The Carlyle Group
Carlyle Group L.P. (Form: 8-K, Received: 08/02/2017 06:35:09)


 
 
 
 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
 
 
 
 
 
FORM 8-K
 
 
 
 
 
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): August 2, 2017
 
 
 
 
 
The Carlyle Group L.P.
(Exact name of registrant as specified in its charter)
 
 
 
 
 

 
 
 
 
 
Delaware
 
001-35538
 
45-2832612
(State or Other Jurisdiction
of Incorporation)
 
(Commission
File Number)
 
(IRS Employer
Identification No.)
 
 
1001 Pennsylvania Avenue, NW
Washington, D.C.
 
20004-2505
(Address of Principal Executive Offices)
 
(Zip Code)
(202) 729-5626
(Registrant’s Telephone Number, Including Area Code)
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
¨
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
¨
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
¨
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
¨
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ¨
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. ¨

 
 
 
 
 






Item 2.02
Results of Operations and Financial Condition.
On August 2, 2017, The Carlyle Group L.P. issued a summary press release and a detailed earnings presentation announcing financial results for its second quarter ended June 30, 2017. The summary press release and the earnings presentation are furnished as Exhibit 99.1 and Exhibit 99.2, respectively, to this Report.
As provided in General Instruction B.2 of Form 8-K, the information in this Item 2.02 and Exhibits 99.1 and 99.2 incorporated in this Form 8-K shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall such information or Exhibits 99.1 and 99.2 be deemed to be incorporated by reference in any filing under the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such a filing.
Item 9.01
Financial Statements and Exhibits.
(d)
Exhibits.
 
 
 
Exhibit No.
  
Description
 
 
99.1
  
Summary earnings press release of The Carlyle Group L.P., dated August 2, 2017.
 
 
99.2
  
Earnings presentation of The Carlyle Group L.P., dated August 2, 2017.
 
 
 







SIGNATURE
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 hereunto duly authorized.
 
 
 
 
 
 
 
 
 
 
THE CARLYLE GROUP L.P.
 
 
 
 
 
 
 
 
By:
 
Carlyle Group Management L.L.C.,
 
 
 
 
 
 
its general partner
 
 
 
 
Date: August 2, 2017
 
 
 
By:
 
/s/ Curtis L. Buser
 
 
 
 
Name:
 
Curtis L. Buser
 
 
 
 
Title:
 
Chief Financial Officer






EXHIBIT INDEX
 
 
 
 
Exhibit No.
  
Description
 
 
Exhibit 99.1
  
Summary earnings press release of The Carlyle Group L.P., dated August 2, 2017.
 
 
Exhibit 99.2
  
Earnings presentation of The Carlyle Group L.P., dated August 2, 2017.
 
 
 




Exhibit 99.1
CARLYLEBLUE300DPIJPGA10.JPG  

The Carlyle Group Announces Second Quarter 2017 Financial Results
Washington, DC, August 2, 2017 – Global alternative asset manager The Carlyle Group L.P. (NASDAQ: CG) today reported its unaudited results for the second quarter ended June 30, 2017 .

Carlyle Co-CEO David M. Rubenstein said, “Carlyle produced another strong value creation quarter, with our net accrued carry balance increasing 46% year to date. As a result of the strong performance we have delivered for our fund investors, demand is high for new funds.  We raised over $8 billion of capital in the second quarter with acceleration likely in the second half of 2017.”
 
Carlyle Co-CEO William E. Conway, Jr. said, “Our diverse carry fund portfolio appreciated 5% in the quarter and a robust 19% over the past twelve months. We continue to deploy capital at a steady pace. The environment for new investments remains competitive, but our deep, global teams continue to find good investments.”

U.S. GAAP results for Q2 2017 included income before provision for income taxes of $ 244 million , and net income attributable to the common unitholders through The Carlyle Group L.P. of $58 million , or net income per common unit of $0.59 , on a diluted basis. U.S. GAAP results for the twelve months ended June 30, 2017 included income before provision for income taxes of $534 million and net income attributable to The Carlyle Group L.P. of $133 million . Total balance sheet assets were $11 billion as of June 30, 2017 .

In addition to this release, Carlyle issued a full detailed presentation of its second quarter 2017 results, which can be viewed on the investor relations section of our website at ir.carlyle.com .

Settlement and final resolution of commodities related exposure

Included in our Q2 2017 quarterly results is the impact of settlements with investors in two commodities investment vehicles managed by an affiliate of Carlyle, thereby fully resolving investor claims relating to these matters. Net of previously recorded reserves and certain insurance proceeds, we recorded a charge of $6 million in connection with the settlements, which is included in general, administrative and other expense in Global Market Strategies. The full amount of the net charge affected GAAP earnings, Economic Net Income, Fee Related Earnings and Distributable Earnings. The charge is lower than our previous estimate of up to $60 million due to the offset of general liability insurance. We continue to pursue additional efforts to recover reimbursement.

