or liabilities on its Condensed Consolidated Statements of Financial Condition at fair value. On the date Blackstone enters into a derivative contract, it designates and documents each derivative contract as one of the following: (a) a hedge of a recognized asset or liability (“fair value hedge”), (b) a hedge of a forecasted transaction or of the variability of cash flows to be received or paid related to a recognized asset or liability (“cash flow hedge”), (c) a hedge of a net investment in a foreign operation, or (d) a derivative instrument not designated as a hedging instrument (“freestanding derivative”). For a fair value hedge, Blackstone records changes in the fair value of the derivative and, to the extent that it is highly effective, changes in the fair value of the hedged asset or liability attributable to the hedged risk, in current period earnings in General, Administrative and Other in the Condensed Consolidated Statements of Operations. Changes in the fair value of derivatives designated as hedging instruments caused by factors other than changes in the risk being hedged, which are excluded from the assessment of hedge effectiveness, are recognized in current period earnings. Gains or losses on a derivative instrument that is designated as, and is effective as, an economic hedge of a net investment in a foreign operation are reported in the cumulative translation adjustment section of other comprehensive income to the extent it is effective as a hedge. The ineffective portion of a net investment hedge is recognized in current period earnings.

Blackstone formally documents at inception its hedge relationships, including identification of the hedging instruments and the hedged items, its risk management objectives, strategy for undertaking the hedge transaction and Blackstone’s evaluation of effectiveness of its hedged transaction. At least monthly, Blackstone also formally assesses whether the derivative it designated in each hedging relationship is expected to be, and has been, highly effective in offsetting changes in estimated fair values or cash flows of the hedged items using either the regression analysis or the dollar offset method. For net investment hedges, Blackstone uses a method based on changes in spot rates to measure effectiveness. If it is determined that a derivative is not highly effective at hedging the designated exposure, hedge accounting is discontinued. Blackstone may also at any time remove a designation of a fair value hedge. The fair values of hedging derivative instruments are reflected within Other Assets in the Condensed Consolidated Statements of Financial Condition.

For freestanding derivative contracts, Blackstone presents changes in fair value in current period earnings. Changes in the fair value of derivative instruments held by consolidated Blackstone Funds are reflected in Net Gains from Fund Investment Activities or, where derivative instruments are held by Blackstone, within Investment Income (Loss) in the Condensed Consolidated Statements of Operations. The fair value of freestanding derivative assets of the consolidated Blackstone Funds are recorded within Investments, the fair value of freestanding derivative assets that are not part of the consolidated Blackstone Funds are recorded within Other Assets and the fair value of freestanding derivative liabilities are recorded within Accounts Payable, Accrued Expenses and Other Liabilities in the Condensed Consolidated Statements of Financial Condition.

Blackstone has elected to not offset derivative assets and liabilities or financial assets in its Condensed Consolidated Statements of Financial Condition, including cash, that may be received or paid as part of collateral arrangements, even when an enforceable master netting agreement is in place that provides Blackstone, in the event of counterparty default, the right to liquidate collateral and the right to offset a counterparty’s rights and obligations.

Blackstone’s other disclosures regarding derivative financial instruments are discussed in Note 6. “Derivative Financial Instruments”.

Blackstone’s disclosures regarding offsetting are discussed in Note 11. “Offsetting of Assets and Liabilities”.

Leases

Blackstone determines if an arrangement is a lease at inception of the arrangement. Blackstone primarily enters into operating leases, as the lessee, for office space. Operating leases are included in

Right-of-Use

(“ROU”) Assets and Operating Lease Liabilities on our Condensed Consolidated Statement of Financial Condition. ROU

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Assets and Operating Lease Liabilities are recognized based on the present value of the future minimum lease payments over the lease term at the commencement date. Blackstone determines the present value of the lease payments using an incremental borrowing rate based on information available at the inception date. Leases may include options to extend or terminate the lease which are included in the ROU Assets and Operating Lease Liability when they are reasonably certain of exercise.

Certain leases include lease and nonlease components, which are accounted for as one single lease component. Occupancy lease agreements, in addition to contractual rent payments, generally include additional payments for certain costs incurred by the landlord, such as building expenses and utilities. To the extent these are fixed or determinable, they are included as part of the minimum lease payments used to measure the Operating Lease Liability. Operating lease expense associated with minimum lease payments is recognized on a straight-line basis over the lease term. When additional payments are based on usage or vary based on other factors, they are expensed when incurred as variable lease expense.

Minimum lease payments for leases with an initial term of twelve months or less are not recorded on the Condensed Consolidated Statement of Financial Condition. Blackstone recognizes lease expense for these leases on a straight-line basis over the lease term.

Affiliates

Blackstone considers its Founder, senior managing directors, employees, the Blackstone Funds and the Portfolio Companies to be affiliates.

Distributions

Distributions are reflected in the condensed consolidated financial statements when declared.

Recent Accounting Developments

In February 2016, the Financial Accounting Standards Board issued amended guidance on the accounting for leases. The new guidance was effective for Blackstone beginning January 1, 2019 and was adopted on a modified retrospective basis. Blackstone elected to apply the guidance to each lease that had commenced as of the adoption date. As a result, periods prior to January 1, 2019 are presented in accordance with previous GAAP. Blackstone also elected a package of practical expedients which resulted in no requirement to reassess (a) whether any expired or existing contracts are or contain leases, (b) the lease classification for any expired or existing leases and (c) the recognition requirements for initial direct costs for any existing leases. Blackstone also elected a practical expedient to account for lease and nonlease components as a single lease component. Short-term leases, which have a stated lease term of twelve months or less, have been excluded from the Operating Lease Liability and ROU Assets as a result of a policy election made by Blackstone.

The guidance requires the recognition of lease assets and lease liabilities for those leases previously classified as operating leases and it retains a distinction between finance leases and operating leases. The classification criteria for distinguishing between finance leases and operating leases are similar, but not identical, to the classification criteria for distinguishing between capital leases and operating leases under previous GAAP. For operating leases, a lessee is required to do the following: (a) recognize a

right-of-use

asset and a lease liability, initially measured at the present value of the lease payments, in the Condensed Consolidated Statement of Financial Condition, (b) recognize a single lease cost, calculated so that the cost of the lease is allocated over the lease term on a generally straight-line basis, and (c) classify all cash payments within operating activities in the Condensed Consolidated Statements of Cash Flows. Upon adoption of the new guidance, Blackstone recognized Operating Lease Liabilities of $601.7 million and corresponding ROU Assets of $540.7 million on the Condensed Consolidated Statement of Financial Condition. These amounts were calculated as the present value of remaining lease payments on existing leases as of January 1, 2019, discounted using an incremental borrowing rate for each lease as of the adoption date. The guidance did not have a material impact on the Condensed Consolidated Statements of Operations or the Condensed Consolidated Statements of Cash Flows.

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(All Dollars Are in Thousands, Except Unit and Per Unit Data, Except Where Noted)

3. Intangible Assets

Intangible Assets, Net consists of the following:


	June 30,			December 31,
	2019			2018
Finite-Lived Intangible Assets / Contractual Rights	$	1,712,576		$	1,712,576
Accumulated Amortization		(1,279,569	)		(1,244,069	)

Intangible Assets, Net	$	433,007		$	468,507

Amortization expense associated with Blackstone’s intangible assets was $17.7 million and $35.5 million for the three and six month periods ended June 30, 2019, respectively, and $14.5 million and $29.0 million for the three and six month periods ended June 30, 2018, respectively.

Amortization of Intangible Assets held at June 30, 2019 is expected to be $71.0 million, $71.0 million, $71.0 million, $63.3 million, and $34.3 million for each of the years ending December 31, 2019, 2020, 2021, 2022 and 2023, respectively. Blackstone’s intangible assets as of June 30, 2019 are expected to amortize over a weighted-average period of 8.2 years.

4. Investments

Investments consist of the following:


	June 30,		December 31,
	2019		2018
Investments of Consolidated Blackstone Funds	$	8,633,794	$	8,376,338
Equity Method Investments
Partnership Investments		3,802,565		3,649,423
Accrued Performance Allocations		6,743,542		5,883,924
Corporate Treasury Investments		2,797,908		2,206,493
Other Investments		264,231		260,853

	$	22,242,040	$	20,377,031

Blackstone’s share of Investments of Consolidated Blackstone Funds totaled $

383.9

million and $

366.5

million at June

2019

and December

2018

, respectively.

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(All Dollars Are in Thousands, Except Unit and Per Unit Data, Except Where Noted)

Investments of Consolidated Blackstone Funds

The following table presents the Realized and Net Change in Unrealized Gains (Losses) on investments held by the consolidated Blackstone Funds and a reconciliation to Other Income – Net Gains from Fund Investment Activities in the Condensed Consolidated Statements of Operations:


	Three Months Ended					Six Months Ended
	June 30,					June 30,
	2019		2018			2019		2018
Realized Gains	$	5,198	$	52,236		$	2,286	$	34,378
Net Change in Unrealized Gains (Losses)		6,257		(22,278	)		112,260		74,963

Realized and Net Change in Unrealized Gains from Consolidated Blackstone Funds		11,455		29,958			114,546		109,341
Interest and Dividend Revenue Attributable to Consolidated Blackstone Funds		49,676		43,561			76,910		74,777

Other Income - Net Gains from Fund Investment Activities	$	61,131	$	73,519		$	191,456	$	184,118

Equity Method Investments

Blackstone’s equity method investments include Partnership Investments, which represent the

pro-rata

investments, and any associated Accrued Performance Allocations, in private equity funds, real estate funds, funds of hedge funds and credit-focused funds. Partnership Investments also includes the 40%

non-controlling

interest in Pátria Investments Limited and Pátria Investimentos Ltda. (collectively, “Pátria”).

Blackstone evaluates each of its equity method investments, excluding Accrued Performance Allocations, to determine if any were significant as defined by guidance from the United States Securities and Exchange Commission. As of and for the six months ended June 30, 2019 and 2018, no individual equity method investment held by Blackstone met the significance criteria. As such, Blackstone is not required to present separate financial statements for any of its equity method investments.

Partnership Investments

Blackstone recognized net gains related to its Partnership Investments accounted for under the equity method of $72.3 million and $165.6 million for the three months ended June 30, 2019 and 2018, respectively.

Blackstone

recognized net gains related to its equity method investments of $

227.7

million and $

328.1

million for the six months ended June

2019

and

2018

, respectively.

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Accrued Performance Allocations

Accrued Performance Allocations to Blackstone were as follows:


	Real			Private			Hedge Fund
	Estate			Equity			Solutions			Credit			Total
Accrued Performance Allocations, December 31, 2018	$	2,853,261		$	2,642,119		$	22,921		$	365,623		$	5,883,924
Performance Allocations as a Result of Changes in Fund Fair Values		832,342			435,425			70,690			105,164			1,443,621
Foreign Exchange Loss		(3,300	)		—			—			—			(3,300	)
Fund Distributions		(268,978	)		(291,911	)		(1,605	)		(18,209	)		(580,703	)

Accrued Performance Allocations, June 30, 2019	$	3,413,325		$	2,785,633		$	92,006		$	452,578		$	6,743,542

Corporate Treasury Investments

The portion of corporate treasury investments included in Investments represents

Blackstone

’s investments into primarily fixed income securities, mutual fund interests, and other fund interests. These strategies are managed by a combination of Blackstone personnel and third party advisors. The following table presents the Realized and Net Change in Unrealized Gains (Losses) on these investments:


	Three Months Ended					Six Months Ended
	June 30,					June 30,
	2019		2018			2019		2018
Realized Gains	$	22,983	$	4,774		$	23,300	$	7,113
Net Change in Unrealized Gains (Losses)		558		(6,702	)		49,217		(14,896	)

	$	23,541	$	(1,928	)	$	72,517	$	(7,783	)

Other Investments

Other Investments consist primarily of proprietary investment securities held by Blackstone. Other Investments include equity investments without readily determinable fair values which have a carrying value of $48.9 million as of June 30, 2019. The following table presents Blackstone’s Realized and Net Change in Unrealized Gains (Losses) in Other Investments:


	Three Months Ended					Six Months Ended
	June 30,					June 30,
	2019			2018		2019		2018
Realized Gains	$	21,491		$	16,207	$	45,727	$	16,319
Net Change in Unrealized Gains (Losses)		(3,933	)		49,643		6,789		45,411

	$	17,558		$	65,850	$	52,516	$	61,730

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5. Net Asset Value as Fair Value

A summary of fair value by strategy type alongside the remaining unfunded commitments and ability to redeem such investments as of June 30, 2019 is presented below:


					Redemption
			Unfunded		Frequency		Redemption
Strategy	Fair Value		Commitments		(if currently eligible)		Notice Period
Diversified Instruments	$	217,399	$	126		(a)		(a)
Credit Driven		84,306		268		(b)		(b)
Equity		36,859		—		(c)		(c)
Commodities		1,720		—		(d)		(d)

	$	340,284	$	394

(a)

Diversified Instruments include investments in funds that invest across multiple strategies. Investments representing 3% of the fair value of the investments in this category may not be redeemed at, or within three months of, the reporting date. The remaining 97% of investments in this category are redeemable as of the reporting date.

(b)

The Credit Driven category includes investments in hedge funds that invest primarily in domestic and international bonds. Investments representing 29% of the fair value of the investments in this category may not be redeemed at, or within three months of, the reporting date. The remaining 71% of investments in this category are redeemable as of the reporting date.

(c)

The Equity category includes investments in hedge funds that invest primarily in domestic and international equity securities. Investments representing 100% of the fair value of the investments in this category may not be redeemed at, or within three months of, the reporting date. As of the reporting date, the investee fund manager had elected to side-pocket 12% of Blackstone’s investments in the category.

(d)

The Commodities category includes investments in commodities-focused funds that primarily invest in futures and physical-based commodity driven strategies. Investments representing 100% of the fair value of the investments in this category may not be redeemed at, or within three months of, the reporting date.

6. Derivative Financial Instruments

Blackstone and the consolidated Blackstone Funds enter into derivative contracts in the normal course of business to achieve certain risk management objectives and for general investment purposes. Blackstone may enter into derivative contracts in order to hedge its interest rate risk exposure against the effects of interest rate changes. Additionally, Blackstone may also enter into derivative contracts in order to hedge its foreign currency risk exposure against the effects of a portion of its

non-U.S.

dollar denominated currency net investments. As a result of the use of derivative contracts, Blackstone and the consolidated Blackstone Funds are exposed to the risk that counterparties will fail to fulfill their contractual obligations. To mitigate such counterparty risk, Blackstone and the consolidated Blackstone Funds enter into contracts with certain major financial institutions, all of which have investment grade ratings. Counterparty credit risk is evaluated in determining the fair value of derivative instruments.

Net Investment Hedges

Blackstone uses foreign currency forward contracts to hedge portions of Blackstone’s net investments in foreign operations. The gains and losses due to change in fair value attributable to changes in spot exchange rates on foreign currency derivatives designated as net investment hedges were recognized in Other Comprehensive Income, Net of Tax - Currency Translation Adjustment.

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Freestanding Derivatives

Freestanding derivatives are instruments that Blackstone and certain of the consolidated Blackstone Funds have entered into as part of their overall risk management and investment strategies. These derivative contracts are not designated as hedging instruments for accounting purposes. Such contracts may include interest rate swaps, foreign exchange contracts, equity swaps, options, futures and other derivative contracts.

The table below summarizes the aggregate notional amount and fair value of the derivative financial instruments. The notional amount represents the absolute value amount of all outstanding derivative contracts.


	June 30, 2019								December 31, 2018
	Assets				Liabilities				Assets				Liabilities
			Fair				Fair				Fair				Fair
	Notional		Value		Notional		Value		Notional		Value		Notional		Value
Freestanding Derivatives
Blackstone
Interest Rate Contracts	$	1,000,426	$	38,299	$	488,463	$	47,845	$	798,137	$	43,632	$	844,620	$	39,164
Foreign Currency Contracts		167,699		615		106,500		444		224,841		1,286		245,371		1,636
Credit Default Swaps		2,204		81		29,205		1,200		—		—		34,060		4,004
Investments of Consolidated Blackstone Funds
Foreign Currency Contracts		29,931		863		78,769		814		108,271		524		16,952		164
Interest Rate Contracts		—		—		28,000		1,382		—		—		10,000		311
Credit Default Swaps		12,612		535		59,888		2,435		20,952		55		46,685		5,710
Total Return Swaps		10,851		15		22,567		382		—		—		31,440		1,855
Equity Options		1		173		1		19		—		—		—		—

	$	1,223,724	$	40,581	$	813,393	$	54,521	$	1,152,201	$	45,497	$	1,229,128	$	52,844

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The table below summarizes the impact to the Condensed Consolidated Statements of Operations from derivative financial instruments:


	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
Net Investment Hedges - Foreign Currency Contracts
Hedge Ineffectiveness	$	—		$	—		$	—		$	(8	)


Freestanding Derivatives
Realized Gains (Losses)
Interest Rate Contracts	$	(416	)	$	449		$	(2,664	)	$	2,070
Foreign Currency Contracts		(1,526	)		12,321			146			8,238
Credit Default Swaps		881			(107	)		1,991			(508	)
Total Return Swaps		(275	)		173			(395	)		174
Equity Options		(124	)		—			(132	)		—

	$	(1,460	)	$	12,836		$	(1,054	)	$	9,974


Net Change in Unrealized Gains (Losses)
Interest Rate Contracts	$	(2,892	)	$	37,261		$	(11,155	)	$	(39	)
Foreign Currency Contracts		1,773			1,456			209			(2,272	)
Credit Default Swaps		(294	)		615			3,647			488
Total Return Swaps		393			(5	)		1,371			52
Equity Options		115			—			65			—

	$	(905	)	$	39,327		$	(5,863	)	$	(1,771	)

As of June 30, 2019 and December 31, 2018, Blackstone had not designated any derivatives as cash flow hedges.

Table of Contents

The Blackstone Group L.P.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

- Continued

(All Dollars Are in Thousands, Except Unit and Per Unit Data, Except Where Noted)

7. Fair Value Option

The following table summarizes the financial instruments for which the fair value option has been elected:


	June 30,		December 31,
	2019		2018
Assets
Loans and Receivables	$	187,831	$	304,173
Equity and Preferred Securities		223,630		390,095
Debt Securities		576,306		529,698
Assets of Consolidated CLO Vehicles
Corporate Loans		6,969,542		6,766,700
Other		988		—

	$	7,958,297	$	7,990,666

Liabilities
Liabilities of Consolidated CLO Vehicles
Senior Secured Notes
Loans Payable	$	6,474,210	$	6,473,233
Due to Affiliates		45,243		3,201
Subordinated Notes
Loans Payable		61,695		7,478
Due to Affiliates		49,575		52,811

	$	6,630,723	$	6,536,723

The following tables present the Realized and Net Change in Unrealized Gains (Losses) on financial instruments on which the fair value option was elected:


	Three Months Ended June 30,
	2019						2018
				Net Change					Net Change
	Realized			in Unrealized			Realized		in Unrealized
	Gains (Losses)			Gains (Losses)			Gains		Gains (Losses)
Assets
Loans and Receivables	$	(747	)	$	(1,897	)	$	—	$	—
Equity and Preferred Securities		9,907			(67	)		—		(2,095	)
Debt Securities		(3,325	)		1,817			15		(2,878	)
Assets of Consolidated CLO Vehicles
Corporate Loans		(10,549	)		(18,025	)		1,074		(25,896	)
Other		—			350			—		—

	$	(4,714	)	$	(17,822	)	$	1,089	$	(30,869	)

Liabilities
Liabilities of Consolidated CLO Vehicles
Senior Secured Notes	$	—		$	6,667		$	—	$	—
Subordinated Notes		—			15,163			—		16,846

	$	—		$	21,830		$	—	$	16,846

Table of Contents

The Blackstone Group L.P.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

- Continued

(All Dollars Are in Thousands, Except Unit and Per Unit Data, Except Where Noted)


	Six Months Ended June 30,
	2019						2018
				Net Change						Net Change
	Realized			in Unrealized			Realized			in Unrealized
	Gains (Losses)			Gains (Losses)			Gains (Losses)			Gains (Losses)
Assets
Loans and Receivables	$	(1,831	)	$	(2,657	)	$	—		$	—
Equity and Preferred Securities		9,908			22,298			—			(1,867	)
Debt Securities		(3,360	)		16,749			827			(2,297	)
Assets of Consolidated CLO Vehicles
Corporate Loans		(14,400	)		161,777			(4,399	)		(7,046	)
Corporate Bonds		—			—			(24,056	)		9,693
Other		—			350			—			6

	$	(9,683	)	$	198,517		$	(27,628	)	$	(1,511	)

Liabilities
Liabilities of Consolidated CLO Vehicles
Senior Secured Notes	$	—		$	(44,893	)	$	—		$	—
Subordinated Notes		—			(50,981	)		—			60,460

	$	—		$	(95,874	)	$	—		$	60,460

The following table presents information for those financial instruments for which the fair value option was elected:

	June 30, 2019							December 31, 2018
				For Financial Assets							For Financial Assets
				Past Due (a)							Past Due (a)
	(Deficiency)					Excess		Excess (Deficiency)					Excess
	of Fair Value			Fair		of Fair Value		of Fair Value			Fair		of Fair Value
	Over Principal			Value		Over Principal		Over Principal			Value		Over Principal
Loans and Receivables	$	(878	)	$	—	$	—	$	2,421		$	—	$	—
Debt Securities		(10,920	)		—		—		(26,660	)		—		—
Assets of Consolidated CLO Vehicles
Corporate Loans		(151,535	)		—		—		(301,085	)		—		—
Other		350			—		—		—			—		—

	$	(162,983	)	$	—	$	—	$	(325,324	)	$	—	$	—

(a)	Corporate Loans within CLO assets are classified as past due if contractual payments are more than one day past due.

As of June 30, 2019 and December 31, 2018, no Loans and Receivables for which the fair value option was elected were past due or in

non-accrual

status. As of June 30, 2019 and December 31, 2018, no Corporate Bonds included within the Assets of Consolidated CLO Vehicles for which the fair value option was elected were past due or in

non-accrual

status.

Table of Contents

The Blackstone Group L.P.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

- Continued

(All Dollars Are in Thousands, Except Unit and Per Unit Data, Except Where Noted)

8.	Fair Value Measurements of Financial Instruments

The following tables summarize the valuation of Blackstone’s financial assets and liabilities by the fair value hierarchy:


	June 30, 2019
	Level I		Level II		Level III		NAV		Total
Assets
Cash and Cash Equivalents - Money Market Funds and Short-Term Investments	$	199,590	$	—	$	—	$	—	$	199,590

Investments
Investments of Consolidated Blackstone Funds (a)
Investment Funds		—		—		—		61,345		61,345
Equity Securities		36,056		40,670		196,319		—		273,045
Partnership and LLC Interests		—		21,371		345,479		—		366,850
Debt Instruments		—		819,352		141,086		—		960,438
Freestanding Derivatives
Foreign Currency Contracts		—		863		—		—		863
Credit Default Swaps		—		535		—		—		535
Total Return Swaps		—		15		—		—		15
Equity Options		—		173		—		—		173
Assets of Consolidated CLO Vehicles
Corporate Loans		—		6,513,318		456,224		—		6,969,542
Other		—		—		988		—		988

Total Investments of Consolidated Blackstone Funds		36,056		7,396,297		1,140,096		61,345		8,633,794

Corporate Treasury Investments
Equity Securities		454,441		—		—		—		454,441
Debt Instruments		503,285		1,544,063		24,307		—		2,071,655
Other		—		—		195		271,617		271,812

Total Corporate Treasury Investments		957,726		1,544,063		24,502		271,617		2,797,908

Other Investments		183,436		—		24,550		7,322		215,308

Total Investments		1,177,218		8,940,360		1,189,148		340,284		11,647,010

Accounts Receivable - Loans and Receivables		—		—		187,831		—		187,831

Other Assets
Freestanding Derivatives
Interest Rate Contracts		548		37,751		—		—		38,299
Foreign Currency Contracts		—		615		—		—		615
Credit Default Swaps		—		81		—		—		81

Total Other Assets		548		38,447		—		—		38,995

	$	1,377,356	$	8,978,807	$	1,376,979	$	340,284	$	12,073,426

Table of Contents

The Blackstone Group L.P.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

- Continued

(All Dollars Are in Thousands, Except Unit and Per Unit Data, Except Where Noted)


	June 30, 2019
	Level I		Level II		Level III		Total
Liabilities
Loans Payable - Liabilities of Consolidated CLO Vehicles (a)
Senior Secured Notes (b)	$	—	$	6,474,210	$	—	$	6,474,210
Subordinated Notes (b)		—		61,695		—		61,695

Total Loans Payable		—		6,535,905		—		6,535,905

Due to Affiliates - Liabilities of Consolidated CLO Vehicles (a)
Senior Secured Notes (b)		—		45,243		—		45,243
Subordinated Notes (b)		—		49,575		—		49,575

Total Due to Affiliates		—		94,818		—		94,818

Securities Sold, Not Yet Purchased		33,870		94,642		—		128,512

Accounts Payable, Accrued Expenses and Other Liabilities
Liabilities of Consolidated Blackstone Funds - Freestanding Derivatives (a)
Foreign Currency Contracts		—		814		—		814
Credit Default Swaps		—		2,435		—		2,435
Total Return Swaps		—		382		—		382
Interest Rate Swaps		—		1,382		—		1,382
Equity Options		—		19		—		19

Total Liabilities of Consolidated Blackstone Funds		—		5,032		—		5,032

Freestanding Derivatives
Interest Rate Contracts		833		47,012		—		47,845
Foreign Currency Contracts		—		444		—		444
Credit Default Swaps		—		1,200		—		1,200

Total Freestanding Derivatives		833		48,656		—		49,489

Total Accounts Payable, Accrued Expenses and Other Liabilities		833		53,688		—		54,521

	$	34,703	$	6,779,053	$	—	$	6,813,756

Table of Contents

The Blackstone Group L.P.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

- Continued

(All Dollars Are in Thousands, Except Unit and Per Unit Data, Except Where Noted)


	December 31, 2018
	Level I		Level II		Level III		NAV		Total
Assets
Cash and Cash Equivalents - Money Market Funds and Short-Term Investments	$	623,526	$	—	$	—	$	—	$	623,526

Investments
Investments of Consolidated Blackstone Funds (a)
Investment Funds		—		—		—		80,726		80,726
Equity Securities		42,937		34,946		201,566		—		279,449
Partnership and LLC Interests		—		7,170		355,273		—		362,443
Debt Instruments		—		752,622		133,819		—		886,441
Freestanding Derivatives
Foreign Currency Contracts		—		524		—		—		524
Credit Default Swaps		—		55		—		—		55
Assets of Consolidated CLO Vehicles
Corporate Loans		—		6,093,342		673,358		—		6,766,700

Total Investments of Consolidated Blackstone Funds		42,937		6,888,659		1,364,016		80,726		8,376,338

Corporate Treasury Investments
Equity Securities		233,834		—		—		—		233,834
Debt Instruments		243,297		1,444,968		24,568		—		1,712,833
Other		—		—		—		259,826		259,826

Total Corporate Treasury Investments		477,131		1,444,968		24,568		259,826		2,206,493

Other Investments		176,432		—		31,617		7,581		215,630

Total Investments		696,500		8,333,627		1,420,201		348,133		10,798,461

Accounts Receivable - Loans and Receivables		—		—		304,173		—		304,173

Other Assets
Freestanding Derivatives
Interest Rate Contracts		1,274		42,358		—		—		43,632
Foreign Currency Contracts		—		1,286		—		—		1,286

Total Other Assets		1,274		43,644		—		—		44,918

	$	1,321,300	$	8,377,271	$	1,724,374	$	348,133	$	11,771,078

Table of Contents

The Blackstone Group L.P.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

- Continued

(All Dollars Are in Thousands, Except Unit and Per Unit Data, Except Where Noted)


	December 31, 2018
	Level I		Level II		Level III		Total
Liabilities
Loans Payable - Liabilities of Consolidated CLO Vehicles (a)
Senior Secured Notes (b)	$	—	$	6,473,233	$	—	$	6,473,233
Subordinated Notes (b)		—		7,478		—		7,478

Total Loans Payable		—		6,480,711		—		6,480,711

Due to Affiliates - Liabilities of Consolidated CLO Vehicles (a)
Senior Secured Notes (b)		—		3,201		—		3,201
Subordinated Notes (b)		—		52,811		—		52,811

Total Due to Affiliates		—		56,012		—		56,012

Securities Sold, Not Yet Purchased		35,959		106,658		—		142,617

Accounts Payable, Accrued Expenses and Other Liabilities
Liabilities of Consolidated Blackstone Funds - Freestanding Derivatives (a)
Foreign Currency Contracts		—		164		—		164
Credit Default Swaps		—		5,710		—		5,710
Total Return Swaps		—		1,855		—		1,855
Interest Rate Swaps		—		311		—		311

Total Liabilities of Consolidated Blackstone Funds		—		8,040		—		8,040

Freestanding Derivatives
Interest Rate Contracts		3,080		36,084		—		39,164
Foreign Currency Contracts		—		1,636		—		1,636
Credit Default Swaps		—		4,004		—		4,004

Total Freestanding Derivatives		3,080		41,724		—		44,804

Total Accounts Payable, Accrued Expenses and Other Liabilities		3,080		49,764		—		52,844

	$	39,039	$	6,693,145	$	—	$	6,732,184

(a)

Pursuant to GAAP consolidation guidance, Blackstone is required to consolidate all VIEs in which it has been identified as the primary beneficiary, including certain CLO vehicles and other funds in which a consolidated entity of Blackstone, such as the general partner of the fund, has a controlling financial interest. While Blackstone is required to consolidate certain funds, including CLO vehicles, for GAAP purposes, Blackstone has no ability to utilize the assets of these funds and there is no recourse to Blackstone for their liabilities since these are client assets and liabilities.

(b)	Senior and subordinated notes issued by CLO vehicles are classified based on the more observable fair value of CLO assets less (1) the fair value of any beneficial interests held by Blackstone, and (2) the carrying value of any beneficial interests that represent compensation for services.

Table of Contents

The Blackstone Group L.P.

Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued

(All Dollars Are in Thousands, Except Unit and Per Unit Data, Except Where Noted)

The following table summarizes the quantitative inputs and assumptions used for items categorized in Level III of the fair value hierarchy as of June 30, 2019:

Valuation

Unobservable

Weighted-

Fair Value

Techniques

Inputs

Ranges

Average (a)

Financial Assets

Investments of Consolidated Blackstone Funds

Equity Securities

175,622

Discounted Cash Flows

Discount Rate

4.9% - 32.1%

12.6%

Revenue CAGR

-4.9% - 28.6%

6.7%

Book Value Multiple

0.9x - 9.5x

8.9x

Exit Capitalization Rate

3.8% - 11.4%

7.7%

Exit Multiple - EBITDA

0.1x - 16.5x

10.1x

Exit Multiple - NOI

12.8x

N/A

Exit Multiple - P/E

17.0x

N/A

7,364

Market Comparable Companies

Book Value Multiple

1.1x

N/A

Dollar/Acre Multiple

$7.0 - $18.0

$16.4

EBITDA Multiple

8.0x - 13.0x

10.0x

8,344

Other

N/A

4,523

Transaction Price

N/A

466

Third Party Pricing

N/A

Partnership and LLC Interests

304,234

Discounted Cash Flows

Discount Rate

3.8% - 26.5%

9.5%

Revenue CAGR

-4.9% - 27.5%

17.6%

Exit Capitalization Rate

2.7% - 15.5%

5.7%

Exit Multiple - EBITDA

3.5x - 15.7x

9.9x

Exit Multiple - NOI

13.3x

N/A

8,332

Market Comparable Companies

Book Value Multiple

1.2x

N/A

Dollar/Acre Multiple

$6.5 - $12.0

$8.1

3,087

Other

N/A

763

Third Party Pricing

N/A

29,063

Transaction Price

N/A

Debt Instruments

12,664

Discounted Cash Flows

Discount Rate

7.0% - 28.5%

9.9%

Exit Capitalization Rate

4.2% - 8.0%

5.8%

Exit Multiple - EBITDA

6.5x - 10.5x

9.3x

92,068

Third Party Pricing

N/A

Other

N/A

36,341

Transaction Price

N/A

Assets of Consolidated CLO Vehicles

Discounted Cash Flows

Discount Rate

1.7%

N/A

457,175

Third Party Pricing

N/A

Total Investments of Consolidated Blackstone Funds

1,140,096

continued...

Table of Contents

The Blackstone Group L.P.

Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued

(All Dollars Are in Thousands, Except Unit and Per Unit Data, Except Where Noted)

Valuation

Unobservable

Fair Value

Techniques

Inputs

Ranges

Weighted- Average (a)

Corporate Treasury Investments

10,395

Discounted Cash Flows

Discount Rate

3.2% - 9.0%

7.1%

Default Rate

2.0%

N/A

Pre-payment

Rate

20.0%

N/A

Recovery Lag

12 Months

N/A

Recovery Rate

15.6% - 70.0%

67.4%

Reinvestment Rate

LIBOR + 400 bps

N/A

195

Market Comparable Companies

EBITDA Multiple

14.6

N/A

13,912

Third Party Pricing

N/A

Loans and Receivables

168,611

Discounted Cash Flows

Discount Rate

7.1% - 9.5%

8.3%

19,220

Third Party Pricing

N/A

Other Investments

24,550

Discounted Cash Flows

Discount Rate

0.5% - 10.3%

2.0%

Default Rate

2.0%

N/A

Pre-payment

Rate

20.0%

N/A

Recovery Lag

12 Months

N/A

Recovery Rate

70.0%

N/A

Reinvestment Rate

LIBOR + 400 bps

N/A

1,376,979

Table of Contents

The Blackstone Group L.P.

Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued

(All Dollars Are in Thousands, Except Unit and Per Unit Data, Except Where Noted)

The following table summarizes the quantitative inputs and assumptions used for items categorized in Level III of the fair value hierarchy as of December 31, 2018:

Valuation

Unobservable

Weighted-

Fair Value

Techniques

Inputs

Ranges

Average (a)

Financial Assets

Investments of Consolidated Blackstone Funds

Equity Securities

138,725

Discounted Cash Flows

Discount Rate

7.1% - 26.1%

12.6%

Revenue CAGR

-0.8% - 32.4%

6.6%

Book Value Multiple

0.9x - 9.5x

8.3x

Exit Capitalization Rate

5.0% - 11.4%

8.0%

Exit Multiple - EBITDA

0.1x - 17.5x

10.3x

Exit Multiple - NOI

12.8x

N/A

Exit Multiple - P/E

17.0x

N/A

21,050

Market Comparable

Companies

Book Value Multiple

0.8x - 8.0x

1.3x

Dollar/Acre Multiple

$7.0 - $44.1

$32.9

21,492

Other

N/A

20,250

Transaction Price

N/A

Third Party Pricing

N/A

Partnership and LLC Interests

295,251

Discounted Cash Flows

Discount Rate

4.1% - 26.5%

9.7%

Revenue CAGR

-1.1% - 48.4%

26.9%

Book Value Multiple

8.5x - 9.3x

9.2x

Exit Capitalization Rate

2.9% - 15.0%

6.3%

Exit Multiple - EBITDA

0.1x - 15.3x

10.0x

Exit Multiple - NOI

13.3x

N/A

9,444

Market Comparable

Companies

Book Value Multiple

1.1x

N/A

Dollar/Acre Multiple

$5.3 - $12.0

$7.5

9,390

Other

N/A

41,188

Transaction Price

N/A

Debt Instruments

8,342

Discounted Cash Flows

Discount Rate

7.0% - 19.3%

9.8%

Revenue CAGR

0.7%

N/A

Exit Multiple - EBITDA

6.5x

N/A

120,843

Third Party Pricing

N/A

4,634

Transaction Price

N/A

Assets of Consolidated CLO Vehicles

Discounted Cash Flows

Discount Rate

5.0%

N/A

673,317

Third Party Pricing

N/A

Total Investments of Consolidated Blackstone Funds

1,364,016

continued...

Table of Contents

The Blackstone Group L.P.

Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued

(All Dollars Are in Thousands, Except Unit and Per Unit Data, Except Where Noted)

Valuation

Unobservable

Fair Value

Techniques

Inputs

Ranges

Weighted- Average (a)

Corporate Treasury Investments

7,947

Discounted Cash Flows

Discount Rate

4.4% - 7.5%

6.6%

Default Rate

2.0%

N/A

Pre-payment

Rate

20.0%

N/A

Recovery Lag

12 Months -

Months

13 Months

Recovery Rate

17.5% - 70.0%

67.7%

Reinvestment Rate

LIBOR + 400 bps

N/A

16,621

Third Party Pricing

N/A

Loans and Receivables

304,173

Discounted Cash Flows

Discount Rate

6.1% - 12.8%

8.7%

Other Investments

26,631

Discounted Cash Flows

Discount Rate

1.0% - 15.0%

2.8%

Default Rate

2.0%

N/A

Pre-payment

Rate

20.0%

N/A

Recovery Lag

12 Months

N/A

Recovery Rate

70.0%

N/A

Reinvestment Rate

LIBOR + 400 bps

N/A

4,986

Transaction Price

N/A

1,724,374


N/A		Not applicable.
CAGR		Compound annual growth rate.
EBITDA		Earnings before interest, taxes, depreciation and amortization.
Exit Multiple		Ranges include the last twelve months EBITDA, forward EBITDA and price/earnings exit multiples.
NOI		Net operating income.
P/E		Price-earnings ratio.
Third Party Pricing		Third Party Pricing is generally determined on the basis of unadjusted prices between market participants provided by reputable dealers or pricing services.
Transaction Price		Includes recent acquisitions or transactions.
(a)		Unobservable inputs were weighted based on the fair value of the investments included in the range.

The significant unobservable inputs used in the fair value measurement of corporate treasury investments, debt instruments and other investments as of the reporting date are discount rates, default rates, recovery rates, recovery lag,

pre-payment

rates and reinvestment rates. Increases (decreases) in any of the discount rates, default rates, recovery lag and

pre-payment

rates in isolation would have resulted in a lower (higher) fair value measurement. Increases (decreases) in any of the recovery rates and reinvestment rates in isolation would have resulted in a higher (lower) fair value measurement. Generally, a change in the assumption used for default rates may be accompanied by a directionally similar change in the assumption used for recovery lag and a directionally opposite change in the assumption used for recovery rates and

pre-payment

rates.

The significant unobservable inputs used in the fair value measurement of equity securities, partnership and limited liability company (“LLC”) interests, debt instruments, assets of consolidated CLO vehicles and loans and receivables are discount rates, exit capitalization rates, exit multiples, EBITDA multiples and revenue compound annual growth rates. Increases (decreases) in any of discount rates and exit capitalization rates in isolation could have resulted in a lower (higher) fair value measurement. Increases (decreases) in any of exit multiples and revenue compound annual growth rates in isolation could have resulted in a higher (lower) fair value measurement.

Since December 31, 2018, there have been

changes in valuation techniques within Level II and Level III that have had a material impact on the valuation of financial instruments.

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Notes to Condensed Consolidated Financial Statements

(Unaudited)

- Continued

(All Dollars Are in Thousands, Except Unit and Per Unit Data, Except Where Noted)

The following tables summarize the changes in financial assets and liabilities measured at fair value for which

Blackstone

has used Level III inputs to determine fair value and does not include gains or losses that were reported in Level III in prior years or for instruments that were transferred out of Level III prior to the end of the respective reporting period. Total realized and unrealized gains and losses recorded for Level III investments are reported in either Investment Income (Loss) or Net Gains from Fund Investment Activities in the Condensed Consolidated Statements of Operations.


	Level III Financial Assets at Fair Value
	Three Months Ended June 30,
	2019												2018
	Investments												Investments
	of			Loans			Other						of			Loans			Other
	Consolidated			and			Investments						Consolidated			and			Investments
	Funds			Receivables			(a)			Total			Funds			Receivables			(a)			Total
Balance, Beginning of Period	$	1,243,800		$	208,226		$	59,133		$	1,511,159		$	963,151		$	163,135		$	117,349		$	1,243,635
Transfer In to Level III (b)		149,275			—			3,986			153,261			152,666			—			—			152,666
Transfer Out of Level III (b)		(294,612	)		—			(14,557	)		(309,169	)		(117,217	)		—			(7,649	)		(124,866	)
Purchases		112,757			198,482			5,251			316,490			203,223			294,258			15,327			512,808
Sales		(84,525	)		(218,148	)		(5,270	)		(307,943	)		(127,718	)		(110,508	)		(23,304	)		(261,530	)
Settlements		—			(3,038	)		—			(3,038	)		—			(5,634	)		(1	)		(5,635	)
Changes in Gains Included in Earnings		13,401			2,309			509			16,219			12,619			5,352			13,001			30,972

Balance, End of Period	$	1,140,096		$	187,831		$	49,052		$	1,376,979		$	1,086,724		$	346,603		$	114,723		$	1,548,050


Changes in Unrealized Gains (Losses) Included in Earnings Related to Financial Assets Still Held at the Reporting Date	$	(2,162	)	$	(1,898	)	$	135		$	(3,925	)	$	146		$	5,353		$	(49	)	$	5,450


	Level III Financial Assets at Fair Value
	Six Months Ended June 30,
	2019												2018
	Investments												Investments
	of			Loans			Other						of			Loans			Other
	Consolidated			and			Investments						Consolidated			and			Investments
	Funds			Receivables			(a)			Total			Funds			Receivables			(a)			Total
Balance, Beginning of Period	$	1,364,016		$	304,173		$	56,185		$	1,724,374		$	1,029,371		$	239,659		$	119,642		$	1,388,672
Transfer In Due to Consolidation and Acquisition		—			—			—			—			50,043			—						50,043
Transfer Out Due to Deconsolidation		—			—			—			—			(217,182	)		—			—			(217,182	)
Transfer In to Level III (b)		106,644			—			12,935			119,579			180,401			—			—			180,401
Transfer Out of Level III (b)		(400,402	)		—			(27,170	)		(427,572	)		(141,104	)		—			(15,717	)		(156,821	)
Purchases		179,305			270,772			12,820			462,897			408,823			370,921			19,812			799,556
Sales		(145,097	)		(383,816	)		(6,141	)		(535,054	)		(260,865	)		(263,703	)		(23,479	)		(548,047	)
Settlements		—			(10,189	)		—			(10,189	)		—			(9,317	)		(4	)		(9,321	)
Changes in Gains Included in Earnings		35,630			6,891			423			42,944			37,237			9,043			14,469			60,749

Balance, End of Period	$	1,140,096		$	187,831		$	49,052		$	1,376,979		$	1,086,724		$	346,603		$	114,723		$	1,548,050


Changes in Unrealized Gains (Losses) Included in Earnings Related to Financial Assets Still Held at the Reporting Date	$	25,821		$	(2,657	)	$	315		$	23,479		$	19,265		$	9,044		$	(289	)	$	28,020

(a)	Represents corporate treasury investments and Other Investments.

(b)	Transfers in and out of Level III financial assets and liabilities were due to changes in the observability of inputs used in the valuation of such assets and liabilities.

There were no Level III financial liabilities as of and for the three and six months ended June 30, 2019 and 2018.

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Notes to Condensed Consolidated Financial Statements

(Unaudited)

- Continued

(All Dollars Are in Thousands, Except Unit and Per Unit Data, Except Where Noted)

9.	Variable Interest Entities

Pursuant to GAAP consolidation guidance, Blackstone consolidates certain VIEs in which it is determined that Blackstone is the primary beneficiary either directly or indirectly, through a consolidated entity or affiliate. VIEs include certain private equity, real estate, credit-focused or funds of hedge funds entities and CLO vehicles. The purpose of such VIEs is to provide strategy specific investment opportunities for investors in exchange for management and performance based fees. The investment strategies of the Blackstone Funds differ by product; however, the fundamental risks of the Blackstone Funds have similar characteristics, including loss of invested capital and loss of management fees and performance based fees. In Blackstone’s role as general partner, collateral manager or investment adviser, it generally considers itself the sponsor of the applicable Blackstone Fund. Blackstone does not provide performance guarantees and has no other financial obligation to provide funding to consolidated VIEs other than its own capital commitments.

The assets of consolidated variable interest entities may only be used to settle obligations of these entities. In addition, there is no recourse to Blackstone for the consolidated VIEs’ liabilities including the liabilities of the consolidated CLO vehicles.

Blackstone holds variable interests in certain VIEs which are not consolidated as it is determined that Blackstone is not the primary beneficiary. Blackstone’s involvement with such entities is in the form of direct and indirect equity interests and fee arrangements. The maximum exposure to loss represents the loss of assets recognized by Blackstone relating to non-consolidated VIEs and any clawback obligation relating to previously distributed Performance Allocations. Blackstone’s maximum exposure to loss relating to non-consolidated VIEs were as follows:


	June 30,		December 31,
	2019		2018
Investments	$	1,042,214	$	942,700
Due from Affiliates		390,467		254,744
Potential Clawback Obligation		181,283		159,691

Maximum Exposure to Loss	$	1,613,964	$	1,357,135


Amounts Due to Non-Consolidated VIEs	$	1,994	$	207

10.	Repurchase Agreements

At June 30, 2019,

Blackstone

pledged securities with a carrying value of $267.9 million and cash to collateralize its repurchase agreements. Such securities can be repledged, delivered or otherwise used by the counterparty.

At December 31, 2018,

Blackstone

pledged securities with a carrying value of $279.5 million and cash to collateralize its repurchase agreements. Such securities can be repledged, delivered or otherwise used by the counterparty.

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Notes to Condensed Consolidated Financial Statements

(Unaudited)

- Continued

(All Dollars Are in Thousands, Except Unit and Per Unit Data, Except Where Noted)

The following tables provide information regarding

Blackstone

’s Repurchase Agreements obligation by type of collateral pledged:

	June 30, 2019
	Remaining Contractual Maturity of the Agreements
	Overnight						Greater
	and		Up to		30 - 90		than
	Continuous		30 Days		Days		90 days		Total
Repurchase Agreements
Asset-Backed Securities	$	—	$	42,034	$	131,448	$	34,194	$	207,676


Gross Amount of Recognized Liabilities for Repurchase Agreements in Note 11. “Offsetting of Assets and Liabilities”									$	207,676


Amounts Related to Agreements Not Included in Offsetting Disclosure in Note 11. “Offsetting of Assets and Liabilities”									$	—


	December 31, 2018
	Remaining Contractual Maturity of the Agreements
	Overnight						Greater
	and		Up to		30 - 90		than
	Continuous		30 Days		Days		90 days		Total
Repurchase Agreements
Asset-Backed Securities	$	—	$	42,908	$	144,731	$	34,563	$	222,202


Gross Amount of Recognized Liabilities for Repurchase Agreements in Note 11. “Offsetting of Assets and Liabilities”									$	222,202


Amounts Related to Agreements Not Included in Offsetting Disclosure in Note 11. “Offsetting of Assets and Liabilities”									$	—

11.	Offsetting of Assets and Liabilities

The following tables present the offsetting of assets and liabilities as of June 30, 2019 and December 31, 2018:

June 30, 2019

Gross and Net

Amounts of

Gross Amounts Not Offset

Assets Presented

in the Statement of

in the Statement

Financial Condition

of Financial

Financial

Cash Collateral

Condition

Instruments (a)

Received

Net Amount

Assets

Freestanding Derivatives

40,581

38,916

—

1,665

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Notes to Condensed Consolidated Financial Statements

(Unaudited)

- Continued

(All Dollars Are in Thousands, Except Unit and Per Unit Data, Except Where Noted)


	June 30, 2019
	Gross and Net
	Amounts of
	Liabilities		Gross Amounts Not Offset
	Presented in the		in the Statement of
	Statement of		Financial Condition
	Financial		Financial		Cash Collateral
	Condition		Instruments (a)		Pledged		Net Amount
Liabilities
Freestanding Derivatives	$	53,725	$	38,205	$	11,290	$	4,230
Repurchase Agreements		207,676		207,676		—		—

	$	261,401	$	245,881	$	11,290	$	4,230

December 31, 2018

Gross and Net

Amounts of

Gross Amounts Not Offset

Assets Presented

in the Statement of

in the Statement

Financial Condition

of Financial

Financial

Cash Collateral

Condition

Instruments (a)

Received

Net Amount

Assets

Freestanding Derivatives

45,416

37,788

5,547

2,081

	December 31, 2018
	Gross and Net
	Amounts of
	Liabilities		Gross Amounts Not Offset
	Presented in the		in the Statement of
	Statement of		Financial Condition
	Financial		Financial		Cash Collateral
	Condition		Instruments (a)		Pledged		Net Amount
Liabilities
Freestanding Derivatives	$	52,844	$	35,905	$	15,377	$	1,562
Repurchase Agreements		222,202		222,202		—		—

	$	275,046	$	258,107	$	15,377	$	1,562

(a)	Amounts presented are inclusive of both legally enforceable master netting agreements, and financial instruments received or pledged as collateral. Financial instruments received or pledged as collateral offset derivative counterparty risk exposure, but do not reduce net balance sheet exposure.

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Notes to Condensed Consolidated Financial Statements

(Unaudited)

- Continued

(All Dollars Are in Thousands, Except Unit and Per Unit Data, Except Where Noted)

Repurchase Agreements are presented separately on the Condensed Consolidated Statements of Financial Condition. Freestanding Derivative assets are included in Other Assets in the Condensed Consolidated Statements of Financial Condition. The following table presents the components of Other Assets:



	June 30,		December 31,
	2019		2018
Furniture, Equipment and Leasehold Improvements, Net	$	142,083	$	120,372
Prepaid Expenses		159,419		110,732
Freestanding Derivatives		38,995		44,918
Other		13,756		18,226

	$	354,253	$	294,248

Freestanding Derivative liabilities are included in Accounts Payable, Accrued Expenses and Other Liabilities in the Condensed Consolidated Statements of Financial Condition and are not a significant component thereof.

Notional Pooling Arrangement

Blackstone has a notional cash pooling arrangement with a financial institution for cash management purposes. This arrangement allows for cash withdrawals based upon aggregate cash balances on deposit at the same financial institution. Cash withdrawals cannot exceed aggregate cash balances on deposit. The net balance of cash on deposit and overdrafts is used as a basis for calculating net interest expense or income. As of June 30, 2019, the aggregate cash balance on deposit relating to the cash pooling arrangement was $

1.2

billion, which was offset with an accompanying overdraft of $

1.2

billion.

12.	Borrowings

On April 10, 2019, Blackstone, through its indirect subsidiary Blackstone Holdings Finance Co. L.L.C. (the “Issuer”), issued

€

600

million aggregate principal amount of Senior Notes due April 10, 2029 (the “2029 Notes”). The 2029 Notes have an interest rate of

1.500

% per annum, accruing from April 10, 2019. Interest on the 2029 Notes is payable annually in arrears on April 10 of each year, commencing on April 10, 2020. The 2029 Notes will be fully and unconditionally guaranteed (the “Guarantees”), jointly and severally, by The Blackstone Group L.P., Blackstone Holdings I L.P., Blackstone Holdings AI L.P., Blackstone Holdings II L.P., Blackstone Holdings III L.P. and Blackstone Holdings IV L.P. (the “Guarantors”). The Guarantees are unsecured and unsubordinated obligations of the Guarantors. Third party costs directly related to the issuance of the 2029 Notes have been capitalized and are being amortized over the life of the 2029 Notes.

The following table presents the general characteristics of each of our notes, as well as their carrying value and fair value. The notes are included in Loans Payable within the Condensed Consolidated Statements of Financial Condition. All of the notes were issued at a discount. All of the notes accrue interest from the issue date thereof and all pay interest in arrears on a semi-annual basis or annual basis as indicated by their respective interest payment dates.

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Notes to Condensed Consolidated Financial Statements

(Unaudited)

- Continued

(All Dollars Are in Thousands, Except Unit and Per Unit Data, Except Where Noted)


	June 30, 2019				December 31, 2018
	Carrying		Fair		Carrying		Fair
Senior Notes	Value		Value (a)		Value		Value (a)
5.875%, Due 3/15/2021	$	399,174	$	422,160	$	398,947	$	421,720
4.750%, Due 2/15/2023		395,700		429,440		395,166		417,600
2.000%, Due 5/19/2025		336,883		367,462		339,959		352,197
1.000%, Due 10/5/2026		673,113		687,293		679,193		647,564
3.150%, Due 10/2/2027		296,880		297,630		296,717		285,030
1.500%, Due 4/10/2029		676,634		705,990		—		—
6.250%, Due 8/15/2042		238,328		314,725		238,221		289,225
5.000%, Due 6/15/2044		488,856		568,500		488,747		490,150
4.450%, Due 7/15/2045		344,097		370,300		344,038		329,770
4.000%, Due 10/2/2047		290,252		294,690		290,163		262,800

	$	4,139,917	$	4,458,190	$	3,471,151	$	3,496,056

(a)	Fair value is determined by broker quote and these notes would be classified as Level II within the fair value hierarchy.

Included within Loans Payable and Due to Affiliates within the Condensed Consolidated Statements of Financial Condition are amounts due to holders of debt securities issued by Blackstone’s consolidated CLO vehicles. Borrowings through the consolidated CLO vehicles consisted of the following:

June 30, 2019

December 31, 2018

Weighted-

Average

Weighted-

Average

Remaining

Average

Remaining

Borrowing

Interest

Maturity in

Borrowing

Interest

Maturity in

Outstanding

Rate

Years

Outstanding

Rate

Years

Senior Secured Notes

6,527,175

4.13%

6.2

6,531,550

4.20%

7.5

Subordinated Notes

321,866

(a)

N/A

331,735

(a)

N/A

6,849,041

6,863,285

(a)	The Subordinated Notes do not have contractual interest rates but instead receive distributions from the excess cash flows of the CLO vehicles.

Senior Secured Notes and Subordinated Notes comprise the following amounts:


	June 30, 2019						December 31, 2018
			Amounts Due to Non-						Amounts Due to Non-
			Consolidated Affiliates						Consolidated Affiliates
			Borrowing						Borrowing
	Fair Value		Outstanding		Fair Value		Fair Value		Outstanding		Fair Value
Senior Secured Notes	$	6,519,453	$	42,750	$	45,243	$	6,476,434	$	3,250	$	3,201
Subordinated Notes		111,270		81,790		49,575		60,289		111,659		52,811

	$	6,630,723	$	124,540	$	94,818	$	6,536,723	$	114,909	$	56,012

The Loans Payable of the consolidated CLO vehicles are collateralized by assets held by each respective CLO vehicle and assets of one vehicle may not be used to satisfy the liabilities of another. This collateral consisted of Cash, Corporate Loans, Corporate Bonds and other securities. As of June 30, 2019 and December 31, 2018, the fair value of the consolidated CLO assets was $7.3 billion and $7.1 billion, respectively.

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Notes to Condensed Consolidated Financial Statements

(Unaudited)

- Continued

(All Dollars Are in Thousands, Except Unit and Per Unit Data, Except Where Noted)

Scheduled principal payments for borrowings as of June 30, 2019 were as follows:


			Blackstone Fund
	Operating		Facilities/CLO		Total
	Borrowings		Vehicles		Borrowings
2019	$	—	$	316	$	316
2020		—		—		—
2021		400,000		—		400,000
2022		—		—		—
2023		400,000		—		400,000
Thereafter		3,405,950		6,849,041		10,254,991

	$	4,205,950	$	6,849,357	$	11,055,307

13.

Leases

Blackstone enters into

non-cancelable

lease and sublease agreements primarily for office space, which expire on various dates through 2030. As of June 30, 2019, the weighted-average remaining lease term was 7.8 years, and the weighted-average discount rate was 2.5%.

The components of lease expense were as follows:


	Three Months Ended			Six Months Ended
	June 30, 2019			June 30, 2019
Operating Lease Cost
Straight-Line Lease Cost (a)	$	22,545		$	44,410
Variable Lease Cost		3,795			6,900
Sublease Income		(168	)		(332	)

	$	26,172		$	50,978

(a)	Straight-line lease cost includes short-term leases, which are immaterial.

Supplemental cash flow information related to leases were as follows:


	Three Months Ended		Six Months Ended
	June 30, 2019		June 30, 2019
Operating Cash Flows from Operating Leases	$	24,283	$	46,415
Right-of-Use Assets Obtained in Exchange for New Operating Lease Liabilities		6,995		7,383

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Notes to Condensed Consolidated Financial Statements

(Unaudited)

- Continued

(All Dollars Are in Thousands, Except Unit and Per Unit Data, Except Where Noted)

The following table shows the undiscounted cash flows on an annual basis for Operating Lease Liabilities as of June 30, 2019:


2019	$	40,794
2020		81,212
2021		85,914
2022		77,605
2023		75,757
Thereafter		272,369

Total Lease Payments (a)		633,651
Less: Imputed Interest		(59,032	)

Present Value of Operating Lease Liabilities	$	574,619

(a)	Excludes $ 113.3 million of lease payments for signed leases that have not yet commenced.

As of December 31, 2018, the aggregate minimum future payments, net of sublease income, required on operating leases are as follows:


2019	$	78,506
2020		72,191
2021		80,914
2022		79,094
2023		77,248
Thereafter		273,347

Total	$	661,300

14.	Income Taxes

Blackstone’s effective tax rate was 5.6% and 8.2% for the three months ended June 30, 2019 and 2018, respectively, and 4.4% and 7.5% for the six months ended June 30, 2019 and 2018, respectively. Blackstone’s income tax provision was $38.7 million and $138.7 million for the three months ended June 30, 2019 and 2018, respectively, and $79.9 million and $193.2 million for the six months ended June 30, 2019 and 2018, respectively.

Prior to the Conversion, Blackstone and certain of its subsidiaries operate in the U.S. as partnerships for income tax purposes (partnerships generally are not subject to federal income taxes) and generally as corporate entities in

non-U.S.

jurisdictions. Blackstone’s effective tax rate for the three and six months ended June 30, 2019 and 2018 was substantially due to the fact that certain corporate subsidiaries are subject to federal, state, local and foreign income taxes (as applicable) and other subsidiaries are subject to New York City unincorporated business taxes.

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Notes to Condensed Consolidated Financial Statements

(Unaudited)

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(All Dollars Are in Thousands, Except Unit and Per Unit Data, Except Where Noted)

15. Net Income Per Common Unit

Basic and diluted net income per common unit for the three and six months ended June 30, 2019 and June 30, 2018 was calculated as follows:


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2019		2018		2019		2018
Net Income for Per Common Unit Calculations
Net Income Attributable to The Blackstone Group L.P., Basic	$	305,792	$	742,042	$	787,096	$	1,109,914
Incremental Net Income from Assumed Exchange of Blackstone Holdings Partnership Units		—		—		610,101		858,727

Net Income Attributable to The Blackstone Group L.P., Diluted	$	305,792	$	742,042	$	1,397,197	$	1,968,641


Units Outstanding
Weighted-Average Common Units Outstanding, Basic		673,655,305		681,794,492		674,079,074		678,156,936
Weighted-Average Unvested Deferred Restricted Common Units		330,639		216,118		269,196		207,526
Weighted-Average Blackstone Holdings Partnership Units		—		—		526,244,006		532,363,486

Weighted-Average Common Units Outstanding, Diluted		673,985,944		682,010,610		1,200,592,276		1,210,727,948


Net Income Per Common Unit, Basic	$	0.45	$	1.09	$	1.17	$	1.64

Net Income Per Common Unit, Diluted	$	0.45	$	1.09	$	1.16	$	1.63

Distributions Declared Per Common Unit (a)	$	0.37	$	0.35	$	0.95	$	1.20

(a)	Distributions declared reflects the calendar date of the declaration for each distribution.

In computing the dilutive effect that the exchange of Blackstone Holdings Partnership Units would have on net income per common unit, Blackstone considered that net income available to holders of common units would increase due to the elimination of non-controlling interests in Blackstone Holdings, inclusive of any tax impact. Because the hypothetical conversion may result in a different tax rate, the Blackstone Holdings Partnership Units are considered anti-dilutive in certain periods and dilutive in other periods.

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Notes to Condensed Consolidated Financial Statements

(Unaudited)

- Continued

(All Dollars Are in Thousands, Except Unit and Per Unit Data, Except Where Noted)

The following table summarizes the anti-dilutive securities for the three and six months ended June 30, 2019 and 2018:


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2019		2018		2019		2018
Weighted-Average Blackstone Holdings Partnership Units		526,721,409		528,872,187		—		—

Unit/Stock Repurchase Program

On July 16, 2019, the board of directors of the Corporation authorized the repurchase of up to $1.0 billion of Class A Common Stock and Blackstone Holdings Partnership Units, which authorization replaced the 2018 Repurchase Authorization. Under the repurchase program, stock may be repurchased from time to time in open market transactions, in privately negotiated transactions or otherwise. The timing and the actual number of shares repurchased will depend on a variety of factors, including legal requirements, price and economic and market conditions. The repurchase program may be changed, suspended or discontinued at any time and does not have a specified expiration date.

During the three and six months ended June 30, 2019, Blackstone repurchased 7.0 million and 8.5 million Blackstone common units, respectively, at a total cost of $290.9 million and $343.1 million, respectively. During the three and six months ended June 30, 2018, Blackstone repurchased 2.2 million Blackstone common units at a total cost of $71.7 million. As of June 30, 2019, the amount remaining available for repurchases under the 2018 Repurchase Authorization was $115.4 million.

Common units repurchased includes units for which trades were executed during the three months ended June 30, 2019 and settlement occurred in July 2019.

16. Equity-Based Compensation

Blackstone

has granted equity-based compensation awards to Blackstone’s senior managing directors,

non-partner

professionals,

non-professionals

and selected external advisers under

Blackstone

’s

2007

Equity Incentive Plan (the “Equity Plan”). The Equity Plan allows for the granting of options, unit appreciation rights or other unit-based awards (units, restricted units, restricted common units, deferred restricted common units, phantom restricted common units or other unit-based awards based in whole or in part on the fair value of the Blackstone common units or Blackstone Holdings Partnership Units) which may contain certain service or performance requirements. As of January

2019

Blackstone

had the ability to grant

171,502,746

units under the Equity Plan.

For the three and six months ended June 30, 2019,

Blackstone

recorded compensation expense of $102.8 million and $224.0 million, respectively, in relation to its equity-based awards with corresponding tax benefits of $15.9 million and $34.5 million, respectively. For the three and six months ended June 30, 2018,

Blackstone

recorded compensation expense of $116.8 million and $209.0 million, respectively, in relation to its equity-based awards with corresponding tax benefits of $20.1 million and $34.5 million, respectively.

As of June 30, 2019, there was $937.1 million of estimated unrecognized compensation expense related to unvested awards. This cost is expected to be recognized over a weighted-average period of 3.7 years.

Total vested and unvested outstanding units, including Blackstone common units, Blackstone Holdings Partnership Units and deferred restricted common units, were 1,195,112,059 as of June 30, 2019. Total outstanding unvested phantom units were 49,075 as of June 30, 2019.

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A summary of the status of

Blackstone

’s unvested equity-based awards as of June 30, 2019 and of changes during the period January 1, 2019 through June 30, 2019 is presented below:


	Blackstone Holdings					The Blackstone Group L.P.
						Equity Settled Awards					Cash Settled Awards
						Deferred
				Weighted-		Restricted			Weighted-					Weighted-
				Average		Common			Average					Average
	Partnership			Grant Date		Units and			Grant Date		Phantom			Grant Date
Unvested Units	Units			Fair Value		Options			Fair Value		Units			Fair Value
Balance, December 31, 2018		31,554,127		$	34.38		9,312,268		$	31.43		46,808		$	34.66
Granted		2,450,200			35.29		1,731,220			30.30		—			—
Vested		(1,860,292	)		34.71		(1,989,321	)		29.81		(80	)		33.47
Forfeited		(92,956	)		32.17		(268,962	)		31.33		—			—

Balance, June 30, 2019		32,051,079		$	34.11		8,785,205		$	31.56		46,728		$	38.69

Units Expected to Vest

The following unvested units, after expected forfeitures, as of June 30, 2019, are expected to vest:


			Weighted-
			Average
			Service Period
	Units		in Years
Blackstone Holdings Partnership Units		28,301,673		3.2
Deferred Restricted Blackstone Common Units		7,618,444		2.1

Total Equity-Based Awards		35,920,117		3.0

Phantom Units		40,016		2.0

17. Related Party Transactions

Affiliate Receivables and Payables

Due from Affiliates and Due to Affiliates consisted of the following:


	June 30,		December 31,
	2019		2018
Due from Affiliates
Management Fees, Performance Revenues, Reimbursable Expenses and Other Receivables from Non-Consolidated Entities and Portfolio Companies	$	1,668,055	$	1,520,100
Due from Certain Non-Controlling Interest Holders and Blackstone Employees		532,374		462,475
Accrual for Potential Clawback of Previously Distributed Performance Allocations		11,308		11,548

	$	2,211,737	$	1,994,123

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	June 30,		December 31,
	2019		2018
Due to Affiliates
Due to Certain Non-Controlling Interest Holders in Connection with the Tax Receivable Agreements	$	739,226	$	796,902
Due to Non-Consolidated Entities		126,625		99,728
Due to Note-Holders of Consolidated CLO Vehicles		94,818		56,012
Due to Certain Non-Controlling Interest Holders and Blackstone Employees		51,158		53,613
Accrual for Potential Repayment of Previously Received Performance Allocations		70,072		29,521

	$	1,081,899	$	1,035,776

Interests of the Founder, Senior Managing Directors, Employees and Other Related Parties

The Founder, senior managing directors, employees and certain other related parties invest on a discretionary basis in the consolidated Blackstone Funds both directly and through consolidated entities. These investments generally are subject to preferential management fee and performance allocation or incentive fee arrangements. As of June 30, 2019 and December 31, 2018, such investments aggregated $885.2 million and $842.9 million, respectively. Their share of the Net Income Attributable to Redeemable

Non-Controlling

and

Non-Controlling

Interests in Consolidated Entities aggregated $17.5 million and $37.0 million for the three months ended June 30, 2019 and 2018, respectively, and $48.5 million and $65.8 million for the six months ended June 30, 2019 and 2018, respectively.

Loans to Affiliates

Loans to affiliates consist of interest bearing advances to certain Blackstone individuals to finance their investments in certain Blackstone Funds. These loans earn interest at Blackstone’s cost of borrowing and such interest totaled $1.8 million and $1.2 million for the three months ended June 30, 2019 and 2018, respectively, and $4.2 million and $2.5 million for the six months ended June 30, 2019 and 2018, respectively.

Contingent Repayment Guarantee

Blackstone and its personnel who have received Performance Allocation distributions have guaranteed payment on a several basis (subject to a cap) to the carry funds of any clawback obligation with respect to the excess Performance Allocation allocated to the general partners of such funds and indirectly received thereby to the extent that either Blackstone or its personnel fails to fulfill its clawback obligation, if any. The Accrual for Potential Repayment of Previously Received Performance Allocations represents amounts previously paid to Blackstone Holdings and

non-controlling

interest holders that would need to be repaid to the Blackstone Funds if the carry funds were to be liquidated based on the fair value of their underlying investments as of June 30, 2019. See Note 18. “Commitments and Contingencies — Contingencies — Contingent Obligations (Clawback)”.

Aircraft and Other Services

In the normal course of business, Blackstone personnel make use of aircraft owned as personal assets by Stephen A. Schwarzman; an aircraft owned jointly as a personal asset by Hamilton E. James, Blackstone’s Executive Vice Chairman and a Director of Blackstone, and another senior managing director; an aircraft owned as a personal asset by Jonathan D. Gray, Blackstone’s President and Chief Operating Officer and a Director of Blackstone; and an aircraft owned jointly as a personal asset by Bennett J. Goodman,

Co-Founder

of GSO Capital and a Director of Blackstone, and a former senior managing director (each such aircraft, “Personal Aircraft”). Mr. Schwarzman paid for his purchases of his Personal Aircraft himself. Mr. James paid for his interest in his jointly owned Personal Aircraft. Mr. Goodman paid for his interest in his jointly owned Personal Aircraft. Mr. Gray paid for his purchase of his Personal Aircraft himself. Mr. Schwarzman, Mr. James, Mr. Goodman and Mr. Gray respectively bear operating,

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personnel and maintenance costs associated with the operation of such Personal Aircraft. Payment by Blackstone for the use of the Personal Aircraft by Blackstone employees is made based on market rates.

In addition, on occasion, certain of Blackstone’s executive officers and employee directors and their families may make personal use of aircraft in which Blackstone owns a fractional interest, as well as other assets of Blackstone. Any such personal use of Blackstone assets is charged to the executive officer or employee director based on market rates and usage. Personal use of Blackstone resources is also reimbursed to Blackstone based on market rates.

The transactions described herein are not material to the Condensed Consolidated Financial Statements.

Tax Receivable Agreements

Blackstone used a portion of the proceeds from the IPO and the sale of

non-voting

common units to Beijing Wonderful Investments to purchase interests in the predecessor businesses from the predecessor owners. In addition, holders of Blackstone Holdings Partnership Units may exchange their Blackstone Holdings Partnership Units for Blackstone common units on a

one-for-one

basis. The purchase and subsequent exchanges are expected to result in increases in the tax basis of the tangible and intangible assets of Blackstone Holdings and therefore reduce the amount of tax that Blackstone’s wholly owned subsidiaries would otherwise be required to pay in the future.

One of the subsidiaries of Blackstone which is a corporate taxpayer has entered into tax receivable agreements with each of the predecessor owners and additional tax receivable agreements have been executed, and will continue to be executed, with newly-admitted senior managing directors and others who acquire Blackstone Holdings Partnership Units. The agreements provide for the payment by the corporate taxpayer to such owners of 85% of the amount of cash savings, if any, in U.S. federal, state and local income tax that the corporate taxpayers actually realize as a result of the aforementioned increases in tax basis and of certain other tax benefits related to entering into these tax receivable agreements. For purposes of the tax receivable agreements, cash savings in income tax will be computed by comparing the actual income tax liability of the corporate taxpayers to the amount of such taxes that the corporate taxpayers would have been required to pay had there been no increase to the tax basis of the tangible and intangible assets of Blackstone Holdings as a result of the exchanges and had the corporate taxpayers not entered into the tax receivable agreements.

Assuming no future material changes in the relevant tax law and that the corporate taxpayers earn sufficient taxable income to realize the full tax benefit of the increased amortization of the assets, the expected future payments under the tax receivable agreements (which are taxable to the recipients) will aggregate $739.2 million over the next 15 years. The

after-tax

net present value of these estimated payments totals $268.2 million assuming a 15% discount rate and using Blackstone’s most recent projections relating to the estimated timing of the benefit to be received. Future payments under the tax receivable agreements in respect of subsequent exchanges would be in addition to these amounts. The payments under the tax receivable agreements are not conditioned upon continued ownership of Blackstone equity interests by the

pre-IPO

owners and the others mentioned above.

Amounts related to the deferred tax asset resulting from the increase in tax basis from the exchange of Blackstone Holdings Partnership Units to Blackstone common units, the resulting remeasurement of net deferred tax assets at the Blackstone ownership percentage at the balance sheet date, the due to affiliates for the future payments resulting from the tax receivable agreements and resulting adjustment to partners’ capital are included as Acquisition of Ownership Interests from

Non-Controlling

Interest Holders in the Supplemental Disclosure of

Non-Cash

Investing and Financing Activities in the Condensed Consolidated Statements of Cash Flows.

Other

Blackstone does business with and on behalf of some of its Portfolio Companies; all such arrangements are on a negotiated basis.

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Additionally, please see Note 18. “Commitments and Contingencies — Contingencies — Guarantees” for information regarding guarantees provided to a lending institution for certain loans held by employees.

18. Commitments and Contingencies

Commitments

Investment Commitments

Blackstone had $3.3 billion of investment commitments as of June 30, 2019 representing general partner capital funding commitments to the Blackstone Funds, limited partner capital funding to other funds and Blackstone principal investment commitments. The consolidated Blackstone Funds had signed investment commitments of $116.3 million as of June 30, 2019 which includes $58.4 million of signed investment commitments for portfolio company acquisitions in the process of closing.

Contingencies

Guarantees

Certain of Blackstone’s consolidated real estate funds guarantee payments to third parties in connection with the

on-going

business activities and/or acquisitions of their Portfolio Companies. There is no direct recourse to Blackstone to fulfill such obligations. To the extent that underlying funds are required to fulfill guarantee obligations, Blackstone’s invested capital in such funds is at risk. Total investments at risk in respect of guarantees extended by consolidated real estate funds was $33.1 million as of June 30, 2019.

The Blackstone Holdings Partnerships provided guarantees to a lending institution for certain loans held by employees either for investment in Blackstone Funds or for members’ capital contributions to The Blackstone Group International Partners LLP. The amount guaranteed as of June 30, 2019 was $179.2 million.

Litigation

Blackstone may from time to time be involved in litigation and claims incidental to the conduct of its business. Blackstone’s businesses are also subject to extensive regulation, which may result in regulatory proceedings against

Blackstone

Blackstone accrues a liability for legal proceedings only when those matters present loss contingencies that are both probable and reasonably estimable. In such cases, there may be an exposure to loss in excess of any amounts accrued. Although there can be no assurance of the outcome of such legal actions, based on information known by management, Blackstone does not have a potential liability related to any current legal proceeding or claim that would individually or in the aggregate materially affect its results of operations, financial position or cash flows.

In December 2017, a purported derivative suit (Mayberry v. KKR & Co., L.P., et al.) was filed in the Commonwealth of Kentucky Franklin County Circuit Court on behalf of the Kentucky Retirement System (“KRS”) by eight of its members and beneficiaries alleging various breaches of fiduciary duty and other violations of Kentucky state law in connection with KRS’s investment in three hedge funds of funds, including a fund managed by Blackstone Alternative Asset Management L.P. (“BAAM L.P.”). The suit names more than 30 defendants, including The Blackstone Group L.P.; BAAM L.P.; Stephen A. Schwarzman, as Chairman and CEO of Blackstone; and J. Tomilson Hill, as then-President and CEO of the Hedge Fund Solutions Group, Vice Chairman of Blackstone and CEO of BAAM (collectively, the “Blackstone Defendants”). Aside from the Blackstone Defendants, the action also names current and former KRS trustees and former KRS officers and various other service providers to KRS and their related persons.

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Blackstone Defendants. In January 2019, certain of the KRS trustee and officer defendants noticed appeals from the denial of the motions to dismiss to the Kentucky Court of Appeals, and also filed a motion to stay the Mayberry proceedings in Circuit Court pending the outcome of those appeals. In addition, several defendants, including Blackstone and BAAM L.P., filed petitions in the Kentucky Court of Appeals for a writ of prohibition against the ongoing Mayberry proceedings on the ground that the plaintiffs lack standing. In April 2019, the KRS trustee and officer defendants’ appeals were transferred to the Kentucky Supreme Court.

On April 23, 2019, the Kentucky Court of Appeals granted the Blackstone Defendants’ petition for a writ of prohibition and vacated the Circuit Court’s November 30, 2018 Opinion and Order denying the motion to dismiss for lack of standing. On April 24, 2019, the Mayberry Plaintiffs filed a notice of appeal of that order to the Kentucky Supreme Court.

The appeal is scheduled to be fully briefed by August 13, 2019.

Blackstone believes that this suit is totally without merit and intends to defend it vigorously.

Contingent Obligations (Clawback)

Performance Allocations are subject to clawback to the extent that the Performance Allocations received to date with respect to a fund exceeds the amount due to Blackstone based on cumulative results of that fund. The actual clawback liability, however, generally does not become realized until the end of a fund’s life except for certain Blackstone real estate funds, multi-asset class investment funds and credit-focused funds, which may have an interim clawback liability. The lives of the carry funds, including available contemplated extensions, for which a liability for potential clawback obligations has been recorded for financial reporting purposes, are currently anticipated to expire at various points through 2028. Further extensions of such terms may be implemented under given circumstances.

For financial reporting purposes, when applicable, the general partners record a liability for potential clawback obligations to the limited partners of some of the carry funds due to changes in the unrealized value of a fund’s remaining investments and where the fund’s general partner has previously received Performance Allocation distributions with respect to such fund’s realized investments.

The following table presents the clawback obligations by segment:


	June 30, 2019							December 31, 2018
			Current and							Current and
	Blackstone		Former					Blackstone		Former
Segment	Holdings		Personnel (a)			Total		Holdings		Personnel (a)			Total
Real Estate	$	15,373	$	9,820		$	25,193	$	15,770	$	10,053		$	25,823
Private Equity		52,493		(10,451	)		42,042		13,296		(12,448	)		848
Credit		1,349		1,488			2,837		1,355		1,495			2,850

	$	69,215	$	857		$	70,072	$	30,421	$	(900	)	$	29,521

(a)	The split of clawback between Blackstone Holdings and Current and Former Personnel is based on the performance of individual investments held by a fund rather than on a fund by fund basis.

For Private Equity, Real Estate, and certain Credit Funds, a portion of the Performance Allocations paid to current and former Blackstone personnel is held in segregated accounts in the event of a cash clawback obligation. These segregated accounts are not included in the Condensed Consolidated Financial Statements of

Blackstone

, except to the extent a portion of the assets held in the segregated accounts may be allocated to a consolidated Blackstone fund of hedge funds. At June 30, 2019, $703.6 million was held in segregated accounts for the purpose of meeting any clawback obligations of current and former personnel if such payments are required.

In the Credit segment, payment of Performance Allocations to

Blackstone

by the majority of the stressed/distressed, mezzanine and credit alpha strategies funds are substantially deferred under the terms of the

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partnership agreements. This deferral mitigates the need to hold funds in segregated accounts in the event of a cash clawback obligation.

If, at June 30, 2019, all of the investments held by our carry funds were deemed worthless, a possibility that management views as remote, the amount of Performance Allocations subject to potential clawback would be $6.9 billion, on an

after-tax

19. Segment Reporting

Blackstone transacts its primary business in the United States and substantially all of its revenues are generated domestically.

Blackstone conducts its alternative asset management businesses through four segments:

•

Real Estate – Blackstone’s Real Estate segment primarily comprises its management of global, Europe and Asia-focused opportunistic real estate funds, high-yield real estate debt funds, liquid real estate debt funds, core+ real estate funds, a NYSE-listed REIT and a

non-exchange

traded REIT.

•

Private Equity – Blackstone’s Private Equity segment primarily comprises its management of flagship corporate private equity funds, sector and geographically-focused corporate private equity funds, including energy and Asia-focused funds, a core private equity fund, an opportunistic investment platform, a secondary fund of funds business, infrastructure-focused funds, a life sciences private investment platform, a multi-asset investment program for eligible high net worth investors and a capital markets services business.

•

Hedge Fund Solutions – The largest component of Blackstone’s Hedge Fund Solutions segment is Blackstone Alternative Asset Management, which manages a broad range of commingled and customized hedge fund of fund solutions. The segment also includes investment platforms that seed new hedge fund businesses, purchase minority ownership interests in more established hedge funds, invest in special situation opportunities, create alternative solutions in the form of mutual funds and UCITS and trade directly.

•

Credit – Blackstone’s Credit segment consists principally of GSO Capital Partners LP, which is organized into performing credit strategies (which include mezzanine lending funds, middle market direct lending funds and other performing credit strategy funds), distressed strategies (which include credit alpha strategies, stressed/distressed funds and energy strategies) and long only strategies (which consist of CLOs, closed end funds, open end funds and separately managed accounts). In addition, the segment includes a publicly traded master limited partnership investment platform, Harvest, and our insurer-focused platform, Blackstone Insurance Solutions.

