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As filed with the Securities and Exchange Commission on March 22, 2007.

Registration No. 333-            

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

The Blackstone Group L.P.
(Exact Name of Registrant as Specified in its Charter)

Delaware
(State or other jurisdiction of
incorporation or organization)		   6282
(Primary Standard Industrial
Classification Code Number)		  
(I.R.S. Employer
Identification No.)

345 Park Avenue
New York, New York 10154
Telephone: (212) 583-5000

(Address, including zip code, and telephone number, including area code, of Registrant's principal executive offices)

Robert L. Friedman
Chief Administrative Officer and Chief Legal Officer
The Blackstone Group L.P.
345 Park Avenue
New York, New York 10154
Telephone: (212) 583-5000

(Name, address, including zip code, and telephone number, including area code, of agent for service)



Copies to:
Joshua Ford Bonnie
Simpson Thacher & Bartlett LLP
425 Lexington Avenue
New York, NY 10017-3954
Telephone: (212) 455-2000
Facsimile: (212) 455-2502		   Phyllis G. Korff
Jennifer A. Bensch
Skadden, Arps, Slate, Meagher & Flom LLP
Four Times Square
New York, New York 10036-6522
Telephone: (212) 735-3000
Facsimile: (212) 735-2000

        Approximate date of commencement of the proposed sale of the securities to the public: As soon as practicable after the Registration Statement is declared effective.

        If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box.    o

        If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.    o

        If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.    o

        If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.    o

CALCULATION OF REGISTRATION FEE

Title Of Each Class Of
Securities To Be Registered
   Proposed Maximum
Aggregate Offering
Price(1)(2)
   Amount of
Registration Fee
Common Units Representing Limited Partner Interests   $4,000,000,000   $122,800
(1)
Estimated solely for the purpose of determining the amount of the registration fee in accordance with Rule 457(o) under the Securities Act of 1933.

(2)
Includes common units subject to the underwriters' option to purchase additional common units.

        The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

SUBJECT TO COMPLETION, DATED MARCH 22, 2007

PRELIMINARY PROSPECTUS

Common Units
Representing Limited Partner Interests

GRAPHIC

        The Blackstone Group L.P. is offering all of the                        common units representing limited partner interests in this offering. This is our initial public offering of common units and no public market currently exists for our common units. We anticipate that the initial public offering price will be between $                              and $                              per common unit. We intend to apply to list the common units on the New York Stock Exchange under the symbol "      ."

        The Blackstone Group L.P. is managed by our general partner, which is owned by our senior managing directors. Unlike the holders of common stock in a corporation, our common unitholders will have only limited voting rights and will have no right to elect our general partner or its directors. Moreover, immediately following this offering our senior managing directors will generally have sufficient voting power to determine the outcome of those few matters that may be submitted for a vote of our limited partners, including any attempt to remove our general partner.

        Our founders want to make these important observations:

        We intend to use a portion of our net proceeds from this offering to purchase equity interests in our business from our existing owners.

        Investing in our common units involves risks. See "Risk Factors" beginning on page 25.

PRICE $            A COMMON UNIT

 
   Price to Public
   Underwriting
Discounts
   Proceeds to
The Blackstone
Group L.P.
Per Common Unit   $                      $                      $                   
Total   $                      $                      $                   

        We have granted the underwriters the right to purchase up to an additional                        common units to cover over-allotments.

        Neither the Securities and Exchange Commission nor any other regulatory body has approved or disapproved these securities or passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.

        The underwriters expect to deliver the common units to purchasers on or about                         , 2007.

Morgan Stanley   Citigroup
Merrill Lynch & Co.   Credit Suisse   Lehman Brothers

Deutsche Bank Securities

                         , 2007

GRAPHIC


Table of Contents

 
   Page
Summary   1
Risk Factors   25
Forward-Looking Statements   56
Market and Industry Data   56
Organizational Structure   57
Use of Proceeds   65
Capitalization   66
Dilution   67
Cash Distribution Policy   68
Unaudited Pro Forma Financial Information   70
Selected Historical Financial Data   82
Management's Discussion and Analysis of Financial Condition and Results of Operations   84
Industry   114
Business   121
Management   159
Certain Relationships and Related Person Transactions   171
    Page
Principal Unitholders   178
Conflicts of Interest and Fiduciary Responsibilities   179
Description of Common Units   186
Material Provisions of The Blackstone Group L.P. Partnership Agreement   187
Common Units Eligible for Future
Sale		   198
Material U.S. Federal Tax Considerations   201
Underwriters   217
Legal Matters   220
Experts   220
Where You Can Find More
Information		   221
Index to Financial Statements   F-1
Appendix A—Form of Amended and Restated Agreement of Limited Partnership of The Blackstone Group L.P.   A-1

        You should rely only on the information contained in this prospectus or in any free writing prospectus we may authorize to be delivered to you. Neither we nor the underwriters have authorized anyone to provide you with additional or different information. We and the underwriters are offering to sell, and seeking offers to buy, our common units only in jurisdictions where offers and sales are permitted. The information in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or any sale of our common units.

        Until                        , 2007 (25 days after the date of this prospectus), all dealers that effect transactions in our common units, whether or not participating in this offering, may be required to deliver a prospectus. This delivery requirement is in addition to the obligation of dealers to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.

        Except where the context requires otherwise, references in this prospectus to "Blackstone," the "Company," "we," "us" or "our" refer (1) prior to the consummation of our reorganization into a holding partnership structure as described under "Organizational Structure", to Blackstone Group, which comprises certain consolidated and combined entities under the common control of our two founders, Mr. Stephen A. Schwarzman and Mr. Peter G. Peterson, and under the common ownership of (a) our founders and other senior managing directors, (b) selected other individuals engaged in some of our businesses and (c) American International Group, Inc., whom we refer to collectively as our "existing owners," and (2) after our reorganization, to The Blackstone Group L.P. and its consolidated subsidiaries, which will continue to be controlled by our founders. References in this prospectus to the ownership of our founders and other senior managing directors and of selected other individuals engaged in some of our businesses include the ownership of current and future personal planning vehicles of these individuals. Completion of our reorganization will occur prior to this offering.

        "Blackstone funds," "our funds" and "our investment funds" refer to the corporate private equity funds, real estate opportunity funds, funds of hedge funds, mezzanine funds, senior debt vehicles,

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proprietary hedge funds and closed-end mutual funds that are managed by Blackstone. "Our carry funds" refer to the corporate private equity funds, real estate opportunity funds and mezzanine funds that are managed by Blackstone. "Our hedge funds" refer to the funds of hedge funds and proprietary hedge funds that are managed by Blackstone.

        "Assets under management" refers to the assets we manage. Our assets under management equal the sum of:

        Our calculation of assets under management may differ from the calculations of other asset managers and as a result this measure may not be comparable to similar measures presented by other asset managers. Our definition of assets under management is not based on any definition of assets under management that is set forth in the agreements governing the investment funds that we manage. See "Business—Structure and Operation of Our Investment Funds—Incentive Arrangements / Fee Structure".

        Unless indicated otherwise, the information included in this prospectus assumes no exercise by the underwriters of the option to purchase up to an additional                        common units from us and that the common units to be sold in this offering are sold at $                                           per common unit, which is the midpoint of the price range indicated on the front cover of this prospectus.

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SUMMARY

        This summary highlights information contained elsewhere in this prospectus and does not contain all the information you should consider before investing in our common units. You should read this entire prospectus carefully, including the section entitled "Risk Factors" and the financial statements and the related notes before you decide to invest in our common units.


Blackstone

        We are a leading global alternative asset manager and provider of financial advisory services. We are one of the largest independent alternative asset managers in the world, with assets under management of approximately $78.7 billion as of March 1, 2007. Our alternative asset management businesses include the management of corporate private equity funds, real estate opportunity funds, funds of hedge funds, mezzanine funds, senior debt vehicles, proprietary hedge funds and closed-end mutual funds. We also provide various financial advisory services, including mergers and acquisitions advisory, restructuring and reorganization advisory and fund placement services.

        We seek to deliver superior returns to investors in our funds through a disciplined, value-oriented investment approach. We believe that this investment approach, implemented across our broad and expanding range of alternative asset classes and investment strategies, helps provide stability and predictability to our business over different economic cycles. Since we were founded in 1985, we have cultivated strong relationships with clients in our financial advisory business, where we endeavor to provide objective and insightful solutions and advice that our clients can trust. We believe our scaled, diversified businesses, coupled with our long track record of investment performance, proven investment approach and strong client relationships, position us to continue to perform well in a variety of market conditions, expand our assets under management and add complementary businesses.

        We currently have 57 senior managing directors and employ approximately 335 other investment and advisory professionals at our headquarters in New York and our offices in Atlanta, Boston, Chicago, Dallas, Los Angeles, San Francisco, London, Paris, Mumbai and Hong Kong. We believe that the depth and breadth of the intellectual capital and experience of our professionals are key reasons why we have generated exceptional returns over many years for the investors in our funds. This track record in turn has allowed us to successfully and repeatedly raise additional assets from an increasingly wide variety of sophisticated investors.

        We have grown our assets under management significantly, from approximately $14.1 billion as of December 31, 2001 to approximately $78.7 billion as of March 1, 2007, representing compound annual growth of 39.5%. The following table sets forth our assets under management by segment and fund type as of March 1, 2007.

 
   Assets Under Management as of March 1, 2007
 
   (in billions)
Corporate private equity funds         $ 31.1
Real estate opportunity funds           17.7
Marketable alternative asset funds           29.9
  Funds of hedge funds   $ 17.1      
  Mezzanine funds     1.5      
  Senior debt vehicles     6.9      
  Distressed securities hedge fund     1.2      
  Equity hedge fund     1.3      
  Closed-end mutual funds     1.9      
   
     
    Total         $ 78.7
         

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        Our business is organized into four business segments:

•
Funds of hedge funds.    We manage a variety of funds of hedge funds, which are investment funds that invest in third-party hedge funds. Our funds of hedge funds are designed as risk-mitigation products that are generally expected to have relatively low volatility and limited correlation with the equity markets. The funds of hedge funds that we manage comprise a wide range of different portfolios and investment strategies, including broadly diversified funds, strategy focused funds, opportunistic funds and client customized funds. We are one of the ten largest independent fund of hedge fund managers in the world with approximately $17.1 billion in aggregate assets under management as of March 1, 2007 in a variety of fund of hedge funds vehicles, which are invested with over 170 different hedge fund managers.

•
Mezzanine funds.    We manage funds that invest primarily in the mezzanine debt of middle-market companies arranged through privately negotiated transactions. These investments are generally structured to earn current income through interest payments and may also include return enhancements including warrants or other equity-linked securities.

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•
Senior debt vehicles.    We manage vehicles that invest primarily in senior secured loans and other debt instruments. These vehicles are of the type commonly referred to as collateralized debt obligation or collateralized loan obligation funds.

•
Proprietary hedge funds.    We have two proprietary hedge funds:

      •
      Distressed securities hedge fund.    Our distressed securities hedge fund invests primarily in distressed and defaulted debt securities and related equities, with an emphasis on smaller, less efficiently traded issues.

      •
      Equity hedge fund.    Our equity hedge fund invests primarily in equity investments on a long and short basis.

•
Closed-end mutual funds.    We are the investment manager of two publicly-traded closed-end mutual funds—The India Fund, Inc. and The Asia Tigers Fund, Inc. The India Fund's investment objective is long-term capital appreciation through investing primarily in the equity securities of Indian companies. The India Fund is the largest India-focused closed-end mutual fund in the United States. The Asia Tigers Fund's investment objective is long-term capital appreciation through investing primarily in the equity securities of Asian companies.

•
Financial Advisory.  Our financial advisory segment comprises our mergers and acquisitions advisory services, restructuring and reorganization advisory services and fund placement services for alternative investment funds. Over the last five years, our financial advisory business revenues have grown at a compound annual rate of 22.7%. For the year ended December 31, 2006, our financial advisory segment generated income before taxes of $193.9 million.

•
Mergers and Acquisitions Advisory.    Since 1985, our mergers and acquisitions advisory services operation has advised on transactions with a total value of more than $250 billion. Professionals in this area have a wide array of specialized industry knowledge and experience and provide all types of corporate and financial advisory services with a wide range of transaction execution capability.

•
Restructuring and Reorganization Advisory.    Our restructuring and reorganization advisory operation is one of the leading advisers to companies and creditors in restructurings and bankruptcies. Since 1991, we have advised on more than 150 distressed situations, both in and out of bankruptcy proceedings, involving more than $350 billion of total liabilities.

•
Park Hill Group.    Park Hill Group is our fund placement business. Since its inception in 2005, Park Hill Group has assisted its clients in raising a total of $42.6 billion for 18 corporate private equity, real estate, venture capital and hedge funds.

Competitive Strengths

        World Leader in Alternative Asset Management.    Alternative asset management is the fastest growing segment of the asset management industry, and we are one of the largest independent alternative asset managers in the world. From the time we entered the asset management business 20 years ago through March 1, 2007, we have raised approximately $59.4 billion of committed capital for our corporate private equity funds, real estate opportunity funds, mezzanine funds and senior debt vehicles, and we managed approximately $21.5 billion in our funds of hedge funds, proprietary hedge funds and closed-end mutual funds as of March 1, 2007. Our assets under management have grown from approximately $14.1 billion as of December 31, 2001 to approximately $78.7 billion as of March 1, 2007, representing compound annual growth of 39.5%. We believe that the strength and breadth of our franchise, supported by our people, investment approach and track record of success, provide a distinct

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advantage when raising capital, evaluating opportunities, making investments, building value and realizing returns.

        One of the Largest Managers of Corporate Private Equity and Real Estate Opportunity Funds.    We have been one of the largest private equity fund managers since we entered this business in 1987. From that time through March 1, 2007, we had invested total capital of $19.8 billion in 109 transactions with a total enterprise value of over $191 billion through our corporate private equity funds and total capital of $13.2 billion in 212 transactions with a total enterprise value of over $102 billion through our real estate opportunity funds. Both the corporate private equity fund and the two real estate opportunity funds (taken together) we are currently investing are among the largest funds ever raised in their respective sectors, with aggregate capital commitments of $18.1 billion and $6.7 billion, respectively, as of March 1, 2007. We believe that our long-term leadership in private equity has imbued the Blackstone brand with value that enhances all of our different businesses and facilitates our ability to expand into complementary new businesses.

        Diversified, Global Investment Platform.    Our asset management businesses are diversified across a broad variety of alternative asset classes and investment strategies and have global reach and scale. We benefit from substantial synergies across all of these businesses, including the ability to leverage the extensive intellectual capital that resides throughout our firm. We believe that the extensive investment review process that is conducted in all of our asset management businesses, involving active participation by Stephen A. Schwarzman and Hamilton E. James across all of our businesses, is not only a significant reason for our successful investment performance but also helps to maximize those synergies. In addition, we believe our financial advisory segment further increases the diversification of our business mix.

        During our 21-year history, we have grown by entering new businesses that were complementary to our existing asset management and financial advisory businesses. For example, in 1987 we entered into a 50-50 partnership with the founders of Blackrock, Inc. and helped those individuals develop an asset management business specializing in fixed income. We sold our interest in Blackrock in 1994. We have invested in complementary new areas because they offered opportunities to deploy our financial and intellectual capital and generate superior investment returns, attractive net income margins and substantial cash flow. We believe that our ability to identify and successfully enter new growth areas is a key competitive advantage, and we will continue to seek new opportunities to expand our asset management franchise and our advisory business.

        Exceptional Investment Track Record.    We have an exceptional record of generating attractive risk-adjusted returns across all of our asset management businesses, as shown in the table below. We believe that the superior investment returns we have generated for investors in our funds over many years across a broad and expanding range of alternative asset classes and through all types of economic conditions and all cycles of the equity and debt capital markets are a key reason why we have been able to successfully and consistently grow our assets under management across our alternative asset management platform.

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   Year of Inception
   Combined Fund Level Annualized IRR or Return
Since Inception(1)
   Annualized IRR or Return,
Net of Fees,
Since Inception(2)
  
Corporate private equity   1987   30.8 % 22.8 %
Real estate opportunity   1991   38.2 % 29.2 %
Funds of hedge funds   1990   13.0 % 11.9 %
Mezzanine   1999   16.0 % 9.3 %
Distressed securities hedge   2005   11.5 % 7.9 %
Equity hedge   2006   11.6 %(3) 8.9 %(3)
Closed-end mutual funds:              
  The India Fund   2005   —   43.9 %(4)
  The Asia Tigers Fund   2005   —   42.5 %(4)
(1)
Through December 31, 2006.

(2)
Through December 31, 2006. The annualized IRR or return, net of fees, of an investment fund represents the gross annualized IRR or return applicable to limited partners net of management fees, organizational expenses, transaction costs, partnership expenses (including interest incurred by the fund itself) and the general partner's allocation of profits or incentive fees, if any.

(3)
Reflects returns from October 1, 2006 (the date operations commenced) through December 31, 2006 only (in contrast to all other results in the table above, which are annualized).

(4)
A subsidiary of ours has been the investment manager of The India Fund and The Asia Tigers Fund since December 5, 2005. The current portfolio manager has managed The India Fund since August 1, 1997 and has managed The Asia Tigers Fund since July 1, 1999. The net annualized returns, based on net asset value, have been calculated since December 5, 2005.

        As of December 31, 2006, the cumulative return, net of fees, since inception (November 22, 2002) to the holders of our senior debt vehicles' most subordinated securities was 14.3% and the gross cumulative return over the same period was 21.2% (before management fees, but after deducting interest expense and administrative expenses). See "Business—The Historical Investment Performance of Our Investment Funds" for information regarding the calculation of investment returns, valuation methodology and factors affecting our investment performance. The historical information presented above and elsewhere in this prospectus with respect to the investment performance of our funds is provided for illustrative purposes only. The historical investment performance of our funds is no guarantee of future performance of our current funds or any other fund we may manage in the future.

        Diverse Base of Longstanding Investors.    We have a long history of raising significant amounts of capital on a global basis across a broad range of asset classes, and we believe that the strength and breadth of our relationships with institutional investors provide us with a competitive advantage in raising capital for our investment funds. During our two decades of asset management activities, we have built long-term relationships with many of the largest institutional investors in the world, most of which invest in a number of different categories of our investment funds. For example, of those of the 50 largest corporate and public pension funds in the United States as measured by assets under management that to our knowledge invest in alternative assets, approximately 72% have invested in our funds. In addition, investors representing approximately 87% of the total capital invested in all of our carry funds since 1987 have invested in successive funds in the same category. Furthermore, our investor base is highly diversified, with no single unaffiliated investor in our current corporate private equity or real estate opportunity funds accounting for more than 10% of the total amount of capital raised for those funds. Our Park Hill Group business further enables us to grow our investor base through its expanding network of relationships with potential investors. We believe that our strong network of investor relationships, together with our long-term track record of providing investors in our funds with superior risk-adjusted investment returns, will enable us to continue to grow our assets under management across our investment platform.

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        Strong Industry and Corporate Relationships.    We believe that the strength of our relationships with investment banking firms, other financial intermediaries and leading corporations and corporate executives provides us with competitive advantages in identifying transactions, securing investment opportunities and generating exceptional returns. We actively cultivate our relationships with major investment banking firms and other financial intermediaries and are among the most significant clients of many of these firms. We believe that our strong network of relationships with these firms provide us with a significant advantage in attracting deal flow and securing transactions, including a substantial number of exclusive investment opportunities and opportunities that are made available to only a very limited number of other private equity firms. We also have a broad range of relationships with senior-level business executives whom we use to generate investment opportunities, analyze prospective investments and act as directors of and advisers to our corporate private equity and real estate opportunity funds' portfolio companies. Moreover, private equity investing in partnership with leading corporations is a signature form of investing for us. Through March 1, 2007, we had invested in 42 corporate partnerships, including transactions with AT&T Inc., General Electric Company, Northrop Grumman Corporation, Sony Corporation, Time Warner Inc., Union Carbide Corporation, Union Pacific Corporation, USX Corporation and Vivendi SA. We believe that the depth and breadth of our corporate partnerships will lead to a significant number of opportunities for our corporate private equity and real estate opportunity funds over the next several years. As a result of these various relationships, we believe that we are less reliant on auction processes in making investments than many of our competitors, thereby providing us with a wider array of attractive investment opportunities.

        Our People.    We believe that our senior management and our talented and experienced professionals are the principal reason why we have achieved significant growth and success in all of our businesses. Since our firm's founding in 1985, Stephen A. Schwarzman has served as our firm's Chief Executive Officer and Peter G. Peterson has served as either Chairman or Senior Chairman. Hamilton E. James serves as our President and Chief Operating Officer, oversees our corporate private equity operation directly and, along with Mr. Schwarzman, oversees and serves on the investment committees or oversight committees for all of our other businesses. Jonathan D. Gray and Chad R. Pike are senior managing directors overseeing our real estate operation. J. Tomilson Hill is our Vice Chairman and the head of our fund of hedge funds business. Howard Gellis leads our corporate debt business, John D. Dionne manages our distressed securities hedge fund, Manish Mittal manages our equity hedge fund and Punita Kumar-Sinha manages our closed-end mutual funds. Our mergers and acquisitions advisory operation is led by John Studzinski, our restructuring and reorganization advisory operation is led by Arthur B. Newman and our fund placement business is overseen by Kenneth C. Whitney. Our 57 senior managing directors have an average of 22 years of relevant experience. This team is supported by approximately 335 other professionals with a variety of backgrounds in investment banking, leveraged finance, private equity, real estate and other disciplines. We believe that the extensive experience and financial acumen of our management and professionals provide us with a significant competitive advantage.

        Alignment of Interests.    One of our fundamental philosophies as a privately-owned firm has been to align our interests, and those of our senior managing directors and other professionals, with the interests of the investors in our funds. Since inception, Blackstone, its senior managing directors and other professionals have committed over $2.6 billion of their own capital to our carry funds and as of March 1, 2007, our hedge funds managed an additional $2.0 billion of Blackstone's senior managing director and employee capital. In structuring this offering, we have sought to achieve the same alignment of interests between our common unitholders and our senior managing directors and other employees through their significant and long-term ownership of our equity. Our senior managing directors and other existing owners who are our employees will own in excess of            % of the equity in our business immediately following this offering. In addition, we intend to make equity awards to all of our employees at the time of this offering and to use appropriate equity-based compensation to motivate and retain our professionals in the future. The equity held by our senior managing directors

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and other employees will be subject to vesting and minimum retained ownership requirements and transfer restrictions as described in "Organizational Structure—Reorganization—Blackstone Holdings Formation", "Management—IPO Date Equity Awards" and "—Minimum Retained Ownership Requirements and Transfer Restrictions".

        Distinct Advisory Perspective.    We are not engaged in securities underwriting, research or other similar activities that might conflict with our role as a trusted financial advisor. We believe that this makes us particularly well-suited to represent boards and special committees in the increasing number of situations where they are looking to retain a financial advisor who is devoid of such conflicts. In addition, we believe that our ability to view financial advisory client assignments from both the client's and an owner's perspective often provides unique insights into how best to maximize value while also achieving our clients' strategic objectives.

Our Growth Strategy

        We intend to create value for our common unitholders by:

Why We Are Going Public

        We have decided to become a public company:

We Intend to be a Different Kind of Public Company

        We have built a leading global alternative asset management and financial advisory firm that has achieved success and substantial growth. While we believe that becoming a publicly traded company will provide us with many benefits, it is our intention to preserve the elements of our culture that have contributed to our success as a privately-owned firm.

        Management with a Long-Term Perspective.    As a privately-owned firm, Blackstone has always been managed with a perspective of achieving successful growth over the long-term. Both in entering and building our various businesses over the years and in determining the types of investments to be made by our investment funds, our management has consistently sought to focus on the best outcomes for our businesses and investments over a period of years rather than on the short-term impact on our revenue, net income or cash flow. We intend to maintain this long-term focus after we become a public company even though this approach, together with the fact that our financial results will be significantly

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affected by the timing of new investments and realizations of gains, may result in significant and unpredictable variances in these items from quarter to quarter. In addition, while the management fees we receive from our investment funds are payable on a regular basis in contractually prescribed amounts over the life of each fund, transaction fees earned by our corporate private equity and real estate operations and fees earned by our advisory business are subject to greater variability from quarter to quarter.

        Our largest businesses—corporate private equity and real estate—have benefited greatly in recent years from public companies accepting going-private acquisition offers in order, among other reasons, to avoid the public markets' focus on short-term earnings performance. As a public company we do not intend to permit the short-term perspective of the public markets to change our own focus on the long-term in making investment, operational and strategic decisions. Because our businesses can vary in significant and unpredictable ways from quarter to quarter and year to year, we do not plan to provide guidance regarding our expected quarterly and annual operating results to investors or analysts after we become a public company.

        Continued Focus on Limited Partner Investors in Our Investment Funds.    Serving the investors in our investment funds has been our guiding principle, and we remain fully committed to our fiduciary and contractual obligations to these investors. We do not intend to permit our status as a public company to change our focus on seeking at all times to optimize returns to investors in our investment funds. Accordingly, we expect to take actions regularly with respect to the purchase or sale of investments and the structuring of investment transactions for our investment funds to achieve this objective, even if these actions adversely affect our near-term results. We believe that optimizing returns for the investors in our funds will create the most value for our common unitholders over time.

        Use of Leverage to Enhance Returns.    In order to generate enhanced returns on equity for our owners, we have historically employed significant leverage on our balance sheet. As a public company, we intend to continue using leverage to create the most efficient capital structure for Blackstone and our public common unitholders. We do not anticipate approaching significant leverage levels during the first one or two years after this offering because the net proceeds we will retain from this offering are expected to be our principal source of financing for our business during that period. However, we anticipate that our debt-to-equity ratio will eventually rise to levels in the range of 3:1 to 4:1 as we attempt to increase our return on equity for the benefit of our common unitholders. This strategy will expose us to the typical risks associated with the use of substantial leverage, including affecting the credit ratings that may be assigned to our debt by rating agencies. See "Risk Factors—Risks Related to Our Business—Our use of leverage to finance our business will expose us to substantial risks, which are exacerbated by our funds' use of leverage to finance investments".

        Partnership Management Structure.    Throughout our 21-year history as a privately-owned firm, our management structure has reflected strong central leadership and active involvement by our senior management. We believe that this management structure has meaningfully contributed to our significant growth and the successful performance of all our businesses. Although our business has been managed as a private partnership since its founding, we also have extensive experience with the management and ownership of public companies. As a public company, we intend to continue to employ our current management structure because we believe this structure will best enable us to continue to achieve the level of success we have achieved as a private partnership.

        No Golden Parachutes/CEO Compensation.    We have no severance arrangements with any of our professionals. Accordingly, unlike in the case of many public companies, the departure of an executive officer or other senior managing director would not trigger any contractual obligation on our part to make any special payments to the departing professional. Moreover, following this offering Mr. Schwarzman will receive no compensation other than a $350,000 salary (and will own a significant portion of the carried interest earned from our carry funds).

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        Equity Awards to All Employees.    Because we believe that the talents and dedication of all of our employees contribute to our success, we intend to make equity awards to all of our approximately 710 non-senior managing director employees at the time of this offering. See "Management—IPO Date Equity Awards".

        Charitable Contributions.    Our senior managing directors intend to contribute an aggregate of $150 million of our equity (calculated based on the initial public offering price per common unit in this offering) to The Blackstone Foundation, a new charitable foundation that is being established to support charitable organizations in the communities in which we operate and worthy charitable organizations with which our employees are personally involved.

Our Common Units Are Not an Appropriate Investment for Investors With a Short-Term Focus

        Our businesses have achieved substantial growth, particularly over the past five years, in no small part due to the successful investment performances of our investment funds. While the long-term growth trends in our businesses are favorable, our financial results are subject to significant volatility and we are unable to predict them from quarter to quarter or year to year. Our corporate private equity and real estate businesses have benefited from high levels of activity in the last few years. These activity levels may continue but they could decline at any time (along with activity levels in any of our other businesses).

        We focus closely on actual and expected changes in the economic conditions and conditions in the debt and equity capital markets in all of the geographic regions in which we conduct our business, and we try to accelerate or reduce (or on occasion suspend entirely) the rate of our investment—or disposition—activities in response to changing economic and market conditions. In the past, changing economic and market conditions and our investment actions in response to those changes have led to swings in investment activity from year to year. We expect these swings to occur in future years as well, which is one of the reasons why there may be significant volatility in our revenue, net income and cash flow. However, we believe that if we continue to follow the management approach that has served us well as a private firm focusing on making the right decisions about purchasing and selling the right assets at the right time and the right prices, without regard to how those decisions affect our financial results in any given quarter, our businesses will continue to prosper. See "—Competitive Strengths—Exceptional Investment Track Record" above.

        Because of the nature of our businesses and the long-term focus we employ in managing them, our common units should only be purchased by investors who expect to remain unitholders for a number of years.


Investment Risks

        An investment in our common units involves substantial risks and uncertainties. Some of the more significant challenges and risks include those associated with our susceptibility to conditions in the global financial markets and global economic conditions, the volatility of our revenue, net income and cash flow, our dependence on our founders and other key senior managing directors and our ability to retain and motivate our existing senior managing directors and recruit, retain and motivate new senior managing directors in the future. See "Risk Factors" for a discussion of the factors you should consider before investing in our common units.

        The Blackstone Group L.P. was formed in Delaware on March 12, 2007. Our principal executive offices are located at 345 Park Avenue, New York, New York 10154, and our telephone number is (212) 583-5000.

9


Organizational Structure

        Our business is presently owned by our founders and other senior managing directors, selected other individuals engaged in some of our businesses and American International Group, Inc., or "AIG," whom we refer to collectively as our "existing owners."

        Prior to this offering we will effect the reorganization described in "Organizational Structure" whereby our existing owners will contribute to Blackstone Holdings I L.P., Blackstone Holdings II L.P., Blackstone Holdings III L.P., Blackstone Holdings IV L.P. or Blackstone Holdings V L.P., which we refer to collectively as "Blackstone Holdings," each of the operating entities included in our historical combined financial statements, with the exception of the general partners of certain legacy Blackstone funds that do not have a meaningful amount of unrealized investments and a number of investment vehicles through which our existing owners and other third parties have made commitments to or investments in or alongside of Blackstone's investment funds, which entities will not be contributed to Blackstone Holdings and will continue to be owned by our existing owners.

        Accordingly, subsidiaries of Blackstone Holdings will generally be entitled to:

        With respect to our actively investing carry funds and proprietary hedge funds as well as any future carry funds and proprietary hedge funds, we intend to continue to allocate to the senior managing directors, other professionals and selected other individuals who work in these operations a portion of the carried interest or incentive fees earned in relation to these funds in order to better align their interests with our own and with those of the investors in these funds. Our current estimate is that approximately      % of the carried interest earned in relation to our carry funds and approximately      % of the incentive fees earned in relation to our proprietary hedge funds will be allocated to such individuals, although these percentages may fluctuate up or down over time.

10


        Management fees, transaction fees, carried interest, incentive fees and other fees received by subsidiaries of Blackstone Holdings will inure to The Blackstone Group L.P.'s benefit to the full extent of its equity interest in Blackstone Holdings. See "Business—Structure and Operation of Our Investment Funds—Incentive Arrangements/Fee Structure".

        Following the reorganization and this offering, The Blackstone Group L.P. will be a holding partnership and, through wholly-owned subsidiaries, hold controlling equity interests in the Blackstone Holdings partnerships. Through wholly-owned subsidiaries, The Blackstone Group L.P. will be the sole general partner of each of the Blackstone Holdings partnerships. Accordingly, The Blackstone Group L.P. will operate and control all of the business and affairs of Blackstone Holdings and will consolidate the financial results of Blackstone Holdings and its consolidated subsidiaries. The Blackstone Group L.P. is itself managed and operated by its general partner, Blackstone Group Management L.L.C., to whom we refer as "our general partner," which is in turn wholly-owned by our senior managing directors and controlled by our founders.

        The diagram below depicts our organizational structure immediately following this offering.

FLOWCHART

11

        Each of the Blackstone Holdings partnerships will have an identical number of partnership units outstanding, and we use the terms "Blackstone Holdings partnership unit" or "partnership unit in/of Blackstone Holdings" to refer collectively to a partnership unit in each of the Blackstone Holdings partnerships. The Blackstone Group L.P. will hold, through wholly-owned subsidiaries, a number of Blackstone Holdings partnership units equal to the number of common units that The Blackstone Group L.P. has issued. Immediately following this offering, The Blackstone Group L.P. will hold Blackstone Holdings partnership units representing    % of the total number of partnership units of Blackstone Holdings, or    % if the underwriters exercise in full their option to purchase additional common units, and our existing owners will hold Blackstone Holdings partnership units representing    % of the total number of partnership units of Blackstone Holdings, or    % if the underwriters exercise in full their option to purchase additional common units. The Blackstone Holdings partnership units that will be held by The Blackstone Group L.P.'s wholly-owned subsidiaries will be economically identical in all respects to the Blackstone Holdings partnership units that will be held by our existing owners, except that The Blackstone Group L.P.'s wholly-owned subsidiaries will be entitled to priority allocations of income through December 31, 2009 as described under "Cash Distribution Policy". Accordingly, immediately following this offering, investors in this offering will own    % of the equity in our business and our existing owners will own    % of the equity in our business. If the underwriters exercise in full their option to purchase additional common units, immediately following this offering, investors in this offering will own    % of the equity in our business and our existing owners will own    % of the equity in our business.

        Under the terms of the partnership agreements of the Blackstone Holdings partnerships, all of the Blackstone Holdings partnership units received by our existing owners in the reorganization described in "Organizational Structure" will be subject to restrictions on transfer and, with the exception of AIG and our Senior Chairman, Peter G. Peterson, minimum retained ownership requirements. In addition, approximately    % of the Blackstone Holdings partnership units received by our existing owners who are our employees will not be vested and, with specified exceptions, will be subject to forfeiture if the employee ceases to be employed by us prior to vesting. See "Management—Minimum Retained Ownership Requirements and Transfer Restrictions" and "Certain Relationships and Related Person Transactions—Blackstone Holdings Partnership Agreements".

        The Blackstone Group L.P. is managed and operated by our general partner. Unlike the holders of common stock in a corporation, our common unitholders will have only limited voting rights and will have no right to elect our general partner or its directors, which will be elected by our founders. In addition, on those few matters that may be submitted for a vote of our common unitholders, the limited partners of Blackstone Holdings (other than AIG) will hold special voting units in The Blackstone Group L.P. that provide them with a number of votes that is equal to the aggregate number of vested and unvested partnership units of Blackstone Holdings that they then hold and entitle them to participate in the vote on the same basis as our common unitholders. Accordingly, immediately following this offering, on those few matters that may be submitted for a vote of the limited partners of The Blackstone Group L.P., investors in this offering will collectively have    % of the voting power of The Blackstone Group L.P. limited partners, or    % if the underwriters exercise in full their option to purchase additional common units, and our existing owners will collectively have    % of the voting power of The Blackstone Group L.P. limited partners, or    % if the underwriters exercise in full their option to purchase additional common units.

        Although our general partner has no business activities other than the management of our business, conflicts of interest may arise in the future between us and our common unitholders, on the one hand, and our general partner and its affiliates, on the other. The resolution of these conflicts may not always be in our best interests or that of our common unitholders. In addition, we have fiduciary and contractual obligations to the investors in our investment funds and we expect to regularly take actions with respect to the purchase or sale of investments in our investment funds, the structuring of

12


investment transactions for those funds or otherwise that are in the best interests of the limited partner investors in those funds but that might at the same time adversely affect our near-term results of operations or cash flow.

        Our partnership agreement limits the liability of, and reduces or eliminates the duties (including fiduciary duties) owed by, our general partner to our common unitholders. Our partnership agreement also restricts the remedies available to common unitholders for actions that might otherwise constitute breaches of our general partner's duties (including fiduciary duties). By purchasing our common units, you are treated as having consented to the provisions set forth in our partnership agreement, including the provisions regarding conflicts of interest situations that, in the absence of such provisions, might be considered a breach of fiduciary or other duties under applicable state law. For a more detailed description of the conflicts of interest and fiduciary responsibilities of our general partner, see "Conflicts of Interest and Fiduciary Responsibilities".

13


The Offering

Common units offered by The Blackstone Group L.P.                   common units.

Common units outstanding after the offering
 
            common units (or            common units if all outstanding Blackstone Holdings partnership units held by our existing owners were exchanged for newly-issued common units on a one-for-one basis).

Use of proceeds
 
We estimate that our net proceeds from this offering, at an assumed initial public offering price of $                  per common unit and after deducting estimated underwriting discounts and offering expenses, will be approximately $                  billion, or $                  billion if the underwriters exercise in full their option to purchase additional common units.

 
 
We intend to use approximately $                  billion of the net proceeds from this offering, or approximately $             billion if the underwriters exercise in full their option to purchase additional common units, to purchase vested Blackstone Holdings partnership units from our existing owners. Accordingly, we will not retain any of these proceeds.

 
 
We intend to use all of the remaining proceeds from this offering, or approximately $                  billion, to subscribe for newly-issued Blackstone Holdings partnership units. We intend to use approximately $                  million of these net proceeds to repay all outstanding borrowings under our revolving credit facility and the remainder:

 
 
•
 
to provide capital to facilitate the growth of our existing asset management and financial advisory businesses, including through funding a portion of our general partner capital commitments to our carry funds;

 
 
•
 
to provide capital to facilitate our expansion into new businesses that are complementary to our existing asset management and financial advisory businesses and that can benefit from being affiliated with us, including possibly through selected strategic acquisitions (see "Business—New Business and Other Growth Initiatives"); and

 
 
•
 
for other general corporate purposes.

 
 
Pending specific application of these net proceeds, we expect to invest them primarily in our funds of hedge funds and additionally in our distressed securities hedge fund and our equity hedge fund.
         

14


Voting rights
 
Our general partner, Blackstone Group Management L.L.C., will manage all of our operations and activities. Unlike the holders of common stock in a corporation, you will have only limited voting rights on matters affecting our business and will have no right to elect our general partner or its directors, which will be elected by our founders.

 
 
On those few matters that may be submitted for a vote of our common unitholders, the limited partners of Blackstone Holdings (other than AIG) will hold special voting units in The Blackstone Group L.P. that provide them with a number of votes that is equal to the aggregate number of partnership units of Blackstone Holdings that they then hold and entitle them to participate in the vote on the same basis as our common unitholders. Accordingly, immediately following this offering our senior managing directors will generally have sufficient voting power to determine the outcome of those few matters that may be submitted for a vote of the limited partners of The Blackstone Group L.P., including any attempt to remove our general partner. See "Material Provisions of The Blackstone Group L.P. Partnership Agreement—Withdrawal or Removal of the General Partner" and "—Meetings; Voting".

Cash distribution policy
 
Our intention is to distribute to our common unitholders on a quarterly basis, commencing in the            quarter of 2007, substantially all of The Blackstone Group L.P.'s net after-tax share of our annual adjusted cash flow from operations in excess of amounts determined by our general partner to be necessary or appropriate to provide for the conduct of our business, to make appropriate investments in our business and our funds, to comply with applicable law, any of our debt instruments or other agreements or to provide for future distributions to our common unitholders for any one or more of the ensuing four quarters. Because we will not know what our available adjusted cash flow from operations will be for any year until the end of such year, we expect that our first three quarterly distributions in respect of any given year will generally be smaller than the final quarterly distribution in respect of such year. See note (3) under "—Summary Historical Financial and Other Data" for a reconciliation of our adjusted cash flow from operations to our cash flow from operations presented in accordance with generally accepted accounting principles.

 
 
The declaration and payment of any distributions will be at the sole discretion of our general partner. Our general partner will take into account general economic and business conditions, our strategic plans and prospects, our business and investment opportunities, our financial condition and operating results, working capital requirements and anticipated cash needs, contractual restrictions and obligations, legal, tax and regulatory restrictions, restrictions and other implications on the payment of distributions by us to our common unitholders or by our subsidiaries to us and such other factors as our general partner may deem relevant.
         

15


 
 
The Blackstone Group L.P. will be a holding partnership and will have no material assets other than its ownership of partnership units in Blackstone Holdings held through wholly-owned subsidiaries. We intend to cause Blackstone Holdings to make distributions to its partners, including The Blackstone Group L.P.'s wholly-owned subsidiaries, in order to fund any distributions The Blackstone Group L.P. may declare on the common units. If Blackstone Holdings makes such distributions, the limited partners of Blackstone Holdings will be entitled to receive equivalent distributions pro rata based on their partnership interests in Blackstone Holdings, except as set forth in "—Priority allocation for the benefit of common unitholders prior to December 31, 2009".

Priority allocation for the benefit of common unitholders prior to December 31, 2009
 
The partnership agreements of the Blackstone Holdings partnerships will provide that until December 31, 2009, the income (and accordingly distributions) of Blackstone Holdings will be allocated:

 
 
•
 
first, to The Blackstone Group L.P.'s wholly-owned subsidiaries until sufficient income has been so allocated to permit The Blackstone Group L.P. to make aggregate distributions to our common unitholders of $                  per common unit on an annualized basis;

 
 
•
 
second, to the other partners of the Blackstone Holdings partnerships until an equivalent amount of income on a partnership interest basis has been allocated to such other partners on an annualized basis; and

 
 
•
 
thereafter, pro rata to all partners of the Blackstone Holdings partnerships in accordance with their respective partnership interests.

 
 
Accordingly, until December 31, 2009, our existing owners will not receive distributions in respect of their Blackstone Holdings partnership units unless and until our common unitholders receive aggregate distributions of $                  per common unit on an annualized basis. We do not intend to maintain this priority allocation after December 31, 2009.

Cash distributions prior to this
offering
 
Prior to this offering, we intend to make one or more distributions to our existing owners representing all of the undistributed earnings generated prior to the date of the offering by the entities being contributed to Blackstone Holdings. If the offering had occurred on December 31, 2006 we estimate that the aggregate amount of such distributions would have been $             million. However, the actual amount of such distributions will depend on the amount of earnings generated by these entities prior to the offering.
         

16


Exchange rights of holders of Blackstone Holdings partnership units
 
Prior to this offering we will enter into an exchange agreement with the holders of partnership units in Blackstone Holdings (other than The Blackstone Group L.P.'s wholly-owned subsidiaries) so that these holders, subject to the vesting and minimum retained ownership requirements and transfer restrictions set forth in the partnership agreements of the Blackstone Holdings partnerships, may exchange their Blackstone Holdings partnership units for The Blackstone Group L.P. common units on a one-for-one basis, subject to customary conversion rate adjustments for splits, unit distributions and reclassifications.

Tax receivable agreement
 
The purchase by The Blackstone Group L.P.'s wholly-owned subsidiaries of vested Blackstone Holdings partnership units from our existing owners with a portion of the proceeds from this offering and future exchanges of Blackstone Holdings partnership units are expected to result in increases in the tax basis of the tangible and intangible assets of Blackstone Holdings that would not otherwise have been available. These increases in tax basis will increase (for tax purposes) depreciation and amortization and therefore reduce the amount of tax that the wholly-owned subsidiaries of The Blackstone Group L.P. that are taxable as corporations for U.S. federal income tax purposes would otherwise be required to pay in the future. These wholly-owned subsidiaries will enter into a tax receivable agreement with our existing owners whereby they will agree to pay to our existing owners 85% of the amount of cash savings, if any, in U.S. federal, state and local income tax that these entities actually realize as a result of these increases in tax basis. See "Certain Relationships and Related Person Transaction—Tax Receivable Agreement".

Risk factors
 
See "Risk Factors" for a discussion of risks you should carefully consider before deciding to invest in our common units.

Proposed New York Stock Exchange symbol
 
"            "

17

        Common units outstanding and the other information based thereon in this prospectus do not reflect:

18


Summary Historical Financial and Other Data

        The following summary historical combined financial and other data of Blackstone Group should be read together with "Organizational Structure", "Unaudited Pro Forma Financial Information", "Selected Historical Financial Data", "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the historical financial statements and related notes included elsewhere in this prospectus. Blackstone Group is considered our predecessor for accounting purposes, and its combined financial statements will be our historical financial statements following this offering.

        We derived the summary historical combined statements of income data of Blackstone Group for each of the years ended December 31, 2004, 2005 and 2006 and the summary historical combined statements of financial condition data as of December 31, 2005 and 2006 from our audited combined financial statements which are included elsewhere in this prospectus. We derived the summary historical combined statements of income data of Blackstone Group for the years ended December 31, 2002 and 2003 and the summary combined statements of financial condition data as of December 31, 2002, 2003 and 2004 from our unaudited combined financial statements which are not included in this prospectus. The unaudited combined financial statements of Blackstone Group have been prepared on substantially the same basis as the audited combined financial statements and include all adjustments that we consider necessary for a fair presentation of our combined financial position and results of operations for all periods presented.

        The summary historical financial data is not indicative of the expected future operating results of The Blackstone Group L.P. following the reorganization and this offering. In particular, following this offering The Blackstone Group L.P. will no longer consolidate in its financial statements the investment funds that have historically been consolidated in our financial statements, with the exception of a limited number of our entities which our employees use to invest in our funds, and certain funds of hedge funds. In addition, the general partners of certain legacy Blackstone funds that do not have a meaningful amount of unrealized investments and a number of investment vehicles through which our existing owners and other third parties have made commitments to or investments in or alongside of Blackstone's investment funds will not be contributed to Blackstone Holdings. See "Organizational Structure—Reorganization" and "Unaudited Pro Forma Financial Information".

19

 
   Year Ended December 31,
  
 
   2006
   2005
   2004
   2003
   2002
  
 
   (Dollars in Thousands)

  
Statement of Income Data                                
Revenues                                
  Fund management fees   $ 852,283   $ 370,574   $ 390,645   $ 304,651   $ 173,538  
  Advisory fees     256,914     120,137     108,356     119,410     141,613  
  Interest and other     11,082     6,037     4,462     2,635     2,972  
   
 
 
 
 
 
    Total Revenues     1,120,279     496,748     503,463     426,696     318,123  
   
 
 
 
 
 
Expenses                                
  Employee compensation and benefits     250,067     182,605     139,512     114,218     94,412  
  Interest     36,932     23,830     16,239     13,834     13,418  
  Occupancy and related charges     35,862     30,763     29,551     23,575     20,064  
  General, administrative and other     86,534     56,650     48,576     44,222     37,614  
  Fund expenses     143,695     67,972     43,123     42,076     24,094  
   
 
 
 
 
 
      Total Expenses     553,090     361,820     277,001     237,925     189,602  
   
 
 
 
 
 
Other Income                                
  Net gains (losses) from investment activities     7,587,296     5,142,530     6,214,519     3,537,268     (438,684 )
   
 
 
 
 
 
  Income (loss) before non-controlling interests in income of consolidated entities and income taxes     8,154,485     5,277,458     6,440,981     3,726,039     (310,163 )
Non-controlling interests in (income) losses of consolidated entities     (5,856,345 )   (3,934,535 )   (4,901,547 )   (2,773,014 )   358,728  
   
 
 
 
 
 
Income before taxes     2,298,140     1,342,923     1,539,434     953,025     48,565  
Income taxes     (31,934 )   (12,260 )   (16,120 )   (11,949 )   (9,119 )
   
 
 
 
 
 
  Net Income   $ 2,266,206   $ 1,330,663   $ 1,523,314   $ 941,076   $ 39,446  
   
 
 
 
 
 
Other Data                                
Total reportable segment fee related earnings(1)   $ 747,421   $ 237,369   $ 303,627   $ 259,124   $ 283,949  
   
 
 
 
 
 
Carry Dollars Created(2)   $ 2,179,471   $ 568,627   $ 686,100   $ 440,019   $ 285,107  
   
 
 
 
 
 
Adjusted cash flow from operations(3)   $ 1,680,651   $ 1,444,597   $ 1,845,225              
   
 
 
 
 
 
Total assets under management   $ 69,503,052   $ 53,919,326   $ 31,701,828   $ 27,032,739   $ 21,701,504  
   
 
 
 
 
 
 
   As of December 31,
 
   2006
   2005
   2004
   2003
   2002
 
   (Dollars in Thousands)
Statement of Financial Condition Data                              
  Total assets   $ 33,891,044   $ 21,121,124   $ 21,253,939   $ 14,937,386   $ 10,348,829
  Total liabilities   $ 2,373,271   $ 2,082,771   $ 1,930,001   $ 1,458,512   $ 891,263
  Non-controlling interests in consolidated entities   $ 28,794,894   $ 17,213,408   $ 17,387,507   $ 12,398,271   $ 9,043,808
  Partners' capital   $ 2,722,879   $ 1,824,945   $ 1,936,431   $ 1,080,603   $ 413,758

20

(1)
Total Reportable Segment Fee Related Earnings is the aggregate of the amounts reported by our four segments. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Segment Analysis" and Note 12 of Blackstone Group's combined financial statements included in this prospectus.

