2010 Black Stone Investor Day

2010 Blackstone Investor Day

September 23, 2010

Hilton New YorkNew York, NY

0

Forward‐Looking Statements and Important Disclosures

This presentation may contain forward‐looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 which reflect Blackstone’s current views with respect to, among other things, Blackstone’s operations and financial performance. You can identify these forward‐looking statements by the use of words such as “outlook,” “believes,” “expects,” “potential,” “continues,” “may,”“will,” “should,” “seeks,” “approximately,” “predicts,” “intends,” “plans,” “estimates,” “anticipates” or the negative version of these words or other comparable words. Such forward‐looking statements are subject to various risks and uncertainties. Accordingly, there are or will be important factors that could cause actual outcomes or results to differ materially from those indicated in these statements. Blackstone believes these factors include but are not limited to those described under the section entitled “Risk Factors” in its Annual Report on Form 10‐K for the fiscal year ended December 31, 2009, as such factors may be updated from time to time in its periodic filings with the SEC, which are accessible on the SEC’s website at www.sec.gov. These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included in the SEC filings.

Blackstone undertakes no obligation to publicly update or review any forward‐looking statement, whether as a result of new information, future developments or otherwise.

This presentation includes Non‐GAAP Financial Measures. You should also read the appendix to this presentation –Reconciliation of Non‐GAAP Financial Measures.

This release is for informational purposes only and does not constitute an offer of any Blackstone fund or an offer to enter into any investment program with Blackstone. Such an offer may only be made by means of an offering memorandum, which would have a complete description of the relevant fund or program, including the risks applicable thereto.


Agenda – Thursday, September 23, 2010Time Function Location 8:00 – 8:05 am Introduction and Overview of The Blackstone Group

Joan Solotar – Senior Managing Director, External Relations and Strategy, The Blackstone Group

Trianon Ballroom, 3rd Floor

8:05 – 8:20 am Welcome Remarks Stephen A. Schwarzman – Chairman, CEO & Co‐Founder, The Blackstone Group


8:20 – 9:00 am Financial Overview Laurence Tosi (“LT”) – Chief Financial Officer, The Blackstone Group


9:00 – 9:40 am Portfolio Operations Group James Quella – Senior Managing Director, The Blackstone Group


9:40 – 10:25 am Private Equity Garrett Moran – Senior Managing Director, The Blackstone Group Vikrant Sawhney – Senior Managing Director, The Blackstone Group


10:25 – 10:45 am BREAK – Cyber Café Petit Trianon, 3rd Floor 10:45 – 11:25 am Blackstone Advisory Partners

John Studzinski – Senior Managing Director, The Blackstone Group Trianon Ballroom, 3rd Floor

11:30 – 12:10 pm Restructuring & Reorganization Advisory Timothy Coleman – Senior Managing Director, The Blackstone Group


12:10 – 12:30 pm BREAK – Cyber Café Petit Trianon, 3rd Floor 12:30 – 1:30 pm GSO Credit Platform – Working Lunch

Bennett Goodman – Senior Managing Director, The Blackstone Group & Founder, GSO Capital Partners

Mercury Ballroom, 3rd Floor

1:30 – 1:45 pm BREAK – Cyber Café Petit Trianon, 3rd Floor 1:45 – 2:35 pm Real Estate

Jonathan Gray – Senior Managing Director, The Blackstone Group Trianon Ballroom, 3rd Floor

2:35 – 3:25 pm Blackstone Alternative Asset Management (“BAAM”) J. Tomilson Hill – Vice Chairman, The Blackstone Group


3:25 – 4:30 pm Wrap‐up and Q&A Stephen A. Schwarzman – Chairman, CEO & Co‐Founder, The Blackstone Group Hamilton E. James – President & COO, The Blackstone Group


4:30 – 5:30 pm COCKTAIL RECEPTION Petit Trianon, 3rd Floor


I. Introduction and Overview of The Blackstone Group

II. Financial Overview

III. Portfolio Operations Group

IV. Private Equity

V. Blackstone Advisory Partners

VI. Restructuring & Reorganization Advisory

VII. GSO Credit Platform

VIII. Real Estate

IX. Blackstone Alternative Asset Management (“BAAM”)

Appendix

A. Reconciliation of Non‐GAAP Financial Measures

B. Speaker Biographies

Table of Contents

I. Introduction and Overview of The Blackstone Group


1

Overview of the Blackstone Group

Global leader in institutional alternative asset management with $101.4 billion of Fee‐Earning AUM • Leader: Brand, scale and diversity creates unique synergies and superior returns • Consistency: Returned an average of 2.4x capital and a net IRR > 25% in Private Equity and Real Estate funds

since inception(1)

• Growth: 15 straight years of fee‐earning asset growth at a 27% CAGR• Outperformance: Raised $20 billion in new funds during down cycle• Value: Created $13 billion of investor value in the last 12 months; returned $30 billion in gains over 25 years

Strong, predictable free cash flow driven by long‐term asset management contracts• Over 70% of Fee‐Earning AUM are under long‐term contracts; not subject to redemption risk• Generated Net Fee Related EBITDA of $547 million and Distributable Earnings of $609 million in the last

12 months

Robust balance sheet with $1.6 billion of cash and liquid investments• ‘A’ rating from S&P with stable outlook; ‘A+’ rating from Fitch with stable outlook

Deep, experienced management team • Presides over strong risk management processes and strict capital discipline across all cycles• Approximately 66% of equity is owned by partners and employees creating a culture of ownership and long‐term

accountability

Private Equity

Credit and Marketable Alternatives

RealEstate

FinancialAdvisory

________________________________________________

Note: Data as of June 30, 2010.(1) Past performance is not necessarily indicative of future results.

II. Financial Overview

1


$3 $4$8 $8 $12 $13 $14

$22$27

$32

$51

$70

$83$91

$96$101

$0

$20

$40

$60

$80

$100

$120

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 June2010

An Unparalleled Record of Consistent Growth

Assets Under Management(1)($ in billions)

Fee‐Earning AUM

CAGR 27%

$52.4 billion Fee‐Earning AUM

Credit & Marketable Alternatives M & A, Restructuring &

Reorganization, Park Hill Placement Agent

Financial Advisory $23.8 billion Fee‐Earning AUM

Real Estate $25.2 billion Fee‐Earning AUM

Private Equity

CAMA

Private Equity

Real Estate

40%

33%

18%

15‐Year CAGR

$117

$16 billion in committed capital not yet paying fees

________________________________________________

(1) Chart reflects Total AUM for years 1995‐2006, and Fee‐Earning AUM thereafter.

2


Blackstone Financials

Management Fees

Transaction & Advisory Fees

Principal Gains on BX Investments in Funds

Key Revenue Drivers

Fee‐Earning AUM (Committed/Invested Capital)

Fee‐Earning AUM(NAV including marks)

Privates(PE, RE, GSO Mezz)

Marketable Alternatives(FoHFs, BREDS, GSO Hedge)

Activity‐based

BX Returns on its GP Investments (2%–3%)

BX Returns on its GP Investments (2%–3%)

Activity‐based

Performance Fees Incentive Fees(% of Positive Returns)

Carried Interest(20% of Positive Returns)(1)

________________________________________________

(1) Assumes preferred return hurdle is achieved by the fund.

3


Fee Revenue Streams

Management Fees are a uniquely consistent revenue stream

• Recurring revenues driven by Fee‐Earning AUM

• $70 billion (~70%) of Fee‐Earning AUM is subject to long‐term lock‐ups (10–12 years)

Transaction and Advisory Fees have material upside generated by activity levels

• More than 50% of Fee‐Earning AUM is eligible for Transaction Fees

Firm’s expense base is covered by fee streams and is profitable across all segments

• Includes all expenses except Performance Fee Compensation for partners and employees

• 70% of total expense base is variable

$804$1,042 $1,000 $1,024

$360

$398 $391 $428$472

$123 $166$127

$0

$300

$600

$900

$1,200

$1,500

$1,800

2007 2008 2009 2010 LTM

Fee Re

venu

es

$0

$30

$60

$90

$120

$150

$180

Fee‐Earning AUM

Management Fees Advisory Fees Transaction & Other Fees Fee‐Earning AUM

$1,636 $1,562 $1,518$1,618

($ in millions) ($ in billions)

4


Realized Performance Revenue Streams

Performance Fees consist of “Carried Interest” and “Incentive Fees”

• Carried Interest generated by Private Equity, Real Estate, and GSO (Mezz)

• Incentive Fees generated by Real Estate Debt Strategies (BREDS), BAAM, and GSO (Hedge)

Performance Fees are recorded on an accrual basis; Realized Performance Fees on a cash basis

While on an accrual basis Performance Fees are variable and can be negative, there can be no negative Realized Performance Fees over the life of a fund = “Riskless Upside”

While “lumpy”, Performance Fees are generated with consistent returns over time

$169$74$39

$1,055

$916$995

$133

$322

$101$96$91$83

$55$37

$24$23$0

$300

$600

$900

$1,200

2003 2004 2005 2006 2007 2008 2009 2010 LTM

Realized

Perform

ance Fees

$0

$40

$80

$120

$160

Fee‐Earning AUM

Realized Performance Fees Fee‐Earning AUM

($ in millions) ($ in billions)

5


Blackstone Financials – 2010 LTM ($ in millions)

Economic Net Income“ENI”

Distributable Earnings“DE”

Key Financial Metrics

Income (Loss) Before Provision for Taxes

+ IPO and Acquisition‐Related Charges

+ Amortization of Intangibles

‐ Income (Loss) of Non‐Controlling Interests

= Economic Net Income

‐ Net Performance Fees and Allocations

‐ Investment Income (Loss)

‐ Taxes Payable

= Net Fee Related Earnings

+ Net Realized Performance Fees and Allocations

+ Realized Investment Income (Loss)

= Distributable Earnings

Net Fee Related Earnings“NFRE”

GAAP $(1,657)

$1,251

$441

$609

6


Private Equity Profile

$81$34

$(1)

$574

$666$602

$231

$79

$(100)

$0

$100

$200

$300

$400

$500

$600

$700

2003 2004 2005 2006 2007 2008 2009 2010LTM

Rea

lized

Perform

ance Fee

s

$(10)

$0

$10

$20

$30

$40

$50

Fee‐Earning AUM


Fee Revenues($ in millions) ($ in billions) Fee‐Earning AUM of $25.2 billion

Capital is subject to 10‐year lock‐up

Management Fees paid on committed capital, not carrying value:

• Insulated from market cyclicality

• Transaction Fees create upside

Performance Fees of 20% paid on realized gains

• $2.1 billion since 2003; positive through downcycle

Substantial “Dry Powder” to invest

Financial profile creates competitive advantage for patient investment and superior returns

Realized Net IRRs since inception of 25%

Realized Performance Fees($ in millions) ($ in billions)

$255 $269 $271 $267

$115 $58$125$97

$392$367$327

$370

$0

$100

$200

$300

$400

$500

2007 2008 2009 2010 LTM

Fee Re

venu

es

$0

$10

$20

$30

$40

$50

Fee‐Earning AUM

Management Fees Transaction & Other Fees

Fee‐Earning AUM

7


Real Estate Profile

$233$296 $328 $333

$338

$40 $33 $33$361

$571

$336$366

$0

$100

$200

$300

$400

$500

$600

2007 2008 2009 2010 LTM

Fee Re

venu

es

$0

$10

$20

$30

$40

$50

Fee‐Earning AUM

Management Fees Transaction & Other Fees

Fee‐Earning AUM

$(3)

$14$25

$327

$209

$347

$67$34

$(100)

$0

$100

$200

$300

$400

2003 2004 2005 2006 2007 2008 2009 2010LTM

Realized

Perform

ance Fee

s

$(10)

$0

$10

$20

$30

$40

Fee‐Earning AUM


Fee‐Earning AUM of $23.8 billion

Capital is subject to 10‐year lock‐up for carry funds

Management Fees paid on committed capital, not carrying value for carry funds

Performance Fees of 20% paid on realized gains

Substantial “Dry Powder” to invest

Realized Net IRRs since inception of 28%

Fee Revenues($ in millions) ($ in billions)


8


5%

7%

3%

33% 52%CustomizedSolutions(BAAM)

Credit Draw‐down

Customized Strategies /

CLOs

Credit HedgeClosed‐End

Mutual Funds (Asia)

Fee‐Earning AUM of $52.4 billion

Highly diversified by strategy, sector and vintage

Counter‐cyclical elements drive growth

Flexible strategies tailored to client and opportunity

Limited partners are predominately institutional

Despite industry shake‐out and redemptions, BAAM and GSO had net inflows in 2008 and 2009

Gaining market share as BAAM and GSO outperform relevant benchmarks

Credit and Marketable Alternatives Profile

CAMA Fee‐Earning AUM Mix as of June 30, 2010

GSO45%

$43

$73

$15

$154

$41$47

$24$20

$0

$40

$80

$120

$160

2003 2004 2005 2006 2007 2008 2009 2010LTM

Realized

Perform

ance Fee

s

$0

$30

$60

$90

Fee‐Earning AUM


$427$394

$488

$327

$0

$100

$200

$300

$400

$500

$600

2007 2008 2009 2010 LTM

Fee Re

venu

es

$0

$20

$40

$60

$80

$100

Fee‐Earning AUM

Fee Revenues Fee‐Earning AUM

Fee Revenues($ in millions) ($ in billions)


9


Pure strategic advisory businesses

Blackstone Restructuring and Reorganization

• Leading restructuring and reorganization franchise, providing counter‐cyclical benefits

• 2009 was second consecutive record year in terms of restructuring revenues

Blackstone Advisory Partners

• Boutique global advisory business, growing revenues even in a down market

Park Hill Group

• Leading private equity and real estate fundraising business for third parties

Revenues per partner nearly double that of independent peers

Invested aggressively in growth during the down cycle

Businesses have counter‐cyclical elements leading to balanced, stable profitability and growth

Financial Advisory Profile

Fee Revenues($ in millions)

$434$396$411$368

$0

$100

$200

$300

$400

$500

2007 2008 2009 2010 LTM

Net Fee Related Earnings($ in millions)

$91$78

$95

$71

$0

$20

$40

$60

$80

$100

2007 Pro Forma

2008 2009 2010 LTM

________________________________________________

(1) 2007 Pro Forma includes all adjustments related to the Initial Public Offering and Reorganization, as if such transaction had been completed in January 1, 2007.

(1)

10


Strong Balance Sheet(1)

“A’ rating from S&P with stable outlook; ‘A+’Rating from Fitch with stable outlook

$3.45 billion in Investments

• No recourse to BX balance sheet

• No direct investments / proprietary positions

• Diversified by business, fund, vintage, sector and region

Added $400 million of 10.5‐year notes at 5.875%; long‐term capital for growth

June 30, 2010

Total Cash and Liquid Investments

Cash and Cash Equivalents

Treasury Cash Management Strategies

Liquid Investments

Total Cash and Liquid Investments

$ 507

813

274

$ 1,594

Total Debt

$1,070 million Revolver

Loans Payable

10‐Year Note Due 2019

Balance Sheet Items with Offsetting Assets

Total Debt

–

592

65

$ 657

($ in millions)

Total Partners’ Capital $ 5,813

________________________________________________(1) Represents deconsolidated balance sheet as presented in public filings.(2) Current Market Capitalization calculated using BX closing price as of September 20, 2010 and Blackstone’s Economic Net Income

Adjusted Units as of June 30, 2010.

Current Market Capitalization(2) $ 12,397

III. Portfolio Operations Group

1


Our Mission: Sustainable Competitive Advantage Delivering Long‐Term Value

Blackstone’s Portfolio Operations Group… works with our investment teams and portfolio company senior management to help acquired businesses become more productive, competitive and efficient

In the process, we build stronger enterprises, preserve and create jobs, and enable our portfolio companies to achieve lasting value for both our fund investors and successor owners

2


Blackstone’s Global Reach and Scale

Blackstone Private Equity’s 62 portfolio companies extend across a broad range of geographies and industries, and collectively represent a portfolio of substantial scale

North America 39

Europe 9

Asia / Africa 14

Geographies

Industrials & Energy 18

Healthcare 10

Tech, Media & Telecom 10

Hospitality / Leisure 8

Business Services 6

Financial Services 5

Retail / Consumer 5

Industries

Over $110 billion total revenues

Approximately 715,000 total employees

Equity invested by Blackstone funds of $24 billion

Total current enterprise value over $200 billion

Size(1)

________________________________________________

(1) Includes BX ownership percentage of DT and Harrah’s. Total enterprise value represents mark‐to‐market value as of 6/30/10.

3


Financial Stability

Productivity & Competitiveness

Structural Transformation

Revenue Optimization

Strategy & Performance Enhancement

Corporate Governance

Corporate Responsibility

Sources of Sustainable Competitive Advantage…

Business Systems / Financial Controls

Working Capital Optimization

Tax Optimization

Process Redesign / Lean

Supply Chain

Procurement Processes and Consortia Buying

IT / Outsourcing

Healthcare Benefits

Transformational Change

“Go to Market” Redesign

Strategic Sales and Marketing

Pricing / Sales Force Optimization

Cross‐Selling

Global Peer Review Process

100‐day Planning

Leadership Development

Management Assessment

Talent Management

Board Composition and Process

Ethics / FCPA

Social Responsibility

Environmental Management

4


Good Progress in 2009 and 2010

… alongside value delivery within the portfolio companies

Portfolio Operations Organization

Investing in Growth and Leadership by hiring specialists in:

Growth

Leadership and management development

Expanded functional capabilities with senior operating advisors

IT, Lean, Supply Chain

Salesforce Effectiveness

Pricing and Marketing

Advertising and Branding

Portfolio Monitoring

and Governance

Reviewed and reorganized portfolio company boards

Increased use of senior advisors / independent directors

Rebalanced BX professionals

New quarterly portfolio review process

Sector‐focused peer reviews

Combining investment and operating executives

CEO‐led portfolio company deep dives

5


Support Model Combines Sector and Functional Expertise

Portfolio Operations Group has grown to over 60 FTEs over the past six years

________________________________________________

(1) North America, Europe, Asia.