With these settlements, Carlyle completes the exit of the commodities investment advisory business and other hedge fund investment advisory businesses that it had acquired from 2010 to 2014.
Distribution
The Board of Directors has declared a quarterly distribution of $0.42 per common unit to holders of record at the close of business on August 14, 2017, payable on August 21, 2017.

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Conference Call
Carlyle will host a conference call at 8:30 a.m. EDT on Wednesday, August 2, 2017, to announce its second quarter 2017 financial results. The call may be accessed by dialing +1 (800) 850-2903 (U.S.) or +1 (253) 237-1169 (international) and referencing “The Carlyle Group Financial Results Call.” The conference call will be webcast simultaneously via a link on Carlyle’s investor relations website at ir.carlyle.com and an archived replay of the webcast also will be available on the website soon after the live call.
About The Carlyle Group
The Carlyle Group (NASDAQ: CG) is a global alternative asset manager with $170 billion of assets under management across 299 investment vehicles as of June 30, 2017 . Carlyle’s purpose is to invest wisely and create value on behalf of its investors, many of whom are public pensions. Carlyle invests across four segments – Corporate Private Equity, Real Assets, Global Market Strategies and Investment Solutions – in Africa, Asia, Australia, Europe, the Middle East, North America and South America. Carlyle has expertise in various industries, including: aerospace, defense & government services, consumer & retail, energy, financial services, healthcare, industrial, real estate, technology & business services, telecommunications & media and transportation. The Carlyle Group employs more than 1,550 people in 31 offices across six continents.
Forward Looking Statements
This press release may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These statements include, but are not limited to, statements related to our expectations regarding the performance of our business, our financial results, our liquidity and capital resources, contingencies, our distribution policy, and other non-historical statements. You can identify these forward-looking statements by the use of words such as “outlook,” “believes,” “expects,” “potential,” “continues,” “may,” “will,” “should,” “seeks,” “approximately,” “predicts,” “intends,” “plans,” “estimates,” “anticipates” or the negative version of these words or other comparable words. Such forward-looking statements are subject to various risks, uncertainties and assumptions. Accordingly, there are or will be important factors that could cause actual outcomes or results to differ materially from those indicated in these statements including, but 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, 2016 filed with the SEC on February 16, 2017, as such factors may be updated from time to time in our periodic filings with the SEC, which are accessible on the SEC’s website at www.sec.gov. These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included in this release and in our filings with the SEC. We undertake no obligation to publicly update or review any forward-looking statements, whether as a result of new information, future developments or otherwise, except as required by applicable law.
This release does not constitute an offer for any Carlyle fund.
Contacts:
Public Market Investor Relations
  
Media
Daniel Harris
  
Elizabeth Gill
Phone: +1 (212) 813-4527
  
Phone: +1 (202) 729-5385
daniel.harris@carlyle.com
  
elizabeth.gill@carlyle.com
 
 
Web: www.carlyle.com
  
 
Videos: www.youtube.com/onecarlyle
  
 
Tweets: www.twitter.com/onecarlyle
  
 
Podcasts: www.carlyle.com/about-carlyle/market-commentary

Page | 2


Exhibit 99.2

CARLYLEBLUE300DPIJPGA10.JPG

For Immediate Release
August 2, 2017

The Carlyle Group Announces Second Quarter 2017 Financial Results

U.S. GAAP results include income before provision for income taxes of $244 million and net income attributable to The Carlyle Group L.P. of $58 million , or $0.59 per common unit on a diluted basis, for Q2 2017

Economic Net Income of $300 million on a pre-tax basis and $0.81 per Adjusted Unit on a post-tax basis in Q2 2017 , driven by 5% carry fund portfolio appreciation

Net accrued performance fees of $1.6 billion as of Q2 2017 , up 9% from Q1 2017 and up 46% from year-end 2016

$199 million of Distributable Earnings on a pre-tax basis for Q2 2017 and $0.56 per common unit on a post-tax basis in Q2 2017

Declared a quarterly distribution of $0.42 per common unit for Q2 2017

$6.0 billion in realized proceeds in Q2 2017 and $26.8 billion realized over the last twelve months
$3.4 billion of invested capital in Q2 2017 and $16.8 billion invested over the last twelve months
$8.4 billion in gross capital raised in Q2 2017 and $18.1 billion raised over the last twelve months

Washington, DC – Global alternative asset manager The Carlyle Group L.P. (NASDAQ: CG) today reported its unaudited results for the second quarter ended June 30, 2017 .

Carlyle Co-CEO David M. Rubenstein said, “Carlyle produced another strong value creation quarter, with our net accrued carry balance increasing 46% year to date. As a result of the strong performance we have delivered for our fund investors, demand is high for new funds.  We raised over $8 billion of capital in the second quarter with acceleration likely in the second half of 2017.”
 
Carlyle Co-CEO William E. Conway, Jr. said, “Our diverse carry fund portfolio appreciated 5% in the quarter and a robust 19% over the past twelve months. We continue to deploy capital at a steady pace. The environment for new investments remains competitive, but our deep, global teams continue to find good investments.”