(2)
"Carry Dollars Created," which is sometimes referred to as "Carry Dollars," is calculated by multiplying the aggregate amount of limited partner capital invested in new transactions during the year by our carry funds by the contractual percentage rate of the profits that we can earn as carried interest from such investments (generally 20%). Carry Dollars Created is a measure of the productivity of our investment activities and is measured at the time of investment by a carry fund.

(3)
Adjusted cash flow from operations is used as a supplemental measure by us to assess liquidity and amounts available for distribution to our common unitholders. See "Cash Distribution Policy". In accordance with generally accepted accounting principles, or "GAAP," certain of the Blackstone funds are consolidated into the financial statements of Blackstone Group, notwithstanding the fact that Blackstone Group has only a minority economic interest in these funds. Consequently, Blackstone Group's combined financial statements reflect the cash flow of the consolidated Blackstone funds on a gross basis rather than the cash flow actually attributable to the Blackstone Group.

        As detailed in the table below, adjusted cash flow from operations is equal to cash flow from operations presented in accordance with GAAP adjusted to exclude cash flow relating to the investment activities of our funds on behalf of the limited partners of those funds and for changes in operating assets and liabilities. Management believes that adjusted cash flow from operations more clearly reflects the cash flow of Blackstone Group. However, adjusted cash flow from operations should not be considered in isolation or as an alternative to cash flow (used in) provided by operating activities presented in accordance with GAAP.

 
   2006
   2005
   2004
  
 
   (Dollars in Thousands)

  
Cash Flow (Used In) Provided By Operating Activities   $ (4,396,614 ) $ 2,709,258   $ 52,682  
  Changes in operating assets and liabilities     1,154,680     4,139     205,642  
  Blackstone funds related investment activities     3,776,325     (2,608,412 )   (84,620 )
  Net realized gains on investments     5,054,995     4,918,364     2,029,266  
  Non-controlling interests in income of consolidated entities     (3,950,664 )   (3,631,179 )   (420,561 )
  Other non-cash adjustments     41,929     52,427     62,815  
   
 
 
 
Adjusted Cash Flow from Operations   $ 1,680,651   $ 1,444,597   $ 1,845,224  
   
 
 
 

21


Summary Pro Forma Financial Data

        The following summary unaudited condensed consolidated pro forma financial information should be read together with "Organizational Structure", "Unaudited Pro Forma Financial Information", "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the historical financial statements and related notes included elsewhere in this prospectus.

        The unaudited pro forma financial information contained herein is subject to completion as a consequence of the fact that information related to our reorganization and the offering is not currently determinable.

        The following unaudited condensed consolidated pro forma statement of income data for the year ended December 31, 2006 and the unaudited condensed consolidated pro forma statement of financial condition data as of December 31, 2006 are based upon our historical financial statements included elsewhere in this prospectus. These pro forma financial data present the consolidated results of operations and financial position of The Blackstone Group L.P. to give pro forma effect to all of the transactions described under "Organizational Structure" and this offering as if such transactions had been completed as of January 1, 2006 with respect to the unaudited condensed consolidated pro forma statement of income data and as of December 31, 2006 with respect to the unaudited pro forma statement of financial condition data. The pro forma adjustments are based on available information and upon assumptions that our management believes are reasonable in order to reflect, on a pro forma basis, the impact of these transactions and this offering on the historical financial information of Blackstone Group. The adjustments are described in the notes to the unaudited condensed consolidated pro forma statement of income and the unaudited condensed consolidated pro forma statement of financial condition in "Unaudited Pro Forma Financial Information".

        The pro forma adjustments principally give effect to:

22

        Blackstone Group is considered our predecessor for accounting purposes, and its combined financial statements will be our historical financial statements following this offering. Because our founders control the legal entities and general partners which comprise Blackstone Group before the reorganization and will control our general partner after the reorganization, we will account for the reorganization as a transfer of interests under common control. Accordingly, except for the non-contributed entities described above and the valuation adjustments attributable to reflecting the effect of reporting certain assets at fair value under SFAS 159, we will carry forward unchanged the value of assets and liabilities recognized in Blackstone Group's combined financial statements into our consolidated financial statements.

        The unaudited condensed consolidated pro forma financial information is included for informational purposes only and does not purport to reflect the results of operations or financial position of The Blackstone Group L.P. that would have occurred had the transactions referenced above occurred on the dates indicated or had we operated as a public entity during the periods presented or for any future period or date.

23

 
   The Blackstone Group L.P.
Consolidated Pro Forma
 
   Year Ended December 31, 2006
 
   ($ in thousands, except per common unit data)
Statement of Income Data    
Revenues    
Fund Management Fees    
Advisory Fees    
Interest and Other    
   
  Total Revenues    
   
Expenses    
Employee Compensation and Benefits    
Interest    
Occupancy and Related Charges    
General, Administrative and Other    
   
  Total Expenses    
   
Other Income    
Net Gains from Investment Activities    
   
Income Before Non-Controlling Interests in Income of Consolidated Entities and Income Taxes    
Non-Controlling Interests in Income of Consolidated Entities    
   
Income Before Taxes    
Income Taxes    
   
Net Income    
   

Net Income Per Common Unit:
 
 
  Basic    
  Diluted    
Weighted Average Common Units:    
  Basic    
  Diluted    
 
   As of December 31, 2006
 
   Blackstone
Holdings
Pro Forma
   The Blackstone
Group L.P.
Consolidated
Pro Forma
 
   ($ in thousands)
Statement of Financial Condition Data        
Total Assets        
Total Liabilities        
Non-Controlling Interests in Consolidated Entities        
Total Partners' Equity        

24


RISK FACTORS

        An investment in our common units involves risks. You should carefully consider the following information about these risks, together with the other information contained in this prospectus, before investing in our common units.

Risks Related to Our Business

Difficult market conditions can adversely affect our business in many ways, including by reducing the value or performance of the investments made by our investment funds, reducing the ability of our investment funds to raise or deploy capital and reducing the volume of the transactions involving our financial advisory business, each of which could materially reduce our revenue and cash flow and adversely affect our financial condition.

        Our business is materially affected by conditions in the global financial markets and economic conditions throughout the world that are outside our control, such as interest rates, availability of credit, inflation rates, economic uncertainty, changes in laws (including laws relating to taxation), trade barriers, commodity prices, currency exchange rates and controls and national and international political circumstances (including wars, terrorist acts or security operations). These factors may affect the level and volatility of securities prices and the liquidity and the value of investments, and we may not be able to or may choose not to manage our exposure to these market conditions. In the event of a market downturn, each of our businesses could be affected in different ways. Our profitability may also be adversely affected by our fixed costs and the possibility that we would be unable to scale back other costs within a time frame sufficient to match any decreases in revenue relating to changes in market and economic conditions.

        Our investment funds may be affected by reduced opportunities to exit and realize value from their investments and by the fact that we may not be able to find suitable investments for the investment funds to effectively deploy capital, which could adversely affect our ability to raise new funds. During periods of difficult market conditions or slowdowns in a particular sector, companies in which we invest may experience decreased revenues, financial losses, difficulty in obtaining access to financing and increased funding costs. During such periods, these companies may also have difficulty in expanding their businesses and operations and be unable to meet their debt service obligations or other expenses as they become due, including expenses payable to us. In addition, during periods of adverse economic conditions, we may have difficulty accessing financial markets, which could make it more difficult or impossible for us to obtain funding for additional investments and harm our assets under management and operating results. A general market downturn, or a specific market dislocation, may result in lower investment returns for our investment funds, which would adversely affect our revenues. Furthermore, such conditions would also increase the risk of default with respect to investments held by our investment funds that have significant debt investments, such as our mezzanine funds, senior debt vehicles and distressed securities hedge fund.

        In addition, our financial advisory business would be materially affected by conditions in the global financial markets and economic conditions throughout the world. For example, revenue generated by our financial advisory business is directly related to the volume and value of the transactions in which we are involved. During periods of unfavorable market or economic conditions, the volume and value of mergers and acquisitions transactions may decrease, thereby reducing the demand for our financial advisory services and increasing price competition among financial services companies seeking such engagements.

Our revenue, net income and cash flow are all highly variable, which may make it difficult for us to achieve steady earnings growth on a quarterly basis and may cause the price of our common units to decline.

        Our revenue, net income and cash flow are all highly variable, primarily due to the fact that we receive carried interest from our carry funds only when investments are realized and transaction fees

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received by our carry funds and fees received by our advisory business can vary significantly from quarter to quarter. In addition, the investment return profiles of most of our investment funds are volatile. We may also experience fluctuations in our results from quarter to quarter due to a number of other factors, including changes in the values of our funds' investments, changes in the amount of distributions, dividends or interest paid in respect of investments, changes in our operating expenses, the degree to which we encounter competition and general economic and market conditions. Such variability may lead to volatility in the trading price of our common units and cause our results for a particular period not to be indicative of our performance in a future period. It may be difficult for us to achieve steady growth in net income and cash flow on a quarterly basis, which could in turn lead to large adverse movements in the price of our common units or increased volatility in our common unit price generally.

        The timing and receipt of carried interest generated by our carry funds is uncertain and will contribute to the volatility of our results. Carried interest depends on our carry funds' performance and opportunities for realizing gains, which may be limited. It takes a substantial period of time to identify attractive investment opportunities, to raise all the funds needed to make an investment and then to realize the cash value (or other proceeds) of an investment through a sale, public offering, recapitalization or other exit. Even if an investment proves to be profitable, it may be several years before any profits can be realized in cash (or other proceeds). We cannot predict when, or if, any realization of investments will occur. If we were to have a realization event in a particular quarter, it may have a significant impact on our results for that particular quarter which may not be replicated in subsequent quarters. We recognize revenue on investments in our investment funds based on our allocable share of realized and unrealized gains (or losses) reported by such investment funds, and a decline in realized or unrealized gains, or an increase in realized or unrealized losses, would adversely affect our revenue, which could further increase the volatility of our quarterly results.

        With respect to our proprietary hedge funds and many of our funds of hedge funds, our incentive fees are paid annually, semi-annually or quarterly if the net asset value of a fund has increased. Our hedge funds also have "high water marks" whereby we do not earn incentive fees during a particular period even though the fund had positive returns in such period as a result of losses in prior periods. If a hedge fund experiences losses, we will not be able to earn incentive fees from the fund until it surpasses the previous high water mark. The incentive fees we earn are therefore dependent on the net asset value of the hedge fund, which could lead to significant volatility in our quarterly results.

        We also earn a portion of our revenue from financial advisory engagements, and in many cases we are not paid until the successful consummation of the underlying transaction, restructuring or closing of the fund. As a result, our financial advisory revenue is highly dependent on market conditions and the decisions and actions of our clients, interested third parties and governmental authorities. If a transaction, restructuring or funding is not consummated, we often do not receive any financial advisory fees other than the reimbursement of certain out-of-pocket expenses, despite the fact that we may have devoted considerable resources to these transactions.

        Because our revenue, net income and cash flow can be highly variable from quarter to quarter and year to year, we plan not to provide any guidance regarding our expected quarterly and annual operating results. The lack of guidance may affect the expectations of public market analysts and could cause increased volatility in our common unit price.

We depend on our founders and other key senior managing directors and the loss of their services would have a material adverse effect on our business, results and financial condition.

        We depend on the efforts, skill, reputations and business contacts of our founders, Messrs. Schwarzman and Peterson, our President and Chief Operating Officer, Hamilton E. James, our Vice Chairman, J. Tomilson Hill, and other key senior managing directors, the information and deal

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flow they and other senior managing directors generate during the normal course of their activities and the synergies among the diverse fields of expertise and knowledge held by our professionals. Accordingly, our success will depend on the continued service of these individuals, who are not obligated to remain employed with us. In addition, all of the Blackstone Holdings partnership units that our founders will receive in the reorganization described in "Organizational Structure" will be fully vested upon issuance. We have experienced departures of several key senior managing directors in the past and may do so in the future, and we cannot predict the impact that any such departures will have on our ability to achieve our investment objectives. The loss of the services of any of them could have a material adverse effect on our revenues, net income and cash flows and could harm our ability to maintain or grow assets under management in existing funds or raise additional funds in the future.

        Our senior managing directors and other key personnel possess substantial experience and expertise and have strong business relationships with investors in our funds, clients and other members of the business community. As a result, the loss of these personnel could jeopardize our relationships with investors in our funds, our clients and members of the business community and result in the reduction of assets under management or fewer investment opportunities. For example, if any of our senior managing directors were to join or form a competing firm, that could have a material adverse effect on our business, results and financial condition.

Our transition to a publicly-traded structure may adversely affect our ability to retain and motivate our senior managing directors and other key personnel and to recruit, retain and motivate new senior managing directors and other key personnel, both of which could adversely affect our business, results and financial condition.

        Our most important asset is our people, and our continued success is highly dependent upon the efforts of our senior managing directors and other professionals. Our future success and growth depends to a substantial degree on our ability to retain and motivate our senior managing directors and other key personnel and to strategically recruit, retain and motivate new talented personnel, including new senior managing directors. However, we may not be successful in our efforts to recruit, retain and motivate the required personnel as the market for qualified investment professionals is extremely competitive. As part of the reorganization we will effect prior to this offering, our current senior managing directors will receive partnership units in Blackstone Holdings. Distributions in respect of these equity interests may not equal the cash distributions previously received by our senior managing directors prior to this offering. Until December 31, 2009, the income (and accordingly distributions) of Blackstone Holdings will be allocated on a priority basis to The Blackstone Group L.P.'s wholly-owned subsidiaries as described in "Cash Distribution Policy", which may reduce the amount of distributions received by our senior managing directors. Additionally, ownership of a portion of the Blackstone Holdings partnership units to be received by our senior managing directors is not dependent upon their continued employment with us as those equity interests will be fully vested upon issuance. Moreover, the minimum retained ownership requirements and transfer restrictions to which these interests are subject in certain instances lapse over time, may not be enforceable in all cases and can be waived. There is no guarantee that the non-competition, non-solicitation and confidentiality agreements to which our senior managing directors are subject, together with our other arrangements with them, will prevent them from leaving us, joining our competitors or otherwise competing with us or that these agreements will be enforceable in all cases. In addition, these agreements will expire after a certain period of time, at which point each of our senior managing directors would be free to compete against us and solicit investors in our funds, clients and employees. See "Organizational Structure—Reorganization—Blackstone Holdings Formation", "Management—Non-Competition, Non-Solicitation and Confidentiality Agreements" and "—Minimum Retained Ownership Requirements and Transfer Restrictions".

        Following this offering, we might not be able to provide future senior managing directors with equity interests in our business to the same extent or with the same tax consequences as our existing

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senior managing directors. Therefore, in order to recruit and retain existing and future senior managing directors, we may need to increase the level of compensation that we pay to them. Accordingly, as we promote or hire new senior managing directors over time, we may increase the level of compensation we pay to our senior managing directors, which would cause our total employee compensation and benefits expense as a percentage of our total revenue to increase and adversely affect our profitability. In addition, issuance of equity interests in our business to future senior managing directors would dilute public common unitholders.

        We strive to maintain a work environment that reinforces our culture of collaboration, motivation and alignment of interests with investors. The effects of becoming public, including potential changes in our compensation structure, could adversely affect this culture. If we do not continue to develop and implement the right processes and tools to manage our changing enterprise and maintain this culture, our ability to compete successfully and achieve our business objectives could be impaired, which could negatively impact our business, financial condition and results of operations.

The requirements of being a public entity and sustaining our growth may strain our resources.

        As a public entity, we will be subject to the reporting requirements of the U.S. Securities Exchange Act of 1934, as amended, or "Exchange Act," and requirements of the U.S. Sarbanes-Oxley Act of 2002, or "Sarbanes-Oxley Act." These requirements may place a strain on our systems and resources. The Exchange Act requires that we file annual, quarterly and current reports with respect to our business and financial condition. The Sarbanes-Oxley Act requires that we maintain effective disclosure controls and procedures and internal controls over financial reporting, which is discussed below. In order to maintain and improve the effectiveness of our disclosure controls and procedures, significant resources and management oversight will be required. We will be implementing additional procedures and processes for the purpose of addressing the standards and requirements applicable to public companies. In addition, sustaining our growth will also require us to commit additional management, operational and financial resources to identify new professionals to join our firm and to maintain appropriate operational and financial systems to adequately support expansion. These activities may divert management's attention from other business concerns, which could have a material adverse effect on our business, financial condition, results of operations and cash flows. We expect to incur significant additional annual expenses related to these steps and, among other things, additional directors and officers liability insurance, director fees, reporting requirements of the Securities and Exchange Commission, or "SEC," transfer agent fees, hiring additional accounting, legal and administrative personnel, increased auditing and legal fees and similar expenses.

Our use of leverage to finance our business will expose us to substantial risks, which are exacerbated by our funds' use of leverage to finance investments.

        It is our intention to eventually use a significant amount of borrowings to finance our business operations as a public company. See "Summary—We Intend to be a Different Kind of Public Company—Use Leverage to Enhance Returns". That will expose us to the typical risks associated with the use of substantial leverage, including those discussed below under "—Dependence on significant leverage in investments by our funds could adversely affect our ability to achieve attractive rates of return on those investments". These risks are exacerbated by our funds' use of leverage to finance investments. Our use of substantial leverage as a public company, coupled with the leverage used by many of our investment funds to finance investments, could also cause us to suffer a decline in the credit ratings assigned to our debt by rating agencies, which might well result in an increase in our borrowing costs and could otherwise adversely affect our business in a material way, particularly if our credit ratings were to fall below investment grade.

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Operational risks may disrupt our businesses, result in losses or limit our growth.

        We rely heavily on our financial, accounting and other data processing systems. If any of these systems do not operate properly or are disabled, we could suffer financial loss, a disruption of our businesses, liability to our investment funds, regulatory intervention or reputational damage.

        In addition, we operate in businesses that are highly dependent on information systems and technology. Our information systems and technology may not continue to be able to accommodate our growth, and the cost of maintaining such systems may increase from its current level. Such a failure to accommodate growth, or an increase in costs related to such information systems, could have a material adverse effect on us.

        Furthermore, we depend on our headquarters in New York City, where most of our personnel are located, for the continued operation of our business. A disaster or a disruption in the infrastructure that supports our businesses, including a disruption involving electronic communications or other services used by us or third parties with whom we conduct business, or directly affecting our headquarters, could have a material adverse impact on our ability to continue to operate our business without interruption. Our disaster recovery programs may not be sufficient to mitigate the harm that may result from such a disaster or disruption. In addition, insurance and other safeguards might only partially reimburse us for our losses, if at all.

        Finally, we rely on third-party service providers for certain aspects of our business, including for certain information systems and technology and administration of our hedge funds. Any interruption or deterioration in the performance of these third parties or failures of their information systems and technology could impair the quality of the funds' operations and could impact our reputation and hence adversely affect our businesses.

Our internal controls over financial reporting do not currently meet all of the standards contemplated by Section 404 of the Sarbanes-Oxley Act, and failure to achieve and maintain effective internal controls over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act could have a material adverse effect on our business and common unit price.

        Our internal controls over financial reporting do not currently meet all of the standards contemplated by Section 404 of the Sarbanes-Oxley Act that we will eventually be required to meet. We are in the process of addressing our internal controls over financial reporting and are establishing formal policies, processes and practices related to financial reporting and to the identification of key financial reporting risks, assessment of their potential impact and linkage of those risks to specific areas and activities within our organization.

        Additionally, we have begun the process of documenting our internal control procedures to satisfy the requirements of Section 404, which requires annual management assessments of the effectiveness of our internal controls over financial reporting and a report by our independent registered public accounting firm addressing these assessments. Because we do not currently have comprehensive documentation of our internal controls and have not yet tested our internal controls in accordance with Section 404, we cannot conclude in accordance with Section 404 that we do not have a material weakness in our internal controls or a combination of significant deficiencies that could result in the conclusion that we have a material weakness in our internal controls. As a public entity, we will be required to complete our initial assessment in a timely manner. If we are not able to implement the requirements of Section 404 in a timely manner or with adequate compliance, our independent registered public accounting firm may not be able to certify as to the adequacy of our internal controls over financial reporting. Matters impacting our internal controls may cause us to be unable to report our financial information on a timely basis and thereby subject us to adverse regulatory consequences, including sanctions by the SEC or violations of applicable stock exchange listing rules, and result in a breach of the covenants under our revolving credit facility. There could also be a negative reaction in

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the financial markets due to a loss of investor confidence in us and the reliability of our financial statements. Confidence in the reliability of our financial statements could also suffer if our independent registered public accounting firm were to report a material weakness in our internal controls over financial reporting. This could materially adversely affect us and lead to a decline in our common unit price.

The time and attention that our senior managing directors and other employees devote to assets that are not being contributed to Blackstone Holdings will not financially benefit us and may reduce the time and attention these individuals devote to our business.

        The general partners of certain legacy Blackstone funds that do not have a meaningful amount of unrealized investments and a number of investment vehicles through which our existing owners and other third parties have made commitments to or investments in or alongside of Blackstone's investment funds are not being contributed to us and will continue to be owned by our senior managing directors and third parties. Accordingly, following this offering we will no longer receive any carried interest income from, or any gains (or losses) arising from, such non-contributed assets. As a result, the time and attention that our senior managing directors and employees devote to these non-contributed assets will not financially benefit us and may reduce the time and attention these individuals devote to our business.

Extensive regulation of our businesses affects our activities and creates the potential for significant liabilities and penalties. The possibility of increased regulatory focus could result in additional burdens on our business. The possibility of tax or other legislative measures being adopted in some countries could adversely affect us.

        Our asset management and financial advisory businesses are subject to extensive regulation. We are subject to regulation, including periodic examinations, by governmental and self-regulatory organizations in the jurisdictions in which we operate around the world. Many of these regulators, including U.S. and foreign government agencies and self-regulatory organizations, as well as state securities commissions in the United States, are empowered to conduct investigations and administrative proceedings that can result in fines, suspensions of personnel or other sanctions, including censure, the issuance of cease-and-desist orders or the suspension or expulsion of a broker-dealer or investment adviser from registration or memberships. Even if an investigation or proceeding did not result in a sanction or the sanction imposed against us or our personnel by a regulator were small in monetary amount, the adverse publicity relating to the investigation, proceeding or imposition of these sanctions could harm our reputation and cause us to lose existing clients or fail to gain new asset management or financial advisory clients. In addition, we regularly rely on exemptions from various requirements of the U.S. Securities Act of 1933, as amended, or "Securities Act," the Exchange Act, the U.S. Investment Company Act of 1940, as amended, or "1940 Act," and the U.S. Employee Retirement Income Security Act of 1974, as amended, in conducting our asset management activities. These exemptions are sometimes highly complex and may in certain circumstances depend on compliance by third parties whom we do not control. If for any reason these exemptions were to become unavailable to us, we could become subject to regulatory action or third-party claims and our business could be materially and adversely affected. See "—Risks Related to Our Organizational Structure—If The Blackstone Group L.P. were deemed an "investment company" under the 1940 Act, applicable restrictions could make it impractical for us to continue our business as contemplated and could have a material adverse effect on our business". Lastly, the requirements imposed by our regulators are designed primarily to ensure the integrity of the financial markets and to protect investors in our investment funds and are not designed to protect our common unitholders. Consequently, these regulations often serve to limit our activities.

        In addition, the regulatory environment in which our asset management and financial advisory clients operate may affect our business. For example, changes in antitrust laws or the enforcement of

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antitrust laws could affect the level of mergers and acquisitions activity and changes in state laws may limit investment activities of state pension plans. See "Business—Regulatory and Compliance Matters" for a further discussion of the regulatory environment in which we conduct our businesses.

        The regulatory environment in which we operate is subject to further regulation. We may be adversely affected as a result of new or revised legislation or regulations imposed by the SEC, other U.S. or non-U.S. governmental regulatory authorities or self-regulatory organizations that supervise the financial markets. We also may be adversely affected by changes in the interpretation or enforcement of existing laws and rules by these governmental authorities and self-regulatory organizations. It is impossible to determine the extent of the impact of any new laws, regulations or initiatives that may be proposed, or whether any of the proposals will become law. Compliance with any new laws or regulations could make compliance more difficult and expensive and affect the manner in which we conduct business.

        Legislative proposals have recently been introduced in Denmark and Germany that would significantly limit the tax deductibility of interest expense incurred by companies in those countries. If adopted, these measures would adversely affect Danish and German companies in which our corporate private equity and real estate opportunity funds have investments and limit the benefits to them of additional investments in those countries. Our corporate private equity and real estate opportunity fund businesses are subject to the risk that similar measures might be introduced in other countries in which they currently have investments or plan to invest in the future, or that other legislative or regulatory measures might be promulgated in any of the countries in which we operate that adversely affect our business. For example, if legislation were to be introduced in the U.S. Congress to tax carried interest as ordinary income rather than as capital gains, adoption of any such legislation would materially increase the amount of taxes that we and possibly our equityholders are required to pay (thereby reducing the value of our common units) and adversely affect our ability to recruit, retain and motivate our current and future professionals.

        Recently, it has been reported in the press that a few of our competitors in the private equity industry have received information requests relating to private equity transactions from the Antitrust Division of the U.S. Department of Justice. In addition, the U.K. Financial Services Authority recently published a discussion paper on the impact that the growth in the private equity market has had on the markets in the United Kingdom and the suitability of its regulatory approach in addressing risks posed by the private equity market.

        In addition, regulatory developments designed to increase oversight of hedge funds may adversely affect our business. In recent years, there has been debate in U.S. and foreign governments about new rules and regulations for hedge funds. For example, the SEC had recently adopted a rule, which was later struck down by a federal court, that would have required registration under the Investment Advisers Act of 1940, or "Advisers Act," of hedge fund managers if they had 15 or more clients. While all of our entities that serve as advisers to our investment funds are already registered with the SEC under the Advisers Act as investment advisers, other new regulations could constrain or otherwise impose burdens on our business.

We are subject to substantial litigation risks and may face significant liabilities and damage to our professional reputation as a result of litigation allegations and negative publicity.

        The investment decisions we make in our asset management business and the activities of our investment professionals on behalf of portfolio companies of our carry funds may subject them and us to the risk of third-party litigation arising from investor dissatisfaction with the performance of those investment funds, the activities of our portfolio companies and a variety of other litigation claims. For example, from time to time we and our portfolio companies have been subject to class action suits by shareholders in public companies that we have agreed to acquire that challenge our acquisition

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transactions and attempt to enjoin them. In addition, thirteen private equity firms, including Blackstone, were recently named as defendants in a purported class action complaint by shareholders in public companies recently acquired by private equity firms. The complaint alleges that the defendant firms engaged in certain cooperative behavior during the bidding process in going-private transactions in violation of antitrust laws and that this purported behavior suppressed the price paid by the private equity firms for the plaintiffs' shares in the acquired companies below that which would otherwise have been paid in the absence of such behavior. The complaint seeks treble damages of an unspecified amount. We believe that this suit lacks any merit.

        Our financial advisory activities may also subject us to the risk of liabilities to our clients and third parties, including our clients' stockholders, under securities or other laws in connection with corporate transactions on which we render advice.

        If any lawsuits were brought against us and resulted in a finding of substantial legal liability, it could materially adversely affect our business, financial condition or results of operations or cause significant reputational harm to us, which could seriously harm our business. We depend to a large extent on our business relationships and our reputation for integrity and high-caliber professional services to attract and retain investors and advisory clients and to pursue investment opportunities for our carry funds. As a result, allegations of improper conduct by private litigants or regulators, whether the ultimate outcome is favorable or unfavorable to us, as well as negative publicity and press speculation about us, our investment activities or the private equity industry in general, whether or not valid, may harm our reputation, which may be more damaging to our business than to other types of businesses.

Employee misconduct could harm us by impairing our ability to attract and retain clients and subjecting us to significant legal liability and reputational harm.

        There is a risk that our employees could engage in misconduct that adversely affects our business. We are subject to a number of obligations and standards arising from our asset management business and our authority over the assets managed by our asset management business. The violation of these obligations and standards by any of our employees would adversely affect our clients and us. Our business often requires that we deal with confidential matters of great significance to companies in which we may invest or our financial advisory clients. If our employees were improperly to use or disclose confidential information, we could suffer serious harm to our reputation, financial position and current and future business relationships. It is not always possible to detect or deter employee misconduct, and the extensive precautions we take to detect and prevent this activity may not be effective in all cases. If one of our employees were to engage in misconduct or were to be accused of such misconduct, our business and our reputation could be adversely affected.

Risks Relating to Our Asset Management Businesses

Poor performance of our investment funds would cause a decline in our revenue, income and cash flow, may obligate us to repay carried interest previously paid to us, and could adversely affect our ability to raise capital for future investment funds.

        In the event that any of our investment funds were to perform poorly, our revenue, income and cash flow would decline because the value of our assets under management would decrease, which would result in a reduction in management fees, and our investment returns would decrease, resulting in a reduction in the carried interest and incentive fees we earn. Moreover, we could experience losses on our investments of our own principal as a result of poor investment performance by our investment funds. Furthermore, if, as a result of poor performance of later investments in a carry fund's life, the fund does not achieve certain investment returns for the fund over its life, we will be obligated to repay the amount by which carried interest that was previously distributed to us exceeds amounts to which we

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are ultimately entitled. Poor performance of our investment funds could make it more difficult for us to raise new capital. Investors in carry funds might decline to invest in future investment funds we raise and investors in hedge funds or other investment funds might withdraw their investments as a result of poor performance of the investment funds in which they are invested. Investors and potential investors in our funds continually assess our investment funds' performance, and our ability to raise capital for existing and future investment funds and avoid excessive redemption levels will depend on our investment funds' continued satisfactory performance.

Valuation methodologies for certain assets in our funds can be subject to significant subjectivity and the values of assets established pursuant to such methodologies may never be realized, which could result in significant losses for our funds.

        There are no readily ascertainable market prices for a very large number of illiquid investments of our corporate private equity, real estate opportunity and mezzanine funds. We determine the value of the investments of each of our corporate private equity, real estate opportunity and mezzanine funds on a periodic basis based on the fair value of such investments. The fair value of investments of a corporate private equity, real estate opportunity or mezzanine fund is determined using a number of methodologies described in the investment funds' valuation policies. We have made valuation determinations historically without the assistance of an independent valuation firm, although an independent valuation firm will participate in valuation determinations following this offering.

        There is no single standard for determining fair value in good faith and, in many cases, fair value is best expressed as a range of fair values from which a single estimate may be derived. The types of factors that may be considered when applying fair value pricing to an investment in a particular company include the historical and projected financial data for the company, valuations given to comparable companies, the size and scope of the company's operations, the strengths and weaknesses of the company, expectations relating to investors' demand for an offering of the company's securities, the size of our investment fund's holding in the portfolio company and any control associated therewith, information with respect to transactions or offers for the portfolio company's securities (including the transaction pursuant to which the investment was made and the period of time that has elapsed from the date of the investment to the valuation date), applicable restrictions on transfer, industry information and assumptions, general economic and market conditions, the nature and realizable value of any collateral or credit support and other relevant factors. Fair values may be established using a market multiple approach that is based on a specific financial measure (such as earnings before interest, taxes, depreciation and amortization, or "EBITDA," adjusted EBITDA, cash flow, net income, revenues or net asset value) or, in some cases, a cost basis or a discounted cash flow or liquidation analysis. In addition, we determine the fair value of a number of the investments in our investment funds based on a variety of valuation methodologies. Because valuations, and in particular valuations of investments for which market quotations are not readily available, are inherently uncertain, may fluctuate over short periods of time and may be based on estimates, determinations of fair value may differ materially from the values that would have resulted if a ready market had existed. Even if market quotations are available for our funds' investments, such quotations may not reflect the value that we would actually be able to realize because of various factors, including the possible illiquidity associated with a large ownership position or legal restrictions on transfer. In addition, because many of the illiquid investments held by our investment funds are in industries or companies which are cyclical, undergoing some uncertainty or distress or otherwise subject to volatility, such investments are subject to rapid changes in value caused by sudden company-specific or industry-wide developments.

        Because there is significant uncertainty in the valuation of, or in the stability of the value of illiquid investments, the fair values of such investments as reflected in an investment fund's net asset value do not necessarily reflect the prices that would actually be obtained by us on behalf of the

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investment fund when such investments are realized. Realizations at values significantly lower than the values at which investments have been reflected in prior fund net asset values would result in losses for the applicable fund, a decline in asset management fees and the loss of potential carried interest and incentive fees. Changes in values attributed to investments from quarter to quarter may result in volatility in the net asset values and results of operations that we report from period to period. Also, a situation where asset values turn out to be materially different than values reflected in prior fund net asset values could cause investors to lose confidence in us, which would in turn result in difficulty in raising additional funds or redemptions from our hedge funds.

The historical returns attributable to our funds should not be considered as indicative of the future results of our funds or of our future results or of any returns expected on an investment in our common units.

        We have presented in this prospectus the annualized IRRs and returns relating to the historical performance of all of our investment funds, including certain legacy Blackstone funds that do not have a meaningful amount of unrealized investments, the general partners of which are not being contributed to Blackstone Holdings in the reorganization described in "Organizational Structure". The historical and potential future returns of the investment funds that we manage are not directly linked to returns on our common units. Therefore, you should not conclude that continued positive performance of the investment funds that we manage will necessarily result in positive returns on an investment in our common units. However, poor performance of the investment funds that we manage would cause a decline in our revenue from such investment funds, and would therefore have a negative effect on our performance and in all likelihood the returns on an investment in our common units.

        Moreover, with respect to the historical returns of our investment funds:

        See "Business—The Historical Investment Performance of Our Investment Funds". In addition, future returns will be affected by the applicable risks described elsewhere in this prospectus, including risks of the industries and businesses in which a particular fund invests.

Dependence on significant leverage in investments by our funds could adversely affect our ability to achieve attractive rates of return on those investments.

        Because many of our corporate private equity and real estate opportunity funds' investments rely heavily on the use of leverage, our ability to achieve attractive rates of return on investments will depend on our continued ability to access sufficient sources of indebtedness at attractive rates. For example, in many private equity investments, indebtedness may constitute 70% or more of a portfolio company's or real estate asset's total debt and equity capitalization, including debt that may be incurred in connection with the investment. An increase in either the general levels of interest rates or in the

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risk spread demanded by sources of indebtedness would make it more expensive to finance those investments. Increases in interest rates could also make it more difficult to locate and consummate private equity investments because other potential buyers, including operating companies acting as strategic buyers, may be able to bid for an asset at a higher price due to a lower overall cost of capital. In addition, a portion of the indebtedness used to finance private equity investments often includes high-yield debt securities issued in the capital markets. Availability of capital from the high-yield debt markets is subject to significant volatility, and there may be times when we might not be able to access those markets at attractive rates, or at all, when completing an investment.

        Investments in highly leveraged entities are inherently more sensitive to declines in revenues, increases in expenses and interest rates and adverse economic, market and industry developments. The incurrence of a significant amount of indebtedness by an entity could, among other things:

As a result, the risk of loss associated with a leveraged entity is generally greater than for companies with comparatively less debt.

        Our hedge funds, many of the hedge funds in which our funds of hedge funds invest and our mezzanine funds may choose to use leverage as part of their respective investment programs and regularly borrow a substantial amount of their capital. The use of leverage poses a significant degree of risk and enhances the possibility of a significant loss in the value of the investment portfolio. The fund may borrow money from time to time to purchase or carry securities. The interest expense and other costs incurred in connection with such borrowing may not be recovered by appreciation in the securities purchased or carried, and will be lost—and the timing and magnitude of such losses may be accelerated or exacerbated—in the event of a decline in the market value of such securities. Gains realized with borrowed funds may cause the fund's net asset value to increase at a faster rate than would be the case without borrowings. However, if investment results fail to cover the cost of borrowings, the fund's net asset value could also decrease faster than if there had been no borrowings.

        Increases in interest rates could also decrease the value of fixed-rate debt investments that our investment funds make.

        Any of the foregoing circumstances could have a material adverse effect on our financial condition, results of operations and cash flow.

The asset management business is intensely competitive.

        The asset management business is intensely competitive, with competition based on a variety of factors, including investment performance, the quality of service provided to clients, brand recognition and business reputation. Our asset management business competes with a number of private equity funds, specialized investment funds, hedge funds, corporate buyers, traditional asset managers,

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commercial banks, investment banks and other financial institutions. A number of factors serve to increase our competitive risks:

        We may lose investment opportunities in the future if we do not match investment prices, structures and terms offered by competitors. Alternatively, we may experience decreased rates of return and increased risks of loss if we match investment prices, structures and terms offered by competitors. In addition, if interest rates were to rise or there were to be a prolonged bull market in equities, the attractiveness of our investment funds relative to investments in other investment products could decrease. This competitive pressure could adversely affect our ability to make successful investments and limit our ability to raise future investment funds, either of which would adversely impact our business, revenue, results of operations and cash flow.

The due diligence process that we undertake in connection with investments by our investment funds may not reveal all facts that may be relevant in connection with an investment.

        Before making investments in private equity and other investments, we conduct due diligence that we deem reasonable and appropriate based on the facts and circumstances applicable to each investment. When conducting due diligence, we may be required to evaluate important and complex business, financial, tax, accounting, environmental and legal issues. Outside consultants, legal advisors, accountants and investment banks may be involved in the due diligence process in varying degrees depending on the type of investment. Nevertheless, when conducting due diligence and making an assessment regarding an investment, we rely on the resources available to us, including information provided by the target of the investment and, in some circumstances, third-party investigations. The due diligence investigation that we will carry out with respect to any investment opportunity may not reveal or highlight all relevant facts that may be necessary or helpful in evaluating such investment

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opportunity. Moreover, such an investigation will not necessarily result in the investment being successful.

Our asset management activities involve investments in relatively high-risk, illiquid assets, and we may fail to realize any profits from these activities for a considerable period of time or lose some or all of our principal investments.

        Many of our investment funds invest in securities that are not publicly traded. In many cases, our investment funds may be prohibited by contract or by applicable securities laws from selling such securities for a period of time. Our investment funds will generally not be able to sell these securities publicly unless their sale is registered under applicable securities laws, or unless an exemption from such registration is available. The ability of many of our investment funds, particularly our corporate private equity funds, to dispose of investments is heavily dependent on the public equity markets. For example, the ability to realize any value from an investment may depend upon the ability to complete an initial public offering of the portfolio company in which such investment is held. Even if the securities are publicly traded, large holdings of securities can often be disposed of only over a substantial length of time, exposing the investment returns to risks of downward movement in market prices during the intended disposition period. Accordingly, under certain conditions, our investment funds may be forced to either sell securities at lower prices than they had expected to realize or defer—potentially for a considerable period of time—sales that they had planned to make. We have made and expect to continue to make significant principal investments in our current and future investment funds. Contributing capital to these investment funds is risky, and we may lose some or all of the principal amount of our investments.

We have increasingly engaged in large-sized investments, which involve certain complexities and risks that are not encountered in small- and medium-sized investments.

        Our corporate private equity and real estate opportunity funds have increasingly been investing in very large transactions. The increased size of these investments involves certain complexities and risks that are not encountered in small- and medium-sized investments. For example, larger transactions may be more difficult to finance, and exiting larger deals may present challenges in many cases.

        Larger transactions may be structured as "consortium transactions" due to the size of the investment and the amount of capital required to be invested. A consortium transaction involves an equity investment in which two or more private equity firms serve together or collectively as equity sponsors. We have participated in a significant number of consortium transactions in recent years due to the increased size of many of the transactions in which we have been involved. Consortium transactions generally entail a reduced level of control by Blackstone over the investment because governance rights must be shared with the other private equity investors. Accordingly, we may not be able to control decisions relating to the investment, including decisions relating to the management and operation of the company and the timing and nature of any exit, which could result in the risks described in "—Our investment funds make investments in companies that we do not control".

        Any of these factors could increase the risk that our larger investments could be less successful. The consequences to our investment funds of an unsuccessful larger investment could be more severe given the size of the investment.

Our investment funds make investments in companies that we do not control.

        Investments by most of our investment funds will include debt instruments and equity securities of companies that we do not control. Such instruments and securities may be acquired by our investment funds through trading activities or through purchases of securities from the issuer. In addition, our corporate private equity and real estate opportunity funds may acquire minority equity interests

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(particularly in consortium transactions, as described in "—We have increasingly engaged in large-sized investments, which involve certain complexities and risks that are not encountered in small- and medium-sized investments") and may also dispose of a portion of their majority equity investments in portfolio companies over time in a manner that results in the investment funds retaining a minority investment. Those investments will be subject to the risk that the company in which the investment is made may make business, financial or management decisions with which we do not agree or that the majority stakeholders or the management of the company may take risks or otherwise act in a manner that does not serve our interests. If any of the foregoing were to occur, the values of investments by our investment funds could decrease and our financial condition, results of operations and cash flow could suffer as a result.

We expect to make investments in companies that are based outside of the United States, which may expose us to additional risks not typically associated with investing in companies that are based in the United States.

        Many of our investment funds generally invest a significant portion of their assets in the equity, debt, loans or other securities of issuers located outside the United States. Investments in non-U.S. securities involve certain factors not typically associated with investing in U.S. securities, including risks relating to:

        There can be no assurance that adverse developments with respect to such risks will not adversely affect our assets that are held in certain countries or the returns from these assets.

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Investments by our investment funds will in most cases rank junior to investments made by others.

        In most cases, the companies in which our investment funds invest will have indebtedness or equity securities, or may be permitted to incur indebtedness or to issue equity securities, that rank senior to our investment. By their terms, such instruments may provide that their holders are entitled to receive payments of dividends, interest or principal on or before the dates on which payments are to be made in respect of our investment. Also, in the event of insolvency, liquidation, dissolution, reorganization or bankruptcy of a company in which an investment is made, holders of securities ranking senior to our investment would typically be entitled to receive payment in full before distributions could be made in respect of our investment. After repaying senior security holders, the company may not have any remaining assets to use for repaying amounts owed in respect of our investment. To the extent that any assets remain, holders of claims that rank equally with our investment would be entitled to share on an equal and ratable basis in distributions that are made out of those assets. Also, during periods of financial distress or following an insolvency, the ability of our investment funds to influence a company's affairs and to take actions to protect their investments may be substantially less than that of the senior creditors.

Third-party investors in our investment funds will have the right to dissolve the investment funds and investors in our hedge funds may redeem their investments in our hedge funds. These events would lead to a decrease in our revenues, which could be substantial.

        In connection with this offering, we are amending the governing agreements of all of our investment funds (with the exception of a limited number of our funds of hedge funds) to provide that, subject to certain conditions, third-party investors in those funds will have the right, without cause, to vote to accelerate the liquidation date of the investment fund or the withdrawal of their capital by a simple majority vote, resulting in a reduction in management fees we would earn from such investment funds and a significant reduction in the amounts of total carried interest and incentive fees from those funds. Carried interest and incentive fees could be significantly reduced as a result of our inability to maximize the value of investments by an investment fund during the liquidation process. Finally, the applicable funds would cease to exist. In addition, the governing agreements of our investment funds enable investors in those funds to vote to remove us as the fund's general partner, accelerate the liquidation date of the fund or accelerate the withdrawal of their investments in specified manners in the event certain "key persons" in our investment funds (for example, both of Stephen A. Schwarzman and Hamilton E. James in the case of our corporate private equity funds) do not remain active managing the fund. In addition to having a significant negative impact on our revenue, net income and cash flow, the occurrence of such an event with respect to any of our investment funds would likely result in significant reputational damage to us.

        Investors in our hedge funds may also generally redeem their investments on an annual, semi-annual or quarterly basis following the expiration of a specified period of time when capital may not be withdrawn (typically between one and three years), subject to the applicable fund's specific redemption provisions. In a declining market, the pace of redemptions and consequent reduction in our assets under management could accelerate. The decrease in revenues that would result from significant redemptions in our hedge funds could have a material adverse effect on our business, revenues, net income and cash flows.

        In addition, because all of our investment funds have advisers that are registered under the Advisers Act, the management agreements of all of our investment funds would be terminated upon an "assignment," without investor consent, of these agreements, which may be deemed to occur in the event these advisers were to experience a change of control. We cannot be certain that consents required to assignments of our investment management agreements will be obtained if a change of control occurs. In addition, with respect to our publicly-traded closed-end mutual funds, each investment fund's investment management agreement must be approved annually by the independent

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members of such investment fund's board of directors and, in certain cases, by its stockholders, as required by law. Termination of these agreements would cause us to lose the fees we earn from such investment funds.

Certain policies and procedures implemented to mitigate potential conflicts of interest and address certain regulatory requirements may reduce the synergies across our various businesses.

        Because of our various lines of asset management and advisory businesses, we will be subject to a number of actual and potential conflicts of interest and subject to greater regulatory oversight than that to which we would otherwise be subject if we had just one line of business. In addressing these conflicts and regulatory requirements across our various businesses, we have implemented certain policies and procedures (for example, information walls) that may reduce the positive synergies that we cultivate across these businesses. For example, we may come into possession of material non-public information with respect to issuers in which we may be considering making an investment or issuers that are our advisory clients. As a consequence, we may be precluded from providing such information or other ideas to our other businesses that might be of benefit to them.

Risk management activities may adversely affect the return on our funds' investments.

        When managing our exposure to market risks, we may (on our own behalf or on behalf of our funds) from time to time use forward contracts, options, swaps, caps, collars and floors or pursue other strategies or use other forms of derivative instruments to limit our exposure to changes in the relative values of investments that may result from market developments, including changes in prevailing interest rates, currency exchange rates and commodity prices. The success of any hedging or other derivative transactions generally will depend on our ability to correctly predict market changes, the degree of correlation between price movements of a derivative instrument, the position being hedged, the creditworthiness of the counterparty and other factors. As a result, while we may enter into a transaction in order to reduce our exposure to market risks, the transaction may result in poorer overall investment performance than if it had not been executed. Such transactions may also limit the opportunity for gain if the value of a hedged position increases.

Our real estate opportunity funds are subject to the risks inherent in the ownership and operation of real estate and the construction and development of real estate.