Deal Partners Focused on

Industry Sectors

14 Sector Focused ex‐CEOs

19 Generalist and Functionally Specialized Executives(1)

30 Full‐time Equivalents

Blackstone Portfolio Companies

Portfolio Strategic Support Groups

GlobalSector Teams

Senior Advisors

Global PortfolioOperations Group

BusinessServices

Consumer / Retail

Financial Institutions

Hospitality / Leisure

Healthcare

India

Industrial /Chemical / Energy

Tech, Media, Telecom

Strategy & Performance Enhancement

Governance

Leadership / Management Assessment

Transformational Change

Lean Process Redesign

Supply Chain / Procurement

Pricing / Sales Force

Healthcare Benefits

Business Systems / Financial Controls

IT / Operations

CoreTrust Purchasing Group™

Equity Healthcare Group

Cross‐SellingPlatforms

TBM Consulting

E&Y Working Capital Optimization

E&Y / Deloitte Tax Optimization

6


Working Collaboratively with Management, Deal Teams and Co‐Sponsors

Our Portfolio‐Wide, Transformational, and Functional Initiatives have generated or are on track to generate over $4 billion of annualized gross EBITDA impact

$4 billion = $36 billion of TEV, or ~20% of total Private Equity portfolio TEV at 9x portfolio multiple

Group Purchasing including Core Trust™ leverages purchasing power of the portfolio in non‐strategic indirect goods and services

Equity Healthcare improves the quality levels of individual healthcare and applies group purchasing to healthcare benefits

Cross‐Selling promotes portfolio companies’ purchasing goods and services from each other

Working Capital optimization increases cash flow and improves asset utilization

Portfolio‐Wide Initiatives

Large‐scale, company‐wide programs aimed at driving significant value

Management upgrades

Integrated corporate programs:

• Corporate‐wide restructuring

• Growth initiatives; pricing and sales productivity

• Lean process redesign

• Plant consolidation and low‐cost sourcing

• Supply chain, procurement, and distribution optimization

• IT and operations restructuring and co‐sourcing

Transformational Initiatives

More focused programs aimed at increasing the efficiency and effectiveness of a particular function in the portfolio company

Examples include:

• Pricing

• Sales Force Productivity

• Lean Process Design

• IT Productivity

• Co‐sourcing

• Procurement

• Outsourcing

Functional Initiatives

7


Freescale Semiconductor

Gokaldas Exports Hilton Hotels Michaels Stores

Nielsen

Travelport

Number of Touches Group

Purchasing Equity

Healthcare

Integrated Performance

& BOD Lean IT &

Outsourcing Sales &

MarketingWorking

Capital + Tax Europe India China 36 28 20 10 15 8 12 23 15 2 Select Portfolio Cos. Allcargo Global Logistics

Alliant Holdings AlliedBarton Apria Healthcare Group Biomet BlueStar Catalent Pharmaceuticals Center Parcs Cineworld DJO

Over 150 Touch Points across the Portfolio Companies

8


Portfolio‐Wide Initiatives

Group Purchasing including Core Trust™

Equity Healthcare

Collaborative Platforms

Working Capital Optimization

Our portfolio‐wide initiatives have generated or are on track to generate over $640 million of annualized gross EBITDA impact, plus an additional $600 million in one‐time cash savings

9


Group Procurement – Progress 2009 vs. 2010

Original 2005 target $100 million–$150 million savings on $3 billion indirect spend

• Achieved $240 million annualized savings in 2008 $300 million annualized savings in 2009

• New target $350+ million annualized savings in 2010

Over ~$1.4 billion of annual spend managed through the program

80% 85% of portfolio companies participate globally

35+ categories available today

Global capability for over 10 categories

No cost to participate in virtually all categories

Substantial benefits from aggregating and integrating purchasing

10


Equity Healthcare (“EH”) Custom Clinical Model

5x clinical staff solely dedicated to EH and 2.5x engagement of members “at risk” vs. standard models

Preadmission CallsEnhanced Discharge Planning

Post Discharge CallsCase Management

Integration with Vendor Partners Medical Director / Support Staff

Vendors

Personal Health Advocate

Behavioral Health / EAP

Disease Management

Centers of Excellence

Customer Service

24‐Hour Nurse Line

Online Coaching & Modules

Care Alerts

Pharmacy

Maternity

MedicalClaims

PharmacyClaims

LabData

Demo‐graphics

BehavioralHealth Claims

DATA

WAREHOUSE

Health Risk Assessment

ABC Co.Health and Wellness ProgramsHRA

Telephonic Coaching

PREDICTION

Integration of Data with Health Risk Assessment /

Future Biometrics

Member and Provider Outreach

11


Equity Healthcare – First Year Results: 2009

Aggregate EH trend is 6.4% vs. U.S. corporate average ~10.6%(1)

2009 estimated net savings of $35 million for 25 portfolio companies

• $19 million medical claim savings due to better quality and decision making

• $16 million administration (ASO) fee savings

Aggressive savings target of $100+ million

• Continued investment in incentives and plan design

• New membership growth

________________________________________________

(1) Segal Trend Survey.

12


Cross‐Selling Opportunity and Program (B2B)

Cross‐selling B2B program continues to grow rapidly, with material revenue and EBITDA impact

Allcargo – logistics

T‐Mobile Wireless – telecom

SunGard – business services

RGIS – inventory management

Performance Food Group – food distribution into hotels, theme parks

Merlin, Michaels Stores, Universal, Tragus, CineWorld, Center Parcs, others – employee promotional discounts / co‐marketing

Intelenet – business process outsourcing

Orbitz , Hilton Hotels, La Quinta – travel services

Alliant Insurance – insurance, employee benefits consulting

AlliedBarton – security services and employee screening

Republic Services – waste management

Full‐time resource in Portfolio Operations Group to coordinate cross‐selling programs (B2B and B2C)

Specific Product / Service Opportunities Examples:

13


Cross‐Selling Platform – Blackstone B2C Marketplace

Exclusive Blackstone platform

Objective is to promote Blackstone portfolio companies

31 U.S. based portfolio companies participating with 350k+ employees... U.K. planned in phase 2

Available to interested LPs

Ability to integrate “Exclusive Blackstone Offers”to employees

Includes many non‐Blackstone merchants

Launched in May

14


CxO On‐line Network for Portfolio Senior Executives (CEO, CFO, CPO, CHRO, CMO, CIO…)

Welcome to The Blackstone Group CEO Network

CEO Network

Welcome to the CEO Network! Our site promotes relationship building among the CEOs of our Portfolio Companies, such as yourself. You will find the latest personal and contact information for members as well as opportunities to interact with them through surveys and discussion boards.

To begin the process you will need to register by clicking on the “New Member Registration” link below. If you have already registered with us, please log in by entering your E‐mail address and Password and then clicking on the “Login” button below.

We hope you enjoy your experience and encourage your feedback as we continue to update the site to meet your needs.

15


Environmental Sustainability Initiative

Environmental Sustainability Task Force formed in 2008 to establish Blackstone as PE industry leader in environmental stewardship

Three primary areas of focus:

• Blackstone energy consumption and environmental impact

• Portfolio energy consumption and environmental impact (both PE and RE)

• Environmental risk assessment in all investment processes

Targeting meaningful energy and carbon reductions over the next five years

• Top‐tier of companies globally

• Sharing expertise across portfolio

• Full compliance with CRC mandate across European portfolio

Broad communication program being launched this quarter

• Documenting environmental and cost benefits for the firm and portfolio

Portfolio Operations Group plans to retain a Chief Sustainability Officer (“CSO”) to drive portfolio‐wide initiatives

16


Our Mission: Sustainable Competitive Advantage Delivering Long‐Term Value

Blackstone’s Portfolio Operations Group… works with our investment teams and portfolio company senior management to help acquired businesses become more productive, competitive and efficient

In the process, we build stronger enterprises, preserve and create jobs, and enable our portfolio companies to achieve lasting value for both our fund investors and successor owners

IV. Private Equity

1


Blackstone Capital Partners Overview(1)

________________________________________________

Note: Past performance is not necessarily indicative of future results. BCP V has invested $17.4 billion as of June 30, 2010 with a realized / unrealized value of $17.2 billion, generating a gross IRR of ‐0.5%, and a net IRR of ‐2%. There can be no assurance that any BCP fund will achieve its objectives or avoid substantial losses.

(1) Information is as of June 2010 unless otherwise stated. Includes Blackstone Communications Partners, a sector‐specific fund.(2) S&P 500 Annual Return has been calculated as the internal rate of return of the total contributions and distributions (including fees, drawdown of expenses, return of capital and recouped losses), and

the corresponding annual rate of return of the S&P 500 Index from each contribution / distribution date to the quarter end for all investments. For BCP I and BCP II, the S&P return has been calculated from the most material investment tranche date to the final exit date for each investment. S&P 500 Annual Rate of Return is provided solely as an indication of returns that could be earned byinvestors by making similar investments in the S&P 500 Index. Blackstone’s funds differ from the S&P 500 Index in that, among other factors, Blackstone’s funds are actively managed entities that bear fees and use leverage.

Global Leader in Private Equity

Invested $33 billion of equity capital in 142 transactions since December 1988

Successful Long‐Term Track

Record

Returns generated in fully invested funds from inception through 06/30/10 • Gross IRR of 33% (25% net) – 2.5x MoIC on realized / partially realized investments

• Over 23 years, BCP has outperformed the S&P Index by 16% annually(2)

Investment Strategy

Transformational value‐added operations capability Mid‐Market / Growth Equity Focus Global reach Demonstrated expertise at timing economic cycles Deep experience in corporate partnerships

Capital Available for Investment

Between BCP V and BCP VI, we currently have approximately $13.5 billion of available capital

Alignment of Interests

$2.3 billion total invested / committed capital by Blackstone and its professionals

• 7% of total capital invested

Deep Investment Team

28 Senior Managing Directors

2


Blackstone Provides Advantages Not Available to Stand‐alone Private Equity Firms

Expertise and deal sourcing beyond the reach of any stand‐alone private equity firm

Real Estate$24 billion AUM

Restructuring AdvisoryRestructurings involving over $925 billion of

total liabilities

Corporate AdvisoryOver $450 billion of

transactions

Credit / GSO$29 billion AUM

Fund of Hedge Funds$29 billion AUM

$28 billion in AUM 28 SMDs /

89 Professionals

Global Macro /Target Identification / Public Market Insights

Joint Investing / Market Insights / Captive Source of Debt for Portfolio Financing

Real Estate Asset Optimization and

Financing / Joint Investing

Deal Sourcing / Corporate Partnerships / Proprietary

Structured Equity

Deal Sourcing / Bankruptcy Investing / Restructuring

Process Insight

________________________________________________

Note: Data as of June 30, 2010.

3


Distressed Investments /Rescue Financings

3%

Minority Stakes12%

Structured Equity1%

Flexible, Multi‐Strategy Investing – Not Mega Deals

The strengths of a large platform applied to less competitive medium‐sized deals

Investments by Strategy(1)

24% in large transactions

36% in small‐ and medium‐sized deals

24% in growth equity

16% in minority and distressed investments

________________________________________________

(1) Based on invested / committed capital from 2000 through September 17, 2010. Percentages may change over time.

Large PrivateTransactions

3%

Large Public‐to‐Privates21%

Platform Buildups /Industry Consolidations

11%

Early Stage /Startups13%

Small‐ and Medium‐Sized Buyouts

36%

4


BlackstoneHeadquarters

Private Equity Office

Affiliated Office

Advisors

Global Reach, Single Fund, One High Standard

Paris

Mumbai Hong Kong

Madrid

GermanyBeijing

Asia4 SMDs

23 Professionals

Tokyo

IstanbulNew York

San Francisco

United States19 SMDs

48 Professionals

HoustonAtlanta

Boston

Los Angeles

Menlo Park

Dallas

Sweden

ItalySwitzerland

Shanghai

Chicago

Detailed drill‐downs into the company’s strengths, weaknesses, opportunities, and threats

Top down themes and bottom up target identification to drive pro‐active deal sourcing

Gates deals and lays out workstreams for all new deals

Price range, structure, value creation plan, risks, upside opportunities, downside protection

First InvestmentCommittee

Strategy Sessions /Lead Generation

Review Committee Workshop 100‐Day Plan ReviewFinal Investment

Committee

Settles on final price and tactics

Reviews results, operational enhancement plan, engagement of strategic support groups, capital structure optimization, and liquidity protection

Europe5 SMDs

16 Professionals5 Local Country Representatives

________________________________________________

(1) Citigroup Investment Research: Chief Investment Officer Survey, September 25, 2007 (to our knowledge, the most recent survey of its kind).

Ranked highest among Chief Investment Officers for investment process and risk management(1)

London

5


Consistent Investment Performance

____________________________________________

Note: Past performance is not necessarily indicative of future results. Inherent in an investment in any BCP / BCOM fund is significant risk and volatility, and there can be no assurance that any BCP / BCOM fund will achieve its objectives or avoid substantial losses.

(1) Based on each closed BCP / BCOM fund’s net IRR as of June 30, 2010 compared to Thomson Reuters’ data as of March 31, 2010, the most current data available. As BCP V is still investing, it is not considered a closed fund and is excluded from this analysis. As BCOM is a sector‐specific communications fund, BCOM’s net IRR was compared to the Thomson Reuters’ Telecom Funds Index rather than the Buyout / Mezzanine Funds Index used to compare the BCP funds.

(2) Includes investments made by Blackstone’s Side‐by‐Side investment entities; excludes LP Co‐investments. (3) S&P 500 Annual Return has been calculated as the internal rate of return of the total contributions and distributions (including fees, drawdown of expenses, return of capital and recouped losses),

and the corresponding annual rate of return of the S&P 500 Index from each contribution / distribution date to the quarter end for all investments. For BCP I and BCP II, the S&P return has been calculated from the most material investment tranche date to the final exit date for each investment. S&P 500 Annual Rate of Return is provided solely as an indication of returns that could be earned by investors by making similar investments in the S&P 500 Index. Blackstone’s funds differ from the S&P 500 Index in that, among other factors, Blackstone’s funds are actively managed entities that bear fees and use leverage.

Every closed BCP / BCOM fund has been in the top quartile or better.(1) Over 23 years, we have outperformed the S&P Index by 16% annually

Realized / Partially Realized Investments Total Investments

Gross Annual Rate of Return

Total Invested

Capital(2) MOIC

Gross Annual Rate of Return

S&P 500 Annual

Return(3)

BCP I $679 2.6x 28% 19% $679 2.6x 28% 19% 13% 6%BCP II 1,201 2.6x 55% 37% 1,292 2.5x 50% 32% 11% 21%BCP III 3,402 2.0x 23% 18% 4,026 2.0x 17% 13% 1% 12%BCOM 1,215 1.8x 27% 24% 2,132 1.3x 14% 7% 1% 6%BCP IV 4,373 3.1x 79% 62% 7,219 2.4x 53% 39% 2% 37% Subtotal – Closed 10,870 2.5x 33% 25% 15,349 2.2x 29% 21% 5% 16%

BCP V 1,504 1.5x 23% 15% 17,428 1.0x 0% ‐2% ‐7% 5%

Total $12,374 2.4x 33% 25% $32,777 1.5x 26% 16% 0% 16%

Blackstone Out‐

Performance

Through June 30, 2010

Net Annual Rate of Return

Net AnnualRate ofReturnMOIC

Total Invested

Capital(2)

($ in millions)

6


Recent Valuation Changes

The portfolio has appreciated by 39% in the last five quarters

BCP Overall Portfolio

7.7%

15.8%

2.4%4.1% 4.3%

0%

10%

20%

2Q 2009 3Q 2009 4Q 2009 1Q 2010 2Q 2010

________________________________________________

Note: Returns to investors will ultimately be reduced by management fees, carried interest, and other fees and expenses. Past performance is not necessarily indicative of future results. Inherent in an investment in any BCP / BCOM fund is significant risk and volatility, and there can be no assurance that any BCP / BCOM fund will achieve its objectives or avoid substantial losses.

7


The Majority of BCP Deals Are under $2 Billion TEV

Blackstone is an opportunistic “multi‐cap” investor, with nearly two‐thirds of our deals in the last ten years having a TEV under $2 billion

________________________________________________

Note: Only TEV >$2,000 labeled. Excludes BankUnited, which does not have a TEV comparable to other transactions.

Total Enterprise Value of Transactions, 2000–2010($ in millions)

Viatel

CTI Holdings

Universal Orlando

TRW Automotive

Nalco

FGIC

Celanese

Freedom

Extended Stay

Southern Cross/NHP

Texas Genco

Merlin/LEGOLANDOrangina

Center ParcsDJO

UBCatalent

Pinnacle

Stiefel

Weather Channel

BlueStar

SeaWorld

2000 2001 2003 2005 2006 2008 2010 2011

>$5,000

$2,000–$5,000

<$2,000

11 Deals

22 Deals

61 Deals

Ish Spirit

SunGard

TDC

Nielsen

Travelport Michaels

Freescale

Biomet

Hilton

BankUnited eAccess

8


Advantages of Scale

Brand name matters

Dedicated 50+ person Portfolio Operations Group focused on creating value

High proportion of exclusive deals

Preferred access to debt financing in capital constrained markets

Process advantages from selling agents, including “last looks”

Broad network of relationships to find deals

Corporate partnerships

Global perspective – even on domestic companies

Deep financial and operating domain expertise in each major sector

Strategic alliances – China, Korea, Brazil

9


Blackstone’s Approach to the Credit Markets

Proactive Maintain a broad range of active and collaborative relationships

with investment banks, commercial banks, hedge funds and mutual funds

Opportunistic Continually stay ahead of, and take advantage of, new

“technology” (e.g., amend/extend)

Customized Tailor the capital structure of each investment to suit that particular investment thesis

Comprehensive and

Coordinated

Manage the debt obligations of the BCP portfolio companies on an integrated basis, leverage best practices and relationships across the portfolio and the firm (e.g., GSO, BAAM)

10


Staying Power

Aggressive balance sheet initiatives – protecting our capital and capturing value. Over 50% of our portfolio companies’ combined debt was eliminated, refinanced or extended in 2009 and 2010 YTD

($ in billions)

Debt Elimination (via Buybacks, Discounted Exchanges, and Debt / Equity Swaps)

$6.9

Refinancings 12.2

Extensions 33.7

Total $52.8

$3 billion of equity value created

11


Built‐in Financial Flexibility

________________________________________________

(1) Represents tranche maturities and excludes undrawn revolvers, where applicable. Excludes publics, development‐stage companies (American Petroleum Tankers, OSUM, and PBF), debt portfolios (Citi and Deutsche Bank), Bayview, BankUnited, Harrah’s, and Summit Materials (new in 3Q 2009). Information based on June 30, 2010 valuations. These statistics attribute all of Hilton’s debt to BCP; BREP and co‐investors own the majority of Hilton.