U.S. GAAP results for Q2 2017 included income before provision for income taxes of $ 244 million , and net income attributable to the common unitholders through The Carlyle Group L.P. of $58 million , or net income per common

Page | 1



unit of $0.59 , on a diluted basis. U.S. GAAP results for the twelve months ended June 30, 2017 included income before provision for income taxes of $534 million and net income attributable to The Carlyle Group L.P. of $133 million . Total balance sheet assets were $11 billion as of June 30, 2017 .

Settlement and final resolution of commodities related exposure
Included in our Q2 2017 quarterly results is the impact of settlements with investors in two commodities investment vehicles managed by an affiliate of Carlyle, thereby fully resolving investor claims relating to these matters. Net of previously recorded reserves and certain insurance proceeds, we recorded a charge of $6 million in connection with the settlements, which is included in general, administrative and other expense in Global Market Strategies. The full amount of the net charge affected GAAP earnings, Economic Net Income, Fee Related Earnings and Distributable Earnings. The charge is lower than our previous estimate of up to $60 million due to the offset of general liability insurance. We continue to pursue additional efforts to recover reimbursement.

With these settlements, Carlyle completes the exit of the commodities investment advisory business and other hedge fund investment advisory businesses that it had acquired from 2010 to 2014.


 
Second Quarter Distribution
The Board of Directors has declared a quarterly distribution of $0.42 per common unit to holders of record at the close of business on August 14, 2017, payable on August 21, 2017.
Distribution Policy
It is Carlyle’s intention to cause Carlyle Holdings to make quarterly distributions to its partners, including The Carlyle Group L.P.’s wholly owned subsidiaries, that will enable The Carlyle Group L.P. to pay a quarterly distribution of approximately 75% of Distributable Earnings per common unit, net of taxes and amounts payable under the tax receivable agreement, for the quarter. Carlyle’s general partner may adjust the distribution for amounts determined to be necessary or appropriate to provide for the conduct of its business, to make appropriate investments in its business and its funds or to comply with applicable law or any of its financing agreements, or to provide for future cash requirements such as tax-related payments, clawback obligations and distributions to unitholders for any ensuing quarter. The amount to be distributed could also be adjusted upward in any one quarter. The declaration and payment of any distributions is at the sole discretion of Carlyle’s general partner, which may change or eliminate the distribution policy at any time.




Page | 2




Carlyle Consolidated GAAP Results
 
The Carlyle Group L.P.
Summary U.S. GAAP Condensed Consolidated Statements of Operations (Unaudited)
 
 
Three Months Ended           
 
LTM
 
 
Jun 30, 2016
Sep 30, 2016
Dec 31, 2016
Mar 31, 2017
Jun 30,
2017
 
Jun 30,
2017
 
 
(Dollars in millions, except per unit data)
 
 
 
Revenues
 
 
 
 
 
 
 
 
Fund management fees
 
$
272.5

$
255.1

$
259.0

$
246.3

$
238.8

 
$
999.2

Total performance fees
 
210.9

214.7

181.0

681.6

543.6

 
1,620.9

Total investment income
 
65.3

70.5

34.3

46.3

59.0

 
210.1

Revenue from consolidated entities
 
54.3

61.7

92.7

135.5

61.4

 
351.3

All other revenues
 
5.0

5.3

8.9

10.4

5.6

 
30.2

Total revenues
 
608.0

607.3

575.9

1,120.1

908.4

 
3,211.7

 
 
 
 
 
 
 
 
 
Expenses
 
 
 
 
 
 
 
 
Base compensation
 
149.9

154.3

176.6

146.0

151.0

 
627.9

Equity-based compensation
 
109.0

81.4

68.8

72.8

88.0

 
311.0

Total performance fee related compensation
 
96.5

110.9

76.2

317.1

257.1

 
761.3

General, administrative and other expenses
 
91.4

188.9

158.5

93.8

95.8

 
537.0

Expenses from consolidated entities
 
84.0

114.4

90.9

164.8

96.9

 
467.0

Interest and other nonoperating expenses
 
16.1

11.9

3.0

15.0

16.6

 
46.5

Total expenses
 
546.9

661.8

574.0

809.5

705.4

 
2,750.7

 
 
 
 
 
 
 
 
 
Net investment gains of consolidated funds
 
6.7

4.8

10.0

17.1

40.7

 
72.6

Income (loss) before provision for income taxes
 
67.8

(49.7
)
11.9

327.7

243.7

 
533.6

Provision (benefit) for income taxes
 
24.3

1.0

(2.7
)
5.8

13.2

 
17.3

Net income (loss)
 
43.5

(50.7
)
14.6

321.9

230.5

 
516.3

Net income (loss) attributable to non-controlling interests in consolidated entities
 
1.6

(29.1
)
70.8

3.3

16.5

 
61.5

Net income (loss) attributable to Carlyle Holdings
 
41.9

(21.6
)
(56.2
)
318.6

214.0

 
454.8

Net income (loss) attributable to non-controlling interests in Carlyle Holdings
 
35.8

(22.4
)
(47.3
)
235.6

156.4

 
322.3

Net income (loss) attributable to The Carlyle Group L.P.
 