        Investments in our real estate opportunity funds will be subject to the risks inherent in the ownership and operation of real estate and real estate-related businesses and assets. These risks include those associated with the burdens of ownership of real property, general and local economic conditions, changes in supply of and demand for competing properties in an area (as a result for instance of overbuilding), fluctuations in the average occupancy and room rates for hotel properties, the financial resources of tenants, changes in building, environmental and other laws, energy and supply shortages, various uninsured or uninsurable risks, natural disasters, changes in government regulations (such as rent control), changes in real property tax rates, changes in interest rates, the reduced availability of mortgage funds which may render the sale or refinancing of properties difficult or impracticable, negative developments in the economy that depress travel activity, environmental liabilities, contingent liabilities on disposition of assets, terrorist attacks, war and other factors that are beyond our control. In addition, if our real estate opportunity funds acquire direct or indirect interests in undeveloped land or underdeveloped real property, which may often be non-income producing, they will be subject to the risks normally associated with such assets and development activities, including risks relating to the availability and timely receipt of zoning and other regulatory or environmental approvals, the cost and timely completion of construction (including risks beyond the control of our fund, such as weather or labor conditions or material shortages) and the availability of both construction and permanent financing on favorable terms.

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Certain of our fund investments may be concentrated in certain asset types or in a geographic region, which could exacerbate any negative performance of those funds to the extent those concentrated investments perform poorly.

        The governing agreements of our investment funds contain only limited investment restrictions and only limited requirements as to diversification of fund investments, either by geographic region or asset type. For example, over 85% of the investments of our real estate opportunity funds are in office building and hotel assets. During periods of difficult market conditions or slowdowns in these sectors, the decreased revenues, difficulty in obtaining access to financing and increased funding costs experienced by our real estate opportunity funds may be exacerbated by this concentration of investments, which would result in lower investment returns for our real estate opportunity funds.

Our hedge fund investments are subject to numerous additional risks.

        Our hedge fund investments, including investments by our funds of hedge funds in other hedge funds, are subject to numerous additional risks, including the following:

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Certain of our investment funds utilize distressed debt and equity investment strategies which involve significant risks and potential additional liabilities.

        Our distressed securities hedge fund invests in issuers with weak financial conditions, poor operating results, substantial financial needs, negative net worth and/or special competitive problems. This fund also invests in issuers that are involved in bankruptcy or reorganization proceedings. In such situations, it may be difficult to obtain full information as to the exact financial and operating conditions of these issuers. Furthermore, some of our distressed securities hedge fund's distressed investments may not be widely traded or may have no recognized market. Depending on the specific fund's investment profile, a fund's exposure to such investments may be substantial in relation to the market for those investments and the acquired assets are likely to be illiquid and difficult to sell or transfer. As a result, it may take a number of years for the fair value of such investments to ultimately reflect their intrinsic value as perceived by us.

        A central strategy of our distressed securities hedge fund is to predict the occurrence of certain corporate events, such as debt and/or equity offerings, restructurings, reorganizations, mergers, takeover offers and other transactions. If we do not accurately predict these events, the market price and value of the fund's investment could decline sharply.

        In addition, these investments could subject our distressed securities hedge fund to certain potential additional liabilities that may exceed the value of its original investment. Under certain circumstances, payments or distributions on certain investments may be reclaimed if any such payment

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or distribution is later determined to have been a fraudulent conveyance, a preferential payment or similar transaction under applicable bankruptcy and insolvency laws. In addition, under certain circumstances, a lender that has inappropriately exercised control of the management and policies of a debtor may have its claims subordinated or disallowed, or may be found liable for damages suffered by parties as a result of such actions. In the case where the investment in securities of troubled companies is made in connection with an attempt to influence a restructuring proposal or plan of reorganization in bankruptcy, our funds may become involved in substantial litigation.

We are subject to risks in using prime brokers, custodians, administrators and other agents.

        Many of our funds of hedge funds, mezzanine funds, senior debt vehicles, proprietary hedge funds, closed-end mutual funds and other investment funds depend on the services of prime brokers, custodians, administrators and other agents to carry out certain securities transactions. For example, in the event of the insolvency of a prime broker and/or custodian, the funds might not be able to recover equivalent assets in full as they will rank among the prime broker's and custodian's unsecured creditors in relation to assets which the prime broker or custodian borrows, lends or otherwise uses. In addition, the funds' cash held with a prime broker or custodian will not be segregated from the prime broker's or custodian's own cash, and the funds will therefore rank as unsecured creditors in relation thereto.

Risks Related to Our Financial Advisory Businesses

Financial advisory fees are not long-term contracted sources of revenue and are not predictable.

        The fees earned by our financial advisory business are typically payable upon the successful completion of a particular transaction or restructuring. A decline in our financial advisory engagements or the market for advisory services would adversely affect our business. Our financial advisory business operates in a highly competitive environment where typically there are no long-term contracted sources of revenue. Each revenue-generating engagement typically is separately solicited, awarded and negotiated. In addition, many businesses do not routinely engage in transactions requiring our services. As a consequence, our fee-paying engagements with many clients are not predictable and high levels of financial advisory revenue in one quarter are not necessarily predictive of continued high levels of financial advisory revenue in future periods. In addition to the fact that most of our financial advisory engagements are single, non-recurring engagements, we lose clients each year as a result of a client's decision to retain other financial advisors, the sale, merger or restructuring of a client, a change in a client's senior management and various other causes. As a result, our financial advisory revenue could decline materially due to such changes in the volume, nature and scope of our engagements.

        The fees earned by Park Hill Group, our fund placement business, are generally payable upon the successful subscription by an investor in a client's fund and/or the closing of that fund. To the extent fewer assets are raised for funds or interest by investors in alternative asset funds declines, the fees earned by Park Hill Group would be adversely affected.

We face strong competition from other financial advisory firms.

        The financial advisory industry is intensely competitive, and we expect it to remain so. We compete on the basis of a number of factors, including the quality of our employees, transaction execution, our products and services, innovation and reputation and price. We have always experienced intense competition over obtaining advisory mandates, and we may experience pricing pressures in our financial advisory business in the future as some of our competitors seek to obtain increased market share by reducing fees. Our primary competitors in our financial advisory business are large financial institutions, many of which have far greater financial and other resources and much broader client relationships than us and (unlike us) have the ability to offer a wide range of products, from loans, deposit-taking and insurance to brokerage and a wide range of investment banking services, which may enhance their competitive position. They also have the ability to support investment banking, including financial

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advisory services, with commercial banking, insurance and other financial services revenue in an effort to gain market share, which puts us at a competitive disadvantage and could result in pricing pressures that could materially adversely affect our revenue and profitability. In addition, Park Hill Group operates in a highly competitive environment and the barriers to entry into the fund placement business are low.

Risks Related to Our Organizational Structure

Our common unitholders do not elect our general partner or vote on our general partner's directors and will have limited ability to influence decisions regarding our business.

        Our general partner, Blackstone Group Management L.L.C., which is owned by our senior managing directors, will manage all of our operations and activities. The limited liability company agreement of Blackstone Group Management L.L.C. establishes a board of directors that will be responsible for the oversight of our business and operations. Our general partner's board of directors will be elected in accordance with its limited liability company agreement, which provides that our founders, Messrs. Schwarzman and Peterson (or, following the withdrawal, death or disability of one of them, the remaining founder), will be vested with the power to elect and remove the directors of our general partner. Actions by our founders in this regard must be taken with their unanimous approval. Following the resignation, death or disability of both of our founders, the power to elect and remove the directors of our general partner will vest in the members of our general partner holding a majority in interest in our general partner.

        Our common unitholders do not elect our general partner or its board of directors and, unlike the holders of common stock in a corporation, will have only limited voting rights on matters affecting our business and therefore limited ability to influence decisions regarding our business. Furthermore, if our common unitholders are dissatisfied with the performance of our general partner, they will have little ability to remove our general partner. Our general partner may not be removed unless that removal is approved by the vote of the holders of not less than 662/3% of the voting power of our outstanding common units and special voting units (including common units and special voting units held by the general partner and its affiliates) and we receive an opinion of counsel regarding limited liability matters. As discussed below, immediately following this offering our existing owners will collectively have            % of the voting power of The Blackstone Group L.P. limited partners, or            % if the underwriters exercise in full their option to purchase additional common units. Therefore, they will have the ability to block any removal of our general partner.

Our senior managing directors will be able to determine the outcome of those few matters that may be submitted for a vote of the limited partners.

        Immediately following this offering, our existing owners will beneficially own            % of the equity in our business, or            % if the underwriters exercise in full their option to purchase additional common units. On those few matters that may be submitted for a vote of our common unitholders, the limited partners of Blackstone Holdings (other than AIG) will hold special voting units in The Blackstone Group L.P. that provide them with a number of votes that is equal to the aggregate number of partnership units of Blackstone Holdings that they then hold and entitle them to participate in the vote on the same basis as our common unitholders. Accordingly, immediately following this offering our senior managing directors will generally have sufficient voting power to determine the outcome of those few matters that may be submitted for a vote of the limited partners of The Blackstone Group L.P., including any attempt to remove our general partner.

        Our common unitholders' voting rights are further restricted by the provision in our partnership agreement stating that any common units held by a person that beneficially owns 20% or more of any class of The Blackstone Group L.P. common units then outstanding (other than our general partner and its affiliates, or a direct or subsequently approved transferee of our general partner or its affiliates)

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cannot be voted on any matter. In addition, our partnership agreement contains provisions limiting the ability of our common unitholders to call meetings or to acquire information about our operations, as well as other provisions limiting the ability of our common unitholders to influence the manner or direction of our management. Our partnership agreement also does not restrict our general partner's ability to take actions that may result in our being treated as an entity taxable as a corporation for U.S. federal (and applicable state) income tax purposes. Furthermore, the common unitholders are not entitled to dissenters' rights of appraisal under our partnership agreement or applicable Delaware law in the event of a merger or consolidation, a sale of substantially all of our assets or any other transaction or event. In addition, we have the right to acquire all our then-outstanding common units if not more than 10% of our common units are held by persons other than our general partner and its affiliates.

        As a result of these matters and the provisions referred to under "—Our common unitholders do not elect our general partner or vote on our general partner's directors and will have limited ability to influence decisions regarding our business", our common unitholders may be deprived of an opportunity to receive a premium for their common units in the future through a sale of The Blackstone Group L.P., and the trading prices of our common units may be adversely affected by the absence or reduction of a takeover premium in the trading price.

We are a limited partnership and as a result will qualify for and intend to rely on exceptions from certain corporate governance and other requirements under the rules of the New York Stock Exchange.

        We are a limited partnership and will qualify for exceptions from certain corporate governance and other requirements of the rules of the New York Stock Exchange. Pursuant to these exceptions, limited partnerships may elect not to comply with certain corporate governance requirements of the New York Stock Exchange, including the requirements (1) that a majority of the board of directors of our general partner consist of independent directors, (2) that we have a nominating/corporate governance committee that is composed entirely of independent directors and (3) that we have a compensation committee that is composed entirely of independent directors. In addition, we will not be required to hold annual meetings of our common unitholders. Following this offering, we intend to avail ourselves of these exceptions. Accordingly, you will not have the same protections afforded to equityholders of entities that are subject to all of the corporate governance requirements of the New York Stock Exchange.

Potential conflicts of interest may arise among our general partner, its affiliates and us. Our general partner and its affiliates have limited fiduciary duties to us and our common unitholders, which may permit them to favor their own interests to the detriment of us and our common unitholders.

        Conflicts of interest may arise among our general partner and its affiliates, on the one hand, and us and our common unitholders, on the other hand. As a result of these conflicts, our general partner may favor its own interests and the interests of its affiliates over the interests of our common unitholders. These conflicts include, among others, the following:

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See "Certain Relationships and Related Person Transactions" and "Conflicts of Interest and Fiduciary Responsibilities".

Our partnership agreement contains provisions that reduce or eliminate duties (including fiduciary duties) of our general partner and limit remedies available to common unitholders for actions that might otherwise constitute a breach of duty. It will be difficult for a common unitholder to challenge a resolution of a conflict of interest by our general partner or by its conflicts committee.

        Our partnership agreement contains provisions that waive or consent to conduct by our general partner and its affiliates that might otherwise raise issues about compliance with fiduciary duties or applicable law. For example, our partnership agreement provides that when our general partner is acting in its individual capacity, as opposed to in its capacity as our general partner, it may act without any fiduciary obligations to us or our common unitholders whatsoever. When our general partner, in its capacity as our general partner, is permitted to or required to make a decision in its "sole discretion" or "discretion" or that it deems "necessary or appropriate" or "necessary or advisable," then our general partner will be entitled to consider only such interests and factors as it desires, including its own interests, and will have no duty or obligation (fiduciary or otherwise) to give any consideration to

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any interest of or factors affecting us or any limited partners. Whenever a potential conflict of interest exists between us and our general partner, our general partner may resolve such conflict of interest. If our general partner determines that its resolution of the conflict of interest is on terms no less favorable to us than those generally being provided to or available from unrelated third parties or is fair and reasonable to us, taking into account the totality of the relationships between us and our general partner, then it will be presumed that in making this determination, our general partner acted in good faith. A common unitholder seeking to challenge this resolution of the conflict of interest would bear the burden of overcoming such presumption. This is different from the situation with Delaware corporations, where a conflict resolution by an interested party would be presumed to be unfair and the interested party would have the burden of demonstrating that the resolution was fair.

        Also, if our general partner obtains the approval of the conflicts committee of our general partner, the resolution will be conclusively deemed to be fair and reasonable to us and not a breach by our general partner of any duties it may owe to us or our common unitholders. This is different from the situation with Delaware corporations, where a conflict resolution by a committee consisting solely of independent directors may, in certain circumstances, merely shift the burden of demonstrating unfairness to the plaintiff. If you choose to purchase a common unit, you will be treated as having consented to the provisions set forth in the partnership agreement, including provisions regarding conflicts of interest situations that, in the absence of such provisions, might be considered a breach of fiduciary or other duties under applicable state law. As a result, common unitholders will, as a practical matter, not be able to successfully challenge an informed decision by the conflicts committee. See "Conflicts of Interest and Fiduciary Responsibilities".

The control of our general partner may be transferred to a third party without common unitholder consent.

        Our general partner may transfer its general partner interest to a third party in a merger or consolidation or in a transfer of all or substantially all of its assets without the consent of our common unitholders. Furthermore, at any time, the members of our general partner may sell or transfer all or part of their limited liability company interests in our general partner without the approval of the common unitholders, subject to certain restrictions as described elsewhere in this prospectus. A new general partner may not be willing or able to form new investment funds and could form funds that have investment objectives and governing terms that differ materially from those of our current investment funds. A new owner could also have a different investment philosophy, employ investment professionals who are less experienced, be unsuccessful in identifying investment opportunities or have a track record that is not as successful as Blackstone's track record. If any of the foregoing were to occur, we could experience difficulty in making new investments, and the value of our existing investments, our business, our results of operations and our financial condition could materially suffer.

We intend to pay regular distributions to our common unitholders, but our ability to do so may be limited by our holding partnership structure, applicable provisions of Delaware law and contractual restrictions.

        After consummation of this offering, we intend to pay cash distributions on a quarterly basis. The Blackstone Group L.P. will be a holding partnership and will have no material assets other than the ownership of the partnership units in Blackstone Holdings held through wholly-owned subsidiaries. The Blackstone Group L.P. has no independent means of generating revenue. Accordingly, we intend to cause Blackstone Holdings to make distributions to its partners, including The Blackstone Group L.P.'s wholly-owned subsidiaries, to fund any distributions The Blackstone Group L.P. may declare on the common units. If Blackstone Holdings makes such distributions, the limited partners of Blackstone Holdings will be entitled to receive equivalent distributions pro rata based on their partnership interests in Blackstone Holdings, except that The Blackstone Group L.P.'s wholly-owned subsidiaries will be entitled to priority allocations of income through December 31, 2009 as described under "Cash Distribution Policy".

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        The declaration and payment of any future distributions will be at the sole discretion of our general partner. Our general partner will take into account general economic and business conditions, our strategic plans and prospects, our business and investment opportunities, our financial condition and operating results, working capital requirements and anticipated cash needs, contractual restrictions and obligations, including payment obligations pursuant to the tax receivable agreement, legal, tax and regulatory restrictions, restrictions or other implications on the payment of distributions by us to our common unitholders or by our subsidiaries to us and such other factors as our general partner may deem relevant. Under the Delaware Limited Partnership Act, we may not make a distribution to a partner if after the distribution all our liabilities, other than liabilities to partners on account of their partnership interests and liabilities for which the recourse of creditors is limited to specific property of the partnership, would exceed the fair value of our assets. If we were to make such an impermissible distribution, any limited partner who received a distribution and knew at the time of the distribution that the distribution was in violation of the Delaware Limited Partnership Act would be liable to us for the amount of the distribution for three years. In addition, Blackstone Holdings' cash flow from operations may be insufficient to enable it to make required minimum tax distributions to its partners, in which case Blackstone Holdings may have to borrow funds or sell assets, and thus our liquidity and financial condition could be materially adversely affected.

        Furthermore, by paying cash distributions rather than investing that cash in our businesses, we risk slowing the pace of our growth, or not having a sufficient amount of cash to fund our operations, new investments or unanticipated capital expenditures, should the need arise.

We will be required to pay our senior managing directors for most of the benefits relating to any additional tax depreciation or amortization deductions we may claim as a result of the tax basis step-up we receive in connection with this offering, subsequent sales of our common units and related transactions.

        As described in "Organizational Structure", we intend to use a portion of the net proceeds from this offering to purchase Blackstone Holdings partnership units from our existing owners. In addition, holders of partnership units in Blackstone Holdings (other than The Blackstone Group L.P.'s wholly-owned subsidiaries), subject to the vesting and minimum retained ownership requirements and transfer restrictions set forth in the partnership agreements of the Blackstone Holdings partnerships, may exchange their Blackstone Holdings partnership units for The Blackstone Group L.P. common units on a one-for-one basis. The initial sale and subsequent exchanges are expected to result in increases in the tax basis of the tangible and intangible assets of Blackstone Holdings that otherwise would not have been available. These increases in tax basis may increase (for tax purposes) depreciation and amortization and therefore reduce the amount of tax that The Blackstone Group L.P.'s wholly-owned subsidiaries that are taxable as corporations for U.S. federal income tax purposes, which we refer to as the "corporate taxpayers," would otherwise be required to pay in the future, although the IRS may challenge all or part of that tax basis increase, and a court could sustain such a challenge.

        The corporate taxpayers will enter into a tax receivable agreement with our existing owners that will provide for the payment by the corporate taxpayers to our existing owners of 85% of the amount of cash savings, if any, in U.S. federal, state and local income tax or franchise tax that the corporate taxpayers actually realize as a result of these increases in tax basis and of certain other tax benefits related to entering into the tax receivable agreement, including tax benefits attributable to payments under the tax receivable agreement. This payment obligation is an obligation of the corporate taxpayers and not of Blackstone Holdings. While the actual increase in tax basis, as well as the amount and timing of any payments under this agreement, will vary depending upon a number of factors, including the timing of exchanges, the price of our common units at the time of the exchange, the extent to which such exchanges are taxable and the amount and timing of our income, we expect that as a result of the size of the increases in the tax basis of the tangible and intangible assets of Blackstone Holdings, the payments that we may make to our existing owners will be substantial. Assuming no material

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changes in the relevant tax law and that we earn significant taxable income to realize the full tax benefit of the increased amortization of our assets, we expect that future payments to our existing owners in respect of the initial sale will aggregate $                      million and range from approximately $                      million to $                       million per year over the next 15 years. Future payments to our existing owners in respect of subsequent exchanges would be in addition to these amounts and are expected to be substantial. The payments under the tax receivable agreement are not conditioned upon our existing owners' continued ownership of us. We may need to incur debt to finance payments under the tax receivable agreement to the extent our cash resources are insufficient to meet our obligations under the tax receivable agreement as a result of timing discrepancies or otherwise.

        Although we are not aware of any issue that would cause the IRS to challenge a tax basis increase, our existing owners will not reimburse us for any payments previously made under the tax receivable agreement. As a result, in certain circumstances payments to our existing owners under the tax receivable agreement could be in excess of the corporate taxpayers' cash tax savings. The corporate taxpayers' ability to achieve benefits from any tax basis increase, and the payments to be made under this agreement, will depend upon a number of factors, as discussed above, including the timing and amount of our future income.

If The Blackstone Group L.P. were deemed an "investment company" under the 1940 Act, applicable restrictions could make it impractical for us to continue our business as contemplated and could have a material adverse effect on our business.

        A person will generally be deemed to be an "investment company" for purposes of the 1940 Act if:

        We believe that we are engaged primarily in the business of providing asset management and financial advisory services and not in the business of investing, reinvesting or trading in securities. We also believe that the primary source of income from each of our businesses is properly characterized as income earned in exchange for the provision of services. We hold ourselves out as an asset management and financial advisory firm and do not propose to engage primarily in the business of investing, reinvesting or trading in securities. Accordingly, we do not believe that The Blackstone Group L.P. is, or following this offering will be, an "orthodox" investment company as defined in section 3(a)(1)(A) of the 1940 Act and described in the first bullet point above. Further, following this offering, The Blackstone Group L.P. will have no material assets other than its equity interests in certain wholly-owned subsidiaries, which in turn will have no material assets (other than intercompany debt) other than general partner interests in the Blackstone Holdings partnerships. (These wholly-owned subsidiaries will be the sole general partners of the Blackstone Holdings partnerships and will be vested with all management and control over the Blackstone Holdings partnerships.) We do not believe the equity interests of The Blackstone Group L.P. in its wholly-owned subsidiaries or the general partner interests of these wholly-owned subsidiaries in the Blackstone Holdings partnerships are investment securities. Moreover, because we believe that the capital interests of the general partners of our funds in their respective funds are neither securities nor investment securities, we believe that less than 40% of The Blackstone Group L.P.'s total assets (exclusive of U.S. government securities and cash items) on an unconsolidated basis after this offering will be comprised of assets that could be considered investment securities. Accordingly, we do not believe The Blackstone Group L.P. is, or following this offering will be, an inadvertent investment company by virtue of the 40% test in section 3(a)(1)(C) of the 1940 Act as described in the second bullet point above.

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        The 1940 Act and the rules thereunder contain detailed parameters for the organization and operation of investment companies. Among other things, the 1940 Act and the rules thereunder limit or prohibit transactions with affiliates, impose limitations on the issuance of debt and equity securities, generally prohibit the issuance of options and impose certain governance requirements. We intend to conduct our operations so that The Blackstone Group L.P. will not be deemed to be an investment company under the 1940 Act. If anything were to happen which would cause The Blackstone Group L.P. to be deemed to be an investment company under the 1940 Act, requirements imposed by the 1940 Act, including limitations on our capital structure, ability to transact business with affiliates (including us) and ability to compensate key employees, could make it impractical for us to continue our business as currently conducted, impair the agreements and arrangements between and among The Blackstone Group L.P., Blackstone Holdings and our senior managing directors, or any combination thereof, and materially adversely affect our business, financial condition and results of operations. In addition, we may be required to limit the amount of investments that we make as a principal or otherwise conduct our business in a manner that does not subject us to the registration and other requirements of the 1940 Act.

Risks Related to Our Common Units and this Offering

There may not be an active trading market for our common units, which may cause our common units to trade at a discount from the initial offering price and make it difficult to sell the common units you purchase.

        Prior to this offering, there has been no public trading market for our common units. It is possible that after this offering an active trading market will not develop or continue, which would make it difficult for you to sell your common units at an attractive price or at all. The initial public offering price per common unit will be determined by agreement among us and the representatives of the underwriters, and may not be indicative of the price at which our common units will trade in the public market after this offering.

A portion of the proceeds from this offering will be used to purchase vested Blackstone Holdings partnership units from our existing owners. Accordingly, we will not retain such proceeds.

        We estimate that our net proceeds from this offering, at an assumed initial public offering price of $                              per common unit and after deducting estimated underwriting discounts and offering expenses, will be approximately $                              billion. We intend to use approximately $                               billion of these net proceeds (or approximately $                              billion if the underwriters exercise in full their option to purchase additional common units) to purchase Blackstone Holdings partnership units from our existing owners Accordingly, we will not retain such proceeds and they will not be used to invest in and grow our business. See "Use of Proceeds".

Our common unit price may decline due to the large number of common units eligible for future sale and for exchange.

        The market price of our common units could decline as a result of sales of a large number of common units in the market after the offering or the perception that such sales could occur. These sales, or the possibility that these sales may occur, also might make it more difficult for us to sell common units in the future at a time and at a price that we deem appropriate. Upon completion of this offering we will have a total of                        of our common units outstanding, or                        common units assuming the underwriters exercise in full their option to purchase additional common units. All of the common units will have been sold in this offering and will be freely tradable without restriction or further registration under the Securities Act by persons other than our "affiliates." See "Common Units Eligible for Future Sale". Subject to the lock-up restrictions described below, we may issue and sell in the future additional common units.

        In addition, upon completion of this offering our existing owners will own an aggregate of                        Blackstone Holdings partnership units. Prior to this offering we will enter into an exchange

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agreement with holders of partnership units in Blackstone Holdings (other than The Blackstone Group L.P.'s wholly-owned subsidiaries) so that these holders, subject to the vesting and minimum retained ownership requirements and transfer restrictions set forth in the partnership agreements of the Blackstone Holdings partnerships, may exchange their Blackstone Holdings partnership units for The Blackstone Group L.P. common units on a one-for-one basis, subject to customary conversion rate adjustments for splits, unit distributions and reclassifications. The common units we issue upon such exchanges would be "restricted securities," as defined in Rule 144 under the Securities Act, unless we register such issuances. However, we will enter into a registration rights agreement with the limited partners of Blackstone Holdings that would require us to register these common units under the Securities Act. See "Common Units Eligible for Future Sale—Registration Rights" and "Certain Relationships and Related Person Transactions—Registration Rights Agreement". While the partnership agreements of the Blackstone Holdings partnerships and related agreements will contractually restrict our existing owners' ability to transfer the Blackstone Holdings partnership units or The Blackstone Group L.P. common units they hold and will require that they maintain a minimum amount of equity ownership during their employ by us, these contractual provisions may lapse over time or be waived, modified or amended at any time. See "Management—Minimum Retained Ownership Requirements and Transfer Restrictions".

        Under our 2007 Equity Incentive Plan, we intend to grant                        unvested restricted common units to our non-senior managing director employees at the time of this offering. An aggregate of                        additional common units and Blackstone Holdings partnership units have been covered by our 2007 Equity Incentive Plan. In addition, beginning in 2008 the aggregate number of common units and Blackstone Holdings partnership units covered by our 2007 Equity Incentive Plan will be increased on the first day of each fiscal year during its term by the excess of (a) 15% of the aggregate number of common units and Blackstone Holdings partnership units outstanding on the last day of the immediately preceding fiscal year (excluding Blackstone Holdings partnership units held by The Blackstone Group LP or its wholly-owned subsidiaries) over (b) the aggregate number of common units and Blackstone Holdings partnership units covered by our 2007 Equity Incentive Plan as of such date (unless the administrator of the 2007 Equity Incentive Plan should decide to increase the number of common units and Blackstone Holdings partnership units covered by the plan by a lesser amount). See "Management—2007 Equity Incentive Plan—IPO Date Equity Awards". We intend to file one or more registration statements on Form S-8 under the Securities Act to register common units covered by our 2007 Equity Incentive Plan (including pursuant to automatic annual increases). Any such Form S-8 registration statement will automatically become effective upon filing. Accordingly, common units registered under such registration statement will be available for sale in the open market. We expect that the initial registration statement on Form S-8 will cover                        common units.

        In addition, our partnership agreement authorizes us to issue an unlimited number of additional partnership securities and options, rights, warrants and appreciation rights relating to partnership securities for the consideration and on the terms and conditions established by our general partner in its sole discretion without the approval of any limited partners. In accordance with the Delaware Limited Partnership Act and the provisions of our partnership agreement, we may also issue additional partnership interests that have certain designations, preferences, rights, powers and duties that do not apply to common units.

The market price of our common units may be volatile, which could cause the value of your investment to decline.

        Securities markets worldwide experience significant price and volume fluctuations. This market volatility, as well as general economic, market or political conditions, could reduce the market price of common units in spite of our operating performance. In addition, our operating results could be below the expectations of public market analysts and investors, and in response the market price of our common units could decrease significantly. You may be unable to resell your common units at or above the initial public offering price.

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Risks Relating to United States Taxation

If we were treated as a corporation for U.S. federal income tax or state tax purposes, then our distributions to you would be substantially reduced and the value of our common units would be adversely affected.

        The value of your investment in us depends largely on our being treated as a partnership for U.S. federal income tax purposes, which requires that 90% or more of our gross income for every taxable year consist of qualifying income, as defined in Section 7704 of the Internal Revenue Code and that The Blackstone Group L.P. not be registered under the 1940 Act. Qualifying income generally includes dividends, interest, capital gains from the sale or other disposition of stocks and securities and certain other forms of investment income. We may not meet these requirements or current law may change so as to cause, in either event, us to be treated as a corporation for U.S. federal income tax purposes or otherwise subject to U.S. federal income tax. Moreover, the anticipated after-tax benefit of an investment in our common units depends largely on our being treated as a partnership for U.S. federal income tax purposes. We have not requested, and do not plan to request, a ruling from the U.S. Internal Revenue Services, or "IRS," on this or any other matter affecting us.

        If we were treated as a corporation for U.S. federal income tax purposes, we would pay U.S. federal income tax on our taxable income at the corporate tax rate. Distributions to you would generally be taxed again as corporate distributions, and no income, gains, losses, deductions or credits would flow through to you. Because a tax would be imposed upon us as a corporation, our distributions to you would be substantially reduced, likely causing a substantial reduction in the value of our common units.

        Current law may change, causing us to be treated as a corporation for U.S. federal or state income tax purposes or otherwise subjecting us to entity level taxation. For example, because of widespread state budget deficits, several states are evaluating ways to subject partnerships to entity level taxation through the imposition of state income, franchise or other forms of taxation. If any state were to impose a tax upon us as an entity, our distributions to you would be reduced.

You may be subject to U.S. federal income tax on your share of our taxable income, regardless of whether you receive any cash dividends from us.

        As long as 90% of our gross income for each taxable year constitutes qualifying income as defined in Section 7704 of the Internal Revenue Code and we are not required to register as an investment company under the 1940 Act on a continuing basis, we will be treated, for U.S. federal income tax purposes, as a partnership and not as an association or a publicly-traded partnership taxable as a corporation. As a result, you may be subject to U.S. federal, state, local and possibly, in some cases, foreign income taxation on your allocable share of our items of income, gain, loss, deduction and credit (including our allocable share of those items of any entity in which we invest that is treated as a partnership or is otherwise subject to tax on a flow through basis) for each of our taxable years ending with or within your taxable year, regardless of whether or not you receive cash dividends from us. See "Material U.S. Federal Tax Considerations".

        You may not receive cash dividends equal to your allocable share of our net taxable income or even the tax liability that results from that income. In addition, certain of our holdings, including holdings, if any, in a Controlled Foreign Corporation, or "CFC," and a Passive Foreign Investment Company, or "PFIC," may produce taxable income prior to the receipt of cash relating to such income, and common unitholders that are U.S. taxpayers will be required to take such income into account in determining their taxable income. In the event of an inadvertent termination of our partnership status for which the IRS has granted us limited relief, each holder of our common units may be obligated to make such adjustments as the IRS may require to maintain our status as a partnership. Such adjustments may require persons holding our common units to recognize additional amounts in income during the years in which they hold such units.

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The Blackstone Group L.P.'s interest in certain of our businesses will be held through Blackstone Holdings I GP Inc., Blackstone Holdings II GP Inc. or Blackstone Holdings V GP L.P., which will be treated as corporations for U.S. federal income tax purposes; such corporations may be liable for significant taxes and may create other adverse tax consequences, which could potentially adversely affect the value of your investment.

        In light of the publicly-traded partnership rules under U.S. federal income tax law and other requirements, The Blackstone Group L.P. will hold its interest in certain of our businesses through Blackstone Holdings I GP Inc., Blackstone Holdings II GP Inc. or Blackstone Holdings V GP L.P., which will be treated as corporations for U.S. federal income tax purposes. Each such corporation could be liable for significant U.S. federal income taxes and applicable state, local and other taxes that would not otherwise be incurred, which could adversely affect the value of your investment. Those additional taxes have not applied to our existing owners in our organizational structure in effect before this offering and will not apply to our existing owners following this offering to the extent they own equity interests directly or indirectly in the Blackstone Holdings partnerships.

Our structure involves complex provisions of U.S. federal income tax law for which no clear precedent or authority may be available. Our structure also is subject to potential legislative, judicial or administrative change and differing interpretations, possibly on a retroactive basis.

        The U.S. federal income tax treatment of common unitholders depends in some instances on determinations of fact and interpretations of complex provisions of U.S. federal income tax law for which no clear precedent or authority may be available. You should be aware that the U.S. federal income tax rules are constantly under review by persons involved in the legislative process, the IRS and the U.S. Treasury Department, frequently resulting in revised interpretations of established concepts, statutory changes, revisions to regulations and other modifications and interpretations. The IRS pays close attention to the proper application of tax laws to partnerships. The present U.S. federal income tax treatment of an investment in our common units may be modified by administrative, legislative or judicial interpretation at any time, and any such action may affect investments and commitments previously made. For example, changes to the U.S. federal tax laws and interpretations thereof could make it more difficult or impossible to meet the qualifying income exception for us to be treated as a partnership for U.S. federal income tax purposes that is not taxable as a corporation, affect or cause us to change our investments and commitments, affect the tax considerations of an investment in us, change the character or treatment of portions of our income (including, for instance, the treatment of carried interest as ordinary income rather than capital gain) and adversely affect an investment in our common units.

        Our organizational documents and agreements permit our general partner to modify our amended and restated limited partnership agreement from time to time, without the consent of the common unitholders, to address certain changes in U.S. federal income tax regulations, legislation or interpretation. In some circumstances, such revisions could have a material adverse impact on some or all common unitholders. Moreover, we will apply certain assumptions and conventions in an attempt to comply with applicable rules and to report income, gain, deduction, loss and credit to common unitholders in a manner that reflects such common unitholders' beneficial ownership of partnership items, taking into account variation in ownership interests during each taxable year because of trading activity. However, those assumptions and conventions may not be in compliance with all aspects of applicable tax requirements. It is possible that the IRS will assert successfully that the conventions and assumptions used by us do not satisfy the technical requirements of the Code and/or Treasury regulations and could require that items of income, gain, deductions, loss or credit, including interest deductions, be adjusted, reallocated or disallowed in a manner that adversely affects common unitholders.

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Complying with certain tax-related requirements may cause us to invest through foreign or domestic corporations subject to corporate income tax or enter into acquisitions, borrowings, financings or arrangements we may not have otherwise entered into.

        In order for us to be treated as a partnership for U.S. federal income tax purposes and not as an association or publicly traded partnership taxable as a corporation, we must meet the qualifying income exception discussed above on a continuing basis and we must not be required to register as an investment company under the 1940 Act. In order to effect such treatment, we (or our subsidiaries) may be required to invest through foreign or domestic corporations subject to corporate income tax, or enter into acquisitions, borrowings, financings or other transactions we may not have otherwise entered into. This may adversely affect our ability to operate solely to maximize our cash flow.

Tax gain or loss on disposition of our common units could be more or less than expected.

        If you sell your common units, you will recognize a gain or loss equal to the difference between the amount realized and the adjusted tax basis in those common units. Prior distributions to you in excess of the total net taxable income allocated to you, which decreased the tax basis in your common units, will in effect become taxable income to you if the common units are sold at a price greater than your tax basis in those common units, even if the price is less than the original cost. A substantial portion of the amount realized, whether or not representing gain, may be ordinary income to you.

We may hold or acquire certain investments through an entity classified as a PFIC or CFC for U.S. federal income tax purposes.

        Certain of our funds' investments may be in foreign corporations or may be acquired through a foreign subsidiary that would be classified as a corporation for U.S. federal income tax purposes. Such an entity may be a PFIC or a CFC for U.S. federal income tax purposes. Common unitholders indirectly owning an interest in a PFIC or a CFC may experience adverse U.S. tax consequences. See "Material U.S. Federal Tax Considerations—Passive Foreign Investment Companies" and "—Controlled Foreign Corporations".

Non-U.S. persons face unique U.S. tax issues from owning common units that may result in adverse tax consequences to them.

        In light of our intended investment activities, we may be, or may become, engaged in a U.S. trade or business for U.S. federal income tax purposes in which case some portion of our income would be treated as effectively connected income with respect to non-U.S. holders, or "ECI." Moreover, dividends paid by an investment that we make in a real estate investment trust, or "REIT," that are attributable to gains from the sale of U.S. real property interests and sales of certain investments in interests in U.S. real property, including stock of certain U.S. corporations owning significant U.S. real property, may be treated as ECI with respect to non-U.S. holders. In addition, certain income of non-U.S. holders from U.S. sources not connected to any such U.S. trade or business conducted by us could be treated as ECI. To the extent our income is treated as ECI, non-U.S. holders generally would be subject to withholding tax on their allocable shares of such income, would be required to file a U.S. federal income tax return for such year reporting their allocable shares of income effectively connected with such trade or business and any other income treated as ECI, and would be subject to U.S. federal income tax at regular U.S. tax rates on any such income (state and local income taxes and filings may also apply in that event). Non-U.S. holders that are corporations may also be subject to a 30% branch profits tax on their allocable share of such income. In addition, certain income from U.S. sources that is not ECI allocable to non-U.S. holders will be reduced by withholding taxes imposed at the highest effective applicable tax rate.

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Tax-exempt entities face unique tax issues from owning common units that may result in adverse tax consequences to them.

        In light of our intended investment activities, we may derive income that constitutes "unrelated business taxable income," or "UBTI." Consequently, a holder of common units that is a tax-exempt organization may be subject to "unrelated business income tax" to the extent that its allocable share of our income consists of UBTI. A tax-exempt partner of a partnership could be treated as earning UBTI if the partnership regularly engages in a trade or business that is unrelated to the exempt function of the tax-exempt partner, if the partnership derives income from debt-financed property or if the partnership interest itself is debt-financed.

We cannot match transferors and transferees of common units, and we will therefore adopt certain income tax accounting positions that may not conform with all aspects of applicable tax requirements. The IRS may challenge this treatment, which could adversely affect the value of our common units.

        Because we cannot match transferors and transferees of common units, we will adopt depreciation, amortization and other tax accounting positions that may not conform with all aspects of existing Treasury regulations. A successful IRS challenge to those positions could adversely affect the amount of tax benefits available to our common unitholders. It also could affect the timing of these tax benefits or the amount of gain on the sale of common units and could have a negative impact on the value of our common units or result in audits of and adjustments to our common unitholders' tax returns.

The sale or exchange of 50% or more of our capital and profit interests will result in the termination of our partnership for U.S. federal income tax purposes.

        We will be considered to have been terminated for U.S. federal income tax purposes if there is a sale or exchange of 50% or more of the total interests in our capital and profits within a 12-month period. Our termination would, among other things, result in the closing of our taxable year for all common unitholders and could result in a deferral of depreciation deductions allowable in computing our taxable income. See "Material U.S. Federal Tax Considerations" for a description of the consequences of our termination for U.S. federal income tax purposes.

Common unitholders will be subject to state and local taxes and return filing requirements as a result of investing in our common units.

        In addition to U.S. federal income taxes, our common unitholders will be subject to other taxes, including state and local taxes, unincorporated business taxes and estate, inheritance or intangible taxes that are imposed by the various jurisdictions in which we do business or own property now or in the future, even if our common unitholders do not reside in any of those jurisdictions. Our common unitholders likely will be required to file state and local income tax returns and pay state and local income taxes in some or all of these jurisdictions. Further, common unitholders may be subject to penalties for failure to comply with those requirements. It is the responsibility of each common unitholder to file all United States federal, state and local tax returns that may be required of such common unitholder. Our counsel has not rendered an opinion on the state or local tax consequences of an investment in our common units.

We do not expect to be able to furnish to each unitholder specific tax information within 90 days after the close of each calendar year, which means that holders of common units who are U.S. taxpayers should anticipate the need to file annually a request for an extension of the due date of their income tax return.

        It will most likely require longer than 90 days after the end of our fiscal year to obtain the requisite information from all lower-tier entities so that K-1s may be prepared for the Partnership. For this reason, holders of common units who are U.S. taxpayers should anticipate the need to file annually with the IRS (and certain states) a request for an extension past April 15 or the otherwise applicable due date of their income tax return for the taxable year. See "Material U.S. Federal Tax Considerations—Administrative Matters—Information Returns".

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FORWARD-LOOKING STATEMENTS

        This prospectus contains forward-looking statements, which reflect our current views with respect to, among other things, our 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. We believe these factors include but are not limited to those described under "Risk Factors". These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included in this prospectus. We undertake no obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise.


MARKET AND INDUSTRY DATA

        This prospectus includes market and industry data and forecasts that we have derived from independent consultant reports, publicly available information, various industry publications, other published industry sources and our internal data and estimates. Independent consultant reports, industry publications and other published industry sources generally indicate that the information contained therein was obtained from sources believed to be reliable.

        Our internal data and estimates are based upon information obtained from investors in our funds, trade and business organizations and other contacts in the markets in which we operate and our management's understanding of industry conditions. Although we believe that such information is reliable, we have not had this information verified by any independent sources.

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ORGANIZATIONAL STRUCTURE

Reorganization

        Our business is presently owned by our founders and other senior managing directors, selected other individuals engaged in some of our businesses and AIG, to whom we refer collectively as our "existing owners."

        Prior to this offering our existing owners will contribute to Blackstone Holdings I L.P., Blackstone Holdings II L.P., Blackstone Holdings III L.P., Blackstone Holdings IV L.P. or Blackstone Holdings V L.P., which we refer to collectively as "Blackstone Holdings," each of the operating entities included in our historical combined financial statements, with the exception of the general partners of certain legacy Blackstone funds that do not have a meaningful amount of unrealized investments and a number of investment vehicles through which our existing owners and other third parties have made commitments to or investments in or alongside of Blackstone's investment funds, which entities will not be contributed to Blackstone Holdings and will continue to be owned by our existing owners. More specifically, our existing owners will contribute to Blackstone Holdings the intellectual property rights associated with the Blackstone name and the indicated equity interests in the following businesses, which we refer to collectively as the "Contributed Businesses":

•
% -    % (depending on the particular fund investment) of all carried interest earned in relation to investments made prior to the date of the Reorganization (as defined below) by both our actively investing corporate private equity and real estate opportunity funds, as well as by all of our historical corporate private equity and real estate opportunity funds that still have a meaningful amount of unrealized investments. This includes all of the carried interest in these funds that had been allocated to our six executive officers and                        other senior managing directors prior to the date of the reorganization; and

•
all of any carried interest earned in relation to investments made by our actively investing carry funds from and after the date of the contribution other than the percentage we determine to allocate to our professionals (as described below);

•
100% of the entities that are the managing members of the general partners and the manager of our senior debt vehicles;

•
100% of the entities that are the managing members of the general partners of our funds of hedge funds, which are entitled to any management and incentive fees payable in respect of such funds;

•
100% of the entities that are the managing members of the general partner and the investment advisor of our distressed securities hedge fund, which entities are entitled to     % of any management fees and    % of any incentive fees payable in respect of such fund;

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        Accordingly, subsidiaries of Blackstone Holdings will generally be entitled to:

        With respect to our actively investing carry funds and proprietary hedge funds as well as any future carry funds and proprietary hedge funds, we intend to continue to allocate to the senior managing directors, other professionals and selected other individuals who work in these operations a portion of the carried interest or incentive fees earned in relation to these funds in order to better align their interests with our own and with those of the investors in these funds. Our current estimate is that approximately    % of the carried interest earned in relation to our carry funds and approximately    % of the incentive fees earned in relation to our proprietary hedge funds will be allocated to such individuals, although these percentages may fluctuate up or down over time.

        Management fees, transaction fees, carried interest, incentive fees and other fees received by subsidiaries of Blackstone Holdings will inure to The Blackstone Group L.P.'s benefit to the full extent of its equity interest in Blackstone Holdings. See "Business—Structure and Operation of Our Investment Funds—Incentive Arrangements / Fee Structure".

        In exchange for the contribution of the Contributed Businesses to Blackstone Holdings described above:

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        We use the terms "Blackstone Holdings partnership unit" or "partnership unit in/of Blackstone Holdings" to refer collectively to a partnership unit in each of the Blackstone Holdings partnerships. We refer to this transaction as the "Blackstone Holdings Formation."

        See "Certain Relationships and Related Person Transactions—Blackstone Holdings Partnership Agreements" for information regarding vesting of the Blackstone Holdings partnership units. In addition, under the terms of the partnership agreements of the Blackstone Holdings partnerships, all of the Blackstone Holdings partnership units received by the limited partners of Blackstone Holdings in the Reorganization will be subject to restrictions on transfer and minimum retained ownership requirements. See "Management—Minimum Retained Ownership Requirements and Transfer Restrictions" and "Certain Relationships and Related Person Transactions—Blackstone Holdings Partnership Agreements". Subject to vesting and minimum retained ownership requirements and transfer restrictions, all of the Blackstone Holdings partnership units to be received by our existing owners in the Blackstone Holdings Formation will be entitled to be exchanged for The Blackstone Group L.P. common units on a one-for-one basis, subject to customary conversion rate adjustments for splits, unit distributions and reclassifications, as described below in "—The Blackstone Group L.P." See "Certain Relationships and Related Person Transactions—Exchange Agreement".

        The vested Blackstone Holdings partnership units received by our existing owners in the Reorganization will be reflected in our financial statements at the historical cost basis of the businesses contributed. We intend to accrue for the unvested Blackstone Holdings partnership units as compensation paid to our non-founding senior managing directors in accordance with Statement of Financial Accounting Standards No. 123(R) "Share-Based Payments", or "SFAS 123(R)." The unvested Blackstone Holdings partnership units will be charged to expense as the Blackstone Holdings partnership units vest over the service period. The expense will be based on the grant date fair value of the Blackstone Holdings partnership units, which will be the initial public offering price of The Blackstone Group L.P. common units into which these partnership units are exchangeable.

        Blackstone Group is considered our predecessor for accounting purposes, and its combined financial statements will be our historical financial statements following this offering. Because our founders control Blackstone Group before the Reorganization and will control our general partner immediately following this offering, the Blackstone Holdings Formation (with the exception of the acquisition by us of the equity interests in Park Hill Group that we do not currently own, which will be accounted for using purchase accounting) will be accounted for as a reorganization of entities under common control. Accordingly, except as described below in respect of the deconsolidation of our investment funds, we will carry forward unchanged the value of the assets and liabilities of the Contributed Businesses recognized in Blackstone Group's historical combined financial statements into our consolidated financial statements.

        In accordance with GAAP, a number of our investment funds have historically been consolidated into our combined financial statements. As a result, our historical combined financial statements reflect the assets, liabilities, revenues, expenses and cash flows of these investment funds on a gross basis rather than reflecting only the value of our principal investments in such investment funds.