These business segments are differentiated by their various investment strategies. The Real Estate, Private Equity, Hedge Fund Solutions and Credit segments primarily earn their income from management fees and investment returns on assets under management.

Segment Distributable Earnings is Blackstone’s segment profitability measure used to make operating decisions and assess performance across Blackstone’s four segments. Blackstone’s segments are presented on a basis that deconsolidates Blackstone Funds, eliminates

non-controlling

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a change in tax law or similar event, transaction costs and any gains or losses associated with these corporate actions.

For segment reporting purposes, Segment Distributable Earnings is presented along with its major components, Fee Related Earnings and Net Realizations. Fee Related Earnings is used to assess Blackstone’s ability to generate profits from revenues that are measured and received on a recurring basis and not subject to future realization events. Net Realizations is the sum of Realized Principal Investment Income and Realized Performance Revenues less Realized Performance Compensation. Performance Allocations and Incentive Fees are presented together and referred to collectively as Performance Revenues or Performance Compensation.

Segment Presentation

The following tables present the financial data for Blackstone’s four segments for the three months ended June 30, 2019 and 2018:


	Three Months Ended June 30, 2019
	Real			Private			Hedge Fund						Total
	Estate			Equity			Solutions			Credit			Segments
Management and Advisory Fees, Net
Base Management Fees	$	255,636		$	265,139		$	136,990		$	147,550		$	805,315
Transaction, Advisory and Other Fees, Net		23,990			31,526			723			5,256			61,495
Management Fee Offsets		(1,686	)		(17,689	)		—			(3,279	)		(22,654	)

Total Management and Advisory Fees, Net		277,940			278,976			137,713			149,527			844,156
Fee Related Performance Revenues		11,072			—			—			2,552			13,624
Fee Related Compensation		(97,795	)		(105,107	)		(36,622	)		(54,310	)		(293,834	)
Other Operating Expenses		(40,114	)		(40,429	)		(21,112	)		(40,466	)		(142,121	)

Fee Related Earnings		151,103			133,440			79,979			57,303			421,825

Realized Performance Revenues		198,573			122,907			11,960			7,946			341,386
Realized Performance Compensation		(67,742	)		(52,081	)		(2,175	)		(3,468	)		(125,466	)
Realized Principal Investment Income		47,420			42,906			12,306			20,925			123,557

Total Net Realizations		178,251			113,732			22,091			25,403			339,477

Total Segment Distributable Earnings	$	329,354		$	247,172		$	102,070		$	82,706		$	761,302

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	Three Months Ended June 30, 2018
	Real			Private			Hedge Fund						Total
	Estate			Equity			Solutions			Credit			Segments
Management and Advisory Fees, Net
Base Management Fees	$	249,680		$	195,521		$	129,553		$	118,161		$	692,915
Transaction, Advisory and Other Fees, Net		23,859			12,780			812			3,461			40,912
Management Fee Offsets		(3,785	)		(4,351	)		—			(2,697	)		(10,833	)

Total Management and Advisory Fees, Net		269,754			203,950			130,365			118,925			722,994
Fee Related Performance Revenues		45,515			—			—			—			45,515
Fee Related Compensation		(120,783	)		(94,170	)		(40,533	)		(50,757	)		(306,243	)
Other Operating Expenses		(36,026	)		(36,047	)		(18,494	)		(31,899	)		(122,466	)

Fee Related Earnings		158,460			73,733			71,338			36,269			339,800

Realized Performance Revenues		317,509			138,171			7,270			14,594			477,544
Realized Performance Compensation		(94,716	)		(68,513	)		(2,546	)		(7,119	)		(172,894	)
Realized Principal Investment Income		50,199			32,600			7,766			4,082			94,647

Total Net Realizations		272,992			102,258			12,490			11,557			399,297

Total Segment Distributable Earnings	$	431,452		$	175,991		$	83,828		$	47,826		$	739,097

The following tables present the financial data for Blackstone’s four segments as of June 30, 2019 and for the six months ended June 30, 2019 and 2018:


	June 30, 2019 and the Six Months Then Ended
	Real			Private			Hedge Fund						Total
	Estate			Equity			Solutions			Credit			Segments
Management and Advisory Fees, Net
Base Management Fees	$	515,881		$	484,556		$	274,318		$	288,078		$	1,562,833
Transaction, Advisory and Other Fees, Net		47,901			68,817			1,041			8,886			126,645
Management Fee Offsets		(1,966	)		(22,674	)		—			(6,620	)		(31,260	)

Total Management and Advisory Fees, Net		561,816			530,699			275,359			290,344			1,658,218
Fee Related Performance Revenues		17,748			—			—			3,655			21,403
Fee Related Compensation		(212,611	)		(212,694	)		(79,576	)		(112,984	)		(617,865	)
Other Operating Expenses		(79,100	)		(74,630	)		(38,997	)		(72,705	)		(265,432	)

Fee Related Earnings		287,853			243,375			156,786			108,310			796,324

Realized Performance Revenues		275,755			279,506			16,051			16,843			588,155
Realized Performance Compensation		(97,642	)		(102,637	)		(3,588	)		(6,839	)		(210,706	)
Realized Principal Investment Income		45,289			68,045			12,023			24,108			149,465

Total Net Realizations		223,402			244,914			24,486			34,112			526,914

Total Segment Distributable Earnings	$	511,255		$	488,289		$	181,272		$	142,422		$	1,323,238

Segment Assets	$	8,305,170		$	8,296,560		$	2,078,511		$	3,771,007		$	22,451,248

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	Six Months Ended June 30, 2018
	Real			Private			Hedge Fund						Total
	Estate			Equity			Solutions			Credit			Segments
Management and Advisory Fees, Net
Base Management Fees	$	476,206		$	378,482		$	258,781		$	286,602		$	1,400,071
Transaction, Advisory and Other Fees, Net		46,947			23,874			1,157			6,000			77,978
Management Fee Offsets		(5,453	)		(7,544	)		—			(6,014	)		(19,011	)

Total Management and Advisory Fees, Net		517,700			394,812			259,938			286,588			1,459,038
Fee Related Performance Revenues		50,018			—			—			(666	)		49,352
Fee Related Compensation		(221,393	)		(183,736	)		(80,172	)		(117,016	)		(602,317	)
Other Operating Expenses		(65,443	)		(67,198	)		(37,279	)		(59,638	)		(229,558	)

Fee Related Earnings		280,882			143,878			142,487			109,268			676,515

Realized Performance Revenues		468,690			215,294			17,447			54,484			755,915
Realized Performance Compensation		(150,831	)		(101,558	)		(5,469	)		(29,865	)		(287,723	)
Realized Principal Investment Income		64,889			38,938			8,406			11,107			123,340

Total Net Realizations		382,748			152,674			20,384			35,726			591,532

Total Segment Distributable Earnings	$	663,630		$	296,552		$	162,871		$	144,994		$	1,268,047

Reconciliations of Total Segment Amounts

The following tables reconcile the Total Segment Revenues, Expenses and Distributable Earnings to their equivalent GAAP measure for the three and six months ended June 30, 2019 and 2018 along with Total Assets as of June 30, 2019:


	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2019			2018			2019			2018
Revenues
Total GAAP Revenues	$	1,486,806		$	2,632,570		$	3,511,677		$	4,401,701
Less: Unrealized Performance Revenues (a)		(157,398	)		(440,424	)		(821,731	)		(1,068,763	)
Less: Unrealized Principal Investment (Income) Loss (b)		56,353			(52,126	)		(83,572	)		(66,104	)
Less: Interest and Dividend Revenue (c)		(45,991	)		(41,727	)		(92,690	)		(78,112	)
Less: Other Revenue (d)		20,150			(94,416	)		6,961			(33,522	)
Impact of Consolidation (e)		(35,119	)		(82,752	)		(104,968	)		(186,276	)
Amortization of Intangibles (f)		387			387			774			774
Transaction-Related Charges (g)		(4,174	)		(582,105	)		(2,706	)		(584,687	)
Intersegment Eliminations		1,709			1,293			3,496			2,634

Total Segment Revenue (h)	$	1,322,723		$	1,340,700		$	2,417,241		$	2,387,645

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The Blackstone Group L.P.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

- Continued

(All Dollars Are in Thousands, Except Unit and Per Unit Data, Except Where Noted)


	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2019			2018			2019			2018
Expenses
Total GAAP Expenses	$	862,240		$	1,016,381		$	1,903,404		$	1,999,312
Less: Unrealized Performance Allocations Compensation (i)		(64,518	)		(189,991	)		(351,533	)		(444,426	)
Less: Equity-Based Compensation (j)		(53,105	)		(34,394	)		(119,881	)		(78,542	)
Less: Interest Expense (k)		(43,230	)		(38,885	)		(84,868	)		(77,123	)
Impact of Consolidation (e)		(14,411	)		(26,288	)		(25,272	)		(86,187	)
Amortization of Intangibles (f)		(16,096	)		(14,486	)		(32,192	)		(28,972	)
Transaction-Related Charges (g)		(111,168	)		(112,027	)		(199,151	)		(167,098	)
Intersegment Eliminations		1,709			1,293			3,496			2,634

Total Segment Expenses (l)	$	561,421		$	601,603		$	1,094,003		$	1,119,598


	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2019			2018			2019			2018
Other Income
Total GAAP Other Income	$	61,131		$	73,519		$	191,456		$	184,118
Impact of Consolidation (e)		(61,131	)		(73,519	)		(191,456	)		(184,118	)

Total Segment Other Income	$	—		$	—		$	—		$	—


	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2019			2018			2019			2018
Income Before Provision for Taxes
Total GAAP Income Before Provision for Taxes	$	685,697		$	1,689,708		$	1,799,729		$	2,586,507
Less: Unrealized Performance Revenues (a)		(157,398	)		(440,424	)		(821,731	)		(1,068,763	)
Less: Unrealized Principal Investment (Income) Loss (b)		56,353			(52,126	)		(83,572	)		(66,104	)
Less: Interest and Dividend Revenue (c)		(45,991	)		(41,727	)		(92,690	)		(78,112	)
Less: Other Revenue (d)		20,150			(94,416	)		6,961			(33,522	)
Plus: Unrealized Performance Allocations Compensation (i)		64,518			189,991			351,533			444,426
Plus: Equity-Based Compensation (j)		53,105			34,394			119,881			78,542
Plus: Interest Expense (k)		43,230			38,885			84,868			77,123
Impact of Consolidation (e)		(81,839	)		(129,983	)		(271,152	)		(284,207	)
Amortization of Intangibles (f)		16,483			14,873			32,966			29,746
Transaction-Related Charges (g)		106,994			(470,078	)		196,445			(417,589	)

Total Segment Distributable Earnings	$	761,302		$	739,097		$	1,323,238		$	1,268,047

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The Blackstone Group L.P.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

- Continued

(All Dollars Are in Thousands, Except Unit and Per Unit Data, Except Where Noted)


	As of
	June 30,
	2019
Total Assets
Total GAAP Assets	$	30,972,213
Impact of Consolidation (e)		(8,520,965	)

Total Segment Assets	$	22,451,248

Segment basis presents revenues and expenses on a basis that deconsolidates the investment funds Blackstone manages and excludes the amortization of intangibles and Transaction-Related Charges.

(a)	This adjustment removes Unrealized Performance Revenues on a segment basis.

(b)	This adjustment removes Unrealized Principal Investment Income on a segment basis.

(c)	This adjustment removes Interest and Dividend Revenue on a segment basis.

(d)	This adjustment removes Other Revenue on a segment basis.

(e)

This adjustment reverses the effect of consolidating Blackstone Funds, which are excluded from Blackstone’s segment presentation. This adjustment includes the elimination of Blackstone’s interest in these funds, the removal of revenue from the reimbursement of certain expenses by the Blackstone Funds, which are presented gross under GAAP but netted against Management and Advisory Fees, Net in the Total Segment measures, and the removal of amounts associated with the ownership of Blackstone consolidated operating partnerships held by non-controlling interests.

(f)	This adjustment removes the amortization of transaction-related intangibles, which are excluded from Blackstone’s segment presentation. This amount includes amortization of intangibles associated with Blackstone’s investment in Pátria, which is accounted for under the equity method.

(g)

This adjustment removes Transaction-Related Charges, which are excluded from Blackstone’s segment presentation. Transaction-Related Charges arise from corporate actions including acquisitions, divestitures, and Blackstone’s initial public offering. They consist primarily of equity-based compensation charges, gains and losses on contingent consideration arrangements, changes in the balance of the Tax Receivable Agreement resulting from a change in tax law or similar event, transaction costs and any gains or losses associated with these corporate actions.

(h)	Total Segment Revenues is comprised of the following:


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2019		2018		2019		2018
Total Segment Management and Advisory Fees, Net	$	844,156	$	722,994	$	1,658,218	$	1,459,038
Total Segment Fee Related Performance Revenues		13,624		45,515		21,403		49,352
Total Segment Realized Performance Revenues		341,386		477,544		588,155		755,915
Total Segment Realized Principal Investment Income		123,557		94,647		149,465		123,340

Total Segment Revenues	$	1,322,723	$	1,340,700	$	2,417,241	$	2,387,645

(i)	This adjustment removes Unrealized Performance Allocations Compensation.

(j)	This adjustment removes Equity-Based Compensation on a segment basis.

(k)	This adjustment removes Interest Expense, excluding interest expense related to the Tax Receivable Agreement.

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The Blackstone Group L.P.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

- Continued

(All Dollars Are in Thousands, Except Unit and Per Unit Data, Except Where Noted)

(l)	Total Segment Expenses is comprised of the following:


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2019		2018		2019		2018
Total Segment Fee Related Compensation	$	293,834	$	306,243	$	617,865	$	602,317
Total Segment Realized Performance Compensation		125,466		172,894		210,706		287,723
Total Segment Other Operating Expenses		142,121		122,466		265,432		229,558

Total Segment Expenses	$	561,421	$	601,603	$	1,094,003	$	1,119,598

Reconciliations of Total Segment Components

The following tables reconcile the components of Total Segments to their equivalent GAAP measures, reported on the Condensed Consolidated Statement of Operations for the three and six months ended June 30, 2019 and 2018:


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2019		2018		2019		2018
Management and Advisory Fees, Net
GAAP	$	840,378	$	721,384	$	1,650,104	$	1,450,233
Segment Adjustment (a)		3,778		1,610		8,114		8,805

Total Segment	$	844,156	$	722,994	$	1,658,218	$	1,459,038


	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2019			2018			2019			2018
GAAP Realized Performance Revenues to Total Segment Fee Related Performance Revenues
GAAP
Incentive Fees	$	21,915		$	19,378		$	34,047		$	31,944
Investment Income - Realized Performance Allocations		332,520			503,376			574,895			773,016

GAAP		354,435			522,754			608,942			804,960
Total Segment
Less: Realized Performance Revenues		(341,386	)		(477,544	)		(588,155	)		(755,915	)
Segment Adjustment (b)		575			305			616			307

Total Segment	$	13,624		$	45,515		$	21,403		$	49,352

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The Blackstone Group L.P.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

- Continued

(All Dollars Are in Thousands, Except Unit and Per Unit Data, Except Where Noted)


	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2019			2018			2019			2018
GAAP Compensation to Total Segment Fee Related Compensation
GAAP
Compensation	$	438,521		$	427,479		$	909,918		$	816,882
Incentive Fee Compensation		8,886			9,743			14,292			16,405
Realized Performance Allocations Compensation		125,825			186,398			212,220			298,460

GAAP		573,232			623,620			1,136,430			1,131,747
Total Segment
Less: Realized Performance Compensation		(125,466	)		(172,894	)		(210,706	)		(287,723	)
Less: Equity-Based Compensation - Operating Compensation		(50,225	)		(31,483	)		(113,933	)		(71,731	)
Less: Equity-Based Compensation - Performance Compensation		(2,880	)		(2,911	)		(5,948	)		(6,811	)
Segment Adjustment (c)		(100,827	)		(110,089	)		(187,978	)		(163,165	)

Total Segment	$	293,834		$	306,243		$	617,865		$	602,317


	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2019			2018			2019			2018
GAAP General, Administrative and Other to Total Segment Other Operating Expenses
GAAP	$	175,308		$	145,828		$	321,370		$	272,541
Segment Adjustment (d)		(33,187	)		(23,362	)		(55,938	)		(42,983	)

Total Segment	$	142,121		$	122,466		$	265,432		$	229,558


	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2019			2018			2019			2018
Realized Performance Revenues
GAAP
Incentive Fees	$	21,915		$	19,378		$	34,047		$	31,944
Investment Income - Realized Performance Allocations		332,520			503,376			574,895			773,016

GAAP		354,435			522,754			608,942			804,960
Total Segment
Less: Fee Related Performance Revenues		(13,624	)		(45,515	)		(21,403	)		(49,352	)
Segment Adjustment (b)		575			305			616			307

Total Segment	$	341,386		$	477,544		$	588,155		$	755,915

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The Blackstone Group L.P.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

- Continued

(All Dollars Are in Thousands, Except Unit and Per Unit Data, Except Where Noted)


	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2019			2018			2019			2018
Realized Performance Compensation
GAAP
Incentive Fee Compensation	$	8,886		$	9,743		$	14,292		$	16,405
Realized Performance Allocation Compensation		125,825			186,398			212,220			298,460

GAAP		134,711			196,141			226,512			314,865
Total Segment
Less: Fee Related Performance Compensation		(6,365	)		(20,336	)		(9,858	)		(20,331	)
Less: Equity-Based Compensation - Performance Compensation		(2,880	)		(2,911	)		(5,948	)		(6,811	)

Total Segment	$	125,466		$	172,894		$	210,706		$	287,723


	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2019			2018			2019			2018
Realized Principal Investment Income
GAAP	$	145,040		$	129,197		$	218,301		$	171,342
Segment Adjustment (e)		(21,483	)		(34,550	)		(68,836	)		(48,002	)

Total Segment	$	123,557		$	94,647		$	149,465		$	123,340

Segment basis presents revenues and expenses on a basis that deconsolidates the investment funds Blackstone manages and excludes the amortization of intangibles, the expense of equity-based awards and Transaction-Related Charges.

(a)

Represents (1) the add back of net management fees earned from consolidated Blackstone Funds which have been eliminated in consolidation, and (2) the removal of revenue from the reimbursement of certain expenses by the Blackstone Funds, which are presented gross under GAAP but netted against Management and Advisory Fees, Net in the Total Segment measures.

(b)	Represents the add back of Performance Revenues earned from consolidated Blackstone Funds which have been eliminated in consolidation.

(c)	Represents the removal of Transaction-Related Charges that are not recorded in the Total Segment measures.

(d)	Represents the removal of (1) the amortization of transaction-related intangibles, and (2) certain expenses reimbursed by the Blackstone Funds, which are presented gross under GAAP but netted against Management and Advisory Fees, Net in the Total Segment measures.

(e)

Represents (1) the add back of Principal Investment Income, including general partner income, earned from consolidated Blackstone Funds which have been eliminated in consolidation, and (2) the removal of amounts associated with the ownership of Blackstone consolidated operating partnerships held by

non-controlling

interests.

20.	Subsequent Events

Effective July 1, 2019, The Blackstone Group L.P. converted from a Delaware limited partnership to a Delaware corporation, The Blackstone Group Inc. See Note 1. “Organization”.

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Item 1A. Unaudited Supplemental Presentation of Statements of Financial Condition

THE BLACKSTONE GROUP L.P.

Unaudited Consolidating Statements of Financial Condition

(Dollars in Thousands)


	June 30, 2019
	Consolidated			Consolidated
	Operating			Blackstone		Reclasses and
	Partnerships			Funds (a)		Eliminations			Consolidated
Assets
Cash and Cash Equivalents	$	1,484,444		$	—	$	—		$	1,484,444
Cash Held by Blackstone Funds and Other		—			324,609		—			324,609
Investments		14,250,246			8,633,794		(642,000	)		22,242,040
Accounts Receivable		432,088			369,978		—			802,066
Due from Affiliates		2,377,752			18,411		(184,426	)		2,211,737
Intangible Assets, Net		433,007			—		—			433,007
Goodwill		1,869,860			—		—			1,869,860
Other Assets		353,654			599		—			354,253
Right-of-Use Assets		507,065			—		—			507,065
Deferred Tax Assets		743,132			—		—			743,132

Total Assets	$	22,451,248		$	9,347,391	$	(826,426	)	$	30,972,213


Liabilities and Partners’ Capital
Loans Payable	$	4,139,917		$	6,536,221	$	—		$	10,676,138
Due to Affiliates		910,264			716,293		(544,658	)		1,081,899
Accrued Compensation and Benefits		3,308,595			—		—			3,308,595
Securities Sold, Not Yet Purchased		46,338			82,174		—			128,512
Repurchase Agreements		—			207,676		—			207,676
Operating Lease Liabilities		574,619			—		—			574,619
Accounts Payable, Accrued Expenses and Other Liabilities		518,973			410,715		—			929,688

Total Liabilities		9,498,706			7,953,079		(544,658	)		16,907,127


Redeemable Non-Controlling Interests in Consolidated Entities		22,001			79,309		—			101,310


Partners’ Capital
Partners’ Capital		6,335,897			281,768		(281,768	)		6,335,897
Accumulated Other Comprehensive Loss		(27,542	)		—		—			(27,542	)
Non-Controlling Interests in Consolidated Entities		2,836,068			1,033,235		—			3,869,303
Non-Controlling Interests in Blackstone Holdings		3,786,118			—		—			3,786,118

Total Partners’ Capital		12,930,541			1,315,003		(281,768	)		13,963,776

Total Liabilities and Partners’ Capital	$	22,451,248		$	9,347,391	$	(826,426	)	$	30,972,213

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THE BLACKSTONE GROUP L.P.

Unaudited Consolidating Statements of Financial Condition

(Dollars in Thousands)


	December 31, 2018
	Consolidated			Consolidated
	Operating			Blackstone		Reclasses and
	Partnerships			Funds (a)		Eliminations			Consolidated
Assets
Cash and Cash Equivalents	$	2,207,841		$	—	$	—		$	2,207,841
Cash Held by Blackstone Funds and Other		—			337,320		—			337,320
Investments		12,596,138			8,376,338		(595,445	)		20,377,031
Accounts Receivable		455,308			180,930		—			636,238
Due from Affiliates		2,011,324			7,405		(24,606	)		1,994,123
Intangible Assets, Net		468,507			—		—			468,507
Goodwill		1,869,860			—		—			1,869,860
Other Assets		290,366			3,882		—			294,248
Deferred Tax Assets		739,482			—		—			739,482

Total Assets	$	20,638,826		$	8,905,875	$	(620,051	)	$	28,924,650


Liabilities and Partners’ Capital
Loans Payable	$	3,471,151		$	6,480,711	$	—		$	9,951,862
Due to Affiliates		907,748			470,780		(342,752	)		1,035,776
Accrued Compensation and Benefits		2,942,128			—		—			2,942,128
Securities Sold, Not Yet Purchased		50,014			92,603		—			142,617
Repurchase Agreements		—			222,202		—			222,202
Accounts Payable, Accrued Expenses and Other Liabilities		622,490			253,489		—			875,979

Total Liabilities		7,993,531			7,519,785		(342,752	)		15,170,564


Redeemable Non-Controlling Interests in Consolidated Entities		22,000			119,779		—			141,779


Partners’ Capital
Partners’ Capital		6,415,700			277,299		(277,299	)		6,415,700
Accumulated Other Comprehensive Loss		(36,476	)		—		—			(36,476	)
Non-Controlling Interests in Consolidated Entities		2,659,754			989,012		—			3,648,766
Non-Controlling Interests in Blackstone Holdings		3,584,317			—		—			3,584,317

Total Partners’ Capital		12,623,295			1,266,311		(277,299	)		13,612,307

Total Liabilities and Partners’ Capital	$	20,638,826		$	8,905,875	$	(620,051	)	$	28,924,650

(a)	The Consolidated Blackstone Funds consisted of the following:

Blackstone / GSO Global Dynamic Credit Feeder Fund (Cayman) LP

Blackstone / GSO Global Dynamic Credit Funding Designated Activity Company

Blackstone / GSO Global Dynamic Credit Master Fund

Blackstone / GSO Global Dynamic Credit USD Feeder Fund (Ireland)

Blackstone Real Estate Special Situations Fund L.P.*

Blackstone Real Estate Special Situations Offshore Fund Ltd.

Blackstone Strategic Alliance Fund L.P.

BSSF I AIV L.P.*

BTD CP Holdings LP

Collateralized loan obligation vehicles

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Mezzanine

side-by-side

investment vehicles

Private equity

side-by-side

investment vehicles

Real estate

side-by-side

investment vehicles

* Consolidated as of December 31, 2018 only.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis should be read in conjunction with The Blackstone Group L.P.’s condensed consolidated financial statements and the related notes included within this Quarterly Report on Form

10-Q.

Our Business

Blackstone is one of the largest independent managers of private capital in the world. Our business is organized into four segments:

•

Real Estate.

Our real estate group is one of the largest real estate investment managers in the world. We operate as one globally integrated business, with investments in North America, Europe, Asia and Latin America. Our real estate investment team seeks to establish a differentiated view and capitalizes on our scale and proprietary information advantages to invest with conviction and generate attractive risk-adjusted returns for our investors over the long-term.

Our Blackstone Real Estate Partners (“BREP”) funds are geographically diversified and target a broad range of “opportunistic” real estate and real estate related investments. The BREP funds include global funds as well as funds focused specifically on Europe or Asia investments. We seek to acquire high quality, well-located yet undermanaged assets at an attractive basis, address any property or business issues through active asset management and sell the assets once our business plan is accomplished. BREP has made significant investments in hotels, office buildings, industrial assets, residential and shopping centers, as well as a variety of real estate operating companies.

Our core+ real estate business, Blackstone Property Partners (“BPP”) has assembled a global portfolio of high quality core+ investments across the U.S., Europe and Asia. We manage several core+ real estate funds, which target substantially stabilized assets in prime markets with a focus on industrial, multifamily, office and retail assets.

BREIT, a

non-exchange

traded real estate investment trust (“REIT”), is focused on investing primarily in stabilized income-oriented commercial real estate in the U.S.

Our Blackstone Real Estate Debt Strategies (“BREDS”) vehicles target debt investment opportunities collateralized by commercial real estate in both public and private markets, primarily in the U.S. and Europe. BREDS’ scale and investment mandates enable it to provide a variety of lending and investment options including mezzanine loans, senior loans and liquid securities. The BREDS platform includes a number of high-yield real estate debt funds, liquid real estate debt funds and BXMT, a NYSE-listed REIT.

•

Private Equity.

We are a world leader in private equity investing, having managed eight general private equity funds, as well as four sector-focused funds and a geographically-focused fund, since we established this business in 1987. Our Private Equity segment includes our corporate private equity business, which

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consists of (a) our flagship private equity funds (Blackstone Capital Partners (“BCP”) funds), (b) our sector-focused private equity funds, including our energy-focused funds (Blackstone Energy Partners (“BEP”) funds), (c) our Asia-focused funds (Blackstone Capital Partners Asia (“BCP Asia”) funds) and (d) our core private equity fund, Blackstone Core Equity Partners (“BCEP”). In addition, our Private Equity segment includes (a) our opportunistic investment platform that invests globally across asset classes, industries and geographies, Blackstone Tactical Opportunities (“Tactical Opportunities”), (b) our secondary fund of funds business, Strategic Partners Fund Solutions (“Strategic Partners”), (c) our infrastructure-focused funds, Blackstone Infrastructure Partners (“BIP”), (d) our life sciences private investment platform, Blackstone Life Sciences (“BXLS”), (e) a multi-asset investment program for eligible high net worth investors offering exposure to certain of Blackstone’s key illiquid investment strategies through a single commitment, Blackstone Total Alternatives Solution (“BTAS”) and (f) our capital markets services business, Blackstone Capital Markets (“BXCM”).

Our corporate private equity business pursues transactions throughout the world across a variety of transaction types, including large buyouts,

mid-cap

buyouts, buy and build platforms (which involve multiple acquisitions behind a single management team and platform) and growth equity/development projects (which involve significant minority investments in mature companies and greenfield development projects in energy and power). Within our corporate private equity business, our core private equity fund targets control-oriented investments in high quality companies with durable businesses and seeks to offer a lower level of risk and a longer hold period than traditional private equity. Tactical Opportunities invests globally across asset classes, industries and geographies, seeking to identify and execute on attractive, differentiated investment opportunities, leveraging the intellectual capital across our various businesses while continuously optimizing its approach in the face of ever-changing market conditions. Strategic Partners is a total fund solutions provider that acquires interests in high quality private funds from original holders seeking liquidity,

co-investments

alongside financial sponsors and provides investment advisory services to clients investing in primary and secondary investments in private funds and

co-investments.

BIP focuses on infrastructure investments in the energy, transportation, communications and water and waste sectors. BXLS is a private investment platform with capabilities to invest across the life cycle of companies and products within the life sciences sector.

•

Hedge Fund Solutions.

The largest component of our Hedge Fund Solutions segment is Blackstone Alternative Asset Management (“BAAM”). BAAM is the world’s largest discretionary allocator to hedge funds, managing a broad range of commingled and customized fund solutions since its inception in 1990. The Hedge Fund Solutions segment also includes investment platforms that seed new hedge fund businesses, purchase minority ownership interests in more established hedge funds, invest in special situation opportunities, create alternative solutions in the form of mutual funds and UCITS and trade directly.

•

Credit.

Our Credit segment consists principally of GSO Capital Partners LP (“GSO”). GSO is one of the largest credit alternative asset managers in the world and is the largest manager of collateralized loan obligations (“CLOs”) globally. The investment portfolios of the funds GSO manages or

sub-advises

predominantly consist of loans and securities of

non-investment

grade companies spread across the capital structure including senior debt, subordinated debt, preferred stock and common equity.

The GSO business is organized into three overarching strategies: performing credit, distressed and long only. Our performing credit strategies include mezzanine lending funds, middle market direct lending funds and other performing credit strategy funds. Our distressed strategies include credit alpha strategies, stressed/distressed funds and energy strategies. GSO’s long only strategies consist of CLOs, closed end funds, open ended funds and separately managed accounts.

In addition, our Credit segment includes our publicly traded master limited partnership (“MLP”) investment platform, which is managed by Harvest. Harvest, which was founded in 2005 and subsequently acquired by Blackstone in 2017, primarily invests capital raised from institutional investors

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in separately managed accounts and pooled vehicles, investing in publicly traded MLPs holding primarily midstream energy assets in the U.S.

Our insurer-focused platform, BIS, also a part of our Credit segment, delivers to insurers bespoke, capital-efficient investments and diversified portfolios of Blackstone products across asset classes tailored to their needs and risk profile.

We generate revenue from fees earned pursuant to contractual arrangements with funds, fund investors and fund portfolio companies (including management, transaction and monitoring fees), and from capital markets services. We invest in the funds we manage and we are entitled to a

pro-rata

share of the results of the fund (a

“pro-rata

allocation”). In addition to a

pro-rata

allocation, and assuming certain investment returns are achieved, we are entitled to a disproportionate allocation of the income otherwise allocable to the limited partners, commonly referred to as carried interest (“Performance Allocations”). In certain structures, we receive a contractual incentive fee from an investment fund in the event that specified cumulative investment returns are achieved (an “Incentive Fee”, and together with Performance Allocations, “Performance Revenues”). The composition of our revenues will vary based on market conditions and the cyclicality of the different businesses in which we operate. Net investment gains and investment income generated by the Blackstone Funds, principally private equity and real estate funds, are driven by value created by our operating and strategic initiatives as well as overall market conditions. Fair values are affected by changes in the fundamentals of the portfolio company, the portfolio company’s industry, the overall economy and other market conditions.

Business Environment

Blackstone’s businesses are materially affected by conditions in the financial markets and economic conditions in the U.S., Europe, Asia and, to a lesser extent, elsewhere in the world.

The second quarter of 2019 was characterized by the continued rise in global markets, although with increased volatility largely due to uncertainty regarding ongoing trade disputes. Equity markets declined intra-quarter, before rebounding following indications of additional monetary easing from central banks around the world.

In the U.S., the S&P 500 increased 4% for the second quarter, while the Dow Jones and Nasdaq indices rose 3% and 4%, respectively. Following the end of the quarter, all three U.S. indices reached

all-time

highs in July. However, risks to the trade outlook led to increased volatility, with the CBOE Volatility Index up 10% in the second quarter, though still down nearly 60% from its recent peak in December 2018. Global and regional equity indices also mostly advanced in the quarter. The MSCI World Index increased 3% and the MSCI Europe Index rose 4%, while the MSCI Asia Index declined 1%.

In fixed income, a more dovish shift in U.S. monetary policy led government and corporate bond yields lower in the second quarter in light of increased expectations for interest rate cuts over the next year. Subsequent to quarter end, the U.S. Federal Reserve dropped its target range to 2.

0-2.

25%, citing an intent to ensure against downside risks from weak global growth and trade tensions, but stopping short of signaling the beginning of aggressive interest rate-cutting.

Ten-year

U.S. Treasury yields declined to 2.01% during the quarter with low interest rates expected to persist in the near term. The Bloomberg Barclays U.S. Aggregate index rose 3.1%, U.S. investment grade corporates were up 4.5% and high-yield corporates advanced 2.5% for the quarter. High-yield spreads were flat during the quarter, while issuance was up 39% year-over-year.

All U.S. equity market sectors posted positive returns during the quarter except energy, with the S&P 500 Energy Index declining 3%. The price of crude oil declined 3% to $58 per barrel, still well below historical averages, while the Henry Hub Natural Gas spot price declined 11%. Spot prices for other commodities also declined, with the Bloomberg Commodity Index down 2% during the quarter.

Year-over-year U.S. wage growth accelerated to 4% to close the second quarter of 2019, which marks an uptick from 3.4% growth at the end of 2018. More broadly, U.S. wage growth has averaged 3.7% in 2019 compared to 2.8% in 2018.

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Industrial production declined at an annual rate of 1.2% for the second quarter of 2019, its second consecutive quarterly decrease. Despite the quarterly decline, however, industrial production was 1.3% higher in June 2019 than it was a year earlier, and remains at 109.6% of its 2012 average.

Along with a continuing rebound in equity markets, global equity issuance for both initial public offerings and

follow-on

increased 41% sequentially, though still down 10% year-over-year. Global merger and acquisition volume fell to $842 billion, down 27% year-over-year.

The global growth cycle has become less synchronized with the U.S. in a mature phase and signs of slowing in Europe, Japan and China. However, most economists continue to expect moderate economic growth in the near term, with limited signals of an imminent recession in the U.S. Although the broader outlook remains constructive, global trade tensions and geopolitical instability continue to pose risks.

Notable Transactions

On April 10, 2019, Blackstone issued

€

600 million aggregate principal amount of 1.500% Senior Notes maturing on April 10, 2029.

Effective July 1, 2019, The Blackstone Group L.P. converted from a Delaware limited partnership to a Delaware corporation, The Blackstone Group Inc. See “– Conversion to a Corporation.”

Organizational Structure

The simplified diagram below depicts our organizational structure through June 30, 2019 and prior to the Conversion. The diagram does not depict all of our subsidiaries, including intermediate holding companies through which certain of the subsidiaries depicted are held.

Conversion to a Corporation

On July 1, 2019, The Blackstone Group L.P. converted from a Delaware limited partnership to a Delaware corporation, The Blackstone Group Inc.

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The simplified diagram below depicts our organizational structure following the Conversion. The diagram does not depict all of our subsidiaries, including intermediate holding companies through which certain of the subsidiaries depicted are held.

Key Financial Measures and Indicators

We manage our business using traditional financial measures and key operating metrics since we believe these metrics measure the productivity of our investment activities. We prepare our Condensed Consolidated Financial Statements in accordance with GAAP. See Note 2. “Summary of Significant Accounting Policies” in the “Notes to Condensed Consolidated Financial Statements” in “Part I. Item 1. Financial Statements” and “— Critical Accounting Policies.” Our key

non-GAAP

financial measures and operating indicators and metrics are discussed below.

Distributable Earnings

Distributable Earnings is derived from Blackstone’s segment reported results. Distributable Earnings is used to assess performance and amounts available for dividends to Blackstone shareholders, including Blackstone personnel and others who are limited partners of the Blackstone Holdings Partnerships. Distributable Earnings is the sum of Segment Distributable Earnings plus Net Interest Income (Loss) less Taxes and Related Payables. Distributable Earnings excludes unrealized activity and is derived from and reconciled to, but not equivalent to, its most directly comparable GAAP measure of Income (Loss) Before Provision for Taxes. See “—

Non-GAAP

Financial Measures” for our reconciliation of Distributable Earnings.

Net Interest Income (Loss) is presented on a segment basis and is equal to Interest and Dividend Revenue less Interest Expense, adjusted for the impact of consolidation of Blackstone Funds, and interest expense associated with the Tax Receivable Agreement.

Taxes and Related Payables represent the total GAAP tax provision adjusted to include only the current tax provision (benefit) calculated on Income (Loss) Before Provision for Taxes excluding the tax impact of any divestitures and including the Payable under the Tax Receivable Agreement.

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Segment Distributable Earnings

Segment Distributable Earnings is Blackstone’s segment profitability measure used to make operating decisions and assess performance across Blackstone’s four segments. Segment Distributable Earnings represents the net realized earnings of Blackstone’s segments and is the sum of Fee Related Earnings and Net Realizations for each segment. Blackstone’s segments are presented on a basis that deconsolidates Blackstone Funds, eliminates

non-controlling

ownership interests in Blackstone’s consolidated operating partnerships, removes the amortization of intangible assets and removes Transaction-Related Charges. Transaction-Related Charges arise from corporate actions including acquisitions, divestitures and Blackstone’s initial public offering. They consist primarily of equity-based compensation charges, gains and losses on contingent consideration arrangements, changes in the balance of the Tax Receivable Agreement resulting from a change in tax law or similar event, transaction costs and any gains or losses associated with these corporate actions. Segment Distributable Earnings excludes unrealized activity and is derived from and reconciled to, but not equivalent to, its most directly comparable GAAP measure of Income (Loss) Before Provision for Taxes. See “—

Non-GAAP

Financial Measures” for our reconciliation of Segment Distributable Earnings.

Net Realizations is presented on a segment basis and is the sum of Realized Principal Investment Income and Realized Performance Revenues (which refers to Realized Performance Revenues excluding Fee Related Performance Revenues), less Realized Performance Compensation (which refers to Realized Performance Compensation excluding Fee Related Performance Compensation and Equity-Based Performance Compensation).

Fee Related Earnings

Fee Related Earnings is a performance measure used to assess Blackstone’s ability to generate profits from revenues that are measured and received on a recurring basis and not subject to future realization events. Fee Related Earnings equals management and advisory fees (net of management fee reductions and offsets) plus Fee Related Performance Revenues, less (a) Fee Related Compensation on a segment basis, and (b) Other Operating Expenses. Fee Related Earnings is derived from and reconciled to, but not equivalent to, its most directly comparable GAAP measure of Income (Loss) Before Provision for Taxes. See “—

Non-GAAP

Financial Measures” for our reconciliation of Fee Related Earnings.

Fee Related Compensation is presented on a segment basis and refers to the compensation expense, excluding Equity-Based Compensation, directly related to (a) Management and Advisory Fees, Net and (b) Fee Related Performance Revenues, referred to as Fee Related Performance Compensation.

Fee Related Performance Revenues refers to the realized portion of Performance Revenues from Perpetual Capital that are (a) measured and received on a recurring basis, and (b) not dependent on realization events from the underlying investments.

Adjusted Earnings Before Interest, Taxes and Depreciation and Amortization

Adjusted Earnings Before Interest, Taxes and Depreciation and Amortization (“Adjusted EBITDA”), is a supplemental measure used to assess performance derived from Blackstone’s segment results and may be used to assess its ability to service its borrowings. Adjusted EBITDA represents Distributable Earnings plus the addition of (a) Interest Expense on a segment basis, (b) Taxes and Related Payables, and (c) Depreciation and Amortization. Adjusted EBITDA is derived from and reconciled to, but not equivalent to, its most directly comparable GAAP measure of Income (Loss) Before Provision for Taxes. See “—

Non-GAAP

Financial Measures” for our reconciliation of Adjusted EBITDA.

Operating Metrics

The alternative asset management business is primarily based on managing third party capital and does not require substantial capital investment to support rapid growth. Since our inception, we have developed and used various key operating metrics to assess and monitor the operating performance of our various alternative asset management businesses in order to monitor the effectiveness of our value creating strategies.

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Assets Under Management.

Assets Under Management refers to the assets we manage. Our Assets Under Management equals the sum of:

(a)

the fair value of the investments held by our carry funds and our

side-by-side

and

co-investment

entities managed by us, plus (1) the capital that we are entitled to call from investors in those funds and entities pursuant to the terms of their respective capital commitments, including capital commitments to funds that have yet to commence their investment periods, or (2) for certain credit-focused funds the amounts available to be borrowed under asset based credit facilities,

(b)

the net asset value of (1) our hedge funds and real estate debt carry funds, BPP, certain

co-investments

managed by us, and our Hedge Fund Solutions and certain credit-focused carry and drawdown funds (plus, in each case, the capital that we are entitled to call from investors in those funds, including commitments yet to commence their investment periods), and (2) our funds of hedge funds, our Hedge Fund Solutions registered investment companies, and BREIT,

(c)

the invested capital, fair value or net asset value of assets we manage pursuant to separately managed accounts,

(d)

the amount of debt and equity outstanding for our CLOs during the reinvestment period,

(e)

the aggregate par amount of collateral assets, including principal cash, for our CLOs after the reinvestment period,

(f)

the gross or net amount of assets (including leverage where applicable) for our credit-focused registered investment companies, and

(g)

the fair value of common stock, preferred stock, convertible debt, or similar instruments issued by BXMT.

Fee-Earning Assets Under Management

Fee-Earning

Assets Under Management refers to the assets we manage on which we derive management fees and/or performance revenues. Our

Fee-Earning

Assets Under Management equals the sum of:

(a)

for our Private Equity segment funds and Real Estate segment carry funds, including certain BREDS and Hedge Fund Solutions funds, the amount of capital commitments, remaining invested capital, fair value, net asset value or par value of assets held, depending on the fee terms of the fund,

(b)

for our credit-focused carry funds, the amount of remaining invested capital (which may include leverage) or net asset value, depending on the fee terms of the fund,

(c)

the remaining invested capital or fair value of assets held in

co-investment

vehicles managed by us on which we receive fees,

(d)

the net asset value of our funds of hedge funds, hedge funds, BPP, certain

co-investments

managed by us, certain registered investment companies, BREIT, and certain of our Hedge Fund Solutions drawdown funds,

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(e)

the invested capital, fair value of assets or the net asset value we manage pursuant to separately managed accounts,

(f)

the net proceeds received from equity offerings and accumulated core earnings of BXMT, subject to certain adjustments,

(g)

the aggregate par amount of collateral assets, including principal cash, of our CLOs, and

(h)

the gross amount of assets (including leverage) or the net assets (plus leverage where applicable) for certain of our credit-focused registered investment companies.

Each of our segments may include certain

Fee-Earning

Assets Under Management on which we earn performance revenues but not management fees.

Our calculations of assets under management and

fee-earning

assets under management may differ from the calculations of other asset managers, and as a result this measure may not be comparable to similar measures presented by other asset managers. In addition, our calculation of assets under management includes commitments to, and the fair value of, invested capital in our funds from Blackstone and our personnel, regardless of whether such commitments or invested capital are subject to fees. Our definitions of assets under management and

fee-earning

assets under management are not based on any definition of assets under management and

fee-earning

assets under management that is set forth in the agreements governing the investment funds that we manage.

For our carry funds, total assets under management includes the fair value of the investments held and uncalled capital commitments, whereas

fee-earning

assets under management includes the total amount of capital commitments or the remaining amount of invested capital at cost depending on whether the investment period has expired or as specified by the fee terms of the fund. As such,

fee-earning

assets under management may be greater than total assets under management when the aggregate fair value of the remaining investments is less than the cost of those investments.

Perpetual Capital

. Perpetual Capital refers to the component of assets under management with an indefinite term, that is not in liquidation, and for which there is no requirement to return capital to investors through redemption requests in the ordinary course of business, except where funded by new capital inflows. Perpetual Capital includes

co-investment

capital with an investor right to convert into Perpetual Capital.

Limited Partner Capital Invested.

Limited Partner Capital Invested represents the aggregate amount of third party capital invested by our funds and vehicles, including investments closed but not yet funded by investors during each period presented, including (a) capital invested by our carry and drawdown funds and vehicles, (b) certain Perpetual Capital invested including undistributed proceeds that are reinvested, and (c) capital invested through

fee-paying

co-investments

made by third parties in investments of our carry and perpetual funds and vehicles.

Dry Powder

. Dry Powder represents the amount of capital available for investment or reinvestment, including general partner and employee capital, and is an indicator of the capital we have available for future investments.

Performance Revenue Eligible Assets Under Management

. Performance Revenue Eligible Assets Under Management represents invested and to be invested capital at fair value, including capital closed for funds whose investment period has not yet commenced, on which performance revenues could be earned if certain hurdles are met.

Income Tax Current Developments

As described in “— Conversion to a Corporation”, on July 1, 2019, we converted from a limited partnership to a corporation. Prior to the Conversion, certain of our share of investment income and carried interest was not subject to U.S. corporate income taxes. Subsequent to the Conversion, we expect that all income earned by us will be subject to U.S. corporate income taxes, resulting in an overall higher income tax expense (or benefit) in periods subsequent to the Conversion.

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States and other jurisdictions have considered legislation to increase taxes with respect to carried interest. For example, New Jersey recently enacted legislation which eliminates an exclusion from New Jersey source income (for

non-residents)

for carried interest and income from providing investment management services, which is not expected to materially affect our common shareholders, and authorizes a contingent 17% surtax on such management income for gross income tax and corporate income tax purposes. These carried interest provisions remain

non-operative

as they are dependent upon Connecticut, New York and Massachusetts enacting legislation with identical provisions. In addition, New York State recently introduced legislation which would tax income from certain investment management services provided by a partner (whether or not a New York resident), which could cause a

non-resident

of New York State who holds our common units to be subject to New York State income tax on carried interest earned by entities in which we hold an indirect interest, thereby requiring the

non-resident

to file a New York State income tax return reporting such carried interest income. As part of that legislation, New York also proposed a state tax surcharge of 19% on carried interest in addition to the personal income tax. Similar to the New Jersey legislation, the New York legislation would not take effect until similar legislation is enacted by Connecticut, New Jersey and Massachusetts. Similar proposals are under consideration in other jurisdictions such as California. Whether or when similar legislation will be enacted is unclear. Although these proposals do not apply to the Corporation following the Conversion, if enacted, they could increase the amount of taxes that our employees and other key personnel would be required to pay and, as a result, could impact our ability to recruit, retain and motivate employees and key personnel in the relevant jurisdictions.

Finally, several state and local jurisdictions are evaluating ways to subject partnerships to entity level taxation through the imposition of state or local income, franchise or other forms of taxation or to increase the amount of such taxation. Although these proposals do not apply to the Corporation following the Conversion, they may apply to any of our subsidiaries which are partnerships. For example, although we believe it would not affect us materially, Connecticut recently enacted an income tax on pass through entities doing business in Connecticut, and states in which we do business may consider similar tax changes. These and other proposals have recently been under heightened consideration in light of U.S. federal income tax legislation, known as the Tax Cuts and Jobs Act, which was signed into law on December 22, 2017 (the “Tax Reform Bill”).

The Tax Reform Bill has resulted in fundamental changes to the Internal Revenue Code. Changes to U.S. tax laws resulting from the Tax Reform Bill, including partial limitation on the deductibility of business interest expense, and a longer three-year holding period requirement for carried interest to be treated as long-term capital gain could have an adverse effect on our business operations and our funds’ investment activities. These and other changes from the Tax Reform Bill—including limitations on the use, carryback and carryforward of net operating losses and changes relating to the scope and timing of U.S. taxation on earnings from international business operations—could also have an adverse effect on our portfolio companies. The exact impact of the Tax Reform Bill for future years is difficult to quantify, but these changes could have an adverse effect on our business, results of operations and financial condition. In addition, other changes could be enacted in the future to increase the corporate tax rate, limit further the deductibility of interest, subject carried interest to more onerous taxation or effect other changes that could have a material adverse effect on our business, results of operations and financial condition.

Congress, the Organization for Economic

Co-operation

and Development (“OECD”) and other government agencies in jurisdictions in which we and our affiliates invest or do business have maintained a focus on issues related to the taxation of multinational companies. The OECD, which represents a coalition of member countries, is contemplating changes to numerous long-standing tax principles through its base erosion and profit shifting (“BEPS”) project, which is focused on a number of issues, including the shifting of profits between affiliated entities in different tax jurisdictions, interest deductibility and eligibility for the benefits of double tax treaties. Several of the proposed measures are potentially relevant to some of our structures and could have an adverse tax impact on our funds, investors and/or our portfolio companies. Some member countries have been moving forward on the BEPS agenda but, because timing of implementation and the specific measures adopted will vary among participating states, significant uncertainty remains regarding the impact of BEPS proposals. If implemented, these proposals could result in a loss of tax treaty benefits and increased taxes on income from our investments.

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A number of European jurisdictions have enacted taxes on financial transactions, and the European Commission has proposed legislation to harmonize these taxes under the

so-called

“enhanced cooperation procedure,” which provides for adoption of

EU-level

legislation applicable to some but not all EU Member States. These contemplated changes, if adopted by individual countries, could increase tax uncertainty and/or costs faced by us, our portfolio companies and our investors, and cause other adverse consequences. The timing or impact of these proposals is unclear at this point. In addition, tax laws, regulations and interpretations are subject to continual changes, which could adversely affect our structures or returns to our investors. For instance, various countries have adopted or proposed tax legislation that may adversely affect portfolio companies and investment structures in countries in which our funds have invested and may limit the benefits of additional investments in those countries.

In addition, legislation enacted in 2015 significantly changed the rules for U.S. federal income tax audits of partnerships. This legislation applies to any taxable years in which we were a partnership commencing after December 31, 2017 and will apply to audits of taxable years of The Blackstone Group L.P. prior to the Conversion (which such audits may occur after the Conversion) and will continue to apply to any of our subsidiaries which are partnerships. Such U.S. federal income tax audits will be conducted at the partnership level, and unless a partnership qualifies for and affirmatively elects an alternative procedure, any adjustments to the amount of tax due (including interest and penalties) will be payable by the partnership. Under an elective alternative procedure, a partnership would issue information returns to persons who were partners in the audited year, who would then be required to take the adjustments into account in calculating their own tax liability, and the partnership would not be liable for the adjustments. If a partnership elects the alternative procedure for a given adjustment, the amount of taxes for which its partners would be liable would be increased by any applicable penalties and a special interest charge. There can be no assurance that we will be eligible to make such an election or that we will, in fact, make such an election for any given adjustment. If we do not or are not able to make such an election, then (a) our then-current common shareholders, in the aggregate, could indirectly bear income tax liabilities in excess of the aggregate amount of taxes that would have been due had we elected the alternative procedure, and (b) a given common shareholders may indirectly bear taxes attributable to income allocable to other common shareholders or former common shareholders, including taxes (as well as interest and penalties) with respect to periods prior to such holder’s ownership of common units. Amounts available for dividends to our common shareholders may be reduced as a result of our obligation to pay any taxes associated with an adjustment. Many issues with respect to, and the overall effect of, this legislation on us (with respect to any taxable years in which we were a partnership commencing after December 31, 2017), and on our partnership subsidiaries are uncertain, and common shareholders should consult their own tax advisors regarding all aspects of this legislation as it affects their particular circumstances.

Please see “Part II. Item 1A. Risk Factors — Following the Conversion, we expect to pay more corporate income taxes than we would have as a limited partnership.” and “— Conversion to a Corporation” in our Quarterly Report on Form

10-Q

for the quarter ended March 31, 2019 for a further discussion of certain tax consequences of the Conversion.

Consolidated Results of Operations

Following is a discussion of our consolidated results of operations for the three and six months ended June 30, 2019 and 2018. For a more detailed discussion of the factors that affected the results of our four business segments (which are presented on a basis that deconsolidates the investment funds we manage) in these periods, see “— Segment Analysis” below.

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The following table sets forth information regarding our consolidated results of operations and certain key operating metrics for the three and six months ended June 30, 2019 and 2018:


	Three Months Ended										Six Months Ended
	June 30,					2019 vs. 2018					June 30,						2019 vs. 2018
	2019			2018		$			%		2019			2018			$			%

	(Dollars in Thousands)
Revenues
Management and Advisory Fees, Net	$	840,378		$	721,384	$	118,994			16%	$	1,650,104		$	1,450,233		$	199,871			14%

Incentive Fees		21,915			19,378		2,537			13%		34,047			31,944			2,103			7%

Investment Income (Loss)
Performance Allocations
Realized		332,520			503,376		(170,856	)		-34%		574,895			773,016			(198,121	)		-26%
Unrealized		157,732			440,351		(282,619	)		-64%		821,731			1,068,440			(246,709	)		-23%
Principal Investments
Realized		145,040			129,197		15,843			12%		218,301			171,342			46,959			27%
Unrealized		(37,345	)		103,468		(140,813	)		N/M		131,699			215,242			(83,543	)		-39%

Total Investment Income		597,947			1,176,392		(578,445	)		-49%		1,746,626			2,228,040			(481,414	)		-22%

Interest and Dividend Revenue		43,686			40,073		3,613			9%		87,770			75,458			12,312			16%
Other		(17,120	)		675,343		(692,463	)		N/M		(6,870	)		616,026			(622,896	)		N/M

Total Revenues		1,486,806			2,632,570		(1,145,764	)		-44%		3,511,677			4,401,701			(890,024	)		-20%

Expenses
Compensation and Benefits
Compensation		438,521			427,479		11,042			3%		909,918			816,882			93,036			11%
Incentive Fee Compensation		8,886			9,743		(857	)		-9%		14,292			16,405			(2,113	)		-13%
Performance Allocations
Compensation
Realized		125,825			186,398		(60,573	)		-32%		212,220			298,460			(86,240	)		-29%
Unrealized		64,518			189,991		(125,473	)		-66%		351,533			444,426			(92,893	)		-21%

Total Compensation and Benefits		637,750			813,611		(175,861	)		-22%		1,487,963			1,576,173			(88,210	)		-6%
General, Administrative and Other		175,308			145,828		29,480			20%		321,370			272,541			48,829			18%
Interest Expense		43,596			39,320		4,276			11%		85,598			77,991			7,607			10%
Fund Expenses		5,586			17,622		(12,036	)		-68%		8,473			72,607			(64,134	)		-88%

Total Expenses		862,240			1,016,381		(154,141	)		-15%		1,903,404			1,999,312			(95,908	)		-5%

Other Income
Net Gains from Fund Investment Activities		61,131			73,519		(12,388	)		-17%		191,456			184,118			7,338			4%

Income Before Provision for Taxes		685,697			1,689,708		(1,004,011	)		-59%		1,799,729			2,586,507			(786,778	)		-30%
Provision for Taxes		38,736			138,731		(99,995	)		-72%		79,891			193,226			(113,335	)		-59%

Net Income		646,961			1,550,977		(904,016	)		-58%		1,719,838			2,393,281			(673,443	)		-28%
Net Income (Loss) Attributable to Redeemable Non-Controlling Interests in Consolidated Entities		1,095			905		190			21%		3,575			(370	)		3,945			N/M
Net Income Attributable to Non-Controlling Interests in Consolidated Entities		80,744			129,078		(48,334	)		-37%		267,577			284,577			(17,000	)		-6%
Net Income Attributable to Non-Controlling Interests in Blackstone Holdings		259,330			678,952		(419,622	)		-62%		661,590			999,160			(337,570	)		-34%

Net Income Attributable to The Blackstone Group L.P.	$	305,792		$	742,042	$	(436,250	)		-59%	$	787,096		$	1,109,914		$	(322,818	)		-29%

N/M Not meaningful.

Three Months Ended June 30, 2019 Compared to Three Months Ended June 30, 2018

Revenues

Revenues were $1.5 billion for the three months ended June 30, 2019, a decrease of $1.1 billion compared to $2.6 billion for the three months ended June 30, 2018. The decrease in Revenues was primarily attributable to

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decreases of $692.5 million in Other Revenue and $578.4 million in Investment Income, partially offset by an increase of $119.0 million in Management and Advisory Fees, Net.

The decrease in Other Revenue was primarily due to proceeds received during the three months ended June 30, 2018 from the conclusion of our

sub-advisory

relationship with FS Investments’ funds and a foreign exchange loss on our euro denominated bonds.

The decrease in Investment Income was primarily attributable to a decrease in our Private Equity and Credit segments of $733.8 million and $67.6 million, respectively, partially offset by increase in our Real Estate and Hedge Fund Solutions segments of $215.6 million and $52.7 million, respectively. The decrease in our Private Equity segment was primarily due to lower appreciation in corporate private equity. Corporate private equity carrying value increased 0.7% in the three months ended June 30, 2019 compared to 9.5% in the three months ended June 30, 2018. The decrease in our Credit segment was primarily attributable to lower returns in our performing credit strategies and distressed strategies. The increase in our Real Estate segment was primarily attributable to higher net appreciation of investment holdings in our BREP opportunistic funds compared to the comparable period in 2018. The carrying value of investments for our BREP opportunistic funds increased 4.4% in the three months ended June 30, 2019 compared to 2.7% in the three months ended June 30, 2018. The increase in our Hedge Fund Solutions segment was primarily driven by year-over-year net appreciation of investments of which Blackstone owns a share.

The increase in Management and Advisory Fees, Net was primarily due to increases in our Private Equity and Credit segments of $75.0 million and $30.6 million, respectively. The increase in our Private Equity segment was primarily due to increases in

Fee-Earning

Assets Under Management in BIP and Strategic Partners. The increase in our Credit segment was primarily due to growth in BIS, our U.S. direct lending platform, and certain other GSO funds.

Expenses

Expenses were $862.2 million for the three months ended June 30, 2019, a decrease of $154.1 million compared to $1.0 billion for the three months ended June 30, 2018. The decrease was primarily attributable to decreases in Performance Allocations Compensation and Fund Expenses, partially offset by an increase in General, Administrative and Other Expenses. The decrease of $186.0 million in Performance Allocations Compensation was primarily due to a decrease in Investment Income. The decrease of $12.0 million in Fund Expenses was due to a decrease of $13.3 million in our Credit segment primarily due to closings of new consolidated CLOs in the quarter ended June 30, 2018. The increase of $29.5 million in General, Administrative and Other Expenses was primarily due to legal and advisory fees associated with the Conversion and growth in BIS and BXLS.

Six Months Ended June

30,

2019 Compared to Six Months Ended June

30,

2018

Revenues

Revenues were $3.5 billion for the six months ended June 30, 2019, a decrease of $890.0 million compared to $4.4 billion for the six months ended June 30, 2018. The decrease in Revenues was primarily attributable to decreases of $622.9 million in Other Revenue and $481.4 million in Investment Income, partially offset by an increase of $199.9 million in Management and Advisory Fees, Net.

The decrease in Other Revenue was primarily due to proceeds received during the three months ended June 30, 2018 from the conclusion of our

sub-advisory

relationship with FS Investments’ funds and a foreign exchange loss on our euro denominated bonds.

The decrease in Investment Income was primarily attributable to a decrease in our Private Equity segment of $770.5 million, partially offset by increases in our Real Estate and Hedge Fund Solutions segments of $304.4 million and $81.7 million, respectively. The decrease in our Private Equity segment was due to lower appreciation in corporate private equity. Corporate private equity carrying value increased 5.3% in the six months ended June 30, 2019 compared to 16.4% in the six months ended June 30, 2018. The increase in our Real Estate segment

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was primarily attributable to higher net appreciation of investment holdings in our BREP opportunistic funds compared to the comparable period in 2018. The carrying value of investments for our BREP opportunistic funds increased 9.1% in the six months ended June 30, 2019 compared to 6.0% in the six months ended June 30, 2018. The increase in our Hedge Fund Solutions segment was primarily driven by year-over-year net appreciation of investments of which Blackstone owns a share.

The increase in Management and Advisory Fees, Net was primarily due to increases in our Private Equity, Real Estate and Hedge Fund Solutions segments of $135.9 million, $44.1 million and $15.4 million, respectively. The increase in our Private Equity segment was primarily due to increases in

Fee-Earning

Assets Under Management in BIP, Tactical Opportunities and Strategic Partners. The increase in our Real Estate segment was primarily due to

Fee-Earning

Asset Under Management growth in our core+ real estate funds. The increase in our Hedge Fund Solutions segment was primarily due to

Fee-Earning

Asset Under Management growth in our individual investor and specialized solutions funds and a reduction of placement fees, which offset Base Management Fees.

Expenses

Expenses were $1.9 billion for the six months ended June 30, 2019, a decrease of $95.9 million compared to $2.0 billion for the six months ended June 30, 2018. The decrease was primarily attributable to decreases in Performance Allocations Compensation and Fund Expenses, partially offset by an increase in Compensation. The decrease of $179.1 million in Performance Allocations Compensation was primarily due to the decrease in Investment Income. The decrease of $64.1 million in Fund Expenses was due to a decrease of $65.7 million in our Credit segment primarily from the deconsolidation of certain CLO and other vehicles in 2018. The increase of $93.0 million in Compensation was due to the increase in Management and Advisory Fees, Net, on which a portion of compensation is based.

Other Income

Three Months Ended June 30, 2019 Compared to Three Months Ended June 30, 2018

Other Income was $61.1 million for the three months ended June 30, 2019, a decrease of $12.4 million compared to $73.5 million for the three months ended June 30, 2018. The decrease in Other Income was due to a decrease in Net Gains from Fund Investment Activities. The decrease in Other Income – Net Gain from Fund Investment Activities was principally driven by a decrease of $24.2 million in our Private Equity segment, partially offset by an increase of $15.3 million in our Real Estate segment. The decrease in our Private Equity segment was primarily due to lower appreciation of investments across our Private Equity funds. The increase in our Real Estate segment was primarily due to a year-over-year net increase in the appreciation of investments in our BREP opportunistic funds.

Six Months Ended June

30,

2019 Compared to Six Months Ended June

30,

2018

Other Income was $191.5 million for the six months ended June 30, 2019, an increase of $7.3 million compared to $184.1 million for the six months ended June 30, 2018. The increase in Other Income was due to an increase in Net Gains from Fund Investment Activities. The increase in Other Income – Net Gain from Fund Investment Activities was principally driven by increases of $21.9 million in our Real Estate segment and $6.1 million in our Credit segment, partially offset by a decrease of $23.5 million in our Private Equity segment. The increase in our Real Estate segment was primarily due to a year-over-year net increase in the appreciation of investments in our BREP opportunistic funds. The increase in our Credit segment was primarily driven by a year-over-year net increase in appreciation of CLOs and the launch of new CLOs in 2019, partially offset by the deconsolidation of certain CLO and other vehicles. The decrease in our Private Equity segment was primarily due to lower appreciation of investments across the Private Equity funds.

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Provision for Taxes

The following table summarizes Blackstone’s tax position:


	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2019			2018			2019			2018
	(Dollars in Thousands)
Income Before Provision for Taxes	$	685,697		$	1,689,708		$	1,799,729		$	2,586,507
Provision for Taxes	$	38,736		$	138,731		$	79,891		$	193,226
Effective Income Tax Rate		5.6	%		8.2	%		4.4	%		7.5	%

The following table reconciles the effective income tax rate to the U.S. federal statutory tax rate:


	Three Months Ended				2019		Six Months Ended				2019
	June 30,				vs.		June 30,				vs.
	2019		2018		2018		2019		2018		2018
Statutory U.S. Federal Income Tax Rate		21.0%		21.0%		-		21.0%		21.0%		-
Income Passed Through to Common Unitholders and Non-Controlling Interest Holders (a)		-15.7%		-14.7%		-1.0%		-16.8%		-15.3%		-1.5%
State and Local Income Taxes		1.3%		2.1%		-0.8%		1.1%		1.9%		-0.8%
Other		-1.0%		-0.2%		-0.8%		-0.9%		-0.1%		-0.8%

Effective Income Tax Rate		5.6%		8.2%		-2.6%		4.4%		7.5%		-3.1%

(a)	Includes income that is not taxable to Blackstone and its subsidiaries. Such income is directly taxable to Blackstone’s unitholders and the non-controlling interest holders.

Three Months Ended June 30, 2019 Compared to Three Months Ended June 30, 2018

Blackstone’s Provision for Taxes for the three months ended June 30, 2019 and 2018 was $38.7 million and $138.7 million, respectively. This resulted in an effective tax rate of 5.6% and 8.2%, respectively.

The decrease in Blackstone’s effective tax rate for the three months ended June 30, 2019 compared to the three months ended June 30, 2018 resulted primarily from the increase in the benefit for the exclusion of income passed through to common unitholders and

non-controlling

interests and the decrease in the expense for the state income tax.

Six Months Ended June 30, 2019 Compared to Six Months Ended June 30, 2018

Blackstone’s Provision for Taxes for the six months ended June 30, 2019 and 2018 was $79.9 million and $193.2 million, respectively. This resulted in an effective tax rate of 4.4% and 7.5%, respectively.

The decrease in Blackstone’s effective tax rate for the six months ended June 30, 2019, compared to the six months ended June 30, 2018 resulted primarily from the increase in the benefit for the exclusion of income passed through to common unitholders and

non-controlling

interests and the decrease in the expense for the state income tax.

Additional information regarding our income taxes can be found in Note 14. “Income Taxes” in the “Notes to Condensed Consolidated Financial Statements” in “Part I. Item 1. Financial Statements” of this filing.

On July 1, 2019, we completed our Conversion from a Delaware limited partnership to the Corporation. See “Part II. Item 1A. Risk Factors — Following the Conversion, we expect to pay more corporate income taxes than we would have as a limited partnership” and “— Conversion to a Corporation” in our Quarterly Report on Form

10-Q

for the quarter ended March 31, 2019.

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Non-Controlling

Interests in Consolidated Entities

The Net Income Attributable to Redeemable

Non-Controlling

Interests in Consolidated Entities and Net Income Attributable to

Non-Controlling

Interests in Consolidated Entities is attributable to the consolidated Blackstone Funds. The amounts of these items vary directly with the performance of the consolidated Blackstone Funds and largely eliminate the amount of Other Income – Net Gains from Fund Investment Activities from the Net Income (Loss) Attributable to The Blackstone Group L.P.

Net Income Attributable to

Non-Controlling

Interests in Blackstone Holdings is derived from the Income Before Provision for Taxes, excluding the Net Gains from Fund Investment Activities and the percentage allocation of the income between Blackstone personnel and others who are limited partners of Blackstone Holdings and Blackstone after considering any contractual arrangements that govern the allocation of income such as fees allocable to Blackstone.

For the three months ended June 30, 2019 and 2018, the Net Income Before Taxes allocated to Blackstone Holdings was 44.0% and 43.9%, respectively. For the six months ended June 30, 2019 and 2018, the net income before taxes allocated to Blackstone personnel and others who are limited partners of Blackstone Holdings was 44.0% and 44.1%, respectively. The increase of 0.1% in the three month period was primarily due to repurchases of common units and the vesting of common units. The decrease of 0.1% in the six month period was primarily due to conversion of Blackstone Holdings Partnership Units to Blackstone common units and the vesting of common units.

The Other Income — Reduction of Tax Receivable Agreement Liability was entirely allocated to Blackstone.

Operating Metrics

The following graphs and tables summarize the

Fee-Earning

and Total Assets Under Management by Segment, followed by a rollforward of activity for the three and six months ended June 30, 2019 and 2018. For a description of how Assets Under Management and

Fee-Earning

Assets Under Management are determined, please see “— Key Financial Measures and Indicators — Operating Metrics — Assets Under Management and

Fee-Earning

Assets Under Management”:

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Note: Totals may not add due to rounding.

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	Three Months Ended
	June 30, 2019															June 30, 2018
				Private			Hedge Fund												Private			Hedge Fund
	Real Estate			Equity			Solutions			Credit			Total			Real Estate			Equity			Solutions			Credit			Total
	(Dollars in Thousands)
Fee-Earning Assets Under Management
Balance, Beginning of Period	$	94,223,034		$	85,446,868		$	73,647,014		$	99,676,478		$	352,993,394		$	87,284,578		$	72,398,415		$	73,570,498		$	111,397,306		$	344,650,797
Inflows, including Commitments (a)		25,130,260			13,723,729			3,578,265			7,548,513			49,980,767			5,937,991			7,057,401			2,379,116			5,579,039			20,953,547
Outflows, including Distributions (b)		(5,571,573	)		(444,360	)		(3,943,643	)		(2,231,944	)		(12,191,520	)		(1,381,867	)		(617,880	)		(4,355,699	)		(21,548,439	)		(27,903,885	)

Net Inflows (Outflows)		19,558,687			13,279,369			(365,378	)		5,316,569			37,789,247			4,556,124			6,439,521			(1,976,583	)		(15,969,400	)		(6,950,338	)
Realizations (c)		(2,375,372	)		(2,103,962	)		(276,016	)		(1,201,419	)		(5,956,769	)		(2,459,391	)		(1,000,261	)		(100,122	)		(1,414,399	)		(4,974,173	)
Market Appreciation (Depreciation) (d)(g)		880,745			(155,003	)		1,647,800			665,228			3,038,770			(604,810	)		208,022			395,497			253,150			251,859

Balance, End of Period (e)	$	112,287,094		$	96,467,272		$	74,653,420		$	104,456,856		$	387,864,642		$	88,776,501		$	78,045,697		$	71,889,290		$	94,266,657		$	332,978,145

Increase (Decrease)	$	18,064,060		$	11,020,404		$	1,006,406		$	4,780,378		$	34,871,248		$	1,491,923		$	5,647,282		$	(1,681,208	)	$	(17,130,649	)	$	(11,672,652	)
Increase (Decrease)		19	%		13	%		1	%		5	%		10	%		2	%		8	%		-2	%		-15	%		-3	%

	Six Months Ended
	June 30, 2019															June 30, 2018
				Private			Hedge Fund												Private			Hedge Fund
	Real Estate			Equity			Solutions			Credit			Total			Real Estate			Equity			Solutions			Credit			Total
	(Dollars in Thousands)
Fee-Earning Assets Under Management
Balance, Beginning of Period	$	93,252,724		$	80,008,166		$	72,280,606		$	96,986,011		$	342,527,507		$	83,984,824		$	70,140,883		$	69,914,061		$	111,304,230		$	335,343,998
Inflows, including Commitments (a)		27,864,125			22,386,445			5,212,771			11,414,091			66,877,432			9,488,268			10,461,715			6,195,502			11,131,172			37,276,657
Outflows, including Distributions (b)		(5,836,255	)		(1,172,943	)		(6,011,376	)		(5,474,048	)		(18,494,622	)		(1,592,458	)		(1,087,275	)		(5,258,000	)		(23,593,109	)		(31,530,842	)

Net Inflows (Outflows)		22,027,870			21,213,502			(798,605	)		5,940,043			48,382,810			7,895,810			9,374,440			937,502			(12,461,937	)		5,745,815
Realizations (c)		(4,589,190	)		(4,664,973	)		(440,452	)		(2,168,269	)		(11,862,884	)		(3,953,617	)		(1,736,535	)		(155,877	)		(3,408,975	)		(9,255,004	)
Market Appreciation (Depreciation) (d)(h)		1,595,690			(89,423	)		3,611,871			3,699,071			8,817,209			849,484			266,909			1,193,604			(1,166,661	)		1,143,336

Balance, End of Period (e)	$	112,287,094		$	96,467,272		$	74,653,420		$	104,456,856		$	387,864,642		$	88,776,501		$	78,045,697		$	71,889,290		$	94,266,657		$	332,978,145

Increase (Decrease)	$	19,034,370		$	16,459,106		$	2,372,814		$	7,470,845		$	45,337,135		$	4,791,677		$	7,904,814		$	1,975,229		$	(17,037,573	)	$	(2,365,853	)
Increase (Decrease)		20	%		21	%		3	%		8	%		13	%		6	%		11	%		3	%		-15	%		-1	%
Annualized Base Management Fee Rate (f)		0.91	%		1.10	%		0.73	%		0.57	%		0.83	%		1.12	%		1.00	%		0.72	%		0.50	%		0.83	%

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	Three Months Ended
	June 30, 2019															June 30, 2018
				Private			Hedge Fund												Private			Hedge Fund
	Real Estate			Equity			Solutions			Credit			Total			Real Estate			Equity			Solutions			Credit			Total
	(Dollars in Thousands)
Total Assets Under Management
Balance, Beginning of Period	$	140,334,043		$	158,988,748		$	80,182,772		$	132,272,199		$	511,777,762		$	119,575,884		$	111,414,214		$	78,657,551		$	139,966,177		$	449,613,826
Inflows, including Commitments (a)		14,364,834			16,806,806			3,812,651			10,126,818			45,111,109			5,124,391			6,282,722			2,995,023			5,687,114			20,089,250
Outflows, including Distributions (b)		(599,928	)		(178,901	)		(4,114,571	)		(2,341,479	)		(7,234,879	)		(1,002,502	)		(401,296	)		(4,544,409	)		(21,647,826	)		(27,596,033	)

Net Inflows (Outflows)		13,764,906			16,627,905			(301,920	)		7,785,339			37,876,230			4,121,889			5,881,426			(1,549,386	)		(15,960,712	)		(7,506,783	)
Realizations (c)		(3,989,755	)		(4,678,685	)		(296,126	)		(1,629,825	)		(10,594,391	)		(4,326,910	)		(2,058,727	)		(126,015	)		(1,791,552	)		(8,303,204	)
Market Appreciation (d)(i)		3,495,626			233,719			1,850,954			842,437			6,422,736			29,110			4,287,605			420,928			845,174			5,582,817

Balance, End of Period (e)	$	153,604,820		$	171,171,687		$	81,435,680		$	139,270,150		$	545,482,337		$	119,399,973		$	119,524,518		$	77,403,078		$	123,059,087		$	439,386,656

Increase (Decrease)	$	13,270,777		$	12,182,939		$	1,252,908		$	6,997,951		$	33,704,575		$	(175,911	)	$	8,110,304		$	(1,254,473	)	$	(16,907,090	)	$	(10,227,170	)
Increase (Decrease)		9	%		8	%		2	%		5	%		7	%		-0	%		7	%		-2	%		-12	%		-2	%

	Six Months Ended
	June 30, 2019															June 30, 2018
				Private			Hedge Fund												Private			Hedge Fund
	Real Estate			Equity			Solutions			Credit			Total			Real Estate			Equity			Solutions			Credit			Total
	(Dollars in Thousands)
Total Assets Under Management
Balance, Beginning of Period	$	136,247,229		$	130,665,286		$	77,814,516		$	127,515,286		$	472,242,317		$	115,340,363		$	105,560,576		$	75,090,834		$	138,136,470		$	434,128,243
Inflows, including Commitments (a)		19,398,685			45,278,266			6,381,594			16,959,688			88,018,233			8,747,267			9,817,185			6,935,637			12,768,519			38,268,608
Outflows, including Distributions (b)		(1,750,109	)		(421,901	)		(6,222,189	)		(6,896,662	)		(15,290,861	)		(1,150,663	)		(779,956	)		(5,671,098	)		(23,608,043	)		(31,209,760	)

Net Inflows (Outflows)		17,648,576			44,856,365			159,405			10,063,026			72,727,372			7,596,604			9,037,229			1,264,539			(10,839,524	)		7,058,848
Realizations (c)		(7,047,896	)		(8,421,343	)		(482,684	)		(2,902,661	)		(18,854,584	)		(6,993,625	)		(3,100,511	)		(182,087	)		(4,283,836	)		(14,560,059	)
Market Appreciation (d)(j)		6,756,911			4,071,379			3,944,443			4,594,499			19,367,232			3,456,631			8,027,224			1,229,792			45,977			12,759,624

Balance, End of Period (e)	$	153,604,820		$	171,171,687		$	81,435,680		$	139,270,150		$	545,482,337		$	119,399,973		$	119,524,518		$	77,403,078		$	123,059,087		$	439,386,656

Increase (Decrease)	$	17,357,591		$	40,506,401		$	3,621,164		$	11,754,864		$	73,240,020		$	4,059,610		$	13,963,942		$	2,312,244		$	(15,077,383	)	$	5,258,413
Increase (Decrease)		13	%		31	%		5	%		9	%		16	%		4	%		13	%		3	%		-11	%		1	%

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(a)

Inflows represent contributions in our hedge funds and closed end mutual funds, increases in available capital for our carry funds (capital raises, recallable capital and increased

side-by-side

commitments) and CLOs, increases in the capital we manage pursuant to separately managed account programs, allocations from multi-asset products to other strategies and acquisitions.

(b)	Outflows represent redemptions in our hedge funds and closed end mutual funds, client withdrawals from our separately managed account programs and decreases in available capital for our carry funds (expired capital, expense drawdowns and decreased side-by-side commitments).

(c)	Realizations represent realizations from the disposition of assets or capital returned to investors from CLOs.

(d)	Market appreciation (depreciation) includes realized and unrealized gains (losses) on portfolio investments and the impact of foreign exchange rate fluctuations.

(e)	Assets Under Management are reported in the segment where the assets are managed.

(f)	Represents the annualized current quarter’s Base Management Fee divided by period end Fee-Earning Assets Under Management.

(g)

For the three months ended June 30, 2019, the impact to

Fee-Earning

Assets Under Management due to foreign exchange rate fluctuations was $150.3 million, $(161.6) million and $(11.3) million for the Real Estate, Credit and Total segments, respectively. For the three months ended June 30, 2018, such impact was $(1.3) billion, $(697.4) million and $(2.0) billion for the Real Estate, Credit and Total segments, respectively.

(h)

For the six months ended June 30, 2019, the impact to

Fee-Earning

Assets Under Management due to foreign exchange rate fluctuations was $(82.1) million, $(272.0) million and $(354.1) million for the Real Estate, Credit and Total segments, respectively. For the six months ended June 30, 2018, such impact was $(711.4) million, $(300.5) million and $(1.0) billion for the Real Estate, Credit and Total segments, respectively.

(i)

For the three months ended June 30, 2019, the impact to Total Assets Under Management due to foreign exchange rate fluctuations was $156.5 million, $(64.3) million, $(189.4) million and $(97.1) million for the Real Estate, Private Equity, Credit and Total segments, respectively. For the three months ended June 30, 2018, such impact was $(2.7) billion, $(743.3) million, $(882.7) million and $(4.3) billion for the Real Estate, Private Equity, Credit and Total segments, respectively.

(j)

For the six months ended June 30, 2019, the impact to Total Assets Under Management due to foreign exchange rate fluctuations was $(271.8) million, $107.4 million, $(296.9) million and $(461.4) million for the Real Estate, Private Equity, Credit and Total segments, respectively. For the six months ended June 30, 2018, such impact was $(1.5) billion, $(270.2) million, $(439.9) million and $(2.2) billion for the Real Estate, Private Equity, Credit and Total segments, respectively.