$
6.1

$
0.8

$
(8.9
)
$
83.0

$
57.6

 
$
132.5

 
 
 
 
 
 
 
 
 
Net income (loss) attributable to The Carlyle Group L.P. per common unit
 
 
 
 
 
 
 
 
   Basic
 
$
0.07

$
0.01

$
(0.11
)
$
0.97

$
0.65

 
 
   Diluted
 
$
0.07

$
(0.02
)
$
(0.16
)
$
0.90

$
0.59

 
 
 
 
 
 
 
 
 
 
 

Income (loss) before provision for income taxes (1) was $ 244 million for Q2 2017 , compared to $ 68 million for Q2 2016. The increase in income before provision for income taxes in Q2 2017 compared to Q2 2016 was primarily due to a $172 million increase in net performance fees and a decrease in equity-based compensation, partially offset by lower fund management fees.

Net income (loss) attributable to The Carlyle Group L.P. was $58 million , or $0.59 per common unit on a diluted basis for Q2 2017 , compared to $6 million , or $0.07 per common unit on a diluted basis for Q2 2016.

(1) Income (loss) before provision for income taxes is the GAAP measure that is most directly comparable to Economic Net Income (ENI) and Distributable Earnings, which management uses to measure the performance of the business.  In most periods, income (loss) before provision for income taxes will be lower than ENI principally due to excluding from ENI equity compensation from awards issued in conjunction with the initial public offering, acquisitions and strategic investments, as well as other acquisition-related charges, including amortization of intangibles and impairment.  In periods of positive earnings, net income (loss) attributable to The Carlyle Group L.P. typically will be lower than ENI as net income (loss) attributable to The Carlyle Group L.P. only includes the portion of earnings (approximately 28% before taxes as of June 30, 2017 ) that is attributable to the public unitholders whereas the calculation of ENI reflects the adjusted earnings attributable to all unitholders.  A full reconciliation is included on page 33. See "Non-GAAP Financial Information and Other Key Terms" for additional information.





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Non-GAAP Operating Results

Carlyle Group Summary  ($ in millions, except unit and per unit amounts)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Quarter
 
LTM
 
% Change    
$ in millions, except per unit data and where noted
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Q2 2016
 
Q3 2016
 
Q4 2016
 
Q1 2017
 
Q2 2017
 
Q3 16 - Q2 17
 
QoQ  
 
YoY
 
LTM
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Economic Net Income
 
$
158.3

 
$
53.5

 
$
5.6

 
$
400.1

 
$
300.1

 
$759.3
 
(25)%
 
90%
 
297%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fee-Related Earnings
 
44.9

 
30.8

 
(145.2
)
 
25.5

 
6.2

 
(82.7)
 
(76)%
 
(86)%
 
(142)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net Performance Fees
 
115.4

 
142.3

 
60.7

 
394.1

 
299.4

 
896.5
 
(24)%
 
159%
 
492%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Realized Net Performance Fees
 
233.3

 
186.3

 
135.6

 
35.3

 
182.1

 
539.3
 
416%
 
(22)%
 
(7)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Distributable Earnings
 
287.5

 
228.2

 
7.4

 
55.4

 
198.9

 
489.9
 
259%
 
(31)%
 
(39)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Economic Net Income, Tax and Per Unit Information
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Economic Net Income (pre-tax)
 
$
158.3

 
$
53.5

 
$
5.6

 
$
400.1

 
$
300.1

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Less (Add): Provision (Benefit) for income taxes (1)
 
43.2

 
(16.2
)
 
(0.8
)
 
35.5

 
25.3

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 
 
 
 
 
 
 
Economic Net Income, After Taxes
 
$
115.1

 
$
69.7

 
$
6.4

 
$
364.6

 
$
274.8

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 
 
 
 
 
 
 
Adjusted Units (in millions)
 
328.6

 
330.2

 
330.2

 
333.7

 
337.5

(2)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Economic Net Income, After Taxes per Adjusted Unit
 
$
0.35

 
$
0.21

 
$
0.02

 
$
1.09

 
$
0.81

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Distributable Earnings, Tax and Per Unit Information
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Distributable Earnings
 
$
287.5

 
$
228.2

 
$
7.4

 
$
55.4

 
$
198.9

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Less: Estimated foreign, state, and local taxes (3)
 
6.6

 
5.6

 
5.4

 
6.8

 
5.6

 
 
 
 
 
 
 
 
 
 


 


 


 


 
 

 
 
 
 
 
 
 
 
Distributable Earnings, After Taxes
 
$
280.9

 
$
222.6

 
$
2.0

 
$
48.6

 
$
193.3

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Allocating Distributable Earnings for only public unitholders of The Carlyle Group L.P.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Distributable Earnings to The Carlyle Group L.P.
 