        The Contributed Businesses that act as a general partner of a consolidated Blackstone fund (other than the general partners of a limited number of our funds of hedge funds) are taking the necessary steps to grant rights to the third-party investors in that fund to provide that a simple majority of the fund's investors will have the right to accelerate the liquidation date of that fund or the withdrawal of their capital, without cause, in accordance with certain procedures. The granting of these rights, which will occur substantially concurrently with the Blackstone Holdings Formation described above, will lead to the deconsolidation of such investment funds from our consolidated financial statements as of and for periods following such event. In addition, because the general partners of certain other legacy Blackstone funds will not be contributed to Blackstone Holdings as part of the Blackstone Holdings Formation as described

59

above, we will also no longer consolidate those funds in our consolidated financial statements following this offering.

        Because the interests of the limited partner investors in our investment funds, which are reflected as "non-controlling interests in consolidated subsidiaries" on our historical combined statements of financial condition and as "minority interest" on our historical combined statements of income, will also be eliminated in connection with the deconsolidation of these investment funds, the deconsolidation of these investment funds will not result in a change in our partners' equity or net income in our consolidated financial statements. See "Unaudited Pro Forma Financial Information" for a more detailed description of the deconsolidation of our investment funds from our financial statements.

        Prior to this offering, we intend to make one or more distributions to our existing owners representing all of the undistributed earnings generated by the Contributed Businesses prior to the date of the offering. If the offering had occurred on December 31, 2006, we estimate that the aggregate amount of such distributions would have been $                              million. However, the actual amount of such distributions will depend on the amount of earnings generated by the Contributed Businesses prior to the offering. We may need to draw on our revolving credit facility to make such distributions.

        We refer to the Blackstone Holdings Formation, the deconsolidation of most Blackstone funds and the distribution to our existing owners of the pre-offering earnings of the Contributed Businesses, collectively, as the "Reorganization".

The Blackstone Group L.P.

        The Blackstone Group L.P. was formed as a Delaware limited partnership on March 12, 2007. The Blackstone Group L.P. has not engaged in any business or other activities except in connection with its formation, the Reorganization and this offering. The Blackstone Group L.P. is managed and operated by its general partner, Blackstone Group Management L.L.C., to whom we refer as "our general partner," which is in turn wholly-owned by our senior managing directors and controlled by our founders. Prior to this offering we will enter into an exchange agreement with holders of partnership units in Blackstone Holdings (other than The Blackstone Group L.P.'s wholly-owned subsidiaries) so that these holders, subject to the vesting and minimum retained ownership requirements and transfer restrictions set forth in the partnership agreements of the Blackstone Holdings partnerships, may exchange their Blackstone Holdings partnership units for The Blackstone Group L.P. common units on a one-for-one basis, subject to customary conversion rate adjustments for splits, unit distributions and reclassifications. The amended and restated partnership agreement of The Blackstone Group L.P. will also provide that on those few matters that may be submitted for a vote of our common unitholders the limited partners of Blackstone Holdings (other than AIG) will hold special voting units in The Blackstone Group L.P. that provide them with a number of votes that is equal to the aggregate number of partnership units of Blackstone Holdings that they then hold and entitle them to participate in the vote on the same basis as our common unitholders. See "Material Provisions of The Blackstone Group L.P. Partnership Agreement".

Offering Transactions

        Upon the consummation of this offering, The Blackstone Group L.P. will contribute the net proceeds to its wholly-owned subsidiaries, Blackstone Holdings I GP Inc. (a Delaware corporation that is a domestic corporation for U.S. federal income tax purposes), Blackstone Holdings II GP Inc. (a Delaware corporation that is a domestic corporation for U.S. federal income tax purposes), Blackstone Holdings III GP L.P. (a Delaware limited partnership that is a disregarded entity and not an association taxable as a corporation for U.S. federal income tax purposes), Blackstone Holdings IV GP L.P. (a Delaware limited partnership that is a disregarded entity and not an association taxable as a corporation for U.S. federal income tax purposes) and Blackstone Holdings V GP L.P. (an Alberta limited partnership that is a foreign corporation for U.S. federal income tax purposes). See "Material U.S. Federal Tax Considerations—United States Taxes—

60


Taxation of our Partnership and the Blackstone Holdings Partnerships" for more information about the tax treatment of The Blackstone Group L.P. and Blackstone Holdings. The wholly-owned subsidiaries of The Blackstone Group L.P. will concurrently with the Reorganization and may from time to time thereafter enter into intracompany lending arrangements with one another.

        The Blackstone Group L.P.'s wholly-owned subsidiaries will then use all of these net proceeds to purchase                        vested Blackstone Holdings partnership units from our existing owners (or                        vested Blackstone Holdings partnership units if the underwriters exercise in full their option to purchase additional common units) and to subscribe for                        newly-issued Blackstone Holdings partnership units so that The Blackstone Group L.P. will hold, through wholly-owned subsidiaries, a number of Blackstone Holdings partnership units equal to the number of common units that The Blackstone Group L.P. has issued in connection with this offering. In connection with their acquisition of partnership units in Blackstone Holdings, these wholly-owned subsidiaries of The Blackstone Group L.P. will become the sole general partners of the Blackstone Holdings partnerships.

        The purchase by The Blackstone Group L.P.'s wholly-owned subsidiaries of vested Blackstone Holdings partnership units from our existing owners with a portion of the proceeds from this offering is expected to result in an increase in the tax basis of the tangible and intangible assets of Blackstone Holdings that would not otherwise have been available. This increase in tax basis will increase (for tax purposes) depreciation and amortization and therefore reduce the amount of tax that the wholly-owned subsidiaries of The Blackstone Group L.P. that are taxable as corporations for U.S. federal income tax purposes would otherwise be required to pay in the future. These wholly-owned subsidiaries will enter into a tax receivable agreement with our existing owners whereby they will agree to pay to our existing owners 85% of the amount of cash savings, if any, in U.S. federal, state and local income tax that these entities actually realize as a result of this increase in tax basis, as well as 85% of the amount of any such savings these entities actually realize as a result of increases in tax basis that arise due to future exchanges of Blackstone Holdings partnership units. No payments will be made if a limited partner elects to exchange his or her Blackstone Holdings partnership units in a tax-free transaction involving a charitable contribution. See "Certain Relationships and Related Person Transaction—Tax Receivable Agreement".

        At the time of this offering, we intend to grant to our non-senior managing director employees awards of restricted common units as described under "Management—IPO Date Equity Awards".

        We refer to the above-described transactions as the "Offering Transactions." We intend to use the remaining net proceeds from this offering as set forth under "Use of Proceeds".

        As a result of the Reorganization and the Offering Transactions, immediately following this offering:

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The Blackstone Holdings partnership units that will be held by The Blackstone Group L.P.'s wholly-owned subsidiaries will be economically identical in all respects to the Blackstone Holdings partnership units that will be held by our existing owners, except that The Blackstone Group L.P.'s wholly-owned subsidiaries will be entitled to priority allocations of income through December 31, 2009 as described under "Cash Distribution Policy". Subject to the vesting and minimum retained ownership requirements and transfer restrictions set forth in the partnership agreements of the Blackstone Holdings partnerships, holders of Blackstone Holdings partnership units may exchange these units for The Blackstone Group L.P. common units on a one-for-one basis, subject to customary conversion rate adjustments for splits, unit distributions and reclassifications. See "Certain Relationships and Related Person Transactions—Exchange Agreement".

        The diagram below depicts our organizational structure immediately following the Reorganization and the Offering Transactions.

GRAPHIC

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Holding Partnership Structure

        The Blackstone Group L.P. will be a holding partnership and, through wholly-owned subsidiaries, the sole general partner of each of the Blackstone Holdings partnerships. The Blackstone Group L.P. will operate and control all of the business and affairs of Blackstone Holdings. Through Blackstone Holdings, we will continue to conduct the Contributed Businesses. The Blackstone Group L.P. will consolidate the financial results of Blackstone Holdings and its consolidated subsidiaries, and the ownership interest of the limited partners of Blackstone Holdings will be reflected as a minority interest in The Blackstone Group L.P.'s consolidated financial statements.

        We believe that The Blackstone Group L.P. will be treated as a partnership and not as a corporation for U.S. federal income tax purposes. An entity that is treated as a partnership for U.S. federal income tax purposes is not a taxable entity and incurs no U.S. federal income tax liability. Instead, each partner is required to take into account its allocable share of items of income, gain, loss and deduction of the partnership in computing its U.S. federal income tax liability, regardless of whether cash distributions are made. Distributions of cash by a partnership to a partner are generally not taxable unless the amount of cash distributed to a partner is in excess of the partner's adjusted basis in its partnership interest. However, our partnership agreement does not restrict our ability to take actions that may result in our being treated as an entity taxable as a corporation for U.S. federal (and applicable state) income tax purposes. See "Material U.S. Federal Tax Consequences" for a summary discussing certain United States federal tax considerations related to the purchase, ownership and disposition of our common units as of the date of this prospectus.

        We believe that the Blackstone Holdings partnerships will also be treated as partnerships and not as corporations for U.S. federal income tax purposes. Accordingly, the holders of partnership units in Blackstone Holdings, including The Blackstone Group L.P.'s wholly-owned subsidiaries, will incur U.S. federal, state and local income taxes on their proportionate share of any net taxable income of Blackstone Holdings. Net profits and net losses of Blackstone Holdings will generally be allocated to its partners (including The Blackstone Group L.P.'s wholly-owned subsidiaries) pro rata in accordance with the percentages of their respective partnership interests, except that The Blackstone Group L.P.'s wholly-owned subsidiaries will be entitled to priority allocations of income through December 31, 2009 as described under "Cash Distribution Policy". Because The Blackstone Group L.P. will indirectly own            % of the total partnership units in Blackstone Holdings (or            % if the underwriters exercise in full their option to purchase additional common units), The Blackstone Group L.P. will indirectly be allocated             % of the net profits and net losses of Blackstone Holdings (or            % if the underwriters exercise in full their option to purchase additional common units), except that The Blackstone Group L.P.'s wholly-owned subsidiaries will be entitled to priority allocations of income through December 31, 2009 as described under "Cash Distribution Policy". The remaining net profits and net losses will be allocated to the limited partners of Blackstone Holdings. These percentages are subject to change, including upon an exchange of Blackstone Holdings partnership units for The Blackstone Group L.P. common units and upon issuance of additional The Blackstone Group L.P. common units to the public. The Blackstone Group L.P. will hold, through wholly-owned subsidiaries, a number of Blackstone Holdings partnership units equal to the number of common units that The Blackstone Group L.P. has issued.

        After this offering, we intend to cause Blackstone Holdings to make distributions to its partners, including The Blackstone Group L.P.'s wholly-owned subsidiaries, in order to fund any distributions The Blackstone Group L.P. may declare on the common units. If Blackstone Holdings makes such distributions, the limited partners of Blackstone Holdings will be entitled to receive equivalent distributions pro rata based on their partnership interests in Blackstone Holdings, except that The Blackstone Group L.P.'s wholly-owned subsidiaries will be entitled to priority allocations of income through December 31, 2009 as described under "Cash Distribution Policy".

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        The partnership agreements of the Blackstone Holdings partnerships will provide for cash distributions, which we refer to as "tax distributions," to the partners of such partnerships if the wholly-owned subsidiaries of The Blackstone Group L.P. which are the general partners of the Blackstone Holdings partnerships determine that the taxable income of the relevant partnership will give rise to taxable income for its partners. Generally, these tax distributions will be computed based on our estimate of the net taxable income of the relevant partnership allocable to a partner multiplied by an assumed tax rate equal to the highest effective marginal combined U.S. federal, state and local income tax rate prescribed for an individual or corporate resident in New York, New York (taking into account the nondeductibility of certain expenses and the character of our income). If we had effected the Reorganization on January 1, 2006, the assumed effective tax rate for 2006 would have been approximately 46%. The Blackstone Holdings partnerships will make tax distributions only to the extent distributions from such partnerships for the relevant year were otherwise insufficient to cover such tax liabilities.

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USE OF PROCEEDS

        We estimate that our net proceeds from this offering, at an assumed initial public offering price of $                              per common unit and after deducting estimated underwriting discounts and offering expenses, will be approximately $                              billion, or $                              billion if the underwriters exercise in full their option to purchase additional common units. A $1.00 increase (decrease) in the assumed initial public offering price of $                      per common unit would increase (decrease) the net proceeds to us from this offering by $            million, assuming the number of common units offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting the estimated underwriting discounts and offering expenses payable by us.

        We intend to use approximately $                              billion of the net proceeds from this offering, or approximately $                              billion if the underwriters exercise in full their option to purchase additional common units, to purchase vested Blackstone Holdings partnership units from our existing owners. Accordingly, we will not retain any of these proceeds.

        We intend to use all of the remaining proceeds from this offering, or approximately $                              billion, to subscribe for newly-issued Blackstone Holdings partnership units. We intend to use approximately $                              million of these net proceeds to repay all outstanding borrowings under our revolving credit facility and the remainder:

Pending specific application of these net proceeds, we expect to invest them primarily in our funds of hedge funds and additionally in our distressed securities hedge fund and our equity hedge fund.

        Our revolving credit facility is a $1 billion revolving credit facility that matures on February 1, 2012. As of December 31, 2006, we had outstanding borrowings of $340 million bearing interest at a weighted average rate of 6.13%. Proceeds from these borrowings have been used for working capital purposes.

        Affiliates of certain of the underwriters are participating lenders in our credit facility and will accordingly indirectly receive a portion of the proceeds used to repay these borrowings. See "Underwriters".

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CAPITALIZATION

        The following table sets forth our cash and cash equivalents and capitalization as of December 31, 2006:

        You should read this table together with the other information contained in this prospectus, including "Organizational Structure", "Use of Proceeds", "Unaudited Pro Forma Financial Information", "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our historical financial statements and related notes included elsewhere in this prospectus.

 
   December 31, 2006
 
   Blackstone
Group
Combined
Historical
   Blackstone
Holdings
Pro Forma
   The Blackstone
Group L.P.
Pro Forma
as Adjusted(1)
 
   (Dollars in thousands)
Cash and cash equivalents   $ 129,443   $     $  
Cash held at consolidated entities     810,725            
   
 
 
Total cash and cash equivalents   $ 940,168            
   
 
 
Loans payable     975,981            
Amounts due to non-controlling interest holders     647,418            
Non-controlling interests in consolidated entities     28,794,894            
Partners' capital     2,712,605            
Accumulated other comprehensive income     10,274            
   
 
 
  Total Capitalization   $ 33,141,172   $     $  
   
 
 
(1)
A $1.00 increase (decrease) in the assumed initial public offering price of $                              per common unit would increase (decrease) total partners' capital and total capitalization by $                              million, assuming the number of common units offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting the estimated underwriting discounts and estimated expenses payable by us.

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DILUTION

        If you invest in our common units, your interest will be diluted to the extent of the difference between the initial public offering price per common unit of our common units and the pro forma net tangible book value per common unit of our common units after this offering. Dilution results from the fact that the per common unit offering price of the common units is substantially in excess of the pro forma net tangible book value per common unit attributable to the existing equity holders.

        Our pro forma net tangible book value as of December 31, 2006 was approximately $            million, or $            per common unit. Pro forma net tangible book value represents the amount of total tangible assets less total liabilities, after giving effect to the Reorganization, and pro forma net tangible book value per common unit represents pro forma net tangible book value divided by the number of common units outstanding, after giving effect to the Reorganization and assuming that all of the holders of partnership units in Blackstone Holdings (other than The Blackstone Group L.P.'s wholly-owned subsidiaries) exchanged their units for newly-issued common units on a one-for-one basis.

        After giving effect to the Reorganization and the Offering Transactions and the application of a portion of the net proceeds from this offering to repay all outstanding borrowings under our revolving credit facility, which were approximately $340 million as of December 31, 2006, as described in "Use of Proceeds", our pro forma net tangible book value as of December 31, 2006 would have been $                              million, or $                              per common unit. This represents an immediate increase in net tangible book value of $                              per common unit to existing equityholders and an immediate dilution in net tangible book value of $            per common unit to new investors.

        The following table illustrates this dilution on a per common unit basis assuming the underwriters do not exercise their option to purchase additional common units:

Assumed initial public offering price per common unit         $  
Pro forma net tangible book value per common unit as of December 31, 2006   $        
Increase in pro forma net tangible book value per common unit attributable to new investors   $        
   
     
Pro forma net tangible book value per common unit after the offering            
         
Dilution in pro forma net tangible book value per common unit to new investors         $  
         

        The following table summarizes, on the same pro forma basis as of December 31, 2006, the total number of common units purchased from us, the total cash consideration paid to us and the average price per common unit paid by the existing equityholders and by new investors purchasing common units in this offering, assuming that all of the holders of partnership units in Blackstone Holdings (other than The Blackstone Group L.P.'s wholly-owned subsidiaries) exchanged their Blackstone Holdings partnership units for our common units on a one-for-one basis.

 
   Common Units
Purchased
   Total
Consideration
    
 
   Average
Price
Per common
unit
 
   Number
   Percent
   Amount
   Percent
Existing equityholders                    
New investors                    
  Total                    

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CASH DISTRIBUTION POLICY

        Throughout our 21-year history as a privately-owned firm, we have had a policy of distributing substantially all of our adjusted cash flow from operations to our owners. Our intention is to distribute to our common unitholders on a quarterly basis, commencing in the                        quarter of 2007, substantially all of The Blackstone Group L.P.'s net after-tax share of our annual adjusted cash flow from operations in excess of amounts determined by our general partner to be necessary or appropriate to provide for the conduct of our business, to make appropriate investments in our business and our funds, to comply with applicable law, any of our debt instruments or other agreements or to provide for future distributions to our common unitholders for any one or more of the ensuing four quarters. Because we will not know what our available adjusted cash flow from operations will be for any year until the end of such year, we expect that our first three quarterly distributions in respect of any given year will generally be smaller than the final quarterly distribution in respect of such year. See note (3) under "Summary—Summary Historical Financial and Other Data" for a reconciliation of our adjusted cash flow from operations to our cash flow from operations presented in accordance with generally accepted accounting principles.

        Because The Blackstone Group L.P. will be a holding partnership and will have no material assets other than its ownership of partnership units in Blackstone Holdings held through wholly-owned subsidiaries, we will fund distributions by The Blackstone Group L.P., if any, in three steps:

        The partnership agreements of the Blackstone Holdings partnerships will provide that until December 31, 2009, the income (and accordingly distributions) of Blackstone Holdings will be allocated:

Accordingly, until December 31, 2009, our existing owners will not receive distributions in respect of their Blackstone Holdings partnership units unless and until our common unitholders receive aggregate distributions of $                              per common unit on an annualized basis. We do not intend to maintain this priority allocation after December 31, 2009.

        In addition, the partnership agreements of the Blackstone Holdings partnerships will provide for cash distributions, which we refer to as "tax distributions," to the partners of such partnerships if the

68


wholly-owned subsidiaries of The Blackstone Group L.P. which are the general partners of the Blackstone Holdings partnerships determine that the taxable income of the relevant partnership will give rise to taxable income for its partners. Generally, these tax distributions will be computed based on our estimate of the net taxable income of the relevant partnership allocable to a partner multiplied by an assumed tax rate equal to the highest effective marginal combined U.S. federal, state and local income tax rate prescribed for an individual or corporate resident in New York, New York (taking into account the nondeductibility of certain expenses and the character of our income). The Blackstone Holdings partnerships will make tax distributions only to the extent distributions from such partnerships for the relevant year were otherwise insufficient to cover such tax liabilities.

        The declaration and payment of any distributions will be at the sole discretion of our general partner. Our general partner will take into account:

        Prior to this offering, we intend to make one or more distributions to our existing owners representing all of the undistributed earnings generated by the Contributed Businesses prior to the date of the offering. If the offering had occurred on December 31, 2006, we estimate that the aggregate amount of such distributions would have been $                               million. However, the actual amount of such distributions will depend on the amount of earnings generated by the Contributed Businesses prior to the offering.

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UNAUDITED PRO FORMA FINANCIAL INFORMATION

        The unaudited pro forma financial information contained herein is subject to completion as a consequence of the fact that information related to our Reorganization and the offering is not currently determinable. We intend to complete the pro forma financial information columns labeled Other Reorganization Adjustments and Adjustments for the Offering and the related columns Blackstone Holdings Pro Forma and The Blackstone Group L.P. Consolidated Pro Forma, respectively, at such time that we update this prospectus and such information is available.

        The following unaudited condensed consolidated pro forma statement of income for the year ended December 31, 2006 and the unaudited condensed consolidated pro forma statement of financial condition as of December 31, 2006 are based upon our historical financial statements included elsewhere in this prospectus. These pro forma financial statements present the consolidated results of operations and financial position of The Blackstone Group L.P. to give pro forma effect to all of the transactions described under "Organizational Structure" and this offering as if such transactions had been completed as of January 1, 2006 with respect to the unaudited condensed consolidated pro forma statement of income and as of December 31, 2006 with respect to the unaudited pro forma statement of financial condition. The pro forma adjustments are based on available information and upon assumptions that our management believes are reasonable in order to reflect, on a pro forma basis, the impact of these transactions and this offering on the historical financial information of the Blackstone Group. The adjustments are described in the notes to the unaudited condensed consolidated pro forma statement of income and the unaudited condensed consolidated pro forma statement of financial condition.

        The pro forma adjustments in the column labeled Deconsolidation and Elimination of Blackstone Funds principally give effect to:

We have also included an adjustment to reflect the change in fair value which would have occurred in a manner similar to the application of Statement of Financial Accounting Standard 159 ("SFAS 159") in these pro forma financial statements as we intend to elect the application of SFAS 159 to our general partnership interests in our corporate private equity and real estate opportunity funds substantially concurrently with this offering. The application of SFAS 159 will result in an increase in the amounts included in the line item captions Investments, at Fair Value on our statement of financial condition and Net Gains from Investment Activities in our statement of income, as described below.

        The pro forma adjustments in the Other Reorganization Adjustments column principally give effect to the other elements of the reorganization described in "Organizational Structure" including:

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        In addition, the pro forma adjustments in the Adjustments for the Offering column principally give effect to the Offering Transactions described in "Organizational Structure", including:

        Blackstone Group is considered our predecessor for accounting purposes, and its combined financial statements will be our historical financial statements following this offering. Because our founders control the legal entities and general partners which comprise the Blackstone Group before the Reorganization and will control our general partner after the Reorganization, we will account for the Reorganization as a transfer of interests under common control. Accordingly, except for the non-contributed entities described above and the valuation adjustments attributable to reflecting the effect of reporting certain assets at fair value under SFAS 159, we will carry forward unchanged the value of assets and liabilities recognized in Blackstone Group's combined financial statements into our consolidated financial statements.

        The Contributed Businesses that act as a general partner of certain consolidated Blackstone funds are taking the necessary steps to grant rights to the unaffiliated investors in that fund to provide that a simple majority of the fund's unaffiliated investors will have the right to accelerate the liquidation date of that fund or the withdrawal of their capital, without cause, in accordance with certain procedures. The granting of these rights, which will occur substantially concurrently with Blackstone Holdings Formation, will lead to the deconsolidation of such investment funds from our consolidated financial statements. In addition, because the general partners of certain other legacy Blackstone funds will not be contributed to Blackstone Holdings as part of the Blackstone Holdings Formation, we will also no longer consolidate those funds in our consolidated financial statements following this offering. See "Organizational Structure—Reorganization—Deconsolidation of Blackstone Funds". The deconsolidation of these investment funds will only affect the manner in which we account for these funds, which will be to reflect our share of the funds' net assets and liabilities and our share of the funds' net earnings; this change in accounting will not affect our consolidated net income or partners' capital. The most significant effects on our consolidated financial statements are:

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        The unaudited condensed consolidated pro forma financial information should be read together with "Organizational Structure", "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the historical financial statements and related notes included elsewhere in this prospectus.

        The unaudited condensed consolidated pro forma financial information is included for informational purposes only and does not purport to reflect the results of operations or financial position of Blackstone that would have occurred had the transactions referenced above occurred on the dates indicated or had we operated as a public entity during the periods presented. The unaudited condensed consolidated pro forma financial information should not be relied upon as being indicative of our results of operations or financial condition had the transactions contemplated in connection with the Reorganization and this offering been completed on the dates assumed. The unaudited condensed consolidated pro forma financial information also does not project our results of operations or financial condition for any future period or date.

        We have not made any pro forma adjustments relating to reporting and compliance costs and investor relations costs that we will incur as a public company. No pro forma adjustment has been made for these additional expenses as an estimate of the expenses is not determinable.

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Unaudited Condensed Consolidated Pro Forma Statement of Financial Condition

 
   As of December 31, 2006
 
   Blackstone
Group
Combined
Historical
   Deconsolidation
and
Elimination of
Blackstone Funds(1)
   Blackstone Group
Deconsolidated
   Other
Reorganization
Adjustments(2)
   Blackstone
Holdings
Pro
Forma
   Adjustments
for
Offering(3)
   The Blackstone
Group L.P.
Consolidated
Pro Forma
 
   ($ in thousands)
Assets                                  
Cash and Cash Equivalents   $ 129,443   $ —   $ 129,443                
Cash Held at Consolidated Entities     810,725     (743,573 )   67,152                
Investments, at Fair Value     31,263,573     (26,930,300 )   4,333,273 *              
Accounts Receivable     656,165     (434,625 )   221,540                
Due from Brokers     398,196     (398,196 )   —                
Investment Subscriptions Paid in Advance     280,917     (246,851 )   34,066                
Due from Affiliates     257,225     103,593     360,818                
Other Assets     94,800     (34,834 )   59,966                
   
 
 
               
Total Assets   $ 33,891,044   $ (28,684,786 ) $ 5,206,258                
   
 
 
 
 
 
 

Liabilities and Partners' Capital
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Loans Payable   $ 975,981   $ (492,233 ) $ 483,748                
Amounts Due to Non-Controlling Interest Holders     647,418     (465,547 )   181,871                
Securities Sold, Not Yet Purchased     422,788     (422,023 )   765                
Due to Affiliates     103,428     (46,252 )   57,176                
Accrued Compensation and Benefits     66,301     —     66,301                
Accounts Payable, Accrued Expenses and Other Liabilities     157,355     (56,418 )   100,937                
   
 
 
               
Total Liabilities     2,373,271     (1,482,473 )   890,798                
   
 
 
 
 
 
 

Non-Controlling Interests in Consolidated Entities
 
 
28,794,894
 
 
(27,847,676
)
 
947,218
 
 
 
 
 
 
 
 

Partners' Capital
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Partners' Capital     2,712,605     645,363     3,357,968                
Accumulated Other Comprehensive Income     10,274     —     10,274                
   
 
 
 
 
 
 
Total Partners' Capital     2,722,879     645,363     3,368,242                
   
 
 
 
 
 
 
Total Liabilities and Partners' Capital   $ 33,891,044   $ (28,684,786 ) $ 5,206,258                
   
 
 
 
 
 
 
(*)
Primarily represents general partner interests in Blackstone funds. See Note (c).

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Notes to Unaudited Condensed Consolidated Pro Forma Statement of Financial Condition

1.     Adjustments for Deconsolidation of Blackstone Funds

 
   As of December 31, 2006
  
 
   Deconsolidation
of
Blackstone Funds(a)
   Elimination of
Non-contributed
Entities(b)
   Application of
Fair Value
Option(c)
   Total
  
Total Assets   $ (29,356,239 ) $ (229,410 ) $ 900,863   $ (28,684,786 )
   
 
 
 
 
Total Liabilities   $ (1,479,124 ) $ (3,349 ) $ —   $ (1,482,473 )
Non-Controlling Interests in Consolidated Entities     (27,877,115 )   29,439           (27,847,676 )
Partners' Capital     —     (255,500 )   900,863     645,363  
   
 
 
 
 
Total Liabilities, Non-Controlling Interests in Consolidated Entities and Partners' Capital   $ (29,356,239 ) $ (229,410 ) $ 900,863   $ (28,684,786 )
   
 
 
 
 
 
   As of December 31, 2006
 
   Blackstone Group
Deconsolidated
   Application
of the Fair
Value Option
   Total
General Partner Interests in Blackstone Funds   $ 2,276,992   $ 900,863   $ 3,177,855
Investments in Blackstone Funds*     1,155,418     —     1,155,418
   
 
 
    $ 3,432,410   $ 900,863   $ 4,333,273
   
 
 
*
Principally represents assets held in employee funds which have been consolidated as variable interest entities; an offsetting amount is included in non-controlling interests in consolidated entities.

(a)
Reflects the deconsolidation of certain investment funds that have historically been consolidated in our combined financial statements.

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2.     Other Reorganization Adjustments

3.     Adjustments for the Offering

•
we will record an increase in deferred tax assets for the estimated income tax effects of the increase in the tax basis of the assets owned by Blackstone Holdings, based on enacted federal and state tax rates at the date of the transaction;

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•
to the extent we estimate that we will not realize the full benefit represented by the deferred tax asset, based on an analysis of expected future earnings, we will reduce the deferred tax asset with a valuation allowance; and

•
we will record 85% of the estimated realizable tax benefit (which is the recorded deferred tax asset less any recorded valuation allowance) as an increase to liability to limited partners of Blackstone Holdings under the tax receivable agreement and the remaining 15% of the estimated realizable tax benefit as an increase to partners' capital.

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Unaudited Condensed Consolidated Pro Forma Statement of Income

 
   Year Ended December 31, 2006
 
   Blackstone
Group
Combined
Historical
   Deconsolidation
and
Elimination of
Blackstone Funds(1)
   Blackstone Group
Deconsolidated
   Other
Reorganization
Adjustments(2)
   Blackstone
Holdings
Pro
Forma
   Adjustments
for Offering(3)
   The Blackstone
Group L.P.
Consolidated
Pro Forma
 
   ($ in thousands, except per common unit data)
Revenues                                  
Fund Management Fees   $ 852,283   $ 35,261   $ 887,544                
Advisory Fees     256,914     —     256,914                
Interest and Other     11,082     —     11,082                
   
 
 
 
 
 
 
  Total Revenues     1,120,279     35,261     1,155,540                
   
 
 
 
 
 
 
Expenses                                  
Employee Compensation and Benefits     250,067     —     250,067                
Interest     36,932     —     36,932                
Occupancy and Related Charges     35,862     —     35,862                
General, Administrative and Other     86,534     —     86,534                
Fund Expenses     143,695     (143,695 )   —                
   
 
 
 
 
 
 
  Total Expenses     553,090     (143,695 )   409,395                
   
 
 
 
 
 
 
Other Income                                  
Net Gains from Investment Activities     7,587,296     (5,466,317 )   2,120,979 *              
   
 
 
 
 
 
 
Income Before Non-Controlling Interests in Income of Consolidated Entities and Income Taxes     8,154,485     (5,287,361 )   2,867,124                
Non-Controlling Interests in Income of Consolidated Entities     5,856,345     (5,666,420 )   189,925                
   
 
 
 
 
 
 
Income Before Taxes     2,298,140     379,059     2,677,199                
Income Taxes     31,934     —     31,934                
   
 
 
 
 
 
 
Net Income   $ 2,266,206   $ 379,059   $ 2,645,265                
   
 
 
 
 
 
 

Net Income Per Common Unit:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  Basic                                  
  Diluted                                  
Weighted Average Common Units:                                  
  Basic                                  
  Diluted                                  
*
Primarily represents the preferred allocation of income ("carried interest") received by the general partners of Blackstone Funds.

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Notes to Unaudited Condensed Consolidated Pro Forma Statement of Income

1.     Adjustments for Deconsolidation of Blackstone Funds

 
   Year Ended December 31, 2006
  
 
   Deconsolidation
of Blackstone
Funds(k)
   Elimination of
Non-Contributed
Entities(l)
   Application of
Fair Value
Option(m)
   Total
  
Total Revenues   $ 35,261   $ —   $ —   $ 35,261  
Total Expenses     (143,695 )   —     —     (143,695 )
   
 
 
 
 
Subtotal     178,956     —     —     178,956  
Other Income     (5,845,376 )   (216,146 )   595,205     (5,466,317 )
Non-Controlling Interests in Consolidated Entities     (5,666,420 )   —     —     (5,666,420 )
   
 
 
 
 
Net Income   $ —   $ (216,146 ) $ 595,205   $ 379,059  
   
 
 
 
 

2.     Other Reorganization Adjustments

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   Year Ended December 31, 2006
Increase to Employee Compensation and Benefits Expense
Aggregate Salary and Bonus Payments to our Senior Managing Directors(i)    
Issuances of Unvested Blackstone Holdings Partnership Units to our Senior Managing Directors(ii)    
Issuance of Unvested Restricted Common Units to our Other Employees(iii)    
Carry Plan Awards to our Senior Managing Directors and Selected Other Individuals(iv)    
   
Total Increase to Employee Compensation and Benefits Expense    
   

79

3.     Adjustments for the Offering

80

Determination of Earnings per Common Unit


 
   The Blackstone Group L.P.
Pro Forma
 
   Year Ended December 31, 2006
 
   Basic
   Diluted
The Blackstone Group L.P. Common Units Offered in this Offering        
The Blackstone Group L.P. Restricted Common Units        
Blackstone Holdings Partnership Units(1)        
   
 
Weighted Average Common Units Outstanding        
   
 
 
   The Blackstone Group L.P.
Pro Forma
 
   Year Ended December 31, 2006
 
   Basic
   Diluted
Net Income Available to Holders of The Blackstone        
  Group L.P. Common Units        
Weighted Average Common Units Outstanding        
Net Income Per Common Unit        

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SELECTED HISTORICAL FINANCIAL DATA

        The following selected historical combined financial and other data of Blackstone Group should be read together with "Organizational Structure", "Unaudited Pro Forma Financial Information", "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the historical financial statements and related notes included elsewhere in this prospectus. Blackstone Group is considered our predecessor for accounting purposes, and its combined financial statements will be our historical financial statements following this offering.

        We derived the selected historical combined statements of income data of Blackstone Group for each of the years ended December 31, 2004, 2005 and 2006 and the selected historical combined statements of financial condition data as of December 31, 2005 and 2006 from our audited combined financial statements which are included elsewhere in this prospectus. We derived the selected historical combined statements of income data of Blackstone Group for the years ended December 31, 2002 and 2003 and the selected combined statements of financial condition data as of December 31, 2002, 2003 and 2004 from our unaudited combined financial statements which are not included in this prospectus. The unaudited combined financial statements of Blackstone Group have been prepared on substantially the same basis as the audited combined financial statements and include all adjustments that we consider necessary for a fair presentation of our combined financial position and results of operations for all periods presented.

        The selected historical financial data is not indicative of the expected future operating results of The Blackstone Group L.P. following the Reorganization and this offering. In particular, following this offering The Blackstone Group L.P. will no longer consolidate in its financial statements the investment funds that have historically been consolidated in our financial statements, with the exception of a limited number of our entities which our employees use to invest in our funds, and certain funds of hedge funds. In addition, the general partners of certain legacy Blackstone funds that do not have a meaningful amount of unrealized investments and a number of investment vehicles through which our existing owners and other third parties have made commitments to or investments in or alongside of Blackstone's investment funds will not be contributed to Blackstone Holdings. See "Organizational Structure" and "Unaudited Pro Forma Financial Information".

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   Year Ended December 31,
  
 
   2006
   2005
   2004
   2003
   2002
  
 
   (Dollars in Thousands)

  
Revenues                                
  Fund management fees   $ 852,283   $ 370,574   $ 390,645   $ 304,651   $ 173,538  
  Advisory fees     256,914     120,137     108,356     119,410     141,613  
  Interest and other     11,082     6,037     4,462     2,635     2,972  
   
 
 
 
 
 
    Total Revenues     1,120,279     496,748     503,463     426,696     318,123  
   
 
 
 
 
 
Expenses                                
  Employee compensation and benefits     250,067     182,605     139,512     114,218     94,412  
  Interest     36,932     23,830     16,239     13,834     13,418  
  Occupancy and related charges     35,862     30,763     29,551     23,575     20,064  
  General, administrative and other     86,534     56,650     48,576     44,222     37,614  
  Fund expenses     143,695     67,972     43,123     42,076     24,094  
   
 
 
 
 
 
      Total Expenses     553,090     361,820     277,001     237,925     189,602  
   
 
 
 
 
 
Other Income                                
  Net gains (losses) from investment activities     7,587,296     5,142,530     6,214,519     3,537,268     (438,684 )
   
 
 
 
 
 
Income (loss) before non-controlling interests in income of consolidated entities and income taxes     8,154,485     5,277,458     6,440,981     3,726,039     (310,163 )
Non-controlling interests in income of consolidated entities     5,856,345     3,934,535     4,901,547     2,773,014     358,728  
   
 
 
 
 
 
Income before taxes     2,298,140     1,342,923     1,539,434     953,025     48,565  
Income taxes     31,934     12,260     16,120     11,949     9,119  
   
 
 
 
 
 
Net Income   $ 2,266,206   $ 1,330,663   $ 1,523,314   $ 941,076   $ 39,446  
   
 
 
 
 
 
 
   As of December 31,
 
   2006
   2005
   2004
   2003
   2002
 
   (Dollars in Thousands)
Statement of Financial Condition Data                              
  Total assets   $ 33,891,044   $ 21,121,124   $ 21,253,939   $ 14,937,386   $ 10,348,829
  Total liabilities   $ 2,373,271   $ 2,082,771   $ 1,930,001   $ 1,458,512   $ 891,263
  Non-controlling interests in consolidated entities   $ 28,794,894   $ 17,213,408   $ 17,387,507   $ 12,398,271   $ 9,043,808
  Partners' capital   $ 2,722,879   $ 1,824,945   $ 1,936,431   $ 1,080,603   $ 413,758

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MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

        The following discussion and analysis should be read in conjunction with the historical financial statements and the related notes included elsewhere in this prospectus.

        The historical combined financial data discussed below reflect the historical results of operations and financial position of Blackstone Group. Blackstone Group is considered our predecessor for accounting purposes, and its combined financial statements will be our historical financial statements following this offering. These historical combined financial data do not give effect to the Reorganization (including the deconsolidation of the investment funds that have historically been consolidated in our combined financial statements and the elimination of the general partners of certain legacy Blackstone funds that do not have a meaningful amount of unrealized investments and a number of investment vehicles through which our existing owners and other third parties have made commitments) or to the completion of this offering. See "Organizational Structure" and "Unaudited Pro Forma Financial Information" included elsewhere in this prospectus.

Overview

        Blackstone is one of the largest independent alternative asset managers in the world. We have grown our assets under management significantly over the past five years, from approximately $14.1 billion as of December 31, 2001 to approximately $69.5 billion as of December 31, 2006, representing a compound annual growth rate of 37.6%. In addition, we provide various financial advisory services, including mergers and acquisitions advisory, restructuring and reorganization advisory and fund placement services.

        Our business is organized into four business segments:

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        We generate our income from fees earned pursuant to contractual arrangements with funds, fund investors and fund portfolio companies (including management, transaction and monitoring fees), and from mergers and acquisitions advisory services, restructuring and reorganization advisory services and fund placement services for alternative investment funds. In certain management arrangements we receive performance fees when the return on assets exceeds certain benchmark returns or other performance targets. We make significant investments in the funds we manage and, in many cases, we receive a preferred allocation of income (i.e., a "carried interest") in the event that specified cumulative investment returns are achieved. Historically, our most significant expense has been compensation for our non-senior managing director employees, which will increase prospectively due to (1) payments to our senior managing directors of salary and bonus following this offering; (2) grants of unvested Blackstone Holdings partnership units to our senior managing directors and selected other individuals engaged in some of our businesses as part of the Reorganization; (3) awards of unvested restricted common units of our other employees; and (4) ownership by our senior managing directors and selected other individuals of a portion of the carried interest income earned in respect of certain of the funds.

Business Environment

        As an investment management firm our businesses are materially affected by conditions in the financial markets and economic conditions generally in the United States, Western Europe and to some extent elsewhere around the world. Our diverse mix of business and product lines has allowed us to generate attractive returns in different business climates. Generally, business conditions characterized by low inflation, low or declining interest rates and strong equity markets provide a positive climate for us to generate attractive returns on existing investments. We also benefit, however, from periods of market volatility and disruption which allow us to use our large capital base and our experience with troubled companies and distressed securities to make investments at attractive prices and terms. In addition, within our financial advisory segment, our mergers and acquisitions advisory services operation, restructuring and reorganization advisory services and fund placement services benefit from different stages of the economic cycle.

Market Considerations

        Our ability to grow our revenues and income in our corporate private equity, real estate and marketable alternative asset management segments depends on our ability to attract new capital and investors and our ability to successfully invest our funds' capital. Our ability to grow our revenues in

85


our financial advisory segment depends on our ability to obtain and successfully complete assignments from existing and new clients. In addition, market factors affecting our performance include:


        We believe recent market conditions have created favorable environments for our asset management and advisory businesses during the periods presented.

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        The market conditions discussed above have been generally favorable to our performance over the periods presented. Future market conditions may not continue to be as favorable.

        For a more detailed description of how economic and global financial market conditions can materially affect our financial performance and condition, see "Risk Factors—Risks Related to Our Business".

        As a privately-owned firm, we have always been managed with a perspective of achieving successful growth over the long-term. Both in entering and building our various businesses over the years, and in determining the types of investments to be made by our investment funds, our management has consistently sought to focus on the best outcomes for our businesses and investments over a period of years rather than on the short-term effect on our revenue, net income or cash flow. We intend to maintain this long-term focus even after we become a public company. This approach will continue to significantly affect our revenue, net income and cash flow as a result of the timing of new investments and realizations of investments by our corporate private equity and real estate opportunity funds. This approach may also result in significant and unpredictable variances in these items from quarter to quarter. In addition, while a significant portion of the management fees derived from our investment funds, fund investors and fund portfolio companies are earned pursuant to multi-year contracts, other fees earned by our corporate private equity funds, real estate opportunity funds and our mezzanine funds, incentive fees earned by our fund of funds and hedge fund businesses and fees earned by our fund placement and advisory businesses are subject to significant variability from quarter to quarter based on transaction volume.

        Our historical combined results of operations are not indicative of the expected future operating results of The Blackstone Group L.P. following the Reorganization and this offering. In particular, following this offering The Blackstone Group L.P. will no longer consolidate in its financial statements the investment funds that have historically been consolidated in our combined financial statements, with the exception of a limited number of our entities which our employees use to invest in our funds and certain funds of hedge funds. See "Organizational Structure—Reorganization" and "Unaudited Pro Forma Financial Information".

Key Financial Measures and Indicators

Revenues

        Fund Management Fees.    Fund management fees are comprised of fees charged directly to funds, fund investors and fund portfolio companies (including management, transaction and monitoring fees). Such fees are based upon the contractual terms of investment advisory and related agreements and are recognized as earned over the specified contract period. In certain management fee arrangements, we are entitled to receive performance fees when the return on assets under management exceeds certain benchmark returns or other performance targets. In such arrangements, performance fees are accrued monthly or quarterly based on measuring account / fund performance to date versus the performance benchmark stated in the investment management agreement. See "Business—Business Segments—Structure and Operation of Our Investment Funds—Incentive Arrangements / Fee Structure".

        Advisory Fees.    Financial advisory fees consist of advisory retainer and transaction based fee arrangements related to mergers, acquisitions, restructurings, divestitures and fund placement services for alternative investment funds. Advisory retainer fees are recognized when services are rendered.

87


Transaction fees are recognized when the services related to the underlying transactions are substantially completed in accordance with the terms of their engagement letters. Funds placement services revenue is recognized as earned upon the acceptance by a fund of capital or capital commitments.

Expenses

        Employee Compensation and Benefits Expense.    Prior to this offering, our employee compensation and benefits expense reflects compensation (primarily salary and bonus) solely to our non-senior managing director employees. Historically, all payments for services rendered by our senior managing directors and selected other individuals engaged in our businesses have been accounted for as partnership distributions rather than as employee compensation and benefits expense. As a result, our employee compensation and benefits expense has not reflected payments for services rendered by these individuals. Following this offering, employee compensation and benefits will reflect the amortization of significant non-cash equity-based compensation as unvested Blackstone Holdings partnership units received in the Reorganization by our senior managing directors and other individuals engaged in some of our businesses and unvested restricted common units granted to our non-senior managing director professionals at the time of this offering are charged to expense.

        In addition, we intend to implement performance-based salary and bonus arrangements for our existing owners working in our businesses across our different operations designed to achieve a relationship between compensation levels and results that are appropriate for each operation given prevailing market conditions. In addition, the existing owners working in our businesses, other professionals and selected other individuals who work on our carry funds will own a portion of the carried interest earned in relation to these funds in order to better align their interests with our own and with those of the investors in these funds.

        See "Unaudited Pro Forma Financial Information." See also "Certain Relationships and Related Person Transactions—Blackstone Holdings Partnership Agreements" for information regarding the vesting of Blackstone Holdings partnership units issued to our senior managing directors and see "Management—2007 Equity Incentive Plan—IPO Date Equity Awards" for information regarding the award of restricted common units to be made to our non-senior managing director employees at the time of this offering.

        Fund Expenses.    The expenses of our consolidated Blackstone funds consist primarily of interest expense, professional service fees and other third-party expenses incurred in connection with the diligencing of potential investments that do not result in closed transactions. These expenses will no longer be reflected in our future financial statements after we deconsolidate the related investment funds. See "Unconsolidated Pro Forma Financial Information".

        Other Expenses.    The balance of our expenses include interest expense, occupancy and equipment expenses and general, administrative and other expenses, which consist of professional fees, travel and related expenses, communications and information services, depreciation and amortization and other operating expenses.

        Net Gains from Investment Activities.    Blackstone and its consolidated funds generate realized and unrealized gains from underlying investments in corporate private equity, real estate and marketable alternative asset management funds. In many cases, our general partner interests in the Blackstone funds entitle us to a preferred allocation of income in the event that the investors in the fund achieve specified cumulative investment returns (i.e., a "carried interest"). When we are entitled to a carried interest allocation, we have historically reflected this through a reduction in the income allocated to third-party investors in our carry funds in the determination of the Non-Controlling Interests in the Income of the Consolidated Entities. Following this offering we will no longer consolidate most of our

88


investment funds and, as a result, income related to our carried interest will be explicitly recognized as net gains from investment activities.

        Income Taxes.    We have historically operated as a partnership or, in the case of certain combined subsidiaries, a S Corporation for U.S. federal income tax purposes and generally as a corporate entity in non-U.S. jurisdictions. As a result, our income has not been subject to U.S. federal and state income taxes. Income taxes shown on Blackstone Group's historical combined income statements are attributable to the New York City unincorporated business tax and income taxes on certain entities located in non-U.S. jurisdictions.

        Following this offering the Blackstone Holdings partnerships and their subsidiaries will continue to operate in the U.S. as partnerships for U.S. federal income tax purposes and generally as corporate entities in non-U.S. jurisdictions; accordingly, these entities will in some cases continue to be subject to New York City unincorporated business taxes or non-U.S. income taxes. In addition, certain of the wholly-owned subsidiaries of The Blackstone Group L.P. will be subject to additional entity-level taxes that will be reflected in our consolidated financial statements. For information on the pro forma effective tax rate of The Blackstone Group L.P. following the Reorganization, see Note q in "Unaudited Pro Forma Financial Information".