Fee-Earning

Assets Under Management

Fee-Earning

Assets Under Management were $387.9 billion at June 30, 2019, an increase of $34.9 billion, or 10%, compared to $353.0 billion at March 31, 2019. The net increase was due to:

•

Inflows of $50.0 billion related to:

$25.1 billion in our Real Estate segment driven by $19.1 billion from BREP IX, which started its investment period on June 3, 2019 (this amount was reflected in Total Assets Under Management at each closing of the fund), $2.1 billion from BREIT, $1.7 billion in BPP and $1.5 billion from BREDS,

$13.7 billion in our Private Equity segment driven by $7.1 billion from BIP, $5.7 billion from Strategic Partners, $705.3 million from Tactical Opportunities and $249.4 million from multi-asset products,

$7.5 billion in our Credit segment driven by $2.8 billion from BIS, $1.6 billion from certain long only and MLP strategies, $1.4 billion from direct lending, $1.4 billion from our distressed strategies, $741.9 million from our mezzanine funds and $453.2 million from a new CLO, partially offset by $864.0 million of allocations to other strategies, and

$3.6 billion in our Hedge Fund Solutions segment driven by $2.4 billion from individual investor and specialized solutions, $662.1 million from commingled products and $544.1 million from customized solutions.

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•

Market appreciation of $3.0 billion due to:

$1.6 billion of appreciation in our Hedge Fund Solutions segment driven by returns from BAAM’s Principal Solutions Composite of 2.0% gross (1.8% net),

$880.7 million of appreciation in our Real Estate segment driven by $612.0 million of appreciation from our core+ real estate funds ($559.4 million from market appreciation and $52.6 million from foreign exchange appreciation) and $200.0 million of market appreciation from BREDS, and

$665.2 million of appreciation in our Credit segment driven by $643.3 million of appreciation from certain long only and MLP strategies as well as $137.6 million of appreciation from BIS, partially offset by $161.6 million of foreign exchange depreciation.

Offsetting these increases were:

•

Outflows of $12.2 billion primarily attributable to:

$5.6 billion in our Real Estate segment driven by $5.4 billion of uninvested reserves at the end of BREP VIII’s investment period,

$3.9 billion in our Hedge Fund Solutions segment driven by $1.5 billion from customized solutions, $1.3 billion from individual investor and specialized solutions and $1.1 billion from commingled products, and

$2.2 billion in our Credit segment driven by $1.8 billion from certain long only and MLP strategies and $189.1 million from our distressed strategies.

•

Realizations of $6.0 billion primarily driven by:

$2.4 billion in our Real Estate segment driven by $1.4 billion from BREP opportunistic funds and

co-investment,

$480.0 million from core+ real estate funds and $527.7 million from BREDS,

$2.1 billion in our Private Equity segment driven by $1.0 billion from corporate private equity, $616.7 million from Tactical Opportunities and $390.8 million from Strategic Partners, and

$1.2 billion in our Credit segment driven by $533.6 million from our distressed strategies, $189.2 million from certain long only and MLP strategies and $178.0 million from mezzanine funds.

Hedge Fund Solutions had net inflows of $2.7 billion from July 1 through August 1, 2019.

Fee-Earning

Assets Under Management were $387.9 billion at June 30, 2019, an increase of $45.3 billion, or 13%, compared to $342.5 billion at December 31, 2018. The net increase was due to:

•

Inflows of $66.9 billion related to:

$27.9 billion in our Real Estate segment driven by $19.1 billion from BREP IX, which started its investment period on June 3, 2019 (this amount was reflected in Total Assets Under Management at each closing of the fund), $3.0 billion from BREIT, $2.3 billion from BREDS, $2.0 billion from BPP U.S. and

co-investment

and $497.9 million from BPP Europe and

co-investment,

$22.4 billion in our Private Equity segment driven by $11.1 billion from Strategic Partners, $8.1 billion from BIP, $1.6 billion from Tactical Opportunities, $841.2 million from multi-asset products and $620.8 million from core private equity,

$11.4 billion in our Credit segment driven by $2.9 billion from BIS, $2.8 billion from certain long only and MLP strategies, $2.3 billion from direct lending, $2.0 billion from our distressed strategies, $1.5 billion from CLO launches and $822.3 million from our mezzanine funds, partially offset by $1.1 billion of allocations to other strategies and

$5.2 billion in our Hedge Fund Solutions segment driven by $3.1 billion from individual investor and specialized solutions, $1.1 billion from customized solutions and $983.5 million from commingled products.

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•

Market appreciation of $8.8 billion due to:

$3.7 billion of appreciation in our Credit segment driven by $3.1 billion of appreciation from certain long only and MLP strategies as well as $807.8 million of appreciation from BIS, partially offset by $272.0 million of foreign exchange depreciation,

$3.6 billion of appreciation in our Hedge Fund Solutions segment driven by returns from BAAM’s Principal Solutions Composite of 5.4% gross (5.0% net), and

$1.6 billion of appreciation in our Real Estate segment driven by $1.2 billion of appreciation from our core+ real estate funds ($1.3 billion from market appreciation and $41.9 million from foreign exchange depreciation) and $450.8 million of foreign exchange appreciation from BREDS.

Offsetting these increases were:

•

Outflows of $18.5 billion primarily attributable to:

$6.0 billion in our Hedge Fund Solutions segment driven by $2.7 billion from customized solutions, $2.1 billion from individual investor and specialized solutions and $1.1 billion from commingled products,

$5.8 billion in our Real Estate segment driven by $5.4 billion of uninvested reserves at the end of BREP VIII’s investment period (this amount is still classified as available capital and included in Total Assets Under Management) and $256.8 million of redemptions from the BREDS liquids funds,

$5.5 billion in our Credit segment driven by $3.6 billion from certain long only and MLP strategies, $1.2 billion from BIS and $333.2 million from our distressed strategies, and

$1.2 billion in our Private Equity segment driven by $369.2 million from corporate private equity, $362.7 million from multi-asset products, $194.1 million from BXLS and $183.9 million from Tactical Opportunities.

•

Realizations of $11.9 billion primarily driven by:

$4.7 billion in our Private Equity segment driven by $2.6 billion from corporate private equity, $968.0 million from Tactical Opportunities, $854.5 million from Strategic Partners and $226.7 million from core private equity,

$4.6 billion in our Real Estate segment driven by $2.5 billion from BREP opportunistic funds and

co-investment,

$1.1 billion from core+ real estate funds and $989.9 million from BREDS, and

$2.2 billion in our Credit segment driven by $893.0 million from our distressed strategies, $471.5 million from mezzanine funds and $368.8 million from certain long only and MLP strategies.

Total Assets Under Management

Total Assets Under Management were $545.5 billion at June 30, 2019, an increase of $33.7 billion compared to $511.8 billion at March 31, 2019. The net increase was due to:

•

Inflows of $45.1 billion related to:

$16.8 billion in our Private Equity segment driven by $7.2 billion from BIP, $6.3 billion from Strategic Partners, $2.4 billion from corporate private equity, $821.6 million from Tactical Opportunities and $142.7 million from core private equity,

$14.4 billion in our Real Estate segment driven by $8.4 billion from the initial close of the sixth European opportunistic fund (this amount will be reflected in Fee-Earning Assets Under Management when the investment period commences), $1.4 billion capital raised from BREP IX, $2.0 billion capital raised from BREIT, $1.2 billion from BREDS and $887.7 million from BPP funds,

$10.1 billion in our Credit segment driven by $5.5 billion from BIS, $2.4 billion from direct lending, $1.7 billion from certain long only and MLP strategies, $628.6 million from our distressed strategies and $453.2 million from a new CLO, partially offset by $864.0 million of allocations to other strategies and

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$3.8 billion in our Hedge Fund Solutions segment driven by $1.9 billion from individual investor and specialized solutions, $1.2 billion from customized solutions and $673.2 million from commingled products.

•

Market appreciation of $6.4 billion due to:

$3.5 billion of appreciation in our Real Estate segment driven by carrying value increases in our opportunistic and core+ real estate funds of 4.4% and 0.8%, respectively, which includes $156.5 million of foreign exchange appreciation across the segment,

$1.9 billion of appreciation in our Hedge Fund Solutions segment driven by reasons noted above in

Fee-Earning

Assets Under Management,

$842.4 million of appreciation in our Credit segment driven by $693.1 million of appreciation from certain long only and MLP strategies and $207.9 million of appreciation from our mezzanine funds, partially offset by $189.4 million of foreign exchange depreciation, and

$233.7 million of appreciation in our Private Equity segment driven by carrying value increase in corporate private equity and Tactical Opportunities of 0.7% and 1.3%, respectively, which included $64.3 million of foreign exchange depreciation across the segment.

Total Assets Under Management market appreciation (depreciation) in our Real Estate and Private Equity segments generally represents the change in fair value of the investments held and typically exceeds the

Fee-Earning

Assets Under Management market appreciation (depreciation).

Offsetting these increases were:

•

Realizations of $10.6 billion primarily driven by:

$4.7 billion in our Private Equity segment driven by continued disposition activity across the segment, mainly related to $2.6 billion from corporate private equity, $1.2 billion from Tactical Opportunities, $621.4 million from Strategic Partners, $137.5 million from core private equity and $136.0 million from BXLS,

$4.0 billion in our Real Estate segment driven by $3.1 billion from BREP opportunistic and

co-investment,

$505.3 million from core+ real estate funds and $358.7 million from BREDS, and

$1.6 billion in our Credit segment driven by $724.2 million from our distressed strategies, $295.9 million from our mezzanine funds and $251.8 million from direct lending.

Total Assets Under Management realizations in our Real Estate and Private Equity segments generally represent the total proceeds and typically exceed the

Fee-Earning

Assets Under Management realizations which generally represent only the invested capital.

•

Outflows of $7.2 billion primarily attributable to:

$4.1 billion in our Hedge Fund Solutions segment driven by $1.5 billion from customized solutions, $1.3 billion from individual investor and specialized solutions and $1.3 billion from commingled products,

$2.3 billion in our Credit segment driven by $1.9 billion from certain long only and MLP strategies and $150.2 million from our distressed strategies, and

$599.9 million in our Real Estate segment driven by redemptions from BREDS liquids funds and the release of uninvested capital for both a core+ vehicle and BREDS drawdown vehicle.

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Total Assets Under Management were $545.5 billion at June 30, 2019, an increase of $73.2 billion, or 16%, compared to $472.2 billion at December 31, 2018. The net increase was due to:

•

Inflows of $88.0 billion related to:

$45.3 billion in our Private Equity segment driven by $24.9 billion from corporate private equity due to the initial close for the eighth flagship private equity fund in the first quarter of 2019 (this amount will be reflected in Fee-Earning Assets Under Management when the investment period commences), $9.0 billion from Strategic Partners, $8.3 billion from BIP, $3.0 billion from Tactical Opportunities and $324.3 million from core private equity, partially offset by $210.2 million from BXLS,

$19.4 billion in our Real Estate segment driven by $8.4 billion from the initial close of the sixth European opportunistic fund, $3.9 billion capital raised from BREP IX, $2.9 billion capital raised from BREIT, $1.7 billion from BPP funds and $1.6 billion from BREDS,

$17.0 billion in our Credit segment driven by $5.6 billion from BIS, $4.0 billion from direct lending, $3.5 billion from our distressed strategies, $3.0 billion from certain long only and MLP strategies and $1.5 billion from CLO launches, and

$6.4 billion in our Hedge Fund Solutions segment driven by $2.7 billion from individual investor and specialized solutions, $2.6 billion from customized solutions, and $1.0 billion from commingled products.

•

Market appreciation of $19.4 billion due to:

$6.8 billion of appreciation in our Real Estate segment driven by carrying value increases in our opportunistic and core+ real estate funds of 9.1% and 4.1%, respectively, which includes $271.8 million of foreign exchange depreciation across the segment,

$4.6 billion of appreciation in our Credit segment driven by $3.2 billion of appreciation from certain long only and MLP strategies, $807.8 million of appreciation from BIS, $467.4 million of appreciation from our mezzanine funds and $244.6 million from direct lending, partially offset by $296.9 million of foreign exchange depreciation,

$4.1 billion of appreciation in our Private Equity segment driven by carrying value increase in corporate private equity, Tactical Opportunities and Strategic Partners of 5.3%, 4.0% and 1.8%, respectively, which included $107.4 million of foreign exchange appreciation across the segment, and

$3.9 billion of appreciation in our Hedge Fund Solutions segment driven by reasons noted above in

Fee-Earning

Assets Under Management.

Offsetting these increases were:

•

Realizations of $18.9 billion primarily driven by:

$8.4 billion in our Private Equity segment driven by continued disposition activity across the segment, mainly related to $4.8 billion from corporate private equity, $1.8 billion from Tactical Opportunities, $1.1 billion from Strategic Partners, $378.0 million from core private equity, and $283.8 million from BXLS,

$7.0 billion in our Real Estate segment driven by $5.2 billion from BREP opportunistic and

co-investment,

$1.1 billion from core+ real estate funds and $717.6 million from BREDS, and

$2.9 billion in our Credit segment driven by $1.2 billion from our distressed strategies, $690.3 million from our mezzanine strategies, $378.0 million from certain long only and MLP strategies and $368.8 million from direct lending.

•

Outflows of $15.3 billion primarily attributable to:

$6.9 billion in our Credit segment driven by $3.6 billion from certain long only and MLP strategies, $1.4 billion from direct lending and $1.2 billion from BIS,

$6.2 billion in our Hedge Fund Solutions segment driven by $2.7 billion from customized solutions, $2.1 billion from individual investor and specialized solutions and $1.3 billion from commingled products, and

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$1.8 billion in our Real Estate segment driven by redemptions from BREDS liquids funds and the release of uninvested capital for both a core+ vehicle and BREDS drawdown vehicle.

Limited Partner Capital Invested

The following presents the Limited Partner Capital Invested for each of the respective three month periods:

Note: Totals may not add due to rounding.


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2018		2019		2018		2019
	(Dollars in Thousands)
Limited Partner Capital Invested
Real Estate	$	4,538,154	$	3,887,091	$	8,792,355	$	6,927,157
Private Equity		2,356,960		6,909,871		5,658,909		13,338,863
Hedge Fund Solutions		112,753		1,101,801		868,571		1,209,807
Credit		1,018,831		3,158,897		2,030,192		4,426,196

	$	8,026,698	$	15,057,660	$	17,350,027	$	25,902,023

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Dry Powder

The following presents our Dry Powder as of quarter end of each period:

Note:

Totals may not add due to rounding.

(a)

Represents illiquid drawdown funds, a component of Perpetual Capital and

fee-paying

co-investments;

includes

fee-paying

third party capital as well as general partner and employee capital that does not earn fees. Amounts are reduced by outstanding capital commitments, for which capital has not yet been invested.


	June 30,
	2018		2019
	(Dollars in Thousands)
Dry Powder Available for Investment
Real Estate	$	26,545,329	$	45,079,008
Private Equity		36,425,713		74,928,694
Hedge Fund Solutions		3,501,849		2,390,445
Credit		21,844,231		27,920,402

	$	88,317,122	$	150,318,549

Net Accrued Performance Revenues

The following table presents the Accrued Performance Revenues, net of performance compensation, of the Blackstone Funds as of June 30, 2019 and 2018. Net Accrued Performance Revenues presented do not include clawback amounts, if any, which are disclosed in Note 18. “Commitments and Contingencies — Contingencies — Contingent Obligations (Clawback)” in the “Notes to Condensed Consolidated Financial Statements” in “Part I. Item 1. Financial Statements” of this filing. The Net Accrued Performance Revenues as of each reporting date were principally unrealized; if realized, such amount can be a significant component of Distributable Earnings. See “—

Non-GAAP

Financial Measures” for our reconciliation of Net Accrued Performance Revenues.

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	June 30,
	2019		2018
	(Dollars in Millions)
Real Estate
BREP IV	$	11	$	14
BREP V		54		159
BREP VI		106		132
BREP VII		542		592
BREP VIII		517		317
BREP International II		25		—
BREP Europe III		—		33
BREP Europe IV		209		211
BREP Europe V		161		61
BREP Asia I		159		110
BPP		242		194
BREIT		36		10
BREDS		28		29
BTAS		41		31

Total Real Estate (a)		2,133		1,893


Private Equity
BCP IV		37		99
BCP V		—		87
BCP VI		755		911
BCP VII		293		94
BCP Asia		6		—
BEP I		134		142
BEP II		54		50
Tactical Opportunities		140		152
Strategic Partners		98		91
BCEP		30		—
BTAS		51		30
Other		—		1

Total Private Equity (a)		1,599		1,657


Hedge Fund Solutions		69		23


Credit		244		299


Total Blackstone Net Accrued Performance Revenues	$	4,044	$	3,872

Note: Totals may not add due to rounding.

(a)	Real Estate and Private Equity include Co-Investments, as applicable.

For the year ended June 30, 2019, Net Accrued Performance Revenues receivable was increased by Net Accrued Performance Revenues of $1.2 billion and decreased by net realized distributions of $1.0 billion.

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Invested Performance Revenue Eligible Assets Under Management

The following presents our Invested Performance Revenue Eligible Assets Under Management as of quarter end for each period:

Note: Totals may not add due to rounding.

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Perpetual Capital

The following presents our Perpetual Capital as of quarter end for each period:

Note:

Totals may not add due to rounding.

Investment Record

Fund returns information for our significant funds is included throughout this discussion and analysis to facilitate an understanding of our results of operations for the periods presented. The fund returns information reflected in this discussion and analysis is not indicative of the financial performance of Blackstone and is also not necessarily indicative of the future performance of any particular fund. An investment in Blackstone is not an investment in any of our funds. There can be no assurance that any of our funds or our other existing and future funds will achieve similar returns.

The following table presents the investment record of our significant drawdown funds from inception through June 30, 2019:

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					Unrealized Investments						Realized Investments				Total Investments
Fund (Investment Period	Committed		Available						%										Net IRRs (d)
Beginning Date / Ending Date) (a)	Capital		Capital (b)		Value		MOIC (c)		Public		Value		MOIC (c)		Value		MOIC (c)		Realized		Total
	(Dollars in Thousands, Except Where Noted)

Real Estate
Pre-BREP	$	140,714	$	—	$	—		N/A		-	$	345,190		2.5x	$	345,190		2.5x		33%		33%
BREP I (Sep 1994 / Oct 1996)		380,708		—		—		N/A		-		1,327,708		2.8x		1,327,708		2.8x		40%		40%
BREP II (Oct 1996 / Mar 1999)		1,198,339		—		—		N/A		-		2,531,614		2.1x		2,531,614		2.1x		19%		19%
BREP III (Apr 1999 / Apr 2003)		1,522,708		—		—		N/A		-		3,330,406		2.4x		3,330,406		2.4x		21%		21%
BREP IV (Apr 2003 / Dec 2005)		2,198,694		—		85,178		0.1x		53%		4,493,255		2.2x		4,578,433		1.7x		28%		12%
BREP V (Dec 2005 / Feb 2007)		5,539,418		—		519,637		1.6x		33%		12,804,964		2.3x		13,324,601		2.3x		12%		11%
BREP VI (Feb 2007 / Aug 2011)		11,060,444		—		1,007,808		2.5x		53%		26,707,066		2.5x		27,714,874		2.5x		13%		13%
BREP VII (Aug 2011 / Apr 2015)		13,496,564		1,906,353		8,990,819		1.7x		16%		20,543,254		2.1x		29,534,073		2.0x		24%		17%
BREP VIII (Apr 2015 / Jun 2019)		16,585,073		5,069,766		15,875,492		1.4x		1%		5,251,374		1.6x		21,126,866		1.4x		27%		15%
BREP IX (Jun 2019 / Dec 2024)		19,562,369		19,562,369		—		N/A		-		—		N/A		—		N/A		N/A		N/A

Total Global BREP	$	71,685,031	$	26,538,488	$	26,478,934		1.5x		9%	$	77,334,831		2.2x	$	103,813,765		2.0x		18%		16%

BREP Int’l (Jan 2001 / Sep 2005)	€	824,172	€	—	€	—		N/A		-	€	1,370,659		2.1x	€	1,370,659		2.1x		23%		23%
BREP Int’l II (Sep 2005 / Jun 2008) (e)		1,629,748		—		167,659		4.4x		-		2,392,421		1.8x		2,560,080		1.8x		8%		8%
BREP Europe III (Jun 2008 / Sep 2013)		3,205,167		465,609		665,111		0.9x		-		5,496,293		2.5x		6,161,404		2.1x		21%		15%
BREP Europe IV (Sep 2013 / Dec 2016)		6,709,145		1,346,165		4,161,915		1.6x		13%		7,564,756		2.0x		11,726,671		1.8x		24%		17%
BREP Europe V (Dec 2016 / Jun 2022)		7,944,368		2,928,021		6,474,004		1.3x		-		186,289		2.4x		6,660,293		1.3x		64%		17%
BREP Europe VI (TBD)		7,525,683		7,525,681		—		N/A		-		—		N/A		—		N/A		N/A		N/A

Total Euro BREP	€	27,838,283	€	12,265,476	€	11,468,689		1.4x		5%	€	17,010,418		2.1x	€	28,479,107		1.7x		16%		14%

BREP Asia I (Jun 2013 / Dec 2017)	$	5,096,361	$	1,728,965	$	4,211,773		1.5x		11%	$	3,312,116		1.8x	$	7,523,889		1.6x		21%		15%
BREP Asia II (Dec 2017 / Jun 2023)		7,179,916		5,408,481		1,968,923		1.1x		-		2,000		N/M		1,970,923		1.1x		N/M		4%
BREP Co-Investment (f)		7,045,918		157,335		1,767,526		1.9x		26%		12,666,695		2.1x		14,434,221		2.1x		16%		16%

Total BREP	$	124,393,601	$	47,740,949	$	47,848,849		1.4x		12%	$	114,954,153		2.2x	$	162,803,002		1.9x		18%		15%

BPP (Various) (g)		26,737,038		1,222,865		30,407,207		1.2x		-		4,504,405		2.3x		34,911,612		1.3x		N/M		10%
BREDS High-Yield (Various) (h)		12,053,117		2,422,012		3,554,670		1.1x		-		10,742,370		1.3x		14,297,040		1.2x		11%		11%

continued...

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					Unrealized Investments						Realized Investments				Total Investments
Fund (Investment Period	Committed		Available						%										Net IRRs (d)
Beginning Date / Ending Date) (a)	Capital		Capital (b)		Value		MOIC (c)		Public		Value		MOIC (c)		Value		MOIC (c)		Realized		Total
	(Dollars in Thousands, Except Where Noted)

Private Equity
BCP I (Oct 1987 / Oct 1993)	$	859,081	$	—	$	—		N/A		-	$	1,741,738		2.6x	$	1,741,738		2.6x		19%		19%
BCP II (Oct 1993 / Aug 1997)		1,361,100		—		—		N/A		-		3,256,819		2.5x		3,256,819		2.5x		32%		32%
BCP III (Aug 1997 / Nov 2002)		3,967,422		—		—		N/A		-		9,184,688		2.3x		9,184,688		2.3x		14%		14%
BCOM (Jun 2000 / Jun 2006)		2,137,330		24,575		13,723		N/A		-		2,953,649		1.4x		2,967,372		1.4x		6%		6%
BCP IV (Nov 2002 / Dec 2005)		6,773,182		204,794		169,034		2.6x		-		21,417,730		2.9x		21,586,764		2.9x		36%		36%
BCP V (Dec 2005 / Jan 2011)		21,013,586		1,039,733		803,327		0.8x		44%		37,188,995		1.9x		37,992,322		1.9x		9%		8%
BCP VI (Jan 2011 / May 2016)		15,191,541		1,740,222		13,779,127		1.7x		38%		13,530,145		2.1x		27,309,272		1.9x		19%		13%
BEP I (Aug 2011 / Feb 2015)		2,435,285		224,784		1,942,443		1.9x		58%		2,655,839		1.9x		4,598,282		1.9x		16%		14%
BEP II (Feb 2015 / Feb 2021)		4,912,842		857,610		4,410,554		1.3x		-		269,992		1.8x		4,680,546		1.3x		24%		9%
BCP VII (May 2016 / May 2022)		18,787,568		7,414,455		12,744,292		1.4x		-		1,167,223		1.7x		13,911,515		1.4x		42%		19%
BCP Asia (Dec 2017 / Dec 2023)		2,389,096		1,495,423		565,977		1.3x		-		—		N/A		565,977		1.3x		N/A		37%
BEP III (TBD)		3,808,631		3,808,631		—		N/A		-		—		N/A		—		N/A		N/A		N/A
BCP VIII (TBD)		23,186,208		23,186,208		—		N/A		-		—		N/A		—		N/A		N/A		N/A

Total Corporate Private Equity	$	106,822,872	$	39,996,435	$	34,428,477		1.5x		19%	$	93,366,818		2.1x	$	127,795,295		1.9x		16%		15%

Tactical Opportunities (Various)		23,700,086		10,574,775		10,193,246		1.2x		10%		7,679,719		1.7x		17,872,965		1.4x		21%		10%
Tactical Opportunities Co-Investment and Other (Various)		5,938,806		1,955,170		3,777,453		1.2x		5%		1,767,187		1.5x		5,544,640		1.3x		24%		12%

Total Tactical Opportunities	$	29,638,892	$	12,529,945	$	13,970,699		1.2x		9%	$	9,446,906		1.7x	$	23,417,605		1.4x		21%		11%

Strategic Partners I-V (Various) (i)		11,862,601		1,752,541		1,281,172		N/M		-		16,352,178		N/M		17,633,350		1.5x		N/A		13%
Strategic Partners VI (Apr 2014 / Apr 2016) (i)		4,362,750		1,123,539		1,590,319		N/M		-		2,956,879		N/M		4,547,198		1.5x		N/A		17%
Strategic Partners VII (May 2016 / Mar 2019) (i)		7,489,970		2,489,452		5,673,278		N/M		-		885,791		N/M		6,559,069		1.4x		N/A		25%
Strategic Partners RA II (May 2017 / Mar 2022) (i)		1,749,807		684,257		730,741		N/M		-		109,311		N/M		840,052		1.2x		N/A		17%
Strategic Partners VIII (Mar 2019 / Jul 2023) (i)		10,533,600		7,676,804		591,603		N/M		-		—		N/A		591,603		1.0x		N/A		N/M
Strategic Partners RE, SMA and Other (Various) (i)		5,665,536		1,881,140		1,926,558		N/M		-		968,040		N/M		2,894,598		1.3x		N/A		17%

Total Strategic Partners	$	41,664,264	$	15,607,733	$	11,793,671		N/M		-	$	21,272,199		N/M	$	33,065,870		1.4x		N/A		14%

BCEP (Jan 2017 / Jan 2021) (j)		4,755,613		2,281,812		3,102,524		1.2x		-		378,007		1.6x		3,480,531		1.3x		27%		14%
BIP (Various)		13,659,163		12,471,902		1,187,262		1.0x		100%		—		N/A		1,187,262		1.0x		N/A		N/M

continued...

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					Unrealized Investments						Realized Investments				Total Investments
Fund (Investment Period	Committed		Available						%										Net IRRs (d)
Beginning Date / Ending Date) (a)	Capital		Capital (b)		Value		MOIC (c)		Public		Value		MOIC (c)		Value		MOIC (c)		Realized		Total
	(Dollars in Thousands, Except Where Noted)

Hedge Fund Solutions
Total Strategic Capital Holdings (Dec 2013 / Jun 2020) (k)	$	3,378,575	$	730,855	$	1,676,269		1.1x		-	$	392,301		N/M	$	2,068,570		1.4x		N/A		9%


Credit (l)
Mezzanine I (Jul 2007 / Oct 2011)	$	2,000,000	$	97,114	$	22,864		1.2x		-	$	4,772,270		1.6x	$	4,795,134		1.6x		N/A		17%
Mezzanine II (Nov 2011 / Nov 2016)		4,120,000		1,078,506		1,898,494		1.0x		7%		4,816,985		1.6x		6,715,479		1.4x		N/A		12%
Mezzanine III (Sep 2016 / Sep 2021)		6,639,133		2,260,839		4,323,712		1.1x		2%		1,248,248		1.6x		5,571,960		1.2x		N/A		13%
Stressed / Distressed Investing I (Sep 2009 / May 2013)		3,253,143		135,000		201,288		0.4x		-		5,744,873		1.6x		5,946,161		1.4x		N/A		10%
Stressed / Distressed Investing II (Jun 2013 / Jun 2018)		5,125,000		540,145		1,686,278		0.8x		18%		3,971,120		1.3x		5,657,398		1.1x		N/A		5%
Stressed / Distressed Investing III (Dec 2017 / Dec 2022)		7,356,380		5,447,806		1,780,427		1.0x		2%		553,681		1.3x		2,334,108		1.1x		N/A		15%
Energy Select Opportunities (Nov 2015 / Nov 2018)		2,856,867		884,658		2,022,053		1.2x		-		670,729		1.6x		2,692,782		1.3x		N/A		12%
Energy Select Opportunities II (Feb 2019 / Feb 2024)		3,347,431		2,976,038		489,928		1.0x		-		—		N/A		489,928		1.0x		N/A		N/M
Euro
European Senior Debt Fund (Feb 2015 / Feb 2019)	€	1,694,689	€	318,903	€	2,108,075		1.0x		-	€	940,008		1.6x	€	3,048,083		1.2x		N/A		10%
European Senior Debt Fund II (Jun 2019 / Jun 2024)	€	629,740	€	476,310	€	152,443		1.0x		-	€	—		N/A	€	152,443		1.0x		N/A		N/M

Total Credit	$	37,678,960	$	14,325,694	$	14,999,276		1.0x		4%	$	22,853,291		1.5x	$	37,852,567		1.3x		N/A		12%

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

N/M	Not meaningful generally due to the limited time since initial investment.

N/A	Not applicable.

(a)	Excludes investment vehicles where Blackstone does not earn fees.

(b)	Available Capital represents total investable capital commitments, including side-by-side, adjusted for certain expenses and expired or recallable capital and may include leverage, less invested capital. This amount is not reduced by outstanding commitments to investments.

(c)	Multiple of Invested Capital (“MOIC”) represents carrying value, before management fees, expenses and Performance Revenues, divided by invested capital.

(d)

Net Internal Rate of Return (“IRR”) represents the annualized inception to June 30, 2019 IRR on total invested capital based on realized proceeds and unrealized value, as applicable, after management fees, expenses and Performance Revenues. IRRs are calculated using actual timing of limited partner cash flows. Initial inception date cash flow may differ from the Investment Period Beginning Date.

(e)	The 8% Realized Net IRR and 8% Total Net IRR exclude investors that opted out of the Hilton investment opportunity. Overall BREP International II performance reflects a 7% Realized Net IRR and a 7% Total Net IRR.

(f)	BREP Co-Investment represents co-investment capital raised for various BREP investments. The Net IRR reflected is calculated by aggregating each co-investment’s realized proceeds and unrealized value, as applicable, after management fees, expenses and Performance Revenues.

(g)	BPP represents the core+ real estate funds which invest with a more modest risk profile and lower leverage. Excludes BREIT.

(h)	BREDS High-Yield represents the flagship real estate debt drawdown funds only and excludes BREDS High-Grade.

(i)	Realizations are treated as return of capital until fully recovered and therefore unrealized and realized MOICs are not meaningful. If information is not available on a timely basis, returns are calculated from results that are reported on a three month lag.

(j)	BCEP, or Blackstone Core Equity Partners, is a core private equity fund which invests with a more modest risk profile and longer hold period.

(k)	Represents Blackstone Strategic Capital Holdings (including Co-investment) which is focused on acquiring strategic minority positions in alternative asset managers.

(l)	Funds presented represent the flagship credit drawdown funds only. The Total Credit Net IRR is the combined IRR of the credit drawdown funds presented.

Segment Analysis

Discussed below is our Segment Distributable Earnings for each of our segments. This information is reflected in the manner utilized by our senior management to make operating decisions, assess performance and allocate resources. References to “our” sectors or investments may also refer to portfolio companies and investments of the underlying funds that we manage.

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Real Estate

The following table presents the results of operations for our Real Estate segment:


	Three Months Ended												Six Months Ended
	June 30,						2019 vs. 2018						June 30,						2019 vs. 2018
	2019			2018			$			%			2019			2018			$			%
	(Dollars in Thousands)
Management Fees, Net
Base Management Fees	$	255,636		$	249,680		$	5,956			2	%	$	515,881		$	476,206		$	39,675			8	%
Transaction and Other Fees, Net		23,990			23,859			131			1	%		47,901			46,947			954			2	%
Management Fee Offsets		(1,686	)		(3,785	)		2,099			-55	%		(1,966	)		(5,453	)		3,487			-64	%

Total Management Fees, Net		277,940			269,754			8,186			3	%		561,816			517,700			44,116			9	%
Fee Related Performance Revenues		11,072			45,515			(34,443	)		-76	%		17,748			50,018			(32,270	)		-65	%
Fee Related Compensation		(97,795	)		(120,783	)		22,988			-19	%		(212,611	)		(221,393	)		8,782			-4	%
Other Operating Expenses		(40,114	)		(36,026	)		(4,088	)		11	%		(79,100	)		(65,443	)		(13,657	)		21	%

Fee Related Earnings		151,103			158,460			(7,357	)		-5	%		287,853			280,882			6,971			2	%

Realized Performance Revenues		198,573			317,509			(118,936	)		-37	%		275,755			468,690			(192,935	)		-41	%
Realized Performance Compensation		(67,742	)		(94,716	)		26,974			-28	%		(97,642	)		(150,831	)		53,189			-35	%
Realized Principal Investment Income		47,420			50,199			(2,779	)		-6	%		45,289			64,889			(19,600	)		-30	%

Net Realizations		178,251			272,992			(94,741	)		-35	%		223,402			382,748			(159,346	)		-42	%

Segment Distributable Earnings	$	329,354		$	431,452		$	(102,098	)		-24	%	$	511,255		$	663,630		$	(152,375	)		-23	%

N/M Not meaningful.

Three Months Ended June 30, 2019 Compared to Three Months Ended June 30, 2018

Segment Distributable Earnings were $329.4 million for the three months ended June 30, 2019, a decrease of $102.1 million, compared to $431.5 million for the three months ended June 30, 2018. The decrease in Segment Distributable Earnings was primarily attributable to decreases of $7.4 million in Fee Related Earnings and $94.7 million in Net Realizations.

Segment Distributable Earnings in our Real Estate segment in the second quarter of 2019 were lower compared to the second quarter of 2018. This was primarily driven by lower realizations in an environment that has, despite increased optimism in the first and second quarters of 2019, been characterized by volatility and macroeconomic and geopolitical concerns, such as concerns regarding trade conflict with China and the rate of global growth. We have also seen an increasing focus in growing urban areas in certain markets in the U.S. and Western Europe toward rent regulation as a means to address residential affordability caused by undersupply. Such conditions (which may be across industries, sectors or geographies) may contribute to adverse operating performance, including by moderating rent growth in certain markets in our residential portfolio. Such conditions may also limit attractive realization opportunities for our Real Estate Segment, which had $4.0 billion of realizations in the second quarter of 2019. Overall, operating trends in our Real Estate portfolio remain stable and supply-demand fundamentals remain positive in most markets, although decelerating growth in certain sectors, including retail, may contribute to a more challenging operating environment. Factors such as increasing wages and a tight labor market create profit margin pressure in certain sectors in the U.S., including hospitality. Capital deployment in opportunistic investments in the United States continues to be challenging, as distress levels are low and asset values are relatively high. Nonetheless, our Real Estate funds deployed or committed an aggregate of $10.1 billion of capital in the second quarter of 2019, primarily in North America. Although interest rates are expected to decrease in the near term, should the Federal Reserve choose to increase interest rates against a backdrop of slowing economic growth, the cost of debt financing for our real estate businesses and assets will likely increase and Segment Distributable Earnings in our Real Estate segment would also potentially be negatively impacted. See “Part I. Item 1A. Risk Factors — Risks Related to Our Business — Difficult market conditions can

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adversely affect our business in many ways, including by reducing the value or performance of the investments made by our investment funds, making it more difficult to find opportunities for our funds to exit and realize value from existing investments and reducing the ability of our investment funds to raise or deploy capital, each of which could materially reduce our revenue, earnings and cash flow and adversely affect our financial prospects and condition.” in our Annual Report on Form

10-K

for the year ended December 31, 2018.

Fee Related Earnings

Fee Related Earnings were $151.1 million for the three months ended June 30, 2019, a decrease of $7.4 million, compared to $158.5 million for the three months ended June 30, 2018. The decrease in Fee Related Earnings was primarily attributable to a decrease of $34.4 million in Fee Related Performance Revenues, partially offset by a decrease of $23.0 million in Fee Related Compensation and an increase of $8.2 million in Management Fees, Net.

Fee Related Performance Revenues were $11.1 million for the three months ended June 30, 2019, a decrease of $34.4 million, compared to $45.5 million for the three months ended June 30, 2018. The decrease was primarily due to timing of crystallizations in BPP U.S.

Fee Related Compensation was $97.8 million for the three months ended June 30, 2019, a decrease of $23.0 million, compared to $120.8 million for the three months ended June 30, 2018. The decrease was primarily due to the decrease in Fee Related Performance Revenues, on which a portion of Fee Related Compensation is based.

Management Fees, Net were $277.9 million for the three months ended June 30, 2019, an increase of $8.2 million, compared to $269.8 million for the three months ended June 30, 2018, primarily driven by an increase in Base Management Fees. Base Management Fees were $255.6 million for the three months ended June 30, 2019, an increase of $6.0 million, compared to $249.7 million for the three months ended June 30, 2018, primarily due to

Fee-Earning

Assets Under Management growth in our core+ real estate funds.

Net Realizations

Net Realizations were $178.3 million for the three months ended June 30, 2019, a decrease of $94.7 million, compared to $273.0 million for the three months ended June 30, 2018. The decrease in Net Realizations was primarily attributable to a decrease of $118.9 million in Realized Performance Revenues, partially offset by a decrease of $27.0 million in Realized Performance Compensation.

Realized Performance Revenues were $198.6 million for the three months ended June 30, 2019, a decrease of $118.9 million, compared to $317.5 million for the three months ended June 30, 2018. The decrease was due to higher realization activity in the three months ended June 30, 2018.

Realized Performance Compensation was $67.7 million for the three months ended June 30, 2019, a decrease of $27.0 million, compared to $94.7 million for the three months ended June 30, 2018. The decrease was due to the decrease in Realized Performance Revenues.

Six Months Ended June 30, 2019 Compared to Six Months Ended June 30, 2018

Segment Distributable Earnings were $511.3 million for the six months ended June 30, 2019, a decrease of $152.4 million, compared to $663.6 million for the six months ended June 30, 2018. The decrease in Segment Distributable Earnings was primarily attributable to a decrease of $159.3 million in Net Realizations, partially offset by an increase of $7.0 million in Fee Related Earnings.

Fee Related Earnings

Fee Related Earnings were $287.9 million for the six months ended June 30, 2019, an increase of $7.0 million, compared to $280.9 million for the six months ended June 30, 2018. The increase in Fee Related Earnings was primarily attributable to an increase of $44.1 million in Management Fees, Net and a decrease of $8.8 million in

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Fee Related Compensation, partially offset by a decrease of $32.3 million in Fee Related Performance Revenues and an increase of $13.7 million in Other Operating Expenses.

Management Fees, Net were $561.8 million for the six months ended June 30, 2019, an increase of $44.1 million, compared to $517.7 million for the six months ended June 30, 2018, primarily driven by an increase in Base Management Fees. Base Management Fees were $515.9 million for the six months ended June 30, 2019, an increase of $39.7 million, compared to $476.2 million for the six months ended June 30, 2018, primarily due to

Fee-Earning

Assets Under Management growth in our core+ real estate funds.

The Annualized Base Management Fee Rate decreased from 1.12% at June 30, 2018 to 0.91% at June 30, 2019. The decrease was principally due to the commencement of the investment period of BREP IX in the second quarter of 2019, which added

Fee-Earning

Assets Under Management, the majority of which are under a Base Management Fee holiday until the fourth quarter of 2019.

Fee Related Compensation was $212.6 million for the six months ended June 30, 2019, a decrease of $8.8 million, compared to $221.4 million for the six months ended June 30, 2018. The decrease was primarily due to a decrease in Fee Related Performance Fee Revenues, offset by an increase in Management and Advisory Fees, Net, on which a portion of Fee Related Compensation is based.

Fee Related Performance Revenues were $17.7 million for the six months ended June 30, 2019, a decrease of $32.3 million, compared to $50.0 million for the six months ended June 30, 2018. The decrease was primarily due to timing of crystallizations in BPP U.S.

Other Operating Expenses were $79.1 million for the six months ended June 30, 2019, an increase of $13.7 million, compared to $65.4 million for the six months ended June 30, 2018. The increase was primarily due to an increase in professional fees.

Net Realizations

Net Realizations were $223.4 million for the six months ended June 30, 2019, a decrease of $159.3 million, compared to $382.7 million for the six months ended June 30, 2018. The decrease in Net Realizations was primarily attributable to decreases of $192.9 million in Realized Performance Revenues and $19.6 million in Realized Principal Investment Income, partially offset by a decrease of $53.2 million in Realized Performance Compensation.

Realized Performance Revenues were $275.8 million for the six months ended June 30, 2019, a decrease of $192.9 million, compared to $468.7 million for the six months ended June 30, 2018. The decrease was due to lower Realized Performance Revenues in BREP.

Realized Principal Investment Income was $45.3 million for the six months ended June 30, 2019, a decrease of $19.6 million, compared to $64.9 million for the six months ended June 30, 2018. The decrease was primarily due to lower Realized Principal Investment Income for BREP VI.

Realized Performance Compensation was $97.6 million for the six months ended June 30, 2019, a decrease of $53.2 million, compared to $150.8 million for the six months ended June 30, 2018. The decrease was due to the decrease in Realized Performance Revenues.

Fund Returns

Fund return information for our significant funds is included throughout this discussion and analysis to facilitate an understanding of our results of operations for the periods presented. The fund returns information reflected in this discussion and analysis is not indicative of the financial performance of Blackstone and is also not necessarily indicative of the future performance of any particular fund. An investment in Blackstone is not an investment in any of our funds. There can be no assurance that any of our funds or our other existing and future funds will achieve similar returns.

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The following table presents the internal rates of return, except where noted, of our significant real estate funds:


	Three Months Ended								Six Months Ended								June 30, 2019
	June 30,								June 30,								Inception to Date
	2019				2018				2019				2018				Realized				Total
Fund / Composite (a)	Gross		Net		Gross		Net		Gross		Net		Gross		Net		Gross		Net		Gross		Net
BREP IV		49%		30%		7%		5%		40%		27%		8%		6%		48%		28%		22%		12%
BREP V		9%		8%		5%		5%		16%		13%		6%		5%		15%		12%		14%		11%
BREP VI		14%		13%		2%		1%		15%		13%		1%		1%		18%		13%		17%		13%
BREP VII		4%		3%		1%		1%		10%		8%		5%		4%		33%		24%		23%		17%
BREP VIII		4%		3%		4%		3%		7%		5%		9%		6%		37%		27%		23%		15%
BREP International II (b)(c)(i)		8%		-6%		9%		8%		140%		66%		14%		12%		9%		8%		10%		8%
BREP Europe III (b)		1%		1%		-1%		-1%		1%		-		1%		-		30%		21%		23%		15%
BREP Europe IV (b)		-		-		6%		5%		5%		4%		11%		9%		33%		24%		23%		17%
BREP Europe V (b)		5%		3%		6%		4%		10%		7%		12%		8%		91%		64%		26%		17%
BREP Asia I		5%		4%		1%		-		10%		8%		4%		3%		29%		21%		22%		15%
BREP Asia II		7%		5%		N/M		N/M		14%		8%		N/M		N/M		N/M		N/M		23%		4%
BREP Co-Investment (d)		9%		9%		4%		3%		25%		23%		3%		2%		18%		16%		18%		16%
BPP (e)		1%		1%		2%		2%		4%		3%		6%		5%		N/M		N/M		12%		10%
BREDS High-Yield (f)		3%		3%		1%		-		8%		6%		5%		4%		15%		11%		15%		11%
BREDS High-Grade (f)		2%		2%		N/M		N/M		4%		3%		N/M		N/M		9%		8%		9%		6%
BREDS Liquid (g)		2%		2%		3%		2%		8%		7%		5%		4%		N/A		N/A		11%		8%
BXMT (h)		N/A		5%		N/A		2%		N/A		16%		N/A		2%		N/A		N/A		N/A		14%
BREIT (h)		N/A		3%		N/A		2%		N/A		5%		N/A		4%		N/A		N/A		N/A		9%

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

N/M	Not meaningful generally due to the limited time since initial investment.

N/A	Not applicable.

(a)	Net returns are based on the change in carrying value (realized and unrealized) after management fees, expenses and Performance Revenues.

(b)	Euro-based internal rates of return.

(c)	The 8% Realized Net IRR and 8% Total Net IRR exclude investors that opted out of the Hilton investment opportunity. Overall BREP International II Performance reflects a 7% Realized Net IRR and a 7% Total Net IRR.

(d)	Excludes fully realized co-investments prior to Blackstone’s IPO.

(e)	BPP represents the core+ real estate funds which invest with a more modest risk profile and lower leverage. Excludes BREIT.

(f)

Effective March 31, 2019, the former BREDS Drawdown composite is being presented by its components, BREDS High-Yield and BREDS High-Grade. BREDS High-Yield represents the flagship real estate debt drawdown funds and excludes the BREDS High-Grade drawdown fund, which has a different risk-return profile. Inception to date returns are from July 1, 2009 and July 1, 2017 for BREDS High-Yield and BREDS High-Grade, respectively. Prior periods have been updated to reflect this presentation.

(g)

BREDS Liquid represents BREDS funds that invest in liquid real estate debt securities, except funds in liquidation and insurance mandates with specific investment objectives. Effective June 30, 2018, the returns presented represent summarized asset-weighted gross and net rates of return. Inception to Date returns are presented on an annualized basis. Prior periods have been updated to reflect such rates of return.

(h)

Reflects annualized return of a shareholder invested in the REIT as of the beginning of each period presented, assuming reinvestment of all dividends received during the period, and no upfront selling commission for BREIT, net of all fees and expenses incurred by the REIT. For BXMT, return incorporates

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the closing NYSE stock price as of each period end, and for BREIT, return incorporates the final Class S NAV/share as of each period end. Inception to date returns are from May 22, 2013 and January 1, 2017 for BXMT and BREIT, respectively.

(i)	For the three and six months ended June 30, 2019, the appreciation of our remaining assets has resulted in the fund exceeding the preferred return.

As of June 30, 2019, the investment period for BREP International II had expired and the fund was not above its carried interest threshold. BREP International II Investors that opted out of the Hilton investment opportunity are not expected to exceed the carried interest threshold in future periods. However, since gains are not earned

pro-rata,

certain BREP International II investors who participated in the Hilton investment opportunity have exceeded the carried interest threshold this quarter.

As of June 30, 2019, BREP Asia II was not above its carried interest threshold at the fund level. However, certain BREP Asia II investors have a reduced base management fee due to a larger capital commitment amount, thereby resulting in higher net gains and have exceeded the carried interest threshold this quarter.

The Real Estate segment has two funds in their investment period, which were above their respective carried interest thresholds as of June 30, 2019: BREP Europe V and BREDS III.

Private Equity

The following table presents the results of operations for our Private Equity segment:


	Three Months Ended												Six Months Ended
	June 30,						2019 vs. 2018						June 30,						2019 vs. 2018
	2019			2018			$			%			2019			2018			$			%
	(Dollars in Thousands)
Management and Advisory Fees, Net
Base Management Fees	$	265,139		$	195,521		$	69,618			36	%	$	484,556		$	378,482		$	106,074			28	%
Transaction, Advisory and Other Fees, Net		31,526			12,780			18,746			147	%		68,817			23,874			44,943			188	%
Management Fee Offsets		(17,689	)		(4,351	)		(13,338	)		307	%		(22,674	)		(7,544	)		(15,130	)		201	%

Total Management and Advisory Fees, Net		278,976			203,950			75,026			37	%		530,699			394,812			135,887			34	%
Fee Related Compensation		(105,107	)		(94,170	)		(10,937	)		12	%		(212,694	)		(183,736	)		(28,958	)		16	%
Other Operating Expenses		(40,429	)		(36,047	)		(4,382	)		12	%		(74,630	)		(67,198	)		(7,432	)		11	%

Fee Related Earnings		133,440			73,733			59,707			81	%		243,375			143,878			99,497			69	%

Realized Performance Revenues		122,907			138,171			(15,264	)		-11	%		279,506			215,294			64,212			30	%
Realized Performance Compensation		(52,081	)		(68,513	)		16,432			-24	%		(102,637	)		(101,558	)		(1,079	)		1	%
Realized Principal Investment Income		42,906			32,600			10,306			32	%		68,045			38,938			29,107			75	%

Net Realizations		113,732			102,258			11,474			11	%		244,914			152,674			92,240			60	%

Segment Distributable Earnings	$	247,172		$	175,991		$	71,181			40	%	$	488,289		$	296,552		$	191,737			65	%

N/M	Not meaningful.

Three Months Ended June 30, 2019 Compared to Three Months Ended June 30, 2018

Segment Distributable Earnings were $247.2 million for the three months ended June 30, 2019, an increase of $71.2 million, or 40%, compared to $176.0 million for the three months ended June 30, 2018. The increase in Segment Distributable Earnings was primarily attributable to increases of $59.7 million in Fee Related Earnings and $11.5 million in Net Realizations.

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Segment Distributable Earnings in our Private Equity segment in the second quarter of 2019 were higher compared to the second quarter of 2018, primarily driven by an increase in

Fee-Earning

Assets Under Management, particularly in Strategic Partners and BIP. Positive underlying performance in the corporate private equity portfolio, which appreciated 0.7% in the second quarter, was partially offset by declines in certain upstream energy positions and one large public holding. The persistence of weakened market fundamentals in certain energy subsectors, particularly upstream, would negatively impact the performance of certain investments in our energy and corporate private equity funds. Despite increased optimism in the first and second quarters of 2019, the market environment has been characterized by volatility and macroeconomic and geopolitical concerns, such as concerns regarding trade conflict with China and the rate of global growth. Such conditions (which may be across industries, sectors or geographies) may contribute to adverse operating performance at our portfolio companies and limit attractive realization opportunities for our Private Equity segment, which had $4.7 billion of realizations in the second quarter of 2019. Factors such as increasing wages, a tight labor market, the imposition of tariffs and overall uncertainty regarding trade policy, create challenges to increasing or maintaining profit margins for U.S. companies, particularly in industrials and retail. In that connection, adverse wage and trade developments put pressure on our ability to increase profit margins at our U.S. portfolio companies through operational initiatives. The market environment continues to be generally characterized by high prices, and this can make deployment of capital more difficult. Nonetheless, we deployed or committed an aggregate of $10.2 billion of capital across the segment in the second quarter of 2019. Although interest rates are expected to decrease in the near term, should the Federal Reserve choose to increase interest rates against a backdrop of slowing economic growth, it should have an adverse effect on markets overall and potentially on Segment Distributable Earnings in our Private Equity segment. See “Part I. Item 1A. Risk Factors — Risks Related to Our Business — Difficult market conditions can adversely affect our business in many ways, including by reducing the value or performance of the investments made by our investment funds, making it more difficult to find opportunities for our funds to exit and realize value from existing investments and reducing the ability of our investment funds to raise or deploy capital, each of which could materially reduce our revenue, earnings and cash flow and adversely affect our financial prospects and condition.” in our Annual Report on Form

10-K

for the year ended December 31, 2018.

Fee Related Earnings

Fee Related Earnings were $133.4 million for the three months ended June 30, 2019, an increase of $59.7 million, or 81%, compared to $73.7 million for the three months ended June 30, 2018. The increase in Fee Related Earnings was primarily attributable to an increase of $75.0 million in Management and Advisory Fees, Net, partially offset by an increase of $10.9 million in Fee Related Compensation.

Management and Advisory Fees, Net were $279.0 million for the three months ended June 30, 2019, an increase of $75.0 million, compared to $204.0 million for the three months ended June 30, 2018, primarily driven by an increase in Base Management Fees. Base Management Fees were $265.1 million for the three months ended June 30, 2019, an increase of $69.6 million, compared to $195.5 million for the three months ended June 30, 2018, primarily due to increases in

Fee-Earning

Assets Under Management in BIP and Strategic Partners.

Fee Related Compensation was $105.1 million for the three months ended June 30, 2019, an increase of $10.9 million, compared to $94.2 million for the three months ended June 30, 2018. The increase was primarily due to the increase in Management and Advisory Fees, Net, on which a portion of Fee Related Compensation is based.

Net Realizations

Net Realizations were $113.7 million for the three months ended June 30, 2019, an increase of $11.5 million, or 11%, compared to $102.3 million for the three months ended June 30, 2018. The increase in Net Realizations was primarily attributable to an increase of $10.3 million in Realized Principal Investment Income and a decrease of $16.4 million in Realized Performance Compensation, partially offset by a decrease of $15.3 million in Realized Performance Revenues.

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Realized Principal Investment Income was $42.9 million for the three months ended June 30, 2019, an increase of $10.3 million, compared to $32.6 million for the three months ended June 30, 2018. The increase was primarily due to realizations on Blackstone’s balance sheet investments.

Realized Performance Compensation was $52.1 million for the three months ended June 30, 2019, a decrease of $16.4 million, compared to $68.5 million for the three months ended June 30, 2018. The decrease was due to the decrease in Realized Performance Revenues.

Realized Performance Revenues were $122.9 million for the three months ended June 30, 2019, a decrease of $15.3 million, compared to $138.2 million for the three months ended June 30, 2018. The decrease was primarily due to lower Realized Performance Revenues in Strategic Partners and corporate private equity.

Six Months Ended June 30, 2019 Compared to Six Months Ended June 30, 2018

Segment Distributable Earnings were $488.3 million for the six months ended June 30, 2019, an increase of $191.7 million, or 65%, compared to $296.6 million for the six months ended June 30, 2018. The increase in Segment Distributable Earnings was primarily attributable to increases of $99.5 million in Fee Related Earnings and $92.2 million in Net Realizations.

Fee Related Earnings

Fee Related Earnings were $243.4 million for the six months ended June 30, 2019, an increase of $99.5 million, or 69%, compared to $143.9 million for the six months ended June 30, 2018. The increase in Fee Related Earnings was primarily attributable to an increase of $135.9 million in Management and Advisory Fees, Net, partially offset by an increase of $29.0 million in Fee Related Compensation.

Management and Advisory Fees, Net were $530.7 million for the six months ended June 30, 2019, an increase of $135.9 million, compared to $394.8 million for the six months ended June 30, 2018, primarily driven by an increase in Base Management Fees. Base Management Fees were $484.6 million for the six months ended June 30, 2019, an increase of $106.1 million, compared to $378.5 million for the six months ended June 30, 2018, primarily due to increases in

Fee-Earning

Assets Under Management in BIP, Tactical Opportunities and Strategic Partners.

The Annualized Base Management Fee Rate increased from 1.00% at June 30, 2018 to 1.10% at June 30, 2019. The increase was principally due to the acquisition of Clarus in the fourth quarter of 2018 and the launch of Strategic Partners VIII in 2019.

Fee Related Compensation was $212.7 million for the six months ended June 30, 2019, an increase of $29.0 million, compared to $183.7 million for the six months ended June 30, 2018. The increase was primarily due to the increase in Management and Advisory Fees, Net, on which a portion of Fee Related Compensation is based.

Net Realizations

Net Realizations were $244.9 million for the six months ended June 30, 2019, an increase of $92.2 million, or 60%, compared to $152.7 million for the six months ended June 30, 2018. The increase in Net Realizations was primarily attributable to increases of $64.2 million in Realized Performance Revenues and $29.1 million in Realized Principal Investment Income.

Realized Performance Revenues were $279.5 million for the six months ended June 30, 2019, an increase of $64.2 million, compared to $215.3 million for the six months ended June 30, 2018. The increase was primarily due to higher Realized Performance Revenues in corporate private equity and Tactical Opportunities.

Realized Principal Investment Income was $68.0 million for the six months ended June 30, 2019, an increase of $29.1 million, compared to $38.9 million for the six months ended June 30, 2018. The increase was primarily due to realizations on Blackstone’s balance sheet investments.

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Fund Returns

The following table presents the internal rates of return of our significant private equity funds:


	Three Months Ended								Six Months Ended								June 30, 2019
	June 30,								June 30,								Inception to Date
	2019				2018				2019				2018				Realized				Total
Fund (a)	Gross		Net		Gross		Net		Gross		Net		Gross		Net		Gross		Net		Gross		Net
BCP IV		-3%		-2%		24%		21%		41%		33%		16%		14%		50%		36%		50%		36%
BCP V		-6%		-3%		14%		11%		-4%		-1%		12%		9%		11%		9%		10%		8%
BCP VI		-2%		-2%		8%		7%		4%		3%		16%		13%		25%		19%		18%		13%
BCP VII		6%		4%		8%		5%		10%		7%		20%		12%		62%		42%		32%		19%
BEP I		1%		1%		19%		16%		12%		11%		19%		16%		22%		16%		18%		14%
BEP II		-2%		-2%		8%		5%		-2%		-3%		18%		11%		57%		24%		19%		9%
BCOM		-12%		-12%		-2%		-2%		-20%		-20%		2%		1%		13%		6%		13%		6%
Tactical Opportunities		1%		-		2%		2%		5%		3%		8%		6%		25%		21%		14%		10%
Tactical Opportunities Co-Investment and Other		1%		-		8%		5%		4%		1%		12%		10%		26%		24%		16%		12%
Strategic Partners I-V (b)		-7%		-7%		2%		1%		-6%		-6%		4%		3%		N/A		N/A		16%		13%
Strategic Partners VI (b)		-6%		-6%		8%		7%		-4%		-4%		14%		12%		N/A		N/A		22%		17%
Strategic Partners VII (b)		-4%		-4%		8%		7%		2%		2%		20%		17%		N/A		N/A		33%		25%
Strategic Partners RA II (b)		6%		4%		10%		5%		11%		8%		26%		19%		N/A		N/A		25%		17%
Strategic Partners RE, SMA and Other (b)		3%		3%		5%		5%		6%		6%		11%		11%		N/A		N/A		21%		17%

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

N/M	Not meaningful generally due to the limited time since initial investment.

N/A	Not applicable.

(a)	Net returns are based on the change in carrying value (realized and unrealized) after management fees, expenses and Performance Revenues.

(b)	Realizations are treated as return of capital until fully recovered and therefore inception to date realized returns are not applicable. Returns are calculated from results that are reported on a three month lag.

The corporate private equity funds within the Private Equity segment have five funds with closed investment periods: BCP IV, BCP V, BCP VI, BCOM and BEP I. As of June 30, 2019, BCP IV was above its carried interest threshold (i.e., the preferred return payable to its limited partners before the general partner is eligible to receive carried interest) and would still be above its carried interest threshold even if all remaining investments were valued at zero. BCP V is comprised of two fund classes based on the timings of fund closings, the BCP V “main fund” and BCP

V-AC

fund. Within these fund classes, the general partner is subject to equalization such that (a) the general partner accrues carried interest when the respective carried interest for either fund class is positive and (b) the general partner realizes carried interest so long as clawback obligations, if any, for either of the respective fund classes are fully satisfied. During the quarter, BCP V is currently below its carried interest threshold, while BCP

V-AC

is above its carried interest threshold. BCP VI is currently above its carried interest threshold. BCOM is

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currently above its carried interest threshold. We are entitled to retain previously realized carried interest up to 20% of BCOM’s net gains. As a result, Performance Revenues are recognized from BCOM on current period gains and losses. BEP I is currently above its carried interest threshold.

Hedge Fund Solutions

The following table presents the results of operations for our Hedge Fund Solutions segment:


	Three Months Ended											Six Months Ended
	June 30,						2019 vs. 2018					June 30,						2019 vs. 2018
	2019			2018			$			%		2019			2018			$			%
	(Dollars in Thousands)
Management Fees, Net
Base Management Fees	$	136,990		$	129,553		$	7,437			6%	$	274,318		$	258,781		$	15,537			6%
Transaction and Other Fees, Net		723			812			(89	)		-11%		1,041			1,157			(116	)		-10%

Total Management Fees, Net		137,713			130,365			7,348			6%		275,359			259,938			15,421			6%
Fee Related Compensation		(36,622	)		(40,533	)		3,911			-10%		(79,576	)		(80,172	)		596			-1%
Other Operating Expenses		(21,112	)		(18,494	)		(2,618	)		14%		(38,997	)		(37,279	)		(1,718	)		5%

Fee Related Earnings		79,979			71,338			8,641			12%		156,786			142,487			14,299			10%

Realized Performance Revenues		11,960			7,270			4,690			65%		16,051			17,447			(1,396	)		-8%
Realized Performance Compensation		(2,175	)		(2,546	)		371			-15%		(3,588	)		(5,469	)		1,881			-34%
Realized Principal Investment Income		12,306			7,766			4,540			58%		12,023			8,406			3,617			43%

Net Realizations		22,091			12,490			9,601			77%		24,486			20,384			4,102			20%

Segment Distributable Earnings	$	102,070		$	83,828		$	18,242			22%	$	181,272		$	162,871		$	18,401			11%

N/M	Not meaningful.

Three Months Ended June 30, 2019 Compared to Three Months Ended June 30, 2018

Segment Distributable Earnings were $102.1 million for the three months ended June 30, 2019, an increase of $18.2 million, or 22%, compared to $83.8 million for the three months ended June 30, 2018. The increase in Segment Distributable Earnings was primarily attributable to increases of $8.6 million in Fee Related Earnings and $9.6 million in Net Realizations.

Segment Distributable Earnings in our Hedge Fund Solutions segment in the second quarter of 2019 were higher compared to the second quarter of 2018. This increase was primarily driven by an increase in Fee Related Earnings as a result of growth in

Fee-Earning

Assets Under Management in individual investor and specialized solutions and performance across a number of strategies compared to the second quarter of 2018. Segment Distributable Earnings in the Hedge Fund Solutions segment would likely be negatively impacted in the event of a significant or sustained decline in global, regional or sector asset prices, deterioration of global market conditions, or withdrawal of assets by investors as a result of liquidity needs, performance or other reasons. In addition, Segment Distributable Earnings in our Hedge Fund Solutions segment may be negatively impacted by a prolonged weak equity market environment, which may be caused by concerns over macroeconomic and geopolitical factors such as trade conflict with China and the rate of global growth. See “Part I. Item 1A. Risk Factors — Risks Related to Our Business — Difficult market conditions can adversely affect our business in many ways, including by reducing the value or performance of the investments made by our investment funds, making it more difficult to find opportunities for our funds to exit and realize value from existing investments and reducing the ability of our investment funds to raise or deploy capital, each of which could materially reduce our revenue, earnings and cash flow and adversely affect our financial prospects and condition” and “— Hedge fund investments are subject to numerous additional risks.” in our Annual Report on Form

10-K

for the year ended December 31, 2018. The segment operates multiple business lines, manages strategies that are both long and short asset classes and generates a majority of its revenue through management fees, which we believe may provide a level of downside

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protection to Hedge Fund Solutions Segment Distributable Earnings. Over time we anticipate an increasing change in the mix of our product offerings to products whose performance based fees represent a more significant proportion of the fees than has historically been the case for such products.

Fee Related Earnings

Fee Related Earnings were $80.0 million for the three months ended June 30, 2019, an increase of $8.6 million, or 12%, compared to $71.3 million for the three months ended June 30, 2018. The increase in Fee Related Earnings was primarily attributable to an increase of $7.3 million in Management Fees, Net and a decrease of $3.9 million in Fee Related Compensation.

Management Fees, Net were $137.7 million for the three months ended June 30, 2019, an increase of $7.3 million, compared to $130.4 million for the three months ended June 30, 2018, primarily driven by an increase in Base Management Fees. Base Management Fees were $137.0 million for the three months ended June 30, 2019, an increase of $7.4 million, compared to $129.6 million for the three months ended June 30, 2018, primarily due to

Fee-Earning

Asset Under Management growth in our individual investor and specialized solutions.

Fee Related Compensation was $36.6 million for the three months ended June 30, 2019, a decrease of $3.9 million, compared to $40.5 million for the three months ended June 30, 2018. The decrease was primarily due to changes in compensation accruals.

Net Realizations

Net Realizations were $22.1 million for the three months ended June 30, 2019, an increase of $9.6 million, or 77%, compared to $12.5 million for the three months ended June 30, 2018. The increase in Net Realizations was primarily attributable to increases of $4.7 million in Realized Performance Revenues and $4.5 million in Realized Principal Investment Income.

Realized Performance Revenues were $12.0 million for the three months ended June 30, 2019, an increase of $4.7 million, compared to $7.3 million for the three months ended June 30, 2018. The increase was primarily driven by higher returns across a number of strategies, including customized solutions, commingled products and individual investor and specialized solutions, compared to the three months ended June 30, 2018.

Realized Principal Investment Income was $12.3 million for the three months ended June 30, 2019, an increase of $4.5 million, compared to $7.8 million for the three months ended June 30, 2018. The increase was primarily driven by realized gains on our Corporate Treasury Investments.

Six Months Ended June 30, 2019 Compared to Six Months Ended June 30, 2018

Segment Distributable Earnings were $181.3 million for the six months ended June 30, 2019, an increase of $18.4 million, or 11%, compared to $162.9 million for the six months ended June 30, 2018. The increase in Segment Distributable Earnings was primarily attributable to increases of $14.3 million in Fee Related Earnings and $4.1 million in Net Realizations.

Fee Related Earnings

Fee Related Earnings were $156.8 million for the six months ended June 30, 2019, an increase of $14.3 million, or 10%, compared to $142.5 million for the six months ended June 30, 2018. The increase in Fee Related Earnings was primarily attributable to an increase of $15.4 million in Management Fees, Net.

Management Fees, Net were $275.4 million for the six months ended June 30, 2019, an increase of $15.4 million, compared to $259.9 million for the six months ended June 30, 2018, primarily driven by an increase in Base Management Fees. Base Management Fees were $274.3 million for the six months ended June 30, 2019, an increase of $15.5 million, compared to $258.8 million for the six months ended June 30, 2018, primarily due to

Fee-Earning

Asset Under Management growth in our individual investor and specialized solutions and a reduction in placement fees, which offset Base Management Fees.

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Net Realizations

Net Realizations were $24.5 million for the six months ended June 30, 2019, an increase of $4.1 million, or 20%, compared to $20.4 million for the six months ended June 30, 2018. The increase in Net Realizations was primarily attributable to an increase of $3.6 million in Realized Principal Investment Income and a decrease of $1.9 million in Realized Performance Compensation, partially offset by a decrease of $1.4 million in Realized Performance Revenues.

Realized Principal Investment Income was $12.0 million for the six months ended June 30, 2019, an increase of $3.6 million, compared to $8.4 million for the six months ended June 30, 2018. The increase was driven by realized gains on our Corporate Treasury Investments.

Realized Performance Compensation was $3.6 million for the six months ended June 30, 2019, a decrease of $1.9 million, compared to $5.5 million for the six months ended June 30, 2018. The decrease was due to the decrease in Realized Performance Revenues.

Realized Performance Revenues were $16.1 million for the six months ended June 30, 2019, a decrease of $1.4 million, compared to $17.4 million for the six months ended June 30, 2018. The decrease was primarily driven by funds entering 2019 with loss carryforward balances.

Operating Metrics

The following table presents information regarding our Invested Performance Revenue Eligible Assets Under Management:


	Invested Performance				Estimated % Above
	Revenue Eligible Assets				High Water Mark /
	Under Management				Benchmark (a)
	As of June 30,				As of June 30,
	2019		2018		2019		2018
	(Dollars in Thousands)
Hedge Fund Solutions Managed Funds (b)		$ 44,988,825		$ 42,720,613		87%		87%

(a)

Estimated % Above High Water Mark/Benchmark represents the percentage of Invested Performance Revenue Eligible Assets Under Management that as of the dates presented would earn performance fees when the applicable Hedge Fund Solutions managed fund has positive investment performance relative to a benchmark, where applicable. Incremental positive performance in the applicable Blackstone Funds may cause additional assets to reach their respective High Water Mark or clear a benchmark return, thereby resulting in an increase in Estimated % Above High Water Mark/Benchmark.

(b)

For the Hedge Fund Solutions managed funds, at June 30, 2019, the incremental appreciation needed for the 13% of Invested Performance Revenue Eligible Assets Under Management below their respective High Water Marks/Benchmarks to reach their respective High Water Marks/Benchmarks was $410.0 million, an increase of $16.9 million, compared to $393.1 million at June 30, 2018. Of the Invested Performance Revenue Eligible Assets Under Management below their respective High Water Marks/ Benchmarks as of June 30, 2019, 71% were within 5% of reaching their respective High Water Mark.

Composite Returns

Composite returns information is included throughout this discussion and analysis to facilitate an understanding of our results of operations for the periods presented. The composite returns information reflected in this discussion and analysis is not indicative of the financial performance of Blackstone and is also not necessarily indicative of the future results of any particular fund. An investment in Blackstone is not an investment in any of our funds or composites. There can be no assurance that any of our funds or composites or our other existing and future funds or composites will achieve similar returns.

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The following table presents the return information of the BAAM Principal Solutions Composite:

Three

Six

Average Annual Returns (a)

Months Ended

Periods Ended

June 30,

June 30, 2019

2019

2018

2019

2018

One Year

Three Year

Five Year

Historical

Composite

Gross

Net

Gross

Net

Gross

Net

Gross

Net

Gross

Net

Gross

Net

Gross

Net

Gross

Net

BAAM Principal Solutions Composite (b)

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

(a)	Composite returns present a summarized asset-weighted return measure to evaluate the overall performance of the applicable class of Blackstone Funds.

(b)

BAAM’s Principal Solutions (“BPS”) Composite covers the period from January 2000 to present, although BAAM’s inception date is September 1990. The BPS Composite includes only BAAM-managed commingled and customized multi-manager funds and accounts. None of the other platforms/strategies managed through the Blackstone Hedge Fund Solutions Group are included in the composite (except for investments by BPS funds/accounts directly into those platforms/strategies). BAAM-managed funds in liquidation and

non-fee-paying

assets (in the case of net returns) are excluded from the composite. The historical return is from January 1, 2000.

Credit

The following table presents the results of operations for our Credit segment:


	Three Months Ended											Six Months Ended
	June 30,						2019 vs. 2018					June 30,						2019 vs. 2018
	2019			2018			$			%		2019			2018			$			%
	(Dollars in Thousands)
Management Fees, Net
Base Management Fees	$	147,550		$	118,161		$	29,389			25%	$	288,078		$	286,602		$	1,476			1%
Transaction and Other Fees, Net		5,256			3,461			1,795			52%		8,886			6,000			2,886			48%
Management Fee Offsets		(3,279	)		(2,697	)		(582	)		22%		(6,620	)		(6,014	)		(606	)		10%

Total Management Fees, Net		149,527			118,925			30,602			26%		290,344			286,588			3,756			1%
Fee Related Performance Revenues		2,552			—			2,552			N/M		3,655			(666	)		4,321			N/M
Fee Related Compensation		(54,310	)		(50,757	)		(3,553	)		7%		(112,984	)		(117,016	)		4,032			-3%
Other Operating Expenses		(40,466	)		(31,899	)		(8,567	)		27%		(72,705	)		(59,638	)		(13,067	)		22%

Fee Related Earnings		57,303			36,269			21,034			58%		108,310			109,268			(958	)		-1%

Realized Performance Revenues		7,946			14,594			(6,648	)		-46%		16,843			54,484			(37,641	)		-69%
Realized Performance Compensation		(3,468	)		(7,119	)		3,651			-51%		(6,839	)		(29,865	)		23,026			-77%
Realized Principal Investment Income		20,925			4,082			16,843			413%		24,108			11,107			13,001			117%

Net Realizations		25,403			11,557			13,846			120%		34,112			35,726			(1,614	)		-5%

Segment Distributable Earnings	$	82,706		$	47,826		$	34,880			73%	$	142,422		$	144,994		$	(2,572	)		-2%

N/M	Not meaningful.

Three Months Ended June 30, 2019 Compared to Three Months Ended June 30, 2018

Segment Distributable Earnings were $82.7 million for the three months ended June 30, 2019, an increase of $34.9 million, or 73%, compared to $47.8 million for the three months ended June 30, 2018. The increase in

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Segment Distributable Earnings was primarily attributable to increases of $21.0 million in Fee Related Earnings and $13.8 million in Net Realizations.

Segment Distributable Earnings in our Credit segment in the second quarter of 2019 were higher compared to the second quarter of 2018, driven in part by high Fee Related Earnings as a result of growth in BIS, our U.S. direct lending platform, and certain other GSO funds. Our performing credit strategies delivered a strong 3.7% gross return in the quarter, while our distressed strategies declined 2.1%, driven entirely by decreases in certain upstream energy positions. The persistence of weakened market fundamentals in certain energy subsectors, particularly upstream, would negatively impact the performance of certain Credit segment investments. Our Credit segment deployed or committed a record $4.1 billion of capital in the second quarter of 2019. Although interest rates are expected to decrease in the near term, should the Federal Reserve choose to increase interest rates against a backdrop of slowing economic growth, capital deployment in our Credit segment may be challenged and Segment Distributable Earnings in our Credit segment could be adversely affected, although we believe our current portfolio is somewhat insulated because much of our debt portfolio is floating rate, short duration and/or held to maturity. See “Part I. Item 1A. Risk Factors — Risks Related to Our Business — Difficult market conditions can adversely affect our business in many ways, including by reducing the value or performance of the investments made by our investment funds, making it more difficult to find opportunities for our funds to exit and realize value from existing investments and reducing the ability of our investment funds to raise or deploy capital, each of which could materially reduce our revenue, earnings and cash flow and adversely affect our financial prospects and condition.” in our Annual Report on Form

10-K

for the year ended December 31, 2018.

Fee Related Earnings

Fee Related Earnings were $57.3 million for the three months ended June 30, 2019, an increase of $21.0 million, or 58%, compared to $36.3 million for the three months ended June 30, 2018. The increase in Fee Related Earnings was primarily attributable to increases of $30.6 million in Management Fees, Net and $2.6 million in Fee Related Performance Revenues, partially offset by increases of $8.6 million in Other Operating Expenses and $3.6 million in Fee Related Compensation.

Management Fees, Net were $149.5 million for the three months ended June 30, 2019, an increase of $30.6 million, compared to $118.9 million for the three months ended June 30, 2018, primarily driven by an increase in Base Management Fees. Base Management Fees were $147.6 million for the three months ended June 30, 2019, an increase of $29.4 million, compared to $118.2 million for the three months ended June 30, 2018, primarily due to growth in BIS and certain GSO funds.

Fee Related Performance Revenues were $2.6 million for the three months ended June 30, 2019, an increase of $2.6 million, compared to the three months ended June 30, 2018. The increase was due to the ramp up of the BDC within the new direct lending platform.

Other Operating Expenses were $40.5 million for the three months ended June 30, 2019, an increase of $8.6 million, compared to $31.9 million for the three months ended June 30, 2018. The increase was primarily due to the growth in our new business initiatives, including BIS and the direct lending platform.

Fee Related Compensation was $54.3 million for the three months ended June 30, 2019, an increase of $3.6 million, compared to $50.8 million for the three months ended June 30, 2018. The increase was primarily due to the increase in Management Fees, Net, on which a portion of Fee Related Compensation is based.

Net Realizations

Net Realizations were $25.4 million for the three months ended June 30, 2019, an increase of $13.8 million, or 120%, compared to $11.6 million for the three months ended June 30, 2018. The increase in Net Realizations was primarily attributable to an increase of $16.8 million in Realized Principal Investment Income and a decrease of $3.7 million in Realized Performance Compensation, partially offset by a decrease of $6.6 million in Realized Performance Revenues.

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Realized Principal Investment Income was $20.9 million for the three months ended June 30, 2019, an increase of $16.8 million, compared to $4.1 million for the three months ended June 30, 2018. The increase was driven by realized gains on our Corporate Treasury Investments.

Realized Performance Compensation was $3.5 million for the three months ended June 30, 2019, a decrease of $3.7 million, compared to $7.1 million for the three months ended June 30, 2018. The decrease was due to the decrease in Realized Performance Revenues.

Realized Performance Revenues were $7.9 million for the three months ended June 30, 2019, a decrease of $6.6 million, compared to $14.6 million for the three months ended June 30, 2018. The decrease was primarily attributable to a significant realization in our mezzanine fund during the three months ended June 30, 2018.

Six Months Ended June 30, 2019 Compared to Six Months Ended June 30, 2018

Segment Distributable Earnings were $142.4 million for the six months ended June 30, 2019, a decrease of $2.6 million, compared to $145.0 million for the six months ended June 30, 2018. The decrease in Segment Distributable Earnings was primarily attributable to decreases of $1.0 million in Fee Related Earnings and $1.6 million in Net Realizations.

Fee Related Earnings

Fee Related Earnings were $108.3 million for the six months ended June 30, 2019, a decrease of $1.0 million, compared to $109.3 million for the six months ended June 30, 2018. The decrease in Fee Related Earnings was primarily attributable to an increase of $13.1 million in Other Operating Expenses, partially offset by an increase of $4.3 million in Fee Related Performance Revenues, a decrease of $4.0 million in Fee Related Compensation and an increase of $3.8 million in Management Fees, Net.

Other Operating Expenses were $72.7 million for the six months ended June 30, 2019, an increase of $13.1 million, compared to $59.6 million for the six months ended June 30, 2018. The increase was primarily due to the growth in our new business initiatives, including our BIS and the direct lending platform.

Fee Related Performance Revenues were $3.7 million for the six months ended June 30, 2019, an increase of $4.3 million, compared to $0.7 million for the six months ended June 30, 2018. The increase was due to the ramp up of the BDC within the new direct lending platform.

Fee Related Compensation was $113.0 million for the six months ended June 30, 2019, a decrease of $4.0 million, compared to $117.0 million for the six months ended June 30, 2018. The decrease was primarily due to changes in compensation accruals.

Management Fees, Net were $290.3 million for the six months ended June 30, 2019, an increase of $3.8 million, compared to $286.6 million for the six months ended June 30, 2018. The increase was primarily due to growth in BIS and certain GSO funds, partially offset by the contractual agreement with FS Investments pursuant to which, in connection with the conclusion of our

sub-advisory

relationship with respect to the BDCs, we received a fixed payment in the first quarter of 2018.

Net Realizations

Net Realizations were $34.1 million for the six months ended June 30, 2019, a decrease of $1.6 million, compared to $35.7 million for the six months ended June 30, 2018. The decrease in Net Realizations was primarily attributable to a decrease of $37.6 million in Realized Performance Revenues, partially offset by a decrease of $23.0 million in Realized Performance Compensation and an increase of $13.0 million in Realized Principal Investment Income.

Realized Performance Revenues were $16.8 million for the six months ended June 30, 2019, a decrease of $37.6 million, compared to $54.5 million for the six months ended June 30, 2018. The decrease was primarily attributable to a mezzanine fund crossing its carry threshold during the fourth quarter of 2017, resulting in higher

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Realized Performance Revenues in the six months ended June 30, 2018 compared to the six months ended June 30, 2019.

Realized Performance Compensation was $6.8 million for the six months ended June 30, 2019, a decrease of $23.0 million, compared to $29.9 million for the six months ended June 30, 2018. The decrease was due to the decrease in Realized Performance Revenues.

Realized Principal Investment Income was $24.1 million for the six months ended June 30, 2019, an increase of $13.0 million, compared to $11.1 million for the six months ended June 30, 2018. The increase was driven by the realized gain on our Corporate Treasury Investments.