Strong Liquidity and Covenant Position

Almost 2/3 of BCP V’s capital is invested in companies with no maintenance covenants

Comfortable covenant cushions for companies with covenants

Less than 3% of BCP V portfolio company debt matures before 2013; 65% matures 2015 and beyond

BCP V Debt Maturities(1)

7.5%

1.2%4.7%

8.2%10.7%

21.0%

46.7%

3.1%1.0%0.2% 3.1%

7.6%

16.9%

33.2%

15.8%16.4%

1.6%0.2%0.9%0%

10%

20%

30%

40%

50%

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018+

% of T

otal BCP

V Deb

t

BCP V Debt Maturities as of December 2008 BCP V Debt Maturities as of September 2010

12


Credit Markets Outlook for BCP VI

As the BCP VI investment period begins, we expect to be at a very favorable point in the credit cycle

Favorable environment for sale of non‐investment grade debt to institutional investors

• Rates are at historic lows• Spreads are well above historic medians• Default rates declining• A shift in asset allocation from public equities to fixed income• Growing focus among insurance companies and pension funds on merits of floating rate bank debt• Record year for HY issuance

Banking institutions have healed

• Exposures to 2007 vintage LBOs have largely been divested• Banks have shifted lending focus disproportionately to “best in class” PE firms with strongest track records• Traditional players have emerged stronger due to consolidation• Credible new players have emerged

BCP has more “arrows in the quiver” than before the crisis:

• GSO – Blackstone’s credit platform• Outstanding relationships with large “direct lenders”• Ongoing dialogue with PMs at hedge funds and mutual funds• Direct relationships with capital markets and syndicate desks at the major broker dealers

13


BCP V Outlook

We expect BCP V to generate a 2x MOIC(1)

• Average revenue and EBITDA growth rates of 5.1% and 8.3%, respectively

• Average margin improvement of 80 bps

Solid balance sheets with comfortable covenant and maturity profiles

91% of BCP V capital invested / committed

• Expect to close investment period in the next few months

________________________________________________

(1) While Blackstone currently believes that the assumptions on which this projection is based are reasonable under current circumstances, there is no guarantee that the conditions on which such assumptions are based will materialize or otherwise be applicable to these funds. There can be no assurance that any fund managed by Blackstone will be profitable or avoid substantial losses. Above projections do not include any assumptions regarding investment time horizon or the rate of return on funds managed by Blackstone. Ultimate returns to investors will be reduced by management fees, fund expenses and carried interest.”

14


Overview of Current Environment

Blackstone has a track record of generating compelling returns across all cycles and is well positioned to take advantage of this economic environment

Market Environment

We are cautious on economic growth prospects

An abundance of private equity in the market makes on‐the‐run deals very difficult

Debt markets have rebounded and support attractive dealmaking…

• …but credit spreads are higher and covenants are tighter

Equity valuations are relatively attractive

• But cyclicals ran sooner in this cycle than previously

• We assume valuations will not return to ’06/’07 levels

Opportunity

Post‐recession vintages have historically provided the highest returns

BCP has significant dry powder and a global opportunity set

Focus on exclusive opportunities driven byindustry / regional depth

Recent Investments

• Summit Materials – Aggregates build‐up

• PBF Refining – depressed refining opportunities

• Sea World – furthering our theme park franchise

• Dili – modernizing distribution in China

15


Best Private Equity Investments Originate at the Bottom of the Cycle

________________________________________________

Source: Global Insight; Cambridge Associates LLC; U.S. private equity Pooled Mean Net IRR to limited partners by vintage year as of March 31, 2010. Vintage year funds formed since 2006 are too young to have produced meaningful returns. GDP projections as per the International Monetary Fund, 2009.

Private Equity Industry Returns by Vintage vs. U.S. GDP Growth

19%

11%

15%

23%

15%

31%

27%26%

9%

21%

11%

6% 7%

15%15%

29%

22%

16%

7%

1%

‐2%

– –NA NA NA

‐5%

0%

5%

10%

15%

20%

25%

30%

35%

1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010

Mean Net IR

R by

Vintage

‐3%

‐2%

‐1%

0%

1%

2%

3%

4%

5%

YoY U.S. G

DP G

rowth

Top of Cycle Bottom of Cycle U.S. GDP Growth

Precedent suggests should be excellent vintage years

?

16


Fundraising and New Initiatives

BCP VI

• Some subscription documents still outstanding, however we anticipate a final fund size of over $13.5 billion

• Given the current and expected investments / commitments for BCP V, we expect to close the BCP V investment period in the next few months

Clean Technology – Growth equity in disruptive technologies

• Estimated fund size of $500 million

• Expect final close in 1Q 2011

RMB Fund – China growth strategies

• Estimated fund size of 5 billion RMB (approximately $740 million)

• First close expected in 4Q 2010

17


Fundraising and New Initiatives (Cont’d)

Infrastructure – Value‐oriented and value‐added Infrastructure investing, currently focused on North American opportunities:

• Energy and Utilities

• Transportation

• Communications

• Estimated fund size of >$1 billion

• Expect final close in 4Q 2011

Other new initiatives under evaluation include:

• Energy fund

• Emerging Asia fund

• Expanded presence in Latin America

V. Blackstone Advisory Partners

A. BAP Overview

2


A. BAP Overview

Blackstone Advisory Partners

Leading Advisor Advisor on over $450 billion of transactions since 1985

Independent and Objective

A leading global independent trusted advisory practice with limited conflicts of interest and a high level of senior attention to clients

Broad Expertise

Advise on and execute complex transactions:

• Merger and Acquisition Advisory

• Strategic and Financial Advisory

• Structured Products

• Divestitures and Reorganizations

• Joint Ventures and Minority Investments

International Reach International hubs in New York, London, Hong Kong, and Paris with assignments throughout the U.S.,

Europe, and Asia

Diverse Industry Coverage

Financial Institutions, Energy and Natural Resources, Chemicals, Technology & Communications, Media, Consumer, Real Estate, Industrials, and Minerals & Mining

Experienced Team 20 Senior Managing Directors with an average of over 20 years of industry expertise

138 professionals globally

3


A. BAP Overview

Overview of Blackstone Advisory Partners: Superior Investment Banking Advice

Independence

Absence of Conflicts of Interest

Able to provide objective financial advisory service; no underwriting, equity research, or trading conflicts

Emphasis on long‐term relationships with select clients; absolute confidentiality

Intellectual Capital

Depth of Expertise; Senior‐Level Attention

Senior Managing Directors with average tenure of 20 years in Investment Banking, nearly all of whom have led industry‐focused investment banking franchises previously

Extensive industry network, senior‐level relationships and regular strategic dialogue with Fortune 500 companies

Innovation

Creative Solutions for Complex Issues

Extensive experience advising a diverse set of clients, including public and private companies, boards, and sovereign entities on strategic, financial, and structured transactions

Structured finance team focuses on customized M&A solutions and creative financing solutions

Investor FocusUnique Perspectives on Value Creation – “Hired Principal” Mentality

Distinctive ability to bring an owner’s mindset to bear on advisory engagements; extensive experience working with the Firm’s portfolio companies

International Network

Global Presence and Ability to Capitalize on Other Blackstone Businesses

Network of international offices and international advisory board allow Blackstone to offer global cross‐border advisory services

Ability to leverage firm knowledge in private equity, restructuring, hedge fund, real estate and valuation expertise

Given our unique philosophy and approach to corporate advisory assignments, Blackstone is well suited to advise clients on complex strategic initiatives

4


Senior‐Level Coverage – “Hands on” Attention from an Exclusive Group of Top Bankers

Blackstone’s corporate advisory business consists of 20 SMDs with an average of 20 years industry experience and 138 bankers around the world

A. BAP Overview

Team Member Focus Area

Years of Experience in Industry Year Joined Blackstone

John Studzinski Head of Blackstone Advisory 31 2006

Martin Alderson Smith Financial Institutions 25 1991

David Bradley Chemicals 25 2009

Ivan Brockman Technology, Menlo Park 16 2007

Mary Anne Citrino Consumer Products 27 2004

Peter Cohen Media & Entertainment 19 2009

Jitesh Gadhia UK & India 20 2010

Martin Gudgeon European Restructuring 21 2007

Greg Hewett Structured Products 10 2005

Jonathan Koplovitz European M&A 20 1996

Thomas Middleton Telecom 25 2003

Larry Nath Structured Products 22 2005

Raffiq A. Nathoo Energy 20 1992

William Oglesby Paper & Packaging, Healthcare IT 27 2004

Chris Pasko Technology, Boston 21 2007

Jean‐Manuel Richier France 20 2009

Anthony Steains Asia / Metals & Mining 16 2008

Jean‐Michel Steg France 31 2009

Thomas Stoddard Financial Institutions 19 2008

Jianping Zheng Greater China 15 2008

5


Advisory Product Categories – Intellectual Capital at Work

Sector Expertise General advice and execution of acquisitions, mergers, joint ventures, minority

investments, asset swaps, divestitures, leveraged buyouts, special committees and takeover defenses

Ability to advise on large‐cap (>$10 billion), mid‐cap and small‐cap (<$500 million) transactions

M&A and Corporate Advisory

Board / Management Advice Advice on share repurchases, dividend policy and cost of capital Independent views on debt and equity capital raising Private capital placement services Coordination of selection of underwriters / lenders and negotiation of termsSector Expertise

Owner‐mindset in helping clients develop strategies for raising capital or monetizing positions

IPO and Capital Markets Advisory

Broad Relationships Strong relationships with issuers, lenders, distressed‐debt investors, legal

advisors and othersStrategic and Financial Acumen Expertise in corporate finance and business strategy, helping both companies

and creditors develop strategic business plans, financial forecasts and restructuring alternatives

In‐depth Knowledge of Restructuring Process Comprehensive understanding of U.S. / European restructuring process and

proven ability to manage it to maximize value

Restructuring and Reorganization Advice

A. BAP Overview

We develop and deliver customized solutions to meet our clients’ complex financial and strategic objectives. Typical engagements include

Structured financings, particularly for non‐traditional assets

Creating customized M&A solutions

Structuring joint ventures with strategic or financial partners

Advising clients on capital structure issues

Structured Products

6


Blackstone Advisory: Representative Large Cap Transactions

Blackstone Advisory Partners has advised on numerous high‐profile transactions globally

________________________________________________

(1) Represents total capital commitment from CDB.

Advisor to

on

$180 BillionSole Global Coordinator

Advisor to

on its acquisition of

$8.3 Billion

Advisor to

on its acquisition ofKraft’s frozen pizza

business

$3.7 Billion

Advisor to

on the sale of its U.S. regulated

utility operations to PPL Corporation

$7.6 Billion

Advisor to

on its merger with

and Advisor to

on the combination of its global power business

with

€93 Billion and N/A

Sole advisor to

on a minority investment in

£6.6 Billion(1)

Advisor to

on its sale to

£10 Billion

Advisor to

on its proposed merger with

$46 Billion

Advisor to the Board of Directors of

on the buyout led by CEO Richard Kinder

including

$23 Billion

Advisor to

on the joint acquisition of

$18 Billion

Advisor to

on the sale to

$17 Billion

Advisor on the sale of

to

$8.0 Billion

Advisor to

on its strategic investment in

$20 Billion

A. BAP Overview

Advisor to

on its sale of Folgers through a Reverse Morris

Trust Structure to

$3.3 Billion

B. BAP Highlights

8


M&A Market OverviewB. BAP Highlights

________________________________________________

Source: Dealogic and Wall Street research.(1) Average for disclosed deals only.(2) Excludes deals in financial services sector.

U.S. M&A Activity

10,079 8,923 8,771 9,893 10,04112,350 13,220

11,3639,181

4,5326,502

12,76712,714

0

4,000

8,000

12,000

16,000

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 YTD 6/09 YTD 6/10

$0

$500

$1,000

$1,500

$2,000 ($ in billions)

Number of Deals Deal Value

U.S. Enterprise Value / LTM EBITDA Multiples(2)

7.1x8.0x 8.2x

9.5x11.0x 11.1x 11.8x

10.4x

8.0x9.4x

8.1x9.1x

0x

3x

6x

9x

12x

15x

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 LTD 6/10

YTD 2010 M&A deal volume is up ~20% and acquisition multiples have increased from recent lows

Avg. DealSize(1) ($M) $307 $226 $181 $137 $157 $209 $274 $337 $355 $220 $212 $211 $159

9


M&A Market Overview (Cont’d)

2010 1H M&A Activity by Region 2010 1H M&A Activity by Target Industry

3.9%3.0%

18.8%

25.2%

49.1% Americas

Europe

Asia‐Pacific

Africa / Middle EastJapan

5%

20%

17%

15%

12%

7%

6%

8%

10%

Energy & Power

Industrials

FinancialsConsumer & Retail

Telecom

Healthcare

Real Estate

High Technology

Media

Total Volume: $1,065 billion

________________________________________________

Source: Thomson Reuters for 1H 2010.

B. BAP Highlights

A diversified set of industries have contributed to 2010 1H M&A activity, with almost 50% of the volume coming from the Americas

10


BAP Market OverviewB. BAP Highlights

Personnel Growth (Total Professional Headcount)

138121

9569

51

0

40

80

120

160

2006 2007 2008 2009 Aug‐10

Personnel Growth(SMDs and MDs)

BAP continues to build an international franchise with lasting relationships with some of the world’s most dynamic companies

Over the past 5 years BAP has maintained and developed strong relationships with large clients, including substantial repeat business

• Increasing visibility through recent high profile assignments including GDF Suez, E.ON, AIG, Chinalco, P&G, Nestle, and Xerox

• Fees generated from large cap clients increased from 23% of the total in 2005 to 47% in 2009

The group has expanded the number of international clients through expansion in Europe and Asia

• Opened London office in 2007

• Opened Hong Kong office in 2008

• Opened Paris office in 2009

• International revenue increased from 8% in 2005 to 32% in 2009

Despite the downturn in the M&A market, BAP has continued to grow both its revenue base and personnel, more than doubling in size since 2007 while maintaining strong profitability

• Added 19 new SMDs and MDs to the firm in the past two years

4236

2721

17

0

10

20

30

40

50

2006 2007 2008 2009 Aug‐10

11


BAP Market Overview (Cont’d)B. BAP Highlights

In the past 5 years BAP has significantly increased its coverage of industries and geographies

2005 2010Coverage Universe

Industries

Products

Geographies

Consumer & Retail Energy, Power & Utilities FIG Media Real Estate Telecom

Consumer & Retail Energy, Power &

Utilities FIG Media Real Estate Telecom

Chemicals Clean Technology Insurance Metals & Mining Technology

Mergers & Acquisitions Mergers & Acquisitions

Structured Products Private Placements Financial Advisory IPO & Equity

Advisory Debt Advisory &

Restructuring

New York Atlanta

New York Atlanta

London Hong Kong Boston Menlo Park Paris Beijing

12


2009 and 2010 YTD Performance SummaryB. BAP Highlights

Despite a challenging macro environment, BAP recorded year‐over‐year growth in 2009 and is well positioned for strong performance in 2010

2009 highlights included:

• Year‐over‐year revenue growth, despite M&A market slowdown

• Added 4 new SMDs

• Geographic expansion with the opening of Paris office, increased German presence and build‐out of Asia offices

• Bolstered capabilities in FIG, Chemicals, and Media

• Maintained strong revenue / SMD relative to competitors

2010 achievements included:

• Top 10 ranking in M&A league tables in 1Q

• Strong pipeline of over 100 projects

• Diverse transaction base across industries and geographies

• Expanded European and Asian business

• Approximately 50% of deals have an international component

13


B. BAP Highlights

BAP continues to diversify its business to fill global market opportunities while maintaining its productivity

70%

6%

24%

Americas

Europe

Asia‐Pacific

LTM BAP Revenue by IndustryLTM BAP Revenue by Region

$7.8

$5.9

$0.0

$2.0

$4.0

$6.0

$8.0

BAP Comp Average

2009 Revenue per SMD(1)

($ in millions)

$1.4$1.2

$0.0

$0.5

$1.0

$1.5

$2.0

BAP Comp Average

2009 Revenue per Professional(1)($ in millions)

________________________________________________

(1) Source: 2009 10‐Ks for Evercore, Greenhill and Lazard’s advisory businesses.

5%18%

23%3%

18%

14%

8%

10%

Energy & Power

Industrials

FinancialsConsumer & Retail

Telecom

Healthcare

Real Estate, 1%

High Technology

Media

2009 and 2010 YTD Performance Summary (Cont’d)

14


Key Initiatives for 2011B. BAP Highlights

BAP stands uniquely positioned and ready to capitalize on the global recovery, with a number of key initiatives for 2011

Recent trends suggest an increase in M&A volume in Fall 2010/2011

• Opening of credit markets has encouraged strategics and financials to pursue new deals

• Emerging market M&A is increasing; Blackstone’s international presence and strong brand allow it to benefit

Continued turmoil and uncertainty at larger firms provides business and hiring opportunities for BAP

• Boutique M&A market share has increased over the past decade

• Major dealmakers at large banks have been moving to smaller advisory firms at record levels

2011 areas of focus include:

• Europe: Germany and potential alliances for other jurisdictions (Eastern and Southern Europe)

• Growth in Asian presence, plus new expansion into Australia

• Further focus on BRIC markets

• Opportunistic expansion in select industry verticals

– Healthcare

– Natural Resources / Oil & Gas

– Industrials

• Globalizing major industry verticals, including FIG, Consumer Products

VI. Restructuring & Reorganization Advisory

A. Restructuring Group Overview

2



Restructuring and Reorganization Group at a Glance

The Restructuring and Reorganization Advisory Group is among the most accomplished and experienced in its field

Established Leader in Restructuring Advisory

Group formed in 1991

Group headed by Tim Coleman

Group has received numerous awards and recognition in recent years

Global Reach

New York team comprised of 46 professionals – includes 6 SMDs, 7 MDs and 4 VPs

London team comprised of 4 professionals – includes 1 SMD and 3 MDs, who report through BAP

SMDs and MDs collectively have over 130 years of experience at Blackstone and over 215 years in restructuring

Wide Range of Advisory Services and ClientsType of Service Company CreditorAdvise on in‐court reorganizations X X

Advise on out‐of‐court recapitalizations X X

Advise on exchange offers X

Raise debt and equity capital X X

Advise on distressed mergers and acquisitions X X

Advise on retiree healthcare issues X

Provide expert witness testimony X X

3



Highly Experienced Team

The Restructuring Group’s Senior Managing Directors have, on average, 18 years of industry experience

Senior Managing Director Years of Relevant

Experience Prior Experience Year

Joined BX Tim Coleman Group Head

24 Citibank 1992

Stefan Feuerabendt 16 Lehman Brothers Hellmold Associates

1998

Michael Genereux 9 Credit Suisse First Boston Merrill Lynch

2003

Flip Huffard 18 Hellmold Associates Smith Barney, Harris Upham & Co., Inc.