$
72.9

 
$
57.8

 
$
0.5

 
$
13.0

 
$
55.6

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Less: Estimated current corporate income taxes (4)
 
1.4

 
1.4

 
1.2

 
1.5

 
1.8

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Distributable Earnings to The Carlyle Group L.P. net of corporate income taxes
 
$
71.5

 
$
56.4

 
$
(0.7
)
 
$
11.5

 
$
53.8

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 
 
 
 
 
 
 
 
 
Units in public float (in millions)
 
85.1

 
85.0

 
85.7

 
88.1

 
96.2

(5)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Distributable Earnings, net, per The Carlyle Group L.P. common unit outstanding
 
$
0.84

 
$
0.66

 
$
0.00

 
$
0.13

 
$
0.56

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Distribution per common unit
 
$
0.63

 
$
0.50

 
$
0.16

 
$
0.10

 
$
0.42

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Note: Totals may not sum due to rounding. 

(1) Represents the implied provision for income taxes that was calculated using a similar methodology as that used in calculating the provision for income taxes for The Carlyle Group L.P., without any reduction for non-controlling interests.
(2) For information regarding our calculation of Adjusted Units as of June 30, 2017 , please see page 35.
(3) Represents the implied provision for current income taxes that was calculated using a similar methodology as that used in calculating the provision for current income taxes for The Carlyle Group L.P., without any reduction for non-controlling interests.
(4) Represents current corporate income taxes payable on Distributable Earnings allocated to Carlyle Holdings I GP Inc. and estimated current Tax Receivable Agreement payments owed.
(5) Includes 5,143,321 common units that were issued in July and August 2017 in connection with the vesting of deferred restricted common units. For purposes of this calculation, these common units have been added to the common units outstanding as of June 30, 2017 because they will participate in the unitholder distribution that will be paid on the common units in August 2017.


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Carry Fund Appreciation and Net Accrued Performance Fees
Carlyle's carry fund portfolio appreciated 5% during Q2 2017 and 19% over the past twelve months. Carlyle's private carry fund portfolio appreciated 6% and the public carry fund portfolio appreciated 10% during Q2 2017 , excluding Investment Solutions. Carry fund valuations for Q2 2017 were positively impacted by broad based strength across our carry fund portfolio, notably in our fifth and sixth U.S. Buyout funds (CP V/VI), our latest vintage Asia Buyout fund (CAP IV), the latest vintage NGP Energy fund (NGP XI), and several U.S. opportunistic Real Estate funds, among others. Net accrued performance fee balance increased 9% during the quarter, or $132 million, to $1.6 billion, and increased 29% over the LTM.
 
 
Quarter
 
LTM
 
Net Accrued
Performance Fees
Fund Valuations ($ in millions)
 
Q2 2016
 
Q3 2016
 
Q4 2016
 
Q1 2017
 
Q2 2017
 
Q3 2016 - Q2 2017
 
Q2 2017
Overall Carry Fund Appreciation/(Depreciation) (1)
 
4%
 
3%
 
5%
 
6%
 
5%
 
19%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Corporate Private Equity (2)
 
4%
 
3%
 
4%
 
9%
 
8%
 
23%
 
$1,080
Buyout
 
4%
 
3%
 
4%
 
9%
 
9%
 
24%
 
$1,032
Growth Capital
 
3%
 
0%
 
3%
 
7%
 
4%
 
15%
 
$48
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Real Assets (2)
 
7%
 
4%
 
4%
 
5%
 
6%
 
20%
 
$385
Real Estate
 
8%
 
0%
 
3%
 
5%
 
6%
 
15%
 
$296
Natural Resources (3)
 
11%
 
12%
 
0%
 
7%
 
6%
 
29%
 
$106
Legacy Energy
 
3%
 
1%
 
9%
 
3%
 
4%
 
17%
 
$(17)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Global Market Strategies Carry Funds (2)
 
(2)%
 
0%
 
2%
 
7%
 
0%
 
11%
 
$44
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Investment Solutions Carry Funds (2)
 
3%
 
2%
 
7%
 
3%
 
1%
 
14%
 
$55
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net Accrued Performance Fees
 
 
 
 
 
 
 
 
 
 
 
 
 
$1,564
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

CGPFRFANDNAPFQ217V1A01.JPG

Note: The sum of quarters may not equal LTM.
(1) Appreciation/(Depreciation) represents unrealized gain/(loss) for the period on a total return basis before fees and expenses. The percentage of return is calculated as: ending remaining investment fair market value plus net investment outflow (sales proceeds minus net purchases) minus beginning remaining investment fair market value divided by beginning remaining investment fair market value. Fund only, does not include co-investment.
(2) We generally earn performance fees (or carried interest) from our carry funds representing a 20% allocation of profits generated on third-party capital, and on which the general partner receives a special residual allocation of income from limited partners, which we refer to as carried interest, in the event that specified investment returns are achieved by the fund. Disclosures referring to carry funds also include the impact of certain commitments that do not earn carried interest, but are either part of, or associated with our carry funds. The rate of carried interest, as well as the share of carried interest allocated to Carlyle, may vary across the carry fund platform. See "Non-GAAP Financial Information and Other Key Terms" for more information.
(3) Natural Resources is comprised of NGP, infrastructure, power and international energy funds.
(4) Other primarily reflects the impact of foreign exchange.