Fund Returns

Fund return information for our significant businesses is included throughout this discussion and analysis to facilitate an understanding of our results of operations for the periods presented. The fund returns information reflected in this discussion and analysis is not indicative of the financial performance of Blackstone and is also not necessarily indicative of the future results of any particular fund. An investment in Blackstone is not an investment in any of our funds. There can be no assurance that any of our funds or our other existing and future funds will achieve similar returns.

The following table presents combined internal rates of return of the segment’s performing credit and distressed strategies funds:


	Three Months Ended								Six Months Ended
	June 30,								June 30,								June 30, 2019
	2019				2018				2019				2018				Inception to Date
Composite (a)	Gross		Net		Gross		Net		Gross		Net		Gross		Net		Gross		Net
Performing Credit Strategies (b)		4%		3%		5%		4%		8%		6%		8%		6%		14%		9%
Distressed Strategies (c)		-2%		-2%		4%		3%		2%		1%		3%		2%		10%		6%

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

(a)	Net returns are based on the change in carrying value (realized and unrealized) after management fees, expenses and Performance Allocations, net of tax advances.

(b)

Performing Credit Strategies include mezzanine lending funds, BDCs and other performing credit strategy funds. Performing Credit Strategies’ returns represent the IRR of the combined cash flows of the

fee-earning

funds exceeding $100 million of fair value at each respective quarter end excluding the Blackstone Funds that were contributed to GSO as part of Blackstone’s acquisition of GSO in March 2008. The inception to date returns are from July 16, 2007.

(c)

Distressed Strategies include stressed/distressed funds, credit alpha strategies and energy strategies. Distressed Strategies’ returns represent the IRR of the combined cash flows of the

fee-earning

funds exceeding $100 million of fair value at each respective quarter end. The inception to date returns are from August 1, 2005.

As of June 30, 2019, there was $17.8 billion of Performance Revenue Eligible Assets Under Management invested in Credit strategies that were above the hurdle necessary to generate Incentive Fees or Performance Allocations. This represented 37% of the total Performance Revenue Eligible Assets Under Management across all Credit strategies.

Non-GAAP

Financial Measures

These

non-GAAP

financial measures are presented without the consolidation of any Blackstone Funds that are consolidated into the Condensed Consolidated Financial Statements. Consequently, all

non-GAAP

financial measures exclude the assets, liabilities and operating results related to the Blackstone Funds. See “— Key Financial

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Measures and Indicators” for our definitions of Distributable Earnings, Segment Distributable Earnings, Fee Related Earnings and Adjusted EBITDA.

The following table is a reconciliation of Net Income Attributable to The Blackstone Group L.P. to Distributable Earnings, Total Segment Distributable Earnings, Fee Related Earnings and Adjusted EBITDA:

(a)

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(b)	This adjustment removes the amortization of transaction-related intangibles, which are excluded from Blackstone’s segment presentation. This amount includes amortization of intangibles associated with Blackstone’s investment in Pátria, which is accounted for under the equity method.

(c)

This adjustment reverses the effect of consolidating Blackstone Funds, which are excluded from Blackstone’s segment presentation. This adjustment includes the elimination of Blackstone’s interest in these funds and the removal of amounts associated with the ownership of Blackstone consolidated operating partnerships held by

non-controlling

interests.

(d)	This adjustment removes Unrealized Performance Revenues on a segment basis. The Segment Adjustment represents the add back of performance revenues earned from consolidated Blackstone Funds which have been eliminated in consolidation.


	Three Months Ended June 30,					Six Months Ended June 30,
	2019			2018		2019		2018
	(Dollars in Thousands)
GAAP Unrealized Performance Allocations	$	157,732		$	440,351	$	821,731	$	1,068,440
Segment Adjustment		(334	)		73		—		323

Unrealized Performance Revenues	$	157,398		$	440,424	$	821,731	$	1,068,763

(e)	This adjustment removes Unrealized Performance Allocations Compensation.

(f)

This adjustment removes Unrealized Principal Investment Income (Loss) on a segment basis. The Segment Adjustment represents (1) the add back of Principal Investment Income, including general partner income, earned from consolidated Blackstone Funds which have been eliminated in consolidation, and (2) the removal of amounts associated with the ownership of Blackstone consolidated operating partnerships held by

non-controlling

interests.


	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
	(Dollars in Thousands)
GAAP Unrealized Principal Investment Income (Loss)	$	(37,345	)	$	103,468		$	131,699		$	215,242
Segment Adjustment		(19,008	)		(51,342	)		(48,127	)		(149,138	)

Unrealized Principal Investment Income (Loss)	$	(56,353	)	$	52,126		$	83,572		$	66,104

(g)

This adjustment removes Other Revenues on a segment basis. The Segment Adjustment represents (1) the add back of Other Revenues earned from consolidated Blackstone Funds which have been eliminated in consolidation, and (2) the removal of certain Transaction-Related Charges. For the three and six months ended June 30, 2018, Transaction-Related Charges included $580.9 million of Other Revenues received upon the conclusion of Blackstone’s investment

sub-advisory

relationship with FS Investments’ funds.


	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
	(Dollars in Thousands)
GAAP Other Revenue	$	(17,120	)	$	675,343		$	(6,870	)	$	616,026
Segment Adjustment		(3,030	)		(580,927	)		(91	)		(582,504	)

Other Revenues	$	(20,150	)	$	94,416		$	(6,961	)	$	33,522

(h)	This adjustment removes Equity-Based Compensation on a segment basis.

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(i)

Taxes represent the total GAAP tax provision adjusted to include only the current tax provision (benefit) calculated on Income (Loss) Before Provision for Taxes and adjusted to exclude the tax impact of any divestitures. Related Payables represent

tax-related

payables including the amount payable under the Tax Receivable Agreement.


	Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
	(Dollars in Thousands)
Taxes	$	34,209	$	20,026	$	49,553	$	38,254
Related Payables		20,992		21,771		34,687		28,585

Taxes and Related Payables	$	55,201	$	41,797	$	84,240	$	66,839

(j)

This adjustment removes Interest and Dividend Revenue less Interest Expense on a segment basis. The Segment Adjustment represents (1) the add back of Other Revenues earned from consolidated Blackstone Funds which have been eliminated in consolidation, and (2) the removal of interest expense associated with the Tax Receivable Agreement.


	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
	(Dollars in Thousands)
GAAP Interest and Dividend Revenue	$	43,686		$	40,073		$	87,770		$	75,458
Segment Adjustment		2,305			1,654			4,920			2,654

Interest and Dividend Revenue		45,991			41,727			92,690			78,112

GAAP Interest Expense		43,596			39,320			85,598			77,991
Segment Adjustment		(366	)		(435	)		(730	)		(868	)

Interest Expense		43,230			38,885			84,868			77,123

Net Interest Income	$	2,761		$	2,842		$	7,822		$	989

(k)	This adjustment removes the total segment amounts of Realized Performance Revenues.

(l)	This adjustment removes the total segment amounts of Realized Performance Compensation.

(m)	This adjustment removes the total segment amount of Realized Principal Investment Income.

(n)	This adjustment adds back Interest Expense on a segment basis.

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The following tables are a reconciliation of Total GAAP Investments to Net Accrued Performance Revenues. Total GAAP Investments and Net Accrued Performance Revenues consist of the following:


	June 30,
	2019			2018
Investments of Consolidated Blackstone Funds	$	8,633,794		$	8,608,565
Equity Method Investments
Partnership Investments		3,802,565			3,589,234
Accrued Performance Allocations		6,743,542			6,354,179
Corporate Treasury Investments		2,797,908			3,088,001
Other Investments		264,231			368,203

Total GAAP Investments	$	22,242,040		$	22,008,182


Accrued Performance Allocations - GAAP	$	6,743,542		$	6,354,179
Impact of Consolidation (a)		607			534
Due From Affiliates - GAAP (b)		25,022			26,365
Less: Accrued Performance Compensation - GAAP (c)		(2,724,998	)		(2,509,219	)

Net Accrued Performance Revenues	$	4,044,173		$	3,871,859

(a)	This adjustment adds back investments in consolidated Blackstone Funds which have been eliminated in consolidation.

(b)	Represents GAAP accrued performance revenue recorded within Due from Affiliates.

(c)	Represents GAAP accrued performance compensation associated with Accrued Performance Allocations and is recorded within Accrued Compensation and Benefits and Due to Affiliates.

Liquidity and Capital Resources

General

Blackstone’s business model derives revenue primarily from third party assets under management. Blackstone is not a capital or balance sheet intensive business and targets operating expense levels such that total management and advisory fees exceed total operating expenses each period. As a result, we require limited capital resources to support the working capital or operating needs of our businesses. We draw primarily on the long-term committed capital of our limited partner investors to fund the investment requirements of the Blackstone Funds and use our own realizations and cash flows to invest in growth initiatives, make commitments to our own funds, where our minimum general partner commitments are generally less than 5% of the limited partner commitments of a fund, and pay dividends to shareholders.

Fluctuations in our statement of financial condition result primarily from activities of the Blackstone Funds which are consolidated as well as business transactions, such as the issuance of senior notes described below. The majority economic ownership interests of the Blackstone Funds are reflected as Redeemable

Non-Controlling

Interests in Consolidated Entities and

Non-Controlling

Interests in Consolidated Entities in the Condensed Consolidated Financial Statements. The consolidation of these Blackstone Funds has no net effect on Blackstone’s Net Income or Partners’ Capital. Additionally, fluctuations in our statement of financial condition also include appreciation or depreciation in Blackstone investments in the Blackstone Funds, additional investments and redemptions of such interests in the Blackstone Funds and the collection of receivables related to management and advisory fees.

Total assets were $31.0 billion as of June 30, 2019, an increase of $2.0 billion, or 7%, from December 31, 2018. The increase in total assets was principally due to an increase of $1.8 billion in total assets attributable to the consolidated operating partnerships. The increase in total assets attributable to the consolidated operating partnerships was primarily due to increases of $1.7 billion in Investments and $507.1 million in

Right-of-Use

Assets. The increase in Investments was primarily due to appreciation in the value of Blackstone’s interests in its real

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estate and private equity investments. Effective January 1, 2019, Blackstone adopted new GAAP guidance on the accounting for leases on a modified retrospective basis. See Note 2. “Summary of Significant Accounting Policies” in the “Notes to Condensed Consolidated Financial Statements” in “Part I. Item 1. Financial Statements” of this filing. The adoption resulted in the recognition of

Right-of-Use

Assets of $507.1 million as of June 30, 2019. The other net variances of the assets attributable to the consolidated operating partnerships were relatively unchanged.

Total liabilities were $16.9 billion as of June 30, 2019, an increase of $1.7 billion, or 11%, from December 31, 2018. The increase in total liabilities was principally due to an increase of $1.5 billion in total liabilities attributable to the consolidated operating partnerships. The increase in total liabilities attributable to the consolidated operating partnerships was primarily due to increases of $668.8 million in Loans Payable and $574.6 million in Operating Lease Liability. The increase in Loans Payable was due to the issuance of our

€

600 million bond on April 10, 2019. Effective January 1, 2019, Blackstone adopted new GAAP guidance on the accounting for leases on a modified retrospective basis. The adoption resulted in the recognition of Operating Lease Liabilities of $574.6 million as of June 30, 2019. The other net variances of the liabilities attributable to the consolidated operating partnerships were relatively unchanged.

Sources and Uses of Liquidity

We have multiple sources of liquidity to meet our capital needs, including annual cash flows, accumulated earnings in the businesses, the proceeds from our issuances of senior notes, liquid investments we hold on our balance sheet for our own use and access to our $1.6 billion committed revolving credit facility. As of June 30, 2019, Blackstone had $1.5 billion in cash and cash equivalents, $3.3 billion invested in corporate treasury investments, $1.9 billion invested in Blackstone Funds and other investments, against $4.2 billion in borrowings from our bond issuances, and no borrowings outstanding under our revolving credit facility.

On April 10, 2019, Blackstone issued

€

600 million aggregate principal amount of 1.500% Senior Notes maturing on April 10, 2029. Blackstone intends to use the net proceeds from the sale of the notes for general corporate purposes.

In addition to the cash we received from our debt offerings and availability under our committed revolving credit facility, we expect to receive (a) cash generated from operating activities, (b) Performance Allocations and Incentive Fee realizations, and (c) realizations on the carry and hedge fund investments that we make. The amounts received from these three sources in particular may vary substantially from year to year and quarter to quarter depending on the frequency and size of realization events or net returns experienced by our investment funds. Our available capital could be adversely affected if there are prolonged periods of few substantial realizations from our investment funds accompanied by substantial capital calls for new investments from those investment funds. Therefore, Blackstone’s commitments to our funds are taken into consideration when managing our overall liquidity and cash position.

We expect that our primary liquidity needs will be cash to (a) provide capital to facilitate the growth of our existing businesses which principally includes funding our general partner and

co-investment

commitments to our funds, (b) provide capital to facilitate our expansion into new businesses that are complementary, (c) pay operating expenses, including cash compensation to our employees and other obligations as they arise, (d) fund modest capital expenditures, (e) repay borrowings and related interest costs, (f) pay income taxes, (g) repurchase our common stock and Blackstone Holdings Partnership Units pursuant to our repurchase program, and (h) pay dividends to our shareholders and the holders of Blackstone Holdings Partnership Units.

On July 1, 2019, we announced our Conversion from a Delaware limited partnership to the Corporation. Following the Conversion, all of the net income attributable to the Corporation will be subject to U.S. federal (and state and local) corporate income taxes. See “Part II. Item 1A. Risk Factors — Following the Conversion, we expect to pay more corporate income taxes than we would have as a limited partnership.” and “— Conversion to a Corporation” in our Quarterly Report on Form

10-Q

for the quarter ended March 31, 2019.

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Our own capital commitments to our funds, the funds we invest in and our investment strategies as of June 30, 2019 consisted of the following:


					Senior Managing Directors
	Blackstone and				and Certain Other
	General Partner				Professionals (a)
	Original		Remaining		Original		Remaining
Fund	Commitment		Commitment		Commitment		Commitment
	(Dollars in Thousands)
Real Estate
BREP VII	$	300,000	$	41,987	$	100,000	$	13,996
BREP VIII		300,000		90,817		100,000		30,272
BREP IX		300,000		300,000		100,000		100,000
BREP Europe III		100,000		13,231		35,000		4,410
BREP Europe IV		130,000		23,842		43,333		7,947
BREP Europe V		150,000		56,620		43,333		16,357
BREP Europe VI		130,000		130,000		43,333		43,333
BREP Asia I		50,000		14,806		16,667		4,935
BREP Asia II		70,707		53,393		23,569		17,798
BREDS II		50,000		6,227		16,667		2,076
BREDS III		50,000		18,126		16,667		6,042
BPP		99,401		17,459		—		—
Other (b)		9,752		2,652		—		—
Private Equity
BCP V		629,356		30,642		—		—
BCP VI		719,718		97,379		250,000		33,826
BCP VII		500,000		249,754		225,000		112,389
BCP VIII		500,000		500,000		225,000		225,000
BEP I		50,000		4,728		—		—
BEP II		80,000		22,916		26,667		7,639
BEP III		74,679		74,679		24,893		24,893
BCEP		120,000		57,590		18,992		9,179
BCP Asia		40,000		32,580		13,333		10,860
Tactical Opportunities		424,211		200,243		123,670		66,748
Strategic Partners		584,120		361,493		90,627		59,377
BIP		168,632		146,653		—		—
BXLS		10,500		7,301		—		—
Other (b)		262,711		32,100		—		—
Hedge Fund Solutions
Strategic Alliance		50,000		2,033		—		—
Strategic Alliance II		50,000		1,482		—		—
Strategic Alliance III		22,000		12,179		—		—
Strategic Holdings LP		154,610		87,393		—		—
Other (b)		4,700		2,546		—		—
Credit
Capital Opportunities Fund II LP		120,000		31,445		110,101		28,851
Capital Opportunities Fund III LP		130,783		65,249		30,688		15,751
GSO European Senior Debt Fund LP		63,000		17,810		56,992		16,112
GSO European Senior Debt Fund II LP		13,775		13,775		4,592		4,592
GSO Capital Solutions		50,000		5,780		27,666		3,198
GSO Capital Solutions II		125,000		52,036		119,959		49,938
GSO Capital Solutions III		151,000		131,267		31,395		27,406
GSO Energy Select Opportunities Fund		80,000		41,259		74,739		38,546
GSO Energy Select Opportunities Fund II		70,736		67,176		23,579		22,392
GSO Credit Alpha Fund LP		52,102		7,465		50,394		7,221
GSO Credit Alpha Fund II LP		25,500		15,868		5,907		3,678
Blackstone / GSO Secured Lending Fund		45,000		27,000		—		—
Other (b)		163,966		57,724		21,098		5,774
Other
Treasury		80,113		32,018		—		—

	$	7,356,072	$	3,258,723	$	2,093,861	$	1,020,536

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(a)

For some of the general partner commitments shown in the table above, we require our senior managing directors and certain other professionals to fund a portion of the commitment even though the ultimate obligation to fund the aggregate commitment is ours pursuant to the governing agreements of the respective funds. The amounts of the aggregate applicable general partner original and remaining commitment are shown in the table above. In addition, certain senior managing directors and other professionals are required to fund a de minimis amount of the commitment in the other private equity, real estate and credit-focused carry funds. We expect our commitments to be drawn down over time and to be funded by available cash and cash generated from operations and realizations. Taking into account prevailing market conditions and both the liquidity and cash or liquid investment balances, we believe that the sources of liquidity described above will be more than sufficient to fund our working capital requirements.

(b)	Represents capital commitments to a number of other funds in each respective segment.

As of June 30, 2019, Blackstone Holdings Finance Co. L.L.C. (the “Issuer”), an indirect subsidiary of Blackstone, had issued and outstanding the following senior notes (collectively the “Notes”):


	Aggregate
	Principal
	Amount
	(Dollars/Euros
Senior Notes (a)	in Thousands)
5.875%, Due 3/15/2021	$	400,000
4.750%, Due 2/15/2023	$	400,000
2.000%, Due 5/19/2025	€	300,000
1.000%, Due 10/5/2026	€	600,000
3.150%, Due 10/2/2027	$	300,000
1.500%, Due 4/10/2029	€	600,000
6.250%, Due 8/15/2042	$	250,000
5.000%, Due 6/15/2044	$	500,000
4.450%, Due 7/15/2045	$	350,000
4.000%, Due 10/2/2047	$	300,000

(a)

The Notes are unsecured and unsubordinated obligations of the Issuer and are fully and unconditionally guaranteed, jointly and severally, by Blackstone and each of the Blackstone Holdings Partnerships. The Notes contain customary covenants and financial restrictions that, among other things, limit the Issuer and the guarantors’ ability, subject to certain exceptions, to incur indebtedness secured by liens on voting stock or profit participating equity interests of their subsidiaries or merge, consolidate or sell, transfer or lease assets. The Notes also contain customary events of default. All or a portion of the Notes may be redeemed at our option, in whole or in part, at any time and from time to time, prior to their stated maturity, at the make-whole redemption price set forth in the Notes. If a change of control repurchase event occurs, the Notes are subject to repurchase at the repurchase price as set forth in the Notes.

Blackstone, through indirect subsidiaries, has a $1.6 billion unsecured revolving credit facility (the “Credit Facility”) with Citibank, N.A., as administrative agent with a maturity date of September 21, 2023. Borrowings may also be made in U.K. sterling, euros, Swiss francs, Japanese yen or Canadian dollars, in each case subject to certain

sub-limits.

The Credit Facility contains customary representations, covenants and events of default. Financial covenants consist of a maximum net leverage ratio and a requirement to keep a minimum amount of

fee-earning

assets under management, each tested quarterly.

On April 16, 2018, the board of directors of our general partner, Blackstone Group Management L.L.C., authorized the repurchase of up to $1.0 billion of Blackstone common units and Blackstone Holdings Partnership Units (the “2018 Repurchase Authorization”). On July 16, 2019, the board of directors of the Corporation

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authorized the repurchase of up to $1.0 billion of Class A Common Stock and Blackstone Holdings Partnership Units, which authorization replaced the 2018 Repurchase Authorization. Under the repurchase program, stock may be repurchased from time to time in open market transactions, in privately negotiated transactions or otherwise. The timing and the actual number of stock repurchased will depend on a variety of factors, including legal requirements, price and economic and market conditions. The stock repurchase program may be changed, suspended or discontinued at any time and does not have a specified expiration date.

During the three and six months ended June 30, 2019, we repurchased 7.0 million and 8.5 million Blackstone common units as part of the unit repurchase program at a total cost of $290.9 million and $343.1 million, respectively. As of June 30, 2019, the amount remaining available for repurchases under the 2018 Repurchase Authorization was $115.4 million. Common units repurchased includes units for which trades were executed during the three months ended June 30, 2019 and settlement occurred in July 2019.

Dividends

Our intention is to dividend quarterly to common shareholders approximately 85% of The Blackstone Group Inc.’s share of Distributable Earnings, subject to adjustment by amounts determined by Blackstone’s board of directors to be necessary or appropriate to provide for the conduct of its business, to make appropriate investments in its business and funds, to comply with applicable law, any of its debt instruments or other agreements, or to provide for future cash requirements such as

tax-related

payments, clawback obligations and dividends to shareholders for any ensuing quarter. The dividend amount could also be adjusted upward in any one quarter.

For Blackstone’s definition of Distributable Earnings, see “— Key Financial Measures and Indicators”.

All of the foregoing is subject to the qualification that the declaration and payment of any dividends are at the sole discretion of our board of directors and our board of directors may change our dividend policy at any time, including, without limitation, to reduce such quarterly dividends or even to eliminate such dividends entirely.

Because the publicly traded entity and/or its wholly owned subsidiaries must pay taxes and make payments under the tax receivable agreements, the amounts ultimately paid as dividends by The Blackstone Group Inc. to common shareholders in respect of each fiscal year are generally expected to be less, on a per unit or share basis, than the amounts distributed by the Blackstone Holdings Partnerships to the Blackstone personnel and others who are limited partners of the Blackstone Holdings Partnerships in respect of their Blackstone Holdings Partnership Units. Following the Conversion, we expect to pay more corporate income taxes than we would have as a limited partnership, which will increase this difference in the dividend and/or distribution amounts on a per unit or share basis.

Dividends are treated as qualified dividends to the extent of Blackstone’s current and accumulated earnings and profits, with any excess dividends treated as a return of capital to the extent of the shareholder’s basis.

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The following graph shows fiscal quarterly and annual per common shareholder dividends for 2018 and 2019. Dividends are declared and paid in the quarter subsequent to the quarter in which they are earned.

With respect to the second quarter of fiscal year 2019, we have paid to common shareholders a dividend of $0.48 per common share, aggregating to $0.85 per common share in respect of the six months ended June 30, 2019. With respect to fiscal year 2018, we paid common shareholders aggregate dividends of $2.15 per common share. The second, third and fourth quarter fiscal 2018 per common share dividends of $0.58, $0.64 and $0.58 each include a $0.10 per common share dividend from a portion of the

after-tax

proceeds received in connection with the conclusion of Blackstone’s

sub-advisory

relationship with FS Investments.

Leverage

We may under certain circumstances use leverage opportunistically and over time to create the most efficient capital structure for Blackstone and our public common shareholders. In addition to the borrowings from our bond issuances and our revolving credit facility, we may use reverse repurchase agreements, repurchase agreements and securities sold, not yet purchased. All of these positions are held in a separately managed portfolio. Reverse repurchase agreements are entered into primarily to take advantage of opportunistic yields otherwise absent in the overnight markets and also to use the collateral received to cover securities sold, not yet purchased. Repurchase agreements are entered into primarily to opportunistically yield higher spreads on purchased securities. The balances held in these financial instruments fluctuate based on Blackstone’s liquidity needs, market conditions and investment risk profiles.

Generally our funds in our Private Equity segment, our opportunistic real estate funds, funds of hedge funds and certain credit-focused funds have not utilized substantial leverage at the fund level other than for (a) short-term borrowings between the date of an investment and the receipt of capital from the investing fund’s investors, and (b) long-term borrowings for certain investments in aggregate amounts which are generally 1% to 25% of the capital commitments of the respective fund. Our carry funds make direct or indirect investments in companies that utilize leverage in their capital structure. The degree of leverage employed varies among portfolio companies.

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Certain of our Real Estate debt hedge funds, Hedge Fund Solutions funds and

credit-focused

funds use leverage in order to obtain additional market exposure, enhance returns on invested capital and/or to bridge short-term cash needs. The forms of leverage primarily employed by these funds include purchasing securities on margin, utilizing collateralized financing and using derivative instruments.

The following table presents information regarding these financial instruments in our Condensed Consolidated Statements of Financial Condition:


			Securities
	Repurchase		Sold, Not Yet
	Agreements		Purchased
	(Dollars in Millions)
Balance, June 30, 2019	$	207.7	$	128.5
Balance, December 31, 2018	$	222.2	$	142.6
Six Months Ended June 30, 2019
Average Daily Balance	$	215.6	$	129.9
Maximum Daily Balance	$	224.6	$	142.9

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Contractual Obligations, Commitments and Contingencies

The following table sets forth information relating to our contractual obligations as of June 30, 2019 on a consolidated basis and on a basis deconsolidating the Blackstone Funds:


	July 1, 2019 to
Contractual Obligations	December 31, 2019			2020-2021			2022-2023			Thereafter			Total
	(Dollars in Thousands)
Operating Lease Obligations (a)	$	41,502		$	187,200		$	183,980		$	335,927		$	748,609
Purchase Obligations		21,410			31,941			98			—			53,449
Blackstone Issued Notes and Revolving Credit Facility (b)		—			400,000			400,000			3,405,950			4,205,950
Interest on Blackstone Issued Notes and Revolving Credit Facility (c)		66,899			276,317			231,567			1,573,358			2,148,141
Blackstone Funds and CLO Vehicles Debt Obligations Payable (d)		316			—			—			6,849,041			6,849,357
Interest on Blackstone Funds and CLO Vehicles Debt Obligations Payable (e)		134,310			539,308			539,308			1,715,351			2,928,277
Blackstone Funds Capital Commitments to Investee Funds (f)		116,251			—			—			—			116,251
Due to Certain Non-Controlling Interest Holders in Connection with Tax Receivable Agreements (g)		—			142,080			145,788			465,879			753,747
Unrecognized Tax Benefits, Including Interest and Penalties (h)		—			873			—			—			873
Blackstone Operating Entities Capital Commitments to Blackstone Funds and Other (i)		3,258,723			—			—			—			3,258,723

Consolidated Contractual Obligations		3,639,411			1,577,719			1,500,741			14,345,506			21,063,377
Blackstone Funds and CLO Vehicles Debt Obligations Payable (d)		(316	)		—			—			(6,849,041	)		(6,849,357	)
Interest on Blackstone Funds and CLO Vehicles Debt Obligations Payable (e)		(134,310	)		(539,308	)		(539,308	)		(1,715,351	)		(2,928,277	)
Blackstone Funds Capital Commitments to Investee Funds (f)		(116,251	)		—			—			—			(116,251	)

Blackstone Operating Entities Contractual Obligations	$	3,388,534		$	1,038,411		$	961,433		$	5,781,114		$	11,169,492

(a)

We lease our primary office space and certain office equipment under agreements that expire through 2030. Occupancy lease agreements, in addition to contractual rent payments, generally include additional payments for certain costs incurred by the landlord, such as building expenses, and utilities. To the extent these are fixed or determinable they are included in the table above. The table above includes operating leases that are recognized as Operating Lease Liabilities, short-term leases that are not recorded as Operating Lease Liabilities and leases that have been signed but not yet commenced which are not recorded as Operating Lease Liabilities. The amounts in this table are presented net of contractual sublease commitments.

(b)	Represents the principal amount due on the senior notes we issued. As of June 30, 2019, we had no outstanding borrowings under our revolver.

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(c)

Represents interest to be paid over the maturity of our senior notes and borrowings under our revolving credit facility which has been calculated assuming no

pre-payments

are made and debt is held until its final maturity date. These amounts exclude commitment fees for unutilized borrowings under our revolver.

(d)	These obligations are those of the Blackstone Funds including the consolidated CLO vehicles.

(e)

Represents interest to be paid over the maturity of the related consolidated Blackstone Funds’ and CLO vehicles’ debt obligations which has been calculated assuming no

pre-payments

will be made and debt will be held until its final maturity date. The future interest payments are calculated using variable rates in effect as of June 30, 2019, at spreads to market rates pursuant to the financing agreements, and range from 0.8% to 9.0%. The majority of the borrowings are due on demand and for purposes of this schedule are assumed to mature within one year. Interest on the majority of these borrowings rolls over into the principal balance at each reset date.

(f)	These obligations represent commitments of the consolidated Blackstone Funds to make capital contributions to investee funds and portfolio companies. These amounts are generally due on demand and are therefore presented in the less than one year category.

(g)

Represents obligations by Blackstone’s corporate subsidiary to make payments under the Tax Receivable Agreements to certain

non-controlling

interest holders for the tax savings realized from the taxable purchases of their interests in connection with the reorganization at the time of Blackstone’s IPO in 2007 and subsequent purchases. The obligation represents the amount of the payments currently expected to be made, which are dependent on the tax savings actually realized as determined annually without discounting for the timing of the payments. As required by GAAP, the amount of the obligation included in the Condensed Consolidated Financial Statements and shown in Note 17. “Related Party Transactions” (see “Part I. Item 1 Financial Statements”) differs to reflect the net present value of the payments due to certain

non-controlling

interest holders.

(h)

The total represents gross unrecognized tax benefits of $0.5 million and interest and penalties of $0.4 million. In addition, Blackstone is not able to make a reasonably reliable estimate of the timing of payments in individual years in connection with gross unrecognized benefits of $23.1 million and interest of $1.9 million; therefore, such amounts are not included in the above contractual obligations table.

(i)

These obligations represent commitments by us to provide general partner capital funding to the Blackstone Funds, limited partner capital funding to other funds and Blackstone principal investment commitments. These amounts are generally due on demand and are therefore presented in the less than one year category; however, a substantial amount of the capital commitments are expected to be called over the next three years. We expect to continue to make these general partner capital commitments as we raise additional amounts for our investment funds over time.

Guarantees

Blackstone and certain of its consolidated funds provide financial guarantees. The amounts and nature of these guarantees are described in Note 18. “Commitments and Contingencies – Contingencies – Guarantees” in the “Notes to Condensed Consolidated Financial Statements” in “Part I. Item 1. Financial Statements” of this filing.

Indemnifications

In many of its service contracts, Blackstone agrees to indemnify the third party service provider under certain circumstances. The terms of the indemnities vary from contract to contract and the amount of indemnification liability, if any, cannot be determined and has not been included in the table above or recorded in our Condensed Consolidated Financial Statements as of June 30, 2019.

Clawback Obligations

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liability for potential clawback obligations has been recorded for financial reporting purposes, are currently anticipated to expire at various points through 2028. Further extensions of such terms may be implemented under given circumstances.

As of June 30, 2019, the total clawback obligations were $70.1 million, of which $69.2 million was related to Blackstone Holdings and $0.9 million was related to current and former Blackstone personnel. The split of clawback between Blackstone Holdings and current and former personnel is based on the performance of individual investments held by a fund rather than on a fund by fund basis. If, at June 30, 2019, all of the investments held by our carry funds were deemed worthless, a possibility that management views as remote, the amount of Performance Allocations subject to potential clawback would be $6.9 billion, on an

after-tax

basis where applicable, of which Blackstone Holdings is potentially liable for $6.3 billion if current and former Blackstone personnel default on their share of the liability, a possibility that management also views as remote. See Note 17. “Related Party Transactions” and Note 18. “Commitments and Contingencies” in the “Notes to Condensed Consolidated Financial Statements” in “Part I. Item 1. Financial Statements” of this filing.

Critical Accounting Policies

We prepare our Condensed Consolidated Financial Statements in accordance with GAAP. In applying many of these accounting principles, we need to make assumptions, estimates and/or judgments that affect the reported amounts of assets, liabilities, revenues and expenses in our condensed consolidated financial statements. We base our estimates and judgments on historical experience and other assumptions that we believe are reasonable under the circumstances. These assumptions, estimates and/or judgments, however, are often subjective. Actual results may be affected negatively based on changing circumstances. If actual amounts are ultimately different from our estimates, the revisions are included in our results of operations for the period in which the actual amounts become known. We believe the following critical accounting policies could potentially produce materially different results if we were to change underlying assumptions, estimates and/or judgments. For a description of our accounting policies, see Note 2. “Summary of Significant Accounting Policies” in the “Notes to Condensed Consolidated Financial Statements” in “Part I. Item 1. Financial Statements” of this filing.

Principles of Consolidation

For a description of our accounting policy on consolidation, see Note 2. “Summary of Significant Accounting Policies — Consolidation” and Note 9. “Variable Interest Entities” in the “Notes to Condensed Consolidated Financial Statements” in “Part I. Item 1. Financial Statements” of this filing for detailed information on Blackstone’s consolidation policy and its involvement with VIEs. The following discussion is intended to provide supplemental information about how the application of consolidation principles impact our financial results, and management’s process for implementing those principles including areas of significant judgment.

The determination that Blackstone holds a controlling financial interest in a Blackstone Fund significantly changes the presentation of our condensed consolidated financial statements. In our Condensed Consolidated Statements of Financial Position included in this filing, we present 100% of the assets and liabilities of consolidated VIEs along with a

non-controlling

interest which represents the portion of the consolidated vehicle’s interests held by third parties. However, assets of our consolidated VIEs can only be used to settle obligations of the consolidated VIE and are not available for general use by Blackstone. Further, the liabilities of our consolidated VIEs do not have recourse to the general credit of Blackstone. In the Condensed Consolidated Statements of Operations, we eliminate any management fees, Incentive Fees, or Performance Allocations received or accrued from consolidated VIEs as they are considered intercompany transactions. We recognize 100% of the consolidated VIE’s investment income (loss) and allocate the portion of that income (loss) attributable to third party ownership to

non-controlling

interests in arriving at Net Income Attributable to The Blackstone Group L.P.

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The assessment of whether we consolidate a Blackstone Fund we manage requires the application of significant judgment. These judgments are applied both at the time we become involved with the VIE and on an ongoing basis and include, but are not limited to:

•

Determining whether our management fees, Incentive Fees or Performance Allocations represent variable interests – We make judgments as to whether the fees we earn are commensurate with the level of effort required for those fees and at market rates. In making this judgment, we consider, among other things, the extent of third party investment in the entity and the terms of any other interests we hold in the VIE.

•

Determining whether

kick-out

rights are substantive – We make judgments as to whether the third party investors in a partnership entity have the ability to remove the general partner, the investment manager or its equivalent, or to dissolve (liquidate) the partnership entity, through a simple majority vote. This includes an evaluation of whether barriers to exercise these rights exist.

•

Concluding whether Blackstone has an obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE – As there is no explicit threshold in GAAP to define “potentially significant,” management must apply judgment and evaluate both quantitative and qualitative factors to conclude whether this threshold is met.

Revenue Recognition

For a description of our accounting policy on revenue recognition, see Note 2. “Summary of Significant Accounting Policies — Revenue Recognition” in the “Notes to Condensed Consolidated Financial Statements” in “Part I. Item 1. Financial Statements”. For additional description of the nature of our revenue arrangements, including how management fees, Incentive Fees, and Performance Allocations are generated, please refer to “Part I. Item 1. Business — Incentive Arrangements / Fee Structure” in our Annual Report on Form

10-K

for the year ended December 31, 2018. The following discussion is intended to provide supplemental information about how the application of revenue recognition principles impact our financial results, and management’s process for implementing those principles including areas of significant judgment.

Management and Advisory Fees, Net

— Blackstone earns base management fees from the investors in each of its managed funds and investment vehicles, at a fixed percentage of a calculation base which is typically assets under management, net asset value, total assets, committed capital or invested capital. The range of management fee rates and the calculation base from which they are earned, generally, are as follows:

On private equity, real estate, and certain of our hedge fund solutions and credit-focused funds:

•

0.25% to 2.00% of committed capital or invested capital during the investment period,

•

0.25% to 1.50% of invested capital, committed capital and investment fair value subsequent to the investment period for private equity and real estate funds, and

•

0.75% to 1.50% of invested capital or net asset value subsequent to the investment period for certain of our hedge fund solutions and

credit-focused

funds.

On real estate, credit and

MLP-focused

funds structured like hedge funds:

•

0.50% to 1.50% of net asset value.

On credit and

MLP-focused

separately managed accounts:

•

0.25% to 1.50% of net asset value or total assets.

On real estate separately managed accounts:

•

0.50% to 2.00% of invested capital, net operating income or net asset value.

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On funds of hedge funds, certain hedge funds and separately managed accounts invested in hedge funds:

•

0.25% to 1.50% of net asset value.

On CLO vehicles:

•

0.40% to 0.65% of the aggregate par amount of collateral assets, including principal cash.

On credit-focused registered and

non-registered

investment companies:

•

0.35% to 1.50% of total assets or net asset value.

The investment adviser of BXMT receives annual management fees based upon 1.50% of BXMT’s net proceeds received from equity offerings and accumulated “core earnings” (which is generally equal to its GAAP net income excluding certain

non-cash

and other items), subject to certain adjustments. The investment adviser of BREIT receives a management fee of 1.25% per annum of net asset value, payable monthly.

Management fee calculations based on committed capital or invested capital are mechanical in nature and therefore do not require the use of significant estimates or judgments. Management fee calculations based on net asset value, total assets, or investment fair value depend on the fair value of the underlying investments within the funds. Estimates and assumptions are made when determining the fair value of the underlying investments within the funds and could vary depending on the valuation methodology that is used as well as economic conditions. See “— Fair Value” below for further discussion of the judgment required for determining the fair value of the underlying investments.

Investment Income (Loss)

— Performance Allocations are made to the general partner based on cumulative fund performance to date, subject to a preferred return to limited partners. Blackstone has concluded that investments made alongside its limited partners in a partnership which entitle Blackstone to a Performance Allocation represent equity method investments that are not in the scope of the GAAP guidance on accounting for revenues from contracts with customers. Blackstone accounts for these arrangements under the equity method of accounting. Under the equity method Blackstone’s share of earnings (losses) from equity method investments is determined using a balance sheet approach referred to as the hypothetical liquidation at book value (“HLBV”) method. Under the HLBV method, at the end of each reporting period Blackstone calculates the accrued Performance Allocations that would be due to Blackstone for each fund pursuant to the fund agreements as if the fair value of the underlying investments were realized as of such date, irrespective of whether such amounts have been realized. Performance Allocations are subject to clawback to the extent that the Performance Allocation received to date exceeds the amount due to Blackstone based on cumulative results.

The change in the fair value of the investments held by certain Blackstone Funds is a significant input into the accrued Performance Allocation calculation and accrual for potential repayment of previously received Performance Allocations. Estimates and assumptions are made when determining the fair value of the underlying investments within the funds. See “— Fair Value” below for further discussion related to significant estimates and assumptions used for determining fair value of the underlying investments.

Fair Value

Blackstone uses fair value throughout the reporting process. For a description of our accounting policies related to valuation, see Note 2. “Summary of Significant Accounting Policies — Fair Value of Financial Instruments” and “Summary of Significant Accounting Policies — Investments at Fair Value” in the “Notes to Condensed Consolidated Financial Statements” in “Part I. Item 1. Financial Statements” of this filing. The following discussion is intended to provide supplemental information about how the application of fair value principles impact our financial results, and management’s process for implementing those principles including areas of significant judgment.

The fair value of the investments held by Blackstone Funds is the primary input to the calculation of certain of our management fees, Incentive Fees, Performance Allocations and the related Compensation we recognize. The

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Blackstone Funds are accounted for as investment companies under the American Institute of Certified Public Accountants Accounting and Auditing Guide,

Investment Companies

, and in accordance with the GAAP guidance on investment companies and reflect their investments, including majority-owned and controlled investments (the “Portfolio Companies”), at fair value. In the absence of observable market prices, we utilize valuation methodologies applied on a consistent basis and assumptions that we believe market participants would use to determine the fair value of the investments. For some investments where little market activity may exist management’s determination of fair value is then based on the best information available in the circumstances, may incorporate management’s own assumptions and involves a significant degree of judgment, taking into consideration a combination of internal and external factors, including the appropriate risk adjustments for

non-performance

and liquidity risks.

Blackstone has also elected the fair value option for certain instruments it owns directly, including loans and receivables and investments in private debt securities, the assets of consolidated CLO vehicles and other proprietary investments. Blackstone is required to measure certain financial instruments at fair value, including debt instruments, equity securities and freestanding derivatives.

Fair Value of Investments or Instruments that are Publicly Traded

Securities that are publicly traded and for which a quoted market exists will be valued at the closing price of such securities in the principal market in which the security trades, or in the absence of a principal market, in the most advantageous market on the valuation date. When a quoted price in an active market exists, no block discounts or control premiums are permitted regardless of the size of the public security held. In some cases, securities will include legal and contractual restrictions limiting their purchase and sale for a period of time, such as may be required under SEC Rule 144 or by underwriters in certain transactions. A discount to publicly traded price may be appropriate in those cases; the amount of the discount shall be determined based on the time period that must pass before the restricted security becomes unrestricted or otherwise available for sale.

Fair Value of Investments or Instruments that are not Publicly Traded

Investments for which market prices are not observable include private investments in the equity or debt of operating companies or real estate properties. Our primary methodology for determining the fair values of such investments is the income approach which provides an indication of fair value based on the present value of cash flows that a business, security, or property is expected to generate in the future. The most widely used methodology under the income approach is the discounted cash flow method which includes significant assumptions about the underlying investment’s projected net earnings or cash flows, discount rate, capitalization rate and exit multiple. Our secondary methodology, generally used to corroborate the results of the income approach, is the market approach. The most widely used methodology under the market approach relies upon valuations for comparable public companies, transactions, or assets, and includes making judgments about which companies, transactions, or assets are comparable.

In certain cases debt and equity securities are valued on the basis of prices from an orderly transaction between market participants provided by reputable dealers or pricing services. In determining the value of a particular investment, pricing services may use certain information with respect to transactions in such investments, quotations from dealers, pricing matrices and market transactions in comparable investments and various relationships between investments.

Management Process on Fair Value

Due to the importance of fair value throughout the condensed consolidated financial statements and the significant judgment required to be applied in arriving at those fair values, we have developed a process around valuation that incorporates several levels of approval and review from both internal and external sources. Blackstone Fund investments are valued on a quarterly basis by our internal valuation teams, which are independent from our investment teams.

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For investments valued utilizing the income method, our valuation team generally has a direct line of communication with each of the Portfolio Company finance teams and collects financial data used to support projections used in a discounted cash flow analysis. The valuation team then analyzes the data received and updates the valuation models reflecting any changes in the underlying discounted cash flow projections, weighted-average cost of capital, exit multiple, and any other valuation input relevant economic conditions.

The results of all valuations of investments held by Blackstone Fund and investment vehicles are reviewed by the relevant business unit’s

sub-committee,

which is made up of key personnel, typically the chief investment officer, chief operating officer, chief financial officer, chief compliance officer (or their respective equivalents where applicable) and other senior managing directors in the business. Following review and approval by each business unit’s

sub-committee,

the results are reviewed and must be approved by Blackstone’s firm-wide valuation committee chaired by Blackstone’s Chief Financial Officer and including senior heads of each of Blackstone’s businesses, as well as representatives from legal and finance. To further corroborate our results, we generally obtain a positive assurance opinion by an independent valuation party, at least annually for all investments and quarterly for certain investments. Each quarter, the valuations of Blackstone’s investments are also reviewed by the audit committee comprised of our

non-employee

directors in a meeting attended by the chairman of the valuation committee.

Off-Balance

Sheet Arrangements

In the normal course of business, we engage in

off-balance

sheet arrangements, including transactions in derivatives, guarantees, commitments, indemnifications and potential contingent repayment obligations. We do not have any

off-balance

sheet arrangements that would require us to fund losses or guarantee target returns to investors in our funds.

Further disclosure on our

off-balance

sheet arrangements is presented in the “Notes to Condensed Consolidated Financial Statements” in “Part I. Item 1. Financial Statements” of this filing as follows:

•

Note 9. “Variable Interest Entities”, and

•

Note 18. “Commitments and Contingencies — Commitments — Investment Commitments” and “— Contingencies — Guarantees”.

Recent Accounting Developments

Information regarding recent accounting developments and their impact on Blackstone can be found in Note 2. “Summary of Significant Accounting Policies” in the “Notes to Condensed Consolidated Financial Statements” in “Part I. Item 1. Financial Statements” of this filing.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Our predominant exposure to market risk is related to our role as general partner or investment adviser to the Blackstone Funds and the sensitivities to movements in the fair value of their investments, including the effect on management fees, performance revenues and investment income.

Although the Blackstone Funds share many common themes, each of our alternative asset management operations runs its own investment and risk management processes, subject to our overall risk tolerance and philosophy:

•

The investment process of our carry funds involves a detailed analysis of potential investments, and asset management teams are assigned to oversee the operations, strategic development, financing and capital deployment decisions of each portfolio investment. Key investment decisions are subject to approval by the applicable investment committee, which is comprised of Blackstone senior managing directors and senior management.

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•

In our capacity as adviser to certain funds in our Hedge Fund Solutions and Credit segments, we continuously monitor a variety of markets for attractive trading opportunities, applying a number of traditional and customized risk management metrics to analyze risk related to specific assets or portfolios. In addition, we perform extensive credit and cash flow analyses of borrowers, credit-based assets and underlying hedge fund managers, and have extensive asset management teams that monitor covenant compliance by, and relevant financial data of, borrowers and other obligors, asset pool performance statistics, tracking of cash payments relating to investments and ongoing analysis of the credit status of investments.

Effect on Fund Management Fees

Our management fees are based on (a) third parties’ capital commitments to a Blackstone Fund, (b) third parties’ capital invested in a Blackstone Fund or (c) the net asset value, or NAV, of a Blackstone Fund, as described in our Condensed Consolidated Financial Statements. Management fees will only be directly affected by short-term changes in market conditions to the extent they are based on NAV or represent permanent impairments of value. These management fees will be increased (or reduced) in direct proportion to the effect of changes in the fair value of our investments in the related funds. The proportion of our management fees that are based on NAV is dependent on the number and types of Blackstone Funds in existence and the current stage of each fund’s life cycle. For the six months ended June 30, 2019 and June 30, 2018, the percentages of our fund management fees based on the NAV of the applicable funds or separately managed accounts, were as follows:


	Six Months Ended June 30,
	2019		2018
Fund Management Fees Based on the NAV of the Applicable Funds or Separately Managed Accounts		40%		36%

Market Risk

The Blackstone Funds hold investments which are reported at fair value. Based on the fair value as of June 30, 2019 and June 30, 2018, we estimate that a 10% decline in fair value of the investments would result in the following declines in Management Fees, Performance Revenues, Net of Related Compensation Expense and Investment Income:


	June 30,
	2019						2018
			Performance						Performance
			Revenues,						Revenues,
			Net of Related						Net of Related
	Management		Compensation		Investment		Management		Compensation		Investment
	Fees (a)		Expense (b)		Income (b)		Fees (a)		Expense (b)		Income (b)
	(Dollars in Thousands)
10% Decline in Fair Value of the Investments	$	120,197	$	1,552,228	$	181,076	$	81,847	$	1,398,609	$	194,951

(a)	Represents the annualized effect of the 10% decline.

(b)	Represents the reporting date effect of the 10% decline.

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Total Assets Under Management, excluding undrawn capital commitments and the amount of capital raised for our CLOs, by segment, and the percentage amount classified as Level III investments as defined within the fair value standards of GAAP, are as follows:


	June 30, 2019
	Total Assets Under Management, Excluding Undrawn Capital Commitments and the Amount of Capital Raised for CLOs		Percentage Amount Classified as Level III Investments
	(Dollars in Thousands)
Real Estate	$	102,086,247		84%
Private Equity	$	73,693,466		70%
Credit	$	80,870,751		33%

The fair value of our investments and securities can vary significantly based on a number of factors that take into consideration the diversity of the Blackstone Funds’ investment portfolio and on a number of factors and inputs such as similar transactions, financial metrics, and industry comparatives, among others. See “Part I. Item 1A. Risk Factors” in our Annual Report on Form

10-K

for the year ended December 31, 2018. Also see “Part I. Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Policies — Investments, at Fair Value”. We believe these fair value amounts should be utilized with caution as our intent and strategy is to hold investments and securities until prevailing market conditions are beneficial for investment sales.

Investors in all of our carry funds (and certain of our credit-focused funds and funds of hedge funds) make capital commitments to those funds that we are entitled to call from those investors at any time during prescribed periods. We depend on investors fulfilling their commitments when we call capital from them in order for those funds to consummate investments and otherwise pay their related obligations when due, including management fees. We have not had investors fail to honor capital calls to any meaningful extent and any investor that did not fund a capital call would be subject to having a significant amount of its existing investment forfeited in that fund; however, if investors were to fail to satisfy a significant amount of capital calls for any particular fund or funds, those funds could be materially and adversely affected.

Exchange Rate Risk

The Blackstone Funds hold investments that are denominated in

non-U.S.

dollar currencies that may be affected by movements in the rate of exchange between the U.S. dollar and

non-U.S.

dollar currencies. Additionally, a portion of our management fees are denominated in

non-U.S.

dollar currencies. We estimate that as of June 30, 2019 and June 30, 2018, a 10% decline in the rate of exchange of all foreign currencies against the U.S. dollar would result in the following declines in Management Fees, Performance Revenues, Net of Related Compensation Expense and Investment Income:

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	June 30,
	2019						2018
			Performance						Performance
			Revenues,						Revenues,
			Net of Related						Net of Related
	Management		Compensation		Investment		Management		Compensation		Investment
	Fees (a)		Expense (b)		Income (b)		Fees (a)		Expense (b)		Income (b)
	(Dollars in Thousands)
10% Decline in the Rate of Exchange of All Foreign Currencies Against the U.S. Dollar	$	19,640	$	411,596	$	34,545	$	19,067	$	324,948	$	31,021

(a)	Represents the annualized effect of the 10% decline.

(b)	Represents the reporting date effect of the 10% decline.

Interest Rate Risk

Blackstone has debt obligations payable that accrue interest at variable rates. Interest rate changes may therefore affect the amount of our interest payments, future earnings and cash flows. Based on our debt obligations payable as of June 30, 2019 and June 30, 2018, we estimate that interest expense relating to variable rates would increase on an annual basis, in the event interest rates were to increase by one percentage point, as follows:


	June 30,
	2019		2018
	(Dollars in Thousands)
Annualized Increase in Interest Expense Due to a One Percentage Point Increase in Interest Rates (a)	$	—	$	28

(a)	As of June 30, 2019 Blackstone had no such debt obligations payable outstanding.

Blackstone has a diversified portfolio of liquid assets to meet the liquidity needs of various businesses. This portfolio includes cash, open ended money market mutual funds, open ended bond mutual funds, marketable investment securities, freestanding derivative contracts, repurchase and reverse repurchase agreements and other investments. If interest rates were to increase by one percentage point, we estimate that our annualized investment income would decrease, offset by an estimated increase in interest income on an annual basis from interest on floating rate assets, as follows:


	June 30,
	2019					2018
	Annualized Decrease in Investment Income			Annualized Increase in Interest Income from Floating Rate Assets		Annualized Decrease in Investment Income			Annualized Increase in Interest Income from Floating Rate Assets
	(Dollars in Thousands)
One Percentage Point Increase in Interest Rates	$	6,295	(a)	$	28,423	$	22,267	(a)	$	23,892

(a)	As of June 30, 2019 and 2018, this represents 0.2% and 0.4% of our portfolio of liquid assets, respectively.

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Blackstone has U.S. dollar and

non-U.S.

dollar based interest rate derivatives whose future cash flows and present value may be affected by movement in their respective underlying yield curves. We estimate that as of June 30, 2019, a one percentage point increase parallel shift in global yield curves would result in the following impact on Other Revenue:


	June 30,
	2019		2018
	(Dollars in Thousands)
Annualized Increase in Other Revenue Due to a One Percentage Point Increase in Interest Rates	$	17,749	$	19,413

Credit Risk

Certain Blackstone Funds and the Investee Funds are subject to certain inherent risks through their investments.

Our portfolio of liquid assets contain certain credit risks including, but not limited to, exposure to uninsured deposits with financial institutions, unsecured corporate bonds and mortgage-backed securities. These exposures are actively monitored on a continuous basis and positions are reallocated based on changes in risk profile, market or economic conditions.

We estimate that our annualized investment income would decrease, if credit spreads were to increase by one percentage point, as follows:


	June 30,
	2019		2018
	(Dollars in Thousands)
Decrease in Annualized Investment Income Due to a One Percentage Point Increase in Credit Spreads (a)	$	77,008	$	36,437

(a)	As of June 30, 2019 and 2018, this represents 2.3% and 0.7% of our portfolio of liquid assets, respectively.

Certain of our entities hold derivative instruments that contain an element of risk in the event that the counterparties may be unable to meet the terms of such agreements. We minimize our risk exposure by limiting the counterparties with which we enter into contracts to banks and investment banks that meet established credit and capital guidelines. We do not expect any counterparty to default on its obligations and therefore do not expect to incur any loss due to counterparty default.

Item 4. Controls and Procedures

We maintain “disclosure controls and procedures,” as such term is defined in Rules

13a-15(e)

and

15d-15(e)

under the Securities Exchange Act of 1934 (the “Exchange Act”), that are designed to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing disclosure controls and procedures, our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures. The design of any disclosure controls and procedures also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired objectives.

Our management, including our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures pursuant to Rule

13a-15

under the Exchange Act as of the end of the

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period covered by this report. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of the period covered by this report, our disclosure controls and procedures (as defined in Rule

13a-15(e)

under the Exchange Act) are effective at the reasonable assurance level to accomplish their objectives of ensuring that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

No change in our internal control over financial reporting (as such term is defined in Rules

13a-15(f)

and

15d-15(f)

under the Exchange Act) occurred during our most recent quarter, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Part II. Other Information

Item 1. Legal Proceedings

We may from time to time be involved in litigation and claims incidental to the conduct of our business. Our businesses are also subject to extensive regulation, which may result in regulatory proceedings against us. See “Part I. Item 1A. Risk Factors” in our Annual Report on Form

10-K

for the year ended December 31, 2018. We are not currently subject to any pending legal (including judicial, regulatory, administrative or arbitration) proceedings that we expect to have a material impact on our consolidated financial statements. However, given the inherent unpredictability of these types of proceedings and the potentially large and/or indeterminate amounts that could be sought, an adverse outcome in certain matters could have a material effect on Blackstone’s financial results in any particular period.

In December 2017, a purported derivative suit (

Mayberry v. KKR

& Co., L.P., et al.

) was filed in the Commonwealth of Kentucky Franklin County Circuit Court on behalf of the Kentucky Retirement System (“KRS”) by eight of its members and beneficiaries alleging various breaches of fiduciary duty and other violations of Kentucky state law in connection with KRS’s investment in three hedge funds of funds, including a fund managed by Blackstone Alternative Asset Management L.P. (“BAAM L.P.”). The suit names more than 30 defendants, including The Blackstone Group L.P.; BAAM L.P.; Stephen A. Schwarzman, as Chairman and CEO of Blackstone; and J. Tomilson Hill, as then-President and CEO of the Hedge Fund Solutions Group, Vice Chairman of Blackstone and CEO of BAAM (collectively, the “Blackstone Defendants”). Aside from the Blackstone Defendants, the action also names current and former KRS trustees and former KRS officers and various other service providers to KRS and their related persons.

The plaintiffs filed an amended complaint in January 2018. In November 2018, the Circuit Court granted one defendant’s motion to dismiss and denied all other defendants’ motions to dismiss, including those of the Blackstone Defendants. In January 2019, certain of the KRS trustee and officer defendants noticed appeals from the denial of the motions to dismiss to the Kentucky Court of Appeals, and also filed a motion to stay the Mayberry proceedings in Circuit Court pending the outcome of those appeals. In addition, several defendants, including Blackstone and BAAM L.P., filed petitions in the Kentucky Court of Appeals for a writ of prohibition against the ongoing Mayberry proceedings on the ground that the plaintiffs lack standing. In April 2019, the KRS trustee and officer defendants’ appeals were transferred to the Kentucky Supreme Court.

Blackstone believes that this suit is totally without merit and intends to defend it vigorously.

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Item 1A. Risk Factors

For a discussion of our other potential risks and uncertainties, see the information under the heading “Risk Factors” in our Annual Report on Form

10-K

for the year ended December 31, 2018, in our Quarterly Report on Form

10-Q

for the quarter ended March 31, 2019 and in our subsequently filed Quarterly Reports on Form

10-Q,

all of which are accessible on the Securities and Exchange Commission’s website at www.sec.gov.

See “Part I. Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Business Environment” in this report for a discussion of the conditions in the financial markets and economic conditions affecting our businesses. This discussion updates, and should be read together with, the risk factor entitled “Difficult market conditions can adversely affect our business 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, each of which could materially reduce our revenue, earnings and cash flow and adversely affect our financial prospects and condition.” in our Annual Report on Form

10-K

for the year ended December 31, 2018.

The risks described, in our Annual Report on Form

10-K,

in our Quarterly report on Form

10-Q

for the quarter ended March 31, 2019 and in our subsequently filed Quarterly Reports on Form

10-Q,

are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

The following table sets forth information regarding repurchases of our common units during the quarter ended June 30, 2019:


Period	Total Number of Units Purchased		Average Price Paid per Unit		Total Number of Units Purchased as Part of Publicly Announced Plans or Programs (a)		Approximate Dollar Value of Units that May Yet Be Purchased Under the Program (Dollars in Thousands) (a)
Apr. 1 - Apr. 30, 2019		367,988	$	40.18		367,988	$	391,565
May 1 - May 31, 2019		2,663,934	$	39.93		2,663,934	$	285,187
Jun. 1 - Jun. 30, 2019 (b)		3,923,963	$	43.26		3,923,963	$	115,417

		6,955,885				6,955,885

(a)

On April 16, 2018, the board of directors of our general partner, Blackstone Group Management L.L.C., authorized the repurchase of up to $1.0 billion of Blackstone common units and Blackstone Holdings Partnership Units. On July 16, 2019, the board of directors of the Corporation authorized the repurchase of up to $1.0 billion of Class A Common Stock and Blackstone Holdings Partnership Units, which authorization replaced the prior authorization. Under the repurchase program, stock may be repurchased from time to time in open market transactions, in privately negotiated transactions or otherwise. The timing and the actual number of stock repurchased will depend on a variety of factors, including legal requirements, price and economic and market conditions. The repurchase program may be changed, suspended or discontinued at any time and does not have a specified expiration date. See “Part I. Item 1. Financial Statements – Notes to Condensed Consolidated Financial Statements – Note 15. Net Income Per Common Unit” and “Part I. Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources – Sources and Uses of Liquidity” for further information regarding this repurchase program.

(b)	Common units repurchased includes units for which trades were executed during the three months ended June 30, 2019 and settlement occurred in July 2019.

As permitted by our policies and procedures governing transactions in our securities by our directors, executive officers and other employees, from time to time some of these persons may establish plans or

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arrangements complying with Rule

10b5-1

under the Exchange Act, and similar plans and arrangements relating to our common units and Blackstone Holdings Partnership Units.

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

Item 6. Exhibits


Exhibit Number		Exhibit Description

	3.1	Certificate of Conversion of The Blackstone Group L.P. (incorporated herein by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K (File No. 001-3351) filed with the SEC on July 1, 2019).

	3.2	Certificate of Incorporation of The Blackstone Group Inc. (incorporated herein by reference to Exhibit 3.2 to the Registrant’s Current Report on Form 8-K (File No. 001-3351) filed with the SEC on July 1, 2019).

	3.3	Bylaws of The Blackstone Group Inc. (incorporated herein by reference to Exhibit 3.3 to the Registrant’s Current Report on Form 8-K (File No. 001-3351) filed with the SEC on July 1, 2019).

	4.1	Twelfth Supplemental Indenture dated as of April 10, 2019 among Blackstone Holdings Finance Co. L.L.C., The Blackstone Group L.P., Blackstone Holdings I L.P., Blackstone Holdings AI L.P., Blackstone Holdings II L.P., Blackstone Holdings III L.P., Blackstone Holdings IV L.P., The Bank of New York Mellon, as trustee, and The Bank of New York Mellon, London Branch, as paying agent (incorporated herein by reference to Exhibit 4.2 to the Registrant’s Current Report on Form 8-K (File No. 001-33551) filed with the SEC on April 11, 2019).

	4.2	Form of 1.500% Senior Notes due 2029 (included in Exhibit 4.1 hereto).

	10.1+*	Amended and Restated Limited Partnership Agreement of Blackstone Management Associates Asia L.P., dated as of August 6, 2019, and deemed effective as of November 9, 2017.

	10.2+*	Amended and Restated Limited Partnership Agreement of BREIT Special Limited Partner L.P., dated as of August 6, 2019 and deemed effective as of January 1, 2018.

	10.3+*	Amended and Restated Exempted Limited Partnership Agreement of Blackstone Real Estate Associates Asia II L.P., dated August 6, 2019 and deemed effective September 21, 2017.

	10.4+*	Amended and Restated Limited Partnership Agreement of Blackstone Total Alternatives Solution Associates L.P., dated as of August 6, 2019 and deemed effective as of August 24, 2014.

	10.5+*	Amended and Restated Limited Partnership Agreement of Blackstone Total Alternatives Solution Associates 2015 I L.P., dated as of August 6, 2019 and deemed effective as of February 24, 2015.

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	10.6+*			Amended and Restated Limited Partnership Agreement of Blackstone Total Alternatives Solution Associates 2016 L.P., dated as of August 6, 2019 and deemed effective as of December 9, 2016.

	10.7+*			Amended and Restated Limited Partnership Agreement of Blackstone Total Alternatives Solution Associates IV L.P., dated as of August 6, 2019 and deemed effective as of December 22, 2017.

	10.8+*			Amended and Restated Limited Partnership Agreement of Blackstone Total Alternatives Solution Associates V L.P., dated as of August 6, 2019 and deemed effective as of October 31, 2018.

	10.9+*			Third Amended and Restated Limited Liability Company Agreement of BTOSIA L.L.C., dated as of August 6, 2019 and deemed effective as of May 12, 2016.

	10.10+*			Amended and Restated Exempted Limited Partnership Agreement of Blackstone UK Mortgage Opportunities Management Associates (Cayman) L.P., dated August 6, 2019 and deemed effective December 4, 2015.

	31.1*			Certification of the Chief Executive Officer pursuant to Rule 13a-14(a).

	31.2*			Certification of the Chief Financial Officer pursuant to Rule 13a-14(a).

	32.1*			Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith).

	32.2*			Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith).

	101.INS*			XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

	101.SCH*			XBRL Taxonomy Extension Schema Document.

	101.CAL*			XBRL Taxonomy Extension Calculation Linkbase Document.

	101.DEF*			XBRL Taxonomy Extension Definition Linkbase Document.

	101.LAB*			XBRL Taxonomy Extension Label Linkbase Document.

	101.PRE*			XBRL Taxonomy Extension Presentation Linkbase Document.

	104.			Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

*	Filed herewith.

+	Management contract or compensatory plan or arrangement in which directors or executive officers are eligible to participate.

The agreements and other documents filed as exhibits to this report are not intended to provide factual information or other disclosure other than with respect to the terms of the agreements or other documents themselves, and you should not rely on them for that purpose. In particular, any representations and warranties made by us in these agreements or other documents were made solely within the specific context of the relevant agreement or document and may not describe the actual state of affairs as of the date they were made or at any other time.

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Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date: August 8, 2019


The Blackstone Group Inc.

/s/ Michael S. Chae
Name:		Michael S. Chae
Title:		Chief Financial Officer
		(Principal Financial Officer and
		Authorized Signatory)

140

Exhibit 10.1

Execution Version

HIGHLY CONFIDENTIAL & TRADE SECRET

BLACKSTONE MANAGEMENT ASSOCIATES ASIA L.P.

AMENDED AND RESTATED AGREEMENT OF EXEMPTED LIMITED PARTNERSHIP

DATED AUGUST 6, 2019

EFFECTIVE NOVEMBER 9, 2017

THE LIMITED PARTNERSHIP INTERESTS (THE “INTERESTS”) OF BLACKSTONE MANAGEMENT ASSOCIATES ASIA L.P. (THE “PARTNERSHIP”) HAVE NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), THE SECURITIES LAWS OF ANY STATE IN THE UNITED STATES OR ANY OTHER APPLICABLE SECURITIES LAWS IN RELIANCE UPON EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUCH LAWS. SUCH INTERESTS MUST BE ACQUIRED FOR INVESTMENT ONLY AND MAY NOT BE OFFERED FOR SALE, PLEDGED, CHARGED, HYPOTHECATED, SOLD, ASSIGNED OR TRANSFERRED AT ANY TIME EXCEPT IN COMPLIANCE WITH (I) THE SECURITIES ACT, THE EXEMPTED LIMITED PARTNERSHIP LAW OF THE CAYMAN ISLANDS, ANY APPLICABLE STATE SECURITIES LAWS, AND ANY OTHER APPLICABLE SECURITIES LAWS; AND (II) THE TERMS AND CONDITIONS OF THIS AMENDED AND RESTATED AGREEMENT OF EXEMPTED LIMITED PARTNERSHIP. THE INTERESTS MAY NOT BE TRANSFERRED OF RECORD EXCEPT IN COMPLIANCE WITH SUCH LAWS AND THIS AMENDED AND RESTATED AGREEMENT OF EXEMPTED LIMITED PARTNERSHIP. THEREFORE, PURCHASERS OF SUCH INTERESTS WILL BE REQUIRED TO BEAR THE RISK OF THEIR INVESTMENT FOR AN INDEFINITE PERIOD OF TIME.

TABLE OF CONTENTS


		Page
ARTICLE I DEFINITIONS			1

Section 1.1.	Definitions		1
Section 1.2.	Terms Generally		16

ARTICLE II GENERAL PROVISIONS			17

Section 2.1.	General Partners, Limited Partners, Special Partner		17
Section 2.2.	Formation; Name		17
Section 2.3.	Term		18
Section 2.4.	Purposes; Powers		18
Section 2.5.	Place of Business		20
Section 2.6.	Withdrawal of Initial Limited Partner		21

ARTICLE III MANAGEMENT			21

Section 3.1.	General Partners		21
Section 3.2.	Limitations on Partners		21
Section 3.3.	Partner Voting, etc.		21
Section 3.4.	Management		21
Section 3.5.	Responsibilities of Partners		24
Section 3.6.	Exculpation and Indemnification		24
Section 3.7.	Representations of Partners		26
Section 3.8.	Tax Representation and Further Assurances		27

ARTICLE IV CAPITAL OF THE PARTNERSHIP			28

Section 4.1.	Capital Contributions by Partners		28
Section 4.2.	Interest		36
Section 4.3.	Withdrawals of Capital		36

ARTICLE V PARTICIPATION IN PROFITS AND LOSSES			36

Section 5.1.	General Accounting Matters		36
Section 5.2.	GP-Related Capital Accounts		38
Section 5.3.	GP-Related Profit Sharing Percentages		39
Section 5.4.	Allocations of GP-Related Net Income (Loss)		39
Section 5.5.	Liability of Partners		41
Section 5.6.	Liability of General Partners		41
Section 5.7.	Repurchase Rights, etc.		41
Section 5.8.	Distributions		41
Section 5.9.	Business Expenses		48
Section 5.10.	Tax Capital Accounts; Tax Allocations		49


ARTICLE VI ADDITIONAL PARTNERS; WITHDRAWAL OF PARTNERS; SATISFACTION AND DISCHARGE OF PARTNERSHIP INTERESTS; TERMINATION		49

Section 6.1.	Additional Partners	49
Section 6.2.	Withdrawal of Partners	51
Section 6.3.	GP-Related Partner Interests Not Transferable	52
Section 6.4.	Consequences upon Withdrawal of a Partner	52
Section 6.5.	Satisfaction and Discharge of a Withdrawn Partner’s GP-Related Partner Interest	53
Section 6.6.	Dissolution of the Partnership	58
Section 6.7.	Certain Tax Matters	59
Section 6.8.	Special Basis Adjustments	60

ARTICLE VII CAPITAL COMMITMENT INTERESTS; CAPITAL CONTRIBUTIONS; ALLOCATIONS; DISTRIBUTIONS		60

Section 7.1.	Capital Commitment Interests, etc	60
Section 7.2.	Capital Commitment Capital Accounts	62
Section 7.3.	Allocations	62
Section 7.4.	Distributions	63
Section 7.5.	Valuations	67
Section 7.6.	Disposition Election	67
Section 7.7.	Capital Commitment Special Distribution Election	68

ARTICLE VIII WITHDRAWAL, ADMISSION OF NEW PARTNERS		68

Section 8.1.	Partner Withdrawal; Repurchase of Capital Commitment Interests.	68
Section 8.2.	Transfer of Partner’s Capital Commitment Interest	74
Section 8.3.	Compliance with Law	74

ARTICLE IX DISSOLUTION		74

Section 9.1.	Dissolution	74
Section 9.2.	Final Distribution	75
Section 9.3.	Amounts Reserved Related to Capital Commitment Partner Interests	75

ARTICLE X MISCELLANEOUS		76

Section 10.1.	Submission to Jurisdiction; Waiver of Jury Trial	76
Section 10.2.	Ownership and Use of the Blackstone Name	77
Section 10.3.	Written Consent	78
Section 10.4.	Letter Agreements; Schedules	78
Section 10.5.	Governing Law; Separability of Provisions	78
Section 10.6.	Successors and Assigns; Third Party Beneficiaries	78
Section 10.7.	Confidentiality	79
Section 10.8.	Notices	80
Section 10.9.	Counterparts	80
Section 10.10.	Power of Attorney	80
Section 10.11.	Partner’s Will	80

iii

BLACKSTONE MANAGEMENT ASSOCIATES ASIA L.P.

AMENDED AND RESTATED AGREEMENT OF EXEMPTED LIMITED PARTNERSHIP, dated August 6, 2019, and effective on November 9, 2017, of Blackstone Management Associates Asia L.P., a Cayman Islands exempted limited partnership (the “Partnership”), by and between BMA Asia L.L.C., a Delaware limited liability company, as general partner (the “Delaware GP”), and BMA Asia Ltd., a Cayman Islands exempted company, as general partner (the “Cayman GP,” and, together with the Delaware GP, the “General Partners” or, collectively, the “General Partner”), Mapcal Limited (the “Initial Limited Partner”), as initial limited partner, the limited partners listed as Limited Partners in the books and records of the Partnership, and such other persons that are admitted to the Partnership as partners after the date hereof in accordance herewith.

WITNESSETH

WHEREAS, the General Partners, each as general partner, and Mapcal Limited, as initial limited partner, entered into an Exempted Limited Partnership Agreement dated April 27, 2017 (the “Original Agreement”) and formed an exempted limited partnership under the laws of the Cayman Islands under the name of Blackstone Management Associates Asia L.P.; and

WHEREAS, the parties hereto desire to enter into this Amended and Restated Agreement of Exempted Limited Partnership, effective on November 9, 2017, and hereby amend and restate the Original Agreement in its entirety and reflect the withdrawal of the Initial Limited Partner, in each case effective on November 9, 2017;

NOW, THEREFORE, in consideration of the mutual promises and agreements herein made and intending to be legally bound hereby, the parties hereto agree that the Original Agreement shall be amended and restated in its entirety as follows:

ARTICLE I

DEFINITIONS

Section 1.1. Definitions. Unless the context otherwise requires, the following terms shall have the following meanings for purposes of this Agreement:

“Adjustment Amount” has the meaning set forth in Section 8.1(b)(ii).

“Advancing Party” has the meaning set forth in Section 7.1(c).

“Affiliate” when used with reference to another person means any person (other than the Partnership), directly or indirectly, through one or more intermediaries, controlling, controlled by, or under common control with, such other person, which may include, for greater certainty and as the context requires, endowment funds, estate planning vehicles (including any trusts, family members, family investment vehicles, descendant, trusts and other related persons and entities), charitable programs and other similar and/or related vehicles or accounts associated with or established by Blackstone and/or its affiliates, partners and current and/or former employees and/or related persons.

“Agreement” means this Amended and Restated Agreement of Exempted Limited Partnership, as it may be further amended, supplemented, restated or otherwise modified from time to time.

“Applicable Collateral Percentage” with respect to any Firm Collateral or Special Firm Collateral, has the meaning set forth in the books and records of the Partnership with respect thereto.

“Bankruptcy” means, with respect to any person, the occurrence of any of the following events: (i) the filing of an application by such person for, or a consent to, the appointment of a trustee or custodian of his or her assets; (ii) the filing by such person of a voluntary petition in Bankruptcy or the seeking of relief under Title 11 of the United States Code, as now constituted or hereafter amended, or the filing of a pleading in any court of record admitting in writing his or her inability to pay his or her debts as they become due; (iii) the failure of such person to pay his or her debts as such debts become due; (iv) the making by such person of a general assignment for the benefit of creditors; (v) the filing by such person of an answer admitting the material allegations of, or his or her consenting to, or defaulting in answering, a Bankruptcy petition filed against him or her in any Bankruptcy proceeding or petition seeking relief under Title 11 of the United States Code, as now constituted or as hereafter amended; or (vi) the entry of an order, judgment or decree by any court of competent jurisdiction adjudicating such person a bankrupt or insolvent or for relief in respect of such person or appointing a trustee or custodian of his or her assets and the continuance of such order, judgment or decree unstayed and in effect for a period of 60 consecutive days.

“BCP Asia” means (i) Blackstone Capital Partners Asia L.P., a Cayman Islands exempted limited partnership, and its successors, (ii) any alternative investment vehicles relating to, or formed in connection with, any of the partnerships referred to in clauses (i) and (iii) of this definition, (iii) any parallel fund, managed account or other capital vehicle relating to, or formed in connection with, any of the partnerships referred to in clause (i) of this definition and (iv) any other limited partnership, limited liability company or other entity (in each case, whether now or hereafter established) of which the Partnership serves, directly or indirectly, as the general partner, special general partner, manager, managing member or in a similar capacity.

“BCP Asia Agreements” means the collective reference to (i) the BCP Asia Partnership Agreement and (ii) any other BCP Asia partnership, limited liability company or other governing agreements, as each may be amended, supplemented, restated or otherwise modified from time to time.

“BCP Asia Partnership Agreement” means the collective reference to the partnership agreement of each limited partnership named in clause (i) of the definition of “BCP Asia,” as each may be amended, supplemented, restated or otherwise modified from time to time.

“BE Agreement” means the limited partnership agreement, limited liability company agreement or other governing document of any limited partnership, limited

liability company or other entity referred to in the definition of “Blackstone Entity,” as such limited partnership agreement, limited liability company agreement or other governing document may be amended, supplemented, restated or otherwise modified to date, and as such limited partnership agreement, limited liability company agreement or other governing document may be further amended, supplemented, restated or otherwise modified from time to time.

“BE Investment” means any direct or indirect investment by any Blackstone Entity.

“Blackstone” means, collectively, The Blackstone Group Inc., a Delaware corporation, and any successor thereto, and any Affiliate thereof (excluding any natural persons and any portfolio companies, investments or similar entities of any Blackstone-sponsored fund (or any affiliate thereof that is not otherwise an Affiliate of The Blackstone Group Inc.)).

“Blackstone Capital Commitment” has the meaning set forth in the BCP Asia Partnership Agreement.

“Blackstone Entity” means any partnership, limited liability company or other entity (excluding any natural persons and any portfolio companies of any Blackstone-sponsored fund) that is an Affiliate of The Blackstone Group Inc., as designated by the General Partner in its sole discretion.

“Business Day” means any day other than a Saturday, Sunday or other day on which banks are authorized or required by law to be closed in New York, New York.

“Capital Commitment BCP Asia Commitment” means the Capital Commitment (as defined in the BCP Asia Partnership Agreement), if any, of the Partnership that relates solely to the Capital Commitment BCP Asia Interest, if any.

“Capital Commitment BCP Asia Interest” means the Interest (as defined in the BCP Asia Partnership Agreement), if any, of the Partnership as a capital partner in BCP Asia.

“Capital Commitment BCP Asia Investment” means the Partnership’s interest in a specific investment of BCP Asia held by the Partnership through the Capital Commitment BCP Asia Interest.

“Capital Commitment Capital Account” means, with respect to each Capital Commitment Investment for each Partner, the account maintained for such Partner to which are credited such Partner’s contributions to the Partnership with respect to such Capital Commitment Investment and any net income allocated to such Partner pursuant to Section 7.3 with respect to such Capital Commitment Investment and from which are debited any distributions with respect to such Capital Commitment Investment to such Partner and any net losses allocated to such Partner with respect to such Capital Commitment Investment pursuant to Section 7.3. In the case of any such distribution in kind, the Capital Commitment Capital Accounts for the related Capital Commitment

Investment shall be adjusted as if the asset distributed had been sold in a taxable transaction and the proceeds distributed in cash, and any resulting gain or loss on such sale shall be allocated to the Partners participating in such Capital Commitment Investment pursuant to Section 7.3.

“Capital Commitment Class A Interest” has the meaning set forth in Section 7.4(f).

“Capital Commitment Class B Interest” has the meaning set forth in Section 7.4(f).

“Capital Commitment Defaulting Party” has the meaning set forth in Section 7.4(g)(ii)(A).

“Capital Commitment Deficiency Contribution” has the meaning set forth in Section 7.4(g)(ii)(A).

“Capital Commitment Disposable Investment” has the meaning set forth in Section 7.4(f).

“Capital Commitment Distributions” means, with respect to each Capital Commitment Investment, all amounts of distributions received by the Partnership with respect to such Capital Commitment Investment solely in respect of the Capital Commitment BCP Asia Interest, if any, less any costs, fees and expenses of the Partnership with respect thereto and less reasonable reserves for payment of costs, fees and expenses of the Partnership that are anticipated with respect thereto, in each case which the General Partner may allocate to all or any portion of such Capital Commitment Investment as it may determine in good faith is appropriate.

“Capital Commitment Giveback Amount” has the meaning set forth in Section 7.4(g)(i).

“Capital Commitment Interest” means the interest of a Partner in a specific Capital Commitment Investment as provided herein.

“Capital Commitment Investment” means any Capital Commitment BCP Asia Investment, but shall exclude any GP-Related Investment.

“Capital Commitment Liquidating Share” means, with respect to each Capital Commitment Investment, in the case of dissolution of the Partnership, the related Capital Commitment Capital Account of a Partner (less amounts reserved in accordance with Section 9.3) as of the close of business on the effective date of dissolution.

“Capital Commitment Net Income (Loss)” means, with respect to each Capital Commitment Investment, all amounts of income received by the Partnership with respect to such Capital Commitment Investment, including without limitation gain or loss in respect of the disposition, in whole or in part, of such Capital Commitment Investment, less any costs, fees and expenses of the Partnership allocated thereto and less reasonable

reserves for payment of costs, fees and expenses of the Partnership anticipated to be allocated thereto;.