1995

Nick Leone 20 Salomon Brothers Drexel Burnham Lambert

1995

Steve Zelin 22 Ernst & Young 1998

4



Blackstone Restructuring Recognition

Blackstone’s restructuring advisory efforts have received substantial praise over recent years

Thomson’s International Financing Review

Awarded “Restructuring Deal of the Year” in 2009 for the Ford Motor Company tender offer and deleveraging transactions

Awarded “Restructuring of the Year” in 2008 for the restructuring of Credit‐Based Asset Servicing and Securitization LLC (“C‐BASS”)

Named “North American Restructuring House of the Year” for the years 2004 and 2005

Turnaround Atlas Awards

Awarded “Turnaround of the Year” ($5+ billion) and “Automotive Industry & Services Deal of the Year” in 2010 for the restructuring of Ford Motor Company

Awarded “Turnaround of the Year” ($1+ billion) in 2010 for the SemGroup Corporation reorganization

Awarded “Corporate Turnaround Deal of the Year” ($500+ million) in 2010 for the restructuring of Merisant Company

Awarded “Beverage, Food & Service Deal of the Year” in 2009 for the reorganization of Mrs. Fields Companies

Turnaround Management Association

Awarded “Mega Company Turnaround of the Year” in 2007 for the Winn‐Dixie Stores reorganization

5



Restructuring and Reorganization Group Role

We provide clients a wide range of advisory services including, but not limited to, the following:

Advise on out‐of‐court recapitalizations and in‐court reorganizations

• Develop strategic business plans, financial forecasts and liquidity forecasts

• Analyze complex legal and capital structures

• Perform complex valuation assignments

• Negotiate consensual solutions in complex and often contentious distressed situations

Advise on exchange offers

Advise on capital markets transactions, including raising all forms of capital

• Debtor‐in‐possession financing

• Secured financing

• Second lien

• Other subordinated debt and equity

Advise on mergers, acquisitions and divestitures of assets or operations

• Divest businesses or other assets in court and out of court

• Advise on mergers and other combinations

• Advise buyers of distressed companies and distressed assets

Advise on pension and retiree healthcare issues

Provide expert witness testimony

6



Selected Restructuring Clients

Blackstone’s Restructuring Group is known for advising both companies and stakeholders in the largest and most complex restructurings

Chapter 11 AssignmentsOut‐of‐Court Assignments Creditor Assignments

7



Broad Industry Expertise – 13 Top Industry Specialties

Automotive

Energy

Consumer Products

Financial Services

Healthcare / Medical Products

Infrastructure

Leisure / Entertainment

Manufacturing / Basic Industry

Media / Communications

Retail / Supermarkets

Steel

Transportation

Real Estate / Casinos

B. Restructuring Market Trends

9



Current Environment Overview

The level of new restructuring activity has decreased in recent months due to the resurgence of the credit markets

U.S. economy remains in a rough patch

After increasing during the last few quarters, GDP growth rate decreased in 2Q(1)

Unemployment rate seems to have peaked at around 10%, but appears stuck at around 9.7%(1)

• New initial jobless claims shot up to 500,000 in mid‐August, defying expectations, and while currently decreasing, still remain above 450,000(1)

Monthly housing starts increased earlier in the year but have decreased since April(1)

Case‐Shiller housing price index hit a low in April 2009 and has remained relatively stable this year(2)

Credit markets rebounded in the second half of 2009 and have continued at an accelerated pace in 2010(3)

Week of August 9, 2010: Record high‐yield weekly volume of $22.1 billion

March 2010: Record high‐yield monthly volume of $40.5 billion

April 2010: Second highest high‐yield monthly volume of $34.2 billion

1Q 2010: Record quarterly high‐yield volume of $76.8 billion

2009: Record yearly high‐yield volume of $180.7 billion

LTM high‐yield default rate peaked in 2009

2009 default rate of 10.2%(4)

JP Morgan forecasts a 2010 default rate of 2%(3)

________________________________________________

(1) Source: Global Insight via Blackstone Research.(2) Represents an index of nominal resale prices for single‐family houses, indexed to 100 in the first quarter of 2000.(3) Source: JP Morgan Credit Strategy Weekly Update as of 8/27/10. (4) Source: JP Morgan Default Monitor.

10


Unemployment Rate and New Jobless Claims(2)(Claims in thousands)

4%5%6%7%8%9%10%11%

Jan‐08 Jul‐08 Jan‐09 Jul‐09 Jan‐10 Aug‐10

0100200300400500600700

Unemployment Rate

Jobless Claims

Monthly Housing Starts(Thousands)

400

600

800

1,000

1,200


Case‐Shiller Housing Price Index(3)

130

145

160

175

190



U.S. Economy

The U.S. economy is still trying to recover

________________________________________________

Source: FRED and Bloomberg, unless otherwise noted.(1) Real GDP growth includes a Bloomberg estimate of 2.5% for 3Q 10.(2) New Jobless Claims are measured on a weekly basis.(3) Represents an index of nominal resale prices for single‐family houses, indexed to 100 in the first quarter of 2000.

Real GDP Growth(1)

(4%)

(2%)

0%

2%

4%

6%


11


31

39

22

57

44

61

12

31

8

36

7

13

55

52

60

77

50

1

49

$0

$20

$40

$60

$80

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q

2006 2007 2008(2) 2009 2010


Credit Markets – New Issue Volume

The high‐yield market has opened up since 2Q 2009 and has become one of the strongest high‐yield markets ever, creating refinancing opportunities for many companies that previously could not access this market

________________________________________________

Source: S&P LCD and JP Morgan Credit Strategy Weekly Update (8/20/2010).(1) Includes both term loans and revolvers.(2) 2008 includes $29.5 billion of block sales of 2007 overhang.(3) Includes amounts unsold by underwriters and only U.S. dollar‐denominated securities.(4) 3Q totals are as of 8/20/2010.

New Issue Volume – Leveraged Loan(1)($ in billions)

118

133

81

148

186

188

84

78

47

55

44

17 26

43

67

161611$0

$50

$100

$150

$200

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q

2006 2007 2008(2) 2009 2010

New Issue Volume – High Yield(3)

($ in billions)

(3Q as of 8/20/10)

(4)

12



High‐Yield Issuance Used to Refinance

13.5%16.0%

32.9% 33.9%

26.3%

16.9%

72.2% 71.7%

54.4%

33.8%

72.0% 70.5%

8.1%9.0%

17.5%

59.9%

0%

10%

20%

30%

40%

50%

60%

70%

80%

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

2010 is on pace to have one of the highest percentages of high‐yield refinancing volume in 15 years

________________________________________________

Source: JP Morgan Default Monitor as of 9/01/2010.

(As of 9/01/10)

13


141

71

(25) (21)(16) (13)

1730 40

(13) (28) (36)(70)

(42)

12 ‐13 41

141

8381

(25)(52)(38)

43

(49) (83)

($80)

($40)

$0

$40

$80

$120

2010 2011 2012 2013 2014 2015 2016 2017 2018 or Later

High‐Yield Bonds Institutional Loans Overall


Upcoming High‐Yield and Leveraged Loan Maturities

While approximately one trillion dollars of high‐yield bonds and institutional leveraged loans are expected to mature between 2011 and 2015, a number of companies have been able to push out their maturities

________________________________________________

Source: JP Morgan Credit Strategy Weekly Update as of 6/18/10.

High‐Yield Bond and Leveraged Loan Maturities as of 6/18/10($ in billions)

138

250

77133156

131925855 15 64 113

274

153

8933

7$0

$100

$200

$300

2010 2011 2012 2013 2014 2015 2016 2017 2018 or Later

High‐Yield Bonds Institutional Loans

Change in Maturity Since End of 2008($ in billions)

14



Upcoming High‐Yield and Leveraged Loan Maturities (Cont’d)

________________________________________________

Source: JP Morgan Credit Strategy Weekly Update as of 4/9/10.

In general, smaller companies will experience maturity issues faster than larger companies

Percent of Total Outstanding Debt Maturing as of 4/9/10by Year of Maturity and Size of Capital Structure

27.4%

59.7%

13.0%18.7%

55.5%

23.8%

12.4%

53.8%

33.8%

16.6%

46.0%

37.4%

0%

10%

20%

30%

40%

50%

60%

70%

2010–2012 2013–2015 2016–2018

$300mm or Less $301mm to $999mm $1bn to $3bn $3bn and Greater

15



High‐Yield Debt Issuance and Restructuring Cycles

Restructuring cycles are driven largely by the high‐yield and the institutional leveraged loan markets

Improving credit markets have allowed many distressed companies to defer restructuring through refinancing

While the high‐yield market appears to be a major contributor to the recovering capital markets and the reduction in new restructuring assignments, it is most likely setting the stage for the next restructuring cycle

While maturities are important, a high percentage of defaults occur because of covenant breaches and cash flow shortages

New high‐yield debt financing and refinancing may only serve to defer rather than prevent restructurings

16



Timing of Defaults

Lower Rated New‐Issue Volume($ in billions)

Leveraged Loans(1) High‐Yield(2)

YearAmount (B/CCC rated)

% of Total Issuance

Amount (B/CCC rated)

% of Total Issuance

2002 $47.7 34.3% $2.3 3.4%2003 37.7 22.7% 15.3 10.1%2004 61.2 23.1% 32.6 20.6%2005 90.3 30.6% 18.5 17.4%2006 126.7 26.4% 31.1 20.9%2007 165.9 31.0% 53.6 36.3%2008 74.1 47.2% 13.7 26.0%2009 44.2 58.9% 19.4 10.7%2010(3) 68.6 38.7% 26.1 14.9%

________________________________________________

(1) Source: S&P LCD Leveraged Lending Review 2Q 10. Includes issues rated split B, CCC or NR (Not Rated).(2) Source: JP Morgan Default Monitor. Includes issues rated Split B or below.(3) 2010 Leveraged Loan amount is as of 2Q and High Yield issuance amount is YTD (9/01/10).

Issuance of B‐ and CCC‐rated debt peaked in 2007

17



Percent of Defaults

Cumulative % Defaulted Debt by Credit Rating at Issuance (Corporate bonds 1981–2009)

0%

10%

20%

30%

40%

50%

60%

70%

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

Years Since Issuance

% Defaulted

(Dollar Weighted)

BB B CCC / C

CCC and Worse

B

BB

________________________________________________

Source: S&P Default, Transition, and Recovery: 2009 Annual Global Corporate Default Study and Rating Transitions (3/27/10). Percent of issues which subsequently defaulted in the stated year following issuance.

Lower rated credits have a significant and predictable default cycle

Increased default rates typically follow peaks in high‐yield debt issuance by approximately three to five years

Historically, 48% of CCC / C rated debt defaults within five years of issuance

18


0%

2%

4%

6%

8%

5/30/2000 9/10/2001 12/23/2002 4/4/2004 7/17/2005 10/28/2006 2/9/2008 5/22/2009 9/3/2010

3‐Month LIBOR U.S. Treasury – 10‐Year


Interest Rates

________________________________________________

Source: Capital IQ.

A low interest rate environment has enabled companies to maintain high leverage

19


$0

$50

$100

$150

$200

$250

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

High‐Yield Issuance (b

illions)

0%

2%

4%

6%

8%

10%

12%

Default Rate

High‐Yield Issuance Default Rate


High‐Yield Debt Issuance and Default Cycles

________________________________________________

Source: For historical data, JP Morgan Default Monitor. (1) Estimated 2010 high‐yield default rate of 2% and gross issuance of $230 billion reflects estimates in JP Morgan Credit Strategy Weekly Update as of 8/13/10.

(1)

Peak Issuance, Low Default

Low Issuance, Peak Default

20



Observations

High‐yield new issue volume increased significantly in 4Q 2009 and has continued to be robust

• Over the past few months, many large companies were able to access the high‐yield debt market in order to extend their debt maturities

• Smaller companies, however, did not have similar access to refinancing sources

Low interest rates have helped companies remain highly levered

The economy has certain structural problems that are likely to persist and potentially create problems for companies expecting economic momentum to pick up materially

• High unemployment

• Lackluster GDP growth and retail sales as consumers deleverage

C. Conclusions

22


C. Conclusions

Conclusions

The dichotomy between a weak economy and robust capital markets could lead to a few different possible scenarios:

• The current cycle could be on a temporary hiatus and could continue for quite a while

– Double‐dip scenarios still remain a possibility

– Consumer confidence has improved slightly but is still low

– High unemployment rates may persist into the future

– The housing sector could take years to recover from the current economic downturn

• The current restructuring cycle could be over, but significant high‐yield offerings could suggest the cycle will begin anew in approximately 3 to 5 years (typical pattern after peak high‐yield issuance)

– Low interest rates may only delay inevitable liquidity issues facing struggling industries

• The current restructuring cycle could be over and the next cycle could begin as historical patterns would predict (typical restructuring cycle is 8 to 10 years)

– The stimulus plan could turn the economy around

– Refinancing done at reasonable rates could provide manageable interest payments

What does this mean for the current restructuring cycle?

Appendix: Select Case Studies

24



Ford Motor Company

Company Overview

Ford Motor Company (“Ford” or the “company”) designs, develops, manufactures and services cars and trucks worldwide

• Company has significant international operations throughout Europe, Asia, and South America

Ford Motor Credit Company (“FMCC”) provides retail and wholesale automotive financing products to dealers, customers and leasing companies worldwide

Background Issues

As of March 3, 2009, Ford was highly levered, with over $35 billion of debt and over $1.8 billion of annual interest expense

Ford’s existing debt traded at severely discounted prices due to the bleak macroeconomic and automotive outlook as well as expectations of continued cash burn. As of March 3, 2009:

• Secured Term Loan traded between $30.00–$32.00

• Unsecured Notes traded between $18.00–$20.00

• Convertible Notes traded between $20.00–$22.00

The Treasury mandated that General Motors and Chrysler, as a result of accepting government loans, reduce unsecured indebtedness by at least two thirds by March 31, 2009

• Ford decided to execute its own balance sheet restructuring to remain competitive with other domestic OEMs and improve its financial profile to ensure long‐term viability

In addition to having a multi‐layered capital structure, Ford had a number of legal and practical restrictions on the use of cash, incurrence of indebtedness and ability to grant additional liens which complicated its balance sheet restructuring

Work Plan Ford retained Blackstone in January 2009 to advise on various

deleveraging transactions During the ensuing months, Blackstone:

• Assisted Ford on structuring two tender offers and a 3(a)9 exchange designed to reduce unsecured indebtedness and alleviate near‐term secured maturities

• Analyzed Credit Agreement and Indentures and determined legal means of executing transactions using FMCC cash

• Built comprehensive recapitalization and financial models to analyze the impact of the transactions on Ford’s capital structure, liquidity, credit profile and equity value

• Assisted company in evaluating alternatives to equitize claims under Voluntary Employee Beneficiary Association

• Assisted the company in developing and presenting its debt restructuring plan to the UAW, government and key stakeholders

• Assisted the company in developing a comprehensive communications and public relations strategies

• Assisted company in executing transactions serving as Restructuring Co‐Advisor, Structuring Agent and Global Lead Dealer Manager for the Unsecured tender offer and Auction Agent for the Term Loan BDutch Auction

Final Outcome On April 3, 2009, the company successfully tendered for $2.2 billion of

Secured Term Loan and $3.4 billion of Unsecured Bonds and successfully exchanged cash and stock for $4.3 billion of Unsecured Convertible Notes

As a result of this complex set of transactions, Ford reduced its total indebtedness by $9.9 billion and eliminated $556 million of annual interest expense with $2.4 billion of cash and 468 million shares of Ford stock

The company remains the only domestic automaker to avoid accepting government loans and has been praised by the White House as well as members of the House and Senate for executing an extremely successful balance sheet and operational restructuring without any government assistance

25



Xerox Corporation

Company Overview

Xerox is a leader in the global document market. The company develops, manufactures, markets, services and finances a range of documentequipment, software, solutions and services

Xerox operates in over 130 countries worldwide, and distributes its products in the Western Hemisphere through divisions, wholly owned subsidiaries and third‐party distributors

Work Plan Blackstone advised on an overall restructuring of Xerox’s capital structure. The financing work included: Extensive due diligence, including meetings with operational and finance

groups in Europe, South America, and North America Creation of detailed financial forecast with flexibility to analyze:

• Impacts of various operating assumptions and cash sources and uses by geography

• Effects of various financing and restructuring proposals, including transition to third‐party customer financing

Identified additional financing to fund liquidity crisis as Xerox undertook major asset sales and shut down negative cash flow operations

Development of various restructuring alternatives including analysis of legal and corporate structure

Assisted in the negotiation and structuring of capital market transactions consistent with legal and corporate structureBackground Issues

Xerox faced various issues beginning in mid‐1999 including:

• Execution issues consolidating customer administration centers• Difficult execution of a major sales force realignment

• SEC investigation into accounting issues at Mexican division

In May 2000, Xerox’s credit rating was downgraded and subsequently lost access to the commercial paper financing market – a primary financing source

• By October 2000, Xerox had $5.4 billion of commercial paper outstanding which would rapidly come due over the course of three months

With this backdrop, Xerox hired Blackstone to assist in formulating a restructuring and financing plan

Final Outcome

In July 2002, Blackstone negotiated a new $4.2 billion credit agreement satisfactory to Xerox and creditors, avoiding bankruptcy

• Obtained 100% approval of entire 59‐member bank group

• Achieved terms that preserved adequate liquidity

• Implemented creative solution that allowed the refinancing to close prior to the resolution of an SEC investigation and restatement

In February 2003, Blackstone assisted in the negotiation and execution of $3.6 billion of new financing, which refinanced the outstanding amounts under the credit agreement:

• Secured credit facility and senior notes

• Mandatory convertible preferred stock and new common stock

In 2009, Blackstone’s Advisory Group advised Xerox on its $8.3 billion acquisition of Affiliated Computer Services

VII. GSO Credit Platform

1


GSO Capital Partners Overview

Global Leader in Credit

World Class Organization

Strong Business Momentum and Huge Market Opportunity

$28.6 billion(1) in total AUM

Exclusively focused in the leveraged finance marketplace

Diversified mix of investment strategies

Senior partners have worked together for over a decade and together have built the leading leveraged finance franchise on Wall Street

Strong brand recognition on global basis

Over 160 professionals worldwide

Strong fundraising momentum across strategies

Our Institutional Limited Partner base is a strategic asset

Investors are actively seeking credit‐oriented strategies managed by a market leader in today’s environment

Outstanding Track Record

Strong performance across strategies

Proven track record of achieving returns with lower volatility

GSO / Blackstone platform creates unique opportunities

________________________________________________

(1) Excludes AUM related to the Blackstone Distressed Debt Hedge Fund, which Blackstone began liquidating in 2008.