Page | 5



Carlyle All Segment Results
Net Funds Raised
 
Invested Capital
 
Realized Proceeds
 
Fund Appreciation
Q2
$8.4 billion
 
Q2
$3.4 billion
 
Q2
$6.0 billion
 
Q2
5%
YTD:
$11.4 bn
LTM:
$15.9 bn
 
YTD:
$7.8 bn
LTM:
$16.8 bn
 
YTD:
$9.5 bn
LTM:
$26.8 bn
 
YTD:
11%
LTM:
19%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

$ in millions, unless noted
 
Q2 2016
 
Q2 2017
 
Prior LTM
 
LTM
 
Commentary
 
 
 
 
 
 
 
 
 
 
 
 
 
Fee-Related Earnings (FRE)
 
$45
 
$6
 
$196
 
$(83)
 
Compared to Q2 2016, the decline in FRE  was driven by a $15 million increase in fundraising expense and the $6 million net commodities charge. Lower Fee-Earning AUM also contributed to lower management fees in addition to a decline in catch up management fees. The LTM decline compared to the prior LTM was primarily due to the net charges incurred within Global Market Strategies in Q4 2016 and Q2 2017.

Net Realized Performance Fees  in Q2 2017 were primarily driven by the sale of Pharmaceutical Product Development (CP V), Multi Packaging Solutions (CEP III), Crystal Orange Hotels (CAP III), and several realizations in our U.S. Real Estate, Power, and Credit funds.

Realized Investment Income  in Q2 2017 was driven by gains in U.S. Buyout and Europe Buyout investments offset by a modest loss realized in Urbplan Desenvolvimento Urbano S.A. ("Urbplan").
 
 
 
 
 
 
 
 
 
 
 
+
Net Realized Performance Fees
 
233
 
182
 
581
 
539
 
 
 
 
 
 
 
 
 
 
 
 
+
Realized Investment Income/(Loss)
 
9
 
11
 
28
 
33
 
 
 
 
 
 
 
 
 
 
 
 
=
Distributable Earnings (DE)
 
$288
 
$199
 
$805
 
$490
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fee-Related Earnings (FRE)
 
$45
 
$6
 
$196
 
$(83)
 
Net Performance Fees  were driven by appreciation of 5% in our carry funds in Q2 2017 and 19% LTM. Year-to-date, approximately 65% of Net Performance Fees were generated by our current generation of carry funds that continue to invest new capital. Corporate Private Equity Buyout funds appreciated 9% for the second consecutive quarter, and have appreciated 24% over the LTM.

Q2 2017 Investment Income  was driven by investment gains in U.S., Europe and Asia Buyout, U.S. and Europe Real Estate, and NGP and International Energy.

Equity-based Compensation  increased this quarter relative to prior quarters, but we expect full year expense generally to be consistent with the prior year.
 
 
 
 
 
 
 
 
 
 
 
+
Net Performance Fees
 
115
 
299
 
151
 
897
 
 
 
 
 
 
 
 
 
 
 
 
+
Investment Income/(Loss)
 
29
 
31
 
17
 
70
 
 
 
 
 
 
 
 
 
 
 
 
Equity-based Compensation
 
31
 
37
 
124
 
124
 
 
 
 
 
 
 
 
 
 
 
 
Other 1
 
 
 
50
 
 
 
 
 
 
 
 
 
 
 
 
 
=
Economic Net Income
 
$158
 
$300
 
$191
 
$759
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fee-Earning Assets Under Management
($ bn)
 
$125.3
 
$116.1
 
 
 
 
 
Fee-Earning AUM  declined relative to Q2 2016 primarily due to strong realizations across the portfolio and the impact of approximately $5 billion in outflows and redemptions in our former hedge fund platform. Fundraising of $8.4 billion during the quarter included first closings in our new opportunistic U.S. real estate fund, opportunistic credit fund and third financial services fund, among others. As of the end of Q2 2017, pending Fee- Earning AUM, which represents funds raised not yet earning fees,was $9 billion, up from $4 billion at the end of Q1 2017.
 
 
 
 
 
 
 
 
 
 
 
 

Note: LTM, or last twelve months, refers to the period Q3 2016 through Q2 2017 . Prior LTM, or the prior rolling 12-month period, refers to the period Q3 2015 through Q2 2016 .
(1) Includes a $50 million reserve for ongoing litigation and contingencies taken in Q4 2015, which was allocated to the segments in the following manner: Corporate Private Equity ($27 million), Real Assets ($9 million), Global Market Strategies ($9 million) and Investment Solutions ($5 million).