“Capital Commitment Partner Carried Interest” means, with respect to any Partner, the aggregate amount of distributions or payments received by such Partner (in any capacity) from Affiliates of the Partnership in respect of or relating to “carried interest.” Capital Commitment Partner Carried Interest includes any amount initially received by an Affiliate of the Partnership from any fund (including BCP Asia, any similar funds formed after the date hereof, and any Other Blackstone Funds (as defined in the BCP Asia Partnership Agreement), whether or not in existence as of the date hereof) to which such Affiliate serves as general partner (or in another similar capacity) that exceeds such Affiliate’s pro rata share of distributions from such fund based upon capital contributions thereto (or the capital contributions to make the investment of such fund giving rise to such “carried interest”).

“Capital Commitment Partner Interest” means a Partner’s exempted limited partnership interest in the Partnership which relates to any Capital Commitment BCP Asia Interest.

“Capital Commitment Profit Sharing Percentage” means, with respect to each Capital Commitment Investment, the percentage interest of a Partner in Capital Commitment Net Income (Loss) from such Capital Commitment Investment set forth in the books and records of the Partnership.

“Capital Commitment Recontribution Amount” has the meaning set forth in Section 7.4(g)(i).

“Capital Commitment-Related Capital Contributions” has the meaning set forth in Section 7.1(b).

“Capital Commitment-Related Commitment” means, with respect to any Partner, such Partner’s commitment to the Partnership relating to such Partner’s Capital Commitment Partner Interest, as set forth in the books and records of the Partnership, including, without limitation, any such commitment that may be set forth in such Partner’s Commitment Agreement or SMD Agreement, if any.

“Capital Commitment Special Distribution” has the meaning set forth in Section 7.7(a).

“Capital Commitment Value” has the meaning set forth in Section 7.5.

“Carried Interest” means (i) “Carried Interest Distributions” as defined in the BCP Asia Partnership Agreement, and (ii) any other carried interest distribution to a Fund GP pursuant to any BCP Asia Agreement. In the case of each of (i) and (ii) above, except as determined by the General Partner, the amount shall not be less any costs, fees and expenses of the Partnership with respect thereto and less reasonable reserves for payment of costs, fees and expenses of the Partnership that are anticipated with respect thereto (in

each case which the General Partner may allocate among all or any portion of the GP-Related Investments as it determines in good faith is appropriate).

“Carried Interest Give Back Percentage” means, for any Partner or Withdrawn Partner, subject to Section 5.8(e), the percentage determined by dividing (A) the aggregate amount of distributions received by such Partner or Withdrawn Partner from the Partnership or any Other Fund GPs or their Affiliates in respect of Carried Interest by (B) the aggregate amount of distributions made to all Partners, Withdrawn Partners or any other person by the Partnership or any Other Fund GP or any of their Affiliates (in any capacity) in respect of Carried Interest. For purposes of determining any “Carried Interest Give Back Percentage” hereunder, all Trust Amounts contributed to the Trust by the Partnership or any Other Fund GPs on behalf of a Partner or Withdrawn Partner (but not the Trust Income thereon) shall be deemed to have been initially distributed or paid to the Partners and Withdrawn Partners as members, partners or other equity interest owners of the Partnership or any of the Other Fund GPs or their Affiliates.

“Carried Interest Sharing Percentage” means, with respect to each GP-Related Investment, the percentage interest of a Partner in Carried Interest from such GP-Related Investment set forth in the books and records of the Partnership.

“Cause” means the occurrence or existence of any of the following with respect to any Partner, as determined fairly, reasonably, on an informed basis and in good faith by the General Partner: (i) (w) any breach by any Partner of any provision of any non-competition agreement, (x) any material breach of this Agreement or any rules or regulations applicable to such Partner that are established by the General Partner, (y) such Partner’s deliberate failure to perform his or her duties to the Partnership or any of its Affiliates, or (z) such Partner’s committing to or engaging in any conduct or behavior that is or may be harmful to the Partnership or any of its Affiliates in a material way as determined by the General Partner; provided, that in the case of any of the foregoing clauses (w), (x), (y) and (z), the General Partner has given such Partner written notice (a “Notice of Breach”) within 15 days after the General Partner becomes aware of such action and such Partner fails to cure such breach, failure to perform or conduct or behavior within 15 days after receipt of such Notice of Breach from the General Partner (or such longer period, not to exceed an additional 15 days, as shall be reasonably required for such cure; provided, that such Partner is diligently pursuing such cure); (ii) any act of actual fraud, misappropriation, dishonesty, embezzlement or similar conduct against the Partnership or any of its Affiliates; or (iii) conviction (on the basis of a trial or by an accepted plea of guilty or nolo contendere) of a felony (under U.S. law or its equivalent in any jurisdiction) or crime (including any misdemeanor charge involving moral turpitude, false statements or misleading omissions, forgery, wrongful taking, embezzlement, extortion or bribery), or a determination by a court of competent jurisdiction, by a regulatory body or by a self-regulatory body having authority with respect to securities laws, rules or regulations of the applicable securities industry, that such Partner individually has violated any applicable securities laws or any rules or regulations thereunder, or any rules of any such self-regulatory body (including, without limitation, any licensing requirement), if such conviction or determination has a material adverse effect on (A) such Partner’s ability to function as a Partner of the Partnership,

taking into account the services required of such Partner and the nature of the business of the Partnership and its Affiliates or (B) the business of the Partnership and its Affiliates or (iv) becoming subject to an event described in Rule 506(d)(1)(i)-(viii) of Regulation D under the Securities Act.

“Cayman GP” means BMA Asia Ltd., a Cayman Islands exempted company and a general partner of the Partnership.

“Clawback Adjustment Amount” has the meaning set forth in Section 5.8(e)(ii)(C).

“Clawback Amount” means the “Clawback Amount”, as defined in the BCP Asia Partnership Agreement, and any other clawback amount payable to the limited partners of BCP Asia or to BCP Asia pursuant to any BCP Asia Agreement, as applicable.

“Clawback Provisions” means paragraph 9.2.8 of the BCP Asia Partnership Agreement and any other similar provisions in any other BCP Asia Agreement existing heretofore or hereafter entered into.

“Code” means the U.S. Internal Revenue Code of 1986, as amended from time to time, or any successor statute. Any reference herein to a particular provision of the Code means, where appropriate, the corresponding provision in any successor statute.

“Commitment Agreements” means the agreements between the Partnership or an Affiliate thereof and Partners, pursuant to which each Partner undertakes certain obligations, including the obligation to make capital contributions pursuant to Section 4.1 and/or Section 7.1. Each Commitment Agreement is hereby incorporated by reference as between the Partnership and the relevant Partner.

“Contingent” means subject to repurchase rights and/or other requirements.

The term “control” when used with reference to any person means the power to direct the management and policies of such person, directly or indirectly, by or through stock or other equity interest ownership, agency or otherwise, or pursuant to or in connection with an agreement, arrangement or understanding (written or oral) with one or more other persons by or through stock or other equity interest ownership, agency or otherwise; and the terms “controlling” and “controlled” shall have meanings correlative to the foregoing.

“Controlled Entity” when used with reference to another person means any person controlled by such other person.

“Covered Person” has the meaning set forth in Section 3.6(a).

“Deceased Partner” means any Partner or Withdrawn Partner who has died or who suffers from Incompetence. For purposes hereof, references to a Deceased Partner shall refer collectively to the Deceased Partner and the estate and heirs or legal representative of such Deceased Partner, as the case may be, that have received such Deceased Partner’s interest in the Partnership.

“Default Interest Rate” means the lower of (i) the sum of (a) the Prime Rate and (b) 5%, or (ii) the highest rate of interest permitted under applicable law.

“Delaware Arbitration Act” has the meaning set forth in Section 10.1(d).

“Delaware GP” means BMA Asia L.L.C., a Delaware limited liability company and a general partner of the Partnership.

“Estate Planning Vehicle” has the meaning set forth in Section 6.3(a).

“Excess Holdback” has the meaning set forth in Section 4.1(d)(v)(A).

“Excess Holdback Percentage” has the meaning set forth in Section 4.1(d)(v)(A).

“Excess Tax-Related Amount” has the meaning set forth in Section 5.8(e).

“Existing Partner” means any Partner who is neither a Retaining Withdrawn Partner nor a Deceased Partner.

“Final Event” means the death, Total Disability, Incompetence, Bankruptcy, liquidation, dissolution or Withdrawal from the Partnership of any person who is a Partner.

“Firm Advances” has the meaning set forth in Section 7.1(c).

“Firm Collateral” means a Partner’s or Withdrawn Partner’s interest in one or more partnerships or limited liability companies, in either case affiliated with the Partnership, and certain other assets of such Partner or Withdrawn Partner, in each case that has been pledged, charged, or made available to the Trustee(s) to satisfy all or any portion of the Excess Holdback of such Partner or Withdrawn Partner as more fully described in the Partnership’s books and records; provided, that for all purposes hereof (and any other agreement (e.g., the Trust Agreement) that incorporates the meaning of the term “Firm Collateral” by reference), references to “Firm Collateral” shall include “Special Firm Collateral”, excluding references to “Firm Collateral” in Section 4.1(d)(v) and Section 4.1(d)(viii).

“Firm Collateral Realization” has the meaning set forth in Section 4.1(d)(v)(B).

“Fiscal Year” means a calendar year, or any other period chosen by the General Partner.

“Fund” has the meaning set forth in Section 3.4(a).

“Fund GP” means the Partnership (only with respect to the GP-Related BCP Asia Interest) and the Other Fund GPs.

“GAAP” means U.S. generally accepted accounting principles.

“General Partner” or “General Partners” means the Cayman GP and the Delaware GP, as applicable, and any person admitted to the Partnership as an additional or substitute general partner of the Partnership in accordance with the provisions of this Agreement and the Partnership Act (until such time as such person ceases to be a general partner of the Partnership as provided herein and in the Partnership Act), in each case, subject to the provisions of Section 3.4. Subject to Section 3.4, all references herein to the “General Partner” in the singular form shall be deemed to also refer to such other General Partner as may be appropriate.

“Giveback Amount(s)” means the amount(s) payable by partners of BCP Asia pursuant to the Giveback Provisions.

“Giveback Provisions” means paragraph 3.4.3 of the BCP Asia Partnership Agreement and any other similar provisions in any other BCP Asia Agreement existing heretofore or hereafter entered into.

“Governmental Entity” has the meaning set forth in Section 10.7(b).

“GP-Related BCP Asia Interest” means the interest of the Partnership in BCP Asia as general partner of BCP Asia, excluding any Capital Commitment Interest.

“GP-Related BCP Asia Investment” means the Partnership’s interest in an Investment (for purposes of this definition, as defined in the BCP Asia Partnership Agreement) in the Partnership’s capacity as the general partner of BCP Asia, but does not include any Capital Commitment Investment.

“GP-Related Capital Account” has the meaning set forth in Section 5.2(a).

“GP-Related Capital Contributions” has the meaning set forth in Section 4.1(a).

“GP-Related Class A Interest” has the meaning set forth in Section 5.8(a)(ii).

“GP-Related Class B Interest” has the meaning set forth in Section 5.8(a)(ii).

“GP-Related Commitment”, with respect to any Partner, means such Partner’s commitment to the Partnership relating to such Partner’s GP-Related Partner Interest, as set forth in the books and records of the Partnership, including, without limitation, any such commitment that may be set forth in such Partner’s Commitment Agreement or SMD Agreement, if any.

“GP-Related Defaulting Party” has the meaning set forth in Section 5.8(d)(ii)(A).

“GP-Related Deficiency Contribution” has the meaning set forth in Section 5.8(d)(ii)(A).

“GP-Related Disposable Investment” has the meaning set forth in Section 5.8(a)(ii).

“GP-Related Giveback Amount” has the meaning set forth in Section 5.8(d)(i)(A).

“GP-Related Investment” means any investment (direct or indirect) of the Partnership in respect of the GP-Related BCP Asia Interest (including, without limitation, any GP-Related BCP Asia Investment, but excluding any Capital Commitment Investment).

“GP-Related Net Income (Loss)” has the meaning set forth in Section 5.1(b).

“GP-Related Partner Interest” of a Partner means all exempted limited partnership interests of such Partner in the Partnership (other than such Partner’s Capital Commitment Partner Interest), including, without limitation, such Partner’s exempted limited partnership interest in the Partnership with respect to the GP-Related BCP Asia Interest and with respect to all GP-Related Investments.

“GP-Related Profit Sharing Percentage” means the “Carried Interest Sharing Percentage” and “Non-Carried Interest Sharing Percentage” of each Partner; provided, that any references in this Agreement to GP-Related Profit Sharing Percentages made (i) in connection with voting or voting rights or (ii) GP-Related Capital Contributions with respect to GP-Related Investments (including Section 5.3(b)) means the “Non-Carried Interest Sharing Percentage” of each Partner; provided further, that the term “GP-Related Profit Sharing Percentage” shall not include any Capital Commitment Profit Sharing Percentage.

“GP-Related Recontribution Amount” has the meaning set forth in Section 5.8(d)(i)(A).

“GP-Related Required Amounts” has the meaning set forth in Section 4.1(a).

“GP-Related Unallocated Percentage” has the meaning set forth in Section 5.3(b).

“GP-Related Unrealized Net Income (Loss)” attributable to any GP-Related BCP Asia Investment as of any date means the GP-Related Net Income (Loss) that would be realized by the Partnership with respect to such GP-Related BCP Asia Investment if BCP Asia’s entire portfolio of investments were sold on such date for cash in an amount equal to their aggregate value on such date (determined in accordance with Section 5.1(e)) and all distributions payable by BCP Asia to the Partnership (indirectly through the general partner of BCP Asia) pursuant to any BCP Asia Partnership Agreement with respect to such GP-Related BCP Asia Investment were made on such date. “GP-Related Unrealized Net Income (Loss)” attributable to any other GP-Related Investment (other than any Capital Commitment Investment) as of any date means the GP-Related Net Income (Loss) that would be realized by the Partnership with respect to such GP-Related Investment if such GP-Related Investment were sold on such date for cash in an amount equal to its value on such date (determined in accordance with Section 5.1(e)).

“Holdback” has the meaning set forth in Section 4.1(d)(i).

“Holdback Percentage” has the meaning set forth in Section 4.1(d)(i).

“Holdback Vote” has the meaning set forth in Section 4.1(d)(iv)(A).

“Holdings” means Blackstone Holdings III L.P., a Québec société en commandite.

“Incompetence” means, with respect to any Partner, the determination by the General Partner in its sole discretion, after consultation with a qualified medical doctor, that such Partner is incompetent to manage his or her person or his or her property.

“Initial Holdback Percentages” has the meaning set forth in Section 4.1(d)(i).

“Initial Limited Partner” has the meaning set forth in the recitals.

“Interest” means a Partner’s exempted limited partnership interest in the Partnership (including the right of a Limited Partner to any and all benefits to which a Limited Partner may be entitled as provided in this Agreement, together with the obligations of such Limited Partner to comply with all the terms and provisions of this Agreement), including any interest that is held by a Retaining Withdrawn Partner, and including any Partner’s GP-Related Partner Interest and Capital Commitment Partner Interest.

“Investment” means any investment (direct or indirect) of the Partnership designated by the General Partner from time to time as an investment in which the Partners’ respective interests shall be established and accounted for on a basis separate from the Partnership’s other businesses, activities and investments, including (a) GP-Related Investments, and (b) Capital Commitment Investments.

“Investor Note” means a promissory note of a Partner evidencing indebtedness incurred by such Partner to purchase a Capital Commitment Interest, the terms of which were or are approved by the General Partner and which is secured by such Capital Commitment Interest, all other Capital Commitment Interests of such Partner and all other interests of such Partner in Blackstone Entities; provided, that such promissory note may also evidence indebtedness relating to other interests of such Partner in Blackstone Entities, and such indebtedness shall be prepayable with Capital Commitment Net Income (whether or not such indebtedness relates to Capital Commitment Investments) as set forth in this Agreement, the Investor Note, the other BE Agreements and any documentation relating to Other Sources; provided further, that references to “Investor Notes” herein refer to multiple loans made pursuant to such note, whether made with respect to Capital Commitment Investments or other BE Investments, and references to an “Investor Note” refer to one such loan as the context requires. In no way shall any indebtedness incurred to acquire Capital Commitment Interests or other interests in Blackstone Entities be considered part of the Investor Notes for purposes hereof if the Lender or Guarantor is not the lender or guarantor with respect thereto.

“Investor Special Partner” means any Special Partner so designated at the time of its admission by the General Partner as a Partner of the Partnership.

“Issuer” means the issuer of any Security comprising part of an Investment.

“L/C” has the meaning set forth in Section 4.1(d)(vi).

“L/C Partner” has the meaning set forth in Section 4.1(d)(vi).

“Lender or Guarantor” means Blackstone Holdings I L.P., in its capacity as lender or guarantor under the Investor Notes, or any other Affiliate of the Partnership that makes or guarantees loans to enable a Partner to acquire Capital Commitment Interests or other interests in Blackstone Entities.

“Limited Partner” means each of the parties listed as Limited Partners in the books and records of the Partnership or any person that has been admitted to the Partnership as a substituted or additional Limited Partner in accordance with the terms of this Agreement, each in its capacity as a limited partner of the Partnership. For the avoidance of doubt, the term “Limited Partner” does not include the General Partner or any Special Partners (notwithstanding the fact that Special Partners are limited partners of the Partnership).

“Loss Amount” has the meaning set forth in Section 5.8(e)(i)(A).

“Loss Investment” has the meaning set forth in Section 5.8(e).

“Losses” has the meaning set forth in Section 3.6(b)(i).

“Majority in Interest of the Partners” on any date (a “vote date”) means one or more persons who are Partners (including the General Partner but excluding Nonvoting Special Partners) on the vote date and who, as of the last day of the most recent accounting period ending on or prior to the vote date (or as of such later date on or prior to the vote date selected by the General Partner as of which the Partners’ capital account balances can be determined), have aggregate capital account balances representing at least a majority in amount of the total capital account balances of all the persons who are Partners (including the General Partner but excluding Nonvoting Special Partners) on the vote date.

“Moody’s” means Moody’s Investors Service, Inc., or any successor thereto.

“Net Carried Interest Distribution” has the meaning set forth in Section 5.8(e)(i)(C).

“Net Carried Interest Distribution Recontribution Amount” has the meaning set forth in Section 5.8(e).

“Net GP-Related Recontribution Amount” has the meaning set forth in Section 5.8(d)(i)(A).

“Non-Carried Interest” means, with respect to each GP-Related Investment, all amounts of distributions, other than Carried Interest and other than Capital Commitment

Distributions, received by the Partnership with respect to such GP-Related Investment, less any costs, fees and expenses of the Partnership with respect thereto and less reasonable reserves for payment of costs, fees and expenses of the Partnership that are anticipated with respect thereto, in each case which the General Partner may allocate to all or any portion of the GP-Related Investments as it may determine in good faith is appropriate.

“Non-Carried Interest Sharing Percentage” means, with respect to each GP-Related Investment, the percentage interest of a Partner in Non-Carried Interest from such GP-Related Investment set forth in the books and records of the Partnership.

“Non-Contingent” means generally not subject to repurchase rights or other requirements.

“Nonvoting Partner” has the meaning set forth in Section 8.2.

“Nonvoting Special Partner” has the meaning set forth in Section 6.1(a).

“Original Agreement” has the meaning set forth in the recitals.

“Other Fund GPs” means the Delaware GP (solely with respect to the Delaware GP’s GP-Related Partner Interest in the Partnership) and any other entity (other than the Partnership) through which any Partner, Withdrawn Partner or any other person directly receives any amounts of Carried Interest, and any successor thereto; provided, that this includes any other entity which has in its organizational documents a provision which indicates that it is a “Fund GP” or an “Other Fund GP”; provided further, that notwithstanding any of the foregoing, neither Holdings nor any Estate Planning Vehicle established for the benefit of family members of any Partner or of any member or partner of any Other Fund GP shall be considered an “Other Fund GP” for purposes hereof.

“Other Sources” means (i) distributions or payments of Capital Commitment Partner Carried Interest (which shall include amounts of Capital Commitment Partner Carried Interest which are not distributed or paid to a Partner but are instead contributed to a trust (or similar arrangement) to satisfy any “holdback” obligation with respect thereto), and (ii) distributions from Blackstone Entities (other than the Partnership) to such Partner.

“Partner” means any person who is a partner of the Partnership, including the Limited Partners, the General Partner and the Special Partners. Except as otherwise specifically provided herein, no group of Partners, including the Special Partners and any group of Partners in the same Partner Category, shall have any right to vote as a class on any matter relating to the Partnership, including, but not limited to, any merger, reorganization, dissolution or liquidation.

“Partner Category” means the General Partner, Existing Partners, Retaining Withdrawn Partners or Deceased Partners, each referred to as a group for purposes hereof.

“Partnership” has the meaning set forth in the preamble hereto.

“Partnership Act” means the Exempted Limited Partnership Law of the Cayman Islands, as it may be amended from time to time, and any successor to such statute.

“Partnership Affiliate” has the meaning set forth in Section 3.4(c).

“Partnership Affiliate Governing Agreement” has the meaning set forth in Section 3.4(c).

“Pledgable Blackstone Interests” has the meaning set forth in Section 4.1(d)(v)(A).

“Prime Rate” means the rate of interest per annum publicly announced from time to time by JPMorgan Chase Bank, N.A. as its prime rate.

“Qualifying Fund” means any fund designated by the General Partner as a “Qualifying Fund”.

“Repurchase Period” has the meaning set forth in Section 5.8(c).

“Required Rating” has the meaning set forth in Section 4.1(d)(vi).

“Retained Portion” has the meaning set forth in Section 7.6(a).

“Retaining Withdrawn Partner” means a Withdrawn Partner who has retained a GP-Related Partner Interest, pursuant to Section 6.5(f) or otherwise. A Retaining Withdrawn Partner shall be considered a Nonvoting Special Partner for all purposes hereof.

“Securities” means any debt or equity securities of an Issuer and its subsidiaries and other Controlled Entities constituting part of an Investment, including without limitation common and preferred stock, interests in limited partnerships and interests in limited liability companies (including warrants, rights, put and call options and other options relating thereto or any combination thereof), notes, bonds, debentures, trust receipts and other obligations, instruments or evidences of indebtedness, choses in action, other property or interests commonly regarded as securities, interests in real property, whether improved or unimproved, interests in oil and gas properties and mineral properties, short-term investments commonly regarded as money-market investments, bank deposits and interests in personal property of all kinds, whether tangible or intangible.

“Securities Act” means the U.S. Securities Act of 1933, as amended from time to time, or any successor statute.

“Settlement Date” has the meaning set forth in Section 6.5(a).

“SMD Agreements” means the agreements between the Partnership and/or one or more of its Affiliates and certain of the Partners, pursuant to which each such Partner undertakes certain obligations with respect to the Partnership and/or its Affiliates. The SMD Agreements are hereby incorporated by reference as between the Partnership and the relevant Partner.

“Special Firm Collateral” means interests in a Qualifying Fund or other assets that have been pledged or charged to the Trustee(s) to satisfy all or any portion of a Partner’s or Withdrawn Partner’s Holdback obligation (excluding any Excess Holdback) as more fully described in the Partnership’s books and records.

“Special Firm Collateral Realization” has the meaning set forth in Section 4.1(d)(viii)(B).

“Special Partner” means any person shown in the books and records of the Partnership as a Special Partner of the Partnership, including any Nonvoting Special Partner and any Investor Special Partner.

“S&P” means Standard & Poor’s Ratings Group, and any successor thereto.

“Subject Investment” has the meaning set forth in Section 5.8(e)(i).

“Subject Partner” has the meaning set forth in Section 4.1(d)(iv)(A).

“Successor in Interest” means any (i) shareholder of; (ii) trustee, custodian, receiver or other person acting in any Bankruptcy or reorganization proceeding with respect to; (iii) assignee for the benefit of the creditors of; (iv) officer, director or partner of; (v) trustee or receiver, or former officer, director or partner, or other fiduciary acting for or with respect to the dissolution, liquidation or termination of; or (vi) other executor, administrator, committee, legal representative or other successor or assign of, any Partner, whether by operation of law or otherwise.

“Tax Advances” has the meaning set forth in Section 6.7(d).

“Tax Matters Partner” has the meaning set forth in Section 6.7(b).

“TM” has the meaning set forth in Section 10.2.

“Total Disability” means the inability of a Limited Partner substantially to perform the services required of such Limited Partner (in its capacity as such or in any other capacity with respect to any Affiliate of the Partnership) for a period of six consecutive months by reason of physical or mental illness or incapacity and whether arising out of sickness, accident or otherwise.

“Transfer” has the meaning set forth in Section 8.2.

“Trust Account” has the meaning set forth in the Trust Agreement.

“Trust Agreement” means the Trust Agreement, dated as of the date set forth therein, as amended, supplemented, restated or otherwise modified from time to time, among the Partners, the Trustee(s) and certain other persons that may receive distributions in respect of or relating to Carried Interest from time to time.

“Trust Amount” has the meaning set forth in the Trust Agreement.

“Trust Income” has the meaning set forth in the Trust Agreement.

“Trustee(s)” has the meaning set forth in the Trust Agreement.

“Unadjusted Carried Interest Distribution” has the meaning set forth in Section 5.8(e)(i)(B).

“Unallocated Capital Commitment Interests” has the meaning set forth in Section 8.1(f).

“U.S.” means the United States of America.

“Withdraw” or “Withdrawal” means, with respect to a Partner, such Partner ceasing to be a partner of the Partnership (except as a Retaining Withdrawn Partner) for any reason (including death, disability, removal, resignation, retirement or the occurrence of any other “event of withdrawal” of the General Partner pursuant to Section 36(7) of the Partnership Act, whether such is voluntary or involuntary), unless the context shall limit the type of withdrawal to a specific reason, and “Withdrawn” with respect to a Partner means, as aforesaid, such Partner ceasing to be a partner of the Partnership.

“Withdrawal Date” means the date of the Withdrawal from the Partnership of a Withdrawn Partner.

“Withdrawn Partner” means a Limited Partner whose GP-Related Partner Interest or Capital Commitment Partner Interest in the Partnership has been terminated for any reason, including the occurrence of an event specified in Section 6.2, and shall include, unless the context requires otherwise, the estate or legal representatives of any such Partner.

“W-8BEN” has the meaning set forth in Section 3.8(b).

“W-8BEN-E” has the meaning set forth in Section 3.8(b).

“W-8IMY” has the meaning set forth in Section 3.8(b).

“W-9” has the meaning set forth in Section 3.8(b).

companies (including limited liability companies), joint ventures, corporations, trusts, governments (or agencies or political subdivisions thereof) and other associations and entities. The words “include”, “includes” and “including” shall be deemed to be followed by the phrase “without limitation”.

ARTICLE II

GENERAL PROVISIONS

Section 2.1. General Partners, Limited Partners, Special Partners. The Partners may be General Partners, Limited Partners or Special Partners. The General Partners on the date hereof are the Cayman GP and the Delaware GP, subject to the provisions of Section 3.4. The Limited Partners and Special Partners shall be as shown in the books and records of the Partnership which shall be maintained in accordance with the Partnership Act. The books and records of the Partnership contain the GP-Related Profit Sharing Percentage and GP-Related Commitment of each Partner (including, without limitation, the Delaware GP) with respect to the GP-Related Investments of the Partnership as of the date hereof. The books and records of the Partnership contain the Capital Commitment Profit Sharing Percentage and Capital Commitment-Related Commitment of each Partner (including, without limitation, the Delaware GP) with respect to the Capital Commitment Investments of the Partnership as of the date hereof. The books and records of the Partnership shall be amended by the General Partner from time to time, in accordance with the Partnership Act and this Agreement, to reflect additional GP-Related Investments, additional Capital Commitment Investments, dispositions by the Partnership of GP-Related Investments, dispositions by the Partnership of Capital Commitment Investments, the GP-Related Profit Sharing Percentages of the Partners (including, without limitation, the Delaware GP) as modified from time to time, the Capital Commitment Profit Sharing Percentages of the Partners (including, without limitation, the Delaware GP) as modified from time to time, the admission of additional Partners, the Withdrawal of Partners, the transfer or assignment of interests in the Partnership pursuant to the terms of this Agreement and any other matters required by the Partnership Act. At the time of admission of each additional Partner, the General Partner shall determine in its sole discretion the GP-Related Investments and Capital Commitment Investments in which such Partner shall participate and such Partner’s GP-Related Commitment, Capital Commitment-Related Commitment, GP-Related Profit Sharing Percentage with respect to each such GP-Related Investment and Capital Commitment Profit Sharing Percentage with respect to each such Capital Commitment Investment. Each Partner may have a GP-Related Partner Interest and/or a Capital Commitment Partner Interest.

Section 2.2. Formation; Name. The Partnership was formed by the Original Agreement and registered as an exempted limited partnership, pursuant to the Partnership Act and is hereby continued as an exempted limited partnership pursuant to the Partnership Act and shall conduct its activities under the name of Blackstone Management Associates Asia L.P. The General Partners shall have the power to change the name of the Partnership at any time, subject to compliance with the requirements of the Partnership Act, and shall thereupon file the requisite notice pursuant to the Partnership Act. The General Partner is further authorized to execute and deliver and file any other certificates (and any amendments and/or restatements thereof) necessary for the Partnership to qualify to do business in a jurisdiction in which the Partnership may wish to conduct business.

Section 2.3. Term. The term of the Partnership shall continue until December 31, 2069, unless earlier wound up and subsequently dissolved in accordance with this Agreement and the Partnership Act.

Section 2.4. Purposes; Powers. (a) The purposes of the Partnership shall be, directly or indirectly through subsidiaries or Affiliates, subject to the Partnership Act:

(i) to serve as a limited partner or general partner of BCP Asia and perform the functions of a limited partner, special general partner or general partner of BCP Asia specified in the BCP Asia Agreements;

(ii) if applicable, to serve as, and hold the Capital Commitment BCP Asia Interest as, a capital partner (and, if applicable, a limited partner, special general partner and/or a general partner) of BCP Asia and perform the functions of a capital partner (and, if applicable, a limited partner, special general partner and/or a general partner) of BCP Asia specified in the BCP Asia Agreements;

(iii) to invest in Capital Commitment Investments and/or GP-Related Investments and acquire and invest in Securities or other property directly or indirectly through BCP Asia,

(iv) to make the Blackstone Capital Commitment or a portion thereof, either directly or indirectly through BCP Asia or otherwise;

(v) to serve as a general partner or limited partner of BCP Asia, and other investment vehicles and perform the functions of a general partner or limited partner, member, shareholder or other equity interest owner specified in any such Fund’s GP’s respective partnership agreement, limited liability company agreement, charter or other governing documents, as amended, supplemented, restated or otherwise modified from time to time, of any such partnership;

(vi) to serve as a member, shareholder or other equity interest owner of limited liability companies, other companies, corporations or other entities and perform the functions of a member, shareholder or other equity interest owner specified in the respective limited liability company agreement, charter or other governing documents, as amended, supplemented, restated or otherwise modified from time to time, of any such limited liability company, company, corporation or other entity;

(vii) to carry on such other businesses, perform such other services and make such other investments as are deemed desirable by the General Partner and as are permitted under the Partnership Act, the BCP Asia Agreements, and any applicable partnership agreement, limited liability company agreement, charter or other governing document referred to in clause (v) or (vi) above, in each case as the same may be amended, supplemented, restated or otherwise modified from time to time;

(viii) any other lawful purpose; and

(ix) to do all things necessary, desirable, convenient or incidental thereto.

(b) In furtherance of its purposes, the Partnership shall have all powers necessary, suitable or convenient for the accomplishment of its purposes, alone or with others, as principal or agent, including the following, provided, that the Partnership shall not undertake business with the public in the Cayman Islands other than so far as may be necessary for the carrying on of business exterior to the Cayman Islands:

(i) to be and become a general partner or limited partner of partnerships, a member of limited liability companies, a holder of common and preferred stock of corporations and/or an investor in the foregoing entities or other entities, in connection with the making of Investments or the acquisition, holding or disposition of Securities or other property or as otherwise deemed appropriate by the General Partner in the conduct of the Partnership’s business, and to take any action in connection therewith;

(ii) to acquire and invest in general partner or limited partner interests, in limited liability company interests, in common and preferred stock of corporations and/or in other interests in or obligations of the foregoing entities or other entities and in Investments and Securities or other property or direct or indirect interests therein, whether such Investments and Securities or other property are readily marketable or not, and to receive, hold, sell, dispose of or otherwise transfer any such partner interests, limited liability company interests, stock, interests, obligations, Investments or Securities or other property and any dividends and distributions thereon and to purchase and sell, on margin, and be long or short, futures contracts and to purchase and sell, and be long or short, options on futures contracts;

(iii) to buy, sell and otherwise acquire investments, whether such investments are readily marketable or not;

(iv) to invest and reinvest the cash assets of the Partnership in money-market or other short-term investments;

(v) to hold, receive, mortgage, pledge, charge, grant security interests over, lease, transfer, exchange or otherwise dispose of, grant options with respect to, and otherwise deal in and exercise all rights, powers, privileges and other incidents of ownership or possession with respect to, all property held or owned by the Partnership;

(vi) to borrow or raise money from time to time and to issue promissory notes, drafts, bills of exchange, warrants, bonds, debentures and other negotiable and non-negotiable instruments and evidences of indebtedness, to secure payment of the principal of any such indebtedness and the interest thereon by mortgage, pledge, charge, conveyance or assignment in trust of, or the granting of a security interest in, the whole or any part of the property of the Partnership, whether at the time owned or thereafter acquired, to guarantee the obligations of others and to buy, sell, pledge, charge, or otherwise dispose of any such instrument or evidence of indebtedness;

(vii) to lend any of its property or funds, either with or without security, at any legal rate of interest or without interest;

(viii) to have and maintain one or more offices within or without the Cayman Islands, and in connection therewith, to rent or acquire office space, engage personnel and compensate them and do such other acts and things as may be advisable or necessary in connection with the maintenance of such office or offices;

(ix) to open, maintain and close accounts, including margin accounts, with brokers;

(x) to open, maintain and close bank accounts and draw checks and other orders for the payment of moneys;

(xi) to engage accountants, auditors, custodians, investment advisers, attorneys and any and all other agents and assistants, both professional and nonprofessional, and to compensate any of them as may be necessary or advisable;

(xii) to form or cause to be formed and to own the stock of one or more corporations, whether foreign or domestic, to form or cause to be formed and to participate in partnerships and joint ventures, whether foreign or domestic and to form or cause to be formed and be a member or manager or both of one or more limited liability companies;

(xiii) to enter into, make and perform all contracts, agreements and other undertakings as may be necessary, convenient, advisable or incident to carrying out its purposes;

(xiv) to sue and be sued, to prosecute, settle or compromise all claims against third parties, to compromise, settle or accept judgment to claims against the Partnership, and to execute all documents and make all representations, admissions and waivers in connection therewith;

(xv) to distribute, subject to the terms of this Agreement, at any time and from time to time to the Partners cash or investments or other property of the Partnership, or any combination thereof; and

(xvi) to take such other actions necessary, desirable, convenient or incidental thereto and to engage in such other businesses as may be permitted under Cayman Islands and other applicable law.

Section 2.5. Place of Business. The Partnership shall maintain its principal place of business and office at 345 Park Avenue, New York, New York 10154, U.S.A or such other place the General Partner determines. The registered office of the Partnership in the Cayman Islands is Intertrust Corporate Services (Cayman) Limited, 190 Elgin Avenue, George Town, Grand Cayman KY1-9005, Cayman Islands or at such other place or places as may from time to time be designated by the General Partner.

Section 2.6. Withdrawal of Initial Limited Partner. Upon the admission of one or more Limited Partners to the Partnership, the Initial Limited Partner shall (a) Withdraw as the Initial Limited Partner of the Partnership and (b) have no further right, interest or obligation of any kind whatsoever as a Partner in the Partnership; provided, that the effective date of such Withdrawal shall be deemed as between the parties hereto to be November 9, 2017.

ARTICLE III

MANAGEMENT

Section 3.1. General Partners. (a) The Cayman GP and the Delaware GP shall be the “General Partners,” as of the date hereof, subject to Section 3.4. A General Partner shall cease to be the General Partner only if (i) it Withdraws from the Partnership for any reason, (ii) it consents in its sole discretion to resign as the General Partner, or (iii) a Final Event with respect to it occurs. No General Partner may be removed without its consent. The relative rights and responsibilities of such General Partners will be as agreed upon from time to time between them.

Section 3.2. Limitations on Partners. Except as otherwise expressly provided herein and except as may be expressly required by the Partnership Act, Partners (including Special Partners) other than General Partners as such shall have no right to, and shall not, take part in the management, conduct or control of the Partnership’s business or act for or bind the Partnership, and shall have only the rights and powers granted to Partners of the applicable class herein or, to the extent not waivable, in the Partnership Act.

Section 3.3. Partner Voting, etc. (a) To the extent a Partner is entitled to vote with respect to any matter relating to the Partnership, such Partner shall not be obligated to abstain from voting on any matter (or vote in any particular manner) because of any interest (or conflict of interest) of such Partner (or any Affiliate thereof) in such matter.

(b) Meetings of the Partners may be called only by the General Partner.

(c) Notwithstanding any other provision of this Agreement, any Limited Partner or Withdrawn Partner that fails to respond to a notice provided by the General Partner requesting the consent, approval or vote of such Limited Partner or Withdrawn Partner within 14 days after such notice is sent to such Limited Partner or Withdrawn Partner shall be deemed to have given its affirmative consent or approval thereto.

kind except the voting of securities of portfolio companies of any Fund and/or the Partnership, and (iii) each reference in this Agreement to the “General Partner” or “General Partners” in relation to the power, authority, management, conduct, control and operation of the Partnership means the Delaware GP, unless such reference relates to the power, authority, management, conduct, control and operation of the Partnership with respect to the voting of securities of portfolio companies of any Fund and/or the Partnership, in which case, such reference to the “General Partner” or “General Partners” means the Cayman GP. Subject to the proviso to the immediately preceding sentence, the General Partners shall, in the General Partners’ discretion, exercise all powers necessary and convenient for the purposes of the Partnership, including those enumerated in Section 2.4, on behalf and in the name of the Partnership. All decisions and determinations (howsoever described herein) to be made by the General Partners pursuant to this Agreement shall be made in the General Partners’ discretion, subject only to the express terms and conditions of this Agreement. “Fund” means any of (x) the Partnership, or (y) any other partnership or other entity or investment vehicle of which the Partnership serves as general partner or in a similar capacity.

(b) All outside business or investment activities of the Partners (including outside directorships or trusteeships) shall be subject to such rules and regulations as are established by the General Partner from time to time.

(c) Notwithstanding any provision in this Agreement to the contrary, the Partnership is hereby authorized, without the need for any further act, vote or consent of any person (directly or indirectly through one or more other entities, in the name and on behalf of the Partnership, on its own behalf or in the Partnership’s capacity as general partner, special general partner, capital partner and/or limited partner of BCP Asia or as general partner or limited partner, member, shareholder or other equity interest owner of any Partnership Affiliate (as hereinafter defined): (i) to execute and deliver, and to perform the Partnership’s obligations under the BCP Asia Agreements, including, without limitation, serving as a general partner of BCP Asia and, if applicable, a capital partner of BCP Asia, (ii) to execute and deliver, and to perform the Partnership’s obligations under, the governing agreement, as amended, supplemented, restated or otherwise modified (each a “Partnership Affiliate Governing Agreement”), of any other partnership, limited liability company, other company, corporation or other entity (each a “Partnership Affiliate”) of which the Partnership is, or is to become, a general partner or limited partner, member, shareholder or other equity interest owner, including, without limitation, serving as a general partner or limited partner, member, shareholder or other equity interest owner of each Partnership Affiliate, and (iii) to take any action, in the applicable capacity, contemplated by or arising out of this Agreement, the BCP Asia Agreement, the BCP Asia Agreements or each Partnership Affiliate Governing Agreement (and any amendment, supplement, restatement and/or other modification of any of the foregoing).

(d) Each of the General Partners, and any other person designated by the General Partners, each acting individually, is hereby authorized and empowered, as an authorized person of the Partnership, or either or both of the General Partners, (within the meaning of the Delaware Limited Liability Company Act, 6 Del. C. §§ 18-101 et seq., as amended, or otherwise) (the General Partners hereby authorizing and ratifying any of the following actions):

(i) to execute and deliver and/or file (including any such action, directly or indirectly through one or more other entities, in the name and on behalf of the Partnership, on its own behalf in its capacity as general partner, special general partner, capital partner and/or limited partner of BCP Asia or as general partner or limited partner, member, shareholder or other equity interest owner of any Partnership Affiliate or, if applicable, in the Partnership’s capacity as a capital partner of BCP Asia or as a general partner or limited partner, member, shareholder or other equity interest owner of any Partnership Affiliate), any of the following:

(A) any agreement, certificate, instrument or other document of the Partnership, BCP Asia or any Partnership Affiliate (and any amendments, supplements, restatements and/or other modifications thereof), including, without limitation, the following: (I) the BCP Asia Agreements and each Partnership Affiliate Governing Agreement, (II) subscription agreements and documents on behalf of BCP Asia, (III) side letters issued in connection with investments in BCP Asia, and (IV) such other agreements, certificates, instruments and other documents as may be necessary or desirable in furtherance of the purposes of the Partnership, BCP Asia or any Partnership Affiliate (and any amendments, supplements, restatements and/or other modifications of any of the foregoing referred to in (I) through (IV) above) and for the avoidance of doubt, this Agreement may be amended by the General Partner in its sole discretion;

(B) the certificates of formation, certificates of limited partnership and/or other organizational documents of the Partnership, BCP Asia and any Partnership Affiliate (and any amendments, supplements, restatements and/or other modifications of any of the foregoing); and

(C) any other certificates, notices, applications and other documents (and any amendments, supplements, restatements and/or other modifications thereof) to be filed with any government or governmental or regulatory body, including, without limitation, any such document that may be necessary for the Partnership, BCP Asia or any Partnership Affiliate to qualify to do business in a jurisdiction in which the Partnership, BCP Asia or such Partnership Affiliate desires to do business;

(ii) to prepare or cause to be prepared, and to sign, execute and deliver and/or file (including any such action, directly or indirectly through one or more other entities, in the name and on behalf of the Partnership, on its own behalf or in its capacity as general partner, capital partner and/or limited partner of BCP Asia or as general partner or limited partner, member, shareholder or other equity interest owner of any Partnership Affiliate (as hereinafter defined) or, if applicable, in the Partnership’s capacity as a capital partner of BCP Asia or as general partner or limited partner, member, shareholder or other equity interest owner of any Partnership Affiliate): (A) any certificates, forms, notices, applications and other documents to be filed with any government or governmental or regulatory body on behalf of the Partnership, BCP Asia and/or any Partnership Affiliate, (B) any certificates, forms, notices, applications and other documents that may be necessary or advisable in connection with any bank account

of the Partnership, BCP Asia or any Partnership Affiliate or any banking facilities or services that may be utilized by the Partnership, BCP Asia or any Partnership Affiliate, and all checks, notes, drafts and other documents of the Partnership, BCP Asia or any Partnership Affiliate that may be required in connection with any such bank account or banking facilities or services and (C) resolutions with respect to any of the foregoing matters (which resolutions, when executed by any person authorized as provided in this Section 3.4(d), each acting individually, shall be deemed to have been duly adopted by the General Partner, the Partnership, BCP Asia or any Partnership Affiliate, as applicable, for all purposes).

(e) The authority granted to any person (other than the General Partner) in Section 3.4(d) may be revoked at any time by the relevant General Partner(s) by an instrument in writing signed by the General Partner.

Section 3.5. Responsibilities of Partners. (a) Unless otherwise determined by the General Partner in a particular case, each Limited Partner (other than a Special Partner) shall devote substantially all of his or her time and attention to the businesses of the Partnership and its Affiliates, and each Special Partner shall not be required to devote any time or attention to the businesses of the Partnership or its Affiliates.

(c) The General Partner may from time to time establish such other rules and regulations applicable to Partners or other employees as the General Partner deems appropriate, including rules governing the authority of Partners or other employees to bind the Partnership to financial commitments or other obligations.

Section 3.6. Exculpation and Indemnification.

relating thereto to the Partnership or to another Partner, to the fullest extent permitted by law, such Partner acting under this Agreement shall not be liable to the Partnership or to any such other Partner for its good faith reliance on the provisions of this Agreement. The provisions of this Agreement, to the extent that they expand or restrict the duties and liabilities of a Partner otherwise existing at law or in equity, are agreed by the Partners, to the fullest extent permitted by law, to modify to that extent such other duties and liabilities of such Partner. To the fullest extent permitted by law, the parties hereto agree that the General Partner shall be held to have acted in good faith for the purposes of this Agreement and its duties under the Partnership Act if it believes that it has acted honestly and in accordance with the specific terms of this Agreement.

(b) Indemnification. (i) To the fullest extent permitted by law, the Partnership shall indemnify and hold harmless (but only to the extent of the Partnership’s assets (including, without limitation, the remaining capital commitments of the Partners)) each Covered Person from and against any and all claims, damages, losses, costs, expenses and liabilities (including, without limitation, amounts paid in satisfaction of judgments, in compromises and settlements, as fines and penalties and legal or other costs and reasonable expenses of investigating or defending against any claim or alleged claim), joint and several, of any nature whatsoever, known or unknown, liquidated or unliquidated (collectively, for purposes of this Section 3.6(b), “Losses”), arising from any and all claims, demands, actions, suits or proceedings, civil, criminal, administrative or investigative, in which the Covered Person may be involved, or threatened to be involved, as a party or otherwise, by reason of such Covered Person’s management of the affairs of the Partnership or which relate to or arise out of or in connection with the Partnership, its property, its business or affairs (other than claims, demands, actions, suits or proceedings, civil, criminal, administrative or investigative, arising out of any act or omission of such Covered Person constituting Cause); provided, that a Covered Person shall not be entitled to indemnification under this Section 3.6(b) with respect to any claim, issue or matter if there is a final and non-appealable judicial determination and/or determination of an arbitrator that such Covered Person did not act in good faith and in what such Covered Person reasonably believed to be in, or not opposed to, the best interests of the Partnership and within the authority granted to such Covered Person by this Agreement; provided further, that if such Covered Person is a Partner or a Withdrawn Partner, such Covered Person shall bear its share of such Losses in accordance with such Covered Person’s GP-Related Profit Sharing Percentage in the Partnership as of the time of the actions or omissions that gave rise to such Losses. To the fullest extent permitted by law, expenses (including legal fees) incurred by a Covered Person (including, without limitation, the General Partner) in defending any claim, demand, action, suit or proceeding may, with the approval of the General Partner, from time to time, be advanced by the Partnership prior to the final disposition of such claim, demand, action, suit or proceeding upon receipt by the Partnership of a written undertaking by or on behalf of the Covered Person to repay such amount to the extent that it shall be subsequently determined that the Covered Person is not entitled to be indemnified as authorized in this Section 3.6(b), and the Partnership and its Affiliates shall have a continuing right of offset against such Covered Person’s interests/investments in the Partnership and such Affiliates and shall have the right to withhold amounts otherwise distributable to such Covered Person to satisfy such repayment obligation. If a Partner institutes litigation against a Covered Person which gives rise to an indemnity obligation hereunder, such Partner shall be responsible, up to the amount of such Partner’s Interests and remaining capital commitments, for such Partner’s pro rata share of the Partnership’s expenses related to such indemnity obligation, as determined by the General

Partner. The Partnership may purchase insurance, to the extent available at reasonable cost, to cover losses, claims, damages or liabilities covered by the foregoing indemnification provisions. Partners will not be personally obligated with respect to indemnification pursuant to this Section 3.6(b). The General Partner shall have the authority to enter into separate agreements with any Covered Person in order to give effect to the obligations to indemnify pursuant to this Section 3.6(b).

(ii) Notwithstanding anything to the contrary herein, for greater certainty, it is understood and/or agreed that the Partnership’s obligations hereunder are not intended to render the Partnership as a primary indemnitor for purposes of the indemnification, advancement of expenses and related provisions under applicable law governing BCP Asia and/or a particular portfolio entity through which an Investment is indirectly held. It is further understood and/or agreed that a Covered Person shall first seek to be so indemnified and have such expenses advanced in the following order of priority: first, out of proceeds available in respect of applicable insurance policies maintained by the applicable portfolio entity and/or BCP Asia; second, by the applicable portfolio entity through which such investment is indirectly held; third, by BCP Asia (only to the extent the foregoing sources are exhausted).

(A) The Partnership’s obligation, if any, to indemnify or advance expenses to any Covered Person shall be reduced by any amount that such Covered Person may collect as indemnification or advancement from BCP Asia and/or the applicable portfolio entity (including by virtue of any applicable insurance policies maintained thereby), and to the extent the Partnership (or any Affiliate thereof) pays or causes to be paid any amounts that should have been paid by BCP Asia and/or the applicable portfolio entity (including by virtue of any applicable insurance policies maintained thereby), it is agreed among the Partners that the Partnership shall have a subrogation claim against BCP Asia and/or such portfolio entity in respect of such advancement or payments. The General Partner and the Partnership shall be specifically empowered to structure any such advancement or payment as a loan or other arrangement (except for a loan to an executive officer of The Blackstone Group Inc. or any of its Affiliates, which shall not be permitted) as the General Partner may determine necessary or advisable to give effect to or otherwise implement the foregoing.

bear the economic risk of an investment in the Partnership for an indefinite period of time. Each Limited Partner and Special Partner represents that such Partner has such knowledge and experience in financial and business matters, that such Partner is capable of evaluating the merits and risks of an investment in the Partnership, and that such Partner is able to bear the economic risk of such investment. Each Limited Partner and Special Partner represents that such Partner’s overall commitment to the Partnership and other investments which are not readily marketable is not disproportionate to the Partner’s net worth and the Partner has no need for liquidity in the Partner’s investment in Interests. Each Limited Partner and Special Partner represents that to the full satisfaction of the Partner, the Partner has been furnished any materials that such Partner has requested relating to the Partnership, any Investment and the offering of Interests and has been afforded the opportunity to ask questions of representatives of the Partnership concerning the terms and conditions of the offering of Interests and any matters pertaining to each Investment and to obtain any other additional information relating thereto. Each Limited Partner and Special Partner represents that the Partner has consulted to the extent deemed appropriate by the Partner with the Partner’s own advisers as to the financial, tax, legal and related matters concerning an investment in Interests and on that basis believes that an investment in the Interests is suitable and appropriate for the Partner.

(b) Each Limited Partner and Special Partner agrees that the representations and warranties contained in paragraph (a) above shall be true and correct as of any date that such Partner (1) makes a capital contribution to the Partnership (whether as a result of Firm Advances made to such Partner or otherwise) with respect to any Investment, and such Partner hereby agrees that such capital contribution shall serve as confirmation thereof and/or (2) repays any portion of the principal amount of a Firm Advance, and such Partner hereby agrees that such repayment shall serve as confirmation thereof.

Section 3.8. Tax Representation and Further Assurances. (a) Each Limited Partner and Special Partner, upon the request of the General Partner, agrees to perform all further acts and to execute, acknowledge and deliver any documents that may be reasonably necessary to comply with the General Partner’s or the Partnership’s obligations under applicable law or to carry out the provisions of this Agreement.

Withholding and Reporting (“W-8IMY”), or otherwise is correct and (ii) the Limited Partner or Special Partner will complete and return the applicable IRS form, including but not limited to a W-8BEN, W-8BEN-E or W-8IMY and (y) (i) the Limited Partner or Special Partner is not a United States person (as defined in the Code) and (ii) the Limited Partner or Special Partner will notify the Partnership within 60 days of any change of such status. Each Limited Partner and Special Partner agrees to provide such cooperation and assistance, including but not limited to properly executing and providing to the Partnership in a timely manner any tax or other documentation or information that may be reasonably requested by the Partnership or the General Partner (including without limitation any self-certification forms required by the Partnership to comply with any obligations under the Common Reporting Standard issued by the Organisation for Economic Co-operation and Development, any similar legislation, regulations or guidance enacted in any other jurisdiction or any legislation, any associated intergovernmental agreement, treaty or any other arrangement and/or any regulations or guidance implemented in the Cayman Islands to give effect to the foregoing).

(c) Each Limited Partner and Special Partner acknowledges and agrees that the Partnership and the General Partner may release confidential information or other information about the Limited Partner or Special Partner or related to such Limited Partner or Special Partner’s investment in the Partnership if the Partnership or the General Partner, in its or their sole discretion, determines that such disclosure is required by applicable law or regulation or in order to comply for an exception from, or reduced tax rate of, tax or other tax benefit. Any such disclosure shall not be treated as a breach of any restriction upon the disclosure of information imposed on any such person by law or otherwise, and a Limited Partner or Special Partner shall have no claim against the Partnership, the General Partner or any of their Affiliates for any form of damages or liability as a result of actions taken by the foregoing in order to comply with any disclosure obligations that the foregoing reasonably believe are required by law, regulation or otherwise.

(d) Each Limited Partner and Special Partner acknowledges and agrees that if it provides information that is in anyway materially misleading, or if it fails to provide the Partnership or its agents with any information requested hereunder, in either case in order to satisfy the Partnership’s obligations, the General Partner reserves the right to take any action and pursue any remedies at its disposal, including (i) requiring such Limited Partner or Special Partner to Withdraw for Cause and (ii) withholding or deducting any costs caused by such Limited Partner’s or Special Partner’s action or inaction from amounts otherwise distributable to such Limited Partner or Special Partner from the Partnership and its Affiliates.

ARTICLE IV

CAPITAL OF THE PARTNERSHIP

Agreement or SMD Agreement, if any, or otherwise; provided, that additional GP-Related Capital Contributions in excess of the GP-Related Required Amounts may be made pro rata among the Partners (other than the Cayman GP) based upon each Partner’s Carried Interest Sharing Percentage. GP-Related Capital Contributions in excess of the GP-Related Required Amounts which are to be used for ongoing business operations (as distinct from financing, legal or other specific liabilities of the Partnership (including those specifically set forth in Section 4.1(d) and Section 5.8(d))) shall be determined by the General Partner. Special Partners shall not be required to make additional GP-Related Capital Contributions to the Partnership in excess of the GP-Related Required Amounts, except (i) as a condition of an increase in such Special Partner’s GP-Related Profit Sharing Percentage or (ii) as specifically set forth in this Agreement; provided, that the General Partner and any Special Partner may agree from time to time that such Special Partner shall make an additional GP-Related Capital Contribution to the Partnership; provided further, that each Investor Special Partner shall maintain its GP-Related Capital Accounts at an aggregate level equal to the product of (i) its GP-Related Profit Sharing Percentage from time to time and (ii) the total capital of the Partnership related to the GP-Related BCP Asia Interest.

(b) Each GP-Related Capital Contribution by a Partner shall be credited to the appropriate GP-Related Capital Account of such Partner in accordance with Section 5.2, subject to Section 5.10.

(c) The General Partner may elect on a case by case basis to (i) cause the Partnership to loan any Partner (including any additional Partner admitted to the Partnership pursuant to Section 6.1 but excluding any Partners who are also executive officers of The Blackstone Group Inc. or any Affiliate thereof) the amount of any GP-Related Capital Contribution required to be made by such Partner or (ii) permit any Partner (including any additional Partner admitted to the Partnership pursuant to Section 6.1 but excluding any Partners who are also executive officers of The Blackstone Group Inc. or any Affiliate thereof) to make a required GP-Related Capital Contribution to the Partnership in installments, in each case on terms determined by the General Partner.

(d) (i) The Partners and the Withdrawn Partners have entered into the Trust Agreement, pursuant to which certain amounts of the distributions relating to Carried Interest will be paid to the Trustee(s) for deposit in the Trust Account (such amounts to be paid to the Trustee(s) for deposit in the Trust Account constituting a “Holdback”). The General Partner shall determine, as set forth below, the percentage of each distribution of Carried Interest that shall be withheld for any General Partner and/or Holdings and each Partner Category (such withheld percentage constituting a General Partner’s and such Partner Category’s “Holdback Percentage”). The applicable Holdback Percentages initially shall be 0% for any General Partner, 15% for Existing Partners (other than any General Partner), 21% for Retaining Withdrawn Partners (other than any General Partner) and 24% for Deceased Partners (the “Initial Holdback Percentages”). Any provision of this Agreement to the contrary notwithstanding, the Holdback Percentage for any General Partner and/or Holdings shall not be subject to change pursuant to clause (ii), (iii) or (iv) of this Section 4.1(d).

(ii) The Holdback Percentage may not be reduced for any individual Partner as compared to the other Partners in his or her Partner Category (except as

provided in clause (iv) below). The General Partner may only reduce the Holdback Percentages among the Partner Categories on a proportionate basis. For example, if the Holdback Percentage for Existing Partners is decreased to 12.5%, the Holdback Percentage for Retaining Withdrawn Partners and Deceased Partners shall be reduced to 17.5% and 20%, respectively. Any reduction in the Holdback Percentage for any Partner shall apply only to distributions relating to Carried Interest made after the date of such reduction.

(iii) The Holdback Percentage may not be increased for any individual Partner as compared to the other Partners in his or her Partner Category (except as provided in clause (iv) below). The General Partner may not increase the Retaining Withdrawn Partners’ Holdback Percentage beyond 21% unless the General Partner concurrently increases the Existing Partners’ Holdback Percentage to 21%. The General Partner may not increase the Deceased Partners’ Holdback Percentage beyond 24% unless the General Partner increases the Holdback Percentage for both Existing Partners and Retaining Withdrawn Partners to 24%. The General Partner may not increase the Holdback Percentage of any Partner Category beyond 24% unless such increase applies equally to all Partner Categories. Any increase in the Holdback Percentage for any Partner shall apply only to distributions relating to Carried Interest made after the date of such increase. The foregoing shall in no way prevent the General Partner from proportionately increasing the Holdback Percentage of any Partner Category (following a reduction of the Holdback Percentages below the Initial Holdback Percentages), if the resulting Holdback Percentages are consistent with the above. For example, if the General Partner reduces the Holdback Percentages for Existing Partners, Retaining Withdrawn Partners and Deceased Partners to 12.5%, 17.5% and 20%, respectively, the General Partner shall have the right to subsequently increase the Holdback Percentages to the Initial Holdback Percentages.

(iv) (A) Notwithstanding anything contained herein to the contrary, the General Partner may increase or decrease the Holdback Percentage for any Partner in any Partner Category (in such capacity, the “Subject Partner”) pursuant to a majority vote of the Limited Partners (a “Holdback Vote”); provided, that, notwithstanding anything to the contrary contained herein, the Holdback Percentage applicable to any General Partner shall not be increased or decreased without its prior written consent; provided further, that a Subject Partner’s Holdback Percentage shall not be (I) increased prior to such time as such Subject Partner (x) is notified by the Partnership of the decision to increase such Subject Partner’s Holdback Percentage and (y) has, if requested by such Subject Partner, been given 30 days to gather and provide information to the Partnership for consideration before a second Holdback Vote (requested by the Subject Partner) or (II) decreased unless such decrease occurs subsequent to an increase in a Subject Partner’s Holdback Percentage pursuant to a Holdback Vote under this clause (iv); provided further, that such decrease shall not exceed an amount such that such Subject Partner’s Holdback Percentage is less than the prevailing Holdback Percentage for the Partner Category of such Subject Partner; provided further, that a Partner shall not vote to increase a Subject Partner’s Holdback Percentage unless such voting Partner determines, in such Partner’s good faith judgment, that the facts and circumstances indicate that it is reasonably likely that such Subject Partner, or any of such Subject Partner’s successors or assigns

(including such Subject Partner’s estate or heirs) who at the time of such vote holds the GP-Related Partner Interest or otherwise has the right to receive distributions relating thereto, will not be capable of satisfying any GP-Related Recontribution Amounts that may become due.

(B) A Holdback Vote shall take place at a Partnership meeting. Each of the Limited Partners shall be entitled to cast one vote with respect to the Holdback Vote regardless of such Limited Partner’s interest in the Partnership. Such vote may be cast by any such Partner in person or by proxy.

(C) If the result of the second Holdback Vote is an increase in a Subject Partner’s Holdback Percentage, such Subject Partner may submit the decision to an arbitrator, the identity of which is mutually agreed upon by both the Subject Partner and the Partnership; provided, that if the Partnership and the Subject Partner cannot agree upon a mutually satisfactory arbitrator within 10 days of the second Holdback Vote, each of the Partnership and the Subject Partner shall request its candidate for arbitrator to select a third arbitrator satisfactory to such candidates; provided further, that if such candidates fail to agree upon a mutually satisfactory arbitrator within 30 days of such request, the then sitting President of the American Arbitration Association shall unilaterally select the arbitrator. Each Subject Partner that submits the decision of the Partnership pursuant to the second Holdback Vote to arbitration and the Partnership shall estimate their reasonably projected out-of-pocket expenses relating thereto, and each such party shall, to the satisfaction of the arbitrator and prior to any determination being made by the arbitrator, pay the total of such estimated expenses (i.e., both the Subject Partner’s and the Partnership’s expenses) into an escrow account. The arbitrator shall direct the escrow agent to pay out of such escrow account all expenses associated with such arbitration (including costs leading thereto) and to return to the “victorious” party the entire amount of funds such party paid into such escrow account. If the amount contributed to the escrow account by the losing party is insufficient to cover the expenses of such arbitration, such “losing” party shall then provide any additional funds necessary to cover such costs to such “victorious” party. For purposes hereof, the “victorious” party shall be the Partnership if the Holdback Percentage ultimately determined by the arbitrator is closer to the percentage determined in the second Holdback Vote than it is to the prevailing Holdback Percentage for the Subject Partner’s Partner Category; otherwise, the Subject Partner shall be the “victorious” party. The party that is not the “victorious” party shall be the “losing” party.

(D) In the event of a decrease in a Subject Partner’s Holdback Percentage (1) pursuant to a Holdback Vote under this clause (iv) or (2) pursuant to a decision of an arbitrator under paragraph (C) of this clause (iv), the Partnership shall release and distribute to such Subject Partner any Trust Amounts (and the Trust Income thereon (except as expressly provided herein with respect to using Trust Income as Firm Collateral)) which exceed the required Holdback of such Subject Partner (in accordance with such Subject Partner’s reduced

Holdback Percentage) as though such reduced Holdback Percentage had applied since the increase of the Subject Partner’s Holdback Percentage pursuant to a previous Holdback Vote under this clause (iv).

(v) (A) If a Partner’s Holdback Percentage exceeds 15% (such percentage in excess of 15% constituting the “Excess Holdback Percentage”), such Partner may satisfy the portion of his or her Holdback obligation in respect of his or her Excess Holdback Percentage (such portion constituting such Partner’s “Excess Holdback”), and such Partner (or a Withdrawn Partner with respect to amounts contributed to the Trust Account while he or she was a Partner), to the extent his or her Excess Holdback obligation has previously been satisfied in cash, may obtain the release of the Trust Amounts (but not the Trust Income thereon which shall remain in the Trust Account and allocated to such Partner or Withdrawn Partner) satisfying such Partner’s or Withdrawn Partner’s Excess Holdback obligation, by pledging, charging, granting a security interest or otherwise making available to the General Partner, on a first priority basis (except as provided below), all or any portion of his or her Firm Collateral in satisfaction of his or her Excess Holdback obligation. Any Partner seeking to satisfy all or any portion of the Excess Holdback utilizing Firm Collateral shall sign such documents and otherwise take such other action as is necessary or appropriate (in the good faith judgment of the General Partner) to perfect a first priority security interest in, and otherwise assure the ability of the Partnership to realize on (if required), such Firm Collateral; provided, that, in the case of entities listed in the Partnership’s books and records in which Partners are permitted to pledge, charge, or grant a security interest over their interests therein to finance all or a portion of their capital contributions thereto (“Pledgable Blackstone Interests”), to the extent a first priority security interest is unavailable because of an existing lien on such Firm Collateral, the Partner or Withdrawn Partner seeking to utilize such Firm Collateral shall grant the General Partner a second priority security interest therein in the manner provided above; provided further, that (x) in the case of Pledgable Blackstone Interests, to the extent that neither a first priority nor a second priority security interest is available, or (y) if the General Partner otherwise determines in its good faith judgment that a security interest in Firm Collateral (and the corresponding documents and actions) are not necessary or appropriate, the Partner or Withdrawn Partner shall (in the case of either clause (x) or (y) above) irrevocably instruct in writing the relevant partnership, limited liability company or other entity listed in the Partnership’s books and records to remit any and all net proceeds resulting from a Firm Collateral Realization on such Firm Collateral to the Trustee(s) as more fully provided in clause (B) below. The Partnership shall, at the request of any Partner or Withdrawn Partner, assist such Partner or Withdrawn Partner in taking such action as is necessary to enable such Partner or Withdrawn Partner to use Firm Collateral as provided hereunder.

Account to fully satisfy such Excess Holdback requirement (allocated to such Partner or Withdrawn Partner) and shall be deemed to be Trust Amounts for purposes hereunder. Any net proceeds from such Firm Collateral Realization in excess of the amount necessary to satisfy such Excess Holdback requirement shall be distributed to such Partner or Withdrawn Partner.

(C) Upon any valuation or revaluation of Firm Collateral that results in a decreased valuation of such Firm Collateral so that such Firm Collateral is insufficient to cover any Partner’s or Withdrawn Partner’s Excess Holdback requirement (including upon a Firm Collateral Realization, if net proceeds therefrom and the remaining Firm Collateral are insufficient to cover any Partner’s or Withdrawn Partner’s Excess Holdback requirement), the Partnership shall provide notice of the foregoing to such Partner or Withdrawn Partner and such Partner or Withdrawn Partner shall, within 30 days of receiving such notice, contribute cash (or additional Firm Collateral) to the Trust Account in an amount necessary to satisfy his or her Excess Holdback requirement. If any such Partner or Withdrawn Partner defaults upon his or her obligations under this clause (C), then Section 5.8(d)(ii) shall apply thereto; provided, that clause (A) of Section 5.8(d)(ii) shall be deemed inapplicable to a default under this clause (C); provided further, that for purposes of applying Section 5.8(d)(ii) to a default under this clause (C): (I) the term “GP-Related Defaulting Party” where such term appears in such Section 5.8(d)(ii) shall be construed as “defaulting party” for purposes hereof and (II) the terms “Net GP-Related Recontribution Amount” and “GP-Related Recontribution Amount” where such terms appear in such Section 5.8(d)(ii) shall be construed as the amount due pursuant to this clause (C).

L/C. The Trustee(s) may (as directed by the Partnership in the case of clause (I) below) draw down on an L/C only if (I) such a drawdown is necessary to satisfy an L/C Partner’s obligation relating to the Partnership’s obligations under the Clawback Provisions or (II) an L/C Partner has not provided a new L/C from a commercial bank whose relevant rating is at least equal to the relevant Required Rating (or the requisite amount of cash and/or Firm Collateral (to the extent permitted hereunder)), at least 30 days prior to the stated expiration of an existing L/C in accordance with this clause (vi). The Trustee(s), as directed by the Partnership, shall return to any L/C Partner his or her L/C upon (1) the termination of the Trust Account and satisfaction of the Partnership’s obligations, if any, in respect of the Clawback Provisions, (2) an L/C Partner satisfying his or her entire Holdback obligation in cash and Firm Collateral (to the extent permitted hereunder) or (3) the release, by the Trustee(s), as directed by the Partnership, of all amounts in the Trust Account to the Partners or Withdrawn Partners. If an L/C Partner satisfies a portion of his or her Holdback obligation in cash and/or Firm Collateral (to the extent permitted hereunder) or if the Trustee(s), as directed by the Partnership, release a portion of the amounts in the Trust Account to the Partners or Withdrawn Partners in the Partner Category of such L/C Partner, the L/C of an L/C Partner may be reduced by an amount corresponding to such portion satisfied in cash and/or Firm Collateral (to the extent permitted hereunder) or such portion released by the Trustee(s), as directed by the Partnership; provided, that in no way shall the general release of any Trust Income cause an L/C Partner to be permitted to reduce the amount of an L/C by any amount.

(vii) (A) Any in-kind distributions by the Partnership relating to Carried Interest shall be made in accordance herewith as though such distributions consisted of cash. The Partnership may direct the Trustee(s) to dispose of any in-kind distributions held in the Trust Account at any time. The net proceeds therefrom shall be treated as though initially contributed to the Trust Account.

(B) In lieu of the foregoing, any Existing Partner may pledge, charge or grant a security interest with respect to any in-kind distribution the Special Firm Collateral referred to in the applicable category in the Partnership’s books and records; provided, that the initial contribution of such Special Firm Collateral shall initially equal 130% of the required Holdback for a period of 90 days, and thereafter shall equal at least 115% of the required Holdback. Sections 4.1(d)(viii)(C) and (D) shall apply to such Special Firm Collateral. To the extent such Special Firm Collateral exceeds the applicable minimum percentage of the required Holdback specified in the first sentence of this clause (vii)(B), the related Partner may obtain a release of such excess amount from the Trust Account.

Trustee(s) on a first priority basis all of his or her Special Firm Collateral in a particular Qualifying Fund, which at all times must equal or exceed the amount of the Holdback distributed to the Partner or Withdrawn Partner (as more fully set forth below). Any Partner seeking to satisfy such Partner’s Holdback utilizing Special Firm Collateral shall sign such documents and otherwise take such other action as is necessary or appropriate (in the good faith judgment of the General Partner) to perfect a first priority security interest in, and otherwise assure the ability of the Trustee(s) to realize on (if required), such Special Firm Collateral.

(B) If upon a distribution, withdrawal, sale, liquidation or other realization of all or any portion of any Special Firm Collateral (a “Special Firm Collateral Realization”), the remaining Special Firm Collateral (which shall not include the amount of Firm Collateral that consists of a Qualifying Fund and is being used in connection with an Excess Holdback) is insufficient to cover any Partner’s or Withdrawn Partner’s Holdback (when taken together with other means of satisfying the Holdback as provided herein (i.e., cash contributed to the Trust Account or an L/C in the Trust Account)), then up to 100% of the net proceeds otherwise distributable to such Partner or Withdrawn Partner from such Special Firm Collateral Realization (which shall not include the amount of Firm Collateral that consists of a Qualifying Fund or other asset and is being used in connection with an Excess Holdback) shall be paid into the Trust (and allocated to such Partner or Withdrawn Partner) to fully satisfy such Holdback and shall be deemed thereafter to be Trust Amounts for purposes hereunder. Any net proceeds from such Special Firm Collateral Realization in excess of the amount necessary to satisfy such Holdback (excluding any Excess Holdback) shall be distributed to such Partner or Withdrawn Partner. To the extent a Qualifying Fund distributes Securities to a Partner or Withdrawn Partner in connection with a Special Firm Collateral Realization, such Partner or Withdrawn Partner shall be required to promptly fund such Partner’s or Withdrawn Partner’s deficiency with respect to his or her Holdback in cash or an L/C.

(C) Upon any valuation or revaluation of the Special Firm Collateral and/or any adjustment in the Applicable Collateral Percentage applicable to a Qualifying Fund (as provided in the Partnership’s books and records), if such Partner’s or Withdrawn Partner’s Special Firm Collateral is valued at less than such Partner’s Holdback (excluding any Excess Holdback) as provided in the Partnership’s books and records, taking into account other permitted means of satisfying the Holdback hereunder, the Partnership shall provide notice of the foregoing to such Partner or Withdrawn Partner and, within 10 Business Days of receiving such notice, such Partner or Withdrawn Partner shall contribute cash or additional Special Firm Collateral to the Trust Account in an amount necessary to make up such deficiency. If any such Partner or Withdrawn Partner defaults upon his or her obligations under this clause (C), then Section 5.8(d)(ii) shall apply thereto; provided, that the first sentence of Section 5.8(d)(ii)(A) shall be deemed inapplicable to such default; provided further, that for purposes of applying Section 5.8(d)(ii) to a default under this clause (C): (I) the term “GP-Related Defaulting Party” where such term appears

in such Section 5.8(d)(ii) shall be construed as “defaulting party” for purposes hereof and (II) the terms “Net GP-Related Recontribution Amount” and “GP-Related Recontribution Amount” where such terms appear in such Section 5.8(d)(ii) shall be construed as the amount due pursuant to this clause (C).

(D) Upon a Partner becoming a Withdrawn Partner, at any time thereafter the General Partner may revoke the ability of such Withdrawn Partner to use Special Firm Collateral as set forth in this Section 4.1(d)(viii), notwithstanding anything else in this Section 4.1(d)(viii). In that case the provisions of clause (C) above shall apply to the Withdrawn Partner’s obligation to satisfy the Holdback (except that 30 days’ notice of such revocation shall be given), given that the Special Firm Collateral is no longer available to satisfy any portion of the Holdback (excluding any Excess Holdback).

(E) Nothing in this Section 4.1(d)(viii) shall prevent any Partner or Withdrawn Partner from using any amount of such Partner’s interest in a Qualifying Fund as Firm Collateral; provided, that at all times Section 4.1(d)(v) and this Section 4.1(d)(viii) are each satisfied.

Section 4.2. Interest. Interest on the balances of the Partners’ capital related to the Partners’ GP-Related Partner Interests (excluding capital invested in GP-Related Investments and, if deemed appropriate by the General Partner, capital invested in any other investment of the Partnership) shall be credited to the Partners’ GP-Related Capital Accounts at the end of each accounting period pursuant to Section 5.2, or at any other time as determined by the General Partner, at rates determined by the General Partner from time to time, and shall be charged as an expense of the Partnership.

Section 4.3. Withdrawals of Capital. No Partner may withdraw capital related to such Partner’s GP-Related Partner Interests from the Partnership except (i) by way of distributions of cash or other property pursuant to Section 5.8, (ii) as otherwise expressly provided in this Agreement or (iii) as determined by the General Partner.

ARTICLE V

PARTICIPATION IN PROFITS AND LOSSES

Section 5.1. General Accounting Matters. (a) GP-Related Net Income (Loss) shall be determined by the General Partner at the end of each accounting period and shall be allocated as described in Section 5.4.

(b) “GP-Related Net Income (Loss)” from any activity of the Partnership related to the GP-Related BCP Asia Interest for any accounting period (other than GP-Related Net Income (Loss) from GP-Related Investments described below) means (i) the gross income realized by the Partnership from such activity during such accounting period less (ii) all expenses of the Partnership, and all other items that are deductible from gross income, for such accounting period that are allocable to such activity (determined as provided below).

(c) “GP-Related Net Income (Loss)” from any GP-Related Investment for any accounting period in which such GP-Related Investment has not been sold or otherwise disposed of means (i) the gross amount of dividends, interest or other income received by the Partnership from such GP-Related Investment during such accounting period less (ii) all expenses of the Partnership for such accounting period that are allocable to such GP-Related Investment (determined as provided below).

(d) “GP-Related Net Income (Loss)” from any GP-Related Investment for the accounting period in which such GP-Related Investment is sold or otherwise disposed of means (i) the sum of the gross proceeds from the sale or other disposition of such GP-Related Investment and the gross amount of dividends, interest or other income received by the Partnership from such GP-Related Investment during such accounting period less (ii) the sum of the cost or other basis to the Partnership of such GP-Related Investment and all expenses of the Partnership for such accounting period that are allocable to such GP-Related Investment.

(e) GP-Related Net Income (Loss) shall be determined in accordance with the accounting method used by the Partnership for U.S. federal income tax purposes with the following adjustments: (i) any income of the Partnership that is exempt from U.S. federal income taxation and not otherwise taken into account in computing GP-Related Net Income (Loss) shall be added to such taxable income or loss; (ii) if any asset has a value in the books of the Partnership that differs from its adjusted tax basis for U.S. federal income tax purposes, any depreciation, amortization or gain resulting from a disposition of such asset shall be calculated with reference to such value; (iii) upon an adjustment to the value of any asset in the books of the Partnership pursuant to Treasury Regulations Section 1.704-1(b)(2), the amount of the adjustment shall be included as gain or loss in computing such taxable income or loss; (iv) any expenditures of the Partnership not deductible in computing taxable income or loss, not properly capitalizable and not otherwise taken into account in computing GP-Related Net Income (Loss) pursuant to this definition shall be treated as deductible items; (v) any income from a GP-Related Investment that is payable to Partnership employees in respect of “phantom interests” in such GP-Related Investment awarded by the General Partner to employees shall be included as an expense in the calculation of GP-Related Net Income (Loss) from such GP-Related Investment, and (vi) items of income and expense (including interest income and overhead and other indirect expenses) of the Partnership, Holdings and other Affiliates of the Partnership shall be allocated among the Partnership, Holdings and such Affiliates, among various Partnership activities and GP-Related Investments and between accounting periods, in each case as determined by the General Partner. Any adjustments to GP-Related Net Income (Loss) by the General Partner, including adjustments for items of income accrued but not yet received, unrealized gains, items of expense accrued but not yet paid, unrealized losses, reserves (including reserves for taxes, bad debts, actual or threatened litigation, or any other expenses, contingencies or obligations) and other appropriate items shall be made in accordance with GAAP; provided, that the General Partner shall not be required to make any such adjustment.

begin a new accounting period, then the General Partner may make such adjustments as it deems appropriate to the Partners’ GP-Related Profit Sharing Percentages for the accounting period in which such event occurs (prior to any allocations of GP-Related Unallocated Percentages or adjustments to GP-Related Profit Sharing Percentages pursuant to Section 5.3) to reflect the Partners’ average GP-Related Profit Sharing Percentages during such accounting period; provided, that the GP-Related Profit Sharing Percentages of Partners in GP-Related Net Income (Loss) from GP-Related Investments acquired during such accounting period will be based on GP-Related Profit Sharing Percentages in effect when each such GP-Related Investment was acquired.

(g) In establishing GP-Related Profit Sharing Percentages and allocating GP-Related Unallocated Percentages pursuant to Section 5.3, the General Partner may consider such factors as it deems appropriate.

(h) All determinations, valuations and other matters of judgment required to be made for accounting purposes under this Agreement shall be made by the General Partner and approved by the Partnership’s independent accountants. Such approved determinations, valuations and other accounting matters shall be conclusive and binding on all Partners, all Withdrawn Partners, their successors, heirs, estates or legal representatives and any other person, and to the fullest extent permitted by law no such person shall have the right to an accounting or an appraisal of the assets of the Partnership or any successor thereto.

Section 5.2. GP-Related Capital Accounts. (a) There shall be established for each Partner in the books of the Partnership, to the extent and at such times as may be appropriate, one or more capital accounts as the General Partner may deem to be appropriate for purposes of accounting for such Partner’s interests in the capital of the Partnership related to the GP-Related BCP Asia Interest and the GP-Related Net Income (Loss) of the Partnership (each a “GP-Related Capital Account”).

(b) As of the end of each accounting period or, in the case of a contribution to the Partnership by one or more of the Partners with respect to such Partner or Partners’ GP-Related Partner Interests or a distribution by the Partnership to one or more of the Partners with respect to such Partner or Partners’ GP-Related Partner Interests, at the time of such contribution or distribution, (i) the appropriate GP-Related Capital Accounts of each Partner shall be credited with the following amounts: (A) the amount of cash and the value of any property contributed by such Partner to the capital of the Partnership related to such Partner’s GP-Related Partner Interest during such accounting period, (B) the GP-Related Net Income allocated to such Partner for such accounting period and (C) the interest credited on the balance of such Partner’s capital related to such Partner’s GP-Related Partner Interest for such accounting period pursuant to Section 4.2; and (ii) the appropriate GP-Related Capital Accounts of each Partner shall be debited with the following amounts: (x) the amount of cash, the principal amount of any subordinated promissory note of the Partnership referred to in Section 6.5 (as such amount is paid) and the value of any property distributed to such Partner during such accounting period with respect to such Partner’s GP-Related Partner Interest and (y) the GP-Related Net Loss allocated to such Partner for such accounting period.