2


GSO Total AUM Organization Chart – As of 6/30/10

GSO Capital Partners

AUM $28.6 billion(1)

Customized Credit Strategies

(CLOs / Permanent Capital Vehicles / Separate Accounts)

$19.4 billion

Capital Solutions(Rescue Lending Fund)

$2.8 billion

Capital Opportunities / Blackstone Mezzanine

(Mezzanine Funds)

$3.3 billion

Private Market Strategies Public Market Strategies

Special Situations Fund

(Credit Hedge Fund)

$3.1 billion(1)

Global footprint with approximately 160 professionals in New York, London, and Houston

________________________________________________


3


Strategic Objectives

Maintain our investment excellence

• Continue our strong performance across funds

Create roadmap to $40 billion AUM enterprise

• Aspirational goal, with acquisitions, could get to $50 billion

Develop a “retail brand” in the credit space

• Breakout potential in new Permanent Capital Vehicles and our existing products

Transform our CLO business into a long‐only platform

• Industry‐leading track record

• Diverse array of new products to be launched

Achieve the following:

• 30% GSO Net Fee Margin

• $300 million of Pre‐Tax, Economic Net Income

4


GSO’s Competitive Advantage

Scale

Unparalleled Expertise

Track Record

Better Access to Information and Deal Flow

High Priority Client to Wall Street

One of Few Players that can Commit to $200 million + in a Transaction

Ability to Leverage Blackstone’s “Intellectual Library” and Private Equity Expertise

Credit and due diligence skills

Deep industry / sector knowledge

Unique origination capability – “problem solving” approach

Collective investment experience results in a time‐tested, rigorous investment process

Track record of generating superior risk‐adjusted returns through disciplined credit selection, structuring and risk management

Achieved our returns with significantly less volatility than our benchmarks

Scale

Better access to information and deal flow

High priority client to Wall Street

One of few players that can commit to $200+ million in a transaction

Ability to leverage Blackstone’s “intellectual library” and Private Equity expertise

5


Performance Review – Hedge Fund

GSO has outperformed our Credit Composite Index by 1,500 bps since inception…

...with superior risk‐adjusted returns

________________________________________________

Note: Please refer to the footnotes on page 14.

Superior risk‐adjusted Return – Cumulative Special Situations Returns Since Inception(1)(2)

Cumulative Net Returns Since Inception(1)(3)

16.8%

21.3%

23.6%

31.7%

0%

5%

10%

15%

20%

25%

30%

35%

GSO SpecialSituations Fund

LP

Tremont EventDriven Distressed

Index

HFRI FundWeighted

Composite Index

Credit CompositeIndex

Sharpe Ratio Since Inception(1)(3)

0.07

0.24

0.32

0.41

0.00

0.09

0.18

0.27

0.36

0.45

GSO SpecialSituations Fund

LP

Tremont EventDriven Distressed

Index

HFRI FundWeighted

Composite Index

Credit CompositeIndex

6


Performance Review – Mezzanine Fund

________________________________________________

Note: Please refer to the disclosures on page 14.

Annualized Net Returns (July 1, 2007 – June 30, 2010)

(9.8%)

(14.1%)

1.6%

5.7%

14.5%

(15%)

(10%)

(5%)

0%

5%

10%

15%

GSO CapitalOpportunities Fund I

Credit SuisseHigh Yield Index

Credit SuisseLeveraged Loan Index

S&P 500 Index Credit SuisseLeveraged Equity Index

GSO Capital Opportunities Fund I has meaningfully outperformed market indices

7


Performance Review – Rescue Lending Fund

________________________________________________

Note: Past performance is not necessarily indicative of future results, and there can be no assurance that the Fund will achieve comparable results or that the Fund will be able to implement its investment strategy or achieve its investment objectives.

Portfolio Performance (as of 6/30/10)

Our Rescue Lending Fund is off to a great start. The current portfolio has generated total gains of $106 million and is marked at 1.2x MOIC as of June 30, 2010

Backlog Two investments pending for approximately

$300 million

Broad set of opportunities we are currently pursuing in the U.S. and Europe

Prospective investments are in a variety of industries (i.e., Leisure, Manufacturing, Energy and Homebuilding)

Generally, investment targets are: (1) Middle Market companies; and (2) good businesses facing liquidity / refinancing issues

Fund Inception: 9/30/09

Fund Size: $3.25 billion

Number of Investments: 7

Capital Deployed: $589.6 million

Realized / Unrealized Value: $695.7 million

Multiple of Invested Capital: 1.2x

8


Performance Review – CLO Business

June 1998 – March 2010

________________________________________________

Source: Standard & Poor’s LCD.Note: Please refer to the disclosures on page 14.

12‐Year U.S. Track Record – Consistent CLO Outperformance

1.31%

0.29%0.0%

0.5%

1.0%

1.5%

GSO / Blackstone S&P LCD US Lev Loan

62.98%

69.55%

56%

60%

64%

68%

72%


3.55%

0.96%0.0%

1.0%

2.0%

3.0%

4.0%


Total Return

74.87%

90.75%

0%

25%

50%

75%

100%

GSO / Blackstone S&P Lev Loan Index

Average Annual Default Rate

Average Recovery Rate Average Annual Principal Loss Rate

9


GSO AUM Growth Since Inception(1)

($ in billions)

$4.1 $3.2 $3.1 $3.1$1.1 $2.8$3.4 $3.2

$3.3$8.7

$13.7$15.3

$16.6

$19.4

$2.2 $3.4

$1.6$1.4

$1.9$5.8

$28.6

$9.4

$13.7

$19.7$21.9

$24.1

$0

$5

$10

$15

$20

$25

$30

2005 2006 2007 2008 2009 2Q'10

Multi‐Strategy Hedge Fund Assets Private Distressed Funds

Mezzanine Funds Customized Credit Strategies ________________________________________________


10


Evolution of the GSO Franchise

2005(1) 2010 (Estimated)# of fund products 2 12# of SMAs 1 7# of CLOs 10 25# of fund LPs ≥ $25 million 19 100Top 10 LPs as a % of total AUM 42% 18%% of capital locked up 41% 90%+

Assets under management ($ in billions) $3.6 $28.6(2)

Products offered Hedge Funds, CLOs, SMAs Hedge Funds, CLOs, SMAs, Mezz Funds,

Distressed Rescue Funds, BDCs, Closed End Funds, Co‐Mingled Loan Funds

________________________________________________

(1) 2005 data reflects only those businesses which were managed by GSO at the time, and is not pro forma for the Blackstone Transaction.(2) Excludes AUM related to the Blackstone Distressed Debt Hedge Fund, which Blackstone began liquidating in 2008.

Comparison of Selected Business Metrics

11


Evolution of the GSO Franchise

“Cross Fertilization” of LP Base($ in millions)

AccountHedgeFund

Mezzanine Fund

Liquidity Fund

Capital Solutions

CustomizedCredit Strategies Total

State Pension (A) 102 ‐ ‐ 600 ‐ 702

State Pension (B) ‐ 200 250 100 ‐ 550

Financial Institution (A) 211 200 62 ‐ ‐ 473

Insurance Company (A) 23 260 100 ‐ ‐ 383

Fund of Funds (A) 144 ‐ 225 ‐ ‐ 369

State Pension (C) ‐ 100 ‐ 250 ‐ 350

Fund of Funds (B) 151 ‐ 33 ‐ 52 236

Sovereign Wealth (A) ‐ 135 15 75 ‐ 225

Foundation (A) 40 75 75 ‐ ‐ 190

Sovereign Wealth (B) ‐ 75 65 50 ‐ 190

Financial Institution (B) ‐ 161 5 16 ‐ 182

Foundation (B) ‐ ‐ 144 25 ‐ 169

Family Office (A) ‐ ‐ 63 ‐ 75 138

Insurance Company (B) 66 50 ‐ ‐ ‐ 116

Family Office (B) 69 10 20 ‐ ‐ 99

Fund of Funds (C) 77 ‐ 12 ‐ ‐ 89

Endowment (A) 23 30 35 ‐ ‐ 88

Family Office (C) ‐ 10 75 ‐ ‐ 85

12


The Case for “Junk” Credit

GSO’s products offer investors extremely attractive risk‐adjusted returns relative to other asset classes in this market environment

Current Conditions Economic uncertainty

Historically low interest rates and large cash balances

Committed capital remains scarce

Market volatility likely to persist

Why Credit? Ability to invest more senior in a capital

structure provides downside protection

Investors will rotate out of cash in favor of higher yielding investments with strong current income

GSO’s private market strategies of providing debt capital to companies commands significant premium

Long / Short, Event‐Driven credit strategies help mitigate volatility and drive value creation

13


Looking Forward

Highly scalable business model

• Top quartile track record

• Great brand

• Team‐oriented culture

• First class operating platform

Blue Chip list of LPs

• We’ve earned very good standing with a diverse array of institutions

• Excellent growth prospects with international LPs

Industry consolidation will lead to potential opportunities

• GSO is a very attractive partner

“Junk Credit” is emerging as a stand‐alone asset class

• Fixed Income departments beginning to make specific allocations

• Retail investors have insatiable appetite for yield

Breakout opportunity for GSO

• Inflection point of our growth curve

• Our strategic plan calls for substantial AUM growth and expansion of our profitability over the next 2 ½ years

14


Performance Review Footnotes and Disclosures

Performance Review: Hedge Fund

(1) Net performance from January 2006 (first full year of the Fund) through June 2010.

(2) The volatility of the indices reflected above and elsewhere in this report may be materially different from the performance of the Fund. In addition, these indices employ different investmentguidelines and criteria than the Fund; as a result, the holdings in the Fund may differ significantly from the securities that comprise the indices. The performance of these indices has not necessarily been selected to represent an appropriate benchmark to compare to the performance of the Fund, but rather is disclosed to allow for comparison of the Fund’s performance to that of well‐known, relevant indices. A summary of the investment guidelines for these indices is available upon request.

(3) Credit Composite Index reflects the average portfolio construction since inception which consists of the following mix of indices: 60% CS Leveraged Loan Index, 25% CS High Yield Index and 15% CS Leveraged Equity Index which we believe is generally consistent with the mix of the Special Situations Fund.

Performance Review: Mezzanine Fund

Credit Suisse High Yield Index is an unmanaged market value‐weighted index designed to mirror the investable universe of the U.S. dollar‐denominated high yield debt market. New issues are added to the index upon issuance if they qualify according to the following criteria: issues must be publicly registered in the United States or issued under Rule 144A with registration rights; issues must be rated “B” or lower; the minimum amount outstanding is $75 million; and issues must be U.S. dollar‐denominated straight corporate debt, including cash‐pay, zero‐coupon, stepped‐rate and pay‐in‐kind (PIK) bonds. Floating‐rate and convertible bonds and preferred stock are not included; if an issuer has more than two issues outstanding, only the two most liquid issues are included in the index.

Credit Suisse Leveraged Loan Index is an unmanaged market value‐weighted index designed to mirror the investable universe of the U.S. dollar‐denominated leveraged loan market. New issues are added to the index on their effective date if they qualify according to the following criteria: loan facilities must be rated “B” or lower; only fully‐funded term loan facilities are included; and issuers must be domiciled in developed countries.

Standard & Poor’s 500 Index (the “S&P 500”) sets forth the performance of a well‐known broad‐based stock market index assuming reinvestment of dividends. The S&P 500 contains only publicly traded, seasoned equity securities.

Credit Suisse Leveraged Equity Index is an unmanaged market‐weighted index designed to mirror the investable universe of the public equity of issuers in the high yield debt market. The index includes the common stock of every issuer in the Credit Suisse High Yield Index which has public equity.

There are significant differences between the GSO Capital Opportunities Fund I’s investments and the indices. For instance, GSO Capital Opportunities Fund I may use leverage and invest in investments that have a greater degree of risk and volatility, as well as less liquidity, than those investments contained in the indices. Moreover, the indices do not reflect the reinvestment of income or dividends and the indices are not subject to any management fees, performance compensation or expenses. It should not be assumed that GSO Capital Opportunities Fund I will invest in any specific investments that comprise the indices, nor should it be understood to mean that there is a correlation between GSO Capital Opportunities Fund I’s returns and the performance of the indices. The statistical data regarding these indices has been obtained from sources believed to be reliable. It is not possible to invest in these indices. These indices are being presented for comparison purposes only to show how GSO Capital Opportunities Fund I’s performance compares to the broad global markets.

Performance Review: CLO Business

Past performance is not necessarily indicative of future results, and there can be no assurance that the Fund will achieve a comparable composition or that the Fund will be able to implement its investment strategy or achieve its investment objectives. Unless otherwise indicated, all yields and rates of return are presented on a “gross” basis and do not reflect the management fees, fund expenses, organizational expenses, performance compensation, taxes and other related expenses that are borne by investors in the portfolios described herein which, in the aggregate, are expected to be substantial and may result in “net” returns being materially lower than those presented herein. Investors are encouraged to contact GSO representatives to discuss any questions they may have concerning the performance information contained herein. Further information may be made available to such investors upon request.

VIII. Real Estate

A. Real Estate Overview

2


Blackstone Real Estate Overview

World Class Organization

Global Leader in Real Estate Private Equity

Outstanding Track Record

Significant Dry Powder

Current Holdings

$22 billion in AUM from Opportunistic funds

$2 billion in AUM from Real Estate Debt funds

Gross IRR of 37.5% (28.3% net) on realized / partially realized investments(1)

Multiple on Invested Capital (“MOIC”) of 2.2x on realized / partially realized investments

We project all 2004–2007 vintage funds will be profitable

$11.2 billion in total available capital ($1.4 billion in pending transactions)

U.S. office portfolio concentrated in Boston, West Los Angeles, Northern California, and New York

Global hotel owner / operator

European leisure parcs, hotels, student housing, and healthcare

Existing Portfolio: 76% North America, 16% Europe, and 8% other

Over 120 Real Estate professionals across the U.S., Europe, and Asia

Partners with an average tenure at Blackstone of 12 years________________________________________________

All figures are as of June 30, 2010.Note: Past performance is not necessarily indicative of future results for Blackstone Real Estate Partners “BREP” funds. There can be no assurance that any fund will

achieve its objectives or avoid losses. (1) Gross IRR for fully invested BREP funds since inception, including unrealized investments, is 29.7%; net is 15.9% .


3


Real Estate – Projected Performance

We expect to outperform competitors with similar vintage funds

Projected Performance

Vintage Fund Size

Total Expected

Gross MOIC(1)

BREP VI 2007 – Present $11.0 2.0x– 2.5x

BREP V 2006 – 2007 $5.2 1.5x– 1.6x

BREP Europe III 2008 – Present $4.1 2.0x– 2.5x

BREP IV 2004 – 2006 $2.7 1.5x– 1.6x

BREDS(2) 2008 – Present $2.0 1.5x– 1.7x

BREP Intl II 2006 – 2007 $1.7 1.2x– 1.4x

Co‐Investment 2007 – Present $1.1 2.0x– 2.5x

________________________________________________

(1) While Blackstone currently believes that the assumptions on which these projections are based are reasonable under current circumstances, there is no guarantee that the conditions on which such assumptions are based will materialize or otherwise be applicable to these funds. There can be no assurance that any fund managed by Blackstone will be profitable or avoid substantial losses. Above projections do not include any assumptions regarding investment time horizon or the rate of return on funds managed by Blackstone. Ultimate returns to investors will be reduced by management fees, fund expenses and carried interest.

(2) BREDS includes several debt funds and investment vehicles that have similar investment objectives.


($ in billions)

4


BREP Strategy Historically

Primary reasons for expected outperformance

Sold $60 billion of assets 2005–2007

Focused on top quality assets

Avoided debt cross‐collateralization / Fund‐level recourse

Virtually no commercial development

Deployed limited capital 2H 07–1H 09

Purchased or extended $24+ billion in portfolio company debt

No material realized losses to date


5


Active Opportunistic Funds’ Valuation and Investment Pace

0.5x 0.5x

0.9x

0.7x

1.2x

0.5x 0.6x

1.1x

0.7x

1.2x

0.0x

0.3x

0.6x

0.9x

1.2x

1Q 2008 2Q 2008 3Q 2008 4Q 2008 1Q 2009 2Q 2009 3Q 2009 4Q 2009 1Q 2010 2Q 2010

BREP VI and BREP Europe III Unrealized Quarterly MOICs

Existing portfolio has begun to improve while at the same time there has been a significant increase in investment pace

$179 $86 $435 $409

$1,219

$0

$500

$1,000

$1,500

1Q 2008 2Q 2008 3Q 3008 4Q 2008 1Q 2009 2Q 2009 3Q 2009 4Q 2009 1Q 2010 2Q 2010

BREP VI and BREP Europe III Committed Capital by Quarter(1)($ in millions)


________________________________________________

All figures are as of June 30, 2010.(1) Committed capital figures may adjust at time of actual closing of an investment due to a multitude of factors.

6


________________________________________________

(1) Includes pending Bank of America (Merrill Lynch ‐ Asia) transaction expected to close in the 4th quarter 2010.

