We Hold These Truths To Be Self-Evident

David M. Rubenstein

Co-Founder & Co-Chief Executive Officer

February 26, 2014

Important Information
This presentation has been prepared by The Carlyle Group L.P. (Carlyle) and may only be used for informational purposes only. This
presentation provides an overview of Carlyle and is not intended to be taken by, and should not be taken by, any individual recipient as
investment advice, a recommendation to buy, hold or sell any security, or an offer to sell or a solicitation of offers to purchase any security. An
offer or solicitation for an investment in an investment fund managed or sponsored by Carlyle or its affiliates (Fund) will occur only through an
offering memorandum and related purchase documentation, and subject to the terms and conditions contained in such documents and in the
Funds operative agreements.
By accepting this presentation, the recipient agrees that it will, and will cause its representatives and advisors to, use the information contained
herein for informational purposes only. Recipient also agrees that neither this presentation nor the information contained herein may be
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referenced, quoted or linked by website, in whole or in part except as agreed to in writing by Carlyle.
Certain information contained in this presentation has been obtained from published and non-published sources prepared by other parties,
which in certain cases have not been updated through the date hereof. While such information is believed to be reliable for the purpose used
in this presentation, Carlyle does not assume any responsibility for the accuracy or completeness of such information and such information
has not been independently verified by Carlyle. Except where otherwise indicated herein, the information provided in this presentation is based
on matters as they exist as of the date of preparation and not as of any future date, and will not be updated or otherwise revised to reflect
information that subsequently becomes available, or circumstances existing or changes occurring after the date hereof. References to portfolio
companies are presented to illustrate the application of Carlyles investment process only and should not be considered a recommendation of
any particular security or portfolio company. Information about recommendations over the last year is available upon request. It should not be
assumed that recommendations made in the future will be profitable or will equal the performance of past recommendations.
Statements contained in this presentation that are not historical facts are based on current expectations, estimates, projections, opinions
and/or beliefs of Carlyle. Such statements involve known and unknown risks, uncertainties and other factors, and undue reliance should not be
placed thereon. Certain information contained in this presentation constitutes forward-looking statements, which can be identified by the use
of forward-looking terminology such as may, will, should, seek, expect, anticipate, forecast, project, estimate, intend, continue,
target, or believe or the negatives thereof or other variations thereon or comparable terminology. Due to various risks and uncertainties,
actual events or results may differ materially from those reflected or contemplated in such forward-looking statements. None of Carlyle or any
of its Funds or representatives makes any assurance as to the accuracy of those predictions or forward looking statements. Carlyle expressly
disclaims any obligation or undertaking to update or revise any such forward-looking statements.

What happened in the

private equity industry in 2013?

Global Private Equity Fundraising Volume Was Up 26% In 2013 But

Remains 30% Below The 2008 Peak
$800
$700

Global Private Equity Fundraising Volume

($ billions)

Largest fundraising
volume since the Great
Recession

970 funds were raised

Record average fund

size of $555 million1

Funds raised by
geographic focus:

$688

$600
$485

$500
$384

$400
$320
$300

$294

$332

$200
$100

North America 63%

Europe 23%

Asia 9%

Rest of World 4%

$0
2008

2009

2010

2011

2012

2013

Source: Preqin. There is no guarantee these trends will continue.

1 Average fund size calculated for funds with available fund size data. Fund size data is not available for all 970 funds
raised
Source:
in 2013
Preqin
so dividing the aggregate fundraising volume by 970 funds does not equal the average fund size raised.