Section 5.3. GP-Related Profit Sharing Percentages. (a) Prior to the beginning of each annual accounting period, the General Partner shall establish the profit sharing percentage (the “GP-Related Profit Sharing Percentage”) of each Partner in each category of GP-Related Net Income (Loss) for such annual accounting period pursuant to Section 5.1(a) taking into account such factors as the General Partner deems appropriate; provided, that (i) the General Partner may elect to establish GP-Related Profit Sharing Percentages in GP-Related Net Income (Loss) from any GP-Related Investment acquired by the Partnership during such accounting period at the time such GP-Related Investment is acquired in accordance with paragraph (c) below and (ii) GP-Related Net Income (Loss) for such accounting period from any GP-Related Investment shall be allocated in accordance with the GP-Related Profit Sharing Percentages in such GP-Related Investment established in accordance with paragraph (c) below. The General Partner may establish different GP-Related Profit Sharing Percentages for any Partner in different categories of GP-Related Net Income (Loss). In the case of the Withdrawal of a Partner, such former Partner’s GP-Related Profit Sharing Percentages shall be allocated by the General Partner to one or more of the remaining Partners as the General Partner shall determine. In the case of the admission of any Partner to the Partnership as an additional Partner, the GP-Related Profit Sharing Percentages of the other Partners shall be reduced by an amount equal to the GP-Related Profit Sharing Percentage allocated to such new Partner pursuant to Section 6.1(b); such reduction of each other Partner’s GP-Related Profit Sharing Percentage shall be pro rata based upon such Partner’s GP-Related Profit Sharing Percentage as in effect immediately prior to the admission of the new Partner. Notwithstanding the foregoing, the General Partner may also adjust the GP-Related Profit Sharing Percentage of any Partner for any annual accounting period at the end of such annual accounting period in its sole discretion.

(b) The General Partner may elect to allocate to the Partners less than 100% of the GP-Related Profit Sharing Percentages of any category for any annual accounting period at the time specified in Section 5.3(a) for the annual fixing of GP-Related Profit Sharing Percentages (any remainder of such GP-Related Profit Sharing Percentages being called a “GP-Related Unallocated Percentage”); provided, that any GP-Related Unallocated Percentage in any category of GP-Related Net Income (Loss) for any annual accounting period that is not allocated by the General Partner within 90 days after the end of such accounting period shall be deemed to be allocated among all the Partners (including the Delaware GP, but excluding the Cayman GP) in the manner determined by the General Partner in its sole discretion.

(c) Unless otherwise determined by the General Partner in a particular case, (i) GP-Related Profit Sharing Percentages in GP-Related Net Income (Loss) from any GP-Related Investment shall be allocated in proportion to the Partners’ respective GP-Related Capital Contributions in respect of such GP-Related Investment and (ii) GP-Related Profit Sharing Percentages in GP-Related Net Income (Loss) from each GP-Related Investment shall be fixed at the time such GP-Related Investment is acquired and shall not thereafter change, subject to any repurchase rights established by the General Partner pursuant to Section 5.7. The Cayman GP shall have no GP-Related Profit Sharing Percentage.

Delaware GP, but excluding the Cayman GP): first, in proportion to and to the extent of the amount of Non-Carried Interest (other than amounts representing a return of GP-Related Capital Contributions) or Carried Interest distributed to the Partners; second, to Partners that received Non-Carried Interest (other than amounts representing a return of GP-Related Capital Contributions) or Carried Interest in years prior to the years such GP-Related Net Income is being allocated to the extent such Non-Carried Interest (other than amounts representing a return of GP-Related Capital Contributions) or Carried Interest exceeded GP-Related Net Income allocated to such Partners in such earlier years; and third, to the Partners in the same manner that such Non-Carried Interest (other than amounts representing a return of GP-Related Capital Contributions) or Carried Interest would have been distributed if cash were available to distribute with respect thereto.

(b) GP-Related Net Loss of the Partnership shall be allocated as follows: (i) GP-Related Net Loss relating to realized losses suffered by BCP Asia and allocated to the Partnership with respect to its pro rata share thereof (based on capital contributions made by the Partnership to BCP Asia with respect to the GP-Related BCP Asia Interest) shall be allocated to the Partners in accordance with each Partner’s Non-Carried Interest Sharing Percentage with respect to the GP-Related Investment giving rise to such loss suffered by BCP Asia and (ii) GP-Related Net Loss relating to realized losses suffered by BCP Asia and allocated to the Partnership with respect to the Carried Interest shall be allocated in accordance with a Partner’s (including a Withdrawn Partner’s) Carried Interest Give Back Percentage (as of the date of such loss) (subject to adjustment pursuant to Section 5.8(e)).

(c) Notwithstanding Section 5.4(a) above, GP-Related Net Income relating to Carried Interest allocated after the allocation of a GP-Related Net Loss pursuant to clause (ii) of Section 5.4(b) shall be allocated in accordance with such Carried Interest Give Back Percentages until such time as the Partners have been allocated GP-Related Net Income relating to Carried Interest equal to the aggregate amount of GP-Related Net Loss previously allocated in accordance with clause (ii) of Section 5.4(b). Withdrawn Partners shall remain Partners for purposes of allocating such GP-Related Net Loss with respect to Carried Interest.

(d) To the extent the Partnership has any GP-Related Net Income (Loss) for any accounting period unrelated to BCP Asia, such GP-Related Net Income (Loss) will be allocated in accordance with GP-Related Profit Sharing Percentages prevailing at the beginning of such accounting period.

(e) The General Partner may authorize from time to time advances to Partners (including any additional Partner admitted to the Partnership pursuant to Section 6.1 but excluding any Partners who are also executive officers of The Blackstone Group Inc. or any Affiliate thereof) against their allocable shares of GP-Related Net Income (Loss).

(f) Notwithstanding the foregoing, the General Partner may make such allocations as it deems reasonably necessary to give economic effect to the provisions of this Agreement, taking into account facts and circumstances as the General Partner deems reasonably necessary for this purpose.

Section 5.5. Liability of Partners. Except as otherwise provided in the Partnership Act or as expressly provided in this Agreement, no Partner shall be personally obligated for any debt, obligation or liability of the Partnership or of any other Partner solely by reason of being a Partner. In no event shall any Partner or Withdrawn Partner (i) be obligated to make any capital contribution or payment to or on behalf of the Partnership or (ii) have any liability to return distributions received by such Partner from the Partnership, in each case except as specifically provided in Section 4.1(d) or Section 5.8 or otherwise in this Agreement, as such Partner shall otherwise expressly agree in writing or as may be required by applicable law.

Section 5.6. Liability of General Partners. The General Partners shall have unlimited liability for the satisfaction and discharge of all losses, liabilities and expenses of the Partnership.

Section 5.7. Repurchase Rights, etc. The General Partner may from time to time establish such repurchase rights and/or other requirements with respect to the Partners’ GP-Related Partner Interests relating to GP-Related BCP Asia Investments as the General Partner may determine. The General Partner shall have authority to (a) withhold any distribution otherwise payable to any Partner until any such repurchase rights have lapsed or any such requirements have been satisfied, (b) pay any distribution to any Partner that is Contingent as of the distribution date and require the refund of any portion of such distribution that is Contingent as of the Withdrawal Date of such Partner, (c) amend any previously established repurchase rights or other requirements from time to time and (d) make such exceptions thereto as it may determine on a case by case basis.

Section 5.8. Distributions.

(a) (i) The Partnership shall make distributions of available cash (subject to reserves and other adjustments as provided herein) or other property to Partners with respect to such Partners’ GP-Related Partner Interests at such times and in such amounts as are determined by the General Partner. The General Partner shall, if it deems it appropriate, determine the availability for distribution of, and distribute, cash or other property separately for each category of GP-Related Net Income (Loss) established pursuant to Section 5.1(a). Distributions of cash or other property with respect to Non-Carried Interest shall be made among the Partners in accordance with their respective Non-Carried Interest Sharing Percentages, and, subject to Section 4.1(d) and Section 5.8(e), distributions of cash or other property with respect to Carried Interest shall be made among Partners in accordance with their respective Carried Interest Sharing Percentages.

(i) At any time that a sale, exchange, transfer or other disposition by BCP Asia of a portion of a GP-Related Investment is being considered by the Partnership (a “GP-Related Disposable Investment”), at the election of the General Partner each Partner’s GP-Related Partner Interest with respect to such GP-Related Investment shall be vertically divided into two separate GP-Related Partner Interests, a GP-Related Partner Interest attributable to the GP-Related Disposable Investment (a Partner’s “GP-Related Class B Interest”), and a GP-Related Partner Interest attributable to such GP-Related Investment excluding the GP-Related Disposable Investment (a Partner’s “GP-Related Class A Interest”). Distributions (including those resulting from a sale, transfer,

exchange or other disposition by BCP Asia) relating to a GP-Related Disposable Investment (with respect to both Carried Interest and Non-Carried Interest) shall be made only to holders of GP-Related Class B Interests with respect to such GP-Related Investment in accordance with their GP-Related Profit Sharing Percentages relating to such GP-Related Class B Interests, and distributions (including those resulting from the sale, transfer, exchange or other disposition by BCP Asia) relating to a GP-Related Investment excluding such GP-Related Disposable Investment (with respect to both Carried Interest and Non-Carried Interest) shall be made only to holders of GP-Related Class A Interests with respect to such GP-Related Investment in accordance with their respective GP-Related Profit Sharing Percentages relating to such GP-Related Class A Interests. Except as provided above, distributions of cash or other property with respect to each category of GP-Related Net Income (Loss) shall be allocated among the Partners in the same proportions as the allocations of GP-Related Net Income (Loss) of each such category.

(b) Subject to the Partnership’s having sufficient available cash in the reasonable judgment of the General Partner and as required by applicable law, the Partnership shall make cash distributions to each Partner with respect to each Fiscal Year of the Partnership in an aggregate amount at least equal to the total U.S. federal, New York State and New York City income and other taxes that would be payable by such Partner with respect to all categories of GP-Related Net Income (Loss) allocated to such Partner for such Fiscal Year, the amount of which shall be calculated (i) on the assumption that each Partner is an individual subject to the then prevailing maximum rate of U.S. federal, New York State and New York City and other income taxes (including, without limitation, taxes under Sections 1401 and 1411 of the Code), (ii) taking into account (x) the limitations on the deductibility of expenses and other items for U.S. federal income tax purposes and (y) the character (e.g., long-term or short-term capital gain or ordinary or exempt) of the applicable income) and (iii) taking into account any differential in applicable rates due to the type and character of GP-Related Net Income (Loss) allocated to such Partner. Notwithstanding the provisions of the foregoing sentence, the General Partner may refrain from making any distribution if, in the reasonable judgment of the General Partner, such distribution is prohibited by applicable law.

Partner, the repurchased portion thereof will be allocated among the remaining Partners with interests in such GP-Related Investment in proportion to their respective percentage interests in such GP-Related Investment, or if no other Partner has a percentage interest in such specific GP-Related Investment, to the Delaware GP; provided, that the General Partner may allocate the Withdrawn Partner’s share of unrealized investment income from a repurchased GP-Related Investment attributable to the period after the Withdrawn Partner’s Withdrawal Date on any basis it may determine, including to existing or new Partners who did not previously have interests in such GP-Related Investment, except that, in any event, each Investor Special Partner shall be allocated a share of such unrealized investment income equal to its respective GP-Related Profit Sharing Percentage of such unrealized investment income.

(d) (i) (A) If the Partnership is obligated under the Clawback Provisions or Giveback Provisions to contribute to BCP Asia a Clawback Amount or a Giveback Amount (other than a Capital Commitment Giveback Amount), directly or indirectly, in respect of the GP-Related BCP Asia Interest, (the amount of any such obligation of the Partnership with respect to such a Giveback Amount being herein called a “GP-Related Giveback Amount”), the General Partner shall call for such amounts as are necessary to satisfy such obligations of the Partnership as determined by the General Partner, in which case each Partner and Withdrawn Partner shall contribute to the Partnership, in cash, when and as called by the General Partner, such an amount of prior distributions by the Partnership (and the Other Fund GPs) with respect to Carried Interest (and/or Non-Carried Interest in the case of a GP-Related Giveback Amount) (the “GP-Related Recontribution Amount”) which equals (I) the product of (a) a Partner’s or Withdrawn Partner’s Carried Interest Give Back Percentage and (b) the aggregate Clawback Amount payable by the Partnership in the case of Clawback Amounts and (II) with respect to a GP-Related Giveback Amount, such Partner’s pro rata share of prior distributions of Carried Interest and/or Non-Carried Interest in connection with (a) the GP-Related BCP Asia Investment giving rise to the GP-Related Giveback Amount, (b) if the amounts contributed pursuant to clause (II)(a) above are insufficient to satisfy such GP-Related Giveback Amount, GP-Related BCP Asia Investments other than the one giving rise to such obligation, but only those amounts received by the Partners with an interest in the GP-Related BCP Asia Investment referred to in clause (II)(a) above, and (c) if the GP-Related Giveback Amount pursuant to an applicable BCP Asia Agreement is unrelated to a specific GP-Related BCP Asia Investment, all GP-Related BCP Asia Investments. Each Partner and Withdrawn Partner shall promptly contribute to the Partnership, along with satisfying his or her comparable obligations to the Other Fund GPs, if any, upon such call such Partner’s or Withdrawn Partner’s GP-Related Recontribution Amount, less the amount paid out of the Trust Account on behalf of such Partner or Withdrawn Partner by the Trustee(s) pursuant to written instructions from the Partnership, or if applicable, any of the Other Fund GPs with respect to Carried Interest (and/or Non-Carried Interest in the case of GP-Related Giveback Amounts) (the “Net GP-Related Recontribution Amount”), irrespective of the fact that the amounts in the Trust Account may be sufficient on an aggregate basis to satisfy the Partnership’s and the Other Fund GPs’ obligation under the Clawback Provisions and/or Giveback Provisions; provided, that to the extent a Partner’s or Withdrawn Partner’s share of the amount paid with respect to the Clawback Amount or the GP-Related Giveback Amount exceeds his or her GP-Related Recontribution Amount, such excess shall be repaid to such Partner or Withdrawn Partner as promptly as reasonably practicable, subject to clause (ii) below; provided further, that such written instructions from the General Partner shall specify each Partner’s and Withdrawn Partner’s GP-Related Recontribution Amount. Prior to such time, the General

Partner may, in its discretion (but shall be under no obligation to), provide notice that in the General Partner’s judgment, the potential obligations in respect of the Clawback Provisions or the Giveback Provisions will probably materialize (and an estimate of the aggregate amount of such obligations); provided further, that any amount from a Partner’s Trust Account used to pay any GP-Related Giveback Amount (or such lesser amount as may be required by the General Partner) shall be contributed by such Partner to such Partner’s Trust Account no later than 30 days after the Net GP-Related Recontribution Amount is paid with respect to such GP-Related Giveback Amount.

(B) To the extent any Partner or Withdrawn Partner has satisfied any Holdback obligation with Firm Collateral, such Partner or Withdrawn Partner shall, within 10 days of the General Partner’s call for GP-Related Recontribution Amounts, make a cash payment into the Trust Account in an amount equal to the amount of the Holdback obligation satisfied with such Firm Collateral, or such lesser amount such that the amount in the Trust Account allocable to such Partner or Withdrawn Partner equals the sum of (I) such Partner’s or Withdrawn Partner’s GP-Related Recontribution Amount and (II) any similar amounts payable to any of the Other Fund GPs. Immediately upon receipt of such cash, the Trustee(s) shall take such steps as are necessary to release such Firm Collateral of such Partner or Withdrawn Partner equal to the amount of such cash payment. If the amount of such cash payment is less than the amount of Firm Collateral of such Partner or Withdrawn Partner, the balance of such Firm Collateral if any, shall be retained to secure the payment of GP-Related Deficiency Contributions, if any, and shall be fully released upon the satisfaction of the Partnership’s and the Other Fund GPs’ obligation to pay the Clawback Amount. The failure of any Partner or Withdrawn Partner to make a cash payment in accordance with this clause (B) (to the extent applicable) shall constitute a default under Section 5.8(d)(ii) as if such cash payment hereunder constitutes a Net GP-Related Recontribution Amount under Section 5.8(d)(ii). Solely to the extent required by the BCP Asia Partnership Agreement, each partner of the General Partner shall have the same obligations as a Partner (which obligations shall be subject to the same limitations as the obligations of a Partner) under this Section 5.8(d)(i)(B) and under Section 5.8(d)(ii)(A) with respect to such partner’s pro rata share of any Clawback Amount and solely to the extent that the Partnership has insufficient funds to meet the Partnership’s obligations under the BCP Asia Partnership Agreement.

its good faith judgment that the Partnership (or an Other Fund GP) will be unable to collect such amount in cash from such GP-Related Defaulting Party for payment of the Clawback Amount or GP-Related Giveback Amount, as the case may be, at least 20 Business Days prior to the latest date that the Partnership, and the Other Fund GPs, if applicable, are permitted to pay the Clawback Amount or GP-Related Giveback Amount, as the case may be; provided, that, subject to Section 5.8(e), no Partner or Withdrawn Partner shall as a result of such GP-Related Deficiency Contribution be required to contribute an amount in excess of 150% of the amount of the Net GP-Related Recontribution Amount initially requested from such Partner or Withdrawn Partner in respect of such default.

(B) Thereafter, the General Partner shall determine in its good faith judgment that the Partnership should either (1) not attempt to collect such amount in light of the costs associated therewith, the likelihood of recovery and any other factors considered relevant in the good faith judgment of the General Partner or (2) pursue any and all remedies (at law or equity) available to the Partnership against the GP-Related Defaulting Party, the cost of which shall be a Partnership expense to the extent not ultimately reimbursed by the GP-Related Defaulting Party. It is agreed that the Partnership shall have the right (effective upon such GP-Related Defaulting Party becoming a GP-Related Defaulting Party) to set-off as appropriate and apply against such GP-Related Defaulting Party’s Net GP-Related Recontribution Amount any amounts otherwise payable to the GP-Related Defaulting Party by the Partnership or any Affiliate thereof (including amounts unrelated to Carried Interest, such as returns of capital and profit thereon). Each Partner and Withdrawn Partner hereby grants to the General Partner a security interest, effective upon such Partner or Withdrawn Partner becoming a GP-Related Defaulting Party, in all accounts receivable and other rights to receive payment from any Affiliate of the Partnership and agrees that, upon the effectiveness of such security interest, the General Partner may sell, collect or otherwise realize upon such collateral. In furtherance of the foregoing, each Partner and Withdrawn Partner hereby appoints the Delaware GP as its true and lawful attorney-in-fact with full irrevocable power and authority, in the name of such Partner or Withdrawn Partner or in the name of the Delaware GP, to take any actions which may be necessary to accomplish the intent of the immediately preceding sentence. The General Partner shall be entitled to collect interest on the Net GP-Related Recontribution Amount of a GP-Related Defaulting Party from the date such Net GP-Related Recontribution Amount was required to be contributed to the Partnership at a rate equal to the Default Interest Rate.

(C) Any Partner’s or Withdrawn Partner’s failure to make a GP-Related Deficiency Contribution shall cause such Partner or Withdrawn Partner to be a GP-Related Defaulting Party with respect to such amount. The Partnership shall first seek any remaining Trust Amounts (and Trust Income thereon) allocated to such Partner or Withdrawn Partner to satisfy such Partner’s or Withdrawn Partner’s obligation to make a GP-Related Deficiency Contribution before seeking cash contributions from such Partner or Withdrawn Partner in

satisfaction of such Partner’s or Withdrawn Partner’s obligation to make a GP-Related Deficiency Contribution.

(iii) In the event any Partner or Withdrawn Partner initially fails to recontribute all or any portion of such Partner or Withdrawn Partner’s pro rata share of any Clawback Amount pursuant to Section 5.8(d)(i)(A), the Partnership shall use its reasonable efforts to collect the amount which such Partner or Withdrawn Partner so fails to recontribute.

(iv) A Partner’s or Withdrawn Partner’s obligation to make contributions to the Partnership under this Section 5.8(d) shall survive the commencement of winding up and subsequent dissolution of the Partnership.

(e) The Partners acknowledge that the General Partner will (and is hereby authorized to) take such steps as it deems appropriate, in its good faith judgment, to further the objective of providing for the fair and equitable treatment of all Partners, including by allocating Aggregate Net Losses from Writedowns (as defined in the BCP Asia Agreements) and Losses (as defined in the BCP Asia Agreements) on GP-Related BCP Asia Investments that have been the subject of a writedown and/or Net Loss (as defined in the BCP Asia Agreements) (each, a “Loss Investment”) to those Partners who participated in such Loss Investments based on their Carried Interest Sharing Percentage therein to the extent that such Partners receive or have received Carried Interest distributions from other GP-Related BCP Asia Investments. Consequently and notwithstanding anything herein to the contrary, adjustments to Carried Interest distributions shall be made as set forth in this Section 5.8(e).

(i) At the time the Partnership is making Carried Interest distributions in connection with a GP-Related BCP Asia Investment (the “Subject Investment”) that have been reduced under any BCP Asia Agreement as a result of one or more Loss Investments, the General Partner shall calculate amounts distributable to or due from each such Partner as follows:

(A) determine each Partner’s share of each such Loss Investment based on his or her Carried Interest Sharing Percentage in each such Loss Investment (which may be zero) to the extent such Loss Investment has reduced the Carried Interest distributions otherwise available for distribution to all Partners (indirectly through the Partnership from BCP Asia) from the Subject Investment (such reduction, the “Loss Amount”);

(B) determine the amount of Carried Interest distributions otherwise distributable to such Partner with respect to the Subject Investment (indirectly through the Partnership from BCP Asia) before any reduction in respect of the amount determined in clause (A) above (the “Unadjusted Carried Interest Distributions”); and

(C) subtract (I) the Loss Amounts relating to all Loss Investments from (II) the Unadjusted Carried Interest Distributions for such

Partner, to determine the amount of Carried Interest distributions to actually be paid to such Partner (“Net Carried Interest Distribution”).

To the extent that the Net Carried Interest Distribution for a Partner as calculated in this clause (i) is a negative number, the General Partner shall (I) notify such Partner, at or prior to the time such Carried Interest distributions are actually made to the Partners, of his or her obligation to recontribute to the Partnership prior Carried Interest distributions (a “Net Carried Interest Distribution Recontribution Amount”), up to the amount of such negative Net Carried Interest Distribution, and (II) to the extent amounts recontributed pursuant to clause (I) are insufficient to satisfy such negative Net Carried Interest Distribution amount, reduce future Carried Interest distributions otherwise due such Partner, up to the amount of such remaining negative Net Carried Interest Distribution. If a Partner’s (x) Net Carried Interest Distribution Recontribution Amount exceeds (y) the aggregate amount of prior Carried Interest distributions less the amount of tax thereon, calculated based on the Assumed Tax Rate (as defined in the BCP Asia Agreements) in effect in the Fiscal Years of such distributions (the “Excess Tax-Related Amount”), then such Partner may, in lieu of paying such Partner’s Excess Tax-Related Amount, defer such amounts as set forth below. Such deferred amount shall accrue interest at the Prime Rate. Such deferred amounts shall be reduced and repaid by the amount of Carried Interest otherwise distributable to such Partner in connection with future Carried Interest distributions until such balance is reduced to zero. Any deferred amounts shall be payable in full upon the earlier of (i) such time as the Clawback Amount is determined (as provided herein) and (ii) such time as the Partner becomes a Withdrawn Partner.

To the extent there is an amount of negative Net Carried Interest Distribution with respect to a Partner remaining after the application of this clause (i), notwithstanding clause (II) of the preceding paragraph, such remaining amount of negative Net Carried Interest Distribution shall be allocated to the other Partners pro rata based on each of their Carried Interest Sharing Percentages in the Subject Investment.

A Partner who fails to pay a Net Carried Interest Distribution Recontribution Amount promptly upon notice from the General Partner (as provided above) shall be deemed a GP-Related Defaulting Party for all purposes hereof.

A Partner may satisfy in part any Net Carried Interest Distribution Recontribution Amount from cash that is then subject to a Holdback, to the extent that the amounts that remain subject to a Holdback satisfy the Holdback requirements hereof as they relate to the reduced amount of aggregate Carried Interest distributions received by such Partner (taking into account any Net Carried Interest Distribution Recontribution Amount contributed to the Partnership by such Partner).

Any Net Carried Interest Distribution Recontribution Amount contributed by a Partner, including amounts of cash subject to a Holdback as provided above, shall increase the amount available for distribution to the other Partners as Carried Interest distributions with respect to the Subject Investment; provided, that any such amounts then subject to a Holdback may be so distributed to the other Partners to the extent a Partner receiving such distribution has satisfied the Holdback requirements with respect to such distribution (taken together with the other Carried Interest distributions received by such Partner to date).

(ii) In the case of Clawback Amounts which are required to be contributed to the Partnership as otherwise provided herein, the obligation of the Partners with respect to any Clawback Amount shall be adjusted by the General Partner as follows:

(A) determine each Partner’s share of any Net Losses (as defined in the BCP Asia Agreements) in any GP-Related BCP Asia Investments which gave rise to the Clawback Amount (i.e., the Losses that followed the last GP-Related BCP Asia Investment with respect to which Carried Interest distributions were made), based on such Partner’s Carried Interest Sharing Percentage in such GP-Related BCP Asia Investments;

(B) determine each Partner’s obligation with respect to the Clawback Amount based on such Partner’s Carried Interest Give Back Percentage as otherwise provided herein; and

(C) subtract the amount determined in clause (B) above from the amount determined in clause (A) above with respect to each Partner to determine the amount of adjustment to each Partner’s share of the Clawback Amount (a Partner’s “Clawback Adjustment Amount”).

A Partner’s share of the Clawback Amount shall for all purposes hereof be decreased by such Partner’s Clawback Adjustment Amount, to the extent it is a negative number (except to the extent expressly provided below). A Partner’s share of the Clawback Amount shall for all purposes hereof be increased by such Partner’s Clawback Adjustment Amount (to the extent it is a positive number); provided, that in no way shall a Partner’s aggregate obligation to satisfy a Clawback Amount as a result of this clause (ii) exceed the aggregate Carried Interest distributions received by such Partner. To the extent a positive Clawback Adjustment Amount remains after the application of this clause (ii) with respect to a Partner, such remaining Clawback Adjustment Amount shall be allocated to the Partners (including any Partner whose Clawback Amount was increased pursuant to this clause (ii)) pro rata based on their Carried Interest Give Back Percentages (determined without regard to this clause (ii)).

Any distribution or contribution adjustments pursuant to this Section 5.8(e) by the General Partner shall be based on its good faith judgment, and no Partner shall have any claim against the Partnership, the General Partner or any other Partners as a result of any adjustment made as set forth above. This Section 5.8(e) applies to all Partners, including Withdrawn Partners.

It is agreed and acknowledged that this Section 5.8(e) is an agreement among the Partners and in no way modifies the obligations of each Partner regarding the Clawback Amount as provided in the BCP Asia Agreements.

Section 5.9. Business Expenses. The Partnership shall reimburse the Partners for reasonable travel, entertainment and miscellaneous expenses incurred by them in the conduct of the Partnership’s business in accordance with rules and regulations established by the General Partner from time to time.

Section 5.10. Tax Capital Accounts; Tax Allocations. (a) For U.S. federal income tax purposes, there shall be established for each Partner a single capital account combining such Partner’s Capital Commitment Capital Account and GP-Related Capital Account, with such adjustments as the General Partner determines are appropriate so that such single capital account is maintained in compliance with the principles and requirements of Section 704(b) of the Code and the Treasury Regulations thereunder.

(b) All items of income, gain, loss, deduction and credit of the Partnership shall be allocated among the Partners for U.S. federal, state and local income tax purposes in the same manner as such items of income, gain, loss, deduction and credit shall be allocated among the Partners pursuant to this Agreement, except as may otherwise be provided herein or by the Code or other applicable law. In the event there is a net decrease in partnership minimum gain or partner nonrecourse debt minimum gain (determined in accordance with the principles of Treasury Regulations Sections 1.704-2(d) and 1.704-2(i)) during any taxable year of the Partnership, each Partner shall be specially allocated items of Partnership income and gain for such year (and, if necessary, subsequent years) in an amount equal to its respective share of such net decrease during such year, determined pursuant to Treasury Regulations Sections 1.704-2(g) and 1.704-2(i)(5). The items to be so allocated shall be determined in accordance with Treasury Regulations Section 1.704-2(f). In addition, this Agreement shall be considered to contain a “qualified income offset” as provided in Treasury Regulations Section 1.704-1(b)(2)(ii)(d). Notwithstanding the foregoing, the General Partner in its sole discretion shall make allocations for tax purposes as may be needed to ensure that allocations are in accordance with the interests of the Partners within the meaning of the Code and the Treasury Regulations.

(c) For U.S. federal, state and local income tax purposes only, Partnership income, gain, loss, deduction or expense (or any item thereof) for each Fiscal Year shall be allocated to and among the Partners in a manner corresponding to the manner in which corresponding items are allocated among the Partners pursuant to the other provisions of this Section 5.10; provided, that the General Partner may in its sole discretion make such allocations for tax purposes as it determines are appropriate so that allocations have substantial economic effect or are in accordance with the interests of the Partners, within the meaning of the Code and the Treasury Regulations thereunder. To the extent there is an adjustment by a taxing authority to any item of income, gain, loss, deduction or credit of the Partnership (or an adjustment to any Partner’s distributive share thereof), the General Partner may reallocate the adjusted items among each Partner or former Partner (as determined by the General Partner) in accordance with the final resolution of such audit adjustment.

ARTICLE VI

ADDITIONAL PARTNERS; WITHDRAWAL OF PARTNERS;

SATISFACTION AND DISCHARGE OF

PARTNERSHIP INTERESTS; TERMINATION

representations and certifications with respect to itself set forth in Section 3.7 and Section 3.8. The General Partner shall determine and negotiate with the additional Partner (which term shall include, without limitation, any substitute Partner) all terms of such additional Partner’s participation in the Partnership, including the additional Partner’s initial GP-Related Capital Contribution, Capital Commitment-Related Capital Contribution, GP-Related Profit Sharing Percentage and Capital Commitment Profit Sharing Percentage. Each additional Partner shall have such voting rights as may be determined by the General Partner from time to time unless, upon the admission to the Partnership of any Special Partner, the General Partner shall designate that such Special Partner shall not have such voting rights (any such Special Partner being called a “Nonvoting Special Partner”). Any additional Partner shall, as a condition to becoming a Partner, agree to become a party to, and be bound by the terms and conditions of, the Trust Agreement. If Blackstone or another or subsequent holder of an Investor Note approved by the General Partner for purposes of this Section 6.1(a) shall foreclose upon a Limited Partner’s Investor Note issued to finance such Limited Partner’s purchase of his or her Capital Commitment Interests, Blackstone or such other or subsequent holder shall succeed to such Limited Partner’s Capital Commitment Interests and shall be deemed to have become a Limited Partner to such extent. Any additional Partner may have a GP-Related Partner Interest or a Capital Commitment Partner Interest, without having the other such interest.

(b) The GP-Related Profit Sharing Percentages, if any, to be allocated to an additional Partner as of the date such Partner is admitted to the Partnership, together with the pro rata reduction in all other Partners’ GP-Related Profit Sharing Percentages as of such date, shall be established by the General Partner pursuant to Section 5.3. The Capital Commitment Profit Sharing Percentages, if any, to be allocated to an additional Partner as of the date such Partner is admitted to the Partnership, together with the pro rata reduction in all other Partners’ Capital Commitment Profit Sharing Percentages as of such date, shall be established by the General Partner. Notwithstanding any provision in this Agreement to the contrary, the General Partner is authorized, without the need for any further act, vote or consent of any person, to make adjustments to the GP-Related Profit Sharing Percentages as it determines necessary in its sole discretion in connection with any additional Partners admitted to the Partnership, adjustments with respect to other Partners of the Partnership and to give effect to other matters set forth herein, as applicable.

(c) An additional Partner shall be required to contribute to the Partnership his or her pro rata share of the Partnership’s total capital, excluding capital in respect of GP-Related Investments and Capital Commitment Investments in which such Partner does not acquire any interests, at such times and in such amounts as shall be determined by the General Partner in accordance with Section 4.1 and Section 7.1.

(d) The admission of an additional Partner will be evidenced by (i) the execution of a deed of adherence to this Agreement by such additional Partner and/or such other documentation as may be required by the General Partner, (ii) the execution of an amendment to this Agreement by the General Partner and the additional Partner, if determined by the General Partner, and/or (iii) the execution by such additional Partner of any other writing evidencing the intent of such person to become an additional Partner and to be bound by the terms of this Agreement and such writing being acceptable to the General Partner on behalf of the Partnership. In addition, each additional Partner shall sign a counterpart copy of the Trust Agreement or any

other writing evidencing the intent of such person to become a party to the Trust Agreement that is acceptable to the General Partner on behalf of the Partnership.

Section 6.2. Withdrawal of Partners. (a) Any Partner may Withdraw voluntarily from the Partnership subject to the prior written consent of the General Partner, including if such Withdrawal would (i) cause the Partnership to be in default under any of its contractual obligations or (ii) in the reasonable judgment of the General Partner, have a material adverse effect on the Partnership or its business. Without limiting the foregoing sentence, the General Partner generally intends to permit voluntary Withdrawals on the last day of any calendar month (or on such other date as shall be determined by the General Partner in its sole discretion), on not less than 15 days’ prior written notice by such Partner to the General Partner (or on such shorter notice period as may be mutually agreed upon between such Partner and the General Partner); provided, that a Partner may Withdraw from the Partnership with respect to such Partner’s GP-Related Partner Interest without Withdrawing from the Partnership with respect to such Partner’s Capital Commitment Partner Interest, and a Partner may Withdraw from the Partnership with respect to such Partner’s Capital Commitment Partner Interest without Withdrawing from the Partnership with respect to such Partner’s GP-Related Partner Interest.

(b) Upon the Withdrawal of any Partner such Partner shall thereupon cease to be a Partner, except as expressly provided herein.

(c) Upon the Total Disability of a Limited Partner, such Partner shall thereupon cease to be a Limited Partner with respect to such person’s GP-Related Partner Interest; provided, that the General Partner may elect to admit such Withdrawn Partner to the Partnership as a Nonvoting Special Partner with respect to such person’s GP-Related Partner Interest, with such GP-Related Partner Interest as the General Partner may determine. The determination of whether any Partner has suffered a Total Disability shall be made by the General Partner in its sole discretion after consultation with a qualified medical doctor. In the absence of agreement between the General Partner and such Partner, each party shall nominate a qualified medical doctor and the two doctors shall select a third doctor, who shall make the determination as to Total Disability.

(d) If the General Partner determines that it shall be in the best interests of the Partnership for any Partner (including any Partner who has given notice of voluntary Withdrawal pursuant to paragraph (a) above) to Withdraw from the Partnership (whether or not Cause exists) with respect to such person’s GP-Related Partner Interest and/or with respect to such person’s Capital Commitment Partner Interest, such Partner, upon written notice by the General Partner to such Partner, shall be required to Withdraw with respect to such person’s GP-Related Partner Interest and/or with respect to such person’s Capital Commitment Partner Interest, as of a date specified in such notice, which date shall be on or after the date of such notice. If the General Partner requires any Partner to Withdraw for Cause with respect to such person’s GP-Related Partner Interest and/or with respect to such person’s Capital Commitment Partner Interest, such notice shall state that it has been given for Cause and shall describe the particulars thereof in reasonable detail.

(e) The Withdrawal from the Partnership of any Partner shall not, in and of itself, affect the obligations of the other Partners to continue the Partnership during the remainder

of its term. A Withdrawn General Partner shall remain liable for all obligations of the Partnership incurred while it was a General Partner and resulting from its acts or omissions as a General Partner to the fullest extent provided by law.

Section 6.3. GP-Related Partner Interests Not Transferable(a) . (a) No Partner may sell, assign, pledge, charge, grant a security interest over or otherwise transfer or encumber all or any portion of such Partner’s GP-Related Partner Interest other than as permitted by written agreement between such Partner and the Partnership; provided, that subject to the Partnership Act, this Section 6.3 shall not impair transfers by operation of law, transfers by will or by other testamentary instrument occurring by virtue of the death or dissolution of a Partner, or transfers required by trust agreements; provided further, that, subject to the prior written consent of the General Partner, which shall not be unreasonably withheld, a Limited Partner may transfer, for estate planning purposes, up to 25% of his or her GP-Related Profit Sharing Percentage to any estate planning trust, limited partnership, or limited liability company with respect to which a Limited Partner controls investments related to any interest in the Partnership held therein (an “Estate Planning Vehicle”). Each Estate Planning Vehicle will be a Nonvoting Special Partner. Such Limited Partner and the Nonvoting Special Partner shall be jointly and severally liable for all obligations of both such Limited Partner and such Nonvoting Special Partner with respect to the Partnership (including the obligation to make additional GP-Related Capital Contributions), as the case may be. The General Partner may at its sole option exercisable at any time require any Estate Planning Vehicle to Withdraw from the Partnership on the terms of this Article VI. Except as provided in the second proviso to the first sentence of this Section 6.3, no assignee, legatee, distributee, heir or transferee (by conveyance, operation of law or otherwise) of the whole or any portion of any Partner’s GP-Related Partner Interest shall have any right to be a Partner without the prior written consent of the General Partner (which consent may be given or withheld in its sole discretion without giving any reason therefor). Notwithstanding the granting of a security interest in the entire Interest of any Partner, such Partner shall continue to be a Partner of the Partnership.

(b) Notwithstanding any provision hereof to the contrary, no sale or transfer of any GP-Related Partner Interest in the Partnership may be made except in compliance with the Partnership Act, the laws of the Cayman Islands and all U.S. federal, state and other applicable laws, including U.S. federal and state securities laws.

the General Partner under, and its agreeing to be bound by, this Agreement and the filing of a statement pursuant to Section 10(2) of the Partnership Act, such person shall be admitted as the General Partner. A person who is so admitted as an additional or substitute General Partner shall thereby become a General Partner and shall have the right to manage the affairs of the Partnership and to vote as a Partner to the extent of the interest in the Partnership so acquired. The General Partner shall file, or cause to be filed, any statement required to be filed pursuant to Section 10 of the Partnership Act with the Cayman Islands Registrar of Exempted Limited Partnerships to give effect to the provisions of this Section 6.4(a). A General Partner shall not cease to be a general partner of the Partnership upon the collateral assignment of or the pledging, charging, or granting of a security interest in its entire Interest in the Partnership.

(b) Except as contemplated by Section 6.4(a) above, Withdrawal by a General Partner is not permitted. The Withdrawal of a Partner shall not commence the winding up of or dissolve the Partnership if at the time of such Withdrawal there are one or more remaining Partners satisfying the requirements of the Partnership Act, and any one or more of such remaining Partners continue the business of the Partnership (any and all such remaining Partners being hereby authorized to continue the business of the Partnership without commencement of winding up or dissolution and hereby agreeing to do so). Notwithstanding Section 6.4(c), if upon the Withdrawal of a Partner there shall be no remaining Limited Partners, the Partnership shall be wound up and subsequently dissolved unless, within 90 days after the occurrence of such Withdrawal, all remaining Special Partners agree (including by acting through the power of attorney granted pursuant to Section 10.11) in writing to continue the business of the Partnership and to the appointment, effective to the maximum extent permissible by the Partnership Act, as of the date of such Withdrawal, of one or more Limited Partners satisfying the requirements, and in accordance with, of the Partnership Act.

(c) The Partnership shall not commence winding up or be dissolved, in and of itself, by the Withdrawal of any Partner, but shall continue with the surviving or remaining Partners as partners thereof in accordance with and subject to the terms and provisions of this Agreement.

Section 6.5. Satisfaction and Discharge of a Withdrawn Partner’s GP-Related Partner Interests. (a) The terms of this Section 6.5 shall apply to the GP-Related Partner Interest of a Withdrawn Partner, but, except as otherwise expressly provided in this Section 6.5, shall not apply to the Capital Commitment Partner Interest of a Withdrawn Partner. For purposes of this Section 6.5, the term “Settlement Date” means the date as of which a Withdrawn Partner’s GP-Related Partner Interest in the Partnership is settled as determined under paragraph (b) below. Notwithstanding the foregoing, any Limited Partner who Withdraws from the Partnership, and all or any portion of whose GP-Related Partner Interest is retained as a Special Partner, shall be considered a Withdrawn Partner for all purposes hereof.

Withdrawn Partner’s Withdrawal Date and Settlement Date, such Withdrawn Partner shall have the same rights and obligations with respect to GP-Related Capital Contributions, interest on capital, allocations of GP-Related Net Income (Loss) and distributions as would have applied had such Withdrawn Partner remained a Partner of the Partnership during such period.

(c) In the event of the Withdrawal of a Partner, with respect to such Withdrawn Partner’s GP-Related Partner Interest, the General Partner shall promptly after such Withdrawn Partner’s Settlement Date (i) determine and allocate to the Withdrawn Partner’s GP-Related Capital Accounts such Withdrawn Partner’s allocable share of the GP-Related Net Income (Loss) of the Partnership for the period ending on such Settlement Date in accordance with Article V and (ii) credit the Withdrawn Partner’s GP-Related Capital Accounts with interest in accordance with Section 5.2. In making the foregoing calculations, the General Partner shall be entitled to establish such reserves (including reserves for taxes, bad debts, unrealized losses, actual or threatened litigation or any other expenses, contingencies or obligations) as it deems appropriate. Unless otherwise determined by the General Partner in a particular case, a Withdrawn Partner shall not be entitled to receive any GP-Related Unallocated Percentage in respect of the accounting period during which such Partner Withdraws from the Partnership (whether or not previously awarded or allocated) or any GP-Related Unallocated Percentage in respect of prior accounting periods that have not been paid or allocated (whether or not previously awarded) as of such Withdrawn Partner’s Withdrawal Date.

(d) From and after the Settlement Date of the Withdrawn Partner, the Withdrawn Partner’s GP-Related Profit Sharing Percentages shall, unless otherwise allocated by the General Partner pursuant to Section 5.3(a), be deemed to be GP-Related Unallocated Percentages (except for GP-Related Profit Sharing Percentages with respect to GP-Related Investments as provided in paragraph (f) below).

in Section 6.5(i) below; provided, that if the Withdrawn Partner was solely a Special Partner on his or her Withdrawal Date, such payment shall be required only to the extent of any amounts payable to such Withdrawn Partner pursuant to this Section 6.5. Any aggregate negative balance in the GP-Related Capital Accounts of a Withdrawn Partner who was solely a Special Partner , upon the settlement of such Withdrawn Partner’s GP-Related Partner Interest in the Partnership pursuant to this Section 6.5, shall be allocated among the other Partners’ GP-Related Capital Accounts in accordance with their respective GP-Related Profit Sharing Percentages in the categories of GP-Related Net Income (Loss) giving rise to such negative balance as determined by the General Partner as of such Withdrawn Partner’s Settlement Date. In the settlement of any Withdrawn Partner’s GP-Related Partner Interest in the Partnership, no value shall be ascribed to goodwill, the Partnership name or the anticipation of any value the Partnership or any successor thereto might have in the event the Partnership or any interest therein were to be sold in whole or in part.

(ii) Notwithstanding clause (i) of this Section 6.5(e), in the case of a Partner whose Withdrawal with respect to such Partner’s GP-Related Partner Interest resulted from such Partner’s death or Incompetence, such Partner’s estate or legal representative, as the case may be, may elect, at the time described below, to receive a Nonvoting Special Partner GP-Related Partner Interest and retain such Partner’s GP-Related Profit Sharing Percentage in all (but not less than all) illiquid investments of the Partnership in lieu of a cash payment (or Investor Note) in settlement of that portion of the Withdrawn Partner’s GP-Related Partner Interest. The election referred to above shall be made within 60 days after the Withdrawn Partner’s Settlement Date, based on a statement of the settlement of such Withdrawn Partner’s GP-Related Partner Interest in the Partnership pursuant to this Section 6.5.

(f) For purposes of clause (y) of paragraph (e)(i) above, a Withdrawn Partner’s “percentage interest” means his or her GP-Related Profit Sharing Percentage as of the Settlement Date in the relevant GP-Related Investment. The Withdrawn Partner shall retain his or her percentage interest in such GP-Related Investment and shall retain his or her GP-Related Capital Account or portion thereof attributable to such GP-Related Investment, in which case such Withdrawn Partner (a “Retaining Withdrawn Partner”) shall become and remain a Special Partner for such purpose (and, if the General Partner so designates, such Special Partner shall be a Nonvoting Special Partner). The GP-Related Partner Interest of a Retaining Withdrawn Partner pursuant to this paragraph (f) shall be subject to the terms and conditions applicable to GP-Related Partner Interests of any kind hereunder and such other terms and conditions as are established by the General Partner. At the option of the General Partner in its sole discretion, the General Partner and the Retaining Withdrawn Partner may agree to have the Partnership acquire such GP-Related Partner Interest without the approval of the other Partners; provided, that the General Partner shall reflect in the books and records of the Partnership the terms of any acquisition pursuant to this sentence.

Related Partner Interest. If any securities or other investments are distributed in kind to a Withdrawn Partner under this paragraph (g), the amount described in clause (x) of paragraph (e)(i) shall be reduced by the value of such distribution as valued on the latest balance sheet of the Partnership in accordance with generally accepted accounting principles or, if not appearing on such balance sheet, as reasonably determined by the General Partner.

(h) [Intentionally omitted.]

(i) Within 120 days after each Settlement Date, the General Partner shall submit to the Withdrawn Partner a statement of the settlement of such Withdrawn Partner’s GP-Related Partner Interest in the Partnership pursuant to this Section 6.5 together with any cash payment, subordinated promissory note and in kind distributions to be made to such Partner as shall be determined by the General Partner. The General Partner shall submit to the Withdrawn Partner supplemental statements with respect to additional amounts payable to or by the Withdrawn Partner in respect of the settlement of his or her GP-Related Partner Interest in the Partnership (e.g., payments in respect of GP-Related Investments pursuant to paragraph (f) above or adjustments to reserves pursuant to paragraph (j) below) promptly after such amounts are determined by the General Partner. To the fullest extent permitted by law, such statements and the valuations on which they are based shall be accepted by the Withdrawn Partner without examination of the accounting books and records of the Partnership or other inquiry. Any amounts payable by the Partnership to a Withdrawn Partner pursuant to this Section 6.5 shall be subordinate in right of payment and subject to the prior payment or provision for payment in full of claims of all present or future creditors of the Partnership or any successor thereto arising out of matters occurring prior to the applicable date of payment or distribution; provided, that such Withdrawn Partner shall otherwise rank pari passu in right of payment (x) with all persons who become Withdrawn Partners and whose Withdrawal Date is within one year before the Withdrawal Date of the Withdrawn Partner in question and (y) with all persons who become Withdrawn Partners and whose Withdrawal Date is within one year after the Withdrawal Date of the Withdrawn Partner in question.

(j) If the aggregate reserves established by the General Partner as of the Settlement Date in making the foregoing calculations should prove, in the determination of the General Partner, to be excessive or inadequate, the General Partner may elect, but shall not be obligated, to pay the Withdrawn Partner or his or her estate such excess, or to charge the Withdrawn Partner or his or her estate such deficiency, as the case may be.

(k) Any amounts owed by the Withdrawn Partner to the Partnership at any time on or after the Settlement Date (e.g., outstanding Partnership loans or advances to such Withdrawn Partner) shall be offset against any amounts payable or distributable by the Partnership to the Withdrawn Partner at any time on or after the Settlement Date or shall be paid by the Withdrawn Partner to the Partnership, in each case as determined by the General Partner. All cash amounts payable by a Withdrawn Partner to the Partnership under this Section 6.5 shall bear interest from the due date to the date of payment at a floating rate equal to the lesser of (x) the Prime Rate or (y) the maximum rate of interest permitted by applicable law. The “due date” of amounts payable by a Withdrawn Partner pursuant to Section 6.5(i) above shall be 120 days after a Withdrawn Partner’s Settlement Date. The “due date” of amounts payable to or by a Withdrawn Partner in respect of GP-Related Investments for which the Withdrawn Partner has

retained a percentage interest in accordance with paragraph (f) above shall be 120 days after realization with respect to such GP-Related Investment. The “due date” of any other amounts payable by a Withdrawn Partner shall be 60 days after the date such amounts are determined to be payable.

(l) At the time of the settlement of any Withdrawn Partner’s GP-Related Partner Interest in the Partnership pursuant to this Section 6.5, the General Partner may, to the fullest extent permitted by applicable law, impose any restrictions it deems appropriate on the assignment, pledge, charge, grant of a security interest, encumbrance or other transfer by such Withdrawn Partner of any interest in any GP-Related Investment retained by such Withdrawn Partner, any securities or other investments distributed in kind to such Withdrawn Partner or such Withdrawn Partner’s right to any payment from the Partnership.

(m) If a Partner is required to Withdraw from the Partnership with respect to such Partner’s GP-Related Partner Interest for Cause pursuant to Section 6.2(d), then his or her GP-Related Partner Interest shall be settled in accordance with paragraphs (a)-(q) of this Section 6.5; provided, that the General Partner may elect (but shall not be required) to apply any or all the following terms and conditions to such settlement:

(i) In settling the Withdrawn Partner’s interest in any GP-Related Investment in which he or she has an interest as of his or her Settlement Date, the General Partner may elect to (A) determine the GP-Related Unrealized Net Income (Loss) attributable to each such GP-Related Investment as of the Settlement Date and allocate to the appropriate GP-Related Capital Account of the Withdrawn Partner his or her allocable share of such GP-Related Unrealized Net Income (Loss) for purposes of calculating the aggregate balance of such Withdrawn Partner’s GP-Related Capital Account pursuant to clause (x) of paragraph (e)(i) above, (B) credit or debit, as applicable, the Withdrawn Partner with the balance of his or her GP-Related Capital Account or portion thereof attributable to each such GP-Related Investment as of his or her Settlement Date without giving effect to the GP-Related Unrealized Net Income (Loss) from such GP-Related Investment as of his or her Settlement Date, which shall be forfeited by the Withdrawn Partner or (C) apply the provisions of paragraph (f) above; provided, that the maximum amount of GP-Related Net Income (Loss) allocable to such Withdrawn Partner with respect to any GP-Related Investment shall equal such Partner’s percentage interest of the GP-Related Unrealized Net Income, if any, attributable to such GP-Related Investment as of the Settlement Date (the balance of such GP-Related Net Income (Loss), if any, shall be allocated as determined by the General Partner). The Withdrawn Partner shall not have any continuing interest in any GP-Related Investment to the extent an election is made pursuant to (A) or (B) above.

(ii) Any amounts payable by the Partnership to the Withdrawn Partner pursuant to this Section 6.5 shall be subordinate in right of payment and subject to the prior payment in full of claims of all present or future creditors of the Partnership or any successor thereto arising out of matters occurring prior to or on or after the applicable date of payment or distribution.

(n) The payments to a Withdrawn Partner pursuant to this Section 6.5 may be conditioned on the compliance by such Withdrawn Partner with any lawful and reasonable (under the circumstances) restrictions against engaging or investing in a business competitive with that of the Partnership or any of its subsidiaries and Affiliates for a period not exceeding two years determined by the General Partner. Upon written notice to the General Partner, any Withdrawn Partner who is subject to noncompetition restrictions established by the General Partner pursuant to this paragraph (n) may elect to forfeit the principal amount payable in the final installment of his or her subordinated promissory note, together with interest to be accrued on such installment after the date of forfeiture, in lieu of being bound by such restrictions.

(o) In addition to the foregoing, the General Partner shall have the right to pay a Withdrawn Partner (other than the Cayman GP or the Delaware GP) a discretionary additional payment in an amount and based upon such circumstances and conditions as it determines to be relevant. The provisions of this Section 6.5 shall apply to any Investor Special Partner relating to a Limited Partner or Special Partner, and to any transferee of any GP-Related Partner Interest of such Partner pursuant to Section 6.3 if such Partner Withdraws from the Partnership.

(p) (i) The Partnership will assist a Withdrawn Partner or his or her estate or guardian, as the case may be, in the settlement of the Withdrawn Partner’s GP-Related Partner Interest in the Partnership. Third party costs incurred by the Partnership in providing this assistance will be borne by the Withdrawn Partner or his or her estate.

(i) The General Partner may reasonably determine in good faith to retain outside professionals to provide the assistance to Withdrawn Partners or their estates or guardians, as referred to above. In such instances, the General Partner will obtain the prior approval of a Withdrawn Partner or his or her estate or guardian, as the case may be, prior to engaging such professionals. If the Withdrawn Partner (or his or her estate or guardian) declines to incur such costs, the General Partner will provide such reasonable assistance as and when it can so as not to interfere with the Partnership’s day-to-day operating, financial, tax and other related responsibilities to the Partnership and the Partners.

(q) To the extent permitted by applicable law, each Partner (other than the General Partners) hereby irrevocably appoints each General Partner as such Partner’s true and lawful agent, representative and attorney-in-fact, each acting alone, in such Partner’s name, place and stead, to make, execute, sign and file, on behalf of such Partner, any and all agreements, instruments, consents, ratifications, documents and certificates which such General Partner deems necessary or advisable in connection with any transaction or matter contemplated by or provided for in this Section 6.5, including, without limitation, the performance of any obligation of such Partner or the Partnership or the exercise of any right of such Partner or the Partnership. Such power of attorney is intended to secure a proprietary interest of the General Partner and the performance of the obligations of each relevant Partner under this Agreement, shall be irrevocable and, to the extent permitted by applicable law, shall survive and continue in full force and effect notwithstanding the Withdrawal from the Partnership of any Partner for any reason and shall not be affected by the death, disability or incapacity of such Partner.

Section 6.6. Dissolution of the Partnership.

The General Partner may wind up and subsequently dissolve the Partnership prior to the expiration of its term at any time on giving not less than 60 days’ notice of the commencement of winding up to the other Partners and, upon completion of the winding up of the Partnership, by filing a notice pursuant to Section 36(2) of the Partnership Act. Upon the commencement of winding up of the Partnership, the Partners’ respective interests in the Partnership shall be valued and settled in accordance with the procedures set forth in Section 5.10, Section 6.5, Section 8.1 and Article IX.

Section 6.7. Certain Tax Matters. (a) The General Partner shall determine all matters concerning allocations for tax purposes not expressly provided for herein in its sole discretion.

(b) The General Partner shall cause to be prepared all U.S. federal, state and local tax returns of the Partnership for each year for which such returns are required to be filed and, after approval of such returns by the General Partner, shall cause such returns to be timely filed. The General Partner shall determine the appropriate treatment of each item of income, gain, loss, deduction and credit of the Partnership and the accounting methods and conventions under the tax laws of the United States, the several States and other relevant jurisdictions as to the treatment of any such item or any other method or procedure related to the preparation of such tax returns. The General Partner may cause the Partnership to make or refrain from making any and all elections permitted by such tax laws. Each Partner agrees that he or she shall not, unless he or she provides prior notice of such action to the Partnership, (i) treat, on his or her individual income tax returns, any item of income, gain, loss, deduction or credit relating to his or her interest in the Partnership in a manner inconsistent with the treatment of such item by the Partnership as reflected on the Form K-1 or other information statement furnished by the Partnership to such Partner for use in preparing his or her income tax returns or (ii) file any claim for refund relating to any such item based on, or which would result in, such inconsistent treatment. In respect of an income tax audit of any tax return of the Partnership, the filing of any amended return or claim for refund in connection with any item of income, gain, loss, deduction or credit reflected on any tax return of the Partnership, or any administrative or judicial proceedings arising out of or in connection with any such audit, amended return, claim for refund or denial of such claim, (A) the Tax Matters Partner (as defined below) shall be authorized to act for, and his or her decision shall be final and binding upon, the Partnership and all Partners except to the extent a Partner shall properly elect to be excluded from such proceeding pursuant to the Code, (B) all expenses incurred by the Tax Matters Partner in connection therewith (including, without limitation, attorneys’, accountants’ and other experts’ fees and disbursements) shall be expenses of the Partnership and (C) no Partner shall have the right to (1) participate in the audit of any Partnership tax return, (2) file any amended return or claim for refund in connection with any item of income, gain, loss, deduction or credit reflected on any tax return of the Partnership (unless he or she provides prior notice of such action to the Partnership as provided above), (3) participate in any administrative or judicial proceedings conducted by the Partnership or the Tax Matters Partner arising out of or in connection with any such audit, amended return, claim for refund or denial of such claim, or (4) appeal, challenge or otherwise protest any adverse findings in any such audit conducted by the Partnership or the Tax Matters Partner or with respect to any such amended return or claim for refund filed by the Partnership or the Tax Matters Partner or in any such administrative or judicial proceedings conducted by the Partnership or the Tax Matters Partner. The Partnership and each Partner hereby designate any

Partner selected by the General Partner as the “partnership representative” (as defined under the Code) (the “Tax Matters Partner”). To the fullest extent permitted by applicable law, each Partner agrees to indemnify and hold harmless the Partnership and all other Partners from and against any and all liabilities, obligations, damages, deficiencies and expenses resulting from any breach or violation by such Partner of the provisions of this Section 6.7 and from all actions, suits, proceedings, demands, assessments, judgments, costs and expenses, including reasonable attorneys’ fees and disbursements, incident to any such breach or violation.

(c) Each individual Partner shall provide to the Partnership copies of each U.S. federal, state and local income tax return of such Partner (including any amendment thereof) within 30 days after filing such return.

(d) To the extent the General Partner reasonably determines that the Partnership (or any entity in which the Partnership holds an interest) is or may be required by law to withhold or to make tax payments, including interest and penalties on such amounts, on behalf of or with respect to any Partner, including pursuant to Section 6225 of the Code (“Tax Advances”), the General Partner may withhold or escrow such amounts or make such tax payments as so required. All Tax Advances made on behalf of a Partner shall, at the option of the General Partner, (i) be promptly paid to the Partnership by the Partner on whose behalf such Tax Advances were made or (ii) be repaid by reducing the amount of the current or next succeeding distribution or distributions which would otherwise have been made to such Partner or, if such distributions are not sufficient for that purpose, by so reducing the proceeds upon dissolution of the Partnership otherwise payable to such Partner. Whenever the General Partner selects option (ii) pursuant to the preceding sentence for repayment of a Tax Advance by a Partner, for all other purposes of this Agreement such Partner shall be treated as having received all distributions (whether before or upon winding up or dissolution of the Partnership) unreduced by the amount of such Tax Advance. To the fullest extent permitted by law, each Partner hereby agrees to indemnify and hold harmless the Partnership and the other Partners from and against any liability (including, without limitation, any liability for taxes, penalties, additions to tax or interest) with respect to income attributable to or distributions or other payments to such Partner. The obligations of a Partner set forth in this Section 6.7(d) shall survive the withdrawal of any Partner from the Partnership or any Transfer of a Partner’s interest.

Section 6.8. Special Basis Adjustments. In connection with any assignment or transfer of a Partnership interest permitted by the terms of this Agreement, the General Partner may cause the Partnership, on behalf of the Partners and at the time and in the manner provided in Treasury Regulations Section 1.754-1(b), to make an election to adjust the basis of the Partnership’s property in the manner provided in Sections 734(b) and 743(b) of the Code.

ARTICLE VII

CAPITAL COMMITMENT INTERESTS; CAPITAL CONTRIBUTIONS;

ALLOCATIONS; DISTRIBUTIONS

Capital Commitment Partner Interests and the Capital Commitment BCP Asia Interest. Except as otherwise expressly provided in this Article VII or in Article VIII, the terms and provisions of this Article VII and Article VIII shall not apply to the GP-Related Partner Interests or the GP-Related BCP Asia Interest.

(b) Each Partner (other than the Cayman GP), severally, agrees to make contributions of capital to the Partnership (“Capital Commitment-Related Capital Contributions”) as required to fund the Partnership’s capital contributions to BCP Asia in respect of the Capital Commitment BCP Asia Interest, if any, and the related Capital Commitment BCP Asia Commitment, if any (including, without limitation, funding all or a portion of the Blackstone Capital Commitment). No Partner shall be obligated to make Capital Commitment-Related Capital Contributions to the Partnership in an amount in excess of such Partner’s Capital Commitment-Related Commitment. The Commitment Agreements and SMD Agreements, if any, of the Partners may include provisions with respect to the foregoing matters. It is understood that a Partner will not necessarily participate in each Capital Commitment Investment (which may include additional amounts invested in an existing Capital Commitment Investment) nor will a Partner necessarily have the same Capital Commitment Profit Sharing Percentage with respect to (i) the Partnership’s portion of the Blackstone Capital Commitment or (ii) the making of each Capital Commitment Investment in which such Partner participates; provided, that this in no way limits the terms of any Commitment Agreement or SMD Agreement. In addition, nothing contained herein shall be construed to give any Partner the right to obtain financing with respect to the purchase of any Capital Commitment Interest, and nothing contained herein shall limit or dictate the terms upon which the Partnership and its Affiliates may provide such financing. The acquisition of a Capital Commitment Interest by a Partner shall be evidenced by receipt by the Partnership of funds equal to such Partner’s Capital Commitment-Related Commitment then due with respect to such Capital Commitment Interest and such appropriate documentation as the General Partner may submit to the Partners from time to time.

(c) The Partnership or one of its Affiliates (in such capacity, the “Advancing Party”) may in its sole discretion advance to any Partner (including any additional Partner admitted to the Partnership pursuant to Section 6.1 but excluding any Partners that are also executive officers of Blackstone) all or any portion of the Capital Commitment-Related Capital Contributions due to the Partnership from such Partner with respect to any Capital Commitment Investment (“Firm Advances”). Each such Partner shall pay interest to the Advancing Party on each Firm Advance from the date of such Firm Advance until the repayment thereof by such Partner. Each Firm Advance shall be repayable in full, including accrued interest to the date of such repayment, upon prior written notice by the Advancing Party. The making and repayment of each Firm Advance shall be recorded in the books and records of the Partnership, and such recording shall be conclusive evidence of each such Firm Advance, binding on the Partner and the Advancing Party absent manifest error. Except as provided below, the interest rate applicable to a Firm Advance shall equal the cost of funds of the Advancing Party at the time of the making of such Firm Advance. The Advancing Party shall inform any Partner of such rate upon such Partner’s request; provided, that such interest rate shall not exceed the maximum interest rate allowable by applicable law; provided further, that amounts that are otherwise payable to such Partner pursuant to Section 7.4(a) shall be used to repay such Firm Advance (including interest thereon). The Advancing Party may, in its sole discretion, change the terms of Firm Advances (including the terms contained herein) and/or discontinue the making of Firm

Advances; provided, that (i) the Advancing Party shall notify the relevant Partners of any material changes to such terms and (ii) the interest rate applicable to such Firm Advances and overdue amounts thereon shall not exceed the maximum interest rate allowable by applicable law.

(d) The Cayman GP shall have no Capital Commitment-Related Commitment and no Capital Commitment Profit Sharing Percentage. The Capital Commitment Profit Sharing Percentage of the Delaware GP with respect to any Capital Commitment Investment will rank pari passu with those of the Limited Partners participating in the same Capital Commitment Investment.

Section 7.2. Capital Commitment Capital Accounts. (a) There shall be established for each Partner (other than the Cayman GP) in the books of the Partnership as of the date of formation of the Partnership, or such later date on which such Partner is admitted to the Partnership, and on each such other date as such Partner first acquires a Capital Commitment Interest in a particular Capital Commitment Investment, a Capital Commitment Capital Account for each Capital Commitment Investment in which such Partner acquires a Capital Commitment Interest on such date. Each Capital Commitment-Related Capital Contribution of a Partner shall be credited to the appropriate Capital Commitment Capital Account of such Partner on the date such Capital Commitment-Related Capital Contribution is paid to the Partnership. Capital Commitment Capital Accounts shall be adjusted to reflect any transfer of a Partner’s interest in the Partnership related to his or her Capital Commitment Partner Interest as provided in this Agreement.

(b) A Partner shall not have any obligation to the Partnership or to any other Partner to restore any negative balance in the Capital Commitment Capital Account of such Partner. Until distribution of any such Partner’s interest in the Partnership with respect to a Capital Commitment Interest as a result of the disposition by the Partnership of the related Capital Commitment Investment and in whole upon the winding up and dissolution of the Partnership, neither such Partner’s Capital Commitment Capital Accounts nor any part thereof shall be subject to withdrawal or redemption except with the consent of the General Partner.

Section 7.3. Allocations. (a) Capital Commitment Net Income (Loss) of the Partnership for each Capital Commitment Investment shall be allocated to the related Capital Commitment Capital Accounts of all the Partners (including the Delaware GP, but excluding the Cayman GP) participating in such Capital Commitment Investment in proportion to their respective Capital Commitment Profit Sharing Percentages for such Capital Commitment Investment. Capital Commitment Net Income (Loss) on any Unallocated Capital Commitment Interest shall be allocated to each Partner in the proportion which such Partner’s aggregate Capital Commitment Capital Accounts bear to the aggregate Capital Commitment Capital Accounts of all Partners; provided, that if any Partner makes the election provided for in Section 7.6, Capital Commitment Net Income (Loss) of the Partnership for each Capital Commitment Investment shall be allocated to the related Capital Commitment Capital Accounts of all the Partners participating in such Capital Commitment Investment who do not make such election in proportion to their respective Capital Commitment Profit Sharing Percentages for such Capital Commitment Investment.

(b) Any special costs relating to distributions pursuant to Section 7.6 or Section 7.7 shall be specially allocated to the electing Partner.

(c) Notwithstanding the foregoing, the General Partner may make such allocations as it deems reasonably necessary to give economic effect to the provisions of this Agreement, taking into account facts and circumstances as the General Partner deems reasonably necessary for this purpose.

Section 7.4. Distributions. (a) Each Partner’s allocable portion of Capital Commitment Net Income received from his or her Capital Commitment Investments, distributions to such Partner that constitute returns of capital, and other Capital Commitment Net Income of the Partnership (including, without limitation, Capital Commitment Net Income attributable to Unallocated Capital Commitment Interests) during a Fiscal Year of the Partnership will be credited to payment of the Investor Notes to the extent required below as of the last day of such Fiscal Year (or on such earlier date as related distributions are made in the sole discretion of the General Partner) with any cash amount distributable to such Partner pursuant to clauses (ii) and (vii) below to be distributed, subject to applicable law, within 45 days after the end of each Fiscal Year of the Partnership (or in each case on such earlier date as selected by the General Partner in its sole discretion) as follows (subject to Section 7.4(c) below):

(i) First, to the payment of interest then due on all Investor Notes (relating to Capital Commitment Investments or otherwise) of such Partner (to the extent Capital Commitment Net Income and distributions or payments from Other Sources do not equal or exceed all interest payments due, the selection of those of such Partner’s Investor Notes upon which interest is to be paid and the division of payments among such Investor Notes to be determined by the Lender or Guarantor);

(ii) Second, to distribution to the Partner of an amount equal to the U.S. federal, state and local income taxes on income of the Partnership allocated to such Partner for such year in respect of such Partner’s Capital Commitment Partner Interest (the aggregate amount of any such distribution shall be determined by the General Partner, subject to the limitation that the minimum aggregate amount of such distribution be the tax that would be payable if the taxable income of the Partnership related to all Partners’ Capital Commitment Partner Interests were all allocated to an individual subject to the then-prevailing maximum rate of U.S. federal, New York State and New York City taxes (including, without limitation, taxes imposed under Section 1411 of the Code) taking into account the character of such taxable income allocated by the Partnership and the limitations on deductibility of expenses and other items for U.S. federal income tax purposes); provided, that additional amounts shall be paid to the Partner pursuant to this clause (ii) to the extent that such amount reduces the amount otherwise distributable to the Partner pursuant to a comparable provision in any other BE Agreement and there are not sufficient amounts to fully satisfy such provision from the relevant partnership or other entity; provided further, that amounts paid pursuant to the provisions in such other BE Agreements comparable to the immediately preceding proviso shall reduce those amounts otherwise distributable to the Partner pursuant to provisions in such other BE Agreements that are comparable to this clause (ii);

(iii) Third, to the payment in full of the principal amount of the Investor Note financing (A) any Capital Commitment Investment disposed of during or prior to such Fiscal Year or (B) any BE Investments (other than Capital Commitment Investments) disposed of during or prior to such Fiscal Year, to the extent not repaid from Other Sources;

(iv) Fourth, to the return to such Partner of (A) all Capital Commitment-Related Capital Contributions made in respect of the Capital Commitment Interest to which any Capital Commitment Investment disposed of during or prior to such Fiscal Year relates or (B) all capital contributions made to any Blackstone Entity (other than the Partnership) in respect of interests therein relating to BE Investments (other than Capital Commitment Investments) disposed of during or prior to such Fiscal Year (including all principal paid on the related Investor Notes), to the extent not repaid from amounts of Other Sources (other than amounts of Capital Commitment Partner Carried Interest);

(v) Fifth, to the payment of principal (including any previously deferred amounts) then owing under all other Investor Notes of such Partner (including those unrelated to the Partnership), the selection of those of such Partner’s Investor Notes to be repaid and the division of payments among such Investor Notes to be determined by the Lender or Guarantor;

(vi) Sixth, up to 50% of any Capital Commitment Net Income remaining after application pursuant to clauses (i) through (v) above shall be applied pro rata to prepayment of principal of all remaining Investor Notes of such Partner (including those unrelated to the Partnership), the selection of those of such Partner’s Investor Notes to be repaid, the division of payments among such Investor Notes and the percentage of remaining Capital Commitment Net Income to be applied thereto to be determined by the Lender or Guarantor; and

(vii) Seventh, to such Partner to the extent of any amount of Capital Commitment Net Income remaining after making the distributions in clauses (i) through (vi) above, and such amount is not otherwise required to be applied to Investor Notes pursuant to the terms thereof.

To the extent there is a partial disposition of a Capital Commitment Investment or any other BE Investment, as applicable, the payments in clauses (iii) and (iv) above shall be based on that portion of the Capital Commitment Investment or other BE Investment, as applicable, disposed of, and the principal amount and related interest payments of such Investor Note shall be adjusted to reflect such partial payment so that there are equal payments over the remaining term of the related Investor Note. For a Partner who is no longer an employee or officer of Holdings or an Affiliate thereof, distributions shall be made pursuant to clauses (i) through (iii) above, and then, unless the Partnership or its Affiliate has exercised its rights pursuant to Section 8.1 hereof, any remaining income or other distribution in respect of such Partner’s Capital Commitment Partner Interest shall be applied to the prepayment of the outstanding Investor Notes of such Partner, until all such Partner’s Investor Notes have been

repaid in full, with any such income or other distribution remaining thereafter distributed to such Partner.

Distributions of Capital Commitment Net Income may be made at any other time at the discretion of the General Partner. At the General Partner’s discretion, any amounts distributed to a Partner in respect of such Partner’s Capital Commitment Partner Interest will be net of any interest and principal payable on his or her Investor Notes for the full period in respect of which the distribution is made.

(b) [Intentionally omitted.]

(c) To the extent that the foregoing Partnership distributions and distributions and payments from Other Sources are insufficient to satisfy any principal and/or interest due on Investor Notes, and to the extent that the General Partner in its sole discretion elects to apply this paragraph (c) to any individual payments due, such unpaid interest will be added to the remaining principal amount of such Investor Notes and shall be payable on the next scheduled principal payment date (along with any deferred principal and any principal and interest due on such date); provided, that such deferral shall not apply to a Partner that is no longer an employee or officer of Holdings or its Affiliates. All unpaid interest on such Investor Notes shall accrue interest at the interest rate then in effect for such Investor Notes.

(d) [Intentionally omitted.]

(e) The Capital Commitment Capital Account of each Partner shall be reduced by the amount of any distribution to such Partner pursuant to Section 7.4(a).

(f) At any time that a sale, exchange, transfer or other disposition of a portion of a Capital Commitment Investment is being considered by the Partnership or BCP Asia (a “Capital Commitment Disposable Investment”), at the election of the General Partner each Partner’s Capital Commitment Interest with respect to such Capital Commitment Investment shall be vertically divided into two separate Capital Commitment Interests, a Capital Commitment Interest attributable to the Capital Commitment Disposable Investment (a Partner’s “Capital Commitment Class B Interest”), and a Capital Commitment Interest attributable to such Capital Commitment Investment excluding the Capital Commitment Disposable Investment (a Partner’s “Capital Commitment Class A Interest”). Distributions (including those resulting from a direct or indirect sale, transfer, exchange or other disposition by the Partnership) relating to a Capital Commitment Disposable Investment shall be made only to holders of Capital Commitment Class B Interests with respect to such Capital Commitment Investment in accordance with their respective Capital Commitment Profit Sharing Percentages relating to such Capital Commitment Class B Interests, and distributions (including those resulting from the direct or indirect sale, transfer, exchange or other disposition by the Partnership) relating to a Capital Commitment Investment excluding such Capital Commitment Disposable Investment shall be made only to holders of Capital Commitment Class A Interests with respect to such Capital Commitment Investment in accordance with their respective Capital Commitment Profit Sharing Percentages relating to such Capital Commitment Class A Interests.

(g) (i) If the Partnership is obligated under the Giveback Provisions to contribute a Giveback Amount to BCP Asia in respect of any Capital Commitment BCP Asia Interest that may be held by the Partnership (the amount of any such obligation of the Partnership with respect to such a Giveback Amount being herein called a “Capital Commitment Giveback Amount”), the General Partner shall call for such amounts as are necessary to satisfy such obligation of the Partnership as determined by the General Partner, in which case, each Partner and Withdrawn Partner shall contribute to the Partnership, in cash, when and as called by the General Partner, such an amount of prior distributions by the Partnership with respect to the Capital Commitment BCP Asia Interest (the “Capital Commitment Recontribution Amount”) which equals such Partner’s pro rata share of prior distributions in connection with (a) the Capital Commitment BCP Asia Investment giving rise to the Capital Commitment Giveback Amount, (b) if the amounts contributed pursuant to clause (a) above are insufficient to satisfy such Capital Commitment Giveback Amount, Capital Commitment BCP Asia Investments other than the one giving rise to such obligation, and (c) if the Capital Commitment Giveback Amount is unrelated to a specific Capital Commitment BCP Asia Investment, all Capital Commitment BCP Asia Investments. Each Partner shall promptly contribute to the Partnership upon notice thereof such Partner’s Capital Commitment Recontribution Amount. Prior to such time, the General Partner may, at the General Partner’s discretion (but shall be under no obligation to), provide notice that in the General Partner’s judgment, the potential obligations in respect of the Capital Commitment Giveback Amount will probably materialize (and an estimate of the aggregate amount of such obligations).

Commitment Recontribution Amount any amounts otherwise payable to the Capital Commitment Defaulting Party by the Partnership or any Affiliate thereof. Each Partner hereby grants to the General Partner a security interest, effective upon such Partner becoming a Capital Commitment Defaulting Party, in all accounts receivable and other rights to receive payment from the Partnership or any Affiliate of the Partnership and agrees that, upon the effectiveness of such security interest, the General Partner may sell, collect or otherwise realize upon such collateral. In furtherance of the foregoing, each Partner hereby appoints the Delaware GP as its true and lawful attorney-in-fact with full irrevocable power and authority, in the name of such Partner or in the name of the Partnership, to take any actions which may be necessary to accomplish the intent of the immediately preceding sentence. The General Partner shall be entitled to collect interest on the Capital Commitment Recontribution Amount of a Capital Commitment Defaulting Party from the date such Capital Commitment Recontribution Amount was required to be contributed to the Partnership at a rate equal to the Default Interest Rate.

(B) Any Partner’s failure to make a Capital Commitment Deficiency Contribution shall cause such Partner to be a Capital Commitment Defaulting Party with respect to such amount.

(iii) A Partner’s obligation to make contributions to the Partnership under this Section 7.4(g) shall survive the commencement of winding up and subsequent dissolution of the Partnership.

Section 7.5. Valuations. Capital Commitment Investments shall be valued annually as of the end of each year (and at such other times as deemed appropriate by the General Partner) in accordance with the principles utilized by the Partnership (or any other Affiliate of the Partnership that is a general partner of BCP Asia) in valuing investments of BCP Asia or, in the case of investments not held by BCP Asia, in the good faith judgment of the General Partner, subject in each case to the second proviso of the immediately succeeding sentence. The value of any Capital Commitment Interest as of any date (the “Capital Commitment Value”) shall be based on the value of the underlying Capital Commitment Investment as set forth above; provided, that the Capital Commitment Value may be determined as of an earlier date if determined appropriate by the General Partner in good faith; provided further, that such value may be adjusted by the General Partner to take into account factors relating solely to the value of a Capital Commitment Interest (as compared to the value of the underlying Capital Commitment Investment), such as restrictions on transferability, the lack of a market for such Capital Commitment Interest and lack of control of the underlying Capital Commitment Investment. To the full extent permitted by applicable law such valuations shall be final and binding on all Partners; provided further, that the immediately preceding proviso shall not apply to any Capital Commitment Interests held by a person who is or was at any time a direct member or partner of a General Partner of the Partnership.

Investment). If the General Partner so permits, such Partner shall instruct the General Partner in writing prior to such date (i) not to dispose of all or any portion of such Partner’s pro rata share of such Capital Commitment Investment (the “Retained Portion”) and (ii) either to (A) distribute such Retained Portion to such Partner on the closing date of such disposition or (B) retain such Retained Portion in the Partnership on behalf of such Partner until such time as such Partner shall instruct the General Partner upon 5 days’ notice to distribute such Retained Portion to such Partner. Such Partner’s Capital Commitment Capital Account shall not be adjusted in any way to reflect the retention in the Partnership of such Retained Portion or the Partnership’s disposition of other Partners’ pro rata shares of such Capital Commitment Investment; provided, that such Partner’s Capital Commitment Capital Account shall be adjusted upon distribution of such Retained Portion to such Partner or upon distribution of proceeds with respect to a subsequent disposition thereof by the Partnership.

(b) No distribution of such Retained Portion shall occur unless any Investor Notes relating thereto shall have been paid in full prior to or simultaneously with such distribution.

Section 7.7. Capital Commitment Special Distribution Election.(a) From time to time during the term of this Agreement, the General Partner may in its sole discretion, upon receipt of a written request from a Partner, distribute to such Partner any portion of its pro rata share of a Capital Commitment Investment (as measured by such Partner’s Capital Commitment Profit Sharing Percentage in such Capital Commitment Investment) (a “Capital Commitment Special Distribution”). Such Partner’s Capital Commitment Capital Account shall be adjusted upon distribution of such Capital Commitment Special Distribution.

(b) No Capital Commitment Special Distributions shall occur unless any Investor Notes relating thereto shall have been paid in full prior to or simultaneously with such Capital Commitment Special Distribution.

ARTICLE VIII

WITHDRAWAL, ADMISSION OF NEW PARTNERS

Section 8.1. Partner Withdrawal; Repurchase of Capital Commitment Interests.

the Capital Commitment Interest that became Non-Contingent as a result of such prepayment; provided further, that the purchase price for such Capital Commitment Interest shall be determined in accordance with the determination of the purchase price of a Partner’s Contingent Capital Commitment Interests as set forth in paragraph (b) below. Prepayments made by a Partner shall apply pro rata against all of such Partner’s Investor Notes; provided, that such Partner may request that such prepayments be applied only to Investor Notes related to BE Investments that are related to one or more Blackstone Entities specified by such Partner. Except as expressly provided herein, Capital Commitment Interests that were not financed in any respect with Investor Notes shall be treated as Non-Contingent Capital Commitment Interests.