Real Estate AUM has increased almost 30% over the past year

Real Estate Assets Under Management

Blackstone Real Estate Total AUM($ in millions)


$19,403$22,004

$1,918

$792

$2,300

$0

$7,000

$14,000

$21,000

$28,000

June 30, 2009 June 30, 2010

BREP BREDS Bank of America (Merrill Lynch ‐ Asia) ‐ Pending

(1)

$20,195

$26,222

7


Investment Activity

Blackstone Real Estate has invested or committed to invest over $4 billion over the past year(1)

Broadgate Estate – Premier London office complex

Busch Entertainment Corporation – Sea World / Busch Gardens theme parks

Glimcher JV – Two large regional malls

Portfolio of industrial assets – Pending

General Growth Properties – Leading regional mall owner / operator – Pending

Sunwest – Large portfolio of assisted and independent living facilities

Extended Stay Hotels – Largest owner / operator of mid‐scale extended stay hotels in the U.S. – Pending

Highland Hospitality – Senior mezzanine loan on a portfolio of 29 hotels

Montgomery / Washington – Note on San Francisco office building

Japanese Distressed Loans – Non‐performing real estate loan portfolio

Various Notes – Notes at significant discounts to face value

Leveraged Public Companies

Bankruptcy Situations

Distressed Debt

BREDS has invested approximately $1.0 billion in public and private debt marketsReal Estate Debt

Strategies (“BREDS”)


________________________________________________

(1) Includes approximately $500 million in transactions post June 30, 2010.

8


Available Capital

$11.2 billion in dry powder in a favorable investment environment

($ in millions)


________________________________________________

All figures are as of June 30, 2010.

$1,404Pending

Transactions

ReservesBREP VI BREP Europe III BREDS

$ 5,718 $ 1,135$ 3,920 $ 435

BREP Intl I

BREP Intl II

BREP V

B. Real Estate Market Overview

10


________________________________________________

(1) Bureau of Labor Statistics: September 2010 Total Private Non‐Farm Payrolls (Seasonally Adjusted).

Real Estate Demand

Monthly Change in U.S. Payrolls(1)(in thousands)

(900)

(700)

(500)

(300)

(100)

100

300

Feb‐07 May‐07 Aug‐07 Nov‐07 Feb‐08 May‐08 Aug‐08 Nov‐08 Feb‐09 May‐09 Aug‐09 Nov‐09 Feb‐10 May‐10 Aug‐10

Employment, the key driver of real estate demand, has turned modestly positive


11


0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

4.5%

Mar‐84

Mar‐86

Mar‐88

Mar‐90

Mar‐92

Mar‐94

Mar‐96

Mar‐98

Mar‐00

Mar‐02

Mar‐04

Mar‐06

Mar‐08

Mar‐10

New supply of commercial real estate is at record low levels

U.S. Aggregate Construction Starts(1)(Annualized)

Long‐term Average = 1.9%

________________________________________________

(1) Source: Citi, September 10, 2010.

Real Estate SupplyB. Real Estate Market Overview

12


Real Estate Occupancy

U.S. REIT Occupancy(1)

Given supply / demand fundamentals, occupancy in U.S. real estate is beginning to improve

90.0%

90.5%

91.0%

91.5%

92.0%

92.5%

93.0%

93.5%

94.0%

94.5%

1Q01

2Q01

3Q01

4Q01

1Q02

2Q02

3Q02

4Q02

1Q03

2Q03

3Q03

4Q03

1Q04

2Q04

3Q04

4Q04

1Q05

2Q05

3Q05

4Q05

1Q06

2Q06

3Q06

4Q06

1Q07

2Q07

3Q07

4Q07

1Q08

2Q08

3Q08

4Q08

1Q09

2Q09

3Q09

4Q09

1Q10

2Q10


________________________________________________

(1) Source: Citi, September 10, 2010.

13


‐3%

‐2%

‐1%

0%

1%

2%

3%

4%

5%

6%

7%

2Q99 2Q00 2Q01 2Q02 2Q03 2Q04 2Q05 2Q06 2Q07 2Q08 2Q09 2Q10

Real Estate Cash Flows

U.S. REIT Change in Same Store NOI(1)

Improving occupancy and bottoming rents translate into stabilizing real estate cash flows


________________________________________________

(1) ISI Group: September 2010.

14


0

50

100

150

200

250

6/06 11/06 4/07 9/07 2/08 7/08 12/08 5/09 10/09 3/10 8/10

Room

s

‐30%

‐20%

‐10%

0%

10%

6/06 11/06 4/07 9/07 2/08 7/08 12/08 5/09 10/09 3/10 8/10

Occupancy ADR RevPAR

Hotel Market Overview

The hotel sector has begun to see a sharp up‐tick in revenue with new supply at all time lows

U.S. Hotel Rooms Under Construction(2)

(in thousands)

Peak‐to‐Current Decline: (72%)

U.S Hotel YoY % Change in Occupancy, ADR & RevPAR(1)


________________________________________________

(1) STR Research: September 4, 2010.(2) STR Research: August 31, 2010.

15


Office Market Overview

020,00040,00060,00080,000100,000120,000140,000160,000180,000

2Q 1997 2Q 1998 2Q 1999 2Q 2000 2Q 2001 2Q 2002 2Q 2003 2Q 2004 2Q 2005 2Q 2006 2Q 2007 2Q 2008 2Q 2009 2Q 2010

New U.S. Office supply remains well below historical levels, while a modestly positive trend in net absorption is beginning to form

Long‐term Average = 3.1%0.7%


U.S. Office Net Absorption as a % of Inventory(1)

New U.S Office Square Footage Under Construction(2)

(SF under Construction in thousands)

________________________________________________

(1) Jones Lang LaSalle: June 30, 2010.(2) ISI Group: June 30, 2010.

‐1.0%‐0.7%‐0.4%‐0.1%0.2%0.5%0.8%1.1%

2Q 2007 3Q 2007 4Q 2007 1Q 2008 2Q 2008 3Q 2008 4Q 2008 1Q 2009 2Q 2009 3Q 2009 4Q 2009 1Q 2010 2Q 2010

16


AAA CMBS Spreads(1)(Spread in bps)

0

200

400

600

800

1,000

1,200

1,400

Apr‐07

Aug‐07

Dec‐07

Apr‐08

Aug‐08

Dec‐08

Apr‐09

Aug‐09

Dec‐09

Apr‐10

Aug‐10

10‐year CMBS

CMBS spreads and REIT unsecured spreads have tightened dramatically from their late 2008 panic levels

REIT Unsecured Debt Spreads to Underlying Treasuries(2)(Spread in bps)

Real Estate Debt Markets

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

Apr‐07

Aug

‐07

Dec‐07

Apr‐08

Aug

‐08

Dec‐08

Apr‐09

Aug

‐09

Dec‐09

Apr‐10

Aug

‐10


________________________________________________

(1) Bank of America Merrill Lynch Global Research: August 20, 2010.(2) Source: Citi, September 10, 2010.

17


Public Real Estate Values

Total % Change in Stock PriceSince 3/31/09

Implied Public

Market Cap Rate(1)

Boston Properties 147% 5.2%Brookfield Properties 169% 6.4%Douglas Emmett 131% 6.1%SL Green 488% 5.8%Weighted Average 209% 5.6%

Public real estate equity markets have recovered sharply from their 2009 troughs

Public office companies in top markets currently trade below a 6% cap rate:

Leading public hotel companies currently trade at a weighted average of 17.0x multiple:

Total % Change in Stock PriceSince 3/31/09

TEV / 2010E

EBITDA(2)

Host Hotels 271% 17.5xMarriott International 121% 15.7xStarwood Hotels 306% 17.7xWeighted Average 210% 17.0x


________________________________________________

Note: The above is a sample of public REITS and reflects Blackstone’s current view of the market place.(1) Green Street Research: September 14, 2010.(2) Source: Citi, September 14, 2010.

18


Private Real Estate Values

Commercial Property Price Index (1)

77.2

61.7

100.0

40

50

60

70

80

90

100

Dec‐97 Dec‐98 Jan‐00 Feb‐01 Mar‐02 Mar‐03 Apr‐04 May‐05 Jun‐06 Jun‐07 Jul‐08 Aug‐09 Aug‐10

Private real estate values have recovered approximately 40% from their 2009 lows, aided by extremely low interest rates


________________________________________________

(1) Green Street Advisors: August 2010 Unleveraged Commercial Property Price Index.

19


U.S. Real Estate Debt Markets

Despite generally improving conditions, significant opportunity exists for investment in commercial real estate given the volume of problem loans in the system coupled with limited new financing


________________________________________________

(1) Source: CS Market Watch, August 25, 2010.(2) JPMorgan “CMBS Weekly Report”: August 20, 2010.

41.0%33.4%29.4%

23.5%21.5%

5%

15%

25%

35%

45%

2003 2004 2005 2006 2007

Watchlist 30+ Days Delinquent & at Special Servicer

Troubled CMBS Loans by Vintage(1)

U.S. CMBS Issuance(2)($ in billions)

$52 $78 $93

$169$202

$3$2$12

$230

$0

$50

$100

$150

$200

$250

2002 2003 2004 2005 2006 2007 2008 2009 2010 YTD

20


U.K. Real Estate Debt Markets

Total Stock of Outstanding U.K. Commercial Real Estate Debt(£ in billions)

£0

£50

£100

£150

£200

£250

2002 2003 2004 2005 2006 2007 2008

Similar to the U.S., the sharp increase in leverage prior to 2008 presents a significant investment opportunity in Europe

Over 2.5x


________________________________________________

Source: “The UK Commercial Property Lending Market”, De Monfort University.

C. Blackstone Real Estate Outlook

22


New Business Initiatives – BREDS

BREDS was a natural and successful addition to the Real Estate platform


34.2%

22.3%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

Gross Net

BSSF IIGrossReturns

BSSF II Return Summary(1)

Strategy Overview

Opportunity to generate equity‐like returns with debt‐like risks Highly complementary to Opportunistic business Platform has great potential for scalability $2 billion of AUM in two years

$0

$10

$20

$30

$40

$50

$60

$70

$80

$90

$100

Peak Current

$75 Original Debt

$25 Original Equity

$17.5 Equity

$15.0 Mezz or B‐Note Financing

$37.5 Senior Debt

$100 Original Value

$70 Value

BREDS Investment Target

BREDSTarget BSSF II

NetReturns

Inception to Date (Cumulative)

________________________________________________

(1) This chart represents the preliminary unaudited cumulative internal rate of return (“IRR”) of Blackstone Real Estate Special Situations Fund II L.P. and Blackstone Real Estate Special Situations Europe Fund Ltd. (together, “BSSF II”). BSSF I’s inception‐to‐date gross return is 40.3% (net 30.7%). Past performance is notnecessarily indicative of future results.

23


New Business Initiatives – Asia

BREP has the opportunity to significantly increase its presence in Asia

In 2007 Blackstone Real Estate opened offices in Mumbai, Tokyo, and Hong Kong staffed with seasoned investment professionals from New York, London, and the region

Deployed limited capital before market decline

Invested approximately $500 million in the region post‐September 2008

Blackstone has entered into an agreement to manage approximately $2 billion in real estate assets from Bank of America / Merrill Lynch Asia

Why:

• Grows on‐the‐ground presence

• Expands local relationships

• Provides better market knowledge

• Widens lender contacts

• Increases Limited Partner base


24


Blackstone Real Estate Summary

Our business is extremely well positioned

We expect to outperform competitors and produce solid returns for our Limited Partners

Competitive landscape has been altered with fewer General Partners competing for new investments and fundraising dollars because of legacy and/or parent company issues

The current investment environment is highly attractive with $11+ billion in dry powder; we have unique position for large, complex real estate investments

Opportunity to substantially increase BREDS platform and Asian investment business

Stable long‐term management fee base

Significant carried interest potential from existing funds


IX. Blackstone Alternative Asset Management (“BAAM”)

1


Where are Hedge Funds Today?

________________________________________________

(1) Global financial assets include equity securities, private debt securities, government debt securities and bank deposits; McKinsey Global Institute, September 2009.

(2) Firms include: Barclays Global, Allianz Group, State Street, Fidelity Investments, AXA Group, BlackRock, Deutsche Bank, Vanguard Group, J.P. Morgan Chase, Capital Group. Assets are as of September 30, 2009.

(3) HFR. HFR Global Hedge Fund Industry Report. March 31, 2010. Assets are as of December 31, 2009.

Hedge Funds in the Current Market Landscape

Volatility and uncertainty – Long / short investment mandates typically better equipped to handle market uncertainty than long‐only

Talent migration – Economics and regulatory changes continue to attract top talent to the industry

Institutional acceptance – Institutions increasingly implementing hedge funds across the investment portfolio

Growth potential – Hedge funds still manage only a small fraction of investable assets

The Potential for Attractive Risk‐adjusted Performance Has Led to Growth in Hedge Fund Assets Over Time($ in billions)

$1,648$1,600$1,407

$1,868

$1,105

$491

$186$39$0

$400

$800

$1,200

$1,600

$2,000

1990 1995 2000 2005 2007 2008 2009 June 30,2010

Hedge Funds Manage Just a Fraction of Financial Assets and the Industry Has Room to Grow($ in trillions)

$1.6$12.9

$178.0

$0

$40

$80

$120

$160

$200

Global FinancialAssets

Aggregate AUMof Top 10 Asset

Managers

Hedge FundIndustry(1)

(2)(2)

(3)

2


BAAM AUM and Asset Flow Summary

________________________________________________

(1) Data is estimated and unaudited. As of July 1, 2010. BAAM net inflows exclude internal (firm / employee) investments.(2) Past performance is not indicative of future results and there is no assurance that any BAAM fund will achieve its objectives or avoid significant losses.

BAAM: Solid Relative Performance, Strong Client Focus, Proper Fund Management

Positive net inflows – Net inflows in 2008, 2009, 1H 2010 – a period of significant outflows for fund of hedge funds(1)

Strong pipeline – Visibility into a diversified range of attractive prospect opportunities in 2011–2012

Differentiated business model – Asset retention and growth through customization, innovation, advice

Diverse product portfolio – Broad array of options for cross‐selling to existing investors and attracting new investors

AUM($ in millions)

$0

$3,000

$6,000

$9,000

$12,000

$15,000

$18,000

$21,000

$24,000

$27,000

$30,000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

$0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

$7,000

$8,000

$9,000

$10,000

BAAM AUM BAAM Net Inflows

(1)

Key Points:

Strong track record of attractive risk‐adjusted returns(2)

Balanced growth between existing investors and new names

Avoidance of significant fee compression due to scope of services and value‐add to LPs

Net Asset Flow($ in millions)

3


BAAM Performance Summary

BAAM’s Investment Process Has Produced Strong Risk‐Adjusted Returns(1)

Portfolio construction – Historically has produced strong risk‐adjusted returns and capital preservation

Differentiated exposure – Ability to “manufacture” tailored capacity and exploit market opportunities

Manager partnerships – Ability to leverage scale and expertise to negotiate benefits for clients

Expertise – Well‐resourced, experienced team sourcing new ideas and monitoring investments

January 2000 – July 2010

________________________________________________

(1) BAAM Composite covers the period from January 2000 to July 2010. BAAM’s inception date is September 1990 (further historical performance is available upon request). Past performance is not indicative of future results and there is no assurance that any BAAM fund will achieve its objectives or avoid significant losses. The BAAM Composite is the asset‐weighted performance of BAAM’sinvestments net of all fees (both BAAM and underlying manager). The Composite does not include BAAM's commodities platform, seed funds, and advisory relationships (details of the performance of all BAAM funds are available upon request). The volatility of the indexes presented may be materially different from that of the performance of any particular BAAM fund included in the Composite. In addition, these indexes employ different investment guidelines and criteria than the BAAM funds; as a result, the holdings in the BAAM funds may differ significantly from the securities that comprise the indexes. The performance of these indexes has not been selected to represent an appropriate benchmark to compare to the performance of the BAAM Composite, but rather is disclosed to allow for comparison of the Composite to that of well‐known and widely recognized indexes. A summary of the investment guidelines for these indexes is available upon request. In the case of equity indices, performance of the indices reflects the reinvestment of dividends.

HFRI FOF Composite

Barclays Agg Bond

MSCI Emerging Markets

GSCI Total Return Index

MSCI World

BAAM Composite

S&P 500 TR Index‐2%

0%

2%

4%

6%

8%

0% 4% 8% 12% 16% 20% 24% 28%

Annualized Standard Deviation

Ann

ualized

Net Return

4


Investor Appetite for Hedge Fund Exposure: Demand Today vs. Demand in the Future

________________________________________________

(1) Data is estimated and unaudited and excludes internal capital. As of July 2010.

BAAM Has Multiple Opportunities to Increase Geographic Market Penetration

Institutional focus – Industry growth driven by institutions seeking attractive risk‐adjusted returns and downside protection

Growing demand in traditional markets – U.S. and European public and corporate pensions

Significant potential in under‐penetrated markets – Middle East, Japan, Australia, and Canada

Sizeable untapped opportunities – Latin America, China, and non‐Japan Asia

BAAM’s Investor Base Is Increasingly Global in Nature

3.8%10.1%

14.7% 13.5%35.2%

30.4%26.9%

25.0% 23.7%

63.0%57.4% 54.3% 50.6% 51.9%

1.7% 4.6% 3.8% 5.5% 5.4%3.7% 4.9% 4.2% 5.4%0.1%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2006 2007 2008 2009 2010

All Others Japan Middle East Europe North America

(1)

Opportunities Exist to Increase Market Penetration and Enter New Geographies

Traditional Focus Developing Market Opportunity

5


Product Innovation: Key Differentiator of the BAAM Model

BAAM “Reverse Engineers” New Solutions to Client Problems

BAAM engages clients to identify key issues in institutional portfolio management

BAAM has a track record of successfully addressing client concerns(1):

• Long‐biased commodities strategy – launched May 2007; over $1 billion in AUM(2)

• Hedge fund seeding platform – first fund launched in 2007; over $1 billion in AUM and commitments(2)

• Long‐only equity “replacement” strategies – increasing interest in hedged exposure, alpha generation

• Customized mandates – ability to accommodate specific risk and return targets

• Solutions research – ongoing across emerging markets and “long‐only” substitute product opportunities

BAAM has developed an array of services for strategic partners, including:

• Advisory services

• Access to BAAM research and proprietary technology platform

• Proactive knowledge transfer and training

• Transitioning and rebuilding troubled client hedge fund portfolios

BAAM is a thoughtful, value‐added partner

• Insight into key regulatory developments and industry responses

• Perspectives on approaches to top‐down asset allocation and other key client investment processes

• Thoughts regarding potential tactical allocations and market opportunities________________________________________________

(1) Past performance is no guarantee of future results.(2) AUM is estimated and unaudited. As of August 1, 2010.