Global Private Equity Deal Volume Was Up 15% In 2013 But Remains 50%
Below The 2006 Peak
$900
$800

Global Private Equity Deal Volume

($ billions)

Largest deal volume

since the Great
Recession

Average purchase price

multiple of 8.8x

Average leverage
multiple of 5.4x

Deal volume by
geographic focus:

$785 $781

$700
$600
$500
$389

$400

$321 $337

$300

$253

$200

$252
$134

$100
$0
2006

2007

2008

2009

2010

2011

2012

2013

North America 59%

Europe 28%

Asia 8%

Rest of World 5%

Source: Thomson One & S&P Leveraged Commentary Data, Q4 2013 Update. There is no guarantee these trends will
continue.
Source: Preqin

Global Private Equity Exit Volume Was 14% Above The 2007 Pre-Great
Recession Peak
$350

Global Private Equity Exit Volume

($ billions)

$313
$300

$285

$266
$250

$303

Second highest exit

volume on record

Record ~1,350 exits

Exit count by type:

$222

$200
$163
$150
$116
$100

$81

$50

Trade sale 51%

Sale to GP 26%

IPO 19%

Restructuring 3%

2013 matched 2010 for

record 19% of exits via
IPO

$0
2006

2007

2008

2009

2010

2011

Source:
Source:
Preqin.
Preqin
There is no guarantee these trends will continue.

2012

2013

Purchase Price Multiples & Equity Contributions Are Generally Back To

Pre-Great Recession Levels
LBO Purchase Price Multiples

LBO Equity Contributions

12.0x

60%

10.0x

8.0x

50%

9.7x
9.1x
8.4x

51%

8.5x

8.4x

8.8x

8.7x

8.8x

7.7x

40%
32%

6.0x

30%

4.0x

20%

2.0x

10%

0.0x

0%
2005 2006 2007 2008 2009 2010 2011 2012 2013

Source: S&P Leveraged Commentary Data, Q4 2013 Update.

44%

43%

42%

39%

37%

33% 33%

2005 2006 2007 2008 2009 2010 2011 2012 2013

7

Self-evident truths about

the private equity industry

Emerging markets have emerged

and will increasingly play a larger
role in private equity

Emerging Markets Now Account For More Than Half Of Global GDP
60.0%

55.0%

50.0%

45.0%

Emerging Markets Share Of Global GDP

Emerging markets account for

~85% of the global population
today vs. only 68% in 1950

2013=54%

Emerging markets are expected

to account for more than half
of global GDP growth from
2013 to 2018

40.0%

35.0%

2004=38%

1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018

30.0%

Source: Carlyle Analysis of IMF Data as of 12/31/13.

10

Emerging Markets Have Increased As Both A Source Of And Destination

For Private Equity Capital
Rest-of-World (Ex. North America
& Europe) Share of Deal Value
14%

13%

12%

Rest-of-World (Ex. North America

& Europe) Share of Capital
Commitments
20%

20%
18%
16%

10%

14%
8%
6%

12%

11%

10%
5%

8%

4%

6%
4%

2%

2%

0%

0%
2002

Source: Thomson One & Preqin Private Equity Quarterly.

2013

2006

2012
11

Emerging Markets Are Still Relatively Under-Penetrated By Private Equity

1.20%

1.03%
1.02% 1.04%

Private Equity Investment As A % of GDP

1.00%
0.89%
0.80%
0.60%
0.40%

0.28%
0.20%
0.24%
0.20%
0.19%
0.13% 0.12%
0.05%
0.06%
0.09%
0.09%
0.09%0.07%0.04%
0.04% 0.01%

0.20%
0.00%
US

UK

S. Korea

India

Source: Emerging Markets Private Equity Association Q4 2013 Industry Statistics.

Brazil

SSA

China

S. Africa

12

Japan

MENA

Sovereign wealth funds will become the

largest single source of capital
for private equity firms, replacing
U.S. public pension funds

13

SWF Assets Have Increased By More Than $4 Trillion In Less Than A Decade
And Are Projected To Grow Faster Than U.S. Public Pension Fund Assets
Sovereign Wealth Fund Assets Under Management ($ trillions)
$10.0
$8.9

$9.0
$8.0
$7.0
$6.0

$5.4

$5.0
$4.0
$3.0
$2.0

$1.4

$1.0
$2004

2013

Source: 2014 Preqin Sovereign Wealth Fund Review and PWC Asset Management 2020: A Brave New World. There is no
guarantee these trends will continue.

