2010 Annual Report - The Carlyle Group

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Carlyle’s Operating Committeecomprises senior managingdirectors who provide leadershipto serve our investors today andinto the future:from left:Gregory L. SummeDavid M. MarchickJeffrey W. FergusonGlenn A. Youngkin, ChairMichael J. PetrickAdena T. FriedmanBruce E. RosenblumMichael W. ArpeyWe have worked hardto maintain our highstandards of performanceand investment returnobjectives whilecreating new optionsfor our investors.In January 2011, we announced plans to acquire a majority stake of AlpInvest Partners,a global private equity fund-of-funds business. Including AlpInvest, Carlyle’s assetsunder management are expected to reach approximately $150 billion in four distinctbusiness lines: Corporate Private Equity, Real Assets, Global Market Strategies andFund-of-Funds Solutions. We have established distinct due diligence, investment sourcing,operational capabilities and investment committee processes in each of thesebusiness segments.A significant goal for Carlyle in 2010 was to realize the value that was embedded inour portfolio. Our investment teams did just that. We exited our ownership stakein 32 investments across our Corporate Private Equity and Real Assets portfolios,distributing some $7.5 billion to our investors in these segments in 2010, an amountonly exceeded by our distributions in 2007. Our momentum has continued in the firstquarter of 2011, during which we distributed in excess of $6 billion to our investors—aCarlyle record for a single quarter.In addition, we selectively accessed the public markets across our portfolio, successfullycompleting 13 initial public offerings (IPOs) in Asia, Europe and the United States in 2010and first quarter 2011. In some of these cases, we realized distributions or dividends; othersserved to reduce debt, positioning our investments to succeed in the future.We also focused on deploying capital in an attractive investment environment. In total,our Corporate Private Equity and Real Assets funds completed or announced 57 newinvestments across 14 countries in 2010. These new investments represent more than$7 billion in new equity investments, with an additional $3 billion committed to investmentsexpected to close in early 2011. This figure far exceeds the $5.2 billion that weinvested in 2009—in investments that focused heavily on either distressed investmentopportunities or emerging markets.Despite the ongoing challenges that pension funds and other traditional investorsare facing, Carlyle raised a total of $4.2 billion in fresh capital commitments in 2010for six funds and multiple co-investment opportunities. The funds that had closingsincluded Carlyle Global Financial Services Partners, L.P. and Carlyle Asia Partners III,12 The Carlyle group
L.P.; we also had several other funds with first or subsequent closings. We are pleasedthat Carlyle continues to earn the confidence of its investors even during the mostturbulent times.Just as Carlyle’s partners and professionals have done for two decades, we continue toput our own after-tax money alongside that of our investors. Today, Carlyle partnersand other professionals and management teams have committed or invested morethan $4 billion of their own after-tax dollars alongside Carlyle’s funds.We also worked to broaden the investment options available to our investors throughstrategic investments and acquisitions. We acquired the management contracts onmore than $5 billion in CLOs, further solidifying Carlyle’s position in the structuredcredit market. In December 2010, we acquired a majority stake in Claren RoadAsset Management, a long-short credit hedge fund manager. With the anticipatedacquisition of AlpInvest Partners, we expect to further expand our reach in the alternativeasset industry.Over the last year, we have taken steps to bolster our core management processesand operations, again with the goal of enabling our investment professionals to focusexclusively on pursuing and supporting good investments. In addition to strengtheningour accounting and investor relations processes, we have recruited new managementtalent, improved investment advisory committee processes and strengthened the firm’sOperating Committee. Carlyle will continue to build and invest in our accounting,legal, regulatory and other investment services functions to enable our investmentteams to better serve our investors.Because our investment decisions affect individuals, communities and the environment,we launched a number of initiatives focused on good corporate citizenship.Our efforts begin with the application of the Guidelines for Responsible Investmentand continue with initiatives to elevate the importance of environmental, social andgovernance considerations. While we are off to a good start, much work remains. Weare committed to building on the foundation we have established and thoroughly integratingenvironmental, social and governance considerations into the fabric of Carlyle.To find out more, turn to pages 31 and 57 of this report or refer to our inauguralCorporate Citizenship Report, published in January 2011 and available on our website.We are grateful for the confidence our investors have shown in Carlyle, and we willwork to foster a culture that continues to reflect the low ego, collaborative, investorsfirstethos that we try to embrace every day. We believe that Carlyle is well preparedto serve our investors today and in the future in the same way we have for the past24 years—through the creation of innovative and differentiated products establishedwith a focus on performance. This has always been and will always be our core purpose:investing wisely to create lasting value for our investors.Senior advisors providewisdom and insightCarlyle’s senior advisors provideinvaluable operational and managementexpertise to help improve theperformance of our investments. Theirextensive networks of industry contactshelp portfolio companies recruitkey management, facilitate customerintroductions and forge business alliances.But, above all, these seasonedprofessionals offer the wisdom andstrategic know-how that come fromyears of working as CEOs, CFOs, COOsand in other senior executive positions.This knowledge enables them to sourcedeals, add expertise and provide leadership.It’s another way Carlyle works toenhance performance.William E. Conway, Jr.Managing DirectorDaniel A. D’AnielloManaging DirectorDavid M. RubensteinManaging DirectorThe Carlyle group 13
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Page 6 and 7: Diversificationcreates opportunityO
Page 8 and 9: Experienceto invest wiselyOur stron
Page 10 and 11: Collaborationdefines our cultureOur
Page 12 and 13: Daniel A. D’AnielloCo-Founder and
Page 16 and 17: How is Carlyle different?We have th
Page 18 and 19: Our culture ofperformance hasenable
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Page 23 and 24: section one PerformanceOur teams id
Page 26 and 27: We apply creative thinkingand innov
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Page 31 and 32: section TWO innovationThe Carlyle g
Page 33 and 34: section TWO innovationCorporate Cit
Page 35 and 36: section Three diversificationOur fo
Page 37 and 38: section Three diversificationMedica
Page 39 and 40: section Three diversificationGrowin
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Page 45 and 46: section Three diversificationGrowth
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Page 52 and 53: We encourage a high degreeof collab
Page 54 and 55: The value of collaborationCollabora
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Page 58 and 59: We are keenly awareof our responsib
Page 60: To strengthen our ties to the commu
Page 63 and 64: our / purposeInvest wisely. Create

2010 Annual Report - The Carlyle Group

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