Page | 6




Corporate Private Equity (CPE)
Net Funds Raised
 
Invested Capital
 
Realized Proceeds
 
Fund Appreciation
Q2
$0.3 billion
 
Q2
$1.4 billion
 
Q2
$2.7 billion
 
Q2
8%
YTD:
$0.5 bn
LTM:
$0.9 bn
 
YTD:
$3.9 bn
LTM:
$7.1 bn
 
YTD:
$3.7 bn
LTM:
$12.1 bn
 
YTD:
18%
LTM:
23%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

$ in millions, unless noted
 
Q2 2016
 
Q2 2017
 
Prior LTM
 
LTM
 
Commentary
 
 
 
 
 
 
 
 
 
 
 
 
 
Fee-Related Earnings (FRE)
 
$23
 
$13
 
$101
 
$59
 
Compared to Q2 2016, the decline in FRE  was driven by an $11 million decline in fee revenue related to lower Fee- Earning AUM and modestly higher compensation expense, partially offset by a $4 million decline in general, administrative and other expense.

CPE Net Realized Performance Fees  in Q2 2017 were primarily driven by exits in Carlyle Partners V, Carlyle Europe Partners III and Carlyle Asia Partners III.

Realized Investment Income  was driven by investment gains in U.S. Buyout and Europe Buyout.
 
 
 
 
 
 
 
 
 
 
 
+
Net Realized Performance Fees
 
195
 
151
 
463
 
502
 
 
 
 
 
 
 
 
 
 
 
 
+
Realized Investment Income
 
18
 
9
 
35
 
47
 
 
 
 
 
 
 
 
 
 
 
 
=
Distributable Earnings (DE)
 
$235
 
$173
 
$599
 
$608
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fee-Related Earnings (FRE)
 
$23
 
$13
 
$101
 
$59
 
Net Performance Fees  were driven by fund appreciation in CPE of 8% in the quarter and 23% over the LTM.

During the quarter, Carlyle Partners V and VI appreciated 6% and 11%, respectively, Carlyle Asia Partners IV appreciated 15%, and Carlyle Global Financial Services Partners II appreciated 16%. Each of these funds is in accrued carry and positively impacted Net Performance Fees and Accrued Performance Fees for the quarter.



 
 
 
 
 
 
 
 
 
 
 
+
Net Performance Fees
 
33
 
224
 
(2)
 
638
 
 
 
 
 
 
 
 
 
 
 
 
+
Investment Income/(Loss)
 
21
 
22
 
18
 
58
 
 
 
 
 
 
 
 
 
 
 
 
Equity-based Compensation
 
18
 
18
 
69
 
66
 
 
 
 
 
 
 
 
 
 
 
 
Other 1
 
 
 
27
 
 
 
 
 
 
 
 
 
 
 
 
 
=
Economic Net Income
 
$58
 
$242
 
$23
 
$689
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fee-Earning Assets Under Management
($ bn)
 
$38.9
 
$36.2
 
 
 
 
 
Fee-Earning AUM  declined relative to Q2 2016 primarily due to a strong level of realizations, offset by deployment in our long-dated private equity fund. Fundraising during the quarter included a first closing in our third Financial Services fund, which has not yet activated fees.
 
 
 
 
 
 
 
 
 
 
 
 
(1) For a description of the "Other" amount, please see page 5.
Corporate Private Equity
 
Quarter
 
LTM
 
% Change    
$ in millions, except per unit data and where noted
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Q2 2016
 
Q3 2016
 
Q4 2016
 
Q1 2017
 
Q2 2017
 
Q3 16 - Q2 17
 
QoQ  
 
YoY
 
LTM
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Economic Net Income
 
58
 
63
 
71
 
313
 
242
 
689
 
(23)%
 
315%
 
NM
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fee-Related Earnings
 
23
 
17
 
19
 
10
 
13
 
59
 
34%
 
(40)%
 
(42)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net Performance Fees
 
33
 
101
 
0
 
313
 
224
 
638
 
(28)%
 
577%
 
NM
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Realized Net Performance Fees
 
195
 
168
 
159
 
25
 
151
 
502
 
497%
 
(23)%
 
9%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Distributable Earnings
 
235
 
209
 
191
 
35
 
173
 
608
 
388%
 
(26)%
 
2%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total Assets Under Management ($ in billions)
 
57.6
 
54.6
 
50.9
 
53.0
 
54.3
 
 
 
2%
 
(6)%
 
(6)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fee-Earning Assets Under Management ($ in billions)
 
38.9
 
37.8
 
36.3
 
36.9
 
36.2
 
 
 
(2)%
 
(7)%
 
(7)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Note: Totals may not sum due to rounding.