        Non-Controlling Interests in Income of Consolidated Entities.    On a historical basis, non-controlling interests in income of consolidated entities has primarily consisted of interests of unaffiliated third-party investors and AIG's investments in Blackstone funds pursuant to AIG's mandated limited partner capital commitments, on which we receive carried interest allocations and which we refer to collectively as "Limited Partners" or "LPs" as well as discretionary investments by the other existing owners and employees. Non-controlling interests related to the corporate private equity, real estate opportunity and mezzanine funds are subject to on-going realizations and distributions of proceeds therefrom during the life of a fund with a final distribution at the end of each respective fund's term, which could occur under certain circumstances in advance of or subsequent to that fund's scheduled termination date. Non-controlling interests related to our funds of hedge funds and hedge funds are generally subject to annual, semi-annual or quarterly withdrawal or redemption by investors in our hedge funds following the expiration of a specified period of time when capital may not be withdrawn (typically between one and three years). When redeemed amounts become legally payable to investors in our hedge funds on a current basis, they are reclassified as a liability.

        Following this offering, we will no longer consolidate most of our investment funds, as we will grant liquidation rights to the unrelated investors, see Note k in "Unaudited Pro Forma Financial Information", and accordingly non-controlling interests in income of consolidated entities related to the Limited Partner interests in the deconsolidated funds will no longer be reflected in our financial results. However, we will record significant non-controlling interests in income of consolidated entities relating to the ownership interest of our existing owners in Blackstone Holdings and the limited partner interests in our investment funds that remain consolidated. As described in "Organizational Structure", The Blackstone Group L.P. will, through wholly-owned subsidiaries, be the sole general partner of each of the Blackstone Holdings partnerships. The Blackstone Group L.P. will consolidate the financial results of Blackstone Holdings and its consolidated subsidiaries, and the ownership interest of the limited partners of Blackstone Holdings will be reflected as a minority interest in The Blackstone Group L.P.'s consolidated financial statements.

Operating Metrics

        The alternative asset management business is a complex business that is unusual due to its ability to support rapid growth without requiring substantial capital investment. However, there also can be volatility associated with its earnings and cash flow. Since our inception, we have developed and used various supplemental operating metrics to assess and monitor the operating performance of our various

89


alternative asset management businesses in order to monitor the effectiveness of our value creating strategies.

        Assets Under Management.    Assets under management refers to the assets we manage. Our assets under management equal the sum of: (1) the net asset value ("NAV") of our carry funds plus the capital that we are entitled to call from investors in those funds pursuant to the terms of their capital commitments to those funds (plus the NAV of co-investments arranged by us that were made by limited partners of our corporate private equity and real estate opportunity funds in portfolio companies of such funds, on which we receive a carried interest allocation); (2) the NAV of our funds of hedge funds, proprietary hedge funds and closed-end mutual funds; and (3) the amount of capital raised for our senior debt funds. The assets under management measure we present in this prospectus also includes assets under management relating to our own and our employees' investments in funds for which we charge either no or nominal management fees. As a result of raising new funds with sizeable capital commitments, and increases in the net asset values of our funds and their retained profits, our fee paying assets under management have increased significantly over the periods discussed.

        Limited Partner Capital Invested.    Limited Partner capital invested represents the amount of Limited Partner capital commitments which were invested by our carry funds during each period presented. Over our history we have earned aggregate multiples of invested capital for realized and partially realized investments of 2.6x and 2.4x in our corporate private equity and real estate opportunity funds, respectively.

        Carry Dollars Created.    Carry Dollars Created is an operating measure of the value created for us when our carry funds make an investment. Carry Dollars Created is calculated by multiplying the aggregate amount of Limited Partner capital invested by the carry funds in transactions during a given period by the contractual percentage (generally 20%) of the profits that we earn as a preferred allocation of income (i.e., carried interest) from these investments, assuming we achieve specified cumulative investment returns. Carry Dollars Created is a critical operating metric in the management of our businesses, and we focus on growing the annual amount of Carry Dollars Created over time. We closely track Carry Dollars Created as an operating measure of the productivity of our investment activities and as a measure of the value attributable to us that is embedded in our existing investment portfolio. Carry Dollars Created reflects the opportunity to earn a preferred allocation of income on an investment by our carry funds and is established when a new investment is made. We believe that Carry Dollars Created serves as a useful indicator of potential future investment results.

        As a public company, we will continue to manage our business as we have in the past, using traditional financial measures and our key operating performance metrics, since we believe that these metrics measure the productivity of our investment activities. See "—Summary Historical Financial and Other Data".

Combined Results of Operations

        Following is a discussion of our combined results of operations for the three years ended December 31, 2006, 2005 and 2004. For a more detailed discussion of the factors that affected the results of our four business segments in these periods, see "—Segment Analysis" below.

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        The following tables set forth information regarding our combined results of operations and certain key operating metrics for the three years ended December 31, 2006, 2005 and 2004:

 
   Year Ended December 31,
 
   2006
   2005
   2004
 
   (Dollars in Thousands)
Revenues                  
  Fund Management Fees   $ 852,283   $ 370,574   $ 390,645
  Advisory Fees     256,914     120,137     108,356
  Interest and Other     11,082     6,037     4,462
   
 
 
    Total     1,120,279     496,748     503,463
   
 
 
Expenses                  
  Employee Compensation and Benefits     250,067     182,605     139,512
  Interest     36,932     23,830     16,239
  Occupancy and Related Charges     35,862     30,763     29,551
  General, Administrative and Other     86,534     56,650     48,576
  Fund Expenses     143,695     67,972     43,123
   
 
 
    Total     553,090     361,820     277,001
   
 
 
Other Income                  
  Net Gains from Investment Activities     7,587,296     5,142,530     6,214,519
   
 
 
Income Before Non-Controlling Interests in Income of Consolidated Entities and Income Taxes     8,154,485     5,277,458     6,440,981
Non-Controlling Interests in Income of Consolidated Entities     5,856,345     3,934,535     4,901,547
   
 
 
Income Before Taxes     2,298,140     1,342,923     1,539,434
Income Taxes     31,934     12,260     16,120
   
 
 
Net Income   $ 2,266,206   $ 1,330,663   $ 1,523,314
   
 
 
Assets Under Management (at Year End)   $ 69,503,052   $ 53,919,326   $ 31,701,828
   
 
 
Capital Deployed:                  
  Limited Partner Capital Invested   $ 11,041,102   $ 2,843,135   $ 3,430,502
   
 
 
  Carry Dollars Created   $ 2,179,471   $ 568,627   $ 686,100
   
 
 

        Revenues were $1.1 billion for the year ended December 31, 2006, an increase of $623.5 million or 125.5% versus the year ended December 31, 2005. The increase was primarily due to an increase in fund management fees from a full year of fees generated from our new corporate private equity fund and two new real estate funds, as well as increased assets under management in our marketable alternative asset management segment. In addition, advisory fees increased primarily resulting from increased activity in our fund placement business and increases in mergers and acquisition engagements.

        Expenses were $553.1 million for the year ended December 31, 2006, an increase of $191.3 million or 52.9% versus the year ended December 31, 2005. The increase was primarily due to an increase in

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employee compensation and benefits reflecting the increased investment activities in 2006 as well as the net addition of personnel. In addition, fund expenses increased $75.7 million.

        Net gains from investment activities totaled $7.6 billion for the year ended December 31, 2006, an increase of $2.4 billion or 47.5% versus the year ended December 31, 2005. The increase was primarily due to increases in unrealized gains in real estate and the increase in the net appreciation of investments in our marketable alternative asset management segment.

        Assets under management were $69.5 billion for the year ended December 31, 2006, an increase of $15.6 billion or 28.9% versus the year ended December 31, 2005. The increase was due to increases in assets under management of $2.5 billion in our corporate private equity segment, $2.3 billion in our real estate segment and $10.8 billion in our marketable alternative asset management segment.

        LP capital invested and carry dollars were $11.0 billion and $2.2 billion, respectively, for the year ended December 31, 2006, which represents an increase of $8.2 billion (288%) and $1.6 billion (283%), respectively. Such amounts reflect increased levels of investment achieved in both our private equity and real estate segments, as we have grown our investment teams and global presence. Investments were made across a number of sectors in 2006, including semi-conductor manufacturing, telecommunications and healthcare in the corporate private equity segment and office and hospitality in the real estate segment.

        Revenues were $496.7 million for the year ended December 31, 2005, a decrease of $6.7 million or 1.3% versus the year ended December 31, 2004. The decrease was primarily due to the timing of commitments and actual closings for corporate private equity transactions and a resultant decrease in our share of related additional fees of $52.9 million. This decrease was partially offset by $13.9 million and $17.9 million of increases in real estate and marketable alternative asset management fund fees, respectively.

        Expenses were $361.8 million for the year ended December 31, 2005, an increase of $84.8 million or 30.6% versus the year ended December 31, 2004. The increase was due to increased employee compensation of $43.1 million due to increased payments to existing personnel, as well as the net addition of personnel in anticipation of the launching of a new corporate private equity fund and two new real estate opportunity funds. In addition, fund expenses increased by $24.8 million.

        Net gains from investment activities totaled $5.1 billion for the year ended December 31, 2005, a decrease of $1.1 billion or 17.2% versus the year ended December 31, 2004. The decrease was due to a decline in realized gains in corporate private equity and real estate, offset by a slight increase in the marketable alternative asset management segment.

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        Assets under management were $53.9 billion for the year ended December 31, 2005, an increase of $22.2 billion or 70.1% versus the year ended December 31, 2004. During 2005, we commenced a corporate private equity fund and two real estate opportunity funds, which increased assets under management in those segments by $14.5 billion and $3.8 billion, respectively. In addition, assets under management in the marketable alternative asset management segment increased by $4.8 billion.

        LP capital invested and carry dollars were $2.8 billion and $568.6 million, respectively, for the year ended December 31, 2005, which represents a decrease of $587.4 million (17%) and $117.5 million (17%), respectively. Such amounts reflect a decline in our private equity segment offset in part by an increase in the real estate segment. Investments were made across a number of sectors in 2005, including healthcare and technology in the corporate private equity segment and hospitality in the real estate segment.

Segment Analysis

        Discussed below are our results of operations for each of our reportable segments. They represent the separate segment information utilized by our senior management to make operating decisions, assess performance and allocate resources. Management makes operating decisions and assesses the performance of each of our business segments based on financial and operating metrics and data that is presented without the consolidation of any of the investment funds we manage. Key performance measures used by management are Carry Dollars Created and economic net income ("ENI"), which has historically been a key performance measure used by management. ENI represents net income excluding the impact of income taxes as well as the impact of non-cash charges related to vesting of equity based compensation. However, our historical combined financial statements do not include non-cash charges related to vesting of equity based compensation. Therefore, ENI is equivalent to income before taxes in our historical combined financial statements. ENI is used by management for our segments in making resource deployment and employee compensation decisions.

        Segment revenues, expenses and net gains from investing activities are presented on a basis that deconsolidates the investment funds we manage. As a result, segment revenues are greater than those presented on a combined GAAP basis because fund management fees recognized in certain segments are received from the Blackstone funds and eliminated in consolidation when presented on a combined GAAP basis. Furthermore, segment expenses and net gains from investments are lower than related amounts presented on a combined GAAP basis due to the exclusion of fund expenses that are paid by LPs and the elimination of non-controlling interests.

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        The following table presents a summary of total segment revenues, expenses, net gains from investment activities and economic net income as included in segment results:

 
   Total Reportable Segments
 
   Year Ended December 31,
 
   2006
   2005
   2004
 
   (Dollars in Thousands)
Revenues                  
  Fund Management Fees   $ 887,876   $ 405,483   $ 424,540
  Advisory Fees     256,914     120,137     108,357
  Interest and Other     12,024     5,595     4,607
   
 
 
    Total     1,156,814     531,215     537,504
   
 
 
Expenses     409,395     293,848     233,878
   
 
 
Fee Related Earnings     747,419     237,367     303,626
   
 
 
Net Gains from Investment Activities     1,550,721     1,105,556     1,235,808
   
 
 
Economic Net Income   $ 2,298,140   $ 1,342,923   $ 1,539,434
   
 
 
Assets Under Management (at Year End)   $ 69,503,052   $ 53,919,326   $ 31,701,828
   
 
 
Capital Deployed:                  
  Limited Partner Capital Invested   $ 11,041,102   $ 2,843,135   $ 3,430,502
   
 
 
  Carry Dollars Created   $ 2,179,471   $ 568,627   $ 686,100
   
 
 

        The following table reconciles the total reportable segments to Blackstone Group Combined for the year ended December 31, 2006:

 
   Year Ended December 31, 2006
 
   (Dollars in Thousands)
 
   Total Reportable
Segments
   Consolidation
Adjustments
   Blackstone Group
Combined
Fee Related Revenues   $ 1,156,814   $ (36,535) (a) $ 1,120,279
Expenses   $ 409,395   $ 143,695   (b) $ 553,090
Net Gains from Investment Activities   $ 1,550,721   $ 6,036,575   (c) $ 7,587,296
(a)
The fee related revenues adjustment represents management fees earned from Blackstone funds to arrive at Blackstone Group combined revenues which were eliminated in consolidation.

(b)
The expenses adjustment represents the addition of expenses of the consolidated Blackstone funds to the Blackstone Group unconsolidated expenses to arrive at Blackstone Group combined expenses.

(c)
The net gains from investment activities adjustment results from the following:

Fund Management Fees Eliminated in Consolidation   $ 36,535
Fund Expenses Added in Consolidation     143,695
Non-Controlling Interests in Income of Consolidated Entities     5,856,345
   
  Total Consolidation Adjustments   $ 6,036,575
   

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        The following table reconciles the total reportable segments to Blackstone Group Combined for the year ended December 31, 2005:

 
   Year Ended December 31, 2005
 
   (Dollars in Thousands)
 
   Total
Reportable
Segments
   Consolidation
Adjustments
   Blackstone Group
Combined
Fee Related Revenues   $ 531,215   $ (34,467 )(a) $ 496,748
Expenses   $ 293,848   $ 67,972   (b) $ 361,820
Net Gains from Investment Activities   $ 1,105,556   $ 4,036,974   (c) $ 5,142,530
(a)
The fee related revenues adjustment represents management fees earned from Blackstone funds to arrive at Blackstone Group combined revenues which were eliminated in consolidation.

(b)
The expenses adjustment represents the addition of expenses of the consolidated Blackstone funds to the Blackstone Group unconsolidated expenses to arrive at Blackstone Group combined expenses.

(c)
The net gains from investment activities adjustment results from the following:

Fund Management Fees Eliminated in Consolidation   $ 34,467
Fund Expenses Added in Consolidation     67,972
Non-Controlling Interests in Income of Consolidated Entities     3,934,535
   
  Total Consolidation Adjustments   $ 4,036,974
   

        The following table reconciles the total reportable segments to Blackstone Group Combined for the year ended December 31, 2004:

 
   Year Ended December 31, 2004
 
   (Dollars in Thousands)
 
   Total
Reportable
Segments
   Consolidation
Adjustments
   Blackstone Group
Combined
Fee Related Revenues   $ 537,504   $ (34,041 )(a) $ 503,463
Expenses   $ 233,878   $ 43,123   (b) $ 277,001
Net Gains from Investment Activities   $ 1,235,808   $ 4,978,711   (c) $ 6,214,519
(a)
The fee related revenues adjustment represents management fees earned from Blackstone funds to arrive at Blackstone Group combined revenues which were eliminated in consolidation.

(b)
The expenses adjustment represents the addition of expenses of the consolidated Blackstone funds to the Blackstone Group unconsolidated expenses to arrive at Blackstone Group combined expenses.

(c)
The net gains from investment activities adjustment results from the following:

Fund Management Fees Eliminated in Consolidation   $ 34,041
Fund Expenses Added in Consolidation     43,123
Non-Controlling Interests in Income of Consolidated Entities     4,901,547
   
  Total Consolidation Adjustments   $ 4,978,711
   

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Corporate Private Equity

        The following table presents our segment results for our corporate private equity segment:

 
   Year Ended December 31,
 
   2006
   2005
   2004
 
   (Dollars in Thousands)
Revenues                  
  Fund Management Fees   $ 404,296   $ 175,772   $ 226,712
  Interest and Other     871     1,666     919
   
 
 
    Total     405,167     177,438     227,631
   
 
 
Expenses     117,724     78,247     70,561
   
 
 
Fee Related Earnings     287,443     99,191     157,070
   
 
 
Net Gains from Investment Activities     722,410     737,506     871,891
   
 
 
Economic Net Income   $ 1,009,853   $ 836,697   $ 1,028,961
   
 
 

        The following operating metrics are used in the management of this business segment:

 
   Year Ended December 31,
 
   2006
   2005
   2004
 
   (Dollars in Thousands)
Assets Under Management (at Year End)   $ 29,808,110   $ 27,263,416   $ 15,651,178
   
 
 
Capital Deployed:                  
 
Limited Partner Capital Invested
 
$
7,791,619
 
$
1,615,106
 
$
2,289,592
   
 
 
  Carry Dollars Created   $ 1,529,574   $ 323,021   $ 457,918
   
 
 

        Revenues were $405.2 million for the year ended December 31, 2006, an increase of $227.7 million or 128.3% versus the year ended December 31, 2005. The increase in 2006 is due to the impact of fund related fees earned from Blackstone Capital Partners V, a new fund that commenced in December 2005, and portfolio company related fees earned in connection with the increased investment activity in 2006 versus 2005 (our share of 2006 portfolio company related fees totaled $198 million as compared to $65.2 million in 2005).

        Expenses were $117.7 million for the year ended December 31, 2006, an increase of $39.5 million or 50.5% versus the year ended December 31, 2005. The increase was due primarily to increased compensation to employees reflecting the growth of the team and increased investment activity and resultant revenues in 2006. In addition, professional fees and interest expense increased in the aggregate by $15.3 million primarily as a result of increased investment activity.

        Net gains from investment activities totaled $722.4 million (including $595.5 million of general partner carried interest allocations) for the year ended December 31, 2006, a decrease of $15.1 million versus the year ended December 31, 2005, primarily attributable to differences in the amount of

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unrealized gains in certain portfolio investments in 2006 compared to recognition of both unrealized and realized gains in other portfolio investments in 2005.

        Assets under management were $29.8 billion for the year ended December 31, 2006, a net increase of $2.5 billion or 9.3% versus the year ended December 31, 2005, arising primarily from a subsequent closing of additional commitments to Blackstone Capital Partners V.

        LP capital invested in private equity transactions and Carry Dollars Created were $7.8 billion and $1.5 billion, respectively, for the year ended December 31, 2006, which represents an increase of $6.2 billion or 382.4% and $1.2 billion or 373.5%, respectively. These increases reflect increases in the size and volume of investment activity.

        Revenues were $177.4 million for the year ended December 31, 2005, a decrease of $50.2 million or 22.1% versus the year ended December 31, 2004. The decrease was due primarily to the decrease in investment activity and a commensurate decrease in portfolio company related fees (our share of 2005 portfolio company related fees totaled $65.2 million as compared to $100.6 million in 2004).

        Expenses were $78.2 million for the year ended December 31, 2005, an increase of $7.7 million or 10.9% versus the year ended December 31, 2004. The increase was due primarily to increased compensation expense of $5.0 million as well as costs associated with Blackstone establishing a presence in India.

        Net gains from investment activities totaled $737.5 million for the year ended December 31, 2005, a decrease of $134.4 million or 15.4% versus the year ended December 31, 2004, primarily attributable to realizations of prior year's unrealized gains and an increase in the 2005 unrealized appreciation of energy related fund investments. Included in 2005 and 2004 net gains from investment activities are general partner carried interest allocations of $607.8 million and $709.8 million, respectively.

        Assets under management were $27.3 billion for the year ended December 31, 2005, a net increase of $11.6 billion or 74.2% versus the year ended December 31, 2004. The increase reflects primarily the December 2005 commencement of Blackstone Capital Partners V, a new fund with total capital commitments of $14.5 billion.

        LP capital invested in private equity transactions and carry dollars created were $1.6 billion and $323.0 million, respectively, for the year ended December 31, 2005, which represents a decrease of $674.5 million or 29.5% and $134.9 million or 29.5%, respectively, versus the year ended December 31, 2004. These decreases reflect a lower level of investment activity in 2005.

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Real Estate

        The following table presents our results for our real estate segment:

 
   Year Ended December 31,
 
   2006
   2005
   2004
 
   (Dollars in Thousands)
Revenues                  
  Fund Management Fees   $ 263,130   $ 100,073   $ 86,113
  Interest and Other     1,076     835     2,502
   
 
 
    Total     264,206     100,908     88,615
   
 
 
Expenses     96,426     68,428     51,797
   
 
 
Fee Related Earnings     167,780     32,480     36,818
   
 
 
Net Gains from Investment Activities     734,964     292,505     296,439
   
 
 
Economic Net Income   $ 902,744   $ 324,985   $ 333,257
   
 
 

        The following operating metrics are used in the management of this business segment:

 
   Year Ended December 31,
 
   2006
   2005
   2004
 
   (Dollars in Thousands)
Assets Under Management (at Year End)   $ 12,796,999   $ 10,537,078   $ 4,867,046
   
 
 
Capital Deployed:                  
 
Limited Partner Capital Invested
 
$
3,130,945
 
$
1,105,882
 
$
935,136
   
 
 
  Carry Dollars Created   $ 626,189   $ 221,176   $ 187,027
   
 
 

        Revenues were $264.2 million for the year ended December 31, 2006, an increase of $163.3 million or 161.8% versus the year ended December 31, 2005. The increase in 2006 is due to the net impact of a full year of fund related fees earned from our two real estate opportunity funds (Blackstone Real Estate Partners V and Blackstone Real Estate Partners International II), which commenced in the second half of 2005 and an increase in portfolio company related fees earned (our share of portfolio company related 2006 fees totaled $114.9 million as compared to $35.0 million in 2005) due to increases in both the size and volume of investments.

        Expenses were $96.4 million for the year ended December 31, 2006, an increase of $28.0 million or 40.9% versus the year ended December 31, 2005. Compensation expense increased $20.6 million, which is primarily due to increased compensation to existing personnel and net additions of personnel to drive growth of the portfolio and increases in investment pace. Professional fees and interest expense increased $5.9 million in total for 2006.

        Net gains from investment activities totaled $735.0 million (including $656.7 million of general partner carried interest allocations) for the year ended December 31, 2006, an increase of

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$442.5 million or 151.3% versus the year ended December 31, 2005. The increase was primarily related to net unrealized gain associated with our real estate opportunity funds' hospitality and office portfolio investments.

        Assets under management were $12.8 billion for the year ended December 31, 2006, an increase of $2.3 billion or 21.4% versus the year ended December 31, 2005. The increase was due to a subsequent closing of $3.4 billion of LP commitments in the first half of 2006 in Blackstone Real Estate V partially offset by a reduction in investments due to the disposition of some of our real estate opportunity funds' domestic and European real estate assets in 2006.

        LP capital invested in real estate transactions and the resultant carry dollars created were $3.1 billion and $626.2 million, respectively, for the year ended December 31, 2006, which represents an increase of $2.0 billion or 183.1% and $405.0 million or 183.1%, respectively, versus the year ended December 31, 2005. This increase reflects the size and volume of investment activity in 2006, which included major acquisitions in the office and hospitality sectors.

        Revenues were $100.9 million for the year ended December 31, 2005, an increase of $12.3 million or 13.9% versus the year ended December 31, 2004, primarily due to the net impact of the commencement of Blackstone Real Estate Partners V and Blackstone Real Estate Partners International II, as well as an increase in our share of portfolio company related fees (our share of 2005 portfolio company related fees totaled $35.0 million as compared to $32.0 million in 2004).

        Expenses were $68.4 million for the year ended December 31, 2005, an increase of $16.6 million or 32.1% versus the year ended December 31, 2004. The increase is due primarily to a $14.5 million increase in compensation for existing personnel, addition of personnel to grow investment activity in Western Europe and hirings required in anticipation of the launching of Blackstone Real Estate Partners V and Blackstone Real Estate Partners International II in the second half of 2005.

        Net gains from investment activities totaled $292.5 million for the year ended December 31, 2005, a decrease of $3.9 million or 1.3% versus the year ended December 31, 2004. For the year ended December 31, 2005, net gains, both realized and unrealized, are primarily related to hospitality portfolio investments. For the year ended December 31, 2004, net gains, both realized and unrealized, are primarily related to hospitality and retail portfolio investments. Included in 2005 and 2004 net gains from investment activities are general partner carried interest allocations of $241.6 million and $241.2 million, respectively.

        Assets under management were $10.5 billion for the year ended December 31, 2005, an increase of $5.7 billion or 116.5% versus the year ended December 31, 2004. The increase represents the closing of two new real estate funds in the second half of 2005: Blackstone Real Estate Partners International II

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with €1.5 billion in LP commitments and an initial closing of $1.8 billion in LP commitments for Blackstone Real Estate Partners V.

        LP capital invested in real estate transactions and the carry dollars created were $1.1 billion and $221.2 million, respectively, for the year ended December 31, 2005, an increase of $170.7 million or 18.3% and $34.1 million or 18.3%, respectively, versus the year ended December 31, 2004. These increases reflect the increase in the investment size and volume activity in 2005, including major acquisitions in the hospitality sector.

Marketable Alternative Asset Management

        The following table presents our results of operations for our marketable alternative asset management segment:

 
   Year Ended December 31,
 
   2006
   2005
   2004
 
   (Dollars in Thousands)
Revenues                  
  Fund Management Fees   $ 220,450   $ 129,638   $ 111,715
  Advisory Fees     —     —     179
  Interest and Other     6,669     2,345     1,081
   
 
 
    Total     227,119     131,983     112,975
   
 
 
Expenses     128,797     92,809     71,485
   
 
 
Fee Related Earnings     98,322     39,174     41,490
   
 
 
Net Gains from Investment Activities     93,347     74,956     67,478
   
 
 
Economic Net Income   $ 191,669   $ 114,130   $ 108,968
   
 
 

        The following operating metrics are used in the management of this business segment:

 
   Year Ended December 31,
 
   2006
   2005
   2004
 
   (Dollars in Thousands)
Assets Under Management (at Year End)   $ 26,897,943   $ 16,118,832   $ 11,183,604
   
 
 
Capital Deployed:                  
 
Limited Partner Capital Invested
 
$
118,538
 
$
122,148
 
$
205,774
   
 
 
  Carry Dollars Created   $ 23,708   $ 24,430   $ 41,155
   
 
 

        Revenues were $227.1 million for the year ended December 31, 2006, an increase of $95.1 million or 72.1% versus the year ended December 31, 2005. The increase in 2006 revenues is primarily due to growth in assets under management from various sources including capital contributions to funds of hedge funds, additional capital raised for our distressed securities hedge fund and our equity hedge fund and appreciation from existing funds. Included in 2006 revenues is $32.1 million of incentive fee revenue earned as management fees.

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        Expenses were $128.8 million for the year ended December 31, 2006, an increase of $36.0 million or 38.8% versus the year ended December 31, 2005. The increase was primarily due to an increase in personnel to support expansion into new areas and higher compensation for existing employees to support asset growth and the creation of new investment products.

        Net gains from investment activities were $93.3 million (including $31.0 million of general partner preferred allocations of income) for the year ended December 31, 2006, an increase of $18.4 million or 24.5% versus the year ended December 31, 2005. The increase was primarily due to the increase in overall performance on a larger asset base.

        Assets under management were $26.9 billion for the year ended December 31, 2006, a net increase of $10.8 billion or 66.9% versus the year ended December 31, 2005. The increase was due to capital contributions to new and existing funds as well as net appreciation on the asset base.

        LP capital invested in mezzanine investments and the carry dollars created were $118.5 million and $23.7 million, respectively, for the year ended December 31, 2006, a decrease of $3.6 million or 3.0% and $0.7 million or 3.0%, respectively, versus the year ended December 31, 2005.

        Revenues were $132.0 million for the year ended December 31, 2005, an increase of $19.0 million or 16.8% versus the year ended December 31, 2004. The increase in 2005 revenues is primarily due to growth in assets under management from various sources including capital contributions, capital appreciation and additional capital from new funds. Included in 2005 and 2004 incentive fee revenue paid as management fees are $11.8 million and $2.8 million, respectively.

        Expenses were $92.8 million for the year ended December 31, 2005, an increase of $21.3 million or 29.8% versus the year ended December 31, 2004. The increase was due primarily to increased compensation to existing personnel as well as the net addition of personnel which resulted in an increase of $15.6 million in 2005. Professional fees and interest expense increased in the aggregate $5.1 million.

        Net gains from investment activities were $75.0 million (including $15.9 million of general partner preferred allocations of income as compared to $11.3 million for 2004) the year ended December 31, 2005, an increase of $7.5 million or 11.1% versus the year ended December 31, 2004. The increase was primarily due to the increase in overall performance on a larger asset base.

        Assets under management were $16.1 billion for the year ended December 31, 2005, an increase of $4.9 billion or 44.1% versus the year ended December 31, 2004. The increase was due to capital

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contributions to new and existing funds in the marketable alternative asset management segment, as well as net appreciation on the asset base.

        LP capital invested in mezzanine transactions and the carry dollars created were $122.1 million and $24.4 million, respectively, for the year ended December 31, 2005, a decrease of $83.6 million or 40.6% and $16.7 million or 40.6%, respectively, versus the year ended December 31, 2004. These decreases are due to significant investment activity during 2004 compared to 2005.

Financial Advisory

        The following table presents our results of operations for our financial advisory segment:

 
   Year Ended December 31,
 
   2006
   2005
   2004
 
   (Dollars in Thousands)
Revenues                  
  Advisory Fees   $ 256,914   $ 120,137   $ 108,178
  Interest and Other     3,408     749     105
   
 
 
    Total     260,322     120,886     108,283
   
 
 
Expenses     66,448     54,364     40,035
   
 
 
Fee Related Earnings     193,874     66,522     68,248
   
 
 
Net Gain from Investment Activities     —     589     —
   
 
 
Economic Net Income   $ 193,874   $ 67,111   $ 68,248
   
 
 

        Revenues were $260.3 million for the year ended December 31, 2006, an increase of $139.4 million or 115.3% versus the year ended December 31, 2005. The increase was primarily due to an increase of $90.6 million in advisory fees arising principally from our entry into the fund placement business as well as an increase in mergers and acquisitions advisory fees in 2006.

        Expenses were $66.4 million for the year ended December 31, 2006, an increase of $12.1 million or 22.2% versus the year ended December 31, 2005. The increase was primarily due to an increase in compensation of $9.0 million, which included personnel additions in our fund placement business. In addition, operating expenses increased $3.1 million.

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        Revenues were $120.9 million for the year ended December 31, 2005, an increase of $12.6 million or 11.6% versus the year ended December 31, 2004. The increase was primarily due to an increase of $27.9 million in mergers and acquisitions advisory fees, as well as increased revenues attributable to the first full year of operations for our fund placement business, partially offset by a decrease in restructuring and reorganization advisory fees following a significant drop in overall corporate defaults due to a strong economy and high global liquidity.

        Expenses were $54.4 million for the year ended December 31, 2005, an increase of $14.3 million or 35.8% versus the year ended December 31, 2004. The increase was primarily due to an increase in compensation of $8.0 million, which includes personnel additions to our mergers and acquisitions business. In addition, professional fees increased by $4.7 million.

Liquidity and Capital Resources

Historical Liquidity and Capital Resources

        On a historical basis we have drawn on the capital resources of our existing owners together with the committed capital from our Limited Partners in order to fund the investment requirements of the Blackstone funds. In addition, we require capital resources to support the working capital needs of our businesses as well as to fund growth and investments in new business initiatives. We have multiple sources of liquidity to meet these capital needs, including accumulated earnings in the businesses as well as access to the committed credit facilities described in Note 8 to the Combined Financial Statements.

        Our historical combined statements of cash flows reflect the cash flows of the Blackstone operating businesses as well as those of our consolidated Blackstone funds. The assets of the consolidated Blackstone funds, on a gross basis, are much larger than the assets of our operating businesses and therefore have a substantial effect on the reported cash flows reflected in our statement of cash flows. As described above in "Combined Results of Operations," our assets under management, which are primarily representative of the net assets within the Blackstone funds, have grown significantly during the periods reflected in our combined financial statements included in this prospectus. This growth is a result of these funds raising and investing capital, and generating gains from investments, during these periods. Their cash flows, which are reflected in our combined statement of cash flows have increased substantially as a result of this growth. It is this growth which is the primary cause of increases in the gross cash flows reflected in our combined statement of cash flows. More specifically, the primary cash flow activities of the consolidated Blackstone funds are (1) raising capital from their investors, which have historically been reflected as non-controlling interests of consolidated entities in our combined financial statements, (2) using this capital to make investments, (3) financing certain investments with debt, (4) generating cash flow from operations through the realization of investments, and (5) distributing cash flow to investors. The Blackstone funds are treated as investment companies for accounting purposes and therefore these amounts are included in cash flows from operations.

        We have managed our historical liquidity and capital requirements by focusing on our deconsolidated cash flows. Our primary cash flow activities on the basis of deconsolidating the Blackstone funds are (1) generating cash flow from operations, (2) funding general partner capital commitments to Blackstone funds (which cash flows are eliminated in consolidation), (3) generating income from investment activities, (4) funding capital expenditures, (5) funding new business initiatives, (6) borrowings and repayments under credit agreements and (7) distributing cash flow to owners.

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        We have managed the historical liquidity and capital requirements of the Blackstone Group by focusing on our cash flows before the consolidation of the Blackstone funds and the effect of normal changes in assets and liabilities which we anticipate will be settled for cash within one year. We use adjusted cash flow from operations as a supplemental measure to assess liquidity and amounts available for distribution to our existing owners. See "Cash Distribution Policy". As noted above, in accordance with GAAP, certain of the Blackstone funds are consolidated into the combined financial statements of Blackstone Group, notwithstanding the fact that Blackstone Group has only a minority economic interest in these funds. Consequently, Blackstone Group's combined financial statements reflect the cash flow of the consolidated Blackstone funds on a gross basis rather than the cash flow actually attributable to the Blackstone Group. Normal movements in our short term assets and liabilities do not affect our distribution decisions given our current and historically available borrowing capability. Adjusted cash flow from operations is equal to cash flow from operations presented in accordance with GAAP, adjusted to exclude cash flow relating to (1) the investment activities, (2) the realized and unrealized income attributable to the non-controlling interest of the Blackstone funds and (3) changes in our operating assets and liabilities. We believe that adjusted cash flow from operations more clearly reflects the cash flow of the Blackstone Group relating to our required capital investments and our ability to pay distributions to the existing owners. However, adjusted cash flow from operations should not be considered in isolation or as alternative to cash flow from operations presented in accordance with GAAP.

        Following is a reconciliation of Cash Flow (Used In) Provided By Operating Activities presented on a GAAP basis to Adjusted Cash Flow from Operations:

 
   2006
   2005
   2004
  
 
   (Dollars in Thousands)

  
Cash Flow Provided By (Used In) Operating Activities   $ (4,396,614 ) $ 2,709,258   $ 52,682  
  Changes in operating assets and liabilities     1,154,680     4,139     205,642  
  Blackstone funds related investment activities     3,776,325     (2,608,412 )   (84,620 )
  Net realized gains on investments     5,054,995     4,918,364     2,029,266  
  Non-controlling interests in income of consolidated entities     (3,950,664 )   (3,631,179 )   (420,561 )
  Other non-cash adjustments     41,929     52,427     62,815  
   
 
 
 
Adjusted Cash Flow from Operations   $ 1,680,651   $ 1,444,597   $ 1,845,224  
   
 
 
 

Operating Activities

        Our net cash flow provided by (used in) operating activities was $(4.4) billion, $2.7 billion and $52.7 million during the years ended December 31, 2006, 2005, and 2004, respectively. These amounts primarily include (1)net purchases of investments by consolidated Blackstone funds, after proceeds from sales of investments, of $3.8 billion, $(2.6) billion and $(84.6) million during those years, respectively, (2) net realized gains on investments of the Blackstone funds of $5.1 billion, $4.9 billion and $2.0 billion during each of the years ended December 31, 2006, 2005 and 2004, respectively, and (3) non-controlling interests in income of consolidated entities of $(4.0) billion $(3.6) billion and $(420.6) million during each of the years ended December 31, 2006, 2005 and 2004, respectively. These amounts are reflected as operating activities pursuant to investment company accounting.

Investing Activities

        Our net cash flow (used in) investing activities was $(24.2) million, $(7.3) million and $(18.3) million during each of the years ended December 31, 2006, 2005, and 2004, respectively. Our investing activities included the purchases of furniture, equipment and leasehold improvements.

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Financing Activities

        Our net cash flow provided by (used in) financing activities was $4.5 billion, $(2.7) billion, and $(48.9) million during the years ended December 31, 2006, 2005, and 2004, respectively. Our financing activities primarily include (1) contributions made by, net of distributions made to, the investors in our consolidated Blackstone funds, historically reflected as non-controlling interests in consolidated entities, of $5.7 billion, $(1.2) billion and $23.9 million during those years, respectively, (2) meeting financing needs of Blackstone Group through net draws on our credit agreement of $134.9 million, $(313.5) million and $598.3 million during each of the years ended December 31, 2006, 2005 and 2004, respectively, and (3) making distributions to, net of contributions by, our equity holders of $1.3 billion, $1.2 billion and $671.0 million during each of the years ended December 31, 2006, 2005 and 2004.

Our Future Sources of Cash and Liquidity Needs

        We expect that our primary liquidity needs will be cash to (1) provide capital to facilitate the growth of our existing asset management and financial advisory businesses, including through funding a portion of our general partner commitments to carry funds, (2) provide capital to facilitate our expansion into new businesses that are complementary to our existing asset management and financial advisory businesses and that can benefit from being affiliated with us, (3) pay operating expenses, including cash compensation to our employees, (4) fund capital expenditures, (5) repay borrowings and related interest costs, (6) pay income taxes and (7) make distributions to our unitholders and the holders of Blackstone Holdings partnership units in accordance with our distribution policy. Taking into account generally expected market conditions, we believe that the sources of liquidity described below will be sufficient to fund our working capital requirements.

        Our initial source of liquidity will consist of the net proceeds from this offering. Based on the mid-point of the price range per common unit set forth on the cover page of this prospectus, we anticipate that we will receive $                                           billion of net proceeds from this offering, after deducting estimated underwriters' discounts and other expenses and exclusive of amounts we intend to use to purchase Blackstone Holdings partnership units from our existing owners. See "Use of Proceeds".

        We will also receive cash from time to time from (1) cash generated from operations, (2) carried interest and other incentive income realizations and (3) realizations on the investments that we make. We expect to use this cash to assist us in making cash distributions to our common unitholders on a quarterly basis in accordance with our distribution policy. Our ability to make cash distributions to our common unitholders will depend on a number of factors, including among others general economic and business conditions, our strategic plans and prospects, our business and investment opportunities, our financial condition and operating results, working capital requirements and anticipated cash needs, contractual restrictions and obligations, legal, tax and regulatory restrictions, restrictions and other implications on the payment of distributions by us to our common unitholders or by our subsidiaries to us and such other factors as our general partner may deem relevant.

        In the future, we may also issue additional common units and other securities to investors and our employees with the objective of increasing our available capital which would be used for purposes similar to those noted above.

        Furthermore, in order to generate enhanced returns on equity for our owners, we have historically employed leverage on our balance sheet, and at times it has been significant. This has enabled us to earn enhanced returns on our equity. As a public company, we intend to continue using leverage to create the most efficient capital structure for Blackstone and our public common unitholders. We do not anticipate approaching significant leverage levels during the first one or two years after this offering because the net proceeds we will retain from this offering are expected to be our principal source of financing for our business during that period. However, we anticipate that our debt-to-equity ratio will

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eventually rise to levels in the range of 3:1 to 4:1 as we attempt to increase our return on equity for the benefit of our common unitholders. This strategy will expose us to the typical risks associated with the use of substantial leverage, including affecting the credit ratings that may be assigned to our debt by rating agencies. For a description of our credit facilities, see Note 8 in the Combined Financial Statements.

        As described in "Organizational Structure," we intend to use a portion of the net proceeds from this offering to purchase Blackstone Holdings partnership units from our existing owners. In addition, holders of partnership units in Blackstone Holdings (other than The Blackstone Group L.P.'s wholly-owned subsidiaries), subject to vesting requirements and transfer restrictions, may exchange their Blackstone Holdings partnership units for The Blackstone Group L.P. common units on a one-for-one basis. The initial sale and subsequent exchanges are expected to result in increases in the tax basis of the tangible and intangible assets of Blackstone Holdings that otherwise would not have been available. These increases in tax basis may increase (for tax purposes) depreciation and amortization and therefore reduce the amount of tax that The Blackstone Group L.P.'s wholly-owned subsidiaries that are taxable as corporations for U.S. federal income purposes, which we refer to as the "corporate taxpayers," would otherwise be required to pay in the future. The corporate taxpayers will enter into a tax receivable agreement with our existing owners that will provide for the payment by the corporate taxpayers to our existing owners of 85% of the amount of cash savings, if any, in U.S. federal, state and local income tax or franchise tax that the corporate taxpayers actually realize as a result of these increases in tax basis and of certain other tax benefits related to entering into the tax receivable agreement, including tax benefits attributable to payments under the tax receivable agreement. This payment obligation is an obligation of the corporate taxpayers and not of Blackstone Holdings. While the actual increase in tax basis, as well as the amount and timing of any payments under this agreement, will vary depending upon a number of factors, including the timing of exchanges, the price of our common units at the time of the exchange, the extent to which such exchanges are taxable and the amount and timing of our income, we expect that as a result of the size of the increases in the tax basis of the tangible and intangible assets of Blackstone Holdings, the payments that we may make to our existing owners will be substantial. Assuming no material changes in the relevant tax law and that we earn significant taxable income to realize the full tax benefit of the increased amortization of our assets, based on the mid-point of the price range per common unit set forth on the cover page of this prospectus, we expect that future payments to our existing owners in respect of the initial sale will aggregate $            million and range from approximately $                               million to $                              million per year over the next 15 years. Future payments to our existing owners in respect of subsequent exchanges would be in addition to these amounts and are expected to be substantial. See "Certain Relationships and Related Person Transactions—Tax Receivable Agreement".

Critical Accounting Policies

        We prepare our financial statements in accordance with accounting principles generally accepted in the United States. In applying many of these accounting principles, we need to make assumptions, estimates and/or judgments that affect the reported amounts of assets, liabilities, revenues and expenses in our consolidated financial statements. We base our estimates and judgments on historical experience and other assumptions that we believe are reasonable under the circumstances. These assumptions, estimates and/or judgments, however, are often subjective and they and our actual results may change negatively or based on changing circumstances or changes in our analyses. If actual amounts are ultimately different from our estimates, the revisions are included in our results of operations for the period in which the actual amounts become known. We believe the following critical accounting policies could potentially produce materially different results if we were to change underlying assumptions, estimates and/or judgments. See the notes to our combined financial statements for a summary of our significant accounting policies.

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Principles of Consolidation

        Our policy is to combine, or consolidate, as appropriate, those entities in which, we through our existing owners have control over significant operating, financial or investing decisions of the entity.

        For Blackstone funds that are determined to be variable interest entities ("VIE"), we consolidate those entities where we absorb a majority of the expected losses or a majority of the expected residual returns, or both, of such entity pursuant to the requirements of FASB Interpretation No. 46 Consolidation of Variable Interest Entities ("FIN 46") as revised. In addition, we consolidate those entities we control through a majority voting interest or otherwise, including those Blackstone funds in which the general partners are presumed to have control over them pursuant to Financial Accounting Standards Board ("FASB") Emerging Issues Task Force ("EITF") Issue No. 04-5, Determining Whether a General Partner, or the General Partners as a Group, Controls a Limited Partnership or Similar Entity When the Limited Partners Have Certain Rights ("EITF 04-5"). The provisions under both FIN 46 and EITF 04-5 have been applied retrospectively to prior periods. All significant intercompany transactions and balances have been eliminated.

        For operating entities over which we may exercise significant influence but which do not meet the requirements for consolidation, we use the equity method of accounting whereby we record our share of the underlying income or losses of these entities.

        In those cases where our investment is less than 20%, 3% in the case of partnership interests, and significant influence does not exist, such investments are carried at fair value.

Revenue Recognition

        Fund Management Fees. Fund management fees are comprised of fees charged directly to funds, fund investors and fund portfolio companies (including management, transaction and monitoring fees). Such fees are based upon the contractual terms of investment advisory and related agreements and are recognized as earned over the specified contract period. In certain management arrangements, we are entitled to receive performance fees when the return on assets under management exceeds certain benchmark returns or other performance targets. In such arrangements, performance fees are accrued monthly or quarterly based on measuring account/fund performance to date versus the performance benchmark stated in the investment management agreement.

        Advisory Fees. Financial advisory fees consist of advisory retainer and transaction based fee arrangements related to mergers, acquisitions, restructurings, divestitures and fund placement services for alternative investment funds. Advisory retainer fees are recognized when services are rendered. Transaction fees are recognized when the services related to the underlying transactions are substantially completed in accordance with the terms of their engagement letters. Fund placement services revenue is recognized as earned upon the acceptance by a fund of capital or capital commitments.

Investments, at Fair Value

        The Blackstone funds are, for GAAP purposes, investment companies under the AICPA Audit and Accounting Guide Investment Companies. Such funds reflect their investments, including securities sold, not yet purchased, on the combined statements of financial condition at their estimated fair value, with unrealized gains and losses resulting from changes in fair value reflected as a component of other income in the combined statements of income. Fair value is the amount at which the investments could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. Additionally, these funds do not consolidate their majority-owned and controlled investments. We have retained the specialized accounting of the Blackstone funds pursuant to EITF Issue No. 85-12 Retention of Specialized Accounting for Investments in Consolidation.

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        The fair value of our investments and securities sold, not yet purchased are based on observable market prices when available. Such prices are based on the last sales price on the date of determination, or, if no sales occurred on such day, at the "bid" price at the close of business on such day and if sold short at the "asked" price at the close of business on such day. Futures and options contracts are valued based on closing market prices. Forward and swap contracts are valued based on market rates or prices obtained from recognized financial data service providers.

        We have valued a significant number of our investments, in the absence of readily observable market prices, using the valuation methodologies described below. The determination of fair value may differ materially from the values that would have resulted if a ready market had existed (see "Qualitative and Quantitative Disclosures About Market Risk—Market Risk" for a discussion of sensitivity). We estimate the fair value of investments for which market prices are not readily observable as follows:

        Corporate private equity, real estate and mezzanine investments.    For investments for which readily observable market prices do not exist, such investments are carried at estimated fair value as determined by management. Fair value is determined after giving consideration to a range of factors, including but not limited to the price at which the investment was acquired, the nature of the investment, local market conditions, trading values on public exchanges for comparable securities, current and projected operating performance and financing transactions subsequent to the acquisition of the investment.

        Funds of hedge funds.    Blackstone funds' direct investments in underlying hedge funds ("Investee Funds") are stated at fair value, which is based on the Blackstone funds' net contribution to the Investee Funds and its allocated share of the undistributed profits and losses, including realized and unrealized gains and losses, based on the information provided by the Investee Funds' management, which may include the audited financial statements of the Investee Fund.

        Certain Blackstone funds sell securities that they do not own, and will therefore be obligated to purchase such securities at a future date. The value of an open short position is recorded as a liability, and the fund records unrealized appreciation or depreciation to the extent of the difference between the proceeds received and the value of the open short position. The applicable Blackstone fund records a realized gain or loss when a short position is closed. By entering into short sales, the applicable Blackstone fund bears the market risk of increases in value of the security sold short. The unrealized appreciation or depreciation as well as the realized gain or loss associated with short positions are included in the combined statements of income as net gains from investment activities.