6


Product Innovation: Implications for BAAM’s Business

________________________________________________

(1) AUM is estimated and unaudited. As of August 1, 2010.(2) The fee analysis excludes internal assets and non‐core BAAM products (commodities platform, seed funds and advisory relationships).

Product Innovation: Key to Developing Strategic Relationships

37 customized client vehicles – nearly 50% of BAAM external AUM(1)

Targeting specific client portfolio objectives

Customized accounts have increased as a proportion of BAAM AUM in recent years

Innovation Has Helped BAAM Avoid Fee Compression

BAAM has avoided significant fee compression, despite reported trends among competitors

Management fees have largely held stable since 2006(2)

Incentive fees(2) – significant amount of assets already above or approaching their high water mark

AUM Composition (August 2010)(1)

51% 49%

Customized Vehicles

Commingled Assets

BAAM’s Fees(2)(normalized to 2006 level)

0%

20%

40%

60%

80%

100%

120%

YE 2006 YE 2007 YE 2008 YE 2009 June 30, 2010

Total Fee

Management Fee Incentive Fee

7


Key Success Drivers of BAAM’s Business

Stable Management Team and Deep Bench of Talent

Portfolio team members who have traded the asset classes and strategies in which BAAM invests

140 team members, over half of whom are involved in the investment process(1)

Global Footprint

BAAM offices in New York, London, and Hong Kong (investment professionals in each location)

Increasingly global institutional investor base

Focus on Liquidity

Proper asset / liability management across funds and strategies

Provided liquidity to investors when needed

Leveraging the “Blackstone Library”(2)

Access to Blackstone experts for industry and market insights

Access to Blackstone’s extensive network of industry contacts

Alignment of Interest and a Culture of Risk Management and Compliance

Significant firm and employee capital invested alongside clients

Significant resources dedicated to reducing the risk of investing in funds that destroy client capital and / or generate negative headlines

________________________________________________

(1) As of July 1, 2010. The Strategy‐Focused Research group includes BAAM’s Business Analyst / Technology Group which is comprised of 18 professionals who support the investment team.

(2) Subject to information wall policies and procedures.

BAAM has evolved beyond the traditional “Fund of Hedge Fund” model

8


Key Success Drivers of BAAM’s Business (Cont’d)

Ability to Use Size and Scale Advantageously

Use size to build strategic hedge fund manager relationships and negotiate beneficial terms / exposures for clients

Leverage human capital, technology investments, and global footprint to further separate BAAM from competition

Product Offerings that Target Different Pools of Investor Capital

Broad commingled product offerings and customized exposures based on client demand

Specialized funds that attract a differentiated investor base

Product Innovation

Ability to create tailored portfolios and fund structures to meet client needs or capitalize on market dislocations

Partnerships with underlying managers where BAAM can access and structure customized exposure for clients

Emphasis on Technology and Transparency

Significant investment in Portfolio Management, Risk Management, and Due Diligence technology tools

Manager relationships and market reputation that facilitate transparency needs

Strategic Client Relationships

BAAM is a trusted advisor to many of the world’s leading institutional investors

A strategic relationship with BAAM can encompass a full scope of services beyond a portfolio mandate

BAAM has evolved beyond the traditional “Fund of Hedge Fund” model

A. Reconciliation of Non-GAAP Financial Measures

1


Reconciliation of GAAP Income (Loss) Before Taxes to ENI to NFRE to DE and NFRE to EBITDA‐NFRE

($ in thousands)

Three Months Ended LTM (1) EndedSep 30, 2009 Dec 31, 2009 Mar 31, 2010 June 30, 2010 June 30, 2010

Revenues $597,023 $725,346 $701,239 $550,088 $2,573,696Expenses 1,097,794 1,170,001 1,100,714 1,127,766 4,496,275 Other Income (Loss) 73,812 79,341 171,804 (59,250) 265,707 Income (Loss) Before Provision for Taxes ($426,959) ($365,314) ($227,671) ($636,928) ($1,656,872)Economic Net Income AdjustmentsIPO and Acquisition‐Related Charges 719,708 751,351 726,722 749,930 2,947,711 Amortization of Intangibles 39,513 39,511 39,512 40,822 159,358 Income (Loss) Associated with Non‐Controlling Interests in Income (Loss) of Consolidated Entities (53,905) (59,703) (159,935) 58,294 (215,249) Management Fee Revenues Associated with Consolidated CLO Entities ‐ ‐ 6,474 9,353 15,827

Economic Net Income, Before Taxes $278,357 $365,845 $385,102 $221,471 $1,250,775NFRE AdjustmentsPerformance Fees and Allocations Adjustment (166,770) (214,960) (186,214) (25,636) (593,580) Investment Income (Loss) Adjustment (58,003) (76,742) (156,828) (102,907) (394,480) Investment Income (Loss) – Cash Management Strategies ‐ 12,368 3,665 5,062 21,095 Performance Fee Related Compensation and Benefits Adjustment 57,357 73,762 62,341 21,987 215,447 Taxes Payable (16,002) (21,110) (9,321) (12,062) (58,495)

Net Fee Related Earnings $94,939 $139,163 $98,745 $107,915 $440,762Distributable Earnings AdjustmentsRealized Performance Fees and Allocations (3,105) 48,172 46,140 23,495 114,702 Realized Investment Income (Loss) 7,669 35,641 5,307 15,721 64,338 Adjustment Related to Investment Income – Cash Management Strategies ‐ (10,142) (1,264) 512 (10,894) Other Payables Including Payable under Tax Receivable Agreement ‐ ‐ (232) (68) (300)

Distributable Earnings $99,503 $212,834 $148,696 $147,575 $608,608NFRE to EBITDA‐NFRE ReconciliationNet Fee Related Earnings $94,939 $139,163 $98,745 $107,915 $440,762Taxes Payable 16,002 21,110 9,321 12,062 58,495 Interest, Depreciation & Amortization 10,318 11,643 12,739 12,889 47,589

Earnings Before Interest, Taxes and Depreciation and Amortization from NFRE $121,259 $171,916 $120,805 $132,866 $546,846

________________________________________________

(1) Last Twelve Months.

2


Reconciliation of ENI Revenues to Fee Revenues and Transaction & Other Fees – Total Segments

($ in thousands)

Twelve Months Ended Three Months Ended LTM EndedDec 31, 2007 Dec 31, 2008 Dec 31, 2009 Sep 30, 2009 Dec 31, 2009 Mar 31, 2010 June 30, 2010 June 30, 2010

Management and Advisory FeesBase Management Fees $804,252 $1,041,718 $999,829 $255,848 $253,299 $251,971 $262,914 $1,024,032Advisory Fees 360,284 397,519 390,718 94,566 122,709 76,568 134,099 427,942Transaction and Other Fees, Net 478,810 96,358 115,040 22,493 59,925 35,260 20,617 138,295Management Fee Offsets (22,484) (16,437) (17,161) (4,536) (2,368) (1,178) (179) (8,261)

Total Management & Advisory Fees $1,620,862 $1,519,158 $1,488,426 $368,371 $433,565 $362,621 $417,451 $1,582,008Performance Fees & AllocationsRealized 1,054,816 39,013 74,264 (3,819) 72,260 53,881 46,374 168,696Unrealized 106,032 (1,286,262) 165,867 170,589 142,700 132,333 (20,738) 424,884

Total Performance Fees & Allocations $1,160,848 ($1,247,249) $240,131 $166,770 $214,960 $186,214 $25,636 $593,580Investment Income (Loss)Realized 262,857 (64,677) 29,544 7,669 35,641 5,307 15,721 64,338Unrealized 130,745 (691,934) 3,880 50,334 41,101 151,521 87,186 330,142

Total Investment Income (Loss) $393,602 ($756,611) $33,424 $58,003 $76,742 $156,828 $102,907 $394,480Interest Income and Dividend Revenue 14,686 29,014 22,492 6,767 11,322 8,690 6,930 33,709Other 528 13,595 7,096 3,893 1,818 (3,250) (644) 1,817Total Revenues $3,190,526 ($442,093) $1,791,569 $603,804 $738,407 $711,103 $552,280 $2,605,594


Fee RevenuesBase Management Fees $804,252 $1,041,718 $999,829 $255,848 $253,299 $251,971 $262,914 $1,024,032Advisory Fees 360,284 397,519 390,718 94,566 122,709 76,568 134,099 427,942Transaction and Other Fees, Net 478,810 96,358 115,040 22,493 59,925 35,260 20,617 138,295Management Fee Offsets (22,484) (16,437) (17,161) (4,536) (2,368) (1,178) (179) (8,261)Interest Income and Dividend Revenue 14,686 29,014 22,492 6,767 11,322 8,690 6,930 33,709Other 528 13,595 7,096 3,893 1,818 (3,250) (644) 1,817

Fee Revenues $1,636,076 $1,561,767 $1,518,014 $379,031 $446,705 $368,061 $423,737 $1,617,534Transaction & Other FeesTransaction and Other Fees, Net $478,810 $96,358 $115,040 $22,493 $59,925 $35,260 $20,617 $138,295Management Fee Offsets (22,484) (16,437) (17,161) (4,536) (2,368) (1,178) (179) (8,261)Interest Income and Dividend Revenue 14,686 29,014 22,492 6,767 11,322 8,690 6,930 33,709Other 528 13,595 7,096 3,893 1,818 (3,250) (644) 1,817

Transaction & Other Fees $471,540 $122,530 $127,467 $28,617 $70,697 $39,522 $26,724 $165,560

ENI Revenues – Total Segments, As Reported

Fee Revenues and Transaction & Other Fees, As Disclosed in Presentation

3


($ in thousands)

Reconciliation of ENI Revenues to Fee Revenues and Transaction & Other Fees – Private Equity


Management and Advisory FeesBase Management Fees $254,843 $268,961 $270,509 $67,009 $67,329 $65,432 $66,795 $266,565Transaction and Other Fees, Net 123,770 51,796 86,336 18,368 42,495 31,972 16,367 109,202Management Fee Offsets (10,734) (4,862) – – – – – –

Total Management & Advisory Fees $367,879 $315,895 $356,845 $85,377 $109,824 $97,404 $83,162 $375,767Performance Fees & AllocationsRealized 574,274 (749) 34,021 – 34,021 46,175 1,106 81,302Unrealized (194,357) (429,736) 303,491 110,867 90,621 45,549 (24,020) 223,017

Total Performance Fees & Allocations $379,917 ($430,485) $337,512 $110,867 $124,642 $91,724 ($22,914) $304,319Investment Income (Loss)Realized 131,498 13,687 36,968 8,794 28,416 (495) 3,141 39,856Unrealized (16,166) (196,200) 33,269 18,640 12,676 84,684 17,275 133,275

Total Investment Income (Loss) $115,332 ($182,513) $70,237 $27,434 $41,092 $84,189 $20,416 $173,131Interest Income and Dividend Revenue 1,731 6,459 7,756 2,553 4,531 3,428 2,728 13,240Other 470 4,474 2,845 677 1,516 100 460 2,753Total Revenues $865,329 ($286,170) $775,195 $226,908 $281,605 $276,845 $83,852 $869,210


Fee RevenuesBase Management Fees $254,843 $268,961 $270,509 $67,009 $67,329 $65,432 $66,795 $266,565Transaction and Other Fees, Net 123,770 51,796 86,336 18,368 42,495 31,972 16,367 109,202Management Fee Offsets (10,734) (4,862) – – – – – –Interest Income and Dividend Revenue 1,731 6,459 7,756 2,553 4,531 3,428 2,728 13,240Other 470 4,474 2,845 677 1,516 100 460 2,753

Fee Revenues $370,080 $326,828 $367,446 $88,607 $115,871 $100,932 $86,350 $391,760Transaction & Other FeesTransaction and Other Fees, Net $123,770 $51,796 $86,336 $18,368 $42,495 $31,972 $16,367 $109,202Management Fee Offsets (10,734) (4,862) – – – – – –Interest Income and Dividend Revenue 1,731 6,459 7,756 2,553 4,531 3,428 2,728 13,240Other 470 4,474 2,845 677 1,516 100 460 2,753


ENI Revenues ‐ Private Equity, As Reported


4


($ in thousands)

Reconciliation of ENI Revenues to Fee Revenues and Transaction & Other Fees – Real Estate


Management and Advisory FeesBase Management Fees $233,072 $295,921 $328,447 $83,409 $83,323 $83,060 $82,916 $332,708Transaction and Other Fees, Net 348,410 36,046 25,838 3,347 16,472 1,942 2,979 24,740Management Fee Offsets (11,717) (4,969) (2,467) (415) (373) (489) (110) (1,387)

Total Management & Advisory Fees $569,765 $326,998 $351,818 $86,341 $99,422 $84,513 $85,785 $356,061Performance Fees & AllocationsRealized 326,514 24,681 (3,039) (11,441) 3,166 5,948 16,319 13,992Unrealized 297,437 (843,704) (252,180) 23,608 5,391 11,391 21,117 61,507

Total Performance Fees & Allocations $623,951 ($819,023) ($255,219) $12,167 $8,557 $17,339 $37,436 $75,499Investment Income (Loss)Realized 68,996 3,778 6,164 (3,078) 6,500 2,632 3,900 9,954Unrealized 65,472 (238,650) (125,624) 1,242 (219) 46,892 79,543 127,458

Total Investment Income (Loss) $134,468 ($234,872) ($119,460) ($1,836) $6,281 $49,524 $83,443 $137,412Interest Income and Dividend Revenue 1,321 5,880 6,030 2,035 3,414 2,718 2,178 10,345Other 38 3,008 3,261 1,450 75 (1,876) (390) (741)Total Revenues $1,329,543 ($718,009) ($13,570) $100,157 $117,749 $152,218 $208,452 $578,576


Fee RevenuesBase Management Fees $233,072 $295,921 $328,447 $83,409 $83,323 $83,060 $82,916 $332,708Transaction and Other Fees, Net 348,410 36,046 25,838 3,347 16,472 1,942 2,979 24,740Management Fee Offsets (11,717) (4,969) (2,467) (415) (373) (489) (110) (1,387)Interest Income and Dividend Revenue 1,321 5,880 6,030 2,035 3,414 2,718 2,178 10,345Other 38 3,008 3,261 1,450 75 (1,876) (390) (741)

Fee Revenues $571,124 $335,886 $361,109 $89,826 $102,911 $85,355 $87,573 $365,665Transaction & Other FeesTransaction and Other Fees, Net $348,410 $36,046 $25,838 $3,347 $16,472 $1,942 $2,979 $24,740Management Fee Offsets (11,717) (4,969) (2,467) (415) (373) (489) (110) (1,387)Interest Income and Dividend Revenue 1,321 5,880 6,030 2,035 3,414 2,718 2,178 10,345Other 38 3,008 3,261 1,450 75 (1,876) (390) (741)


ENI Revenues ‐ Real Estate, As Reported


5


($ in thousands)

Reconciliation of ENI Revenues to Fee Revenues and Transaction & Other Fees – CAMA


Management and Advisory FeesBase Management Fees $316,337 $476,836 $400,873 $105,430 $102,647 $103,479 $113,203 $424,759Transaction and Other Fees, Net 6,630 8,516 2,866 778 958 1,345 1,169 4,250Management Fee Offsets (33) (6,606) (14,694) (4,121) (1,995) (689) (69) (6,874)

Total Management & Advisory Fees $322,934 $478,746 $389,045 $102,087 $101,610 $104,135 $114,303 $422,135Performance Fees & AllocationsRealized 154,028 15,081 43,282 7,622 35,073 1,758 28,949 73,402 Unrealized 2,952 (12,822) 114,556 36,114 46,688 75,393 (17,835) 140,360

Total Performance Fees & Allocations $156,980 $2,259 $157,838 $43,736 $81,761 $77,151 $11,114 $213,762Investment Income (Loss)Realized 62,363 (82,142) (15,031) 1,953 (718) 2,983 8,729 12,947 Unrealized 81,439 (257,084) 96,016 29,976 28,901 19,715 (10,193) 68,399

Total Investment Income (Loss) $143,802 ($339,226) $80,985 $31,929 $28,183 $22,698 ($1,464) $81,346Interest Income and Dividend Revenue 4,249 8,527 3,452 929 1,535 1,148 756 4,368 Other 31 1,214 1,025 715 248 (542) (372) 49 Total Revenues $627,996 $151,520 $632,345 $179,396 $213,337 $204,590 $124,337 $721,660


Fee RevenuesBase Management Fees $316,337 $476,836 $400,873 $105,430 $102,647 $103,479 $113,203 $424,759Transaction and Other Fees, Net 6,630 8,516 2,866 778 958 1,345 1,169 4,250 Management Fee Offsets (33) (6,606) (14,694) (4,121) (1,995) (689) (69) (6,874) Interest Income and Dividend Revenue 4,249 8,527 3,452 929 1,535 1,148 756 4,368 Other 31 1,214 1,025 715 248 (542) (372) 49

Fee Revenues $327,214 $488,487 $393,522 $103,731 $103,393 $104,741 $114,687 $426,552

ENI Revenues – Credit and Marketable Alternatives, As Reported

Fee Revenues, As Disclosed in Presentation

6


($ in thousands)

Reconciliation of ENI Revenues to Fee Revenues and Transaction & Other Fees and ENI to NFRE –Financial Advisory


Management and Advisory FeesAdvisory Fees $360,284 $397,519 $390,718 $94,566 $122,709 $76,568 $134,099 $427,942Transaction and Other Fees, Net – – – – – 1 102 103

Total Management & Advisory Fees $360,284 $397,519 $390,718 94,566 122,709 76,569 134,201 $428,045Investment Income (Loss)Realized – – 1,443 – 1,443 187 (49) 1,581Unrealized – – 219 476 (257) 230 561 1,010

Total Investment Income (Loss) – – $1,662 $476 $1,186 $417 $512 $2,591Interest Income and Dividend Revenue 7,385 8,148 5,254 1,250 1,842 1,396 1,268 5,756Other (11) 4,899 (35) 1,051 (21) (932) (342) (244)Total Revenues $367,658 $410,566 $397,599 $97,343 $125,716 $77,450 $135,639 $436,148ExpensesCompensation and Benefits ‐ Base Compensation 132,633$ 234,755 232,359 57,686 69,482 54,492 76,152 257,812 Other Operating Expenses 39,037 67,277 79,572 22,666 22,196 14,727 17,316 76,905

Total Expenses $171,670 $302,032 $311,931 $80,352 $91,678 $69,219 $93,468 $334,717

Economic Net Income $195,988 $108,534 $85,668 $16,991 $34,038 $8,231 $42,171 $101,431


Fee RevenuesAdvisory Fees $360,284 $397,519 $390,718 $94,566 $122,709 $76,568 $134,099 $427,942Transaction and Other Fees, Net – – – – – 1 102 103Interest Income and Dividend Revenue 7,385 8,148 5,254 1,250 1,842 1,396 1,268 5,756Other (11) 4,899 (35) 1,051 (21) (932) (342) (244)

Fee Revenues $367,658 $410,566 $395,937 $96,867 $124,530 $77,033 $135,127 $433,557ENI to NFRE ReconciliationEconomic Net Income $195,988 $108,534 $85,668 $16,991 $34,038 $8,231 $42,171 $101,431Pro Forma Compensation Adjustment (1) (57,530) – – – – – – –Pro Forma Interest Expense (2) 1,122Investment Income (Loss) Adjustment – – (1,662) (476) (1,186) (417) (512) (2,591)Investment Income (Loss) – Blackstone's Treasury Cash Management Strategies – – 1,220 – 1,220 350 484 2,054

Taxes Payable (68,140) (13,356) (7,475) (110) (2,294) (2,092) (4,987) (9,483)Net Fee Related Earnings (3) $71,440 $95,178 $77,751 $16,405 $31,778 $6,072 $37,156 $91,411

ENI Recap – Financial Advisory, As Reported

Fee Revenues and Net Fee Related Earnings, As Disclosed in Presentation

________________________________________________

(1) Represents adjustments for expenses related to employee compensation and profit sharing arrangements that were not effective prior to the reorganization.(2) Represents adjustments to add back interest expense based on the assumption that the revolving credit facility was repaid in full from the proceeds of the offering as of January 1, 2007.(3) Pro Forma for Twelve Months Ended December 31, 2007.