2020P
14

Sovereign Wealth Funds Have Quadrupled Their Share Of Commitments To

Private Equity Funds Since 2010
% of Total Commitments To Private Equity Funds

2010

2013
SWFs
3%
SWFs
13%

All Other
Investors
97%

All Other
Investors
87%

Source: Dow Jones Private Equity Analyst Sources of Capital Survey, 5/29/13. There is no guarantee these trends will continue.

15

Individual investors (including non-accredited

investors) will become a larger part of the
private equity investor base

16

Mass Affluent Assets Under Management Are Larger And Faster Growing
Than High Net Worth Assets Under Management
Mass Affluent AUM
($100k - $1mm net worth)
$ trillions
$120

$120
$100

$100

$80

$100
$77

$80
$60

$60
$40

High Net Worth AUM

($1mm+ net worth)
$ trillions

$60

$42

$40

$20

$20

$-

$2004

2012

Source: PWC Asset Management 2020: A Brave New World.

2020P

$52
$38

2004

2012
17

2020P

US Retirement Plans Alone Have $20 Trillion In AUM

$25

Total Value of US
Retirement Plans ($ trillions)

$20

$20

$15

$9
$11

$10
$5

$6
$5
$3

$5

$3

$-

2002
IRAs

Defined Contribution Plans

2012
Other (Incl. Defined Benefit Plans)

Source: Investment Company Institute Fact Book 2013. There is no guarantee these trends will continue.

18

Individual Investors Have Almost Doubled Their Share Of Capital

Commitments To Private Equity In Just The Past Few Years
Industry-Wide % of Capital Committed by
High Net Worth Individuals & Family Offices
20%

19%

18%
16%
14%
12%
10%

10%

8%
6%
4%
2%
0%
2008-2010
Source: 2014 Preqin Global Private Equity Report. There is no guarantee these trends will continue.

2011-2013
19

Returns will continue to come

down but private equity will still
outperform public equities

20

Returns Have Come Down Over The Past 20 Years

U.S. Private Equity Fund Pooled Net IRR By Vintage
35%
30%
25%
20%

Median = 15%

15%
10%
5%

Source: Cambridge Associates LLC U.S. Private Equity Index and Selected Benchmark Statistics. As of 9/30/13. Excludes
vintages with less than 3 years of performance.

21

2010

2009

2008

2007

2006

2005

2004

2003

2002

2001

2000

1999

1998

1997

1996

1995

1994

1993

1992

1991

1990

1989

1988

1987

1986

0%

But Top Quartile Private Equity Funds Have Significantly Outperformed

Public Equities Over A Variety Of Time Horizons

30%

Buyout Fund Net Returns vs. Public Equity Total Returns

(5-,10-, & 20-year net returns)

29%

26%
25%
20%
15%

13%
11%

10%

8%

7%

11%

8%

7%

5%
0%
5-Year
MSCI World Index

10-Year
All Buyout Funds

20-Year
Top Quartile Buyout Funds

Source: Cambridge Associates, Thomson One Financial as of 9/30/13. There is no guarantee these trends will continue.

22

Private Equitys Focus On Value Creation Will Drive Outperformance

Source of Value Creation
100%
90%
80%

70%
60%
50%
40%
30%
20%
10%
0%
Leverage Era (1980s)

Multiple Expansion Era

(1990s)

Operational Improvement
Source: Goldman Sachs, BCG-IESE estimate.

Earnings Growth Era

(2000s)

Multiple Arbitrage

Operational
Improvement (2010s)

Leverage
23

Allocations to private equity

will continue to increase

24

Allocations To Private Equity Have Gone Up Across-The-Board

30%

28%

Private Equity Allocation as a Percent of Total Assets

25%

20%

18%

15%

13%

10%

8%

12%
9%
5%

5%

6%
4%

6%
3% 3%

0%
Family Offices

Endowments

Foundations
2009

Public Pension Private Sector

Funds
Pension Funds
2013

Source: 2013 Preqin Investor Network Global Alternatives Report & Preqin 2014 Global Private Equity Report. There is no
guarantee these trends will continue.