        Securities transactions are recorded on a trade date basis.

Recent Accounting Pronouncements

        In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements, ("SFAS 157"). SFAS 157 defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. We intend to early adopt SFAS 157 as of January 1, 2007. The adoption of SFAS 157 is not expected to have a material impact on our combined financial statements.

        In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities, ("SFAS 159"). SFAS 159 permits entities to choose to measure many financial instruments and certain other items at fair value, with changes in fair value recognized in earnings. Blackstone intends to early adopt SFAS 159 as of January 1, 2007. Upon adoption of SFAS 159, Blackstone currently intends to elect to apply the fair value option to selected investments in non-consolidated investment entities, which would otherwise be accounted for under the equity method of accounting. In the event we elect to account for such investments at fair value, the initial application

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of the fair value option to such interests is not expected to have a material cumulative effect on partners' capital or investments, at fair value.

        We are currently planning a reorganization in contemplation of a future public offering. In connection with the Reorganization, we intend to grant substantive kick-out, liquidating or other participating rights to the limited partners of our corporate private equity, real estate and selected other Blackstone funds. We currently intend to apply SFAS 159 to all of our corporate private equity and real estate general partner interests in investment partnerships that are expected to be deconsolidated as part of the reorganization. As a consequence of electing the fair value option, net gains from investment activities would potentially increase by a material amount reflective of current market conditions at that time.

        In September 2006, the FASB cleared the AICPA Statement of Position No. 07-1, Clarification of the Scope of the Audit and Accounting Guide Investment Companies and Accounting by Parent Companies and Equity Method Investors for Investments in Investment Companies ("SOP 07-1") for issuance. SOP 07-1 addresses whether the accounting principles of the AICPA Audit and Accounting Guide Investment Companies may be applied to an entity by clarifying the definition of an investment company and whether those accounting principles may be retained by a parent company in consolidation or by an investor in the application of the equity method of accounting. SOP 07-1 applies to the later of (1) reporting periods beginning on or after December 15, 2007 or (2) the first permitted early adoption date of the FASB's fair value option statement. The adoption of SOP 07-1 is not expected to have a material impact on our combined financial statements.

        In June 2006, the FASB issued Interpretation No. 48, Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109 ("FIN 48"). FIN 48 requires companies to recognize the tax benefits of uncertain tax positions only where the position is "more likely than not" to be sustained assuming examination by tax authorities. The tax benefit recognized is the largest amount of benefit that is greater than 50 percent likely of being realized upon ultimate settlement. FIN 48 is effective for fiscal years beginning after December 15, 2006. The adoption of FIN 48 will not have a material impact on our combined financial statements.

        In February 2006, the FASB issued SFAS No. 155, Accounting for Certain Hybrid Financial Instruments ("SFAS 155"), which amends SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, ("SFAS 133") and SFAS No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities. SFAS 155 provides, among other things, that (1) for embedded derivatives which would otherwise be required to be bifurcated from their host contracts and accounted for at fair value in accordance with SFAS 133, an entity may make an irrevocable election, on an instrument-by-instrument basis, to measure the hybrid financial instrument at fair value in its entirety, with changes in fair value recognized in earnings and (2) concentrations of credit risk in the form of subordination are not considered embedded derivatives. SFAS 155 is effective for all financial instruments acquired, issued or subject to remeasurement after the beginning of an entity's first fiscal year that begins after September 15, 2006. Upon adoption, differences between the total carrying amount of the individual components of an existing bifurcated hybrid financial instrument and the fair value of the combined hybrid financial instrument should be recognized as a cumulative effect adjustment to beginning retained earnings. Prior periods are not restated. The adoption of SFAS 155 is not expected to have a material impact on our combined financial statements.

Off Balance Sheet Arrangements

        In the normal course of business, we engage in off-balance sheet arrangements, including establishing certain special purpose entities ("SPEs"), owning securities or interests in SPEs and providing investment and collateral management services to SPEs. There are two types of SPEs—qualifying special purposes entities ("QSPEs"), which are entities whose permitted activities are limited

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to passively holding financial interests in distributing cash flows generated by the assets, and variable interest entities ("VIEs"). Certain combined entities of the Blackstone funds transact regularly with VIEs which do not meet the QSPE criteria due to their permitted activities not being sufficiently limited or because the assets are not deemed qualifying financial instruments. Under Financial Accounting Standards Board ("FASB") Interpretation No. 46 (revised December 2003), Consolidation of Variable Interest Entities—an interpretation of ARB No. 51 ("FIN 46 (R)"), we consolidate those VIEs where we absorb either a majority of the expected losses or residual returns (as defined) and are therefore considered the primary beneficiary. Our primary involvement with VIEs consists of collateralized debt obligations. For additional information about our involvement with VIEs, see Note 3, "Investments—Investment in Variable Interest Entities" in the Notes to the Combined Financial Statements.

        In addition to VIEs, in the ordinary course of business certain combined entities of the Blackstone funds issue various guarantees to counterparties in connection with investments, debt, leasing and other transactions. See Note 11, "Commitments and Contingencies" in Notes to the Combined Financial Statements for a discussion of guarantees.

Contractual Obligations, Commitments and Contingencies

        The following table sets forth information relating to our contractual obligations as of December 31, 2006 on a combined basis and on a basis deconsolidating the Blackstone funds:

 
   2007
   2008-2009
   2010-2011
   Thereafter
   Total
  
 
   (Dollars in Thousands)

  
Contractual Obligations                                
Operating Lease Obligations(1)   $ 18,311   $ 35,798   $ 44,223   $ 237,730   $ 336,062  
Purchase Obligations     2,601     2,195     341     —     5,137  
Blackstone Operating Entities Loan and Credit Facilities Payable(2)     425,747     31,168     18,654     —     475,569  
Blackstone Funds Debt Obligations Payable(2)(3)     500,412     —     —     —     500,412  
Blackstone Fund Capital Commitments to Portfolio Entities(4)     5,103,862     —     —     —     5,103,862  
   
 
 
 
 
 
Combined Contractual Obligations     6,050,933     69,161     63,218     237,730     6,421,042  
Blackstone Operating Entities Capital Commitments to Blackstone Funds(5)     338,285     —     —     —     338,285  
Blackstone Funds Debt Obligations Payable(2)(3)     (500,412 )   —     —     —     (500,412 )
Blackstone Fund Capital Commitments to Portfolio Entities(4)     (5,103,862 )   —     —     —     (5,103,862 )
   
 
 
 
 
 
Blackstone Operating Entities Contractual Obligations   $ 784,944   $ 69,161   $ 63,218   $ 237,730   $ 1,155,053  
   
 
 
 
 
 
(1)
We lease our primary office space and certain office equipment under agreements that expire through 2024. In connection with certain lease agreements, we are responsible for escalation payments. The contractual obligation table above includes only guaranteed minimum lease payments for such leases and does not project potential escalation or other lease-related payments. These leases are classified as operating leases for financial statement purposes and as such are not recorded as liabilities on the combined statement of financial condition as of December 31, 2006.

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(2)
Includes interest to be paid over the maturity of the related debt obligation which has been calculated assuming no prepayments are made and debt is held until its final maturity date. The future interest payments are calculated using variable rates in effect as of December 31, 2006, at spreads to market rates pursuant to the financing agreements.

(3)
These obligations are those of the Blackstone funds, which will be deconsolidated following completion of this offering. See "Unaudited Pro Forma Financial Information".

(4)
These commitments to make capital contributions to portfolio entities, some of which are in the form of guarantees, relate to the Blackstone funds which will be deconsolidated following completion of this offering. These amounts are generally due on demand and are therefore presented in the less than one year category. Our funds will continue to make these commitments in the ordinary course of business. See "Unaudited Pro Forma Financial Information".

(5)
These obligations represent commitments by us to provide general partner capital funding to the Blackstone funds, which are consolidated as of December 31, 2006. Upon completion of this offering, the Blackstone funds will be deconsolidated and these general partner capital commitments to them will remain. (See "Unaudited Pro Forma Financial Information".) These amounts are generally due on demand and are therefore presented in the less than one year category; however, the capital commitments are expected to be called substantially over the next three years. We expect to continue to make these general partner capital commitments as we raise additional amounts for our investment funds over time.

        We had approximately $175 million of letters of credit outstanding to satisfy various contractual requirements primarily related to portfolio companies at December 31, 2006.

        Certain real estate funds guarantee payments to third parties in connection with the on-going business activities and/or acquisitions of their portfolio companies. At December 31, 2006, such guarantees amount to $2,482 million.

        In many of its service contracts, Blackstone agrees to indemnify the third party service provider under certain circumstances. The terms of the indemnities vary from contract to contract and the amount of indemnification liability, if any, cannot be determined and has not been included in the table above or recorded in our combined financial statements as of December 31, 2006.

Qualitative and Quantitative Disclosures About Market Risk

        Our predominant exposure to market risk is related to our role as general partner or investment advisor to the Blackstone funds and the sensitivities to movements in the fair value of their investments, including the effect on management fee and incentive fee income.

        The fair value of our financial assets may fluctuate in response to changes in the value of securities, non-U.S. dollar exchange and interest rates. The net effect of these fair value changes affects the gains (losses) from investments in our combined statements of income; however, the majority of these fair value changes, if losses, are absorbed by the non-controlling interest holders. The effect of gains from investments is allocated according to fund governing agreements, and in most cases the controlling interests receive an incentive fee or carried interest allocation in excess of their stated interest. To the extent the Blackstone funds are deconsolidated, our interests in the funds will continue to affect our net income in a similar way.

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        Although the Blackstone funds share many common themes, each of our alternative asset management operations runs its own investment and risk management processes, subject to our overall risk tolerance and philosophy:


        We are sensitive to changes in market risk factors that affect our financial results.

        Our management fees are based on (1) capital commitments to a Blackstone fund, (2) capital invested in a Blackstone fund or (3) the net asset value, or NAV, of a Blackstone fund, as described in our audited combined financial statements. Management fees will only be directly affected by changes in market risk factors to the extent they are based on NAV. These management fees will be increased (or reduced) in direct proportion to the effect of changes in the market value of our investments in the related funds. The proportion of our management fees that are based on NAV is dependent on the number and types of Blackstone funds in existence and the current stage of each fund's life cycle. As of December 31, 2006, approximately 20% of our management fees earned were based on the NAV of the applicable funds.

        The Blackstone funds hold as of the reporting date investments that are reported at fair value and securities sold not yet purchased. Based on the balance as of December 31, 2006, we estimate that the fair value of investments and securities sold not yet purchased, would change by $3.1 billion and $42.3 million, respectively, in the event of a 10% change in fair value of the investments and securities. However, we estimate the affect to our gain (loss) on investments would be significantly less than the changes noted above since we generally have up to an approximately 7% investment in these funds, and the non-controlling interests in income of consolidated entities would correspondingly offset a substantial majority of the change in fair value. As discussed above, this change would also affect our management fees.

        The Blackstone funds hold investments that are denominated in non-U.S. dollar currencies that may be affected by movements in the rate of exchange between the U.S. dollar and non-U.S. dollar currencies. We estimate that as of December 31, 2006, a 10% change in rate of exchange against the U.S. dollar would have the following effects (1) management fee revenues would change by $2.0 million and (2) net gains from investment activities would change by $40.7 million.

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        The Blackstone Group has debt obligations payable that accrue interest at variable rates. Interest rate changes may therefore affect the amount of interest payments, future earnings and cash flows. Based on our debt obligations payable as of December 31, 2006, we estimate that interest expense relating to variable rate debt obligations payable would increase by $5.3 million on an annual basis, in the event interest rates were to increase by one percentage point. However, we estimate the effect to net income of a one percentage point increase in interest rates on the debt obligations payable of the Blackstone funds would be significantly less than the $5.3 million increase in interest expense noted above since we generally have up to an approximately 7% investment in these funds, and the non-controlling interests in income of consolidated entities would correspondingly offset a substantial majority of the increase in interest expense.

        Certain Blackstone funds and the Investee Funds are subject to certain inherent risks through their investments.

        Various of our entities invest substantially all of their excess cash in an open-end money market fund and a money market demand account, which are included in cash and cash equivalents. The money market fund invests primarily in government securities and other short-term, highly liquid instruments with a low risk of loss. We continually monitor the fund's performance in order to manage any risk associated with these investments.

        Certain of our entities hold derivative instruments that contain an element of risk in the event that the counterparties may be unable to meet the terms of such agreements. We minimize our risk exposure by limiting the counterparties with which we enter into contracts to banks and investment banks who meet established credit and capital guidelines. We do not expect any counterparty to default on its obligations and therefore do not expect to incur any loss due to counterparty default.

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INDUSTRY

Asset Management

Overview

        Asset management generally involves the management of investments by third-party managers on behalf of investors. The total value of assets under management worldwide was estimated to exceed $45 trillion in 2006. Asset managers employ a diverse range of strategies, which may be generally divided into two broad categories: traditional equity and fixed income fund strategies, and alternative investment strategies.

        Traditional asset managers manage and trade portfolios of equity, fixed income and/or derivative securities. Assets may be invested in investment companies registered under the 1940 Act (for example, mutual funds and exchange traded funds) or through separate accounts managed on behalf of individuals or institutions. Investors in traditional funds generally have unrestricted access to their funds either through market transactions in the case of closed-end mutual funds and exchange traded funds, or through withdrawals in the case of open-end mutual funds and separate managed accounts. Traditional fund managers are generally compensated with fees that are a percentage of assets under management.

        Alternative asset managers utilize a variety of investment strategies to achieve return objectives within certain predefined risk parameters and investment guidelines. The universe of alternative asset managers includes private equity funds, real estate funds, venture capital, hedge funds, funds of funds (that is, funds that invest in investment funds) and mezzanine and structured debt funds. Many alternative asset managers, particularly private equity managers, limit investors' access to funds once committed or invested until such time as such investments are realized.

        The asset management industry has experienced significant growth in worldwide assets under management in the past ten years, fueled in significant respects by aging populations in both developed and emerging markets around the world, which have increased the pools of savings and particularly pension assets. For example, total pension assets in the United States grew from $6.8 trillion at the end of 1996 to $14.0 trillion at the end of 2006. Alternative asset management vehicles have been the fastest growing segment of the asset management industry in part because many investors have sought to diversify their investment portfolios to include alternative asset strategies and alternative asset managers have generally delivered superior returns with a lower correlation to the broader market than traditional asset management strategies.

Alternative Asset Management

        Private equity funds generally invest in non-public, non-actively traded common equity, preferred stock or mezzanine or distressed debt securities, and a number of private equity transactions consist of going private transactions of then-public companies. Real estate funds generally invest in equity, fixed income, preferred stock or loan securities of real estate companies, mortgage-backed securities or direct investments in real estate properties. Private equity and real estate funds typically have specified terms with provisions to extend the term under certain circumstances. Qualified investors make a commitment to provide capital to the fund, and this capital is typically called by the fund on an "as needed" basis as investments are identified and returned through distributions upon realization of the underlying investments. Private equity and real estate fund managers typically earn management fees on committed or contributed capital, transaction and monitoring fees as capital is invested and carried interest based on the net profits of the fund. Carried interest is often subject to a preferred return for investors and a contingent repayment if actual realized performance of the fund at the time of liquidation does not meet the specified requirements.

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        Private Equity.    Private equity funds have experienced significant capital inflows recently, with over $400 billion of capital raised in the United States since the beginning of 2002, according to Private Equity Analyst. Capital committed to private equity has accelerated in recent years, as indicated by the following chart, which shows new capital committed to U.S. private equity funds over the last eight years. According to the Russell Investment Group, allocations to private equity are forecast to reach record levels in all markets in 2007.


U.S. Corporate Private Equity Funds Raised

         GRAPHIC

(1)
A compound annual growth rate, or "CAGR," represents the annual rate of growth over a period, assuming growth at a steady rate.

        A significant reason why many private equity funds may deliver superior returns on equity relative to traditional equity investments is the benefit of leverage. In the typical transaction effected by a private equity fund—a leveraged buyout acquisition of a company—the private equity fund borrows most of the purchase price and thereby magnifies the gain on its investment if the company's value appreciates (or its loss if the company's value declines). If a private equity fund were to acquire a company today with a total enterprise value of $1 billion, a typical capital structure for the transaction would be an equity investment of $300 million and $700 million of debt (generally consisting of senior loans from commercial banks and high yield bonds issued in the public market). If the private equity fund is successful in its objective of improving the operating performance of the acquired company over the period of its ownership of the company so that five years later it can effect a sale of the company at a total enterprise value of $1.3 billion, a 6% annual appreciation over the price it paid, it will have achieved a doubling of its equity investment or a gross annual internal rate of return of 15%. If over that period of time the company has used its operating cash flow to repay $300 million of the acquisition borrowings, the private equity fund will have tripled its equity investment and achieved a gross annual internal rate of return of 25%. Alternatively, if the acquired company were to encounter operating difficulties resulting in a 15% decline in its total enterprise value to $850 million and had not been able to use operating cash flow to repay any acquisition debt, the private equity fund would lose half of its equity investment if the company were to be sold at that price.

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        Both the dollar volume of private equity transactions and their percentage of all merger and acquisition transactions have increased dramatically over the last eight years, as indicated in the chart below.

Dollar Volume of Private Equity M&A   Private Equity M&A as a Percentage of Total M&A
GRAPHIC   GRAPHIC

Source: Thomson Financial
 
Source: Thomson Financial

        The fastest growing segment of the private equity industry has been large transactions, especially public-to-private transactions. In 2006, there were 149 sponsor-driven public-to-private transactions in the United States and Europe, up from only 26 in 2000, which represents a compounded annual growth rate of 34%.

        Real Estate.    The real estate industry is also experiencing historically high levels of growth and liquidity driven by the strength of the U.S. economy, office employment growth, limited new construction and the availability of financing for acquiring real estate assets. Concurrently, replacement costs of real property assets have continued to escalate substantially. Since 2001, gross domestic product, or "GDP," growth has steadily improved, and GDP is currently predicted to grow at an average annual rate of approximately 3.1% from 2007 through 2009 as indicated by Haver Analytics, World Bank Indicators and Oxford Economic Forecasting. In addition, recent job growth statistics have indicated higher employment levels during 2005 and 2006, which generally produces greater demand for real estate assets. The strong investor demand for real estate assets is due to a number of factors, including persistent, reasonable levels of interest rates, the lack of alternative investments that provide the same levels of expected returns and the ability of lenders to repackage their loans into securitizations, thereby diversifying and limiting their risk. These factors have combined to significantly increase the capital committed to real estate funds from a variety of institutional investors, including institutional pension funds. As a result, the amount of global real estate funds raised has increased dramatically in the past four years, as indicated by the following chart:

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Global Real Estate Funds Raised

         GRAPHIC

        Hedge Funds.    Hedge funds seek to generate positive returns under a wide variety of market conditions. Hedge funds differ from traditional asset management vehicles such as mutual funds either by the more heterogenous asset classes in which they may invest or the more varied strategies they employ, including arbitrage, asset-based lending, distressed securities, equity long-short, global macro and other quantitative and non-quantitative strategies. The fee structure of hedge funds is performance driven. Hedge fund managers earn a base management fee based on the net asset value of the fund and carried interest or incentive fees based on the overall performance of the fund that they manage (that is, the net realized and unrealized gains in the portfolio). Some hedge funds set a "hurdle rate" under which the fund manager does not earn an incentive fee until the fund's performance exceeds a benchmark rate. Another feature common to hedge funds is the "high water mark" under which a fund manager does not earn carried interest or incentive fees until the net asset value exceeds the highest historical value on which incentive fees were last paid. Investors can invest and withdraw funds periodically in accordance with the terms of the funds, which may include an initial period of time in which capital may not be withdrawn, allowing for withdrawals only at specified times and other limitations on withdrawals.

        Historically hedge funds have generated positive performance across a variety of market conditions with less correlation to traditional benchmarks. Hedge funds achieve this through a variety of methods, including use of short selling, hedging or arbitrage strategies and inclusion of fixed income-related securities or derivatives into investment portfolios. By employing these strategies, hedge funds have been utilized by an increasing number of institutional asset managers as diversification instruments and in light of the generally positive performance, have experienced significant inflows in recent years. Global assets under management in the hedge fund industry, as reported by HFR Industry Reports, have grown from approximately $456 billion at December 31, 1999 to an estimated $1.4 trillion at December 31, 2006, a 17.7% compound annual growth rate. Set forth below is a chart that shows total assets under management of all hedge funds over the last eight years.

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Hedge Fund Assets Under Management

         GRAPHIC

        Fund of Funds.    Fund of funds managers invest in a portfolio of other investment funds rather than investing directly in stocks, bonds or other securities. Fund of funds managers are predominantly associated with investments in alternative strategies such as hedge funds and private equity, but some fund of funds managers invest in portfolios of traditional mutual funds. Fund of funds managers generally earn fees on a percentage of net asset value, which may include the value of committed and undrawn funds. Fund of fund managers in alternative assets may also earn carried interest or incentive fees in certain circumstances. Investor liquidity varies by manager and strategy, with many fund of hedge funds managers providing periodic liquidity, while the liquidity terms of funds of private equity funds tend to track the capital commitment, term and distribution models of the underlying private equity funds in which they invest. Funds of funds generally seek to deliver the risk/return profile of the underlying funds' asset category from a diversified group of managers.

        Growth of the fund of funds business is driven by the increasing interest in the underlying alternative strategies of hedge funds and private equity, and by many investors' preference for investing in alternative investments on a broadly diversified basis. Funds of funds help investors reduce risk by limiting exposure to single managers and by closely monitoring manager performance and making allocation decisions. Commitments to fund of funds vehicles have increased substantially over the past several years. According to HFR Industry Reports total assets committed to funds of funds have grown from $76 billion at the end of 1999 to $547 billion at the end of 2006, representing a 32.6% compound annual growth rate. The chart below shows total assets under management over the last eight years.


Aggregate Fund of Hedge Fund Assets Under Management

         GRAPHIC

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        Mezzanine Funds and Structured Debt Funds.    Mezzanine funds and structured debt funds invest in diversified portfolios of debt securities. Mezzanine funds invest primarily in high-yielding debt securities and loans that, in addition to interest payments, may include return enhancements such as warrants or other equity-linked securities. Mezzanine securities are used extensively to finance middle-market private companies, and can also be a source of capital for small public companies. Mezzanine activity is most closely correlated to the volume of middle market mergers and acquisition activity, primarily acquisitions of middle market companies by private equity firms.

        Structured debt funds are pooled investment vehicles that invest in senior secured loans, high-yield notes, mezzanine securities and other debt and credit-linked securities. These funds take a variety of forms and often target specific assets classes, such as portfolios of primarily non-investment grade senior credit facilities or portfolios of investment grade and high-yield bonds. These funds finance their purchases of debt securities through issuances of multiple tranches of debt and equity securities that are structured to achieve specific credit rating targets. Structured debt vehicles seek to earn a return for investors in their junior securities by borrowing funds at a lower cost than the yield the vehicles earn on their underlying investments. Set forth below is a chart that shows total U.S. leveraged loan arbitrage activity by collateralized debt obligation funds over the last eight years.


U.S. Leveraged Loan Arbitrage CDO Activity

         GRAPHIC

Advisory Services

        Advisory services include advice on a variety of strategic and financial matters, such as mergers, acquisitions and divestitures, restructurings and reorganizations and capital raising and capital structure. Advisory services are generally provided by investment banking firms, integrated commercial banks and specialized "boutique" financial advisory firms. Advisors typically earn either a fixed fee or a fee based on a percentage of a transaction's value, generally paid only when the transaction is completed. The total global merger and acquisition deal volume in 2006 was $3.7 trillion according to Thomson Financial, an increase of 36% over $2.7 trillion of deal volume in 2005 and up from $1.7 trillion of deal volume in 2001.

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        The chart below shows the total dollar volume of global merger and acquisition transactions over the last six years.


Dollar Volume of Global M&A

         GRAPHIC

        Restructuring and reorganization advisors provide strategic financial advice with respect to firms in financial distress or bankruptcy. Services may include structuring out-of-court restructurings, assistance with formal bankruptcy proceedings, distressed mergers and acquisitions and capital sourcing. Advisors provide their services to companies, lenders and creditors in distressed or potentially distressed credit situations.

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BUSINESS

Overview

        We are a leading global alternative asset manager and provider of financial advisory services. We are one of the largest independent alternative asset managers in the world, with assets under management of approximately $78.7 billion as of March 1, 2007. Our alternative asset management businesses include the management of corporate private equity funds, real estate opportunity funds, funds of hedge funds, mezzanine funds, senior debt vehicles, proprietary hedge funds and closed-end mutual funds. We also provide various financial advisory services, including mergers and acquisitions advisory, restructuring and reorganization advisory and fund placement services.

        We seek to deliver superior returns to investors in our funds through a disciplined, value-oriented investment approach. We believe that this investment approach, implemented across our broad and expanding range of alternative asset classes and investment strategies, helps provide stability and predictability to our business over different economic cycles. Since we were founded in 1985, we have cultivated strong relationships with clients in our financial advisory business, where we endeavor to provide objective and insightful solutions and advice that our clients can trust. We believe our scaled, diversified businesses, coupled with our long track record of investment performance, proven investment approach and strong client relationships, position us to continue to perform well in a variety of market conditions, expand our assets under management and add complementary businesses.

        We currently have 57 senior managing directors and employ approximately 335 other investment and advisory professionals at our headquarters in New York and our offices in Atlanta, Boston, Chicago, Dallas, Los Angeles, San Francisco, London, Paris, Mumbai and Hong Kong. We believe that the depth and breadth of the intellectual capital and experience of our professionals are key reasons why we have generated exceptional returns over many years for the investors in our funds. This track record in turn has allowed us to successfully and repeatedly raise additional assets from an increasingly wide variety of sophisticated investors.

        We have grown our assets under management significantly, from approximately $14.1 billion as of December 31, 2001 to approximately $78.7 billion as of March 1, 2007, representing compound annual growth of 39.5%. The following table sets forth our assets under management by segment and fund type as of March 1, 2007.

 
   Assets Under Management
as of March 1, 2007
 
   (in millions)
Corporate private equity funds         $ 31.1
Real estate opportunity funds           17.7
Marketable alternative asset funds           29.9
  Funds of hedge funds   $ 17.1      
  Mezzanine funds     1.5      
  Senior debt vehicles     6.9      
  Distressed securities hedge fund     1.2      
  Equity hedge fund     1.3      
  Closed-end mutual funds     1.9      
   
     
    Total         $ 78.7
         

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Competitive Strengths

        Alternative asset management is the fastest growing segment of the asset management industry, and we are one of the largest independent alternative asset managers in the world. From the time we entered the asset management business 20 years ago through March 1, 2007, we have raised approximately $59.4 billion of committed capital for our corporate private equity funds, real estate opportunity funds, mezzanine funds and senior debt vehicles, and we managed approximately $21.5 billion in our funds of hedge funds, proprietary hedge funds and closed-end mutual funds as of March 1, 2007. Our assets under management have grown from approximately $14.1 billion as of December 31, 2001 to approximately $78.7 billion as of March 1, 2007, representing compound annual growth of 39.5%. We believe that the strength and breadth of our franchise, supported by our people, investment approach and track record of success, provide a distinct advantage when raising capital, evaluating opportunities, making investments, building value and realizing returns.

        One of the Largest Managers of Corporate Private Equity and Real Estate Opportunity Funds.    We have been one of the largest private equity fund managers since we entered this business in 1987. From that time through March 1, 2007, we had invested total capital of $19.8 billion in 109 transactions with a total enterprise value of over $191 billion through our corporate private equity funds and total capital of $13.2 billion in 212 transactions with a total enterprise value of over $102 billion through our real estate opportunity funds. Both the corporate private equity fund and the two real estate opportunity funds (taken together) we are currently investing are among the largest funds ever raised in their respective sectors, with aggregate capital commitments of $18.1 billion and $6.7 billion, respectively, as of March 1, 2007. We believe that our long-term leadership in private equity has imbued the Blackstone brand with value that enhances all of our different businesses and facilitates our ability to expand into complementary new businesses.

        Diversified, Global Investment Platform.    Our asset management businesses are diversified across a broad variety of alternative asset classes and investment strategies and have global reach and scale. We benefit from substantial synergies across all of these businesses, including the ability to leverage the extensive intellectual capital that resides throughout our firm. We believe that the extensive investment review process that is conducted in all of our asset management businesses, involving active participation by Stephen A. Schwarzman and Hamilton E. James, across all of our businesses, is not only a significant reason for our successful investment performance but also helps to maximize those synergies. In addition, we believe our financial advisory segment further increases the diversification of our business mix.

        During our 21-year history, we have grown by entering new businesses that were complementary to our existing asset management and financial advisory businesses. For example, in 1987 we entered into a 50-50 partnership with the founders of Blackrock, Inc. and helped those individuals develop an asset management business specializing in fixed income. We sold our interest in Blackrock in 1994. We have invested in complementary new areas because they offered opportunities to deploy our financial and intellectual capital and generate superior investment returns, attractive net income margins and substantial cash flow. We believe that our ability to identify and successfully enter new growth areas is a key competitive advantage, and we will continue to seek new opportunities to expand our asset management franchise and our advisory business. The chart below

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presents our assets under management for each of our asset management operations as a percentage of aggregate assets under management as of March 1, 2007.


Assets Under Management by Fund Category

         GRAPHIC

        Exceptional Investment Track Record.    We have an exceptional record of generating attractive risk-adjusted returns across all of our asset management businesses, as shown in the table below. We believe that the superior investment returns we have generated for investors in our funds over many years across a broad and expanding range of alternative asset classes and through all types of economic conditions and all cycles of the equity and debt capital markets are a key reason why we have been able to successfully and consistently grow our assets under management across our alternative asset management platform.

 
   Year of
Inception
   Combined Fund Level
Annualized
IRR or Return Since
Inception(1)
   Annualized IRR or Return,
Net of Fees,
Since Inception(2)
  
Corporate private equity   1987   30.8 % 22.8 %
Real estate opportunity   1991   38.2 % 29.2 %
Funds of hedge funds   1990   13.0 % 11.9 %
Mezzanine   1999   16.0 % 9.3 %
Distressed securities hedge   2005   11.5 % 7.9 %
Equity hedge   2006   11.6 %(3) 8.9 %(3)
Closed-end mutual funds              
  The India Fund   2005   —   43.9 %(4)
  The Asia Tigers Fund   2005   —   42.5 %(4)
(1)
Through December 31, 2006.

(2)
Through December 31, 2006. The annualized IRR or return, net of fees, of an investment fund represents the gross annualized IRR or return applicable to limited partners net of management fees, organizational expenses, transaction costs, partnership expenses (including interest incurred by the fund itself) and the general partner's allocation of profits or incentive fees, if any.

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(3)
Reflects returns from October 1, 2006 (the date operations commenced) through December 31, 2006 only (in contrast to all other results in the table above, which are annualized).

(4)
A subsidiary of ours has been the investment manager of The India Fund and The Asia Tigers Fund since December 5, 2005. The current portfolio manager has managed The India Fund since August 1, 1997 and has managed The Asia Tigers Fund since July 1, 1999. The net annualized returns, based on net asset values have been calculated since December 5, 2005.

        As of December 31, 2006, the cumulative return, net of fees, since inception (November 22, 2002) to the holders of our senior debt vehicles' most subordinated securities was 14.3% and the gross cumulative return over that same period was 21.2% (before management fees, but after deducting interest expense and administrative expenses). The following charts compare the net annualized returns of our two largest businesses—our corporate private equity funds and our real estate opportunity funds—since the inception of those funds in 1987 and 1991, respectively, and the five years ended December 31, 2006, against the S&P 500 for the comparable periods:

Corporate Private Equity Funds
Net Annualized Returns(1) vs. S&P 500(2)		   Real Estate Opportunity Funds
Net Annualized Returns(3) vs. S&P 500(4)

GRAPHIC
 
GRAPHIC
       

(1)
(2)
 
Through December 31, 2006.
Through December 31, 2006. Total annualized returns for the S&P 500 adjusted for dividends reinvested.
 
(3)


(4)
 
Through December 31, 2006. Our real estate private equity operations commenced in 1991. Returns since inception calculated from January 1, 1992.
Through December 31, 2006. Total annualized returns for S&P 500 adjusted for dividends reinvested.

See "—The Historical Investment Performance of Our Investment Funds" for information regarding the calculation of investment returns, valuation methodology and factors affecting our investment performance. The historical information presented above and elsewhere in this prospectus with respect to the investment performance of our funds is provided for illustrative purposes only. The historical investment performance of our funds is no guarantee of future performance of our current funds or any other fund we may manage in the future.

        Diverse Base of Longstanding Investors.    We have a long history of raising significant amounts of capital on a global basis across a broad range of asset classes, and we believe that the strength and breadth of our relationships with institutional investors provide us with a competitive advantage in raising capital for our investment funds. During our two decades of asset management activities, we have built long-term relationships with many of the largest institutional investors in the world, most of which invest in a number of different categories of our investment funds. For example, of those of the 50 largest corporate and public pension funds in the United States as measured by assets under management that to our knowledge invest in alternative assets, approximately 72% have invested in our

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funds. Investors representing approximately 64% of the total capital invested in our funds since the inception of our asset management activities in 1987 have invested across multiple categories of our funds. Our 20 largest unaffiliated investors have invested with us for an average of over 10 years. In addition, investors representing approximately 87% of the total capital invested in all of our carry funds since 1987 have invested in successive funds in the same category. Furthermore, our investor base is highly diversified, with no single unaffiliated investor in our current corporate private equity or real estate opportunity funds accounting for more than 10% of the total amount of capital raised for those funds. We have a group of professionals led by senior managing director Kenneth C. Whitney that is dedicated to managing our relationships with limited partners across our carry funds. This group also markets new funds to potential investors and is actively involved in our new product development. Our Park Hill Group business further enables us to grow our investor base through its expanding network of relationships with potential investors. We believe that our strong network of investor relationships, together with our long-term track record of providing investors in our funds with superior risk-adjusted investment returns, will enable us to continue to grow our assets under management across our investment platform.

        The chart below presents our investors' total committed capital for our carry funds plus the assets under management for our hedge funds as of March 1, 2007 by category.


Investors by Category

         GRAPHIC

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        The graph below presents the growth of net capital flows to each of our asset management operations from January 1, 2002 to March 1, 2007.


Growth in Net Capital Flows

         GRAPHIC

        Strong Industry and Corporate Relationships.    We believe that the strength of our relationships with investment banking firms, other financial intermediaries and leading corporations and corporate executives provides us with competitive advantages in identifying transactions, securing investment opportunities and generating exceptional returns. We actively cultivate our relationships with major investment banking firms and other financial intermediaries and are among the most significant clients of many of these firms. We believe that our strong network of relationships with these firms provide us with a significant advantage in attracting deal flow and securing transactions, including a substantial number of exclusive investment opportunities and opportunities that are made available to only a very limited number of other private equity firms. We also have a broad range of relationships with senior-level business executives whom we use to generate investment opportunities, analyze prospective investments and act as directors of and advisers to our corporate private equity and real estate opportunity funds' portfolio companies. Moreover, private equity investing in partnership with leading corporations is a signature form of investing for us. Through March 1, 2007, we had invested in 42 corporate partnerships, including transactions with AT&T Inc., General Electric Company, Northrop Grumman Corporation, Sony Corporation, Time Warner Inc., Union Carbide Corporation, Union and Pacific Corporation, USX Corporation and Vivendi SA. We believe that the depth and breadth of our corporate partnerships will lead to a significant number of opportunities for our corporate private equity and real estate opportunity funds over the next several years. As a result of these various relationships, we believe that we are less reliant on auction processes in making investments than many of our competitors, thereby providing us with a wider array of attractive investment opportunities.

        Our People.    We believe that our senior management and our talented and experienced professionals are the principal reason why we have achieved significant growth and success in all of our businesses. Since our firm's founding in 1985, Stephen A. Schwarzman has served as our firm's Chief Executive Officer and Peter G. Peterson has served as either Chairman or Senior Chairman. Hamilton E. James serves as our President and Chief Operating Officer, oversees our corporate private equity operation directly and, along with Mr. Schwarzman, oversees and serves on the investment committees or oversight committees for all of our other businesses. Jonathan D. Gray and Chad R. Pike are senior managing directors overseeing our real estate operation. J. Tomilson Hill is our Vice Chairman and the head of our fund of hedge funds business. Howard Gellis leads our corporate debt business, John D. Dionne manages our distressed securities hedge fund, Manish Mittal manages our equity hedge fund

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and Punita Kumar-Sinha manages our closed-end mutual funds. Our mergers and acquisitions advisory operation is led by John Studzinski, our restructuring and reorganization advisory operation is led by Arthur B. Newman and our fund placement business is overseen by Kenneth C. Whitney. Our 57 senior managing directors have an average of 22 years of relevant experience. This team is supported by approximately 335 other professionals with a variety of backgrounds in investment banking, leveraged finance, private equity, real estate and other disciplines. We believe that the extensive experience and financial acumen of our management and professionals provide us with a significant competitive advantage.

        Alignment of Interests.    One of our fundamental philosophies as a privately-owned firm has been to align our interests, and those of our senior managing directors and other professionals, with the interests of the investors in our funds. Since inception, Blackstone, its senior managing directors and other professionals have committed over $2.6 billion of their own capital to our carry funds and as of March 1, 2007, our hedge funds managed an additional $2.0 billion of Blackstone's senior managing director and employee capital. In structuring this offering, we have sought to achieve the same alignment of interests between our common unitholders and our senior managing directors and other employees through their significant and long-term ownership of our equity. Our senior managing directors and other existing owners who are our employees will own in excess of            % of the equity in our business immediately following this offering. In addition, we intend to make equity awards to all of our employees at the time of this offering and to use appropriate equity-based compensation to motivate and retain our professionals in the future. The equity held by our senior managing directors and other employees will be subject to vesting and minimum retained ownership requirements and transfer restrictions as described in "Organizational Structure—Reorganization—Blackstone Holdings Formation", "Management—IPO Date Equity Awards" and "—Minimum Retained Ownership Requirements and Transfer Restrictions".

        Distinct Advisory Perspective.    We are not engaged in securities underwriting, research or other similar activities that might conflict with our role as a trusted financial advisor. We believe that this makes us particularly well-suited to represent boards and special committees in the increasing number of situations where they are looking to retain a financial advisor who is devoid of such conflicts. In addition, we believe that our ability to view financial advisory client assignments from both the client's and an owner's perspective often provides unique insights into how best to maximize value while also achieving our clients' strategic objectives.

Our Growth Strategy

        We intend to create value for our common unitholders by:


Business Segments

        Our four business segments are (1) our corporate private equity segment, (2) our real estate segment, (3) our marketable alternative asset management segment, which comprises our management of funds of hedge funds, mezzanine funds, senior debt vehicles, proprietary hedge funds and publicly-traded closed-end mutual funds, and (4) our financial advisory segment, which comprises our mergers

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and acquisitions advisory services, restructuring and reorganization advisory services and Park Hill Group, which provides fund placement services for alternative investment funds.

        As of March 1, 2007, our asset management business had raised approximately $59.4 billion of committed capital for our carry funds and senior debt vehicles since 1987, and was managing $21.5 billion in our funds of hedge funds, proprietary hedge funds and closed-end mutual funds. As of March 1, 2007, we had approximately $78.7 billion of assets under management, which included approximately $31.1 billion in our corporate private equity segment, approximately $17.7 billion in our real estate segment and approximately $29.9 billion in our marketable alternative asset management segment, which includes approximately $17.1 billion in assets under management in 72 different funds of hedge fund vehicles, approximately $1.5 billion invested in our mezzanine funds, approximately $6.9 billion invested across over 450 different senior loans and other debt instruments through our senior debt vehicles, approximately $2.5 billion of total assets under management in two proprietary hedge funds and approximately $1.9 billion of total assets under management in two publicly-traded closed-end mutual funds.

        Since 1985, our mergers and acquisition advisory business has advised on transactions with a total value of over $250 billion. Since 1991, our restructuring and reorganization advisory business had advised companies and creditors in more than 150 distressed situations, both in and out of bankruptcy proceedings, involving more than $350 billion of total liabilities. Since 2004, Park Hill Group has provided placement services to 18 corporate private equity, real estate, venture capital and hedge funds that have collectively raised an aggregate of $42.6 billion of assets under management.

        Information about our business segments should be read together with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the historical financial statements and related notes included elsewhere in this prospectus.

Corporate Private Equity Segment

        Our corporate private equity operation, established in 1987, is a global business with 83 investment professionals and offices in New York, London, Mumbai and Hong Kong. We are a world leader in private equity investing, having managed five general private equity funds as well as one specialized fund focusing on communications-related investments. From an operation focused in our early years on consummating leveraged buyout acquisitions of U.S.-based companies, we have grown into a business pursuing transactions throughout the world and executing not only typical leveraged buyout acquisitions of seasoned companies but also transactions involving start-up businesses in established industries, turnarounds, minority investments, corporate partnerships and industry consolidations, in all cases in strictly friendly transactions supported by the subject company's board of directors. In total, our corporate private equity operation has raised approximately $32 billion in outside capital since 1987, with each of our corporate private equity funds raised in 1987, 1993, 1997, 2002 and 2005 constituting one of the largest private equity funds raised in that year. As of March 1, 2007, our corporate private equity operation had approximately $31.1 billion of assets under management. Blackstone Capital Partners V L.P., or "BCP V," the only corporate private equity fund that we are currently investing, is the largest corporate private equity fund ever raised, with aggregate capital commitments (inclusive of projected management fees expected to be received over the life of the fund) of over $18.1 billion.

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        Since its inception in 1987 through December 31, 2006, our corporate private equity operation has achieved a combined gross annualized IRR of 30.8% and a combined net annualized IRR of 22.8% on realized and unrealized investments, as compared with a total annualized return of 11.0% for the S&P 500 Index over the same period. Our corporate private equity operation has achieved an aggregate multiple of invested capital for realized and partially realized investments of 2.6x over this same time period. Each of our corporate private equity funds has performed in the top quartile of its peers according to Thomson Financial, and the combined net annualized IRR of each of our private equity funds across a full spectrum of economic and equity and debt capital market conditions has exceeded the return of the S&P 500 Index by 12 percentage points. The S&P 500 is an unmanaged index and its returns assume reinvestment of dividends and do not reflect any fees or expenses. See "—The Historical Investment Performance of Our Investment Funds" for more information regarding the calculation of investment returns, valuation methodology and factors affecting our investment performance. For the five years ending on December 31, 2006, our corporate private equity operation achieved aggregate realized and unrealized gains for investors in these funds of $12.4 billion.

        From 1987 through March 1, 2007, our corporate private equity funds have invested in approximately 109 companies in a variety of industries and geographies in pursuit of their investment objectives. The total enterprise value of all transactions effected by our corporate private equity operations through March 1, 2007 was over $191 billion. As of March 1, 2007, our corporate private equity funds had significant equity investments in 42 different companies. The following table presents selected recent investments made or committed by our corporate private equity funds:

 
   Year of
Investment
   Industry
   Region
   Equity Invested
($MM)(1)
   Transaction
Value ($MM)
Ushodaya Enterprises Limited   2007   Media   India   $ 175   $ 1,250
Freescale Semiconductor, Inc.   2006   Semiconductors   United States     1,200     16,536
Travelport Limited   2006   Travel   United States     757     4,500
The Nielsen Company   2006   Communications   Europe     810     12,700
Center Parcs UK   2006   Lodging   Europe     206 (2)   2,088
Michaels Stores, Inc.   2006   Retail   United States     800     5,970
Deutsche Telekom AG.   2006   Telecom   Europe     1,018     3,510
HealthMarkets, Inc.   2006   Insurance   United States     610     1,871
Cadbury Schweppes plc European Beverages Division   2006   Food & Beverage   Europe     364     2,298
TDC A/S   2005   Telecom   Europe     646     15,797
SunGard Data Systems Inc.   2005   Communications   United States     483     12,007
Celanese Corporation   2004   Chemicals   Europe     406     4,081
Texas Genco Holdings, Inc.   2004   Energy   United States     223     3,738
Extended Stay America, Inc.   2004   Hotels   United States     352 (2)   3,921
Southern Cross/NHP   2004   Care Homes   Europe     324 (2)   2,310
(1)
Amount constitutes equity invested by our corporate private equity funds and does not include equity invested by co-investors.

(2)
Excludes amounts invested by our real estate funds.

        We believe that our rigorous investment approach, extensive due diligence focus, global reach, substantial transaction and financing expertise and focus on operational oversight are all key reasons why corporate private equity funds have had attractive performance returns. The following are some of the core investment principles of our corporate private equity funds:

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Real Estate Segment

        Our real estate operation has managed six domestic and two non-U.S. real estate opportunity funds and has raised approximately $17.6 billion in capital since its formation in 1991. As of March 1, 2007, our real estate operation had approximately $17.7 billion of assets under management. We recently completed an initial fund-raising round for Blackstone Real Estate Partners VI L.P., or "BREP

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VI." Taken together, BREP VI and Blackstone Real Estate Partners International II L.P., or "BREP Int'l II," the two real estate funds we are currently investing, would represent one of the the largest real estate opportunity funds ever raised with aggregate capital commitments of over $6.7 billion. Since its inception in 1991 through December 31, 2006, our real estate operation has achieved a combined gross annualized IRR of 38.2% and a combined net annualized IRR of 29.2% on realized and unrealized investments, as compared with an annualized return of 10.6% for the S&P 500 Index over the same period. Our real estate private equity operation has achieved an aggregate multiple of invested capital for realized and partially realized investments of 2.4x over the same time period. The S&P 500 is an unmanaged index and its returns assume reinvestment of dividends and do not reflect any fees or expenses. Each of our real estate opportunity funds has performed in the top quartile of its peers according to Thomson Financial. See "—The Historical Investment Performance of Our Investment Funds" for more information regarding the calculation of investment returns, valuation methodology and factors affecting our investment performance. For the five years ended December 31, 2006, our real estate opportunity funds achieved aggregate realized and unrealized gains for investors of $6.7 billion.

        The total enterprise value of the 212 transactions effected by our real estate operations from 1991 through March 1, 2007 was over $102 billion. The following table presents selected recent investments made by our real estate opportunity funds:

 
   Year of
Investment
   Region
   Equity Invested
($MM)(1)
   Transaction
Value ($MM)
Equity Office Properties Trust   2007   United States   $ 3,501   $ 38,656
Trizec Properties, Inc.   2006   United States     625     9,252
Center Parcs UK   2006   Europe     204 (2)   2,063
CarrAmerica Realty Corporation   2006   United States     778     5,798
MeriStar Hospitality Corporation.   2006   United States     196     2,296
LaQuinta Inns Inc   2006   United States     469     3,435
Southern Cross/NHP   2005   Europe     200 (2)   2,205
Wyndham International, Inc.   2005   United States     505     3,305
Boca Resorts, Inc.   2004   United States     264     1,265
Prime Hospitality Corp.   2004   United States     145     869
Extended Stay America, Inc.   2004   United States     297(2 )   3,383
(1)
Amount constitutes equity invested by our real estate funds and does not include equity invested by co-investors.

(2)
Excludes amounts invested by our corporate private equity funds.

        Our real estate business is a global operation with 49 investment professionals and offices in New York, Chicago, Los Angeles, London, Paris and Mumbai.