(b) (i) Upon a Partner ceasing to be an officer or employee of the Partnership or any of its Affiliates, other than as a result of such Partner dying or suffering a Total Disability, such Partner and the Partnership or any other person designated by the General Partner shall each have the right (exercisable by the Withdrawn Partner within 30 days and by the Partnership or its designee(s) within 45 days after such Partner’s ceasing to be such an officer or employee) or any time thereafter, upon 30 days’ notice, but not the obligation, to require the Partnership (subject to the prior consent of the General Partner, such consent not to be unreasonably withheld or delayed), subject to the Partnership Act, to buy (in the case of exercise of such right by such Withdrawn Partner) or the Withdrawn Partner to sell (in the case of exercise of such right by the Partnership or its designee(s)) all (but not less than all) such Withdrawn Partner’s Contingent Capital Commitment Interests.

(ii) The purchase price for each such Contingent Capital Commitment Interest shall be an amount equal to (A) the outstanding principal amount of the related Investor Note plus accrued interest thereon to the date of purchase (such portion of the purchase price to be paid in cash) and (B) an additional amount (the “Adjustment Amount”) equal to (x) all interest paid by the Partner on the portion of the principal amount of such Investor Note(s) relating to the portion of the related Capital Commitment Interest remaining Contingent and to be repurchased, plus (y) all Capital Commitment Net Losses allocated to the Withdrawn Partner on such Contingent portion of such Capital Commitment Interest, minus (z) all Capital Commitment Net Income allocated to the Withdrawn Partner on the Contingent portion of such Capital Commitment Interest; provided, that, if the Withdrawn Partner was terminated from employment or his or her position as an officer for Cause, all amounts referred to in clause (x) or (y) of the Adjustment Amount, in the General Partner’s sole discretion, may be deemed to equal zero. The Adjustment Amount shall, if positive, be payable by the holders of the purchased Capital Commitment Interests to the Withdrawn Partner from the next Capital Commitment Net Income received by such holders on the Contingent portion of such Withdrawn Partner’s Capital Commitment Interests at the time such Capital Commitment Net Income is received. If the Adjustment Amount is negative, it shall be payable to the holders of the purchased Capital Commitment Interest by the Withdrawn Partner (A) from the next Capital Commitment Net Income on the Non-Contingent portion of the Withdrawn Partner’s Capital Commitment Interests at the time such Capital Commitment Net Income is received by the Withdrawn Partner, or (B) if the Partnership or its designee(s) elect to purchase such Withdrawn Partner’s Non-Contingent Capital Commitment Interests, in cash by the Withdrawn Partner at the time of such purchase; provided, that the Partnership and its Affiliates may offset any amounts

otherwise owing to a Withdrawn Partner against any Adjustment Amount owed by such Withdrawn Partner. Until so paid, such remaining Adjustment Amount will not itself bear interest. At the time of such purchase of the Withdrawn Partner’s Contingent Capital Commitment Interests, his or her related Investor Note shall be payable in full.

(iii) Upon such Partner ceasing to be such an officer or employee all Investor Notes shall become fully recourse to the Withdrawn Partner in his or her individual capacity (whether or not the Withdrawn Partner or the Partnership or its designee(s) exercises the right to require repurchase of the Withdrawn Partner’s Contingent Capital Commitment Interests).

(iv) If neither the Withdrawn Partner nor the Partnership nor its designee(s) exercises the right to require repurchase of such Contingent Capital Commitment Interests, then the Withdrawn Partner shall retain the Contingent portion of his or her Capital Commitment Interests and the Investor Notes shall remain outstanding, shall become fully recourse to the Withdrawn Partner in his or her individual capacity, shall be payable in accordance with their remaining original maturity schedules and shall be prepayable at any time by the Withdrawn Partner at his or her option, and the Partnership shall apply such prepayments against outstanding Investor Notes on a pro rata basis.

(v) To the extent that another Partner purchases a portion of a Capital Commitment Interest of a Withdrawn Partner, the purchasing Partner’s Capital Commitment Capital Account and Capital Commitment Profit Sharing Percentage for such Capital Commitment Investment shall be correspondingly increased.

(c) Upon the occurrence of a Final Event with respect to any Partner, such Partner shall thereupon cease to be a Partner with respect to such Partner’s Capital Commitment Partner Interest. If such a Final Event shall occur, no Successor in Interest to any such Partner shall for any purpose hereof become or be deemed to become a Partner. The sole right, as against the Partnership and the remaining Partners, acquired hereunder by, or resulting hereunder to, a Successor in Interest to any Partner shall be to receive any distributions and allocations with respect to such Partner’s Capital Commitment Partner Interest pursuant to Article VII and this Article VIII (subject to the right of the Partnership to purchase the Capital Commitment Interests of such former Partner pursuant to Section 8.1(b) or Section 8.1(d)), to the extent, at the time, in the manner and in the amount otherwise payable to such Partner had such a Final Event not occurred, and no other right shall be acquired hereunder by, or shall result hereunder to, a Successor in Interest to such Partner, whether by operation of law or otherwise and the Partnership shall be entitled to treat any Successor in Interest to such Partner as the only person entitled to receive distributions and allocations hereunder. Until distribution of any such Partner’s interest in the Partnership upon the winding up of the Partnership as provided in Section 9.2, neither his or her Capital Commitment Capital Accounts nor any part thereof shall be subject to withdrawal or redemption without the consent of the General Partner. The General Partner shall be entitled to treat any Successor in Interest to such Partner as the only person entitled to receive distributions and allocations hereunder with respect to such Partner’s Capital Commitment Partner Interest.

(d) If a Partner dies or suffers a Total Disability, all Contingent Capital Commitment Interests of such Partner shall be purchased by the Partnership or its designee (within 30 days of the first date on which the Partnership knows or has reason to know of such Partner’s death or Total Disability) (and the purchase price for such Contingent Capital Commitment Interests shall be determined in accordance with Section 8.1(b) (except that any Adjustment Amount shall be payable by or to such Partner’s estate, personal representative or other Successor in Interest, in cash)), and any Investor Notes financing such Contingent Capital Commitment Interests shall thereupon be prepaid as provided in Section 8.1(b). Upon such Partner’s death or Total Disability, any Investor Note(s) financing such Contingent Capital Commitment Interests shall become fully recourse. In addition, in the case of the death or Total Disability of a Partner, if the estate, personal representative or other Successor in Interest of such Partner, so requests in writing within 180 days after the Partner’s death or ceasing to be an employee or member (directly or indirectly) of the Partnership or any of its Affiliates by reason of Total Disability (such requests shall not exceed one per calendar year), the Partnership or its designee may but is not obligated to purchase for cash all (but not less than all) Non-Contingent Capital Commitment Interests of such Partner as of the last day of the Partnership’s then current Fiscal Year at a price equal to the Capital Commitment Value thereof as of the most recent valuation prior to the date of purchase. Each Partner shall be required to include appropriate provisions in his or her will to reflect such provisions of this Agreement. In addition, the Partnership may, in the sole discretion of the General Partner, upon notice to the estate, personal representative or other Successor in Interest of such Partner, within 30 days of the first date on which the General Partner knows or has reason to know of such Partner’s death or Total Disability, determine either (i) to distribute Securities or other property to the estate, personal representative or other Successor in Interest, in exchange for such Non-Contingent Capital Commitment Interests as provided in Section 8.1(e) or (ii) to require sale of such Non-Contingent Capital Commitment Interests to the Partnership or its designee as of the last day of any Fiscal Year of the Partnership (or earlier period, as determined by the General Partner in its sole discretion) for an amount in cash equal to the Capital Commitment Value thereof.

(e) In lieu of retaining a Withdrawn Partner as a Partner with respect to any Non-Contingent Capital Commitment Interests, the General Partner may, in its sole discretion, by notice to such Withdrawn Partner within 45 days of his or her ceasing to be an employee or officer of the Partnership or any of its Affiliates, or at any time thereafter, upon 30 days written notice, determine (1) to distribute to such Withdrawn Partner the pro rata portion of the Securities or other property underlying such Withdrawn Partner’s Non-Contingent Capital Commitment Interests, subject to any restrictions on distributions associated with the Securities or other property, in satisfaction of his or her Non-Contingent Capital Commitment Interests in the Partnership or (2) to cause, as of the last day of any Fiscal Year of the Partnership (or earlier period, as determined by the General Partner in its sole discretion), the Partnership or another person designated by the General Partner (who may be itself another Partner or another Affiliate of the Partnership) to purchase all (but not less than all) of such Withdrawn Partner’s Non-Contingent Capital Commitment Interests for a price equal to the Capital Commitment Value thereof (determined in good faith by the General Partner as of the most recent valuation prior to the date of purchase). The General Partner shall condition any distribution or purchase of voting Securities pursuant to paragraph (d) above or this paragraph (e) upon the Withdrawn Partner’s execution and delivery to the Partnership of an appropriate irrevocable proxy, in favor of the General Partner or its nominee, relating to such Securities.

(f) The Partnership may subsequently transfer any Unallocated Capital Commitment Interest or portion thereof which is purchased by it as described above to any other person approved by the General Partner. In connection with such purchase or transfer or the purchase of a Capital Commitment Interest or portion thereof by the General Partner’s designee(s), Holdings may loan all or a portion of the purchase price of the transferred or purchased Capital Commitment Interest to the Partnership, the transferee or the designee-purchaser(s), as applicable (excluding any of the foregoing who is an executive officer of The Blackstone Group Inc. or any Affiliate thereof). To the extent that a Withdrawn Partner’s Capital Commitment Interests (or portions thereof) are repurchased by the Partnership and not transferred to or purchased by another person, all or any portion of such repurchased Capital Commitment Interests may, in the sole discretion of the General Partner, (i) be allocated to each Partner already participating in the Capital Commitment Investment to which the repurchased Capital Commitment Interest relates, (ii) be allocated to each Partner in the Partnership, whether or not already participating in such Capital Commitment Investment, and/or (iii) continue to be held by the Partnership itself as an unallocated Capital Commitment Investment (such Capital Commitment Interests being herein called “Unallocated Capital Commitment Interests”). To the extent that a Capital Commitment Interest is allocated to Partners as provided in clause (i) and/or (ii) above, any indebtedness incurred by the Partnership to finance such repurchase shall also be allocated to such Partners. All such Capital Commitment Interests allocated to Partners shall be deemed to be Contingent and shall become Non-Contingent as and to the extent that the principal amount of such related indebtedness is repaid. The Partners receiving such allocations shall be responsible for such related indebtedness only on a nonrecourse basis to the extent appropriate as provided in this Agreement, except as otherwise provided in this Section 8.1 and except as such Partners and the General Partner shall otherwise agree; provided, that such indebtedness shall become fully recourse to the extent and at the time provided in this Section 8.1. If the indebtedness financing such repurchased interests is not to be non-recourse or so limited, the Partnership may require an assumption by the Partners of such indebtedness on the terms thereof as a precondition to allocation of the related Capital Commitment Interests to such Partners; provided, that a Partner shall not, except as set forth in his or her Investor Note(s), be obligated to accept any obligation that is personally recourse (except as provided in this Section 8.1), unless his or her prior consent is obtained. So long as the Partnership itself retains the Unallocated Capital Commitment Interests pursuant to clause (iii) above, such Unallocated Capital Commitment Interests shall belong to the Partnership and any indebtedness financing the Unallocated Capital Commitment Interests shall be an obligation of the Partnership to which all income of the Partnership is subject except as otherwise agreed by the lender of such indebtedness. Any Capital Commitment Net Income (Loss) on an Unallocated Capital Commitment Interest shall be allocated to each Partner in the proportion his or her aggregate Capital Commitment Capital Accounts bear to the aggregate Capital Commitment Capital Accounts of all Partners; debt service on such related financing will be an expense of the Partnership allocable to all Partners in such proportions.

(g) If a Partner is required to Withdraw from the Partnership with respect to such Partner’s Capital Commitment Partner Interest for Cause, then his or her Capital Commitment Interest shall be settled in accordance with paragraphs (a)-(f) and (j) of this Section 8.1; provided, that if such Partner was not at any time a direct partner of a General Partner of the Partnership, the General Partner may elect (but shall not be required) to apply any or all the following terms and conditions to such settlement:

(i) purchase for cash all of such Withdrawn Partner’s Non-Contingent Capital Commitment Interests. The purchase price for each such Non-Contingent Capital Commitment Interest shall be the lower of (A) the original cost of such Non-Contingent Capital Commitment Interest or (B) an amount equal to the Capital Commitment Value thereof (determined as of the most recent valuation prior to the date of the purchase of such Non-Contingent Capital Commitment Interest);

(ii) allow the Withdrawn Partner to retain such Non-Contingent Capital Commitment Interests; provided, that the maximum amount of Capital Commitment Net Income allocable to such Withdrawn Partner with respect to any Capital Commitment Investment shall equal the amount of Capital Commitment Net Income that would have been allocated to such Withdrawn Partner if such Capital Commitment Investment had been sold as of the Settlement Date at the then prevailing Capital Commitment Value thereof; or

(iii) in lieu of cash, purchase such Non-Contingent Capital Commitment Interests by providing the Withdrawn Partner with a promissory note in the amount determined in (i) above. Such promissory note shall have a maximum term of ten (10) years with interest at the Federal Funds Rate.

(h) The Partnership will assist a Withdrawn Partner or his or her estate or guardian, as the case may be, in the settlement of the Withdrawn Partner’s Capital Commitment Partner Interest in the Partnership. Third party costs incurred by the Partnership in providing this assistance will be borne by the Withdrawn Partner or his or her estate.

(j) To the extent permitted by applicable law, each Partner hereby irrevocably appoints each General Partner as such Partner’s true and lawful agent, representative and attorney-in-fact, each acting alone, in such Partner’s name, place and stead, to make, execute, sign and file, on behalf of such Partner, any and all agreements, instruments, consents, ratifications, documents and certificates which such General Partner deems necessary or advisable in connection with any transaction or matter contemplated by or provided for in this Section 8.1, including, without limitation, the performance of any obligation of such Partner or the Partnership or the exercise of any right of such Partner or the Partnership. Such power of attorney is intended to secure an interest in property, and, in addition, the obligations of each relevant Limited Partner under this Agreement and, to the extent permitted by applicable law, shall survive and continue in full force and effect notwithstanding the Withdrawal from the Partnership of any Partner for any reason and shall not be affected by the death, disability or incapacity of such Partner.

Section 8.2. Transfer of Partner’s Capital Commitment Interest. Except as otherwise agreed by the General Partner, no Partner or former Partner shall have the right to sell, assign, mortgage, pledge, charge, grant a security interest over, or otherwise dispose of or transfer (“Transfer”) all or part of any such Partner’s Capital Commitment Partner Interest in the Partnership; provided, that this Section 8.2 shall in no way impair (i) Transfers as permitted in Section 8.1 above and subject to the Partnership Act, in the case of the purchase of a Withdrawn Partner’s or Deceased or Totally Disabled Partner’s Capital Commitment Interests, (ii) with the prior written consent of the General Partner, which shall not be unreasonably withheld, Transfers by a Partner to another Partner of Non-Contingent Capital Commitment Interests, (iii) Transfers with the prior written consent of the General Partner (which consent may be granted or withheld in its sole discretion without giving any reason therefor) and (iv) with the prior written consent of the General Partner, which shall not be unreasonably withheld, Transfers of up to 25% of a Limited Partner’s Capital Commitment Partner Interest to an Estate Planning Vehicle (it being understood that it shall not be unreasonable for the General Partner to condition any Transfer of an Interest pursuant to this clause (iv) on the satisfaction of certain conditions and/or requirements imposed by the General Partner in connection with any such Transfer, including, for example, a requirement that any transferee of an Interest hold such Interest as a passive, non-voting interest in the Partnership). Each Estate Planning Vehicle shall not have voting rights (any such Partner being called a “Nonvoting Partner”). Such Partner shall be jointly and severally liable for all obligations of both such Partner and such Nonvoting Partner with respect to the interest transferred (including the obligation to make additional Capital Commitment-Related Capital Contributions). The General Partner may at its sole option exercisable at any time require such Estate Planning Vehicle to Withdraw from the Partnership on the terms of Section 8.1 and Article VI. No person acquiring an interest in the Partnership pursuant to this Section 8.2 shall become a Partner of the Partnership, or acquire such Partner’s right to participate in the affairs of the Partnership, unless such person shall be admitted as a Partner pursuant to Section 6.1. A Partner shall not cease to be a Partner of the Partnership upon the collateral assignment of, or the pledging, or granting of a security interest in, its entire Interest in the Partnership in accordance with the provisions of this Agreement.

Section 8.3. Compliance with Law. Notwithstanding any provision hereof to the contrary, no sale or Transfer of a Capital Commitment Interest in the Partnership may be made except in compliance with the Partnership Act, the laws of the Cayman Islands and all U.S. federal, state and other applicable laws, including U.S. federal and state securities laws.

ARTICLE IX

DISSOLUTION

Section 9.1. Dissolution. The Partnership shall commence winding up and be subsequently dissolved pursuant to this Article IX and Section 36(1) the Partnership Act:

(a) pursuant to Section 6.6;

(b) the making of an order by the courts of the Cayman Islands to commence winding up the Partnership; or

Section 9.2. Final Distribution. (a) Upon the commencement of winding up of the Partnership, and following the payment of creditors of the Partnership and the making of provisions for the payment of any contingent, conditional or unmatured claims known to the Partnership as required under the Partnership Act:

(b) The Partners’ respective interests in the Partnership shall be valued and settled in accordance with the procedures set forth in Section 6.5 which provide for allocations to the GP-Related Capital Accounts of the Partners and distributions in accordance with the GP-Related Capital Account balances of the Partners; and

(c) With respect to each Partner’s Capital Commitment Partner Interest, an amount shall be paid to such Partner in cash or Securities in an amount equal to such Partner’s respective Capital Commitment Liquidating Share for each Capital Commitment Investment; provided, that if the remaining assets relating to any Capital Commitment Investment shall not be equal to or exceed the aggregate Capital Commitment Liquidating Shares for such Capital Commitment Investment, to each Partner in proportion to its Capital Commitment Liquidating Share for such Capital Commitment Investment; and the remaining assets of the Partnership related to the Partners’ Capital Commitment Partner Interests shall be paid to the Partners in cash or Securities in proportion to their respective Capital Commitment Profit Sharing Percentages for each Capital Commitment Investment from which such cash or Securities are derived.

(d) The General Partner shall be the liquidator. In the event that the General Partner is unable to serve as liquidator, a liquidating trustee shall be chosen by the affirmative vote of a Majority in Interest of the Partners voting at a meeting of Partners (excluding Nonvoting Special Partners).

Section 9.3. Amounts Reserved Related to Capital Commitment Partner Interests. (a) If there are any Securities or other property or other investments or securities related to the Partners’ Capital Commitment Partner Interests which, in the judgment of the liquidator, cannot be sold, or properly distributed in kind in the case of dissolution, without sacrificing a significant portion of the value thereof, the value of a Partner’s interest in each such Security or other investment or security may be excluded from the amount distributed to the Partners participating in the related Capital Commitment Investment pursuant to Section 9.2(b). Any interest of a Partner, including his or her pro rata interest in any gains, losses or distributions, in Securities or other property or other investments or securities so excluded shall not be paid or distributed until such time as the liquidator shall determine.

(b) If there is any pending transaction, contingent liability or claim by or against the Partnership related to the Partners’ Capital Commitment Partner Interests as to which the interest or obligation of any Partner therein cannot, in the judgment of the liquidator, be then ascertained, the value thereof or probable loss therefrom may be deducted from the amount distributable to such Partner pursuant to Section 9.2(b). No amount shall be paid or charged to any such Partner on account of any such transaction or claim until its final settlement or such earlier time as the liquidator shall determine. The Partnership may meanwhile retain from other sums due such Partner in respect of such Partner’s Capital Commitment Partner Interest an

amount which the liquidator estimates to be sufficient to cover the share of such Partner in any probable loss or liability on account of such transaction or claim.

(c) Upon determination by the liquidator that circumstances no longer require the exclusion of any Securities or other property or retention of sums as provided in paragraphs (a) and (b) of this Section 9.3, the liquidator shall, at the earliest practicable time, distribute as provided in Section 9.2(b) such sums or such Securities or other property or the proceeds realized from the sale of such Securities or other property to each Partner from whom such sums or Securities or other property were withheld.

(d) When the General Partner or other liquidator has complied with and completed the winding up of the Partnership, the General Partner or such other liquidator, on behalf of all Partners, shall execute, acknowledge and cause to be filed with the Registrar a notice of dissolution in accordance with the Partnership Act.

ARTICLE X

MISCELLANEOUS

Section 10.1. Submission to Jurisdiction; Waiver of Jury Trial. (a) Any and all disputes which cannot be settled amicably, including any ancillary claims of any party, arising out of, relating to or in connection with the validity, negotiation, execution, interpretation, performance or nonperformance of this Agreement (including the validity, scope and enforceability of this arbitration provision as well as any and all disputes arising out of, relating to or in connection with the winding up or dissolution of the Partnership), whether arising during the existence of the Partnership or during or after the winding up or dissolution of the Partnership, shall be finally settled by arbitration conducted by a single arbitrator in New York, New York U.S.A. in accordance with the then-existing Rules of Arbitration of the International Chamber of Commerce. If the parties to the dispute fail to agree on the selection of an arbitrator within 30 days of the receipt of the request for arbitration, the International Chamber of Commerce shall make the appointment. The arbitrator shall be a lawyer and shall conduct the proceedings in the English language. Performance under this Agreement shall continue if reasonably possible during any arbitration proceedings.

(b) Notwithstanding the provisions of paragraph (a), the General Partner may bring, or may cause the Partnership to bring, on behalf of the General Partner or the Partnership or on behalf of one or more Partners, an action or special proceeding in any court of competent jurisdiction for the purpose of compelling a party to arbitrate, seeking temporary or preliminary relief in aid of an arbitration hereunder, and/or enforcing an arbitration award and, for the purposes of this paragraph (b), each Partner (i) expressly consents to the application of paragraph (c) of this Section 10.1 to any such action or proceeding, (ii) agrees that proof shall not be required that monetary damages for breach of the provisions of this Agreement would be difficult to calculate and that remedies at law would be inadequate, and (iii) irrevocably appoints the General Partner as such Partner’s agent for service of process in connection with any such action or proceeding and agrees that service of process upon any such agent, who shall promptly advise such Partner of any such service of process, shall be deemed in every respect effective service of process upon the Partner in any such action or proceeding.

(c) (i) EACH PARTNER HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF COURTS LOCATED IN NEW YORK, NEW YORK FOR THE PURPOSE OF ANY JUDICIAL PROCEEDING BROUGHT IN ACCORDANCE WITH THE PROVISIONS OF PARAGRAPH (B) OF THIS SECTION 10.1, OR ANY JUDICIAL PROCEEDING ANCILLARY TO AN ARBITRATION OR CONTEMPLATED ARBITRATION ARISING OUT OF OR RELATING TO OR CONCERNING THIS AGREEMENT. Such ancillary judicial proceedings include any suit, action or proceeding to compel arbitration, to obtain temporary or preliminary judicial relief in aid of arbitration, or to confirm an arbitration award. The parties acknowledge that the forum(s) designated by this paragraph (c) have a reasonable relation to this Agreement, and to the parties’ relationship with one another.

(ii) The parties hereby waive, to the fullest extent permitted by applicable law, any objection which they now or hereafter may have to personal jurisdiction or to the laying of venue of any such ancillary suit, action or proceeding brought in any court referred to in paragraph (c)(i) of this Section 10.1 and such parties agree not to plead or claim the same.

(d) Notwithstanding any provision of this Agreement to the contrary, this Section 10.1 shall be construed to the maximum extent possible to comply with the laws of the State of Delaware, including the Delaware Uniform Arbitration Act (10 Del. C. § 5701 et seq.) (the “Delaware Arbitration Act”). If, nevertheless, it shall be determined by a court of competent jurisdiction that any provision or wording of this Section 10.1, including any rules of the International Chamber of Commerce, shall be invalid or unenforceable under the Delaware Arbitration Act, or other applicable law, such invalidity shall not invalidate all of this Section 10.1. In that case, this Section 10.1 shall be construed so as to limit any term or provision so as to make it valid or enforceable within the requirements of the Delaware Arbitration Act or other applicable law, and, in the event such term or provision cannot be so limited, this Section 10.1 shall be construed to omit such invalid or unenforceable provision.

Section 10.2. Ownership and Use of the Blackstone Name. The Partnership acknowledges that Blackstone TM L.L.C. (“TM”), a Delaware limited liability company with a principal place of business at 345 Park Avenue, New York, New York 10154 U.S.A., (or its successors or assigns) is the sole and exclusive owner of the mark and name BLACKSTONE and that the ownership of, and the right to use, sell or otherwise dispose of, the firm name or any abbreviation or modification thereof which consists of or includes BLACKSTONE, shall belong exclusively to TM, which company (or its predecessors, successors or assigns) has licensed the Partnership to use BLACKSTONE in its name. The Partnership acknowledges that TM owns the service mark BLACKSTONE for various services and that the Partnership is using the BLACKSTONE mark and name on a non-exclusive, non-sublicensable and non-assignable basis in connection with its business and authorized activities with the permission of TM. All services rendered by the Partnership under the BLACKSTONE mark and name will be rendered in a manner and with quality levels that are consistent with the high reputation heretofore developed for the BLACKSTONE mark by TM and its Affiliates and licensees. The Partnership understands that TM may terminate its right to use BLACKSTONE at any time in TM’s sole discretion by giving the Partnership written notice of termination. Promptly following any such termination, the Partnership will take all steps necessary to change its partnership name to one

which does not include BLACKSTONE or any confusingly similar term and cease all use of BLACKSTONE or any term confusingly similar thereto as a service mark or otherwise.

Section 10.3. Written Consent. Subject to applicable law, any action required or permitted to be taken by a vote of Partners at a meeting may be taken without a meeting if a Majority in Interest of the Partners consent thereto in writing.

Section 10.4. Letter Agreements; Schedules. The General Partner may, or may cause the Partnership to, enter or has previously entered into separate letter agreements with individual Partners, officers or employees with respect to GP-Related Profit Sharing Percentages, Capital Commitment Profit Sharing Percentages, benefits or any other matter. The General Partner may from time to time execute and deliver to the Partners schedules which set forth the then current capital balances, GP-Related Profit Sharing Percentages and Capital Commitment Profit Sharing Percentages of the Partners and any other matters deemed appropriate by the General Partner. Such schedules shall be for information purposes only and shall not be deemed to be part of this Agreement for any purpose whatsoever; provided, that this in no way limits the effectiveness of any Commitment Agreement or SMD Agreement.

Section 10.5. Governing Law; Separability of Provisions. This Agreement shall be governed by and construed in accordance with the laws of the Cayman Islands, without regard to principles of conflicts of law. In particular, the Partnership is registered as an exempted limited partnership pursuant to the Partnership Act, and the rights, duties and liabilities of the General Partners, Limited Partners and the Special Partners shall be as provided therein, except as herein otherwise expressly provided. If any provision of this Agreement shall be held to be invalid, such provision shall be given its meaning to the maximum extent permitted by law and the remainder of this Agreement shall not be affected thereby. Unless the context otherwise requires, any reference to any law, regulation, governmental entity or agency or such survivor concepts shall be with respect to any jurisdiction, whether Cayman Islands, U.S. or otherwise.

representatives, heirs, successors and permitted assigns. Notwithstanding the foregoing, solely to the extent required by the BCP Asia Agreements, (x) the limited partners in BCP Asia shall be third-party beneficiaries of the provisions of Section 5.8(d)(i)(A) and Section 5.8(d)(ii)(A) (and the definitions relating thereto), solely as they relate to any Clawback Amount (for purpose of this sentence, as defined in paragraph 9.2.8(b) of the BCP Asia Partnership Agreement), and (y) the amendment of the provisions of Section 5.8(d)(i)(A) and Section 5.8(d)(ii)(A) (and the definitions relating thereto), solely as they relate to any Clawback Amount (for purpose of this sentence, as defined in paragraph 9.2.8(c) of the BCP Asia Partnership Agreement), shall be effective against such limited partners only with the 66 2/3% Combined Limited Partner Consent (as such term is defined in the BCP Asia Partnership Agreement).

Section 10.7. Confidentiality. (a) By executing this Agreement, each Partner expressly agrees, at all times during the term of the Partnership and thereafter and whether or not at the time a Partner of the Partnership, to maintain the confidentiality of, and not to disclose to any person other than the Partnership, another Partner or a person designated by the Partnership, any information relating to the business, financial structure, financial position or financial results, clients or affairs of the Partnership that shall not be generally known to the public or the securities industry, except as otherwise required by law or by any regulatory or self-regulatory organization having jurisdiction; provided, that any corporate Partner may disclose any such information it is required by law, rule, regulation or custom to disclose. Notwithstanding anything in this Agreement to the contrary, to comply with Treasury Regulations Section 1.6011-4(b)(3)(i), each Partner (and any employee, representative or other agent of such Partner) may disclose to any and all persons, without limitation of any kind, the U.S. federal income tax treatment and tax structure of the Partnership, it being understood and agreed, for this purpose, (1) the name of, or any other identifying information regarding (a) the Partners or any existing or future investor (or any Affiliate thereof) in any of the Partners, or (b) any investment or transaction entered into by the Partners; (2) any performance information relating to any of the Partners or their investments; and (3) any performance or other information relating to previous funds or investments sponsored by any of the Partners, does not constitute such tax treatment or tax structure information.

(b) Nothing in this Agreement shall prohibit or impede any Partner from communicating, cooperating or filing a complaint on possible violations of U.S. federal, state or local law or regulation to or with any governmental agency or regulatory authority (collectively, a “Governmental Entity”), including, but not limited to, the SEC, FINRA, EEOC or NLRB, or from making other disclosures to any Governmental Entity that are protected under the whistleblower provisions of U.S. federal, state or local law or regulation; provided, that in each case such communications and disclosures are consistent with applicable law. Each Partner understands and acknowledges that (a) an individual shall not be held criminally or civilly liable under any U.S. federal or state trade secret law for the disclosure of a trade secret that is made (i) in confidence to a U.S. federal, state, or local government official or to an attorney solely for the purpose of reporting or investigating a suspected violation of law, or (ii) in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal, and (b) an individual who files a lawsuit for retaliation by an employer for reporting a suspected violation of law may disclose the trade secret to the attorney of the individual and use the trade secret information in the court proceeding, if the individual files any document containing the trade secret under seal; and does not disclose the trade secret, except pursuant to court order.

Moreover, a Partner shall not be required to give prior notice to (or get prior authorization from) Blackstone regarding any such communication or disclosure. Except as otherwise provided in this paragraph or under applicable law, under no circumstance is any Partner authorized to disclose any information covered by Blackstone or its affiliates’ attorney-client privilege or attorney work product or Blackstone’s trade secrets without the prior written consent of Blackstone.

Section 10.8. Notices. Whenever notice is required or permitted by this Agreement to be given, such notice shall be in writing (including telecopy or similar writing) and shall be given by hand delivery (including any courier service) or telecopy to any Partner at its address or telecopy number shown in the Partnership’s books and records or, if given to the General Partner, at the address or telecopy number of the Partnership in New York City. Each such notice shall be effective (i) if given by telecopy, upon dispatch, and (ii) if given by hand delivery, when delivered to the address of such Partner, the General Partner or the Partnership specified as aforesaid. Sections 8 and 19(3) of the Electronic Transactions Law (2003 Revision) of the Cayman Islands shall not apply to this Agreement.

Section 10.9. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be an original and all of which together shall constitute a single instrument.

Section 10.10. Power of Attorney. Each Partner hereby irrevocably appoints each General Partner as such Partner’s true and lawful representative and attorney-in-fact, each acting alone, in such Partner’s name, place and stead, to make, execute, sign and file all instruments, documents and certificates which, from time to time, may be required to set forth any amendment to this Agreement or may be required by this Agreement or by the laws of the United States of America, the Cayman Islands, the State of Delaware or any other state or country in which the Partnership shall determine to do business, or any political subdivision or agency thereof, to execute, implement and continue the valid and subsisting existence of the Partnership. Such power of attorney is intended to secure a proprietary interest of the General Partner and the performance of the obligations of each relevant Limited Partner under this Agreement, shall be irrevocable and shall survive and continue in full force and effect notwithstanding the subsequent Withdrawal from the Partnership of any Partner for any reason and shall not be affected by the subsequent disability or incapacity of such Partner.

Section 10.11. Partner’s Will. Each Partner and Withdrawn Partner shall include in his or her will a provision that addresses certain matters in respect of his or her obligations relating to the Partnership that is satisfactory to the General Partner and each such Partner and Withdrawn Partner shall confirm annually to the Partnership, in writing, that such provision remains in his or her current will. Where applicable, any estate planning trust of such Partner or Withdrawn Partner to which a portion of such Partner’s or Withdrawn Partner’s Interest is transferred shall include a provision substantially similar to such provision and the trustee of such trust shall confirm annually to the Partnership, in writing, that such provision or its substantial equivalent remains in such trust. In the event any Partner or Withdrawn Partner fails to comply with the provisions of this Section 10.11 after the Partnership has notified such Partner or Withdrawn Partner of his or her failure to so comply and such failure to so comply is not cured within 30 days of such notice, the Partnership may withhold any and all distributions to

such Partner until the time at which such party complies with the requirements of this Section 10.11.

Section 10.12. Cumulative Remedies. Rights and remedies under this Agreement are cumulative and do not preclude use of other rights and remedies available under applicable law.

Section 10.13. Legal Fees. Except as more specifically provided herein, in the event of a legal dispute (including litigation, arbitration or mediation) between any Partner or Withdrawn Partner and the Partnership, arising in connection with any party seeking to enforce Section 4.1(d) or any other provision of this Agreement relating to the Holdback, the Clawback Amount, the GP-Related Giveback Amount, the Capital Commitment Giveback Amount, the Net GP-Related Recontribution Amount or the Capital Commitment Recontribution Amount, the “losing” party to such dispute shall promptly reimburse the “victorious party” for all reasonable legal fees and expenses incurred in connection with such dispute (such determination to be made by the relevant adjudicator). Any amounts due under this Section 10.13 shall be paid within 30 days of the date upon which such amounts are due to be paid and such amounts remaining unpaid after such date shall accrue interest at the Default Interest Rate.

Section 10.14. Entire Agreement; Modifications. This Agreement embodies the entire agreement and understanding of the parties hereto in respect of the subject matter contained herein. There are no restrictions, promises, representations, warranties, covenants or undertakings, other than those expressly set forth or referred to herein. Subject to Section 10.4, this Agreement supersedes all prior agreements and understandings between the parties with respect to such subject matter. Except as provided herein, this Agreement may be amended or modified at any time by the General Partner in its sole discretion, upon notification thereof to the Limited Partners.

Section 10.15. Effective Date. Notwithstanding the date of execution of this Agreement, each of the parties agrees that their respective rights, duties and obligations pursuant to this Agreement shall have effect from November 9, 2017, as between the parties, and the parties agree to account to each other accordingly.

Section 10.16. Third Party Rights. (a) Any Covered Person not being a party to this Agreement may enforce any rights granted to it pursuant to this Agreement in its own right as if it were a party to this Agreement.

(b) Except as expressly provided in Section (a) above, a person who is not a party to this Agreement shall not have any rights under the Contracts (Rights of Third Parties) Law (as amended) to enforce any term of this Agreement.

(c) Notwithstanding any term of this Agreement, the consent of or notice to any person who is not a party to this Agreement shall not be required for any termination, rescission or agreement to any variation, waiver, assignment, novation, release or settlement under this Agreement at any time.

IN WITNESS WHEREOF, the parties have executed and unconditionally delivered this Agreement as a deed on the day and year first above written. In the event that it is impracticable to obtain the signature of any one or more of the Partners to this Agreement, this Agreement shall be binding among the other Partners executing the same.


GENERAL PARTNERS:

BMA Asia L.L.C.

By:	Blackstone Holdings III L.P., its Sole Member

By:	Blackstone Holdings III GP L.P., its General Partner

By:	Blackstone Holdings III GP Management L.L.C., its General Partner

By:	/s/ John G. Finley
	Name:	John G. Finley
	Title:	Chief Legal Officer and Secretary

/s/ Rhonda Coleman
Witnessed by: Rhonda Coleman


BMA ASIA LTD.

By:	Blackstone Capital Partners Holdings
	Director L.L.C., its Director

By:	Blackstone Holdings III L.P., its Sole
	Member

By:	Blackstone Holdings III GP L.P., its General
	Partner

By:	Blackstone Holdings III GP Management
	L.L.C., its General Partner

By:	/s/ John G. Finley
	Name:	John G. Finley
	Title:	Chief Legal Officer and Secretary

/s/ Rhonda Coleman
Witnessed by: Rhonda Coleman


LIMITED PARTNERS AND SPECIAL PARTNERS:

Limited Partners and Special Partners now and hereafter admitted pursuant to powers of attorney granted to BMA Asia L.L.C. pursuant to powers of attorney executed by such Limited Partners

By:	BMA Asia L.L.C.

By:	Blackstone Holdings III L.P., its Sole Member

By:	Blackstone Holdings III GP L.P., its General
	Partner

By:	Blackstone Holdings III GP Management L.L.C., its General Partner

By:	/s/ John G. Finley
	Name:	John G. Finley
	Title:	Chief Legal Officer and Secretary

/s/ Rhonda Coleman
Witnessed by: Rhonda Coleman


INITIAL LIMITED PARTNER

MAPCAL LIMITED
As Initial Limited Partner, solely to reflect its
Withdrawal from the Partnership

By:		/s/ Patrick Rosenfeld
		Name: Patrick Rosenfeld
		Title: Authorized Signatory

/s/ Michelle Lockwood
Witnessed by: Michelle Lockwood

Exhibit 10.02

Execution Version

BREIT SPECIAL LIMITED PARTNER L.P.

AMENDED AND RESTATED LIMITED PARTNERSHIP AGREEMENT

DATED AS OF AUGUST 6, 2019

EFFECTIVE JANUARY 1, 2018

THE PARTNERSHIP INTERESTS (THE “INTERESTS”) OF BREIT SPECIAL LIMITED PARTNER L.P., A DELAWARE LIMITED PARTNERSHIP (THE “PARTNERSHIP”), HAVE NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), THE SECURITIES LAWS OF ANY STATE OR ANY OTHER APPLICABLE SECURITIES LAWS IN RELIANCE UPON EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUCH LAWS. SUCH INTERESTS MUST BE ACQUIRED FOR INVESTMENT ONLY AND MAY NOT BE OFFERED FOR SALE, PLEDGED, HYPOTHECATED, SOLD, ASSIGNED OR TRANSFERRED AT ANY TIME EXCEPT IN COMPLIANCE WITH (I) THE SECURITIES ACT, ANY APPLICABLE STATE SECURITIES LAWS, AND ANY OTHER APPLICABLE SECURITIES LAWS; AND (II) THE TERMS AND CONDITIONS OF THIS LIMITED PARTNERSHIP AGREEMENT. THE INTERESTS MAY NOT BE TRANSFERRED OF RECORD EXCEPT IN COMPLIANCE WITH SUCH LAWS AND THIS LIMITED PARTNERSHIP AGREEMENT. THEREFORE, PURCHASERS OF SUCH INTERESTS WILL BE REQUIRED TO BEAR THE RISK OF THEIR INVESTMENT FOR AN INDEFINITE PERIOD OF TIME.

TABLE OF CONTENTS


ARTICLE I DEFINITIONS		2
Section 1.1	Definitions	2
Section 1.2	Terms Generally	7

ARTICLE II GENERAL PROVISIONS		7
Section 2.1	Converstion; Formation	7
Section 2.2	General Partner, Limited Partner, Special Partner	7
Section 2.2	Continuation; Name; Foreign Jurisdictions	7
Section 2.3	Term	8
Section 2.4	Purpose; Powers	8
Section 2.5	Registered Office; Place of Business; Registered Agent	10

ARTICLE III MANAGEMENT		10
Section 3.1	General Partner	10
Section 3.2	Partner Voting, etc.	10
Section 3.3	Management	11
Section 3.4	Responsibilities of Partners	12
Section 3.5	Exculpation and Indemnification	12
Section 3.6	Representations of Partners	14
Section 3.7	Tax Representation and Further Assurances	15

ARTICLE IV CAPITAL OF THE PARTNERSHIP		16
Section 4.1	Capital Contributions by Partners	16
Section 4.2	Interest	16
Section 4.3	Partial Withdrawals of Capital	16

ARTICLE V PARTICIPATION IN PROFITS AND LOSSES		16
Section 5.1	General Accounting Matters	16
Section 5.2	Capital Accounts	18
Section 5.3	Profit Sharing Percentages	18
Section 5.4	Allocations of Net Income (Loss)	19
Section 5.5	Liability of Partners	19
Section 5.6	Repurchase Rights, etc.	19
Section 5.7	Distributions	19
Section 5.8	Business Expenses	20

ARTICLE VI ADDITIONAL PARTNERS; WITHDRAWAL OF PARTNERS; SATISFACTION AND DISCHARGE OF PARTNERSHIP INTERESTS; TERMINATION		20
Section 6.1	Additional Partners	20
Section 6.2	Withdrawal of Partners	21
Section 6.3	Partnership Interests Not Transferable	22
Section 6.4	Consequences upon Withdrawal of a Partner	22
Section 6.5	Satisfaction and Discharge of a Withdrawn Partner’s Interest	23
Section 6.6	Dissolution of the Partnership	26
Section 6.7	Certain Tax Matters	26
Section 6.8	Special Basis Adjustments	29

ARTICLE VII MISCELLANEOUS		29
Section 7.1	Submission to Jurisdiction; Waiver of Jury Trial	29


Section 7.2	Ownership and Use of the Blackstone Name	30
Section 7.3	Written Consent	30
Section 7.4	Admission Letters; Schedules	30
Section 7.5	Governing Law; Separability of Provisions	31
Section 7.6	Successors and Assigns	31
Section 7.8	Confidentiality; Restrictive Covenants	31
Section 7.9	Notices	32
Section 7.10	Counterparts	32
Section 7.11	Power of Attorney	32
Section 7.12	Cumulative Remedies	33
Section 7.13	Legal Fees	33
Section 7.15	Entire Agreement	33

BREIT SPECIAL LIMITED PARTNER L.P.

AMENDED AND RESTATED LIMITED PARTNERSHIP AGREEMENT (this “Agreement”) of BREIT SPECIAL LIMITED PARTNER L.P., a Delaware limited partnership (the “Partnership”), dated as of August 6, 2019, by and among Blackstone Holdings III L.P., a Québec société en commandite, as general partner of the Partnership (in its capacity as general partner of the Partnership the “General Partner”), the other partners of the Partnership as set forth in the books and records of the Partnership, and such other persons that are admitted to the Partnership as partners after the date hereof in accordance herewith.

W I T N E S S E T H

WHEREAS BREIT Special Limited Partner L.L.C. (the “Company”) was formed as a limited liability company under the laws of the State of Delaware pursuant to the filing of a Certificate of Formation with the Office of the Secretary of State of the State of Delaware on August 5, 2016; and a Limited Liability Company Agreement, dated as of August 23, 2016 (the “LLC Agreement”), by Blackstone Holdings III L.P., as the sole member of the Company;

WHEREAS, (i) the Company’s conversion to BREIT Special Limited Partner L.P., a Delaware limited partnership, and (ii) the adoption of this Agreement were each authorized under the LLC Agreement, and the Delaware Limited Liability Company Act (6 Del. C. § 18-101, et seq.), as amended from time to time, and any successor to such statute (the “LLC Act”);

WHEREAS, on January 25, 2018, the Company was converted to a limited partnership (the “Conversion”) pursuant to the Delaware Revised Uniform Limited Partnership Act, 6 Del. C. § 17-101, et seq., as it may be amended from time to time (the “Partnership Act”), and Section 18-216 of the LLC Act by causing the filing in the office of the Secretary of State of the State of Delaware of a Certificate of Conversion to Limited Partnership of the Company to the Partnership and a Certificate of Limited Partnership of the Partnership;

WHEREAS, the limited liability company interests of the Company were converted into partnership interests in the Partnership in accordance with Section 2.1 of this Agreement;

WHEREAS, in accordance with Section 17-217(g) of the Partnership Act, the Partnership shall constitute a continuation of the existence of the Company in the form of a Delaware limited partnership and, for all purposes of the laws of the State of Delaware, shall be deemed to be the same entity as the Company;

WHEREAS, it is the intent of the current and former Partners of the Partnership that the Conversion is effective as of January 1, 2018.

WHEREAS, the parties hereto desire to enter into this Agreement;

NOW, THEREFORE, in consideration of the mutual promises and agreements herein made and intending to be legally bound hereby, the parties hereto agree to continue the existence of the Company in the form of the Partnership, and as follows:

ARTICLE I

DEFINITIONS

Section 1.1 Definitions. Unless the context otherwise requires, the following terms shall have the following meanings for purposes of this Agreement:

“Admission Letter” has the meaning set forth in Section 7.4.

“Affiliate” when used with reference to another person means any person (other than the Partnership), directly or indirectly, through one or more intermediaries, controlling, controlled by, or under common control with, such other person, which may include, for greater certainty and as the context requires, endowment funds, estate planning vehicles (including any trusts, family members, family investment vehicles, descendant, trusts and other related persons and entities), charitable programs and other similar and/or related vehicles or accounts associated with or established by Blackstone and/or its affiliates, partners and current and/or former employees and/or related persons.

“Agreement” means this Amended and Restated Limited Partnership Agreement, as it may be further amended, supplemented, restated or otherwise modified from time to time.

“BE Agreement” means the limited partnership agreement, limited liability company agreement or other governing document of any limited partnership, limited liability company or other entity referred to in the definition of “Blackstone Entity,” as such limited partnership agreement, limited liability company agreement or other governing document may be amended, supplemented, restated or otherwise modified to date, and as such limited partnership agreement, limited liability company agreement or other governing document may be further amended, supplemented, restated or otherwise modified from time to time.

“Blackstone” means, collectively, The Blackstone Group Inc., a Delaware corporation, and any successor thereto, and any Affiliate thereof (excluding any natural persons and any portfolio companies, investments or similar entities of any Blackstone-sponsored fund (or any affiliate thereof that is not otherwise an Affiliate of The Blackstone Group Inc.)).

“Blackstone Entity” means any partnership, limited liability company or other entity (excluding any natural persons and any portfolio companies of any Blackstone–sponsored fund) that is an Affiliate of The Blackstone Group Inc., as designated by the General Partner in its sole discretion.

“BREIT Operating Partnership L.P.” means the Delaware limited partnership formed pursuant to the Limited Partnership Agreement entered into as of August 25, 2016 (as amended, supplemented, modified or restated from time to time), between Blackstone Real Estate Income Trust, Inc., a Maryland corporation, as general partner and the Company as a limited partner.

“Capital Account” means a capital account established for each Partner in the books and records of the Partnership and maintained and adjusted as provided in Articles V and VI. A separate Capital Account shall be established for each Partner with respect to each category of Net Income (Loss) (including, without limitation, Fund Net Income (Loss), Other Net Income (Loss) and the Performance Allocation) as may be determined by the General Partner in its sole discretion.

“Cause” means the occurrence or existence of any of the following with respect to a Partner, as determined fairly, reasonably, on an informed basis and in good faith by the General Partner: (i) (w) any breach by any Partner of any provision of any non-competition agreement, (x) any material

breach of this Agreement or any rules or regulations applicable to such Partner that are established by the General Partner, (y) such Partner’s deliberate failure to perform his or her duties to the Partnership or any of its Affiliates, or (z) such Partner’s committing to or engaging in any conduct or behavior that is or may be harmful to the Partnership or any of its Affiliates in a material way as determined by the General Partner; provided, that in the case of any of the foregoing clauses (w), (x), (y) and (z), the General Partner has given such Partner written notice (a “Notice of Breach”) within 15 days after the General Partner becomes aware of such action and such Partner fails to cure such breach, failure to perform, conduct or behavior within 15 days after receipt of such Notice of Breach from the General Partner (or such longer period, not to exceed an additional 15 days, as shall be reasonably required for such cure, provided that such Partner is diligently pursuing such cure); (ii) any act of fraud, misappropriation, dishonesty, embezzlement or similar conduct against the Partnership or any of its Affiliates; (iii) conviction (on the basis of a trial or by an accepted plea of guilty or nolo contendere) of a felony (under U.S. law or its equivalent in any jurisdiction) or crime (including any misdemeanor charge involving moral turpitude, false statements or misleading omissions, forgery, wrongful taking, embezzlement, extortion or bribery), or a determination by a court of competent jurisdiction, by a regulatory body or by a self-regulatory body having authority with respect to securities laws, rules or regulations of the applicable securities industry, that such Partner individually has violated any applicable securities laws or any rules or regulations thereunder, or any rules of any such self-regulatory body (including, without limitation, any licensing requirement), if such conviction or determination has a material adverse effect on (A) such Partner’s ability to function as a Partner of the Partnership, taking into account the services required of such Partner and the nature of the business of the Partnership and its Affiliates, or (B) the business of the Partnership and its Affiliates or (iv) such partner becomes subject to an event described in Rule 506(d)(1)(i)-(vii) of Regulation D under the Securities Act.

“Code” means the Internal Revenue Code of 1986, as amended from time to time, or any successor statute. Any reference herein to a particular provision of the Code means, where appropriate, the corresponding provision in any successor statute.

“Contingent” means subject to repurchase rights and/or other requirements.

The term “control” when used with reference to any person means the power to direct the management and policies of such person, directly or indirectly, by or through stock or other equity ownership, agency or otherwise, or pursuant to or in connection with an agreement, arrangement or understanding (written or oral) with one or more other persons by or through stock or other equity ownership, agency or otherwise; and the terms “controlling” and “controlled” shall have meanings correlative to the foregoing.

“Controlled Entity” when used with reference to another person means any person controlled by such other person.

“Covered Person” has the meaning set forth in Section 3.5(a).

“Delaware Arbitration Act” has the meaning set forth in Section 7.1(d).

“Estate Planning Vehicle” has the meaning set forth in Section 6.3.

“Exchange Act” means the U.S. Securities Exchange Act of 1934, as amended.

“Final Event” means the death, Total Disability, Incompetence, Bankruptcy, liquidation, dissolution or Withdrawal from the Partnership of any person who is a Partner.

“Firm Advances” means any capital contribution due to the Partnership by a Partner that the General Partner or one of its Affiliates may in its sole discretion advance to such Partner (including any additional Partner admitted to the Partnership pursuant to Section 6.1 but excluding any Partners that are also executive officers of Blackstone).

“Fiscal Year” means a calendar year, or any other period chosen by the General Partner.

“Fund Agreements” means the collective reference to (i) the Limited Partnership Agreement of BREIT Operating Partnership L.P., dated August 25, 2016 (as amended, supplemented, modified or restated from time to time) and (ii) any other limited partnership agreements, operating agreements and other governing documentation of the Funds, in each case, as amended, supplemented or otherwise modified from time to time.

“Funds” means the collective reference to (i) BREIT Operating Partnership L.P. and (ii) any other investment vehicle for which the Partnership serves as the direct or indirect general partner, special limited partner or other capacity and, where the context requires, any parallel funds, managed accounts or alternative investment vehicles related to the foregoing.

“Fund Net Income (Loss)” means any net income (loss) of the Partnership relating to the Partnership’s interest in the Funds and any appreciation or depreciation relating thereto, but not including (i) Other Net Income (Loss) or (ii) any net income (loss) relating to the Performance Allocation. The General Partner may designate separate categories of Fund Net Income (Loss) as it may determine in its sole discretion, and may establish and allocate Profit Sharing Percentages with respect to such separate categories accordingly.

“GAAP” has the meaning set forth in Section 5.1(c).

“General Partner” has the meaning set forth in the preamble hereto.

“Incompetence” means, with respect to any Partner, the determination by the General Partner in its sole discretion, after consultation with a qualified medical doctor, that such Partner is incompetent to manage his or her person or his or her property.

“Interest” means a partnership interest (as defined in § 7-101(13) ) of the Partnership Act) in the Partnership, including those which are held by a Retaining Withdrawn Partner.

“Investor Note” means a promissory note of a Partner evidencing indebtedness incurred by such Partner to the Lender or Guarantor for the purpose of financing the purchase of an Interest in the Partnership and/or the amount of one or more capital contributions to the Partnership, which is secured by such Interest and all other Interests of such Partner in the Partnership (if any), in each case on terms which were or are approved by the General Partner; provided, that such promissory note may also evidence indebtedness relating to other interests of such Partner in Blackstone Entities, in which case, such indebtedness shall also be secured by such other interests of such Partner in such Blackstone Entities, in each case on terms which were or are approved by the General Partner. Such indebtedness shall be prepayable as provided in the Investor Note, any security agreement related thereto and any applicable BE Agreements and any documentation related thereto. References to “Investor Notes” herein may refer to multiple loans made pursuant to such promissory note, whether made with respect to such Partner’s Interest(s) in the Partnership or such Partner’s interests in other Blackstone Entities, and references to an “Investor Note” refer to one such loan as the context requires. In no way shall any indebtedness incurred to acquire Interests in the Partnership, and, if applicable, interests in other Blackstone Entities be considered part of the Investor Notes for purposes hereof if the Lender or

Guarantor is not the lender or guarantor with respect thereto.

“Lender or Guarantor” means Blackstone Holdings III L.P., in its capacity as lender or guarantor under the Investor Notes, or any other Affiliate of the Partnership that makes or guarantees loans to enable a Partner to acquire Interests or other interests in Blackstone Entities.

“Limited Partner” means each of the parties listed as Limited Partners in the books and records of the Partnership or any Person that has been admitted to the Partnership as a substituted or additional Limited Partner in accordance with the terms of this Agreement, each in its capacity as a limited partner of the Partnership. For the avoidance of doubt, the term Limited Partner does not include the General Partner or any Special Partners.

“LLC Act” has the meaning set forth in the preamble hereto.

“Losses” has the meaning set forth in Section 3.5(b).

“Majority in Interest of the Partners” on any date (a “vote date”) means one or more persons who are Partners (including the General Partner but excluding Nonvoting Special Partners) on the vote date and who, as of the last day of the most recent accounting period ending on or prior to the vote date (or as of such later date on or prior to the vote date selected by the General Partner), have aggregate Profit Sharing Percentages representing at least a majority of the Profit Sharing Percentages of all the persons who are Partners (including the General Partner but excluding Nonvoting Special Partners) on the vote date.

“Net Income (Loss)” has the meaning set forth in Section 5.1(b).

“Non-Contingent” means generally not subject to repurchase rights or other requirements.

“Nonvoting Special Partner” has the meaning set forth in Section 6.1(a).

“Other Net Income (Loss)” for any accounting period means the net income or net loss of the Partnership for such accounting period as determined on an accrual basis after deduction for expenses of the Partnership, in accordance with GAAP, excluding (i) Fund Net Income (Loss) and (ii) any net income (loss) relating to the Performance Allocation. The General Partner may designate separate categories of Other Net Income (Loss) as it may determine in its sole discretion, and may establish and allocate Profit Sharing Percentages with respect to such separate categories accordingly.

“Partner” means any person who is a partner of the Partnership, including the Limited Partners, the General Partner and the Special Partners. Except as otherwise specifically provided herein, no group of Partners, including the Special Partners and any group of Partners in the same Partner Category, shall have any right to vote as a class on any matter relating to the Partnership, including, but not limited to, any merger, reorganization, dissolution or liquidation.

“Partnership Act” means the Delaware Revised Uniform Limited Partnership Act, 6 Del. C. § 17-101, et seq., as it may be amended from time to time

“Partnership Representative” has the meaning set forth in Section 6.7(c).

“Pass-Thru Partner” has the meaning set forth in Section 6.7(c).

“Performance Allocation” means the performance allocations of net capital appreciation or net profits allocated by the Funds to the Partnership pursuant to the applicable Fund Agreements. The General Partner may designate separate categories of net income (loss) relating to the Performance Allocation as it may determine in its sole discretion, and may establish and allocate Profit Sharing Percentages with respect to such separate categories accordingly.

“Person” means any individual, partnership, joint venture, corporation, limited liability company, unincorporated organization or association, trust (including the trustees thereof in their capacity as such), government (or agency or subdivision thereof), governmental entity or other entity.

“Prime Rate” means the rate of interest per annum publicly announced from time to time by JPMorgan Chase Bank, N.A. (“JPM”) as its prime rate or, if JPM fails to publish such rate, the equivalent rate as published by another national bank.

“Profit Sharing Percentage” means, with respect to any Partner, such Partner’s percentage interest in Net Income (Loss) or any category thereof (including, without limitation, Fund Net Income (Loss), Other Net Income (Loss) and the Performance Allocation), as determined by the General Partner and set forth in the books and records of the Partnership, as such Profit Sharing Percentage may be modified from time to time in accordance herewith. Separate Profit Sharing Percentages may be established for each Partner with respect to each separate category of Net Income (Loss).

“Positive Basis” has the meaning set forth in Section 6.7(b).

“Positive Basis Partner” has the meaning set forth in Section 6.7(b).

“Regulations” means the U.S. Treasury regulations promulgated under the Code.

“Repurchase Period” has the meaning set forth in Section 5.7(c).

“Retaining Withdrawn Partner” means a Withdrawn Partner who has retained an Interest in the Partnership following such Withdrawn Partner’s Withdrawal Date. A Retaining Withdrawn Partner shall be considered a Nonvoting Special Partner for all purposes hereof.

“Securities Act” means the U.S. Securities Act of 1933, as amended from time to time, or any successor statute.

“Settlement Date” has the meaning set forth in Section 6.5(a).

“Special Partner” means any person shown in the books and records of the Partnership as a Special Partner of the Partnership, including any Nonvoting Special Partner.

“Tax Advances” has the meaning set forth in Section 6.7(d).

“TM” has the meaning set forth in Section 7.2.

“Total Disability” means the inability of a Limited Partner substantially to perform the services required of such Limited Partner (in its capacity as such or in any other capacity with respect to any Affiliate of the Partnership) for a period of six consecutive months by reason of physical or mental illness or incapacity and whether arising out of sickness, accident or otherwise.

“Withdraw” or “Withdrawal” with respect to a Partner means a Partner ceasing to be a partner of the Partnership (except as a Retaining Withdrawn Partner) for any reason (including death, Total Disability, Incompetence, removal, resignation or retirement, whether such is voluntary or involuntary) unless the context shall limit the type of withdrawal to a specific reason and “Withdrawn” with respect to a Partner means, as aforesaid, a Partner who has ceased to be a partner of the Partnership (except as a Retaining Withdrawn Partner).

“Withdrawal Date” means, with respect to any Withdrawn Partner, the date on which such Withdrawn Partner ceases to be a Partner of the Partnership.

“Withdrawn Partner” means a Partner whose Interest in the Partnership has been terminated for any reason including the occurrence of an event specified in Section 6.2, and shall include, unless the context requires otherwise, the estate or legal representatives of any such Partner.

Section 1.2 Terms Generally. The definitions in Section 1.1 shall apply equally to both the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The term “person” includes individuals, partnerships (including limited liability partnerships), companies (including limited liability companies), joint ventures, corporations, trusts, governments (or agencies or political subdivisions thereof) and other associations and entities. The words “include”, “includes” and “including” shall be deemed to be followed by the phrase “without limitation”.

ARTICLE II

GENERAL PROVISIONS

Section 2.1 Conversion; Formation. Effective as of January 1, 2018, to the maximum extent permitted by law (i) all of the organizational documents of the Company (including the certificate of formation and the LLC Agreement of the Company) are replaced and superseded in their entirety by this Agreement in respect of all periods beginning on or after the January 1, 2018, (ii) all of the limited liability company interests in the Company issued and outstanding immediately prior to the January 1, 2018 are converted to all of the Interests in the Partnership, (iii) upon execution of a counterpart signature page to this Agreement Blackstone Holdings III L.P., a Québec société en commandite, is hereby admitted to the Partnership as the general partner of the Partnership and shall have no economic Interest or other interest in the Partnership, and (iv) upon its admission to the Partnership in accordance with the terms hereof each Limited Partner is bound to this Agreement.

Section 2.2 General Partner, Limited Partner, Special Partner. The Partners may be General Partners, Limited Partners or Special Partners. The General Partner as of the date hereof is Blackstone Holdings III L.P. and the Limited Partners as of the date hereof are those persons shown as Limited Partners in the books and records of the Partnership, and the Special Partners as of the date hereof are persons shown as Special Partners on the signature pages hereof.

Section 2.3 Continuation; Name; Foreign Jurisdictions. The Partnership is BREIT Special Limited Partner L.P. The certificate of limited partnership of the Partnership may be amended and/or restated from time to time by the General Partner. The General Partner is further authorized to execute and deliver and file any other certificates (and any amendments and/or restatements thereof) necessary for the Partnership to qualify to do business in a jurisdiction in which the Partnership may wish to conduct business.

Section 2.4 Term. The term of the Partnership shall continue unless and until the Partnership is dissolved as provided herein.

Section 2.5 Purpose; Powers.

(a) The purpose of the Partnership shall be, directly or indirectly through subsidiaries or Affiliates, (i) to serve as a direct or indirect general partner, special limited partner and/or limited partner of the Funds or other partnerships and/or as a member of one or more limited liability companies, (ii) to invest in, and acquire, directly or indirectly, partnership interests, limited liability company interests and/or other equity interests in, and/or securities of, any one or more limited partnerships, limited liability companies and/or other entities, and/or receive allocations, fees, distributions and other payments, directly or indirectly, from any one more of such limited partnerships, limited liability companies and/or other entities, in each case as the General Partner shall determine, (iii) to carry on such other businesses, perform such other services and make such other investments as are deemed desirable by the General Partner and as are permitted under the Partnership Act and the applicable Fund Agreements, in each case as the same may be amended, supplemented, restated or otherwise modified from time to time; (iv) any other lawful purpose, and (v) to do all things necessary, desirable, convenient and/or incidental thereto.

(b) In furtherance of its purpose, the Partnership shall have all powers necessary, suitable or convenient for the accomplishment of its purposes, alone or with others, as principal or agent, including the following:

(i) to be and become a direct or indirect general or limited partner of partnerships, a member of limited liability companies, a holder of common and preferred stock of corporations and/or an investor in the foregoing entities or other entities, in connection with the making of investments or the acquisition, holding or disposition of investments or other property or as otherwise deemed appropriate by the General Partner in the conduct of the Partnership’s business, and to take any action in connection therewith;

(ii) do any and all acts on behalf of the Funds (subject to applicable Fund Agreements) and exercise all rights and remedies thereof with respect to its interest in any Person, firm, corporation or other entity, including, without limitation, the voting or lending of investments, participation in arrangements with creditors, the institution and settlement or compromise of suits and administrative proceedings and other similar matters;

(iii) to acquire and invest in general partner or limited partner interests, in limited liability company interests, in common and preferred stock of corporations and/or in other interests in or obligations of the foregoing entities or other entities and in investments and securities or other property or direct or indirect interests therein, whether such investments and securities or other property are readily marketable or not, and to receive, hold, sell, dispose of or otherwise transfer any such partner interests, limited liability company interests, stock, interests, obligations, investments or securities or other property and any dividends and distributions thereon and to purchase and sell, on margin, and be long or short, futures contracts and to purchase and sell, and be long or short, options on futures contracts;

(iv) to buy, sell and otherwise acquire investments, whether such investments are readily marketable or not;

(v) to invest and reinvest the cash assets of the Partnership in money-market or other short term investments;

(vi) to hold, receive, mortgage, pledge, grant security interests over, lease, transfer, exchange or otherwise dispose of, grant options with respect to, and otherwise deal in and exercise all rights, powers, privileges and other incidents of ownership or possession with respect to, all property held or owned by the Partnership;

(vii) to borrow or raise money from time to time and to issue promissory notes, drafts, bills of exchange, warrants, bonds, debentures and other negotiable and non-negotiable instruments and evidences of indebtedness, to secure payment of the principal of any such indebtedness and the interest thereon by mortgage, pledge, conveyance or assignment in trust of, or the granting of a security interest in, the whole or any part of the property of the Partnership, whether at the time owned or thereafter acquired, to guarantee the obligations of others and to buy, sell, pledge or otherwise dispose of any such instrument or evidence of indebtedness;

(viii) make, in its sole discretion, any and all elections for U.S. federal, state, local and non-U.S. tax purposes;

(ix) to lend any of its property or funds, either with or without security, at any legal rate of interest or without interest;

(x) to have and maintain one or more offices within or without the State of Delaware, and in connection therewith, to rent or acquire office space, engage personnel and compensate them and do such other acts and things as may be advisable or necessary in connection with the maintenance of such office or offices;

(xi) to open, maintain and close accounts, including margin accounts, with brokers;

(xii) to open, maintain and close bank accounts and draw checks and other orders for the payment of moneys;

(xiii) to engage accountants, auditors, custodians, investment advisers, attorneys and any and all other agents and assistants, both professional and nonprofessional, and to compensate any of them as may be necessary or advisable;

(xiv) to form or cause to be formed and to own the stock of one or more corporations, whether foreign or domestic, to form or cause to be formed and to participate in partnerships and joint ventures, whether foreign or domestic, and to form or cause to be formed and be a member or manager or both of one or more limited liability companies;

(xv) to enter into, make and perform all contracts, agreements and other undertakings as may be necessary, convenient or advisable or incident to carrying out its purposes;

(xvi) to sue and be sued, to prosecute, settle or compromise all claims against third parties, to compromise, settle or accept judgment to claims against the Partnership, and to execute all documents and make all representations, admissions and waivers in connection therewith;

(xvii) to distribute, subject to the terms of this Agreement, at any time and from time to time to the Partners cash or investments or other property of the Partnership, or any combination thereof; and

(xviii) to take such other actions necessary, desirable, convenient or incidental thereto and to engage in such other businesses as may be permitted under Delaware and other applicable law.

Section 2.6 Registered Office; Place of Business; Registered Agent. The Partnership shall maintain an office and principal place of business at 345 Park Avenue, New York, New York 10154 or such other place or places as the General Partner may designate from time to time. The Partnership shall maintain a registered office at c/o Intertrust Corporate Services Delaware Ltd., 200 Bellevue Parkway, Suite 2010, Bellevue Park Corporate Center, Wilmington, Delaware 19809. The name and address of the registered agent of the Partnership for service of process on the Partnership in the State of Delaware shall be Intertrust Corporate Services Delaware, Ltd., 200 Bellevue Parkway, Suite 210, Bellevue Park Corporate Center, Wilmington, Delaware 19809. The General Partner may from time to time change the registered agent or office by an amendment to the certificate of limited partnership of the Partnership.

ARTICLE III

MANAGEMENT

Section 3.1 General Partner.

(a) Blackstone Holdings III L.P. is the General Partner as of the date hereof. The General Partner shall cease to be the General Partner only if it (i) Withdraws from the Partnership for any reason (ii) consents in its sole discretion to resign as the General Partner or (iii) a Final Event with respect to it occurs. The General Partner may not be removed without its consent. There may be one or more General Partners. In the event that one or more other General Partners is admitted to the Partnership as such, all references herein to the “General Partner” in the singular form shall be deemed to also refer to such other General Partners as may be appropriate. The relative rights and responsibilities of such General Partners will be as agreed upon from time to time between them.

(b) Upon the Withdrawal from the Partnership or voluntary resignation of the last remaining General Partner, all of the powers formerly vested therein pursuant to this Agreement and the Partnership Act shall be exercised by a Majority in Interest of the Partners.

Section 3.2 Partner Voting, etc.

(a) Except as otherwise expressly provided herein and except as may be expressly required by the Partnership Act, Partners (including Special Partners), other than General Partners, as such shall have no right to, and shall not, take part in the management or control of the Partnership’s business or act for or bind the Partnership, and shall have only the rights and powers granted to Partners of the applicable class herein.

(b) To the extent a Partner is entitled to vote with respect to any matter relating to the Partnership, such Partner shall not be obligated to abstain from voting on any matter (or vote in any particular manner) because of any interest (or conflict of interest) of such Partner (or any Affiliate thereof) in such matter.

(d) Notwithstanding any other provision of this Agreement, any Limited Partner or Withdrawn Partner that fails to respond to a notice provided by the General Partner requesting the

consent, approval or vote (including, without limitation, with respect to any amendments pursuant to Section 7.14) of such Limited Partner or Withdrawn Partner within 14 days after such notice is sent to such Limited Partner or Withdrawn Partner shall be deemed to have given its affirmative consent or approval thereto.

Section 3.3 Management. (a) The management, control and operation of the Partnership and the formulation and execution of business and investment policy shall be vested in the General Partner. The General Partner shall have full control over the business and affairs of the Partnership, and shall, in its discretion, exercise all powers necessary and convenient for the purposes of the Partnership, including those enumerated in Section 2.5, on behalf and in the name of the Partnership. All decisions and determinations (howsoever described herein) to be made by the General Partner pursuant to this Agreement shall be made in its discretion, subject only to the express terms and conditions of this Agreement (including Section 7.4).

(b) Notwithstanding any provision of this Agreement to the contrary, the Partnership is hereby authorized, without the need for any further act, vote or consent of any Partner, (i) to execute and deliver, and to perform the Partnership’s obligations under, each agreement of the Partnership (including, without limitation, the applicable Fund Agreements), including, without limitation, serving as the managing member, general partner, special limited partner or limited partner, as the case may be, of the Funds, (ii) to execute and deliver the applicable Fund Agreements, as amended, restated and/or supplemented, and to perform the Partnership’s obligations, and to cause the Funds (subject to the applicable Fund Agreements) to perform their respective obligations, under the applicable Fund Agreements, (iii) to execute and deliver, and to perform the Partnership’s obligations, under the governing agreements of any other partnership, limited liability company, other company, corporation or other entity (each a “Partnership Affiliate”) of which the Partnership is to become a general partner or limited partner, member, shareholder or other equity interest owner, including, without limitation, serving as a general partner or limited partner, member, shareholder or other equity interest owner of each Partnership Affiliate and (iv) to take any action, in the applicable capacity, contemplated by or arising out of any applicable Fund Agreements.

(c) The General Partner and any other person designated by the General Partner, each acting individually, is hereby authorized and empowered, as an authorized signatory of the Partnership (the General Partner hereby authorizing and ratifying any of the following actions):

(i) to execute and deliver and/or file (in the name and on behalf of the Partnership) any agreement of the Partnership (including, without limitation, the applicable Fund Agreements) or of the Funds (including, without limitation, the applicable Fund Agreements) and any amendments, restatements and/or supplements thereof, the certificate of limited partnership of the Partnership (and any amendments, restatements and/or supplements of any of the foregoing) and any other certificates, notices, applications and other documents (and any amendments, restatements and/or supplements thereof) to be filed with any government or governmental or regulatory body, including, without limitation, any such document that may be necessary for the Partnership or the Funds to qualify to do business in a jurisdiction in which the Partnership or the Funds desires to do business; or

(ii) to prepare or cause to be prepared, and to sign, execute and deliver and/or file (including any such action, directly or indirectly through one or more other entities, in the name and on behalf of the Partnership and/or in the name and on behalf of the Partnership), (A) such documents, instruments, certificates and agreements as may be necessary or desirable in furtherance of the Partnership’s or the Funds’ purposes, (B) any certificates, forms, notices, applications and other documents to be filed with any government or governmental or regulatory body on behalf of the Partnership or the Funds, (C) any certificates, forms, notices, applications and other documents that may

be necessary or advisable in connection with any bank account of the Partnership or the Funds, and all checks, notes, drafts and other documents of the Funds that may be required in connection with any such bank account or any banking facilities or services that may be utilized by the Partnership or the Funds, (D) resolutions with respect to any of the foregoing matters (which resolutions, when executed by any person authorized as provided in this Section 3.3(c), each acting individually, shall be deemed to have been adopted by the Partners, the Partnership or the Funds, as applicable, for all purposes), and (E) any amendments, restatements and/or supplements of any of the foregoing.

The authority granted to any person (other than the General Partner) in this Section 3.3(c) may be revoked at any time by the General Partner by an instrument in writing signed by the General Partner.

Section 3.4 Responsibilities of Partners.

(a) Unless otherwise determined by the General Partner in a particular case, each Limited Partner (other than Special Partner) shall devote substantially all his or her time and attention to the businesses of the Partnership and its Affiliates, and each Special Partner shall not be required to devote any time or attention to the businesses of the Partnership or its Affiliates.

Section 3.5 Exculpation and Indemnification.

(a) Liability to Partners. Notwithstanding any other provision of this Agreement, whether express or implied, to the fullest extent permitted by law, no Partner nor any of such Partner’s representatives, agents or advisors nor any partner, member, officer, employee, representative, agent or advisor of the Partnership or any of its Affiliates (individually, a “Covered Person” and, collectively, the “Covered Persons”) shall be liable to the Partnership or any other Partner for any act or omission (in relation to the Partnership, this Agreement, any related document or any transaction or investment contemplated hereby or thereby) taken or omitted by a Covered Person (other than any act or omission constituting Cause) unless there is a final and non-appealable judicial determination and/or determination of an arbitrator that such Covered Person did not act in good faith. Each Covered Person shall be entitled to rely in good faith on the advice of legal counsel to the Partnership, accountants and other experts or professional advisors, and no action taken by any Covered Person in reliance on such advice shall in any event subject such person to any liability to any Partner or the Partnership. To the extent that, at law or in equity, a Partner has duties (including fiduciary duties) and liabilities relating thereto to the Partnership or to another Partner, to the fullest extent permitted by law, such Partner acting under this Agreement shall not be liable to the Partnership or to any such other Partner for its good faith reliance on the provisions of this Agreement. The provisions of this Agreement, to the extent that they expand or restrict the duties and liabilities of a Partner otherwise existing at law or in equity, are agreed by the Partners, to the fullest extent permitted by law, to modify to that extent such other duties and liabilities of such Partner. To the fullest extent permitted by law, the parties hereto agree that the General Partner shall be held to have acted in good faith for the purposes of this Agreement and its duties under the Partnership Act if it believes that it has acted honestly and in accordance with the specific terms of this Agreement.

(b) Indemnification. (i) To the fullest extent permitted by law, the Partnership shall indemnify and hold harmless (but only to the extent of the Partnership’s assets (including, without limitation, the remaining capital commitments of the Partners) each Covered Person from and against any and all claims, damages, losses, costs, expenses and liabilities (including, without limitation, amounts paid in satisfaction of judgments, in compromises and settlements, as fines and penalties and legal or other costs and reasonable expenses of investigating or defending against any claim or alleged claim), joint and several, of any nature whatsoever, known or unknown, liquidated or unliquidated (collectively, for purposes of this Section 3.5, “Losses”), arising from any and all claims, demands, actions, suits or proceedings, civil, criminal, administrative or investigative, in which the Covered Person may be involved, or threatened to be involved, as a party or otherwise, by reason of such Covered Person’s management of the affairs of the Partnership or which relate to or arise out of or in connection with the Partnership, its property, its business or affairs (other than claims, demands, actions, suits or proceedings, civil, criminal, administrative or investigative, arising out of any act or omission of such Covered Person constituting Cause); provided, that a Covered Person shall not be entitled to indemnification under this Section 3.5(b) with respect to any claim, issue or matter if there is a final and non-appealable judicial determination and/or determination of an arbitrator that such Covered Person did not act in good faith; provided further, that if such Covered Person is a Partner or a Withdrawn Partner, such Covered Person shall bear its share of such Losses in accordance with such Covered Person’s Profit Sharing Percentage in the Partnership as of the time of the actions or omissions that gave rise to such Losses. To the fullest extent permitted by law, expenses (including legal fees) incurred by a Covered Person (including, without limitation, the General Partner) in defending any claim, demand, action, suit or proceeding may, with the approval of the General Partner, from time to time, be advanced by the Partnership prior to the final disposition of such claim, demand, action, suit or proceeding upon receipt by the Partnership of a written undertaking by or on behalf of the Covered Person to repay such amount to the extent that it shall be subsequently determined that the Covered Person is not entitled to be indemnified as authorized in this Section 3.5(b), and the Partnership and its Affiliates shall have a continuing right of offset against such Covered Person’s interests/investments in the Partnership and such Affiliates and shall have the right to withhold amounts otherwise distributable to such Covered Person to satisfy such repayment obligation. If a Partner institutes litigation against a Covered Person which gives rise to an indemnity obligation hereunder, such Partner shall be responsible, up to the amount of such Partner’s Interests and remaining capital commitment, for such Partner’s pro rata share of the Partnership’s expenses related to such indemnity obligation, as determined by the General Partner. The Partnership may purchase insurance, to the extent available at reasonable cost, to cover losses, claims, damages or liabilities covered by the foregoing indemnification provisions. Partners will not be personally obligated with respect to indemnification pursuant to this Section 3.5(b). The General Partner shall have the authority to enter into separate agreements with any Covered Person in order to give effect to the obligations to indemnify pursuant to this Section 3.5(b).

(ii) (A) Notwithstanding anything to the contrary herein, for greater certainty, it is understood and/or agreed that the Partnership’s obligations hereunder are not intended to render the Partnership as a primary indemnitor for purposes of the indemnification, advancement of expenses and related provisions under applicable law governing the Funds and/or a particular portfolio entity through which an investment is indirectly held. It is further understood and/or agreed that a Covered Person shall first seek to be so indemnified and have such expenses advanced in the following order of priority (to the extent available and permitted pursuant to the terms of the applicable Fund Agreement and applicable insurance policies): first, out of proceeds available in respect of applicable insurance policies maintained by the applicable portfolio entity and/or the Funds; second, by the applicable portfolio entity through which such investment is indirectly held and third, by the Funds (only to the extent the foregoing sources have been exhausted).

(B) The Partnership’s obligation, if any, to indemnify or advance expenses to any Covered Person shall be reduced by any amount that such Covered Person may collect as indemnification or advancement from the Funds and/or the applicable portfolio entity (including by virtue of any applicable insurance policies maintained thereby), and to the extent the Partnership (or any Affiliate thereof) pays or causes to be paid any amounts that should have been paid by the Funds and/or the applicable portfolio entity (including by virtue of any applicable insurance policies maintained thereby), it is agreed among the Partners that the Partnership shall have a subrogation claim against the Funds and/or such portfolio entity in respect of such advancement or payments (to the extent available and permitted pursuant to the terms of the applicable Fund Agreement and applicable insurance policies). The General Partner and the Partnership shall be specifically empowered to structure any such advancement or payment as a loan or other arrangement (except for a loan to an executive officer of Blackstone, which shall not be permitted) as the General Partner may determine necessary or advisable to give effect to or otherwise implement the foregoing.