25

Insurance
Companies

Almost 40% Of Investors Are Below Their Target Allocation To Private

Equity And Almost 40% Of Investors Plan To Increase Their Allocation
Proportion of Investors Relative
To Their Target Allocation
100%
90%

Investors Intentions for Private

Equity Allocations
100%

18%

90%

80%

80%

70%

70%

60%

44%

60%

50%

50%

40%

40%

30%

30%

20%

39%

20%

10%

10%

0%

0%

Dec-13

10%

53%

36%

Dec-13

Above Target Allocation

Increase Allocation

At Target Allocation

Maintain Allocation

Below Target Allocation

Decrease Allocation

Source: 2014 Preqin Global Private Equity Report.

26

The private equity industry will be seen as

mainstream rather than alternative

27

Private Equity AUM Has Grown At A 20% CAGR Since 1980 And
Now Stands At $3.5 Trillion
$4.0

Global Private Equity AUM ($ trillions)

$3.5

$3.5

$3.3
$3.0

$3.0

$2.8
$2.5

$2.5

$2.3 $2.3

$2.0

$1.7

$1.5

$1.2

$1.0
$0.5
$-

$0.7 $0.8 $0.8

$0.2
$0.1 $0.1 $0.1
$0.1
$0.1
$0.1
$0.0
$0.0

$0.3

$0.9

$1.0

$0.4

1980 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Source:
Source:
2013Preqin
Preqin Investor Network Global Alternatives Report and McKinsey.

28

Alternatives Have Doubled Their Share Of Total Asset Management AUM

In Just The Past Decade

Alternatives AUM is $6 trillion today vs. $2 trillion a decade ago (14% CAGR)

Asset management AUM is $62 trillion today vs. $38 trillion a decade ago (6% CAGR)

Alternatives AUM As A % Of Total Asset Management AUM

12%
10%

10%
8%
6%

5%

4%
2%
0%
2003
Source: BCG Global Asset Management 2013 Report: Capitalizing On The Recovery. There is no guarantee these trends will
continue.

2012
29

Public firms will become more common;

larger firms will get a greater
share of commitments

30

Seven Private Equity Firms Have Gone Public Since 2007

(2007)
(2007)

(2007)
(2010)

(2012)

Note: Year respective firm went public. Presented for illustrative purposes only.

(2011)

(2012)

31

Investors Are Increasing Commitments To Global Alternative Asset

Managers
Market Share of Fundraising (3-year
rolling average) of publicly traded
alternative asset managers as a % of
total industry fundraising1
10.9%

Driving Factors

Stability

Consistency of returns

Brand

Size

Transparency

Global Presence

Value Added

Public Visibility

6.8%

2006

2013

Source: Preqin. Industry fundraising includes Buyout, Growth, Real Estate, Natural Resources, Mezzanine, Distressed, Early/Venture,
Balanced, , Special Situation, Timber, and Turnaround. Represents the rolling 3-year average market share of The Carlyle Group &
US publicly traded peers relative to overall industry wide fundraising. There is no guarantee these trends will continue.

32

Private equity firms will continue to diversify

their product offerings

33

Today Non-Corporate Private Equity Assets Make Up A Larger Share Of

Publicly Traded Alternatives Firms AUM
Median Non-CPE Assets As A % Of Total AUM
70%

66%

60%
50%

47%

40%
30%
20%
10%
0%
IPO
Source: SEC Filings. Calculated as the median of non-corporate private equity assets / total assets for Carlyle, Blackstone,
Apollo, KKR, & Oaktree. Calculated as of each companys respective IPO date and 9/30/13.