        Our real estate operations' approach to investing is guided by some core investment principles, many of which are similar to our corporate private equity operation, including global scope, focus on large transactions, significant number of exclusive opportunities, superior financing expertise and operations oversight. In addition, our real estate investment approach includes:

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Marketable Alternative Asset Management Segment

        We manage of a variety of funds of hedge funds. Our funds of hedge funds operation was founded in 1990 to manage the internal assets of both Blackstone and our senior managing directors through a diversified portfolio of hedge fund investments. Working with our clients over the past fifteen years, our fund of hedge fund group has developed into a leading manager of institutional funds of hedge funds with approximately 100 professionals and offices in New York, London and Hong Kong. Our funds of hedge funds operation had approximately $17.1 billion of assets under management as of March 1, 2007.

        Our fund of hedge fund group's overall investment philosophy is to utilize leading non-traditional investment managers to achieve attractive risk-adjusted returns with relatively low volatility and low correlation to traditional asset classes. Diversification, risk management and a focus on downside protection are key tenets of our approach. Our fund of hedge fund professionals have constructed a broad range of products using sophisticated quantitative and qualitative analyses in an effort to identify the best fund managers and combine them to create products that have appropriate risk profiles and return objectives for investors in our funds of hedge funds. The funds managed by our fund of hedge fund group pursue differing strategies, including broadly diversified funds, strategy focused funds (for instance, funds focused on emerging markets), opportunistic funds (for instance, funds that invest in niche strategies or with activist managers) or client customized funds. Our funds of hedge funds operation manages a variety of fund of fund vehicles that are invested with approximately 170 hedge fund managers, a number of which refuse to accept new investors.

        Unlike many other funds of hedge funds, we are focused on institutional investors. As of March 1, 2007, institutional investors—consisting of corporate and public pension funds as well as insurance companies, industrial corporations, foundations and university endowments—accounted for over 85% of our fund of hedge fund's asset base, and individual investors (excluding our senior managing directors and employees) represented only 5.2% of our fund of hedge fund assets. We believe that institutional investors provide a more stable base of investors than individual investors. Our fund of hedge fund group works with its institutional clients to meet their specific needs either with its broad product range or the creation of customized investment strategies.

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        Founded in 1999, our corporate debt operation, which comprises our mezzanine funds and our senior debt vehicles, has grown to become a major participant in the leveraged finance markets with approximately $8.4 billion of assets under management as of March 1, 2007. Our corporate debt operations' investment portfolio is comprised of securities spread across the capital structure including senior debt, subordinated debt, preferred stock and common equity. Our corporate debt operation has 27 investment professionals and offices in New York and London.

        Our corporate debt operation manages funds investing primarily in mezzanine debt of middle-market companies arranged through privately negotiated transactions. It typically makes investments through direct negotiations with issuers and sponsors. Our corporate debt group investment professionals structure the fund's investments to earn current income through interest payment features and such investments may also include return enhancements including warrants or other equity securities. Our mezzanine funds had approximately $1.5 billion of assets under management as of March 1, 2007. Since their inception in 1999 through December 31, 2006, our mezzanine funds have achieved a combined gross annualized IRR of 16.0% and a combined net annualized IRR of 9.3% on realized and unrealized investments. See "—The Historical Investment Performance of Our Investment Funds" for information regarding the calculation of investment returns, valuation methodology and factors affecting our investment performance. Over the last five years, our mezzanine funds achieved aggregate realized and unrealized gains for investors in these funds of approximately $400 million.

        In 2002 we established our senior debt operation, which manages our senior debt vehicles, consisting of a series of structured vehicles investing primarily in senior secured loans. These investment vehicles are of the type commonly referred to as collateralized debt obligation funds.

        As of March 1, 2007, we managed 10 different collateralized debt obligation funds having approximately $6.9 billion of assets under management. Since 2002, we have raised over $7.3 billion of capital for our senior debt vehicles. From inception through December 31, 2006, these vehicles experienced an annualized default rate of 0.26% of invested assets. Defaults are the primary cause of

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losses in senior debt vehicles and the rate of defaults is one measure that may be used to estimate the level of risk in a senior debt vehicle and its overall performance.

        In 2004, we commenced a strategy of sponsoring proprietary hedge funds managed by individuals affiliated with Blackstone. In 2005 we established our distressed securities hedge fund, which invests primarily in distressed and defaulted debt securities and related equities with an emphasis on smaller, less efficiently traded issues. As of March 1, 2007, our distressed securities hedge fund had approximately $1.2 billion of assets under management. From inception through December 31, 2006, our distressed securities hedge fund has achieved a gross annualized return of 11.5% and a net annualized return of 7.9% without the use of leverage. These returns have been achieved with a

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volatility of 1.8%. Volatility is a measure of uncertainty related to the size of changes in a security's value. This compares to a return of 9.6% and a volatility of 2.8% for the JPMorgan Global High Yield Index over the same period. The JP Morgan Global High Yield Index is an unmanaged index and is not available for direct investment, so its performance is not an exact representation of any particular investment. Index returns assume reinvestment of dividends and do not reflect any fees or expenses. See "—The Historical Investment Performance of Our Investment Funds" for more information regarding the calculation of investment returns, valuation methodology and factors affecting our investment performance.

        In 2006 we established our equity hedge fund, which invests primarily in equity investments on a long and short basis. As of March 1, 2007, our equity hedge fund had approximately $1.3 billion of assets under management. From its inception on October 1, 2006 through December 31, 2006, our equity hedge fund has achieved a gross return of 11.6% and a net return of 8.9%, with a volatility of 6.7%. This compares to a return of 6.2% and a volatility of 7.3% for the S&P 500 Index over the same period. The S&P 500 is an unmanaged index and its returns assume reinvestment of dividends and do not reflect any fees or expenses. See "—The Historical Investment Performance of Our Investment Funds" for information regarding the calculation of investment returns, valuation methodology and factors affecting our investment performance.

        In addition to the investment experience and network of relationships of their investment teams, we believe that our proprietary hedge fund teams benefit considerably from Blackstone's relationships and resources. Blackstone's various businesses provide a "library" of in-house knowledge across a broad spectrum of industries and access to relationships, portfolio companies and operating executives that can augment the identification and evaluation of our funds' investment opportunities and otherwise support their investment activities. Our proprietary hedge funds also benefit in their fund-raising efforts from the assistance of Blackstone's fund placement capabilities and our firm's extensive network of investors. In addition, Blackstone's infrastructure provides our proprietary hedge fund teams with resources, staff and back office functions that would otherwise need to be developed separately and would therefore take time and resources away from their investment research initiatives. Our proprietary hedge funds also benefit from priority access to the trading desks and research of investment banking firms due to Blackstone's overall importance as a client of those firms.

        We are regularly evaluating other new proprietary hedge fund ideas and opportunities, and we plan to add other new proprietary hedge funds over the next few years.

        Our distressed securities hedge fund seeks to provide superior risk-adjusted returns on investments in the debt or equity of financially distressed companies and in other deep-value, catalyst-driven opportunities. The fund focuses primarily on financially distressed companies and seeks to invest in securities that, due to security specific and other complex circumstances, it believes are incorrectly valued. The following are some of the specific elements of the investment approach:

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        Our equity hedge fund seeks to provide superior risk-adjusted returns by investing in a global portfolio consisting primarily of long and short equity investments. It uses a fundamentally driven, research-intensive approach that is intended to identify and evaluate investments where there is an opportunity to take advantage of mispriced and misunderstood securities. The following are some of the specific elements of the investment approach:

        In 2005, we were appointed the investment manager and adviser of two publicly-traded closed-end mutual funds. The India Fund, with $1.8 billion in assets under management as of March 1, 2007, trades on the New York Stock Exchange under the symbol "IFN." The India Fund is the largest India-focused closed-end mutual fund in the United States. The India Fund's investment objective is long-term capital appreciation through investing primarily in the equity securities of Indian companies. Under normal market conditions, at least 80% of the fund's total assets are invested in equity securities of Indian companies. The Asia Tigers Fund, with $104 million in assets under management as of March 1, 2007, trades on the New York Stock Exchange under the symbol "GRR." The Asia Tigers Fund's investment objective is long-term capital appreciation through investing primarily in the equity securities of Asian companies. At least 80% of the fund's total assets will typically be invested in equity securities of Asian companies. Both funds may invest in common and preferred stocks, ADRs, GDRs, convertible bonds, notes, debentures, equity interests in trusts, partnerships, joint ventures and common stock purchase warrants and rights.

        Since December 5, 2005, when our subsidiary was appointed investment manager, through December 31, 2006, The India Fund has achieved a net annualized return of 43.9% and the Asia Tigers Fund has achieved a net annualized return of 42.5%. See "—The Historical Investment Performance of Our Investment Funds" for information regarding the calculation of investment returns, valuation methodology and factors affecting our investment performance. Over this same period, the aggregate assets under management in these two funds grew from $1.2 billion to $2.0 billion (a 61% increase), due to both their investment performance and a $449 million rights offering effected by The India

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Fund in August 2006. We believe that our closed-end mutual funds benefit from synergies with our corporate private equity and real estate operations in India as our India-based professionals are able to share insights and knowledge about industries, trends and companies in the region.

        In February 2007, we entered into a venture with India Infrastructure Finance Company Ltd., or "IDFC," to invest in infrastructure projects in India. The venture, which will be managed by IDFC, intends to deploy $5 billion in capital for infrastructure projects.

Financial Advisory Business Segment

        Financial advisory services have been an important business of our firm from the day we were founded in 1985. We believe that our ability to view financial advisory client assignments from both the client's and an owner's perspective often provides unique insights into how best to maximize value while also achieving our clients' strategic objectives. We believe that the countercyclical nature of our restructuring and reorganization advisory business balances our mergers and acquisitions advisory operation. We also benefit from the fact that these two businesses can work together in a complementary fashion on assignments, such as disposition transactions involving troubled companies and their assets.

        Our financial advisory business segment is a global business with approximately 164 employees and offices in New York, Atlanta, Boston and London. Our financial advisory business has grown revenues from $93.5 million for the year ended December 31, 2001 to $260.3 million for the year ended December 31, 2006, a compound annual growth rate of 22.7%. For the year ended December 31, 2006, our financial advisory segment generated income before taxes of $193.9 million.

        Our mergers and acquisitions advisory operation has been an independent provider of financial and mergers and acquisitions advisory services for over 21 years. Professionals in this area have a wide array of specialized industry knowledge and experience and provide all types of financial and mergers and acquisitions advisory services with a wide range of transaction execution capability with respect to acquisitions, mergers, joint ventures, minority investments, asset swaps, divestitures, takeover defenses and distressed sales.

        The services provided also include specialized advice in various areas, including special committee assignments, exclusive sales, demutualizations and conversions, structured products and financing advice. Since 1985, our mergers and acquisitions advisory services operation has advised on transactions with a total value of more than $250 billion. Some of the clients we have recently advised include Albertsons, Comcast Corporation, Fox Entertainment Group, Inc., Kinder Morgan, Microsoft Corporation, The Proctor & Gamble Company, Sony Corporation and Suez S.A. In 2006, we opened an office in London to expand our mergers and acquisitions service offerings beyond our U.S. base.

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        The success of our mergers and acquisitions advisory services has resulted from our core principles, including protecting client confidentiality, prioritizing our client's interests, avoidance of conflicts and giving each assignment senior-level attention. The 12 senior managing directors in our mergers and acquisitions services operation have an average of over 20 years of experience in providing financial and mergers and acquisitions advice.

        Our restructuring and reorganization advisory operation is one of the leading advisers to companies and creditors in restructurings and bankruptcies. Since 1991, we have advised in more than 150 distressed situations, both in and out of bankruptcy proceedings, involving more than $350 billion of total liabilities. Our restructuring and reorganization advisory services clients include companies, creditors, corporate parents, financial sponsors and acquirors of troubled companies. This operation is particularly active in large, complex and high-profile bankruptcies and restructurings. Some of the debtor clients that we have advised include Delta Airlines, Enron, Global Crossing, Mirant, W.R. Grace and Winn-Dixie Stores in their Chapter 11 reorganizations. In addition to restructuring advice, the group has provided general advice to such major companies as General Motors, Goodyear and Xerox. Our restructuring and reorganizing advisory operation has done work in the United States and Europe and in June 2007 we expect to open an office in London to expand our offerings abroad.

        Senior-level attention and the ability to facilitate prompt resolutions are critical ingredients in our restructuring and reorganization advisory approach. We believe we have one of the most seasoned and

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experienced restructuring and reorganization advisory operations on Wall Street, working on a significant share of all major restructuring assignments. Our six senior managing directors in this area have an average of 19 years of experience in restructuring assignments and employ the skills we feel are crucial to successful restructuring assignments.

        Park Hill Group provides fund placement services for corporate private equity funds, real estate funds, venture capital funds and hedge funds. Park Hill Group primarily provides placement services to unrelated third-party sponsored funds. It also assists us in raising capital for our own investment funds from time to time and providing insights into new alternative asset products and trends. Park Hill Group was formed in 2005 with a focus on corporate private equity, mezzanine and venture capital funds. In June 2006 we added a team focused on real estate funds, and a team specializing in hedge funds and related vehicles. Park Hill Group has approximately 50 employees and offices in New York, San Francisco, Chicago, Dallas and Los Angeles. Since it commenced operation in 2005, Park Hill Group has assisted 18 clients in raising an aggregate of $42.6 billion of capital. Park Hill Group and our investment funds each benefit from the others' relationships with both limited partners and other fund sponsors.

New Business and Other Growth Initiatives

        Our management's principal operating strategy throughout our firm's 21-year history has been to seek to grow by expanding our existing businesses and entering into attractive new businesses. While most of our growth in recent years has come from the substantial growth of our core operations (primarily through substantial growth in the size and favorable investment results of our investment

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funds), significant growth has also come from our entry into various new businesses. The following lists the various new businesses initiatives we have implemented since 1999:

1999

2000


2001

2002

2004

2005

2006

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2007

        We regularly explore new business opportunities that are complementary to our existing asset management and financial advisory businesses, that can benefit from being affiliated with us and that are expected to generate attractive returns to common unitholders, and we will continue to consider such expansion opportunities in the future. One of the reasons for this offering and one of the intended uses of net proceeds from this offering is to provide capital to facilitate our expansion into complementary new businesses.

        In addition to exploring entering into new businesses, we intend to continue to explore ways to expand our existing businesses as we have successfully done throughout our firm's history, including by (1) adding new investment funds to our various asset management businesses (potentially including new structured debt and asset backed funds, a new fund of funds with different investment strategies, new proprietary hedge funds and industry- or geography-specialized types of private equity funds) and otherwise pursuing ways to expand our assets under management in all of our asset management businesses, and (2) continuing to attract to our firm individuals who can help us expand our asset management and financial advisory businesses into new investment or advisory areas and new geographic regions.

        We expect that most of our expansion into new businesses will be effected in the same manner as all of our previous entries into new businesses—by bringing into our firm experienced professionals and helping them build a new business for us. However, we may also consider pursuing selected strategic acquisitions of existing businesses that will either be complementary or additive to our existing businesses.

Investment Process and Risk Management

        We maintain a rigorous investment process and a comprehensive due diligence approach across all of our funds. Each fund has investment policies and procedures which generally contain requirements and limitations for investments, such as limitations relating to the amount that will be invested in any one company and the types of industries or geographic regions in which the fund will invest.

Corporate Private Equity Funds

        Our corporate private equity investment professionals are responsible for selecting, evaluating, structuring, diligencing, negotiating, executing, monitoring and exiting investments, as well as pursuing operational improvements. After an initial selection, evaluation and diligence process, the relevant team of investment professionals will present a proposed transaction to a weekly review committee comprised

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of the senior managing directors of our corporate private equity operation, a number of whom participate in each weekly meeting. Review committee meetings are co-chaired by our President and Chief Operating Officer, Hamilton E. James, and Garrett M. Moran. After discussing the contemplated transaction with the deal team, the review committee will decide whether to give its preliminary approval to the deal team to continue the selection, evaluation, diligence and negotiation process and provides guidance on strategy, process and other pertinent considerations.

        Once a proposed transaction has reached a more advanced stage, it undergoes a detailed interim review by the investment committee of our corporate private equity funds. At the conclusion of the process, an investment committee memo detailing key aspects of the transaction and an analysis of the company and the industry in question is prepared by the deal team for the investment committee's final review and approval. The investment committee of our corporate private equity funds is chaired by our Chairman and Chief Executive Officer, Stephen A. Schwarzman, and comprises the other senior managing directors of our corporate private equity operation. Hamilton E. James and Garrett M. Moran participate in each meeting, along with a rotating group of other senior managing directors who are designated to attend all investment committee meetings for a specified period of time. Both the review committee and the investment committee processes involve a consensus approach to decision-making among committee members. The investment committee is responsible for approving all investment decisions made on behalf of our corporate private equity funds and will typically conduct several lengthy meetings to consider a particular investment before finally approving that investment and its terms. Both at such meetings and in other discussions with the deal team, members of the investment committee will provide guidance to the deal team on strategy, process and other pertinent considerations.

        The investment professionals of our corporate private equity funds are responsible for monitoring an investment once it is made and for making recommendations with respect to exiting an investment. In addition to members of a deal team and our portfolio management group responsible for monitoring and enhancing portfolio companies' operations, all professionals in the corporate private equity operation meet several times each year to review the performance of the funds' portfolio companies. The investment committee approves all disposition decisions made on behalf of the funds.

Real Estate Opportunity, Mezzanine and Senior Debt Funds

        Each of our real estate opportunity, mezzanine and senior debt operations has an investment committee process similar to that described under "—Corporate Private Equity Funds." The real estate investment committee, which includes Stephen A. Schwarzman, Hamilton E. James and the senior managing directors in the real estate operation, scrutinize potential transactions, provide guidance and instructions at the appropriate stage of each transaction and approve the making of each investment as well as each disposition. The investment committees for the mezzanine and senior debt operations, which comprise Stephen A. Schwarzman, Hamilton E. James, Garrett M. Moran, Kenneth C. Whitney and senior members of the respective operations, review potential transactions, provide input regarding the scope of due diligence and approve recommended investments and dispositions. These investment committees have delegated certain abilities to approve investments and dispositions to credit committees within each operation which consist of the senior members of these operations.

Funds of Hedge Funds

        Before deciding to invest in a new hedge fund, our fund of hedge fund operation conducts extensive due diligence. A dedicated team of investment professionals conducts an on-site "front office" review of each potential hedge fund manager, including a due diligence review, reference check and background investigation, as well as an on-site "back-office" review comprising an operational/compliance review and a legal review. The team of investment professionals will present a proposed investment to the fund of hedge fund investment committee, which reviews key aspects of the proposed

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investment and is comprised of our fund of hedge fund senior managing directors and other senior investment professionals. The fund of hedge fund investment committee is directly responsible for investment decisions and meets on at least a monthly basis. With respect to each of our funds of hedge funds, the investment committee monitors the investments of the fund on an ongoing basis in order to ensure compliance with the fund's investment guidelines. Recommendations by the investment committee to approve an investment in a hedge fund are sent to the executive committee, chaired by J. Tomilson Hill, which makes the ultimate decision whether to approve an investment. Our fund of hedge fund operation is assisted by the advice and guidance of its President's Council, which provides market insights and strategy recommendations. The President's Council is comprised of Stephen A. Schwarzman, Peter G. Peterson, Hamilton E. James, J. Tomilson Hill, other senior Blackstone investment personnel and external senior professionals who are experienced in the investment advisory business.

        To ensure that both individual hedge fund managers and fund portfolios are positioned to meet formulated risk and return objectives, our fund of hedge fund operation employs comprehensive quantitative analysis to understand each underlying manager's individual risk profile, as well as the effect it has on an overall portfolio of the applicable fund of hedge funds. In addition, our fund of hedge fund operation actively monitors hedge funds on an ongoing basis. Our professionals regularly contact underlying managers to obtain information on investment strategy, key risk and return drivers, large positions and their hedges, market trends and their impact and organizational developments.

Proprietary Hedge Funds

        The senior managing director who leads each of our proprietary hedge funds is responsible for all investment and risk management activities for that fund. In addition, these senior managing directors meet weekly with an oversight committee consisting of Stephen A. Schwarzman, Hamilton E. James and Garrett M. Moran to discuss investment and risk management activities and market conditions.

Maximizing Intellectual Knowledge

        Because Messrs. Schwarzman, James and Moran actively participate in the oversight of the investment processes for most of our funds as noted above, they are able to ensure that relevant knowledge or contacts that one business has are made available to other businesses than can benefit from such knowledge or contacts (working at all times with our compliance group to insure that we maintain full compliance with the legal and contractual obligations to which we are subject).

Structure and Operation of Our Investment Funds

        We conduct the sponsorship and management of our carry funds and other similar vehicles primarily through a partnership structure in which limited partnerships organized by us accept commitments and/or funds for investment from institutional investors and (to a limited extent) high net worth individuals. Hedge funds and other investment vehicles, such as many of our funds of hedge funds and our proprietary hedge funds, are generally organized as limited partnerships with respect to U.S. domiciled vehicles and limited liability (and other similar) companies with respect to non-U.S. domiciled vehicles.

        Typically, an investment fund has an investment adviser, which is registered under the Advisers Act. Substantially all of the responsibility for the day-to-day operations of the investment funds is typically delegated to the investment funds' respective investment advisers. The investment funds themselves do not register as investment companies under the Advisers Act or the 1940 Act, in reliance on Section 3(c)(7) thereof or, typically in the case of funds formed prior to 1997, Section 3(c)(1) thereof or Section 7(d) thereof. Section 3(c)(7) of the 1940 Act excepts from its registration requirements investment funds privately placed in the United States whose securities are owned

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exclusively by persons who, at the time of acquisition of such securities, are "qualified purchasers." Section 3(c)(1) of the 1940 Act excepts from its registration requirements privately placed investment funds whose securities are beneficially owned by not more than 100 persons. In addition, under current interpretations of the SEC, Section 7(d) of the 1940 Act exempts from registration thereunder any non-U.S. investment fund all of whose outstanding securities are beneficially owned either by non-U.S. residents or by U.S. residents that are qualified purchasers.

        In addition to having an investment adviser, each investment fund that is a limited partnership, or partnership fund, is ultimately managed by its general partner, which makes all policy and investment decisions relating to the conduct of the investment fund's business. Furthermore, all decisions concerning the making, monitoring and disposing of investments are made solely by the general partner. The limited partners of the partnership funds take no part in the conduct or control of the business of the investment funds, have no right or authority to act for or bind the investment funds and have no influence over the voting or disposition of the securities or other assets held by the investment funds, although such limited partners may often remove the general partner or manager or cause an early liquidation by supermajority vote. These decisions are made by the investment fund's general partner in its sole discretion. In connection with this offering, we are amending the governing agreements of all of our investment funds (with the exception of a limited number of our funds of hedge funds) to provide that, subject to certain conditions, third-party investors in those funds will have the right, without cause, to vote to accelerate the liquidation date of the investment fund or withdrawal of their capital by a simple majority vote.

Incentive Arrangements / Fee Structure

        The investment adviser of each of our carry funds generally receives an annual management fee that ranges from 1.0% to 2.0% of the investment fund's capital commitments during the investment period and at least 0.75% of invested capital after the investment period. The investment adviser of each of our proprietary hedge funds receives an annual management fee that ranges from 1.5% to 2.0% of the hedge fund's net asset value. The investment adviser of each of our funds of hedge funds is generally entitled to a management fee with respect to each fund it manages ranging from 0.75% to 1.5% of assets under management per annum. The investment adviser of each of our senior debt vehicles receives annual management fees typically equal to 0.50% to 1.25% of each fund's total assets, generally with additional management fees which are incentive based (that is, subject to meeting certain return criteria). The investment adviser of each of our closed-end mutual funds receives an annual management fee that ranges from 0.75% to 1.1% depending on the amount of assets in the applicable fund. The management fees we receive from our carry funds are payable on a regular basis (typically quarterly) in the contractually prescribed amounts noted above over the life of the fund and do not depend on the investment performance of the fund. The management fees received by our hedge funds have similar characteristics, except that such funds often afford investors increased liquidity through annual, semi-annual or quarterly withdrawal or redemption rights following the expiration of a specified period of time when capital may not be withdrawn (typically between one and three years) and the amount of management fees to which the investment adviser is entitled with respect thereto will proportionately increase as the net asset value of each investor's capital account grows and will proportionately decrease as the net asset value of each investor's capital account decreases. The assets under management measure we present in this prospectus as of March 1, 2007 includes approximately $4.4 billion of assets under management relating to our own and employees' investments in our funds as to which we charge either no or nominal management fees.

        The general partner or an affiliate of each of our carry funds, our proprietary hedge funds and certain of our funds of hedge funds and senior debt vehicles also receives "carried interest" or an "incentive fee" from the investment fund. Carried interest or incentive fees entitle the general partner (or an affiliate) to a percentage of a fund's gains, effectively serving as a performance-based incentive.

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The carried interest or incentive fees are typically structured as a net profits interest in the applicable fund. In the case of our carry funds, carried interest is calculated on a "realized gain" basis, and each general partner is generally entitled to a carried interest equal to 20% of the net realized income and gains (generally taking into account unrealized losses) generated by such fund. Net realized income or loss is not netted between or among funds. For most carry funds, the carried interest is subject to an annual preferred limited partner return ranging from 7.0% to 9.0%. If, as a result of diminished performance of later investments in a carry fund's life, the carry fund does not achieve investment returns that (in most cases) exceed the preferred return threshold or (in all cases) the general partner receives in excess of 20% of the fund's net profits over the life of the fund, we will be obligated to repay the amount by which the carried interest that was previously distributed to us exceeds amounts to which we are ultimately entitled. This obligation, which is known as a "clawback" obligation, operates with respect to a given carry fund's own net investment performance only. Performances of other funds are not netted for this purpose. In the case of our proprietary hedge funds, performance fees (or similar incentive allocations) are equal to 20% of the applicable fund's net capital appreciation per annum, subject to certain net loss carry-forward provisions (known as a "high water mark"). In the case of some of our funds of hedge funds, we receive incentive fees ranging from 5% to 10% of net appreciation per annum, subject to a high water mark and in some cases a preferred return. The incentive fees for our senior debt vehicles are typically subject to minimum return thresholds and are payable either as a percentage of assets under management or as a percentage of investment income.

        The fee structure of funds that are limited liability (and other similar) companies, or "limited liability company funds," is somewhat different from that of partnership funds. However, in the case of both types of funds, the carried interest with respect to the investment funds is often the primary source of our revenues from the management of the investment funds and the chief incentive for producing strong performance. Like the general partners of the partnership funds, the investment advisers of the limited liability company funds also have carried interest in those funds. For limited liability company funds, the carried interest is sometimes structured as an incentive fee payable to the investment adviser and other times is structured as an incentive allocation payable to an affiliate of the investment adviser by a wholly-owned limited partnership subsidiary of the fund.

        Our carry funds receive customary transaction fees upon consummation of many of their funds' acquisition transactions, receive monitoring fees from many of their portfolio companies following acquisition, and may from time to time receive disposition and other fees in connection with their activities. The transaction fees which they receive are generally calculated as a percentage (that can range up to 1%) of the total enterprise value of the acquired entity. Our carry funds are required to reduce their management fees charged to their limited partner investors by 50% to 100% of such transaction fees and certain other fees that they receive. We believe the stability of our fee revenue sets us apart from many financial services firms. A majority of our aggregate fee income in 2006 was derived from multi-year contractual arrangements.

Capital Invested In and Alongside Our Investment Funds

        To further align our interests with those of investors in our investment funds, we have invested our own capital and that of our senior managing directors in the investment funds we sponsor and manage. A portion of the proceeds from this offering will be used to fund our general partner capital commitments to our investment funds.

        Investors in many of our carry funds also receive the opportunity to make additional "co-investments" with the investment funds. Our senior managing directors and employees, as well as Blackstone itself, also make co-investments, which we refer to as "side-by-side investments," with all of our carry funds. Co-investments and side-by-side investments are investments in portfolio companies or other assets on the same terms and conditions as those acquired by the applicable fund. Co-investments refer to investments arranged by us that are made by our limited partner investors (and some other

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investors in some instances) in a portfolio company or other assets alongside a carry fund. In certain cases, such co-investments may involve additional fees or carried interest. Side-by-side investments are similar to co-investments but are made pursuant to a binding election, subject to certain limitations, submitted in January of each year for the estimated activity during the ensuing 12 months under which the senior managing directors, employees and certain affiliates of Blackstone, as well as Blackstone itself, are permitted to make investments alongside a particular carry fund in all transactions of that fund for that year. After this offering, we expect that Blackstone will increase considerably the amount of its side-by-side investments in our carry funds.

        Our intended uses of the proceeds from this offering include funding co-investments by us in our corporate private equity funds' acquisition transactions in situations in which there is available equity for investment in excess of the amounts that we think is appropriate for our fund to commit and which is not subscribed for through co-investments by our limited partners in that fund. As the manager of the largest private equity fund in the world, we (either alone or as a leading firm involved in consortium transactions) are frequently in a position to make determinations regarding the allocation of equity investment opportunities. Indeed, there was approximately $14 billion of equity capital that was invested by third parties (other than co-investments by our limited partners) in transactions consummated by our corporate private equity and real estate opportunity funds in 2006. With the additional capital we will have as a result of this offering, we intend to co-invest in corporate private equity and real estate transactions led by us in the manner described above.

The Historical Investment Performance of Our Investment Funds

        The following tables present information relating to the historical performance of our carry funds, hedge funds and mutual funds, including certain legacy Blackstone funds that do not have a meaningful amount of unrealized investments, the general partners of which are not being contributed to Blackstone Holdings in the Reorganization. The data for these investment funds is presented from the date indicated through December 31, 2006 and has not been adjusted to reflect acquisitions or disposals of investments subsequent to that date.

        When considering the data presented below, you should note that the historical results of our investment funds are not indicative of the future results that you should expect from such funds, from any future investment funds we may raise or from your investment in our common units. The historical and potential future returns of the investment funds we manage are not directly linked to returns on our common units. Therefore, you should not conclude that continued positive performance of the investment funds we manage will necessarily result in positive returns on an investment in our common units. However, poor performance of the investment funds that we manage would cause a decline in our revenue from such investment funds, and would therefore have a negative effect on our performance and in all likelihood the returns on an investment in our common units.

        Moreover, with respect to the historical returns of our investment funds:

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        See "Risk Factors—Risks Relating to Our Asset Management Businesses—Valuation methodologies for certain assets in our funds can be subject to significant subjectivity and the values of assets established pursuant to such methodologies may never be realized, which could result in significant losses for our funds" and "—The historical returns attributable to our funds should not be considered as indicative of the future results of our funds or of our future results or of any returns expected on an investment in our common units". In addition, future returns will be affected by the applicable risks described elsewhere in this prospectus, including risks of the industries and businesses in which a particular fund invests.

        Internal Rates of Return.    The internal rate of return, or "IRR," for an investment fund measures the aggregate returns generated by the fund's investments over a holding period. In all cases, rates of return were computed using what is known as a "dollar-weighted" rate of return, which takes into account the timing of cash flows and amounts invested at any given time, and realized and unrealized returns were determined using the methodologies described below with respect to our various funds.

        Gross Annualized IRR.    The gross annualized IRR of an investment fund represents the cumulative investment-related cash flows for all of the partners of the investment fund and our side-by-side investments before management fees and the general partner's allocation of profits but after all other partnership expenses (including interest incurred by the fund itself). Gross annualized IRRs are calculated before giving effect to the allocation of realized and unrealized returns on the fund's investments to the fund's general partner pursuant to carried interest, the payment of any applicable management fees to the fund and the incurrence of organizational expenses. These amounts measure the returns on the fund's investments as a whole without regard to whether all of the returns would, if distributed, be payable to the investment fund's limited partners.

        Net Annualized IRR.    The net annualized IRR of an investment fund represents the cumulative investment-related cash flows as used in the calculation of the gross annualized IRR applicable to all limited partners and net of management fees, organizational expenses, transaction costs, and other partnership expenses (including interest incurred by the fund itself) and the general partner's allocation of profits. To the extent that the fund exceeds all requirements detailed within the applicable partnership agreement, the unrealized value is adjusted such that 20% of the unrealized gain is allocated to the general partner, thereby reducing the balance attributable to the limited partners. These amounts measure returns based on amounts that, if distributed, would be paid to limited partners of the fund.

        Gross Annualized Returns.    The gross annualized return of an investment fund represents the gross compound annual rate of return based on proceeds and estimated valuations as of a specified date. Investments valued at original cost are included in the computation of the unrealized returns.

        Net Annualized Returns.    The net annualized return of an investment fund represents the net compound annual rate of return after management fees, organizational expenses, partnership expenses and the general partner's allocation of profits. Investments valued at original cost are included in the computation of the unrealized returns.

        Combined Annualized IRR or Annualized Returns.    The combined annualized IRR or annualized returns of an investment fund represent the cumulative investment-related cash flows for all underlying

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investments in an operation since inception without regard to the investment fund to which such investments relate in accordance with the definitions set forth above.

        Volatility.    Volatility is a measure of uncertainty or risk related to the size of changes in a security's value.

        We intend to retain an independent valuation firm, to assist us in valuing our investments and those of our investment funds on an annual basis. While our management will make determinations as to investment values, the independent valuation firm will provide third-party valuation assistance in accordance with limited procedures that we will identify and request it to perform. These procedures will not involve an audit, review compilation or any other form of examination or attestation under generally accepted auditing standards. In accordance with U.S. GAAP, an investment for which a market quotation is readily available will be valued using a market price for the investment as of the end of the applicable reporting period and an investment for which a market quotation is not readily available will be valued at the investment's fair value as of the end of the applicable reporting period as determined in good faith. While there is no single standard for determining fair value in good faith, the methodologies described below will generally be followed when fair value pricing is applied. The historical return information we present below has not been prepared with the assistance of an independent valuation firm.

        The aggregate realized value of a carry fund's portfolio company investments is calculated based on the historical amount of the net cash and marketable securities actually distributed to fund investors from all of the fund's investments made from the date of the fund's formation through the valuation date. Such amounts do not give effect to the allocation of any realized returns to the fund's general partner pursuant to carried interest or the payment of any applicable management fees to the fund's investment adviser. Where the value of an investment was only partially realized, the actual cash and other consideration distributed to fund investors was classified as realized value and the balance of the value of the investment was classified as unrealized and valued using the methodology described below.

        The aggregate unrealized value of a carry fund is calculated by adding the individual unrealized values of the fund's portfolio companies. Individual investment valuations were obtained using market prices where a market quotation was available for the investment or fair value pricing where a market quotation was not available for the investment. Fair value pricing represents an investment's fair value as determined by us in good faith. Market value represents a valuation of an investment derived from the last available closing sales price as of the valuation date. Market values derived from market quotations do not take into account various factors which may affect the value that may ultimately be realized in the future, such as the possible illiquidity associated with a large ownership position.

        There is no single standard for determining fair value in good faith and in many cases fair value is best expressed as a range of fair values from which a single estimate may be derived. We determine the fair values of investments for which market quotations were not readily available based on the enterprise values at which we believe the portfolio companies could be sold in orderly dispositions over a reasonable period of time between willing parties other than in a forced or liquidation sale. There can be no assurance that unrealized values will be realized for the amount shown.

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        Since its inception in 1987 through December 31, 2006, our corporate private equity operation has achieved an aggregate multiple of invested capital for realized and partially realized investments of 2.6x. Since its inception in 1991 through December 31, 2006, our real estate operation has achieved an aggregate multiple of invested capital for realized and partially realized investments of 2.4x. The following table summarizes the investment record for our carry funds. Information is presented for the last year, the last three years, the last five years, the last ten years and over the life of the investment funds, as applicable.

Fund (Inception Date)
   Total
Invested
Capital(1)
   Total
Unrealized
Value
(BOY)(1)
   Realized
Value
   Unrealized
Value
   Total
Realized/
Unrealized
Value
   Combined
Fund Level
Annualized
IRR(2)
   Combined
Annualized
IRR Net of Fees(3)
  
 
   ($ in millions)

  
Corporate Private Equity Funds (1987):                                        
January 1, 2006 through December 31, 2006   $ 7,467   $ 11,069   $ 5,302   $ 16,567   $ 21,868   29.4 % 24.1 %
January 1, 2004 through December 31, 2006     11,951     6,906     12,911     16,567     29,477   44.1   35.0  
January 1, 2002 through December 31, 2006     14,663     4,390     14,841     16,567     31,408   32.1   26.2  
January 1, 1997 through December 31, 2006     18,459     1,152     17,529     16,567     34,095   26.4   21.3  
Inception through December 31, 2006     19,774     —     19,327     16,567     35,894   30.8   22.8  

Real Estate Opportunity Funds (1991):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
January 1, 2006 through December 31, 2006   $ 3,283   $ 2,845   $ 3,017   $ 6,476   $ 9,493   105.6 % 84.4 %
January 1, 2004 through December 31, 2006     5,499     1,723     6,960     6,476     13,436   85.7   66.2  
January 1, 2002 through December 31, 2006     6,359     1,581     8,131     6,476     14,607   46.0   37.5  
January 1, 1997 through December 31, 2006     8,582     501     11,029     6,476     17,505   35.6   28.0  
Inception through December 31, 2006     9,200 (4)   —     11,544 (4)   6,476     18,020 (4) 38.2 (4) 29.2 (4)

Mezzanine Funds (1999):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
January 1, 2006 through December 31, 2006   $ 246   $ 448   $ 136   $ 608   $ 745   9.7 % 6.6 %
January 1, 2004 through December 31, 2006     730     485     918     608     1,526   22.2   19.4  
January 1, 2002 through December 31, 2006     1,005     310     1,102     608     1,710   17.6   12.9  
Inception through December 31, 2006     1,322     —     1,152     608     1,760   16.0   9.3  
(1)
Includes side-by-side investments made by our affiliates.

(2)
Represents the combined gross annualized IRR on total invested capital based on realized proceeds and estimated valuations as of December 31, 2006, before management fees, organizational expenses and the carried interest but after partnership expenses (including interest incurred by the fund itself).

(3)
Represents the combined net annualized IRR for third-party investors after management fees, organizational expenses, partnership expenses (including interest incurred by the fund itself) and the general partner's allocation of profit.

(4)
Includes $140.7 million invested by us and our first corporate private equity fund prior to the inception of our first real estate opportunity fund.

Historical Returns of our Other Funds

        Fund of Hedge Funds.    In general, we will value the assets of our funds of hedge funds at fair market value in a commercially reasonable manner. We may rely on the net asset valuations provided

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to us by the underlying hedge funds in which our funds of hedge funds invest. Valuations provided by the underlying hedge funds may be subject to adjustment by us if we believe that the valuations furnished do not fairly reflect the fair market value of the underlying assets.

        Senior Debt Vehicles.    Our senior debt vehicles are cash flow structures and as such do not require mark-to-market valuations. Our senior debt vehicles have various covenants related to cash flow, collateral profile and collateral principal amount which dictate investment parameters and cash flow distributions of each fund. The payments of incentive fees on our senior debt vehicles are determined based upon cash flow distributions to each vehicle's investors; such incentive fees are typically not payable until the end of each vehicle's investment period.

        Proprietary Hedge Funds.    Securities that are listed on a recognized exchange or a computerized quotation system and that are freely transferable will generally be valued at their last sales price on the relevant exchange or computerized quotation system on the date of determination or, if no sales occurred on such day, generally at the "bid" price (and if sold short at the "asked" price) on the consolidated tape at the close of business on such day. All other assets of the hedge fund will be valued at fair value in the manner determined by us. The foregoing valuation methods may be changed by us if we determine in good faith that such change is advisable to better reflect market conditions or activities.

        Closed-End Mutual Funds.    Securities that are listed on a recognized exchange or a computerized quotation system and that are freely transferable are valued at their last sales price on the relevant exchange or computerized quotation system on the date of determination or, if no sales occurred on such day, generally at the mean between the "bid" and "asked" prices on the consolidated tape at the close of business on such day or "bid" price if only bid quotations are available. Securities for which sales prices and bid and asked quotations are not available on the date of determination may be valued at the most recently available prices or quotations under policies adopted by our closed-end mutual funds' boards of directors. Investments in short-term debt securities having a maturity of 60 days or less are valued at amortized cost which approximates market value. All other securities and assets are carried at fair value as determined in good faith by our closed-end mutual funds' boards of directors.

        The following table summarizes the investment record for our funds of hedge funds, proprietary hedge funds and closed-end mutual funds. The investment record for our funds of hedge funds is presented generally by investment strategy and includes 16 broadly diversified funds, 22 strategy focused funds, 25 opportunistic funds and eight special purpose vehicles that we manage for clients

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with custom tailored strategies. Information is presented for the last year, the last three years, the last five years, the last ten years and over the life of the investment funds, as applicable.

Fund (Inception Date)
   Assets Under
Management
as of the End
of the Period
   Combined Fund Level
Annualized Returns
   Annualized Returns,
Net of Fees
   Volatility
  
 
   ($ in millions)

  
Funds of Hedge Funds(1):                    
Broadly Diversified                    
January 1, 2006 through December 31, 2006 (1 year)         12.7 % 11.4 % 3.3 %
January 1, 2004 through December 31, 2006 (3 year)         8.3 % 7.0 % 2.8 %
January 1, 2002 through December 31, 2006 (5 year)         7.9 % 6.5 % 2.7 %
January 1, 1997 through December 31, 2006 (10 year)         11.4 % 10.0 % 3.8 %
Inception through December 31, 2006   $ 6,913   12.4 % 11.0 % 4.8 %

Strategy Focused
 
 
 
 
 
 
 
 
 
 
January 1, 2006 through December 31, 2006 (1 year)         12.3 % 10.3 % 3.6 %
January 1, 2004 through December 31, 2006 (3 year)         11.1 % 9.4 % 3.6 %
January 1, 2002 through December 31, 2006 (5 year)         10.6 % 8.9 % 3.8 %
January 1, 1997 through December 31, 2006 (10 year)         N/A   N/A   N/A  
Inception through December 31, 2006   $ 4,744   10.8 % 9.2 % 4.0 %

Opportunistic
 
 
 
 
 
 
 
 
 
 
January 1, 2006 through December 31, 2006 (1 year)         12.2 % 10.0 % 5.2 %
January 1, 2004 through December 31, 2006 (3 year)         11.0 % 9.0 % 4.5 %
January 1, 2002 through December 31, 2006 (5 year)         9.2 % 7.3 % 3.8 %
January 1, 1997 through December 31, 2006 (10 year)         13.5 % 11.3 % 6.1 %
Inception through December 31, 2006   $ 6,322   14.6 % 12.2 % 6.0 %

Client Customized Funds (SPVs)
 
 
 
 
 
 
 
 
 
 
January 1, 2006 through December 31, 2006 (1 year)         13.2 % 11.9 % 3.7 %
January 1, 2004 through December 31, 2006 (3 year)         8.8 % 7.7 % 3.1 %
January 1, 2002 through December 31, 2006 (5 year)         N/A   N/A   N/A  
January 1, 1997 through December 31, 2006 (10 year)         N/A   N/A   N/A  
Inception through December 31, 2006   $ 3,398   9.3 % 8.1 % 2.9 %

Proprietary Hedge Funds:
 
 
 
 
 
 
 
 
 
 
Distressed Securities Hedge Fund July 1, 2005:                    
January 1, 2006 through December 31, 2006   $ 1,037   13.3 % 9.3 %    
Inception through December 31, 2006         11.5 % 7.9 % 1.8 %
Equity Hedge Fund (October 1, 2006):                    
Inception through December 31, 2006   $ 647   11.6 %(2) 8.9 %(2) 6.7 %

Closed-End Mutual Funds:
 
 
 
 
 
 
 
 
 
 
The India Fund (December 2005)(3):                    
Inception through December 31, 2006   $ 1,913   —   43.9 %    
The Asia Tigers Fund (December 2005)(3):                    
Inception through December 31, 2006   $ 105   —   42.5 %    
(1)
Total assets by strategy groups presented above include inter-fund investments made by our funds of hedge funds.

(2)
Reflects aggregate returns from October 1, 2006 (the date operations commenced) through December 31, 2006.

(3)
A subsidiary of ours has been the investment manager of The India Fund and The Asia Tigers Fund since December 5, 2005. The current portfolio manager has managed The India Fund since August 1, 1997 and has managed The Asia Tigers Fund since July1, 1999. The net annualized returns, based on net asset value, have been calculated since December 5, 2005.

        Our senior debt vehicles are closed end funds that are privately placed to an investor base traditionally interested in hold-to-maturity type securities. These vehicles are capitalized with (1) debt instruments rated investment-grade that pay holders a contractual margin above a floating rate of interest; and (2) tiers of subordinated securities that are either rated non-investment-grade or not rated at all. Typically, the subordinated securities that are rated non-investment grade pay holders a contractual margin above a floating rate of interest. The most subordinated security benefits from all residual income after satisfying the vehicle's debt service obligations, administrative expenses and

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management fees. The most subordinated security typically represents approximately 7.0% to 15.0% of a vehicle's total capitalization. Return outcomes vary based on a number of factors. A principal determinant among these factors is the default rate experienced by a vehicle's assets over its investment period. As of December 31, 2006, our funds under management experienced an annualized default rate of 0.26%. As of December 31, 2006, the cumulative return, net of fees, since inception (November 22, 2002) to the holders of our vehicles' most subordinated securities was 14.3% and the gross cumulative return over that same period was 21.2% (before management fees, but after deducting interest expense and administrative expenses). When calculating these returns, (1) we take into consideration actual distributions by each vehicle to date; (2) we assume each vehicle's formation expenses are amortized over the contractual weighted average life of the vehicle; and (3) we exclude the three vehicles which closed after September 30, 2006 as such vehicles are still in their contractually agreed upon period of asset accumulation.

Competition

        The asset management and financial advisory industries are intensely competitive, and we expect them to remain so. We compete both globally and on a regional, industry and niche basis. We compete on the basis of a number of factors, including investment performance, transaction execution skills, access to capital, reputation, range of products and services, innovation and price.

        Asset Management.    We face competition both in the pursuit of outside investors for our investment funds and in acquiring investments in attractive portfolio companies and making other investments. Depending on the investment, we expect to face competition primarily from other private equity funds, specialized investment funds, hedge fund sponsors, other financial institutions, corporate buyers and other parties. Many of these competitors in some of our businesses are substantially larger and have considerably greater financial, technical and marketing resources than are available to us. Several of these competitors have recently raised, or are expected to raise, significant amounts of capital and many of them have similar investment objectives to us, which may create additional competition for investment opportunities. Some of these competitors may also have a lower cost of capital and access to funding sources that are not available to us, which may create competitive disadvantages for us with respect to investment opportunities. In addition, some of these competitors may have higher risk tolerances, different risk assessments or lower return thresholds, which could allow them to consider a wider variety of investments and to bid more aggressively than us for investments that we want to make. Corporate buyers may be able to achieve synergistic cost savings with regard to an investment that may provide them with a competitive advantage in bidding for an investment. Lastly, the allocation of increasing amounts of capital to alternative investment strategies by institutional and individual investors could well lead to a reduction in the size and duration of pricing inefficiencies that many of our investment funds seek to exploit.

        Financial Advisory.    Our competitors are other financial advisory and investment banking firms. Our primary competitors in our financial advisory business are large financial institutions, many of which have far greater financial and other resources and much broader client relationships than us and (unlike us) have the ability to offer a wide range of products, from loans, deposit-taking and insurance to brokerage and a wide range of investment banking services, which may enhance their competitive position. Our competitors also have the ability to support investment banking, including financial advisory services, with commercial banking, insurance and other financial services revenue in an effort to gain market share, which puts us at a competitive disadvantage and could result in pricing pressures that could materially adversely affect our revenue and profitability. In addition, Park Hill Group operates in a highly competitive environment and the barriers to entry into the fund placement business are low.