Section 3.6 Representations of Partners. (a) Each Limited Partner and Special Partner by execution of this Agreement (or by otherwise becoming bound by the terms and conditions hereof as provided herein or in the Partnership Act) represents and warrants to every other Partner and to the Partnership, except as may be waived by the General Partner, that such Partner is acquiring each of such Partner’s Interests for such Partner’s own account for investment and not with a view to resell or distribute the same or any part thereof, and that no other person has any interest in any such Interest or in the rights of such Partner hereunder; provided, that a Partner may choose to make transfers for estate and charitable planning purposes (pursuant to Section 6.3(a) and otherwise in accordance with the terms hereof). Each Limited Partner and Special Partner represents and warrants that he or she understands that the Interests have not been registered under the Securities Act, and therefore such Interests may not be resold without registration under such act or exemption from such registration, and that accordingly such Partner must bear the economic risk of an investment in the Partnership for an indefinite period of time. Each Limited Partner and Special Partner represents and warrants, unless otherwise agreed to by the General Partner in writing, that such Partner is both an “accredited investor” within the meaning of Rule 501 of Regulation D under the Securities Act (an “Accredited Investor”), and a “qualified purchaser” or a “knowledgeable employee” within the meaning of the Investment Company Act (and the rules and regulations promulgated thereby) (a “Qualified Purchaser”). Each Limited Partner and Special Partner represents that such Partner has such knowledge and experience in financial and business matters, that such Partner is capable of evaluating the merits and risks of an investment in the Partnership, and that he or she is able to bear the economic risk of such investment. Each Limited Partner and Special Partner represents that such Partner’s overall commitment to the Partnership and other investments which are not readily marketable is not disproportionate to the Partner’s net worth and the Partner has no need for liquidity in the Partner’s investment in Interests. Each Limited Partner and Special Partner represents that to the full satisfaction of the Partner, the Partner has been furnished any materials that such Partner has requested relating to the Partnership and the offering of Interests and has been afforded the opportunity to ask questions of representatives of the Partnership concerning the terms and conditions of the offering of Interests and any matters pertaining thereto and to obtain any other additional information relating thereto. Each Limited Partner and Special Partner represents that the Partner has consulted to the extent deemed appropriate by the Partner with the Partner’s own advisors as to the financial, tax, legal and related matters concerning an investment in Interests and on that basis believes that an investment in the Interests is suitable and appropriate for the Partner.

contribution shall serve as confirmation thereof and/or (2) repays any portion of the principal amount of a Firm Advance, and such Partner hereby agrees that such repayment shall serve as confirmation thereof.

Section 3.7 Tax Representation and Further Assurances.

(a) Each Limited Partner and Special Partner, upon the request of the General Partner, agrees to perform all further acts and to execute, acknowledge and deliver any documents that may be reasonably necessary to comply with the General Partner’s or the Partnership’s obligations under applicable law or to carry out the provisions of this Agreement.

(b) Each Limited Partner and Special Partner certifies that (A) if the Limited Partner or Special Partner is a United States person (as defined in the Code) (x) (i) the Limited Partner or Special Partner’s name, social security number (or, if applicable, employer identification number) and address provided to the Partnership and its Affiliates pursuant to an IRS Form W 9, Request for Taxpayer Identification Number Certification (“W-9”) or otherwise are correct and (ii) the Limited Partner or Special Partner will complete and return a W-9 and (y) (i) the Limited Partner or Special Partner is a United States person (as defined in the Code) and (ii) the Limited Partner or Special Partner will notify the Partnership within 60 days of a change to foreign (non-United States) status or (B) if the Limited Partner or Special Partner is not a United States person (as defined in the Code) (x) (i) the information on the completed IRS Form W-8BEN, Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding and Reporting (Individuals) (“W-8BEN”), IRS Form W-8BEN-E, Certificate of Status of Beneficial Owner for United States Tax Withholding and Reporting (Entities) (“W-8BEN-E”), or other applicable form, including but not limited to IRS Form W-8IMY, Certificate of Foreign Intermediary, Foreign Flow-Through Entity, or Certain U.S. Branches for United States Tax Withholding and Reporting (“W-8IMY”), or otherwise is correct and (ii) the Limited Partner or Special Partner will complete and return the applicable IRS form, including but not limited to a W-8BEN, W-8BEN-E or W-8IMY, and (y) (i) the Limited Partner or Special Partner is not a United States person (as defined in the Code) and (ii) the Limited Partner or Special Partner will notify the Partnership within 60 days of any change of such status. Each Limited Partner and Special Partner agrees to provide such cooperation and assistance, including but not limited to properly executing and providing to the Partnership in a timely manner any tax or other documentation or information that may be reasonably requested by the Partnership or the General Partner.

(d) Each Limited Partner and Special Partner acknowledges and agrees that if it provides information that is in anyway materially misleading, or if it fails to provide the Partnership or its agents with any information requested hereunder, in either case in order to satisfy the Partnership’s obligations, the General Partner reserves the right to take any action and pursue any remedies at its disposal, including (i) requiring such Limited Partner or Special Partner to Withdraw for Cause and (ii) withholding or deducting any costs caused by such Limited Partner’s action or inaction from amounts otherwise distributable to such Limited Partner or Special Partner from the Partnership and its Affiliates.

ARTICLE IV

CAPITAL OF THE PARTNERSHIP

Section 4.1 Capital Contributions by Partners.

(a) Each Limited Partner may be required to make capital contributions to the Partnership at such times and in such amounts as may be determined by the General Partner from time to time or as may be mutually agreed (including, where applicable, as set forth in such Limited Partner’s Admission Letter). Special Partners shall not be required to make capital contributions to the Partnership except as specifically set forth in this Agreement or as they otherwise agree; provided, that the General Partner and any Special Partner may agree from time to time that such Special Partner shall make an additional capital contribution to the Partnership.

(b) Each capital contribution by a Partner shall be credited to the appropriate Capital Account (or sub account) of such Partner in accordance with Section 5.2 and maintained in the books and records of the Partnership.

(c) The General Partner may elect on a case-by-case basis with respect to any Partner (including any additional Partner admitted to the Partnership pursuant to Section 6.1 but excluding any Partner that is also an executive officer of Blackstone) to (i) cause the Partnership to loan to any such Partner the amount of any capital contribution to the Partnership by such Partner on terms determined by the General Partner, (ii) permit any such Partner to make a required capital contribution to the Partnership in installments on terms determined by the General Partner or (iii) permit any such Partner to incur indebtedness to the Lender or Guarantor for the purpose of financing the purchase of an Interest in the Partnership and/or the amount of one or more capital contributions to the Partnership, which indebtedness shall be evidenced by an Investor Note and secured by such Interest, all other Interests of such Partner in the Partnership (if any) and, if applicable, interests of such Partner in any Blackstone Collateral Entities, in each case on terms which were or are approved by the General Partner.

Section 4.2 Interest. There shall be no interest on the balances of the Partners’ Capital Accounts.

Section 4.3 Partial Withdrawals of Capital. Each Partner may make partial withdrawals in respect of such Partner’s Capital Account(s) in such amounts and at such times as may be permitted by the General Partner from time to time. Payments with respect to any such partial withdrawals will be made at such times and in cash or in kind as may be determined by the General Partner.

ARTICLE V

PARTICIPATION IN PROFITS AND LOSSES

Section 5.1 General Accounting Matters.

(a) Net Income (Loss) shall be determined by the General Partner at the end of each accounting period and shall be allocated as described in Section 5.4.

(b) “Net Income (Loss)” means, with respect to any accounting period, the sum of: (i) Fund Net Income (Loss) for such period, (ii) Other Net Income (Loss) for such period, and (iii) any net income (loss) relating to the Performance Allocation (including any property received from each Fund

with respect thereto) for such period. The General Partner may from time to time (i) establish additional separate categories of Net Income (Loss) and/or subcategories within any one or more categories of Net Income (Loss) (each of which subcategories for purposes of this Agreement shall also be deemed a separate “category” of Net Income (Loss)) with respect to the Partnership as it may determine and (ii) calculate and allocate Net Income (Loss) for each such category on a separate basis.

(c) Net Income (Loss) with respect to any accounting period shall be determined in accordance with the accounting method used by the Partnership for U.S. federal income tax purposes with the following adjustments: (i) any income of the Partnership that is exempt from U.S. federal income taxation and not otherwise taken into account in computing Net Income (Loss) shall be added to such taxable income or loss; (ii) if any asset has a value in the books of the Partnership that differs from its adjusted tax basis for U.S. federal income tax purposes, any depreciation, amortization or gain resulting from a disposition of such asset shall be calculated with reference to such value; (iii) upon an adjustment to the value of any asset in the books of the Partnership pursuant to Regulation Section 1.704-1 (b) (2), the amount of the adjustment shall be included as gain or loss in computing such taxable income or loss; (iv) any expenditures of the Partnership not deductible in computing taxable income or loss, not properly capitalizable and not otherwise taken into account in computing Net Income (Loss) pursuant to this definition shall be treated as deductible items; (v) any income that is payable to Partnership employees in respect of “phantom interests” awarded by the General Partner to employees shall be included as an expense in the calculation of Net Income (Loss), and (vi) items of income and expense (including interest income and overhead and other indirect expenses) of the Partnership, General Partner and other Affiliates of the Partnership shall be allocated among the Partnership, General Partner and such Affiliates as determined by the General Partner. Any adjustments to Net Income (Loss) by the General Partner, including adjustments for items of income accrued but not yet received, unrealized gains, items of expense accrued but not yet paid, unrealized losses, reserves (including reserves for taxes, bad debts, actual or threatened litigation, or any other expenses, contingencies or obligations) and other appropriate items shall be made in accordance with U.S. generally accepted accounting principles (“GAAP”); provided, that the General Partner shall not be required to make any such adjustments; provided further, that the General Partner may elect from time to time to calculate and allocate Net Income (Loss) attributable to any item of income or expense or any investment of the Partnership on a basis separate from the Partnership’s other business.

(d) An accounting period shall be a Fiscal Year, except that, at the option of the General Partner, an accounting period will terminate and a new accounting period will begin on the admission date of an additional Partner or the Withdrawal Date of a Withdrawn Partner, if any such date is not the first day of a Fiscal Year, or on any other date determined by the General Partner in its sole discretion. If any event referred to in the preceding sentence occurs and the General Partner does not elect to terminate an accounting period and begin a new accounting period, then the General Partner may make such adjustments as its deems appropriate to the Partners’ Profit Sharing Percentages for the accounting period in which such event occurs (prior to any allocations or adjustments to Profit Sharing Percentages pursuant to Section 5.3) to reflect the Partners’ average Profit Sharing Percentages during such accounting period.

(e) In establishing Profit Sharing Percentages pursuant to Section 5.3, the General Partner may consider such factors as it deems appropriate in its sole discretion.

(f) All determinations, valuations and other matters of judgment required to be made for accounting purposes under this Agreement shall be made by the General Partner and approved by the Partnership’s independent accountants. Such approved determinations, valuations and other accounting matters shall be conclusive and binding on all Partners, all Withdrawn Partners, their successors, heirs, estates or legal representatives and any other person, and to the fullest extent permitted

by law, no such person shall have the right to an accounting or an appraisal of the assets of the Partnership or any successor thereto.

Section 5.2 Capital Accounts.

(a) There shall be established for each Partner in the books of the Partnership, to the extent and at such times as may be appropriate, one or more Capital Accounts (or sub accounts) as the General Partner may deem to be appropriate for purposes of accounting for such Partner’s interests in the capital and Net Income (Loss) of the Partnership. A separate Capital Account (or sub account) shall be established for each Partner with respect to Fund Net Income (Loss), Other Net Income (Loss) and the Performance Allocation, provided that each Partner shall have a single Capital Account for U.S. federal income tax purposes. In addition, the General Partner may also establish separate Capital Accounts (or sub accounts) for each Partner with respect to any other categories of Net Income (Loss) (if any) as it may determine in its sole discretion.

(b) As of the end of each accounting period or, in the case of a capital contribution to the Partnership by one or more of the Partners or a distribution by the Partnership to one or more of the Partners, at the time of such contribution or distribution, (i) the appropriate Capital Accounts (or sub accounts) of each Partner shall be credited with the following amounts: (A) the amount of cash and the value of any property contributed by such Partner to the capital of the Partnership during such accounting period and (B) the Net Income allocated to such Partner in respect of such Capital Account (or sub account) for such accounting period; and (ii) the appropriate Capital Accounts (or sub accounts) of each Partner shall be debited with the following amounts: (x) the amount of cash, the principal amount of any subordinated promissory note of the Partnership referred to in Section 6.5 (as such amount is paid) and the value of any property distributed to such Partner during such accounting period and (y) the Net Loss allocated to such Partner in respect of such Capital Account (or sub account) for such accounting period.

Section 5.3 Profit Sharing Percentages.

(a) On or about the beginning of each annual accounting period (or at such other times as determined by the General Partner in its sole discretion), the General Partner shall establish the profit sharing percentage (the “Profit Sharing Percentage”) of each Partner in each category of Net Income (Loss) for such annual accounting period pursuant to Section 5.1(a), taking into account such factors as the General Partner deems appropriate, including those referred to in Section 5.1. The General Partner may establish different Profit Sharing Percentages for any Partner on a Fund-by-Fund basis with respect to each different category of Net Income (Loss) for each such Fund (including, without limitation, Fund Net Income (Loss), Other Net Income (Loss) and the Performance Allocation) as it may determine in its sole discretion. The Profit Sharing Percentages for any Partner with respect to each different category of Net Income (Loss) for any individual Fund (including, without limitation, Fund Net Income (Loss), Other Net Income (Loss) and the Performance Allocation) may be the same or different as the General Partner may determine in its sole discretion, subject to legal, tax regulatory and other considerations. The Profit Sharing Percentage(s) of any Partner for any annual accounting period may be adjusted in the case of the Withdrawal of a Partner pursuant to Section 6.5(d) and in the case of the admission of any Partner to the Partnership as an additional Partner pursuant to Section 6.1(b). Notwithstanding the foregoing, the General Partner may also adjust the Profit Sharing Percentage(s) of any Partner for any annual accounting period at the end of such annual accounting period in its sole discretion. For the avoidance of doubt, the General Partner shall take into account and exclude the Partnership’s capital contributions and related interests in the Funds made prior to a Partner’s admission to the Partnership in determining such Partner’s Capital Account balance and Profit Sharing Percentage(s).

(b) The General Partner may elect to allocate to the Partners less than 100% of the Profit Sharing Percentages of any category of Net Income (Loss) for any annual accounting period at the time specified in Section 5.3(a) for the annual fixing of Profit Sharing Percentages (any remainder of such Profit Sharing Percentages shall be the General Partner’s). In connection with the foregoing, the General Partner shall take such other actions and make such adjustments (including to the Partnership’s books and records) as the General Partner determines are necessary or appropriate in its discretion.

Section 5.4 Allocations of Net Income (Loss). Except as otherwise provided in this Agreement, Net Income (Loss) and, to the extent necessary, individual categories thereof or components of income, gain, loss or deduction, of the Partnership shall be allocated among the Partners in a manner that as closely as possible gives economic effect to the provisions of this Article V and the other relevant provisions of this Agreement, as determined in the reasonable discretion of the General Partner.

Section 5.5 Liability of Partners Section 5.6 . Except as otherwise provided in the Partnership Act, no Partner shall be personally obligated for any debt, obligation or liability of the Partnership or of any other Partner solely by reason of being a Partner. In addition, in no way does any of the foregoing limit any Partner’s obligations to make capital contributions as provided hereunder.

Section 5.6 Repurchase Rights, etc. The General Partner may from time to time establish such repurchase rights and/or other requirements with respect to the Partners’ Interests in the Partnership as the General Partner may determine. The General Partner shall have authority to (a) withhold any distribution otherwise payable to any Partner until any such repurchase rights have lapsed, or any such requirements have been satisfied, (b) pay any distribution to any Partner that is Contingent as of the distribution date and require the refund of any portion of such distribution that is Contingent as of the Withdrawal Date of such Partner, (c) amend any previously established repurchase or other requirements from time to time and (d) make such exceptions thereto as it may determine on a case-by-case basis.

Section 5.7 Distributions.

(a) The Partnership shall make distributions of available cash (subject to reserves and other adjustments as provided herein) or other property to the Partners at such times and in such amounts as are determined by the General Partner in its sole discretion; it being understood that certain Partners may receive cash while others may receive other property (e.g. Fund units) as determined by the General Partner in its sole discretion. The General Partner shall, if it deems it appropriate, determine the availability for distribution of, and distribute, cash or other property separately for each category of Net Income (Loss) established pursuant to Section 5.1(a). Subject to Section 5.1(e), distributions of cash or other property with respect to Performance Allocation shall be made among Partners in accordance with their respective Profit Sharing Percentages with respect thereto. In accordance with the terms of each Fund Agreement, with respect to each Partner, the General Partner shall elect to receive the Performance Allocation from each Fund in cash or property (and to redeem any property for other property in accordance with the terms of each Fund Agreement), as determined by the General Partner in its sole discretion.

(b) Subject to the Partnership’s having sufficient available cash in the reasonable judgment of the General Partner, the Partnership may make cash distributions to each Partner with respect to each Fiscal Year of the Partnership in an aggregate amount at least equal to the total U.S. federal, New York State and New York City income and other taxes that would be payable by such Partner with respect to all categories of GP-Related Net Income (Loss) allocated to such Partner for such Fiscal Year, the amount of which shall be calculated (i) on the assumption that each Partner is an individual subject to the then prevailing maximum rate of U.S. federal, New York State and New York City and other income

taxes (including, without limitation, taxes under Section 1411 of the Code), (ii) taking into account the limitations on the deductibility of expenses and other items for U.S. federal income tax purposes and (iii) taking into account any differential in applicable rates due to the type and character of GP-Related Net Income (Loss) allocated to such Partner and (iv) taking into account any other distribution made to such Partner under this Agreement during such Fiscal Year. Notwithstanding the provisions of the foregoing sentence, the General Partner may refrain from making any distribution if, in the reasonable judgment of the General Partner, such distribution would be prohibited by § 17-607 of the Partnership Act.

(c) The General Partner may provide that a Partner’s right to distributions and investments of the Partnership may be subject to repurchase by the Partnership during such period as the General Partner shall determine (a “Repurchase Period”). Any Contingent distributions from investments subject to repurchase rights will be withheld by the Partnership and will be distributed to the recipient thereof (together with interest thereon at rates determined by the General Partner from time to time) as the recipient’s rights to such distributions become Non-Contingent (by virtue of the expiration of the applicable Repurchase Period or otherwise). The General Partner may elect in an individual case to have the Partnership distribute any Contingent distribution to the applicable recipient thereof irrespective of whether the applicable Repurchase Period has lapsed. If a Partner withdraws from the Partnership for any reason other than his or her death, Total Disability or Incompetence, the undistributed share of such Partner’s Interest that remains Contingent as of the applicable Withdrawal Date shall be repurchased by the Partnership at a purchase price determined at such time by the General Partner. Unless determined otherwise by the General Partner, the repurchased portion thereof will be allocated among the remaining Partners in proportion to their respective Profit Sharing Percentages or if no other Partner has an applicable Profit Sharing Percentage, to the General Partner; provided, that the General Partner may allocate the Withdrawn Partner’s share of applicable unrealized investment income attributable to the period after the Withdrawn Partner’s Withdrawal Date on any basis it may determine, including to existing or new Partners who did not previously have any applicable interests, except that, in any event, each Limited Partner shall be allocated a share of such unrealized investment income equal to its respective Profit Sharing Percentages with respect thereto.

Section 5.8 Business Expenses. The Partnership shall reimburse the Partners for reasonable travel, entertainment and miscellaneous expenses incurred by them in the conduct of the Partnership’s business in accordance with rules and regulations established by the General Partner from time to time.

ARTICLE VI

ADDITIONAL PARTNERS; WITHDRAWAL OF PARTNERS;

SATISFACTION AND DISCHARGE OF

PARTNERSHIP INTERESTS; TERMINATION

Section 6.1 Additional Partners. (a) Effective on the first day of any year (or on such other date as shall be determined by the General Partner in its sole discretion), the General Partner shall have the right to admit one or more additional or substitute persons into the Partnership as Limited Partners or Special Partners. Each such person shall make the representations and certifications with respect to itself set forth in Section 3.6 and Section 3.7. The General Partner shall determine and negotiate with each additional Partner (which term, for the avoidance of doubt, shall include, without limitation, any substitute Partner) all terms of such additional Partner’s participation in the Partnership, including (as applicable and without limitation) such additional Partner’s initial capital contribution, and Profit Sharing Percentage(s). Each additional Partner shall have such voting rights as may be determined by the General Partner unless, upon the admission to the Partnership of any Special Partner, the General

Partner shall designate that such Special Partner shall not have such voting rights (any such Special Partner being called a “Nonvoting Special Partner”).

(b) Except as may be otherwise determined by the General Partner, in the case of the admission of any Partner to the Partnership as an additional Partner, the Profit Sharing Percentages of the other Partners with respect to any category of Net Income (Loss) for any Fund may be reduced on a pro rata basis (based on such Partners’ respective Profit Sharing Percentages in effect immediately prior to such admission) by an amount equal to the Profit Sharing Percentage allocated to such new Partner with respect to each such category of Net Income (Loss) for each such Fund.

(c) Each additional Partner may be required to contribute to the Partnership a share of the Partnership’s total capital, at such times and in such amounts as shall be determined by the General Partner or as may be mutually agreed (including, where applicable, as set forth in such Limited Partner’s Admission Letter) in accordance with Section 4.1.

(d) The admission of an additional Partner will be evidenced by (i) the execution of a counterpart copy of, or counter-signature page with respect to, this Agreement by such additional Partner or (ii) the execution of an amendment to this Agreement by all the Partners (including the additional Partner), as determined by the General Partner or (iii) the execution by such additional Partner of any other writing evidencing the intent of such person to become a substitute or additional Limited Partner or Special Partner and to be bound by the terms of this Agreement and such writing being accepted by the General Partner on behalf of the Partnership (which, for the avoidance of doubt, may be in the form of an electronic acknowledgement (or click through) on a web-based portal maintained by Blackstone).

Section 6.2 Withdrawal of Partners. (a) Any Partner (i) may be removed from the Partnership at any time by the General Partner for any reason (including, but not limited to, as indicated in any Admission Letter applicable to such Partner) or no reason or (ii) shall be deemed to have withdrawn from the Partnership upon such Partner’s death, Total Disability or Incompetence. Any Partner may Withdraw voluntarily from the Partnership subject to the prior written consent of the General Partner. The General Partner generally intends to permit voluntary Withdrawals on the last day of the calendar month (or on such other date as shall be determined by the General Partner in its sole discretion), on not less than 15 days’ prior written notice by the Partner to the General Partner (or on such shorter notice period as may be mutually agreed upon between such Partner and the General Partner); provided, that a Partner may not voluntarily Withdraw without the consent of the General Partner if such Withdrawal would (i) cause the Partnership to be in default under any of its contractual obligations or (ii) in the reasonable judgment of the General Partner, have a material adverse effect on the Partnership or its business; provided further, that to the extent a Withdrawal relates to a Capital Account relating to an investment of capital in the Funds, such Withdrawal may only be made to the extent permitted by the applicable Fund Agreements.

(b) Upon the Withdrawal of any Partner, including by the occurrence of any Withdrawal event under the Partnership Act with respect to any Partner, such Partner shall thereupon cease to be a Partner, except as expressly provided herein and the Partnership Act.

(c) If the General Partner determines that it shall be in the best interests of the Partnership for any Partner (including any Partner who has given notice of voluntary Withdrawal pursuant to paragraph (a) above) to Withdraw from the Partnership (whether or not Cause exists) with respect to such Partner’s Interest, such Partner, upon written notice by the General Partner to such Partner, shall be required to Withdraw with respect to such Partner’s Interest, as determined by the General Partner, as of a date specified in such notice, which date shall be on or after the date of such notice. If the General

Partner requires any Partner to Withdraw for Cause with respect to such Partner’s Interest, such notice shall state that it has been given for Cause and shall describe the particulars thereof in reasonable detail.

(d) Upon the Total Disability of a Limited Partner, such Partner shall thereupon cease to be a Limited Partner with respect to such Partner’s Interest; provided, that the General Partner may elect to admit such Withdrawn Partner to the Partnership as a Nonvoting Special Partner with respect to such Partner’s Interest, with such Interest as the General Partner may determine. The determination of whether any Partner has suffered a Total Disability shall be made by the General Partner in its sole discretion after consultation with a qualified medical doctor. In the absence of agreement between the General Partner and such Partner, each party shall nominate a qualified medical doctor and the two doctors shall select a third doctor, who shall make the determination as to Total Disability.

(e) The withdrawal from the Partnership of any Partner shall not, in and of itself, affect the obligations of the other Partners to continue the Partnership during the remainder of its term. A Withdrawn General Partner shall remain liable for all obligations of the Partnership incurred while it was a General Partner and resulting from its acts or omissions as a General Partner to the fullest extent provided by law.

Section 6.3 Partnership Interests Not Transferable. (a) No Partner may sell, assign, pledge or otherwise transfer or encumber all or any portion of such Partner’s Interest other than as permitted by written agreement between such Partner and the Partnership; provided, that this Section 6.3 shall not impair transfers by operation of law, transfers by will or by other testamentary instrument occurring by virtue of the death or dissolution of a Partner, or transfers required by trust agreements; provided further, that a Limited Partner may transfer, for estate planning purposes, up to 25% of his or her Profit Sharing Percentage to any estate planning trust, limited partnership, or limited liability company with respect to which a Limited Partner controls investments related to any interest in the Partnership held therein (an “Estate Planning Vehicle”). Each Estate Planning Vehicle will be a Nonvoting Special Partner. Such Limited Partner and the Nonvoting Special Partner shall be jointly and severally liable for all obligations of both such Limited Partner and such Nonvoting Special Partner with respect to the Partnership, as the case may be. The General Partner may at its sole option exercisable at any time require any Estate Planning Vehicle to withdraw from the Partnership on the terms of this Article VI. Except as provided in the second proviso to the first sentence of this Section 6.3, no assignee, legatee, distributee, heir or transferee (by conveyance, operation of law or otherwise) of the whole or any portion of any Partner’s Interest shall have any right to be a Partner without the prior written consent of the General Partner (which consent may be withheld without giving reason therefor). Notwithstanding the granting of a security interest in the entire Interest of any Partner, such Partner shall continue to be a Partner of the Partnership.

(b) Notwithstanding any provision hereof to the contrary, no sale or transfer of any interest in the Partnership may be made except in compliance with all federal, state and other applicable laws, including federal and state securities laws.

Section 6.4 Consequences upon Withdrawal of a Partner.

(a) The Withdrawal of a Partner shall not dissolve the Partnership if at the time of such Withdrawal there are one or more remaining Partners (including the General Partner) and any one or more of such remaining Partners continue the business of the Partnership (any and all such remaining Partners being hereby authorized to continue the business of the Partnership without dissolution and hereby agreeing to do so).

(b) The Partnership shall not be dissolved, in and of itself, by the Withdrawal of any Partner, but shall continue with the surviving or remaining Partners as partners thereof in accordance with and subject to the terms and provisions of this Agreement.

Section 6.5 Satisfaction and Discharge of a Withdrawn Partner’s Interest. (a) The terms of this Section 6.5 shall apply to the Interest of a Withdrawn Partner. The term “Settlement Date” shall mean the date as of which a Withdrawn Partner’s Interest in the Partnership is settled as determined under paragraph (b) below.

(b) Except where a later date for the settlement of a Withdrawn Partner’s Interest in the Partnership may be agreed to by the General Partner and a Withdrawn Partner, a Withdrawn Partner’s Settlement Date shall be his or her Withdrawal Date; provided, that if a Withdrawn Partner’s Withdrawal Date or Settlement Date is not the last day of a month, then the General Partner may elect in its discretion for the Withdrawal Date or the Settlement Date to be the last day of the month following the Withdrawal Date or Settlement Date as the case may be. During the interval, if any, between a Withdrawn Partner’s Withdrawal Date and Settlement Date, such Withdrawn Partner shall (subject to such Partner’s Admission Letter, as applicable) have the same rights and obligations with respect to capital contributions, interest on capital, allocations of Net Income (Loss) and distributions as would have applied had such Withdrawn Partner remained a Partner of the Partnership during such period.

(c) In the event of the Withdrawal of a Partner, the General Partner shall promptly after such Withdrawn Partner’s Settlement Date (i) determine and allocate to the Withdrawn Partner’s Capital Account such Withdrawn Partner’s allocable share of the Net Income (Loss) of the Partnership for the period ending on such Settlement Date in accordance with Article V and (ii) credit the Withdrawn Partner’s Capital Account with interest in accordance with Section 5.2. In making the foregoing calculations, the General Partner shall be entitled to establish such reserves (including reserves, taxes, bad debts, unrealized losses, actual or threatened litigation or any other expenses, contingencies or obligations) as it deems appropriate. Except as provided in this Section 6.5(c) and unless otherwise determined by the General Partner in a particular case, a Withdrawn Partner shall not be entitled to receive any amounts in respect of the annual accounting period during which such Partner Withdraws from the Partnership (whether or not previously awarded or allocated) or any amounts in respect of prior annual accounting periods that have not been paid or allocated (whether or not previously awarded) as of such Withdrawn Partner’s Withdrawal Date.

(d) From and after the Settlement Date of a Withdrawn Partner, such Partner’s Profit Sharing Percentages in respect of each category of Net Income (Loss) of the Partnership shall be reduced to zero (or in the case of a partial Withdrawal, shall be reduced proportionately based on the percentage of the Interest withdrawn by the relevant Partner), and (i) the Profit Sharing Percentages of all of the remaining Partners shall be adjusted pro rata to their respective Profit Sharing Percentages in such category of Net Income (Loss) of the Partnership at such time or (ii) the Profit Sharing Percentages of the General Partner shall be adjusted to include the Profit Sharing Percentages of the Withdrawn Partner, or any combination of the foregoing, in each case, as determined by the General Partner in its sole discretion.

(e) Upon the Withdrawal from the Partnership of a Partner such Withdrawn Partner thereafter shall not, except as expressly provided in this Section 6.5, have any rights of a Partner (including voting rights), and, except as expressly provided in this Section 6.5, such Withdrawn Partner shall not have any interest in any category of the Partnership’s Net Income (Loss) (including, without limitation, Fund Net Income (Loss), Other Net Income (Loss) or the Performance Allocation) or in distributions, investments or other assets related to such Partner’s Interest. If a Partner Withdraws from the Partnership for any reason other than for Cause, then the Withdrawn Partner shall be entitled to

receive, at the time or times specified in Section 6.5(g) below, in satisfaction and discharge in full of the Withdrawn Partner’s Interest in the Partnership, payment equal to the aggregate positive balance, if any, as of the Settlement Date of the Withdrawn Partner’s Capital Account (or portion thereof, as applicable), subject to all the terms and conditions of paragraphs (a)-(o) of this Section 6.5. If the amount determined pursuant to the language above is an aggregate negative balance, the Withdrawn Partner shall pay the amount thereof to the Partnership upon demand by the General Partner on or after the date of the statement referred to in Section 6.5(g) below; provided, that if the Withdrawn Partner was solely a Special Partner on his or her Withdrawal Date, such payment shall be required only to the extent of any amounts payable to such Withdrawn Partner pursuant to this Section 6.5. Any aggregate negative balance in the Capital Accounts of a Withdrawn Partner who was solely a Special Partner, upon the settlement of such Withdrawn Partner’s Interest in the Partnership pursuant to this Section 6.5, shall be allocated among the other Partners’ Capital Accounts in accordance with their respective Profit Sharing Percentages in the categories of Net Income (Loss) giving rise to such negative balance as determined by the General Partner as of such Withdrawn Partner’s Settlement Date. In the settlement of any Withdrawn Partner’s Interest in the Partnership, no value shall be ascribed to goodwill, the Partnership name or in anticipation of any value the Partnership or any successor thereto might have in the event the Partnership or any interest therein were to be sold in whole or in part.

(ii) Notwithstanding clause (i) of this Section 6.5(e), in the case of a Partner whose Withdrawal with respect to such Partner’s Interest resulted from such Partner’s death or Incompetence, such Partner’s estate or legal representative, as the case may be, may elect, at the time described below, to receive a Nonvoting Special Partner Interest and retain such Partner’s Profit Sharing Percentage in all (but not less than all) illiquid investments of the Partnership in lieu of a cash payment (or promissory note) in settlement of that portion of the Withdrawn Partner’s Interest. The election referred to above shall be made within 60 days after the Withdrawn Partner’s Settlement Date, based on a statement of the settlement of such Withdrawn Partner’s Interest in the Partnership pursuant to this Section 6.5.

(f) The General Partner may elect, in lieu of payment in cash of any amount payable to a Withdrawn Partner pursuant to paragraph (e) above, to have the Partnership issue the Withdrawn Partner a subordinated promissory note and/or to distribute in-kind to the Withdrawn Partner such Withdrawn Partner’s pro rata share (as determined by the General Partner) of any securities or other investments of the Partnership in relation to such Partner’s Interest. If any such distributions in-kind are made to a Withdrawn Partner in respect of its Interest under this paragraph (g), the amount described in paragraph (e) shall be reduced by the value of such distribution as valued on the latest balance sheet of the Partnership in accordance with generally accepted accounting principles or, if not appearing on such balance sheet, as reasonably determined by the General Partner.

(g) Within 120 days after the Settlement Date, the General Partner shall submit to the Withdrawn Partner a statement of the settlement of such Withdrawn Partner’s Interest in the Partnership pursuant to this Section 6.5 together with any cash payment, subordinated promissory note and in kind distributions to be made to such Partner as shall be determined by the General Partner. The General Partner shall submit to the Withdrawn Partner supplemental statements with respect to additional amounts payable to or by the Withdrawn Partner in respect of the settlement of his or her Interest in the Partnership promptly after such amounts are determined by the General Partner. To the fullest extent permitted by law, such statements and the valuations on which they are based shall be accepted by the Withdrawn Partner without examination of the accounting books and records of the Partnership or other inquiry. Any amounts payable by the Partnership to a Withdrawn Partner pursuant to this Section 6.5 shall be subordinate in right of payment and subject to the prior payment or provision for payment in full of claims of all present or future creditors of the Partnership or any successor thereto arising out of matters occurring prior to the applicable date of payment or distribution; provided that such Withdrawn

Partner shall otherwise rank pari passu in right of payment (x) with all persons who become Withdrawn Partners and whose Withdrawal Date is within one year before the Withdrawal Date of the Withdrawn Partner in question and (y) with all persons who become Withdrawn Partners and whose Withdrawal Date is within one year after the Withdrawal Date of the Withdrawn Partner in question.

(h) If the aggregate reserves established by the General Partner as of the Settlement Date in making the foregoing calculations should prove, in the determination of the General Partner, to be excessive or inadequate, the General Partner may elect, but shall not be obligated, to pay the Withdrawn Partner or his or her estate such excess, or to charge the Withdrawn Partner or his or her estate such deficiency, as the case may be.

(i) Any amounts owed by the Withdrawn Partner to the Partnership or any of its Affiliates at any time on or after the Settlement Date (e.g., outstanding Partnership loans or advances to such Withdrawn Partner) shall be offset against any amounts payable or distributable by the Partnership to the Withdrawn Partner at any time on or after the Settlement Date or shall be paid by the Withdrawn Partner to the Partnership, in each case as determined by the General Partner. All cash amounts payable by a Withdrawn Partner to the Partnership under this Section 6.5 shall bear interest from the due date to the date of payment at a floating rate equal to the lesser of (x) the Prime Rate or (y) the maximum rate of interest permitted by applicable law. The “due date” of amounts payable by a Withdrawn Partner pursuant to Section 6.5(h) above shall be 120 days after a Withdrawn Partner’s Settlement Date. The “due date” of any amounts payable by a Withdrawn Partner shall be 60 days after the date such amounts are determined to be payable.

(j) At the time of the settlement of any Withdrawn Partner’s Interest in the Partnership pursuant to this Section 6.5, the General Partner may, to the fullest extent permitted by applicable law, impose any restrictions it deems appropriate on the assignment, pledge, encumbrance or other transfer by such Withdrawn Partner of any Interest retained by such Withdrawn Partner, any securities or other investments distributed in-kind to such Withdrawn Partner or such Withdrawn Partner’s right to any payment from the Partnership.

(k) If a Partner is required to Withdraw from the Partnership with respect to such Partner’s Interest for Cause, then his or her Partner Interest shall be settled in accordance with paragraphs (a)-(o) of this Section 6.5; provided, however, that the General Partner may elect (but shall not be required) to determine that any amounts payable by the Partnership to the Withdrawn Partner pursuant to this Section 6.5 shall be subordinate in right of payment and subject to the prior payments in full of claims of all present or future creditors of the Partnership or any successor thereto arising out of matters occurring prior to or on or after the applicable date of payment or distribution.

(l) The payments to a Withdrawn Partner pursuant to this Section 6.5 may be conditioned on the compliance by such Withdrawn Partner with any lawful and reasonable (under the circumstances) restrictions against engaging or investing in a business competitive with that of the Partnership or any of its subsidiaries and Affiliates for a period not exceeding two years determined by the General Partner. Upon written notice to the General Partner, any Withdrawn Partner who is subject to noncompetition restrictions established by the General Partner pursuant to this paragraph (l) may elect to forfeit the principal amount payable in the final installment of his or her subordinated promissory note, together with interest to be accrued on such installment after the date of forfeiture, in lieu of being bound by such restrictions.

(m) In addition to the foregoing, the General Partner shall have the right to pay a Withdrawn Partner a discretionary additional payment in an amount and based upon such circumstances and conditions as it determines to be relevant.

(n) The provisions of this Section 6.5 shall apply to any Partner relating to a Partner and to any transferee of any interest of such Partner pursuant to Section 6.3 if such Partner Withdraws from the Partnership.

(o) The Partnership will assist a Withdrawn Partner or its estate or guardian, as the case may be, in the settlement of the Withdrawn Partner’s Interest in the Partnership. Third party costs incurred by the Partnership in providing this assistance will be borne by the Withdrawn Partner or its estate.

(p) The Partnership may reasonably determine in good faith to retain outside professionals to provide the assistance to Withdrawn Partners or their estates or guardians, as referred to above. In such instances, the Partnership will obtain the prior approval of a Withdrawn Partner or his or her estate or guardian, as the case may be, prior to engaging such professionals. If the Withdrawn Partner (or his or her estate or guardian) declines to incur such costs, the Partnership will provide such reasonable assistance as and when it can so as not to interfere with the Partnership’s day-to-day operating, financial, tax and other related responsibilities to the Partnership and the Partners.

(q) Each Partner hereby irrevocably appoints the General Partner as such Partner’s true and lawful agent, representative and attorney-in-fact, each acting alone, in such Partner’s name, place and stead, to make, execute, sign and file, on behalf of such Partner, any and all agreements, instruments, consents, ratifications, documents and certificates which the General Partner deems necessary or advisable in connection with any transaction or matter contemplated by or provided for in this Section 6.5, including, without limitation, the performance of any obligation of such Partner or the Partnership or the exercise of any right of such Partner or the Partnership. Such power of attorney is coupled with an interest and shall survive and continue in full force and effect notwithstanding the Withdrawal from the Partnership of any Partner for any reason and shall not be affected by the death, disability or incapacity of such Partner.

Section 6.6 Dissolution of the Partnership. The General Partner may dissolve the Partnership at any time on not less than 60 days’ notice of the dissolution date given to the other Partners. Upon the dissolution of the Partnership, and following the payment of creditors of the Partnership and the making of provisions for the payment of any contingent, conditional or unmatured claims known to the Partnership as required under the Partnership Act, the Partners’ respective interests in the Partnership shall be valued and settled in accordance with the procedures set forth in Sections 5.7 and 6.5 which provide for allocations to the Capital Accounts of the Partners and distributions in accordance with the Capital Account balances of the Partners. The General Partner shall be the liquidator. In the event that the General Partner is unable to serve as liquidator, a liquidating trustee shall be chosen by affirmative vote of a Majority in Interest of the Partners voting at a meeting of Partners (excluding Nonvoting Special Partners).

Section 6.7 Certain Tax Matters. (a) All items of income, gain, loss, deduction and credit of the Partnership shall be allocated among the Partners for federal, state and local income tax purposes in the same manner as such items of income, gain, loss, deduction and credit shall be allocated among the Partners pursuant to this Agreement, except as may otherwise be provided herein or by the Code or other applicable law. To the extent Regulations promulgated pursuant to Subchapter K of the Code (including under Sections 704(b) and (c) of the Code) or other applicable law require allocations for tax purposes that differ from the foregoing allocations, the General Partner may determine the manner in which such tax allocations shall be made so as to comply more fully with such Regulations or other applicable law and, at the same time, preserve the economic relationships among the Partners as set forth in this Agreement. In the case of a sale or other taxable exchange of an asset of the Partnership by the Partnership on behalf of a Limited Partner or Special Partner in accordance with this Agreement

(including a taxable exchange of such asset for consideration other than cash), taxable gain and taxable loss on the disposition of such asset shall be specially allocated among the Partners such that, to the maximum extent possible, such Partners who receive cash or other proceeds from such disposition (including a distribution in-kind of the asset received in a taxable exchange) shall be allocated taxable gain and loss resulting from such sale or exchange. In the event there is a net decrease in partnership minimum gain or partner nonrecourse debt minimum gain (determined in accordance with the principles of Regulation Sections 1.704-2(d) and 1.704-2(i)) during any taxable year of the Partnership, each Partner shall be specially allocated items of Partnership income and gain for such year (and, if necessary, subsequent years) in an amount equal to its respective share of such net decrease during such year, determined pursuant to Regulations Sections 1.704-2(g) and 1.704-2(i) (5). The items to be so allocated shall be determined in accordance with Regulations Section 1.704-2(f). In addition, this Agreement shall be considered to contain a “qualified income offset” as provided in Regulations Section 1.704-1(b)(2)(ii)(d).

(b) Notwithstanding Section 6.7(a), if the Partnership realizes capital gains (including short-term capital gains) for federal income tax purposes (“gains”) for any fiscal year during or as of the end of which one or more Positive Basis Partners (as hereinafter defined) Withdraw from the Partnership pursuant to this Article VI, the General Partner may elect to allocate such gains as follows: (i) to allocate such gains among such Positive Basis Partners, pro rata in proportion to the respective Positive Basis (as hereinafter defined) of each such Positive Basis Partner, until either the full amount of such gains shall have been so allocated or the Positive Basis of each such Positive Basis Partner shall have been eliminated and (ii) to allocate any gains not so allocated to Positive Basis Partners to the other Partners in such manner as shall equitably reflect the amounts allocated to such Partners’ Capital Accounts pursuant to this Agreement.

As used herein, (i) the term “Positive Basis” shall mean, with respect to any Partner and as of any time of calculation, the amount by which its aggregate Capital Account balance (determined in accordance with Section 5.2) as of such time exceeds its “adjusted tax basis,” for Federal income tax purposes, in its interest in the Partnership as of such time (determined without regard to any adjustments made to such “adjusted tax basis” by reason of any transfer or assignment of such interest, including by reason of death, and without regard to such Partner’s share of the liabilities of the Partnership under Section 752 of the Code), and (ii) the term “Positive Basis Partner” shall mean any Partner who Withdraws from the Partnership and who has Positive Basis as of the effective date of its Withdrawal, but such Partner shall cease to be a Positive Basis Partner at such time as it shall have received allocations pursuant to clause (i) of the first paragraph of this Section 6.7(b) equal to its Positive Basis as of the effective date of its Withdrawal.

(c) The General Partner shall cause to be prepared all federal, state and local tax returns of the Partnership for each year for which such returns are required to be filed and, after approval of such returns by the General Partner, shall cause such returns to be timely filed. The General Partner shall determine the appropriate treatment of each item of income, gain, loss, deduction and credit of the Partnership and the accounting methods and conventions under the tax laws of the United States, the several states and other relevant jurisdictions as to the treatment of any such item or any other method or procedure related to the preparation of such tax returns. The General Partner may cause the Partnership to make or refrain from making any and all elections permitted by such tax laws. Each Partner agrees that he or she shall not, unless he or she provides prior notice of such action to the Partnership, (i) treat, on his or her individual income tax returns, any item of income, gain, loss, deduction or credit relating to his or her interest in the Partnership in a manner inconsistent with the treatment of such item by the Partnership as reflected on the Form K-l or other information statement furnished by the Partnership to such Partner for use in preparing his or her income tax returns or (ii) file any claim for refund relating to any such item based on, or which would result in, such inconsistent treatment. In respect of an income tax audit of any

tax return of the Partnership, the filing of any amended return or claim for refund in connection with any item of income, gain, loss, deduction or credit reflected on any tax return of the Partnership, or any administrative or judicial proceedings arising out of or in connection with any such audit, amended return, claim for refund or denial of such claim, (A) the Partnership Representative (as defined below) shall be authorized to act for, and his or her decision shall be final and binding upon, the Partnership and all Partners except to the extent a Partner shall properly elect to be excluded from such proceeding pursuant to the Code, (B) all expenses incurred by the Partnership Representative in connection therewith (including, without limitation, attorneys’, accountants’ and other experts’ fees and disbursements) shall be expenses of the Partnership and (C) no Partner shall have the right to (1) participate in the audit of any Partnership tax return, (2) file any amended return or claim for refund in connection with any item of income, gain, loss, deduction or credit reflected on any tax return of the Partnership (unless he or she provides prior notice of such action to the Partnership as provided above), (3) participate in any administrative or judicial proceedings conducted by the Partnership or the Partnership Representative arising out of or in connection with any such audit, amended return, claim for refund or denial of such claim or (4) appeal, challenge or otherwise protest any adverse findings in any such audit conducted by the Partnership or the Partnership Representative or with respect to any such amended return or claim for refund filed by the Partnership or the Partnership Representative or in any such administrative or judicial proceedings conducted by the Partnership or the Partnership Representative. The Partnership and each Partner shall designate any person selected by the General Partner as the “partnership representative” within the meaning of Section 6223(a) of the Code (the “Partnership Representative”). To the fullest extent permitted by applicable law, each Partner agrees to indemnify and hold harmless the Partnership and all other Partners from and against any and all liabilities, obligations, damages, deficiencies and expenses resulting from any breach or violation by such Partner of the provisions of this Section 6.7 and from all actions, suits, proceedings, demands, assessments, judgments, costs and expenses, including reasonable attorneys’ fees and disbursements, incident to any such breach or violation. Each person (for purposes of this Section 6.7(c), called a “Pass-Thru Partner”) that holds or controls an interest as a Partner on behalf of, or for the benefit of, another person or persons, or which Pass-Thru Partner is beneficially owned (directly or indirectly) by another person or persons, shall, within 30 days following receipt from the Partnership Representative of any notice, demand, request for information or similar document, convey such notice or other document in writing to all holders of beneficial interests in the Partnership holding such interests through such Pass-Thru Partner.

(d) Each individual Partner shall provide to the Partnership copies of each federal, state and local income tax return of such Partner (including any amendment thereof) within 30 days after filing such return.

(e) To the extent the General Partner reasonably determines that the Partnership (or any entity in which the Partnership holds an interest) is or may be required by law to withhold or to make tax payments, including interest and penalties on such amounts, on behalf of or with respect to any Partner, including pursuant to Section 6225 of the Code (“Tax Advances”), the General Partner may withhold or escrow such amounts or make such tax payments as so required. All Tax Advances made on behalf of a Partner shall, at the option of the General Partner, (i) be promptly paid to the Partnership by the Partner on whose behalf such Tax Advances were made or (ii) be repaid by reducing the amount of the current or next succeeding distribution or distributions which would otherwise have been made to such Partner or, if such distributions are not sufficient for that purpose, by so reducing the proceeds upon dissolution of the Partnership otherwise payable to such Partnership. Whenever the General Partner selects option (ii) pursuant to the preceding sentence for repayment of a Tax Advance by a Partner, for all other purposes of this Agreement such Partner shall be treated as having received all distributions (whether before or upon dissolution of the Partnership) unreduced by the amount of such Tax Advance. To the fullest extent permitted by law, each Partner hereby agrees to indemnify and hold harmless all other Partners from and against any liability (including, without limitation, any liability for taxes,

penalties, additions to tax or interest) with respect to income attributable to or distributions or other payments to such Partner. The obligations of a Partner set forth in this Section 6.7(d) shall survive the withdrawal of any Partner from the Partnership or any transfer of a Partner’s interest.

Section 6.8 Special Basis Adjustments. In connection with a distribution of Partnership property to a Partner or any assignment or transfer of a Partnership interest permitted by the terms of this Agreement, the General Partner may cause the Partnership, on behalf of the Partners and at the time and in the manner provided in Code Section 754 and Regulation Section 1.754-1(b), to make an election to adjust the basis of the Partnership’s property in the manner provided in Sections 734(b) and 743(b) of the Code.

ARTICLE VII

MISCELLANEOUS

Section 7.1 Submission to Jurisdiction; Waiver of Jury Trial.

(a) Any and all disputes which cannot be settled amicably, including any ancillary claims of any party, arising out of, relating to or in connection with the validity, negotiation, execution, interpretation, performance or non-performance of this Agreement (including the validity, scope and enforceability of this arbitration provision as well as any and all disputes arising out of, relating to or in connection with the termination, winding up or dissolution of the Partnership), whether arising during the existence of the Partnership or at or after its termination or during or after the winding up or dissolution of the Partnership shall be finally settled by arbitration conducted by a single arbitrator in New York, New York U.S.A. in accordance with the then-existing Rules of Arbitration of the International Chamber of Commerce. If the parties to the dispute fail to agree on the selection of an arbitrator within 30 days of the receipt of the request for arbitration, the International Chamber of Commerce shall make the appointment. The arbitrator shall be a lawyer and shall conduct the proceedings in the English language. Performance under this Agreement shall continue if reasonably possible during any arbitration proceedings.

(b) Notwithstanding the provisions of paragraph (a), the General Partner may bring, or may cause the Partnership to bring, on behalf of the General Partner or the Partnership or on behalf of one or more Partners, an action or special proceeding in any court of competent jurisdiction for the purpose of compelling a party to arbitrate, seeking temporary or preliminary relief in aid of an arbitration hereunder, and/or enforcing an arbitration award and, for the purposes of this paragraph (b), each Partner (i) expressly consents to the application of paragraph (c) of this Section 7.1 to any such action or proceeding, (ii) agrees that proof shall not be required that monetary damages for breach of the provisions of this Agreement would be difficult to calculate and that remedies at law would be inadequate, and (iii) irrevocably appoints the General Partner as such Partner’s agent for service of process in connection with any such action or proceeding and agrees that service of process upon any such agent, who shall promptly advise such Partner of any such service of process, shall be deemed in every respect effective service of process upon the Partner in any such action or proceeding.

(C) (i) EACH PARTNER HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF COURTS LOCATED IN NEW YORK, NEW YORK FOR THE PURPOSE OF ANY JUDICIAL PROCEEDING BROUGHT IN ACCORDANCE WITH THE PROVISIONS OF PARAGRAPH (C) OF THIS SECTION 7.1, OR ANY JUDICIAL PROCEEDING ANCILLARY TO AN ARBITRATION OR CONTEMPLATED ARBITRATION ARISING OUT OF OR RELATING TO OR CONCERNING THIS AGREEMENT. Such ancillary judicial proceedings include any suit, action or proceeding to compel arbitration, to obtain temporary or preliminary judicial relief in aid of arbitration, or

to confirm an arbitration award. The parties acknowledge that the forum(s) designated by this paragraph (c) have a reasonable relation to this Agreement, and to the parties’ relationship with one another.

(ii) The parties hereby waive, to the fullest extent permitted by applicable law, any objection which they now or hereafter may have to personal jurisdiction or to the laying of venue of any such ancillary suit, action or proceeding brought in any court referred to in paragraph (c)(i) of this Section 7.1 and such parties agree not to plead or claim the same.

(d) Notwithstanding any provision of this Agreement to the contrary, this Section 7.1 shall be construed to the maximum extent possible to comply with the laws of the State of Delaware, including the Delaware Uniform Arbitration Act (10 Del. C. § 5701 et seq.) (the “Delaware Arbitration Act”). If, nevertheless, it shall be determined by a court of competent jurisdiction that any provision or wording of this Section 7.1, including any rules of the International Chamber of Commerce, shall be invalid or unenforceable under the Delaware Arbitration Act, or other applicable law, such invalidity shall not invalidate all of this Section 7.1. In that case, this Section 7.1 shall be construed so as to limit any term or provision so as to make it valid or enforceable within the requirements of the Delaware Arbitration Act or other applicable law, and, in the event such term or provision cannot be so limited, this Section 7.1 shall be construed to omit such invalid or unenforceable provision.

Section 7.2 Ownership and Use of the Blackstone Name. The Partnership acknowledges that Blackstone TM L.L.C. (“TM”), a Delaware limited liability company with a principal place of business at 345 Park Avenue, New York, New York 10154, (or its successors or assigns) is the sole and exclusive owner of the mark and name BLACKSTONE and that the ownership of, and the right to use, sell or otherwise dispose of, the firm name or any abbreviation or modification thereof which consists of or includes BLACKSTONE, shall belong exclusively to TM, which company (or its predecessors, successors or assigns) has licensed the Partnership to use BLACKSTONE in its name. The Partnership acknowledges that TM owns the service mark BLACKSTONE for various services and that the Partnership is using the BLACKSTONE mark and name on a non-exclusive, non-sublicensable and non-assignable basis in connection with its business and authorized activities with the Permission of TM. All services rendered by the Partnership under the BLACKSTONE mark and name will be rendered in a manner and with quality levels that are consistent with the high reputation heretofore developed for the BLACKSTONE mark by TM and its Affiliates and licensees. The Partnership understands that TM may terminate its right to use BLACKSTONE at any time in TM’s sole discretion by giving the Partnership written notice of termination. Promptly following any such termination, the Partnership will take all steps necessary to change its partnership name to one which does not include BLACKSTONE or any confusingly similar term and cease all use of BLACKSTONE or any term confusingly similar thereto as a service mark or otherwise.

Section 7.3 Written Consent. Any action required or permitted to be taken by a vote of Partners at a meeting may be taken without a meeting if a Majority in Interest of the Partners consent thereto in writing.

Section 7.4 Admission Letters; Schedules. The General Partner may, or may cause the Partnership to, enter or has previously entered into separate letter agreements or other agreements or undertakings, which may be in the form of electronic “acknowledgements” and similar arrangements and related materials posted or maintained on one or more web-based portals established by Blackstone (collectively, “Admission Letters”) with certain Partners with respect to capital contributions, Profit Sharing Percentages, benefits or any other matter. Notwithstanding anything in this Agreement to the contrary, each Partner’s interest in the Partnership shall be subject to repurchase rights and other terms as indicated in such Partner’s Admission Letter (or other writing between the General Partner and such Partner). The General Partner may from time to time execute and deliver to the Partners schedules which

set forth the then current Capital Account balances and Profit Sharing Percentages of the Partners and any other matters deemed appropriate by the General Partner. Such schedules shall be for information purposes only and shall not be deemed to be part of this Agreement for any purpose whatsoever.

Section 7.5 Governing Law; Separability of Provisions. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware without regard to principles of conflict of laws. In particular, the Partnership has been formed pursuant to the Partnership Act, and the rights and liabilities of the Partners shall be as provided therein, except as herein otherwise expressly provided. If any provision of this Agreement shall be held to be invalid, such provision shall be given its meaning to the maximum extent permitted by law and the remainder of this Agreement shall not be affected thereby.

Section 7.6 Successors and Assigns. This Agreement shall be binding upon and shall, subject to the penultimate sentence of Section 6.3, inure to the benefit of the parties hereto, their respective heirs and personal representatives, and any successor to a trustee of a trust which is or becomes a party hereto; provided that no person claiming by, through or under a Partner (whether such Partner’s heir, personal representative or otherwise), as distinct from such Partner itself, shall have any rights as, or in respect to, a Partner (including the right to approve or vote on any matter or to notice thereof) except the right to receive only those distributions expressly payable to such person pursuant to Article VI. Any Partner or Withdrawn Partner shall remain liable for the obligations under this Agreement of any transferee of all or any portion of such Partner’s or Withdrawn Partner’s interest in the Partnership, unless waived by the General Partner. Nothing in this Agreement is intended, nor shall anything herein be construed, to confer any rights, legal or equitable, in any person other than the Partners and their respective legal representatives, heirs, successors and permitted assigns.

Section 7.7 Partner’s Will. Each Limited Partner and Withdrawn Partner shall include in his or her will a provision that addresses certain matters in respect of his or her obligation relating to the Partnership that is satisfactory to the General Partner, and each such Limited Partner and Withdrawn Partner shall confirm annually to the Partnership, in writing, that such provision remains in his or her current will. Where applicable, any estate planning trust of such Partner or Withdrawn Partner to which a portion of such Limited Partner’s or Withdrawn Partners’ Interest is transferred shall include a provision substantially similar to such provision and the trustee of such trust shall confirm annually to the Partnership, in writing, that such provision or its substantial equivalent remains in such trust. In the event any Limited Partner or Withdrawn Partner fails to comply with the provisions of this Section 7.7 after the Partnership has notified such Limited Partner or Withdrawn Partner of his or her failure to so comply and such failure to so comply is not cured within 30 days of such notice, the Partnership may withhold any and all distributions to such Limited Partner or Withdrawn Partner until the time at which such party complies with the requirements of this Section 7.7.

Section 7.8 Confidentiality; Restrictive Covenants. (a) By executing this Agreement, each Partner expressly agrees, at all times during the term of the Partnership and thereafter and whether or not at the time a Partner of the Partnership, to maintain the confidentiality of, and not to disclose to any person other than the Partnership, another Partner or a person designated by the Partnership, any information relating to the business, financial structure, financial position or financial results, clients or affairs of the Partnership or the Funds that shall not be generally known to the public or the securities industry, except as otherwise required by law or by any regulatory or self-regulatory organization having jurisdiction; provided, that any corporate Partner may disclose any such information it is required by law, rule, regulation or custom to disclose. In addition, each Partner shall be subject to the restrictive covenants and other obligations set forth in such Partner’s Admission Letter. Notwithstanding anything in this Agreement to the contrary, to comply with Treasury Regulations Section 1.6011-4(b)(3)(i), each Partner (and any employee, representative or other agent of such Partner) may disclose to any and all

persons, without limitation of any kind, the U.S. federal income tax treatment and tax structure of the Partnership, it being understood and agreed, for this purpose, (1) the name of, or any other identifying information regarding (a) the Partners or any existing or future investor (or any Affiliate thereof) in any of the Partners, or (b) any investment or transaction entered into by the Partners; (2) any performance information relating to any of the Partners or their investments; and (3) any performance or other information relating to previous funds or investments sponsored by any of the Partners, does not constitute such tax treatment or tax structure information.

(b) Nothing in this Agreement shall prohibit or impede any Partner from communicating, cooperating or filing a complaint on possible violations of U.S. federal, state or local law or regulation to or with any governmental agency or regulatory authority (collectively, a “Governmental Entity”), including, but not limited to, the SEC, FINRA, EEOC or NLRB, or from making other disclosures to any Governmental Entity that are protected under the whistleblower provisions of U.S. federal, state or local law or regulation, provided that in each case such communications and disclosures are consistent with applicable law. Each Partner understands and acknowledges that (a) an individual shall not be held criminally or civilly liable under any U.S. federal or state trade secret law for the disclosure of a trade secret that is made (i) in confidence to a U.S. federal, state, or local government official or to an attorney solely for the purpose of reporting or investigating a suspected violation of law, or (ii) in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal, and (b) an individual who files a lawsuit for retaliation by an employer for reporting a suspected violation of law may disclose the trade secret to the attorney of the individual and use the trade secret information in the court proceeding, if the individual files any document containing the trade secret under seal; and does not disclose the trade secret, except pursuant to court order. Moreover, a Partner shall not be required to give prior notice to (or get prior authorization from) Blackstone regarding any such communication or disclosure. Except as otherwise provided in this paragraph or under applicable law, under no circumstance is any Partner authorized to disclose any information covered by Blackstone or its affiliates’ attorney-client privilege or attorney work product or Blackstone’s trade secrets without the prior written consent of Blackstone.

Section 7.9 Notices. Whenever notice is required or permitted by this Agreement to be given, such notice shall be in writing (including telecopy, email or similar writing) and shall be given by hand delivery (including any courier service) or telecopy or email to any Partner at its address, telecopy number or email address shown in the Partnership’s books and records or, if given to the General Partner or the Partnership, at the address of the Partnership provided herein or at the telecopy number or email address of the Partnership furnished to any Partner upon written request of such Partner. Each such notice shall be effective (i) if given by telecopy or email, upon dispatch, and (ii) if given by hand delivery, when delivered to the address of such Partner, the General Partner or the Partnership specified as aforesaid.

Section 7.10 Counterparts. This Agreement may be executed in any number of counterparts, all of which together shall constitute a single instrument.

Section 7.11 Power of Attorney. Each Partner (other than the General Partner) hereby irrevocably appoints the General Partner as such Partner’s true and lawful agent, representative and attorney-in-fact, each acting alone, in such Partner’s name, place and stead, to make, execute, sign and file, on behalf of such Partner, any and all agreements, instruments, documents and certificates which the General Partner deems necessary or advisable in connection with any transaction or matter contemplated by or provided for in this Agreement, including without limitation, the performance of any obligation of such Partner or the Partnership or the exercise of any right of such Partner or the Partnership or an amendment to this Agreement or may be required by this Agreement or by the laws of the United States of America, the State of Delaware or any other state in which the Partnership shall determine to do

business, or any political subdivision or agency thereof, to execute, implement and continue the valid and subsisting existence of the Partnership. Such power of attorney is coupled with an interest and shall survive and continue in full force and effect notwithstanding the Withdrawal from the Partnership of any Partner for any reason and shall not be affected by the death, Total Disability or Incompetence of such Partner.

Section 7.12 Cumulative Remedies. Rights and remedies under this Agreement are cumulative and do not preclude use of other rights and remedies available under applicable law.

Section 7.13 Legal Fees. Except as more specifically provided herein, in the event of a legal dispute (including litigation, arbitration or mediation) between any Partner or Withdrawn Partner and the Partnership, arising in connection with any provision of this Agreement, the “losing” party to such dispute shall promptly reimburse the “victorious party” for all reasonable legal fees and expenses incurred in connection with such dispute (such determination to be made by the relevant adjudicator). Any amounts due under this Section 7.13 shall be paid within 30 days of the date upon which such amounts are due to be paid and any amounts remaining unpaid after such date shall accrue interest at the Default Interest Rate.

Section 7.14 Modifications. Except as provided herein, this Agreement may be amended or modified at any time by the General Partner in its sole discretion upon notification thereof to the Limited Partners.

Section 7.15 Entire Agreement. This Agreement embodies the entire agreement and understanding of the parties hereto in respect of the subject matter contained herein. There are no restrictions, promises, representations, warranties, covenants or undertakings, other than those expressly set forth or referred to herein. Subject to Section 7.4, this Agreement supersedes all prior agreements and understandings between the parties with respect to such subject matter.

* * * * *

IN WITNESS WHEREOF, the parties have executed this Agreement effective as of the day and year first above written. In the event that it is impracticable to obtain the signature of any of the Partners to this Agreement, this Agreement shall be binding among the other Partners executing the same.



GENERAL PARTNER:

Blackstone Holdings III, L.P.

By:		Blackstone Holdings III GP L.P., its General Partner

By:		Blackstone Holdings III GP Management L.L.C., its General Partner

By:		/s/ John G. Finley
Name:		John G. Finley
Title:		Chief Legal Officer and Secretary

LIMITED PARTNERS AND SPECIAL PARTNERS

All Limited Partners and Special Partners now and hereafter admitted pursuant to powers of attorney now and hereafter granted to Blackstone Holdings III L.P.

Blackstone Holdings III, L.P.

By:		Blackstone Holdings III GP L.P., its General Partner

By:		Blackstone Holdings III GP Management L.L.C., its General Partner

By:		/s/ John G. Finley
Name:		John G. Finley
Title:		Chief Legal Officer and Secretary

[Signature Page to Amended and Restated Limited Partnership Agreement of BREIT Special Limited Partner L.P.]

Exhibit 10.03

Execution Version

HIGHLY CONFIDENTIAL & TRADE SECRET

BLACKSTONE REAL ESTATE ASSOCIATES ASIA II L.P.

AMENDED AND RESTATED AGREEMENT OF EXEMPTED LIMITED PARTNERSHIP

DATED AUGUST 6, 2019

EFFECTIVE SEPTEMBER 21, 2017

THE EXEMPTED LIMITED PARTNERSHIP INTERESTS (THE “INTERESTS”) OF BLACKSTONE REAL ESTATE ASSOCIATES ASIA II L.P. (THE “PARTNERSHIP”) HAVE NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), THE SECURITIES LAWS OF ANY STATE IN THE UNITED STATES OR ANY OTHER APPLICABLE SECURITIES LAWS IN RELIANCE UPON EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUCH LAWS. SUCH INTERESTS MUST BE ACQUIRED FOR INVESTMENT ONLY AND MAY NOT BE OFFERED FOR SALE, PLEDGED, CHARGED, HYPOTHECATED, SOLD, ASSIGNED OR TRANSFERRED AT ANY TIME EXCEPT IN COMPLIANCE WITH (I) THE SECURITIES ACT, THE EXEMPTED LIMITED PARTNERSHIP LAW OF THE CAYMAN ISLANDS, ANY APPLICABLE STATE SECURITIES LAWS, AND ANY OTHER APPLICABLE SECURITIES LAWS; AND (II) THE TERMS AND CONDITIONS OF THIS AMENDED AND RESTATED AGREEMENT OF EXEMPTED LIMITED PARTNERSHIP. THE INTERESTS MAY NOT BE TRANSFERRED OF RECORD EXCEPT IN COMPLIANCE WITH SUCH LAWS AND THIS AMENDED AND RESTATED AGREEMENT OF EXEMPTED LIMITED PARTNERSHIP. THEREFORE, PURCHASERS OF SUCH INTERESTS WILL BE REQUIRED TO BEAR THE RISK OF THEIR INVESTMENT FOR AN INDEFINITE PERIOD OF TIME.

TABLE OF CONTENTS



		Page
ARTICLE I DEFINITIONS		1

Section 1.1.	Definitions	1
Section 1.2.	Terms Generally	17

ARTICLE II GENERAL PROVISIONS		17

Section 2.1.	General Partners, Limited Partners, Special Partner	17
Section 2.2.	Formation; Name	18
Section 2.3.	Term	18
Section 2.4.	Purposes; Powers	18
Section 2.5.	Place of Business	21
Section 2.6.	Withdrawal of Initial Limited Partner	21

ARTICLE III MANAGEMENT		21

Section 3.1.	General Partners	21
Section 3.2.	Limitations on Partners	21
Section 3.3.	Partner Voting, etc.	21
Section 3.4.	Management	22
Section 3.5.	Responsibilities of Partners	24
Section 3.6.	Exculpation and Indemnification	24
Section 3.7.	Representations of Partners	26
Section 3.8.	Tax Representation and Further Assurances	27

ARTICLE IV CAPITAL OF THE PARTNERSHIP		29

Section 4.1.	Capital Contributions by Partners	29
Section 4.2.	Interest	36
Section 4.3.	Withdrawals of Capital	36

ARTICLE V PARTICIPATION IN PROFITS AND LOSSES		37

Section 5.1.	General Accounting Matters	37
Section 5.2.	GP-Related Capital Accounts	38
Section 5.3.	GP-Related Profit Sharing Percentages	39
Section 5.4.	Allocations of GP-Related Net Income (Loss)	40
Section 5.5.	Liability of Partners	41
Section 5.6.	Liability of General Partners	41
Section 5.7.	Repurchase Rights, etc.	41
Section 5.8.	Distributions	41
Section 5.9.	Business Expenses	49
Section 5.10.	Tax Capital Accounts; Tax Allocations	49


ARTICLE VI ADDITIONAL PARTNERS; WITHDRAWAL OF PARTNERS; SATISFACTION AND DISCHARGE OF PARTNERSHIP INTERESTS; TERMINATION		50

Section 6.1.	Additional Partners	50
Section 6.2.	Withdrawal of Partners	51
Section 6.3.	GP-Related Partner Interests Not Transferable	52
Section 6.4.	Consequences upon Withdrawal of a Partner	53
Section 6.5.	Satisfaction and Discharge of a Withdrawn Partner’s GP-Related Partner Interest	54
Section 6.6.	Dissolution of the Partnership	59
Section 6.7.	Certain Tax Matters	59
Section 6.8.	Special Basis Adjustments	61

ARTICLE VII CAPITAL COMMITMENT INTERESTS; CAPITAL CONTRIBUTIONS; ALLOCATIONS; DISTRIBUTIONS		61

Section 7.1.	Capital Commitment Interests, etc.	61
Section 7.2.	Capital Commitment Capital Accounts	62
Section 7.3.	Allocations	63
Section 7.4.	Distributions	63
Section 7.5.	Valuations	67
Section 7.6.	Disposition Election	68
Section 7.7.	Capital Commitment Special Distribution Election	68

ARTICLE VIII WITHDRAWAL, ADMISSION OF NEW PARTNERS		69

Section 8.1.	Partner Withdrawal; Repurchase of Capital Commitment Interests.	69
Section 8.2.	Transfer of Partner’s Capital Commitment Interest	74
Section 8.3.	Compliance with Law	75

ARTICLE IX DISSOLUTION		75

Section 9.1.	Dissolution	75
Section 9.2.	Final Distribution	75
Section 9.3.	Amounts Reserved Related to Capital Commitment Partner Interests	76

ARTICLE X MISCELLANEOUS		76

Section 10.1.	Submission to Jurisdiction; Waiver of Jury Trial	76
Section 10.2.	Ownership and Use of the Blackstone Name	78
Section 10.3.	Written Consent	78
Section 10.4.	Letter Agreements; Schedules	78
Section 10.5.	Governing Law; Separability of Provisions	78
Section 10.6.	Successors and Assigns; Third Party Beneficiaries	79
Section 10.7.	Confidentiality	79
Section 10.8.	Notices	80
Section 10.9.	Counterparts	80
Section 10.10.	Power of Attorney	80
Section 10.11.	Partner’s Will	81



Section 10.12.	Cumulative Remedies	81

Section 10.13.	Legal Fees	81

Section 10.14.	Entire Agreement	81

Section 10.15.	Effective Date	82

Section 10.16.	Third Party Rights	82

BLACKSTONE REAL ESTATE ASSOCIATES ASIA II L.P.

AMENDED AND RESTATED AGREEMENT OF EXEMPTED LIMITED PARTNERSHIP, dated August 6, 2019, and effective on September 21, 2017, of Blackstone Real Estate Associates Asia II L.P., a Cayman Islands exempted limited partnership (the “Partnership”), by and between BREP Asia II L.L.C., a Delaware limited liability company, as general partner (the “Delaware GP”), and BREP Asia II Ltd., a Cayman Islands exempted company, as general partner (the “Cayman GP,” and, together with the Delaware GP, the “General Partners” or, collectively, the “General Partner”), Mapcal Limited (the “Initial Limited Partner”), as initial limited partner, the limited partners listed as Limited Partners in the books and records of the Partnership, and such other persons that are admitted to the Partnership as partners after the date hereof in accordance herewith.

WITNESSETH

WHEREAS, the General Partners, each as general partner, and Mapcal Limited, as initial limited partner, entered into an Exempted Limited Partnership Agreement dated February 3, 2017 (the “Original Agreement”) and formed an exempted limited partnership under the laws of the Cayman Islands under the name of Blackstone Real Estate Associates Asia II L.P.; and

WHEREAS, the parties hereto desire to enter into this Amended and Restated Agreement of Exempted Limited Partnership, effective on September 21, 2017, and hereby amend and restate the Original Agreement in its entirety and reflect the withdrawal of the Initial Limited Partner, in each case effective on September 21, 2017;

ARTICLE I

DEFINITIONS

Section 1.1. Definitions. Unless the context otherwise requires, the following terms shall have the following meanings for purposes of this Agreement:

“Adjustment Amount” has the meaning set forth in Section 8.1(b)(ii).

“Advancing Party” has the meaning set forth in Section 7.1(c).

similar and/or related vehicles or accounts associated with or established by Blackstone and/or its affiliates, partners and current and/or former employees and/or related persons.

“Agreement” means this Amended and Restated Agreement of Exempted Limited Partnership, as it may be further amended, supplemented, restated or otherwise modified from time to time.

“Applicable Collateral Percentage” with respect to any Firm Collateral or Special Firm Collateral, has the meaning set forth in the books and records of the Partnership with respect thereto.

“BE Agreement” means the limited partnership agreement, limited liability company agreement or other governing document of any limited partnership, limited liability company or other entity referred to in the definition of “Blackstone Entity,” as such limited partnership agreement, limited liability company agreement or other governing document may be amended, supplemented, restated or otherwise modified to date, and as such limited partnership agreement, limited liability company agreement or other governing document may be further amended, supplemented, restated or otherwise modified from time to time.

“BE Investment” means any direct or indirect investment by any Blackstone Entity.

“Blackstone Capital Commitment” has the meaning set forth in the BREP Asia Partnership Agreement.

“BREP Asia” means (i) Blackstone Real Estate Partners Asia II L.P., a Cayman Islands exempted limited partnership, (ii) any alternative investment vehicles relating to, or formed in connection with, any of the partnerships referred to in clauses (i) and (iii) of this definition, (iii) any parallel fund, managed account or other capital vehicle relating to, or formed in connection with, any of the partnerships referred to in clause (i) of this definition and (iv) any other limited partnership, limited liability company or other entity (in each case, whether now or hereafter established) of which the Partnership serves, directly or indirectly, as the general partner, special general partner, manager, managing member or in a similar capacity.

“BREP Asia Agreements” means the collective reference to (i) the BREP Asia Partnership Agreement and (ii) any other BREP Asia partnership, limited liability company or other governing agreements, as each may be amended, supplemented, restated or otherwise modified from time to time.

“BREP Asia Partnership Agreement” means the collective reference to the partnership agreement of each limited partnership named in clause (i) of the definition of “BREP Asia,” as each may be amended, supplemented, restated or otherwise modified from time to time.

“Business Day” means any day other than a Saturday, Sunday or other day on which banks are authorized or required by law to be closed in New York, New York.

“Capital Commitment BREP Asia Commitment” means the Capital Commitment (as defined in the BREP Asia Partnership Agreement), if any, of the Partnership that relates solely to the Capital Commitment BREP Asia Interest, if any.

“Capital Commitment BREP Asia Interest” means the Interest (as defined in the BREP Asia Partnership Agreement), if any, of the Partnership as a capital partner in BREP Asia.

“Capital Commitment BREP Asia Investment” means the Partnership’s interest in a specific investment of BREP Asia held by the Partnership through the Capital Commitment BREP Asia Interest.

debited any distributions with respect to such Capital Commitment Investment to such Partner and any net losses allocated to such Partner with respect to such Capital Commitment Investment pursuant to Section 7.3. In the case of any such distribution in kind, the Capital Commitment Capital Accounts for the related Capital Commitment Investment shall be adjusted as if the asset distributed had been sold in a taxable transaction and the proceeds distributed in cash, and any resulting gain or loss on such sale shall be allocated to the Partners participating in such Capital Commitment Investment pursuant to Section 7.3.

“Capital Commitment Class A Interest” has the meaning set forth in Section 7.4(f).

“Capital Commitment Class B Interest” has the meaning set forth in Section 7.4(f).

“Capital Commitment Defaulting Party” has the meaning set forth in Section 7.4(g)(ii)(A).

“Capital Commitment Deficiency Contribution” has the meaning set forth in Section 7.4(g)(ii)(A).

“Capital Commitment Disposable Investment” has the meaning set forth in Section 7.4(f).

“Capital Commitment Distributions” means, with respect to each Capital Commitment Investment, all amounts of distributions received by the Partnership with respect to such Capital Commitment Investment solely in respect of the Capital Commitment BREP Asia Interest, if any, less any costs, fees and expenses of the Partnership with respect thereto and less reasonable reserves for payment of costs, fees and expenses of the Partnership that are anticipated with respect thereto, in each case which the General Partner may allocate to all or any portion of such Capital Commitment Investment as it may determine in good faith is appropriate.

“Capital Commitment Giveback Amount” has the meaning set forth in Section 7.4(g)(i).

“Capital Commitment Interest” means the interest of a Partner in a specific Capital Commitment Investment as provided herein.

“Capital Commitment Investment” means any Capital Commitment BREP Asia Investment, but shall exclude any GP-Related Investment.

“Capital Commitment Partner Carried Interest” means, with respect to any Partner, the aggregate amount of distributions or payments received by such Partner (in any capacity) from Affiliates of the Partnership in respect of or relating to “carried interest.” Capital Commitment Partner Carried Interest includes any amount initially received by an Affiliate of the Partnership from any fund (including BREP Asia, any similar funds formed after the date hereof, and any Other Blackstone Funds (as defined in the BREP Asia Partnership Agreement), whether or not in existence as of the date hereof) to which such Affiliate serves as general partner (or in another similar capacity) that exceeds such Affiliate’s pro rata share of distributions from such fund based upon capital contributions thereto (or the capital contributions to make the investment of such fund giving rise to such “carried interest”).

“Capital Commitment Partner Interest” means a Partner’s exempted limited partnership interest in the Partnership which relates to any Capital Commitment BREP Asia Interest.

“Capital Commitment Recontribution Amount” has the meaning set forth in Section 7.4(g)(i).

“Capital Commitment-Related Capital Contributions” has the meaning set forth in Section 7.1(b).

“Capital Commitment Special Distribution” has the meaning set forth in Section 7.7(a).

“Capital Commitment Value” has the meaning set forth in Section 7.5.

“Carried Interest” means (i) “Carried Interest Distributions” as defined in the BREP Asia Partnership Agreement, and (ii) any other carried interest distribution to a

Fund GP pursuant to any BREP Asia Agreement. In the case of each of (i) and (ii) above, except as determined by the General Partner, the amount shall not be less any costs, fees and expenses of the Partnership with respect thereto and less reasonable reserves for payment of costs, fees and expenses of the Partnership that are anticipated with respect thereto (in each case which the General Partner may allocate among all or any portion of the GP-Related Investments as it determines in good faith is appropriate).

such Partner individually has violated any applicable securities laws or any rules or regulations thereunder, or any rules of any such self-regulatory body (including, without limitation, any licensing requirement), if such conviction or determination has a material adverse effect on (A) such Partner’s ability to function as a Partner of the Partnership, taking into account the services required of such Partner and the nature of the business of the Partnership and its Affiliates or (B) the business of the Partnership and its Affiliates or (iv) becoming subject to an event described in Rule 506(d)(1)(i)-(viii) of Regulation D under the Securities Act.

“Cayman GP” means BREP Asia II Ltd., a Cayman Islands exempted company and a general partner of the Partnership.

“Clawback Adjustment Amount” has the meaning set forth in Section 5.8(e)(ii)(C).

“Clawback Amount” means the “Clawback Amount” and the “Interim Clawback Amount,” each, as defined in the BREP Asia Partnership Agreement, and any other clawback amount payable to the limited partners of BREP Asia or to BREP Asia pursuant to any BREP Asia Agreement, as applicable.

“Clawback Provisions” means paragraphs 4.2.9 and 9.2.8 of the BREP Asia Partnership Agreement and any other similar provisions in any other BREP Asia Agreement existing heretofore or hereafter entered into.

“Contingent” means subject to repurchase rights and/or other requirements.

“Controlled Entity” when used with reference to another person means any person controlled by such other person.

“Covered Person” has the meaning set forth in Section 3.6(a).

“Default Interest Rate” means the lower of (i) the sum of (a) the Prime Rate and (b) 5%, or (ii) the highest rate of interest permitted under applicable law.

“Delaware Arbitration Act” has the meaning set forth in Section 10.1(d).

“Delaware GP” means BREP Asia II L.L.C., a Delaware limited liability company and a general partner of the Partnership.