Q4 2013
34

Interest rates will rise but cheap credit

will be readily available

35

Non-Bank Lenders Provide A Significant Majority Of The Types Of Loans

Used In Private Equity Transactions
100%

Bank vs. Non-Bank Share of Highly Leveraged Loans

Non-Banks (86%)

75%

50%

25%

Banks (14%)

0%
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Banks

Non-Banks

Source: S&P LCD Quarterly Q4 2013. Non-banks include: institutional investors, insurance companies, and finance companies.

36

Interest Costs For Corporate Borrowers Have To Rise 200 Basis Points Just
To Reach Pre-Great Recession Levels
8.0%

7.7%

7.0%
6.0%

3.3%

5.7%

5.0%
4.0%
4.5%

3.0%
2.0%

4.4%

1.0%
1.2%
0.0%
2005-2007
Avg. 5 Year Treasury

2013
Avg. B-Rated Corporate Spread

Source: St. Louis Federal Reserve. B-Rate Corporate Spread represents BofA Merrill Lynch US High Yield B Option-Adjusted
Spread.

37

Europe will be the market of focus in 2014

38

Europes Economy Has Reached The Bottom

GDP: ~$17 trillion

The European Union economy accounts

for nearly one-quarter of the global
economy

5.0%

Growth of just 1.2% will add more than

$750 billion to global GDP. This is the
same contribution to global GDP that
China generates by growing at 8.5%.

3.0%

Spain was the biggest upside surprise in

2013 of all economies. Instead of
contracting at a 1.2% rate as forecast by
the IMF, Spanish GDP was flat, with
growth strengthening throughout the
year and exceeding 1% in Q4-2013.

0.0%

Germany has the largest current account

surplus in the world, exceeding China,
thanks to manufacturing export growth

Euro Zone GDP Growth Rate

4.0%
3.0%
2.0%
1.6%

2.0%
1.0%

0.4%

-0.4%
-0.7%

-1.0%
-2.0%
-3.0%
-4.0%
-5.0%

1.4%
1.0%

-4.4%

Source: U.S. Bureau of Economic Analysis. 2014 & 2015 Projections from IMF January 2014 World Economic Outlook Update.

39

Europes Share Of Private Equity Investment Has Unduly Declined

European Private Equity Deal Volume As A
Percent Of Total Private Equity Deal Volume
60%
51%

50%

40%

52%

46%

48%

48%

44%

39%
34%

36%

33%

32%

31%

28%

30%
23%
20%

10%

0%
2000
Source: Thomson One.

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011
40

2012

2013

European Assets Are Priced At A Substantial Discount

US & European EBITDA
Multiples, 2010-20131

EBITDA Multiples on Major Stock Market

Indexes as of 1/12/13

11.00x

10.1x

EBITDA Multiple

10.00x

9.00x

8.00x

European Average: 7.8x

R.O.W. Average:
9.4x

14.00x

12.3x
12.00x

8.2x

23%

8.00x

7%

10.1x

10.00x

7.3x

8.1x

9.1x 9.3x 8.9x

6.2x

7.8x

7.00x

6.00x
4.00x

6.00x

7.6x
2.00x
0.00x

5.00x

European Avg

8.0x 7.7x 8.2x

U.S. Value-Weighted

Source: S&Q Capital IQ, Bloomberg EEO. 1. FTSE 100, DAX 30, CAC 40, AEX, Ibex 35, FTSE MIB; arithmetic mean. The EBITDA
multiples and financial indices referenced herein as benchmarks are provided for informational purposes only.

41

Truths That Will Become More Self-Evident In The Future

Private equity enhances the value of companies and generally prevents

job loss

Private equitys high returns will increasingly be sought by and made

available to non-accredited investors

Current regulations of the private equity industry provide appropriate

oversight and protection

Private equity cannot appropriately be seen as a source of systemic risk

Private equity will continue to have one of the best risk-return profiles of
any area in money management

Governments should welcome private equity investment and the growth

of the private equity industry in their country
42

Bonus Truths:
100% of private equity funds will
continue to be in the top quartile
All private equity firms will
continue to avoid participation in any auction
The new name for the
private equity industry will be

43