B. Speaker Biographies


Presenter Biographies

Stephen A. Schwarzman is Chairman, CEO and Co‐Founder of Blackstone and the Chairman of the board of directors of its general partner, Blackstone Group Management L.L.C. He has been involved in all phases of the firm’s development since its founding in 1985.

Mr. Schwarzman began his career at Lehman Brothers, where he was elected Managing Director in 1978 at the age of 31. He was engaged principally in the firm’s mergers and acquisitions business from 1977 to 1984, and served as Chairman of the firm’s Mergers & Acquisitions Committee in 1983 and 1984.

Mr. Schwarzman is a member of The Council on Foreign Relations and The Business Council. He is on the board of The New York Public Library, and The Asia Society. He serves on The JP Morgan Chase National Advisory Board, The New York City Partnership Board of Directors and The Advisory Board of the School of Economics and Management, Tsinghua University, Beijing. Mr. Schwarzman is a Trustee of The Frick Collection in New York City and Chairman Emeritus of the Board of The John F. Kennedy Center for the Performing Arts. He also was awarded the Légiond’honneur by President Jacques Chirac.

Mr. Schwarzman holds a BA from Yale University and an MBA from Harvard Business School. He has served as an adjunct professor at the Yale School of Management and on the Harvard Business School Board of Dean’s Advisors.

Hamilton (“Tony”) E. James is President, Chief Operating Officer of Blackstone, and a member of the board of directors of our general partner, Blackstone Group Management L.L.C. He is also a member of Blackstone’s Management and Executive Committees and sits on each of the firm’s investment committees.

Prior to joining Blackstone Mr. James was Chairman of Global Investment Banking and Private Equity at Credit Suisse First Boston and a member of the Executive Board. Prior to the acquisition of Donaldson, Lufkin & Jenrette by Credit Suisse First Boston in 2000, Mr. James was the Chairman of DLJ’s Banking Group, responsible for all the firm’s investment banking and merchant banking activities. Mr. James joined DLJ in 1975 as an Investment Banking associate. He became head of DLJ’s global M&A group in 1982, founded DLJ Merchant Banking, Inc. in 1985, and was named Chairman of the Banking Group in 1995. He is a Director of Costco Wholesale Corporation and Swift River Investments, Inc., and has served on a number of other corporate Boards.

Mr. James is Vice Chairman of The Kennedy Center Corporate Fund Board, Trustee and member of The Executive Committee of The Second Stage Theatre, Trustee of The Metropolitan Museum of Art , Vice Chairman of Trout Unlimited’s Coldwater Conservation Fund, Trustee of Woods Hole Oceanographic, Trustee of Wildlife Conservation Society, Advisory Board member of The Montana Land Reliance, and Chairman Emeritus of the Board of Trustees of American Ballet Theatre. He is also a former member of the President’s Export Council – Subcommittee on Technology & Competitiveness.

Mr. James graduated magna cum laude with a BA from Harvard College in 1973 and was a John Harvard Scholar. He earned an MBA with high distinction from the Harvard Business School and graduated as a Baker Scholar in 1975.



Timothy Coleman is a Senior Managing Director and Head of the Restructuring & Reorganization Group. Mr. Coleman also serves as a member of Blackstone’s Executive Committee.

Since joining Blackstone in 1992, Mr. Coleman has worked on a variety of restructuring and reorganization assignments for companies, creditor groups, special committees of corporate boards, corporate parents of troubled companies and acquirers of distressed assets. Mr. Coleman’s most notable assignments include Adelphia, AT&T (in the restructurings of AT&T Canada, Alestra, AT&T Broadband and Excite@Home), Bear Stearns Asset Management, Bidermann Industries USA, Inc., Cable & Wireless Holdings, Camelot Music, Inc., CellNet Data Systems Inc., Credit‐Based Asset Servicing and Securitization LLC (“C‐BASS”), Criimi Mae, Delta Air Lines, Edison Brothers Stores, Inc., Ermis Maritime Shipping, Financial Guaranty Insurance Company (“FGIC”), FLAG Telecom, Geneva Steel Company, Guangdong Enterprises, Harnischfeger Industries, Harrah’s Jazz Company, JPS Textile Group, Inc., Koll Real Estate, Mirant Corp., Molten Metal Technology, Inc., RCN, R.H. Macy & Co., Stratosphere Corporation, Supercanal Holding, S.A., Vencor, Inc., Williams Communications, Xerox Corporation and XL Capital.

The International Financing Review recognized Mr. Coleman’s efforts in the restructuring of C‐BASS by naming the transaction the Restructuring of the Year in 2008.

Before joining Blackstone, Mr. Coleman was a Vice President at Citibank N.A. for twelve years, where he divided his time between corporate restructuring, real estate restructuring, and loan syndications.

Mr. Coleman is a frequent guest lecturer at Columbia University and New York University. He is a member of the inMotion Board of Directors and the Board of Leaders of the Marshall School of Business at the University of Southern California.

Mr. Coleman received a BA from the University of California at Santa Barbara and an MBA from the University of Southern California.

Bennett J. Goodman, Senior Managing Director of The Blackstone Group and a Member of the Blackstone Group Executive Committee, is a Founder of GSO Capital Partners.

Before co‐founding GSO Capital Partners in 2005, Mr. Goodman was Chairman, Founder and Managing Partner of the Alternative Capital Division of Credit Suisse First Boston. He was responsible for overseeing $33 billion of assets under management, including investment partnerships for private equity investments, mezzanine securities, real estate investments and several credit oriented investment strategies. Mr. Goodman was a member of the Executive Board and the Management Council of CSFB. Additionally, Mr. Goodman served as the Chairman of the Corporate Bank, overseeing CSFB’s $35 billion of global corporate lending activities.

Mr. Goodman joined CSFB in 2000 when it acquired Donaldson, Lufkin & Jenrette (“DLJ”) where he was Global Head of Leveraged Finance. Mr. Goodman joined DLJ in 1988 as the founder of the High Yield Capital Markets Group. In 1993, DLJ became the #1 global issuer of high yield bonds and Mr. Goodman’s team retained that coveted market position for the next 11 consecutive years. Prior to joining DLJ, Mr. Goodman worked in the high yield business at Drexel Burnham Lambert from 1984 to 1988.

Mr. Goodman graduated from Lafayette College and the Harvard Business School. He is on the Board of Directors of the Film Society of Lincoln Center, the Cancer Research Institute and the American Jewish Committee (Westchester Chapter). He also serves on the Dean’s Council of Mt. Sinai School of Medicine and the investment committee of the Lafayette College endowment. Mr. Goodman received the 2004 Lifetime Achievement Award from Euromoney Magazine for his career achievements in the global capital markets.



Jonathan D. Gray is Senior Managing Director and Co‐Head of Real Estate. He is also a member of Blackstone’s Management and Executive Committees.

Since joining Blackstone in 1992, Mr. Gray has led the privatization of eleven public real estate companies valued at more than $100 billion including Extended Stay America, Carr America, Equity Office Properties and Hilton Hotels. Mr. Gray previously worked in the Advisory Group and the Private Equity Group at Blackstone.

Mr. Gray received a BS in Economics from the Wharton School, as well as a BA in English from the College of Arts and Sciences of the University of Pennsylvania, where he graduated magna cum laude and was elected to Phi Beta Kappa. He currently serves as a board member of the Pension Real Estate Association, NAREIT, Harlem Village Academies and Trinity School.

J. Tomilson Hill is President and Chief Executive Officer of the Funds of Hedge Funds group, a Vice Chairman of Blackstone and a member of the board of directors of our general partner, Blackstone Group Management L.L.C.

Mr. Hill previously served as Co‐Head of the Corporate and Mergers and Acquisitions Advisory group before assuming his role in the Funds of Hedge Funds group. In his current capacity, Mr. Hill is responsible for overseeing the day‐to‐day activities of the group, including investment management, client relationships, marketing, operations and administration. He also serves as a member of Blackstone’s Management and Executive Committees.

Before joining Blackstone in 1993, Mr. Hill began his career at First Boston, later becoming one of the Co‐Founders of its Mergers & Acquisitions Department. After running the Mergers & Acquisitions Department at Smith Barney, he joined Lehman Brothers as a partner in 1982, serving as Co‐Head and subsequently Head of Investment Banking. Later, he served as Co‐Chief Executive Officer of Lehman Brothers and Co‐President and Co‐COO of Shearson Lehman Brothers Holding Inc.

Mr. Hill is a graduate of Harvard College and the Harvard Business School. He is a member of the Council on Foreign Relations where he chairs the Investment Committee and serves on the Council’s Board of Directors, and is a member of the Board of Directors of Lincoln Center Theater, where he serves as President. Mr. Hill serves as Chairman of the Board of Trustees of the Smithsonian’s Hirshhorn Museum and Sculpture Garden. He is a member of the Advisory Board of Christie’s and a member of the Board of Directors of OpenPeak Inc.



Garrett M. Moran is a Senior Managing Director and Chief Operating Officer of the Private Equity Group. He is a member of Blackstone’s Executive Committee, as well as all investment committees for the Private Equity Group.

Prior to joining Blackstone in 2005, Mr. Moran was a Senior Principal and the President of MMC Capital. Before joining MMC Capital in 2002, Mr. Moran had a long career at Donaldson, Lufkin & Jenrette. His last position there was Vice Chairman and co‐head of the Banking Group. He joined DLJ in 1982 as an investment banking associate and subsequently headed the firm’s High Yield Bond Department and served as Chief Operating Officer of DLJ’S Taxable Fixed Income Division. He was Vice Chairman and co‐head of the Banking Group of DLJ at the time of the firm’s acquisition by Credit Suisse First Boston Corporation. Following that acquisition, Mr. Moran served CSFB as co‐head of the investment banking integration effort and subsequently was the head of CSFB’s Private Equity Division.

Mr. Moran is a board member of the Posse Foundation, former Chairman of the Board of Trustees of the Brunswick School and former Vice Chairman of the board of Middlebury College. He received a BA from Middlebury College and an MBA from the Wharton School of the University of Pennsylvania.

James A. Quella is a Senior Managing Director and Senior Operating Partner in the Private Equity Group.

Mr. Quella is responsible for monitoring the strategy and operational performance of Blackstone portfolio companies and providing direct assistance in the oversight of large investments. He is also a member of the firm’s Private Equity Investment Committee.

Prior to joining Blackstone in 2004, Mr. Quella was a Managing Director and Senior Operating Partner with DLJ Merchant Banking Partners‐CSFB Private Equity. Prior to that, Mr. Quella worked at Mercer Management Consulting and Strategic Planning Associates, its predecessor firm, where he served as a senior consultant to CEOs and senior management teams, and was Co‐Vice Chairman with shared responsibility for overall management of the firm.

Mr. Quella received a BA in International Studies from the University of Chicago/University of Wisconsin‐Madison and an MBA with dean’s honors from the University of Chicago. He is also the co‐author of Profit Patterns: 30 Ways to Anticipate and Profit from the Strategic Forces Reshaping Your Business. Mr. Quella has been a member of various Private Equity company boards and currently serves as a Director of Catalent, Freescale Semiconductor, Graham Packaging, Michaels Stores, Inc., and Vanguard Health Systems.

Vikrant Sawhney is a Senior Managing Director in the Private Equity Group and is based in New York. Mr. Sawhney leads the Private Equity Group’s capital markets activities and also works closely with GSO, Advisory & Restructuring Group and various other parts of the firm on credit‐related matters.

Before joining Blackstone in 2007, Mr. Sawhney worked as a Managing Director in the Financial Sponsors Group at Deutsche Bank, where he was responsible for managing the firm’s relationships with Blackstone and several other large private equity firms. Prior to joining Deutsche Bank, Mr. Sawhney was an Associate at the law firm of Simpson Thacher & Bartlett.

Mr. Sawhney received a BA, magna cum laude, from Dartmouth College, where he was elected to Phi Beta Kappa. He also received a J.D., cum laude, from Harvard Law School.



John Studzinski CBE is a Senior Managing Director and global head of Blackstone Advisory Partners LP. Mr. Studzinski is based in both New York and London.

Mr. Studzinski’s primary role is to oversee Blackstone’s global advisory business. He is a member of the firm’s Executive Committee.

Before joining Blackstone in 2006, Mr. Studzinski was a member of the Group Management Board and co‐head of investment banking at HSBC based in London from 2003 to 2006. Prior to that he was at Morgan Stanley from 1980 to 2003, where he served as head of the European Investment Banking Division and Deputy Chairman of Morgan Stanley International.

His recent transaction experience includes advising the Board of AIG on its global restructuring, the Ministers of the Government of the Ukraine, the Board of Reuters on the merger with Thomson, China Development Bank on its investment in Barclays PLC, the Board of Northern Rock on its restructuring, the Board of Suez on the proposed merger with Gaz de France, the Board of Unilever on the Dual Head Structure, the BAT senior management on certain material strategic options and the Board of Petrochina on a possible acquisition of Unocal.

Mr. Studzinski graduated from Bowdoin College in 1978 with a double BA Degree magna cum laude in Biology & Sociology. He received an MBA from the University of Chicago in 1980 in Finance and Marketing. He is Vice‐Chair and Director of Human Rights Watch where he serves on the Executive Committee as well as Chairman of the Investment Committee. He also serves as a Trustee of Bowdoin College, the Tate Foundation, The Passage Day Centre for the Homeless and The Royal Parks Foundation. He is a member of the Council of The Royal College of Art and is Chair of the Emmaus Revives Lives campaign. In mid 2007, Mr. Studzinski stepped down as a trustee of the Tate and became Chairman of Benjamin Franklin House. In 2001, he established the Genesis Foundation which supports and nurtures emerging composers, directors, writers and actors into sustained careers in the arts.

Mr. Studzinski was made a Knight of the Order of St. Gregory for his humanitarian work for the homeless. He was also made a Knight Commander of Saint Sylvester. He received the Prince of Wales Ambassador’s Award in recognition of his contribution to the homeless. He received the Beacon Prize in 2004 for services to philanthropy and in October 2007 was voted Banker of the Year by the Variety Club UK. In 2008, he was named in the Queen’s New Year Honours List as a Commander of the British Empire (“CBE”) for his services to the Arts and to Charity.

Laurence Tosi, a Senior Managing Director, is the firm’s Chief Financial Officer. He also serves on the firm’s Executive Committee.

Before joining Blackstone in 2008, Laurence Tosi was the Chief Operating Officer for the Global Markets and Investment Banking Group of Merrill Lynch & Co. Prior to that, he was Senior Vice President and Finance Director responsible for Merrill Lynch’s global finance organization, including worldwide accounting, regulatory reporting, budgeting and corporate development.

Laurence Tosi received a BA, a JD and an MBA from Georgetown University.



Joan Solotar is a Senior Managing Director in the External Relations and Strategy Group of The Blackstone Group and a member of the firm’s Executive Committee. Ms. Solotar has management responsibility for shareholder relations and public affairs and also guides the firm on analyzing strategic development opportunities.

Before joining Blackstone in 2007, Ms. Solotar was with Banc of America Securities where she was a Managing Director and Head of Equity Research. She started her career in equity research at The First Boston Corporation and prior to joining Bank of America was part of the financial services team at Donaldson, Lufkin & Jenrette and later with CSFB as a Managing Director. Ms. Solotar was ranked each year from 1995 to 2002 in the Brokers and Asset Management category on the Institutional Investor All‐America Research Team, and consistently ranked highly in the Greenwich Survey of portfolio managers. She also served as Chairperson of the Research Committee for the Securities Industry Association.

Ms. Solotar received a BS in Management Information Systems at the State University of New York at Albany and an MBA in Finance at NYU. She is currently on the Board of Directors of the East Harlem Tutorial Program.

Weston Tucker is a Vice President in the External Relations and Strategy Group.

Since joining Blackstone, Mr. Tucker has been involved in Blackstone’s dealings with the investment community.

Before joining Blackstone in 2007, Mr. Tucker worked as an associate in JPMorgan’s equity research department, covering telecom and cable. He began his career at AT&T, where he worked in a variety of finance roles including investor relations and communications, as well as corporate development.

Mr. Tucker graduated summa cum laude with a BS in Business Administration (Finance) from Ohio State University.


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Documents

2010 Black Stone Investor Day