Page | 7




Real Assets
Net Funds Raised
 
Invested Capital
 
Realized Proceeds
 
Fund Appreciation
Q2
$3.7 billion
 
Q2
$0.8 billion
 
Q2
$0.9 billion
 
Q2
6%
YTD:
$4.7 bn
LTM:
$5.2 bn
 
YTD:
$1.5 bn
LTM:
$4.6 bn
 
YTD:
$1.5 bn
LTM:
$5.2 bn
 
YTD:
11%
LTM:
20%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Note: Invested capital, realized proceeds, and fund appreciation are for carry funds only.
$ in millions, unless noted
 
Q2 2016
 
Q2 2017
 
Prior LTM
 
LTM
 
Commentary
 
 
 
 
 
 
 
 
 
 
 
 
 
Fee-Related Earnings (FRE)
 
$15
 
$(11)
 
$73
 
$17
 
Compared to Q2 2016, the FRE  decline was attributable to a $12 million increase in fundraising costs as well as an $8 million decline in fee revenue, partially owing to a $5 million decline in catch-up management fees. Fees on capital raised for our eighth U.S. real estate fund are not yet activated. The LTM decline in FRE compared to the prior LTM was primarily driven by lower management fees owing to lower average Fee-Earning AUM, as well as an $11 million increase in fundraising costs.

Net Realized Performance Fees  in Q2 2017 were primarily driven by U.S. Real Estate and Power Opportunities.

Realized Investment Income  was $0 in Q2 2017, as a small realized loss in Urbplan was offset by other investment gains.
 
 
 
 
 
 
 
 
 
 
 
+
Net Realized Performance Fees
 
34
 
22
 
95
 
10
 
 
 
 
 
 
 
 
 
 
 
 
+
Realized Investment Income (Loss)
 
(10)
 
 
(11)
 
(21)
 
 
 
 
 
 
 
 
 
 
 
 
=
Distributable Earnings (DE)
 
$39
 
$12
 
$156
 
$6
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fee-Related Earnings (FRE)
 
$15
 
$(11)
 
$73
 
$17
 
Net Performance Fees  were driven by fund appreciation in Real Assets of 6% in the quarter and 20% over the LTM.

Real Estate funds appreciated 6% in the quarter and 15% LTM. Our latest vintage U.S. opportunistic real estate fund, CRP VII, appreciated 6% in the quarter. NGP XI appreciated 7% in Q2 2017 and our international energy fund, CIEP, appreciated 19% in the quarter.

Investment Income  in Q2 2017 was primarily attributable to appreciation on investments in U.S. and Europe Real Estate funds, NGP and International energy funds, and was partially offset by a modest loss in Urbplan.


 
 
 
 
 
 
 
 
 
 
 
+
Net Performance Fees
 
74
 
64
 
169
 
210
 
 
 
 
 
 
 
 
 
 
 
 
+
Investment Income/(Loss)
 
(3)
 
7
 
(2)
 
(10)
 
 
 
 
 
 
 
 
 
 
 
 
Equity-based Compensation
 
7
 
9
 
25
 
31
 
 
 
 
 
 
 
 
 
 
 
 
Other 1
 
 
 
9
 
 
 
 
 
 
 
 
 
 
 
 
 
=
Economic Net Income
 
$79
 
$51
 
$206
 
$186
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fee-Earning Assets Under Management
($ bn)
 
$30.4
 
$26.2
 
 
 
 
 
Fee-Earning AUM  declined relative to Q2 2016 primarily due to significant realizations, partially offset by deployment in our Core Plus real estate fund and new commitments to our China real estate fund. In Q2 2017, we had a first close on our eighth U.S. real estate fund, which increased Pending Fee-Earning AUM to $4 billion from under $1 billion last quarter.
 
 
 
 
 
 
 
 
 
 
 
 
(1) For a description of the "Other" amount, please see page 5.
Real Assets
 
Quarter
 
LTM
 
% Change
$ in millions, except per unit data and where noted
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Q2 2016
 
Q3 2016
 
Q4 2016
 
Q1 2017
 
Q2 2017
 
Q3 16 - Q2 17
 
QoQ  
 
YoY
 
LTM
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Economic Net Income
 
79
 
4
 
73
 
59
 
51
 
186
 
(15)%
 
(36)%
 
(9)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fee-Related Earnings
 
15
 
14
 
9
 
5
 
(11)
 
17
 
(316)%
 
NM
 
(76)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net Performance Fees
 
74
 
28
 
52
 
66
 
64
 
210
 
(4)%
 
(13)%
 
24%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Realized Net Performance Fees
 
34
 
11
 
(30)
 
7
 
22
 
10
 
233%
 
(33)%
 
(89)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Distributable Earnings
 
39
 
10
 
(20)
 
4
 
12
 
6
 
228%
 
(70)%
 
(96)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total Assets Under Management ($ in billions)
 
37.5
 
35.7
 
34.3
 
35.6
 
38.9
 
 
 
9%
 
4%
 
4%