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        Competition is also intense for the attraction and retention of qualified employees. Our ability to continue to compete effectively in our businesses will depend upon our ability to attract new employees and retain and motivate our existing employees.

        For additional information concerning the competitive risks that we face, see "Risks Factors—Risks Relating to Our Asset Management Businesses—The asset management business is intensely competitive" and "—Risks Relating to Our Financial Advisory Business—We face strong competition from other financial advisory firms".

Employees

        We believe that one of the strengths and principal reasons for our success is the quality and dedication of our people. As of December 31, 2006, we employed approximately 770 people, including our 57 senior managing directors and approximately 335 other investment and advisory professionals. We strive to maintain a work environment that fosters professionalism, excellence, integrity and cooperation among our employees.

Our Senior Managing Directors

        Set forth below are the names, ages, numbers of years with Blackstone and area of operation of each of our senior managing directors other than our directors and executive officers, Stephen A. Schwarzman, Peter G. Peterson, Hamilton E. James, J. Tomilson Hill, Michael A. Puglisi and Robert L. Friedman, who are each described in "Management—Directors and Executive Officers". We use the title "senior managing director" to refer to our senior asset management and financial advisory professionals; this title does not imply that these individuals are directors or officers of the general partner of Blackstone Group Management L.L.C.

Name
   Age
   Years with Blackstone
Corporate Private Equity Funds        
  Joseph Baratta   36   8
  David Blitzer   37   15
  Michael S. Chae   38   9
  Chinh E. Chu   40   17
  David I. Foley   39   11
  Lawrence H. Guffey   38   15
  Akhil Gupta   54   1
  Benjamin J. Jenkins   36   7
  Antony Leung   55   <1
  Prakash Melwani   48   3
  Garrett M. Moran   52   1
  James A. Quella   57   2
  Paul C. Schorr IV   39   1
  Neil P. Simpkins   40   8
  David Tolley   39   6

Real Estate Opportunity Funds
 
 
 
 
  Jonathan D. Gray (co-head)   37   14
  Chad R. Pike (co-head)   35   11
  Gary M. Sumers (chief operating officer)   54   12
  Kenneth A. Caplan   33   9
  Frank Cohen   34   10
  William J. Stein   44   10
         

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BAAM
 
 
 
 
  Bruce H. Amlicke (chief investment officer)   43   3
  Brian F. Gavin   37   4
  Halbert D. Lindquist   60   10
  Stephen W. Sullens   39   5

Corporate Debt Funds
 
 
 
 
  Howard Gellis (head)   53   8
  Salvatore Gentile   44   8
  Dean T. Criares   44   5

Distressed Securities Hedge Fund
 
 
 
 
  John D. Dionne (head)   43   2

Equity Hedge Fund
 
 
 
 
  Manish Mittal (head)   34   <1

Closed-End Mutual Funds
 
 
 
 
  Punita Kumar-Sinha (head)   44   1

Mergers and Acquisitions Advisory Services
 
 
 
 
  John Studzinski (head)   51   <1
  A. J. Agarwal   40   14
  Martin Alderson Smith   49   15
  Mary Anne Citrino   47   2
  Michael Dugan   51   2
  James Fields   51   1
  Erik S. Katz   41   15
  Jonathan Koplovitz   38   10
  Thomas Middleton   50   3
  Laurence Nath   45   1
  Raffiq A. Nathoo   40   15
  William S. Oglesby   47   2

Restructuring and Reorganization Advisory Services
 
 
 
 
  Arthur B. Newman (head)   63   15
  Timothy R. Coleman   52   15
  Paul Huffard   43   11
  Nicholas P. Leone   41   11
  Steven Zelin   43   9
  Pamela D. Zilly   53   15

Limited Partner Relations and Fund Placement
 
 
 
 
  Kenneth C. Whitney   48   16

Administration
 
 
 
 
  Sylvia Moss   64   9

Regulatory and Compliance Matters

        Our businesses, as well as the financial services industry generally, are subject to extensive regulation in the United States and elsewhere.

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        All of the investment advisors of our investment funds are registered as investment advisors with the SEC. Registered investment advisors are subject to the requirements and regulations of the Advisers Act. Such requirements relate to, among other things, fiduciary duties to clients, maintaining an effective compliance program, solicitation agreements, conflicts of interest, recordkeeping and reporting requirements, disclosure requirements, limitations on agency cross and principal transactions between an advisor and advisory clients and general anti-fraud prohibitions.

        Blackstone Advisory Services L.P., a wholly-owned subsidiary of ours through which we conduct our financial advisory business, is registered as a broker-dealer with the SEC and is a member of the National Association of Securities Dealers, Inc. or "NASD," and is registered as a broker-dealer in 44 states, the District of Columbia and the Commonwealth of Puerto Rico. Park Hill Group LLC is registered as a broker-dealer with the SEC and is a member of the NASD and is registered as a broker-dealer in several states. Park Hill Group Real Estate Group LLC is also registered as a broker-dealer with the SEC and is a member of the NASD and is registered as a broker-dealer in several states. Our broker-dealer entities are subject to regulation and oversight by the SEC. In addition, the NASD, a self-regulatory organization that is subject to oversight by the SEC, adopts and enforces rules governing the conduct, and examines the activities, of its member firms, including our broker-dealer entities. State securities regulators also have regulatory or oversight authority over our broker-dealer entities.

        Broker-dealers are subject to regulations that cover all aspects of the securities business, including sales methods, trade practices among broker-dealers, use and safekeeping of customers' funds and securities, capital structure, record-keeping, the financing of customers' purchases and the conduct and qualifications of directors, officers and employees. In particular, as a registered broker-dealer and member of a self-regulatory organization, we are subject to the SEC's uniform net capital rule, Rule 15c3-1. Rule 15c3-1 specifies the minimum level of net capital a broker-dealer must maintain and also requires that a significant part of a broker-dealer's assets be kept in relatively liquid form. The SEC and various self-regulatory organizations impose rules that require notification when net capital falls below certain predefined criteria, limit the ratio of subordinated debt to equity in the regulatory capital composition of a broker-dealer and constrain the ability of a broker-dealer to expand its business under certain circumstances. Additionally, the SEC's uniform net capital rule imposes certain requirements that may have the effect of prohibiting a broker-dealer from distributing or withdrawing capital and requiring prior notice to the SEC for certain withdrawals of capital.

        The Blackstone Group International Ltd. is an authorized investment manager in the United Kingdom. The U.K. Financial Services and Markets Act 2000, or "FSMA," and rules promulgated thereunder govern all aspects of the U.K. investment business, including sales, research and trading practices, provision of investment advice, use and safekeeping of client funds and securities, regulatory capital, record keeping, margin practices and procedures, approval standards for individuals, anti-money laundering, periodic reporting and settlement procedures. Pursuant to the FSMA, certain of our subsidiaries are subject to regulations promulgated and administered by the U.K. Financial Services Authority.

        In addition, each of the closed-end mutual funds we manage is registered under the 1940 Act as a closed-end investment company. The closed-end mutual funds and the entities that serve as the funds' investment advisers are subject to the 1940 Act and the rules thereunder, which among other things regulate the relationship between a registered investment company and its investment adviser and prohibit or severely restrict principal transactions and joint transactions.

        The SEC and various self-regulatory organizations have in recent years aggressively increased their regulatory activities in respect of asset management firms.

        Certain of our businesses are subject to compliance with laws and regulations of U.S. federal and state governments, non-U.S. governments, their respective agencies and/or various self-regulatory

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organizations or exchanges relating to, among other things, the privacy of client information, and any failure to comply with these regulations could expose us to liability and/or reputational damage. Our businesses have operated for many years within a legal framework that requires our being able to monitor and comply with a broad range of legal and regulatory developments that affect our activities. However, additional legislation, changes in rules promulgated by self-regulatory organizations or changes in the interpretation or enforcement of existing laws and rules, either in the United States or elsewhere, may directly affect our mode of operation and profitability.

        Rigorous legal and compliance analysis of our businesses and investments is important to our culture. We strive to maintain a culture of compliance through the use of policies and procedures such as oversight compliance, codes of conduct, compliance systems, communication of compliance guidance and employee education and training. We have a compliance group that monitors our compliance with all of the regulatory requirements to which we are subject and manages our compliance policies and procedures. Our Chief Administrative Officer and Chief Legal Officer supervises our compliance group, which is responsible for addressing all regulatory and compliance matters that affect our activities. Our compliance policies and procedures address a variety of regulatory and compliance risks such as the handling of material non-public information, position reporting, personal securities trading, valuation of investments on a fund-specific basis, document retention, potential conflicts of interest and the allocation of investment opportunities.

        Our compliance group also monitors the information barriers that we maintain between each of our different businesses. As noted elsewhere in this prospectus, we believe that our various businesses' access to the intellectual knowledge and contacts and relationships that reside throughout our firm benefits all of our businesses. However, in order to maximize that access without compromising our compliance with the legal and contractual obligations to which we are subject, our compliance group oversees and monitors the communications between or among our firm's different businesses to facilitate regulatory compliance.

Properties

        Our principal executive offices are located in leased office space at 345 Park Avenue, New York, New York. We also lease the space for our offices in Atlanta, Boston, Chicago, Dallas, Los Angeles, San Francisco, London, Paris, Mumbai and Hong Kong. We do not own any real property. We consider these facilities to be suitable and adequate for the management and operation of our business.

Legal Proceedings

        We may from time to time be involved in litigation and claims incidental to the conduct of our business. Our businesses are also subject to extensive regulation, which may result in regulatory proceedings against us.

        We are not currently subject to any pending judicial, administrative or arbitration proceedings that we expect to have a material impact on our results of operations or financial condition. See "Risk Factors—Risks Related to Our Businesses—Extensive regulation of our businesses affects our activities and creates the potential for significant liabilities and penalties. The possibility of increased regulatory focus could result in additional burdens on our business. The possibility of tax or other legislative measures being adopted in some countries could adversely affect us" and "—We are subject to substantial litigation risks and may face significant liabilities and damage to our professional reputation as a result".

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MANAGEMENT

Directors and Executive Officers

        The following table sets forth the names, ages and positions of the directors and executive officers of our general partner, Blackstone Group Management L.L.C.

Name
   Age
   Position
Stephen A. Schwarzman   60   Co-Founder, Chairman and Chief Executive Officer and Director
Peter G. Peterson   80   Co-Founder, Senior Chairman and Director
Hamilton E. James   56   President, Chief Operating Officer and Director
J. Tomilson Hill   58   Vice Chairman and Director
Michael A. Puglisi   56   Chief Financial Officer
Robert L. Friedman   64   Chief Administrative Officer and Chief Legal Officer

        Stephen A. Schwarzman is the Chairman and Chief Executive Officer of Blackstone and the Chairman of the Board of Directors of our general partner. Mr. Schwarzman is a founder of The Blackstone Group and 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. 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 Chairman of the Board of The John F. Kennedy Center for the Performing Arts. He is also a member of the Council on Foreign Relations and is on the boards of various organizations, including The New York Public Library, The Frick Collection, the New York City Ballet, the Film Society of Lincoln Center, the JPMorgan Chase National Advisory Board and The Partnership for New York City Board of Directors.

        Peter G. Peterson is the Senior Chairman of Blackstone and a member of the Board of Directors of our general partner. Mr. Peterson is a founder of The Blackstone Group. Mr. Peterson is Chairman of the Council on Foreign Relations, founding Chairman of the Peter G. Peterson Institute for International Economics (Washington, D.C.) and founding President of The Concord Coalition. Mr. Peterson was the Co-Chair of The Conference Board Commission on Public Trust and Private Enterprises. He was also Chairman of the Federal Reserve Bank of New York from 2000 to 2004. Prior to founding Blackstone, Mr. Peterson was Chairman and Chief Executive Officer of Lehman Brothers (1973-1984). He was Chairman and Chief Executive Officer of Bell and Howell Company from 1963 to 1971. In 1971, President Richard Nixon named Mr. Peterson Assistant to the President for International Economic Affairs. He was named Secretary of Commerce by President Nixon in 1972. Mr. Peterson is a director of The India Fund, Inc. and The Asia Tigers Fund, Inc., and has served on a number of other corporate boards. Mr. Peterson is a Trustee of the Committee for Economic Development, the Japan Society and The Museum of Modern Art and a Director of the National Bureau of Economic Research, The Public Agenda Foundation and The Nixon Center.

        Hamilton E. James is President, Chief Operating Officer of Blackstone and a member of the Board of Directors of our general partner. Prior to joining Blackstone in 2002, Mr. James was Chairman of Global Investment Banking and Private Equity at Credit Suisse First Boston and a member of its Executive Board since the acquisition of Donaldson, Lufkin & Jenrette, or "DLJ," by Credit Suisse First Boston in 2000. Prior to the acquisition of DLJ, Mr. James was the Chairman of DLJ's Banking Group, responsible for all the firm's investment banking and merchant banking activities and a member of its Board of Directors. Mr. James joined DLJ in 1975 as an Investment Banking associate. He became head of DLJ's global mergers and acquisitions group in 1982, founded DLJ Merchant Banking, Inc. in 1985, and was named Chairman of the Banking Group in 1995 with responsibility for all of the firm's investment banking, alternative asset management and emerging market sales and trading activities. Mr. James is a Director of Costco Wholesale Corporation and Swift River

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Investments, Inc., and has served on a number of other corporate boards. Mr. James is Chairman Emeritus of the Board of Trustees of American Ballet Theatre, Trustee and member of The Executive Committee of the Second Stage Theatre, Vice Chairman of Coldwater Conservations Fund and Trustee of Woods Hole Oceanographic Institute.

        J. Tomilson Hill is Vice Chairman of Blackstone and a member of the Board of Directors of our general partner. Mr. Hill is head of our fund of hedge funds operation, having previously served as co-head of our mergers and acquisitions advisory operation before assuming his current role in 2000. 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 heading 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-Chief Operating Officer of Shearson Lehman Brothers Holdings Inc. Mr. Hill is a member of the Council on Foreign Relations and is a member of the Board of Directors of the Lincoln Center Theater. Mr. Hill serves as Chairman of the Board of Trustees of the Smithsonian's Hirshhorn Museum and Sculpture Garden. He serves as a director of OpenPeak Inc.

        Michael A. Puglisi is Chief Financial Officer of Blackstone. Since joining Blackstone in 1994, Mr. Puglisi has worked on personnel, financial, tax, compliance and administrative matters. His current responsibilities include firm-wide financial and tax budgeting, analysis and reporting as well as compensation matters and the firm's treasury functions and credit facilities. Before joining Blackstone, Mr. Puglisi served for eleven years in a variety of financial officer roles for Fosterlane Holdings Corporation and its subsidiaries. Prior to Fosterlane, Mr. Puglisi was with Arthur Andersen & Co.

        Robert L. Friedman is Chief Administrative Officer and Chief Legal Officer of Blackstone. On joining Blackstone in 1999, Mr. Friedman worked primarily in our corporate private equity operation and also participated in the work of our mergers and acquisitions advisory operation. He became chief administrative officer and chief legal officer in early 2003 and also continues to participate in the work of our corporate private equity and mergers and acquisitions advisory operations. Before joining Blackstone, Mr. Friedman had been a partner with Simpson Thacher & Bartlett LLP for 25 years, where he was a senior member of that law firm's mergers and acquisitions practice. At Simpson Thacher & Bartlett LLP, Mr. Friedman advised The Blackstone Group since we were founded in 1985. Mr. Friedman currently serves as a director of AXIS Capital Holdings Limited, Northwest Airlines, Inc. and TRW Automotive Holdings Corp., and has served on a number of other boards. He is Chairman of the Board of Advisers of the Institute for Law and Economics of the University of Pennsylvania, a member of the Board of Visitors of Columbia College and a Trustee of Chess-in-the-Schools and New Alternatives for Children, Inc.

        There are no family relationships among any of the directors or executive officers of our general partner.

Composition of the Board of Directors after this Offering

        Prior to the closing of this offering, we expect that three additional, independent directors will be appointed to the board of directors of our general partner, Blackstone Group Management L.L.C., an entity wholly-owned by our senior managing directors and controlled by our founders. Following these additions, we expect that the board of directors of our general partner will consist of seven directors.

        The limited liability company agreement of Blackstone Group Management L.L.C. establishes a board of directors that will be responsible for the oversight of our business and operations. Our general partner's board of directors will be elected in accordance with its limited liability company agreement, which provides that our founders, Messrs. Schwarzman and Peterson (or, following the withdrawal, death or disability of one of them, the remaining founder), will be vested with the power to elect and remove the directors of our general partner. Actions by our founders in this regard must be taken with

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their unanimous approval. Following the withdrawal, death or disability of both of our founders, the power to elect and remove the directors of our general partner will vest in the members of our general partner holding a majority in interest in our general partner.

        Mr. Peterson has informed us that he intends to retire from our firm and relinquish his role as a founder by no later than December 31, 2008. When Mr. Peterson relinquishes his role as a founder, all of the powers and authorities of our founders will be vested in Mr. Schwarzman alone. Mr. Schwarzman has informed us that when he decides to relinquish his role as a founder, it is his current intention to recommend that Hamilton E. James be provided with the authority of the founders in his place.

Management Approach

        Throughout our history as a privately-owned firm, we have had a management structure involving strong central control by our two founders, Messrs. Schwarzman and Peterson. Mr. Schwarzman has served as our firm's Chief Executive Officer since our founding in 1985 and he also became Chairman of Blackstone in 2005. From our firm's founding in 1985 through 2004, Mr. Peterson served as Chairman of Blackstone and he has served as Senior Chairman since 2005. As noted in "—Composition of the Board of Directors after this Offering", Mr. Peterson intends to relinquish his role as a founder by no later than December 31, 2008. We believe that this management structure has been a meaningful reason why we have achieved significant growth and successful performance in all of our businesses.

        Moreover, as a privately-owned firm, Blackstone has always been managed with a perspective of achieving successful growth over the long term. Both in entering and building our various businesses over the years and in determining the types of investments to be made by our investment funds, our management has consistently sought to focus on the best way to grow our businesses and investments over a period of many years and has paid little regard to their short-term impact on revenue, net income or cash flow.

        As a public company, we intend to continue to employ our current management structure with strong central control by our founders and to maintain our focus on achieving successful growth over the long term. This desire to preserve our current management structure is one of the principal reasons why we have decided to organize The Blackstone Group L.P. as a limited partnership that is managed by our general partner and to avail ourselves of the limited partnership exception from certain of the New York Stock Exchange governance rules, which eliminates the requirements that we have a majority of independent directors on our board of directors and that we have a compensation committee and a nominating and corporate governance committee composed entirely of independent directors. In addition, we will not be required to hold annual meetings of our common unitholders.

Committees of the Board of Directors

        The board of directors of Blackstone Group Management L.L.C. has established an executive committee. We anticipate that prior to this offering, the board of directors of Blackstone Group Management L.L.C. will establish an audit committee and will adopt a charter for the audit committee that complies with current federal and New York Stock Exchange rules relating to corporate governance matters. Prior to this offering, the board of directors of Blackstone Group Management L.L.C. will establish a conflicts committee. The board of directors of our general partner may establish other committees from time to time.

        Audit committee.    The purpose of the audit committee will be to assist the board of directors of Blackstone Group Management L.L.C. in overseeing and monitoring (1) the quality and integrity of our financial statements, (2) our compliance with legal and regulatory requirements, (3) our independent registered public accounting firm's qualifications and independence and (4) the performance of our

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independent registered public accounting firm. The members of the audit committee will meet the independence standards for service on an audit committee of a board of directors pursuant to federal and New York Stock Exchange rules relating to corporate governance matters.

        Conflicts committee.    The board of directors of Blackstone Group Management L.L.C. will establish a conflicts committee that will be charged with reviewing specific matters that our general partner's board of directors believes may involve conflicts of interest. The conflicts committee will determine if the resolution of any conflict of interest submitted to it is fair and reasonable to us. Any matters approved by the conflicts committee will be conclusively deemed to be fair and reasonable to us and not a breach by us of any duties we may owe to our common unitholders. In addition, the conflicts committee may review and approve any related person transactions, other than those that are approved pursuant to our related person policy, as described under "Certain Relationships and Related Person Transactions—Statement of Policy Regarding Transactions with Related Persons", and may establish guidelines or rules to cover specific categories of transactions. The members of the conflicts committee will meet the independence standards for service on an audit committee of a board of directors pursuant to federal and New York Stock Exchange rules relating to corporate governance matters.

        Executive committee.    The executive committee of the board of directors of Blackstone Group Management L.L.C. currently consists of Messrs. Schwarzman, Peterson, James and Hill. The board of directors has delegated all of the power and authority of the full board of directors to the executive committee to act when the board of directors is not in session.

Compensation Committee Interlocks and Insider Participation

        We do not have a compensation committee. Our founders, Messrs. Schwarzman and Peterson, have historically made all final determinations regarding executive officer compensation. The board of directors of our general partner has determined that maintaining as closely as possible our current compensation practices following this offering is desirable and intends that these practices will continue. Accordingly, the board of directors of our general partner does not intend to establish a compensation committee. For a description of certain transactions between us and Messrs. Schwarzman and Peterson, see "Certain Relationships and Related Person Transactions".

Executive Compensation

        One of our fundamental philosophies as a privately-owned firm has been to align the interests of our senior managing directors and other key personnel with those of our investors. That alignment has principally been achieved by the investment of a significant amount of our own capital, and that of our senior managing directors and other key personnel, in many of the investment funds we manage, and by the ownership of our senior managing directors and other key personnel of the investment advisers and general partners of our investment funds, which are entitled to receive the carried interest or incentive fees payable in respect of our investment funds. In addition, our senior managing directors, including our executive officers, have historically owned interests in our various fee-generating businesses. Accordingly, our senior managing directors have not historically received salary or bonus, but have instead benefited from the increased value of their ownership interests in our businesses and from distributions in respect of those interests.

        We believe that this philosophy of seeking to align the interests of our senior managing directors and other personnel with those of the investors in our funds has been a key contributor to the growth and successful performance of our firm, and we therefore intend that the senior managing directors, other professionals and selected other individuals who work in our carry fund and proprietary hedge fund operations will continue to own a portion of the carried interest or incentive fees earned in relation to these funds in order to better align their interests with our own and with those of the

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investors in these funds. In addition, we believe the continued ownership by our senior managing directors of significant amounts of our equity through their direct and indirect interests in Blackstone Holdings will afford significant alignment with our common unitholders.

        Following this offering, our Chairman and Chief Executive Officer, Mr. Schwarzman, will receive no compensation other than a $350,000 salary (and will own a significant portion of the carried interest earned from our carry funds). We believe that the ownership by Mr. Schwarzman of a portion of the carried interest earned from our carry funds, together with his ownership of a significant amount of our equity in the form of Blackstone Holdings partnership units, will align his interests with those of our common unitholders and investors in our carry funds. In addition, following this offering we intend to implement performance-based compensation for our other executive officers.

        The following table sets forth certain summary information concerning compensation paid or accrued by us for services rendered in all capacities during the fiscal year ended December 31, 2006 for our Chief Executive Officer, our Chief Financial Officer and our three other highest paid executive officers during the fiscal year ended December 31, 2006. These individuals are referred to as the "named executive officers" in other parts of this prospectus. As discussed above under "—Compensation Disclosure and Analysis", our named executive officers have not historically received salary or bonus, but have instead benefited from the increased value of their ownership interests in our businesses and from distributions in respect of those interests. Cash distributions to our named executive officers in respect of our fiscal and tax year ended December 31, 2006 were $                              to Mr. Schwarzman, $                              to Mr. Peterson, $                              to Mr. James, $                              to Mr. Hill and $                              to Mr. Puglisi.

Name And Principal Position
   Salary
   Bonus
   All Other Compensation(1)
   Total
Stephen A. Schwarzman, Chairman and Chief Executive Officer                         (2 ) —
Peter G. Peterson, Senior Chairman                         (3 ) —
Hamilton E. James, President and Chief Operating Officer           $             (4 ) —
J. Tomilson Hill, Vice Chairman                 —
Michael A. Puglisi, Chief Financial Officer                 —
(1)
Except as otherwise provided below, perquisites and other personal benefits to the named executive officers were less than $10,000 and therefore information regarding perquisites and other personal benefits has not been included.

(2)
Mr. Schwarzman makes business and personal use of a car and driver and he and members of his family also make business and personal use of an airplane in which we have a fractional interest and in each case he reimburses us for the full cost of such personal usage. In addition, certain Blackstone personnel administer personal matters for Mr. Schwarzman and he bears the full incremental cost to us of such personnel.

(3)
Mr. Peterson makes business and personal use of a car and driver and of an airplane in which we have a fractional interest and in each case he reimburses us for the full cost of such personal usage. In addition, certain Blackstone personnel administer personal matters for Mr. Peterson and he bears the full incremental cost to us of such personnel.

(4)
Mr. James and members of his family make personal use of an airplane in which we have a fractional interest and he reimburses us for a portion of the cost of such usage. The amount reflected in the table reflects the unreimbursed portion of the cost of such usage.

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Director Compensation

        No additional remuneration will be paid to our employees for service as a director of our general partner.

        We expect to establish customary compensation practices for outside directors of our general partner.

Non-Competition, Non-Solicitation and Confidentiality Agreements

        We have entered or will be entering into a non-competition, non-solicitation and confidentiality agreement with each of our founders, our other senior managing directors, most of our other professional employees and specified senior administrative personnel to whom we refer collectively as "Contracting Employees." Following are descriptions of the material terms of each such non-competition, non-solicitation and confidentiality agreement. With the exception of the few differences noted in the description below, the terms of each non-competition, non-solicitation and confidentiality agreement are in relevant part similar.

        Full-Time Commitment.    Each Contracting Employee agrees to devote substantially all of his or her business time, skill, energies and attention to his or her responsibilities at Blackstone in a diligent manner.

        Confidentiality.    Each Contracting Employee is required, whether during or after his or her employment with us, to protect and only use "confidential information" in accordance with strict restrictions placed by us on its use and disclosure. (Every employee of ours is subject to similar strict confidentiality obligations imposed by our Code of Conduct applicable to all Blackstone personnel.)

        Notice of Termination.    Each Contracting Employee is required to give us prior written notice of his or her intention to leave our employ—six months in the case of our founders and 90 days for our other senior managing directors and between 30 and 60 days in the case of all other Contracting Employees.

        Garden Leave.    Upon his or her voluntary departure from our firm, a Contracting Employee is required to take a prescribed period of garden leave. The period of garden leave is 90 days for our non-founding senior managing directors and between 30 and 60 days for all other Contracting Employees. During this period the Contracting Employee will continue to receive some of his or her Blackstone compensation and benefits, but is prohibited from commencing employment with a new employer until the garden leave period has expired. The period of garden leave for each Contracting Employee will run coterminously with the non-competition Restricted Period that applies to him or her as described below. Our founders will be subject to noncompetition covenants but not garden leave requirements.

        Non-Competition.    During the term of employment of each Contracting Employee, and during the Restricted Period (as such term is defined below) immediately thereafter, such individual will not, directly or indirectly:

"Competitive business" means any business that competes, during the term of employment through the date of termination, with our business, including any businesses that we are actively considering conducting at the time of the Contracting Employee's termination of employment, so long as such

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individual knows or reasonably should have known about such plans, in any geographical or market area where we or our affiliates provide our products or services.

        Non-Solicitation.    During the term of employment of each Contracting Employee, and during the Restricted Period immediately thereafter, such individual will not, directly or indirectly, in any manner solicit any of our employees to leave their employment with us, or hire any such employee who was employed by us as of the date of such individual's termination or who left employment with us within one year prior to or after the date of such individual's termination. Additionally, each Contracting Employee may not solicit or encourage to cease to work with us any consultant or senior advisers that the individual knows or should know is under contract with us.

        In addition, during the term of employment of each Contracting Employee, and during the Restricted Period immediately thereafter, such individual will not, directly or indirectly, in any manner solicit the business of any client or prospective client of ours with whom the individual, employees reporting to the individual, or anyone whom the individual had direct or indirect responsibility over had personal contact or dealings on our behalf during the three-year period immediately preceding such individual's termination. Contracting Employees who are employed in our asset management businesses are subject to a similar non-solicitation covenant with respect to investors and prospective investors in our investment funds.

        Non-Interference and Non-Disparagement.    During the term of employment of each Contracting Employee, and during the Restricted Period immediately thereafter, such individual may not interfere with business relationships between us and any of our clients, customers, suppliers or partners. Such individual is also prohibited from disparaging us in any way.

        Restricted Period.    For purposes of the foregoing covenants, the Restricted Period will be defined to be:

Covenant
   Founders
   Other Senior Managing
Directors
   Other Contracting Employees
Non-competition   The later of four years after the date of this offering or two years after termination of employment.   The later of two years after the date of this offering or one year (six months for senior managing directors who are eligible to retire, as defined below) after termination of employment.   The later of between six months and one year after the date of this offering or between 90 days and six months after termination of employment.
Non-solicitation of Blackstone employees   The later of four years after the date of this offering or two years after termination of employment.   The later of one year after the date of this offering or one year after termination of employment.   The later of one year after the date of this offering or between six months and one year after termination of employment.
Non-solicitation of Blackstone clients or investors   The later of four years after the date of this offering or two years after termination of employment.   The later of two years after the date of this offering or one year after termination of employment.   The later of one year after the date of this offering or between six months and one year after termination of employment.
Non-interference with business relationships   The later of four years after the date of this offering or two years after termination of employment.   The later of two years after the date of this offering or one year after termination of employment.   The later of one year after the date of this offering or between six months and one year after termination of employment.

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        Retirement.    Blackstone personnel will be eligible to retire if they have satisfied any of the following tests: (1) one has reached the age of 65 and has at least five full years of service with our firm; or (2) one has reached the age of 50 and has at least five full years of service with our firm and the sum of his or her age plus years of service with our firm totals at least 65. Except for Peter G. Peterson, no Blackstone personnel will be eligible to retire under the standards specified in the preceding clauses prior to June 30, 2010.

        Intellectual Property.    Each Contracting Employee is subject to customary intellectual property covenants with respect to works created, invented, designed or developed by such individual that are relevant to or implicated by his or her employment with us.

        Specific Performance.    In the case of any breach of the confidentiality, non-competition, non-solicitation, non-interference, non-disparagement or intellectual property provisions by a Contracting Employee, the breaching individual agrees that we will be entitled to seek equitable relief in the form of specific performance, restraining orders, injunctions or other equitable remedies.

2007 Equity Incentive Plan

        The board of directors of our general partner intends to adopt the 2007 The Blackstone Group L.P. Equity Incentive Plan, or the "2007 Equity Incentive Plan," before the effective date of this offering. The following description of the 2007 Equity Incentive Plan is not complete and is qualified by reference to the full text of the 2007 Equity Incentive Plan, which will be filed as an exhibit to the registration statement of which this prospectus forms a part. The 2007 Equity Incentive Plan will be a source of new equity-based awards permitting us to grant to our senior managing directors, other employees, directors of our general partner and consultants non-qualified options, unit appreciation rights, restricted common units, phantom restricted common units and other awards based on our common units and Blackstone Holdings partnership units, to which we collectively refer as our "units."

        Administration.    The board of directors of our general partner will administer the 2007 Equity Incentive Plan. However, the board of directors of our general partner may delegate such authority, including to a committee or subcommittee of the board of directors, and the board intends to effect such a delegation to a committee comprising Messrs. Schwarzman and Peterson. We refer to the board of directors of our general partner or the committee or subcommittee thereof to whom authority to administer the 2007 Equity Incentive Plan has been delegated, as the case may be, as the "Administrator." The Administrator will determine who will receive awards under the 2007 Equity Incentive Plan, as well as the form of the awards, the number of units underlying the awards and the terms and conditions of the awards consistent with the terms of the 2007 Equity Incentive Plan. The Administrator will have full authority to interpret and administer the 2007 Equity Incentive Plan, which determinations will be final and binding on all parties concerned.

        Units Subject to the 2007 Equity Incentive Plan.    The total number of our common units and Blackstone Holdings partnership units which have initially been covered by the 2007 Equity Incentive Plan is                        . Beginning in 2008 the aggregate number of common units and Blackstone Holdings partnership units covered by our 2007 Equity Incentive Plan will be increased on the first day of each fiscal year during its term by the excess of (a) 15% of the aggregate number of common units and Blackstone Holdings partnership units outstanding on the last day of the immediately preceding fiscal year (excluding Blackstone Holdings partnership units held by The Blackstone Group L.P. or its wholly-owned subsidiaries) over (b) the aggregate number of common units and Blackstone Holdings partnership units covered by our 2007 Equity Incentive Plan as of such date (unless the administrator of the 2007 Equity Incentive Plan should decide to increase the number of common units and Blackstone Holdings partnership units covered by the plan by a lesser amount). We will make available the number of units necessary to satisfy the maximum number of units that may be issued under the 2007 Equity Incentive Plan. The units underlying any award granted under the 2007 Equity Incentive

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Plan that expire, terminate or are cancelled or satisfied for any reason without being settled in units will again become available for awards under the 2007 Equity Incentive Plan.

        Options and Unit Appreciation Rights.    The Administrator may award non-qualified options under the 2007 Equity Incentive Plan. Options granted under the 2007 Equity Incentive Plan will become vested and exercisable at such times and upon such terms and conditions as may be determined by the Administrator at the time of grant, but an option will generally not be exercisable for a period of more than ten years after it is granted. The exercise price per unit for any option awarded will not be less than the fair market value of a unit on the day the option is granted. To the extent permitted by the Administrator, the exercise price of an option may be paid in cash or its equivalent, in units having a fair market value equal to the aggregate option exercise price; partly in cash and partly in units and satisfying such other requirements as may be imposed by the Administrator; or through the delivery of irrevocable instructions to a broker to sell units obtained upon the exercise of the option and to deliver promptly to us an amount out of the proceeds of the sale equal to the aggregate option exercise price for the common units being purchased.

        The Administrator may grant unit appreciation rights independent of or in conjunction with an option. The exercise price of a unit appreciation right will not be less than the greater of (i) the fair market value of a unit on the date the unit appreciation right is granted and (ii) the minimum amount permitted by applicable laws, rules, by-laws or policies of regulatory authorities or stock exchanges; except that, in the case of a unit appreciation right granted in conjunction with an option, the exercise price will not be less than the exercise price of the related option. Each unit appreciation right granted independent of a unit option shall entitle a participant upon exercise to an amount equal to (i) the excess of (A) the fair market value on the exercise date of one unit over (B) the exercise price per unit, multiplied by (ii) the number of units covered by the unit appreciation right, and each unit appreciation right granted in conjunction with an option will entitle a participant to surrender to us the option and to receive such amount. Payment will be made in units and/or cash (any common unit valued at fair market value), as determined by the Administrator.

        Other Equity-Based Awards.    The Administrator, in its sole discretion, may grant or sell units and awards that are valued in whole or in part by reference to, or are otherwise based on the fair market value of, our units. Any of these other equity-based awards may be in such form, and dependent on such conditions, as the Administrator determines, including without limitation the right to receive, or vest with respect to, one or more units (or the equivalent cash value of such units) upon the completion of a specified period of service, the occurrence of an event and/or the attainment of performance objectives. The Administrator may in its discretion determine whether other equity-based awards will be payable in cash, units or a combination of both cash and units.

        Adjustments upon Certain Events.    In the event of any change in the outstanding units by reason of any unit dividend or split, reorganization, recapitalization, merger, consolidation, spin-off, combination, combination or transaction or exchange of units or other corporate exchange, or any distribution to holders of units other than regular cash dividends, or any transaction similar to the foregoing, the Administrator in its sole discretion and without liability to any person will make such substitution or adjustment, if any, as it deems to be equitable, as to (i) the number or kind of units or other securities issued or covered by our 2007 Equity Incentive Plan or pursuant to outstanding awards, (ii) the maximum number of units for which options or unit appreciation rights may be granted during a fiscal year to any participant, (iii) the option price or exercise price of any unit appreciation right and/or (iv) any other affected terms of such awards.

        Change in Control.    In the event of a change in control of us (as defined in the 2007 Equity Incentive Plan), the 2007 Equity Incentive Plan provides that (i) if determined by the Administrator in the applicable award agreement or otherwise, any outstanding awards then held by participants which are unexercisable or otherwise unvested or subject to lapse restrictions shall automatically be deemed

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exercisable or otherwise vested or no longer subject to lapse restrictions, as the case may be, as of immediately prior to such change in control and (ii) the Administrator may, but shall not be obligated to (A) cancel awards for fair value, (B) provide for the issuance of substitute awards that will substantially preserve the otherwise applicable terms of any affected awards previously granted under the 2007 Equity Incentive Plan as determined by the Administrator in its sole discretion, or (C) provide that, with respect to any awards that are options, for a period of at least 15 days prior to the change in control, such options will be exercisable as to all units subject thereto and that upon the occurrence of the change in control, such options will terminate.

        Transferability.    Unless otherwise determined by our Administrator, no award granted under the plan will be transferable or assignable by a participant in the plan, other than by will or by the laws of descent and distribution.

        Amendment and Termination.    The Administrator may amend or terminate the 2007 Equity Incentive Plan, but no amendment or termination shall be made without the consent of a participant, if such action would diminish any of the rights of the participant under any award theretofore granted to such participant under the 2007 Equity Incentive Plan; provided, however, that the Administrator may amend the 2007 Equity Incentive Plan and/or any outstanding awards in such manner as it deems necessary to permit the 2007 Equity Incentive Plan and/or any outstanding awards to satisfy applicable requirements of the Code or other applicable laws.

IPO Date Equity Awards

        At the time of this offering, we intend to grant to our non-senior managing director employees an aggregate of                        restricted common units under our 2007 Equity Incentive Plan, of which                        will be granted to our non-senior managing director professionals, analysts and senior finance and administrative personnel, to whom we refer collectively as "Non-SMD Professionals," and                        will be granted to certain of our other non-senior managing director employees, to whom we refer collectively as "Non-SMD Employees." We will settle the restricted common units granted to our Non-SMD Professionals in The Blackstone Group L.P. common units and the restricted common units granted to our Non-SMD Employees in cash. Holders of restricted common units will not be entitled to any voting rights with respect to such restricted common units. We refer to these grants, collectively, as the "IPO Date Award".

        Common Unit-Settled Awards.    Subject to a Non-SMD Professional's continued employment with us, the restricted common units granted to the Non-SMD Professional as part of the IPO Date Award will vest, and the underlying The Blackstone Group L.P. common units will be delivered, in equal annual installments on each of the first, second, third, fourth and fifth anniversaries of this offering.

        We will not make any distributions with respect to unvested restricted common units granted to our Non-SMD Professionals in connection with the IPO Date Award.

        Upon the termination of a Non-SMD Professional's employment with us for any reason, (1) all unvested restricted common units granted to the Non-SMD Professional as part of the IPO Date Award and then held by the Non-SMD Professional will be immediately forfeited without any payment or consideration and (2) if he or she violates any of the restrictive covenants that are applicable to the Non-SMD Professional (see "—Non-Competition, Non-Solicitation and Confidentiality Agreements"), all of the common units delivered to our Non-SMD Professionals in settlement of the IPO Date Award and then held by the Non-SMD Professional will also be immediately forfeited without any payment or consideration.

        While employed by us and thereafter until the longest applicable Restricted Period to which the Non-SMD Professional is subject lapses (see "—Non-Competition, Non-Solicitation and Confidentiality Agreements"), each of our Non-SMD Professionals will be required to continue to hold (and may not

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transfer) at least 25% of the common units that are delivered to them in settlement of the IPO Date Award. No other transfer restrictions will apply.

        Cash-Settled Awards.    Subject to a Non-SMD Employee's continued employment with us, the restricted common units granted to the Non-SMD Employee as part of the IPO Date Award will vest in equal installments on each of the first, second and third anniversaries of this offering. On each such vesting date, we will deliver cash to our Non-SMD Employees in an amount equal to the number of restricted common units held by each such Non-SMD Employee that will vest on such date multiplied by the then fair market value of the common units on such date. We will not make any distributions with respect to unvested restricted common units held by any of our Non-SMD Employees. Upon the termination of a Non-SMD Employee's employment with us for any reason, all outstanding restricted common units granted to the Non-SMD Employee as part of the IPO Date Award and then held by the Non-SMD Employee will be immediately forfeited without any payment or consideration.

Minimum Retained Ownership Requirements and Transfer Restrictions for Existing Owners

        All of our existing owners are subject to the following minimum retained ownership requirements and transfer restrictions in respect of all Blackstone Holdings partnership units received by them as part of the Reorganization (or The Blackstone Group L.P. common units received in exchange for such Blackstone Holdings partnership units). We refer to the Blackstone Holdings partnership units issued as part of the Reorganization and The Blackstone Group L.P. common units received in exchange for such Blackstone Holdings partnership units as "subject units."

        See "Certain Relationships and Related Person Transactions—Blackstone Holdings Partnership Agreements" for a description of vesting requirements applicable to the Blackstone Holdings partnership units received by our existing owners as part of the Reorganization.

        Minimum Retained Ownership Requirements.    While employed by us and thereafter until the longest applicable Restricted Period to which the existing owner is subject lapses, each of our existing owners will be required to continue to hold (and may not transfer) at least 25% of all vested subject units received by him or her (except as otherwise provided below). Subject units held by current and future personal planning vehicles beneficially owned by the families of our existing owners are deemed to be owned by these individuals for purposes of such minimum retained ownership requirements. Mr. Peterson and AIG will not be subject to these minimum retained ownership requirements.

        Transfer Restrictions.    The subject units received by our existing owners will be subject to the following transfer restrictions:

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        The foregoing transfer restrictions will apply to sales, pledges of subject units (unless the pledgee agrees to be subject to the same transfer restrictions), grants of options, rights or warrants to purchase subject units or swaps or other arrangements that transfer to another, in whole or in part, any of the economic consequences of ownership of the subject units, other than our purchase of vested Blackstone Holdings partnership units from our existing owners with the net proceeds from this offering. Transfers to personal planning vehicles beneficially owned by the families of our existing owners and charitable gifts are exempted from such transfer restrictions, provided that the transferee or donee agrees to be subject to the same transfer restrictions (except as specified above with respect to Stephen A. Schwarzman and Peter G. Peterson).

        The transfer restrictions set forth above will continue to apply following the termination of employment of an existing owner employed by Blackstone other than our founders for any reason, except that the transfer restrictions set forth above will lapse upon death or permanent disability.

Charitable Contributions

        Our senior managing directors intend to contribute an aggregate of $150 million of our equity (calculated based on the initial public offering price per common unit in this offering) to The Blackstone Foundation, a new charitable foundation that is being established to support charitable organizations in the communities in which we operate and worthy charitable organizations with which our employees are personally involved. Units transferred or sold for the purpose of satisfying these charitable contributions are exempted from the transfer restrictions enumerated in "—Minimum Retained Ownership Requirements and Transfer Restrictions".

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CERTAIN RELATIONSHIPS AND RELATED PERSON TRANSACTIONS

        The forms of the agreements described in this section are filed as exhibits to the registration statement of which this prospectus forms a part, and the following descriptions are qualified by reference thereto.

Reorganization

        Prior to this offering we will undertake a number of transactions in connection with the Reorganization described in "Organizational Structure—Reorganization" whereby our existing owners will contribute to Blackstone Holdings each of the operating entities included in our historical combined financial statements, with the exception of the general partners of certain legacy Blackstone funds that do not have a meaningful amount of unrealized investments and a number of investment vehicles through which our existing owners and other third parties have made commitments to or investments in or alongside of Blackstone's investment funds, which entities will not be contributed to Blackstone Holdings and will continue to be owned by our existing owners. As part of the Reorganization, we intend to make one or more distributions to our existing owners, including our executive officers, representing all of the undistributed earnings generated by the Contributed Businesses prior to the date of the offering. In addition, as part of the Offering Transactions described in "Organizational Structure—Offering Transactions", we intend to use a portion of the net proceeds from this offering to purchase vested Blackstone Holdings partnership units from our existing owners, including certain of our executive officers. See also "Principal Unitholders."

Tax Receivable Agreement

        As described in "Organizational Structure—Offering Transactions", we intend to use a portion of the net proceeds from this offering to purchase Blackstone Holdings partnership units from our existing owners. In addition, holders of partnership units in Blackstone Holdings (other than The Blackstone Group L.P.'s wholly-owned subsidiaries), subject to the vesting and minimum retained ownership requirements and transfer restrictions set forth in the partnership agreements of the Blackstone Holdings partnerships, may exchange their Blackstone Holdings partnership units for The Blackstone Group L.P. common units on a one-for-one basis. Blackstone Holdings intends to make an election under Section 754 of the Code effective for each taxable year in which an exchange of partnership units for common units occurs, which may result in an adjustment to the tax basis of the assets of Blackstone Holdings at the time of an exchange of partnership units. The initial sale and subsequent exchanges are expected to result in increases in the tax basis of the tangible and intangible assets of Blackstone Holdings that otherwise would not have been available. These increases in tax basis would increase (for tax purposes) depreciation and amortization and therefore reduce the amount of tax that The Blackstone Group L.P.'s wholly-owned subsidiaries that are taxable as corporations for U.S. federal income tax purposes, which we refer to as the "corporate taxpayers," would otherwise be required to pay in the future.

        The corporate taxpayers will enter into a tax receivable agreement with our existing owners that will provide for the payment by the corporate taxpayers to our existing owners of 85% of the amount of cash savings, if any, in U.S. federal, state and local income tax that the corporate taxpayers actually realize (or are deemed to realize in the case of an early termination payment by the corporate taxpayers or a change of control, as discussed below) as a result of these increases in tax basis and of certain other tax benefits related to our entering into the tax receivable agreement, including tax benefits attributable to payments under the tax receivable agreement. This payment obligation is an obligation of the corporate taxpayers and not of Blackstone Holdings. The corporate taxpayers expect to benefit from the remaining 15% of cash savings, if any, in income tax that they realize. For purposes of the tax receivable agreement, cash savings in income tax will be computed by comparing the actual income tax liability of the corporate taxpayers to the amount of such taxes that the corporate taxpayers would have been required to pay had there been no increase to the tax basis of the tangible and

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intangible assets of Blackstone Holdings as a result of the exchanges and had the corporate taxpayers not entered into the tax receivable agreement. A limited partner of Blackstone Holdings may also elect to exchange his or her Blackstone Holdings partnership units in a tax-free transaction where the limited partner is making a charitable contribution. In such a case, the exchange will not result in an increase in the tax basis of the assets of Blackstone Holdings and no payments will be made under the tax receivable agreement. The term of the tax receivable agreement will commence upon consummation of this offering and will continue until all such tax benefits have been utilized or expired, unless the corporate taxpayers exercise their right to terminate the tax receivable agreement for an amount based on the agreed payments remaining to be made under the agreement. Estimating the amount of payments that may be made under the tax receivable agreement is by its nature imprecise, insofar as the calculation of amounts payable depends on a variety of factors. The actual increase in tax basis, as well as the amount and timing of any payments under the tax receivable agreement, will vary depending upon a number of factors, including:

        We expect that as a result of the size of the increases in the tax basis of the tangible and intangible assets of Blackstone Holdings, the payments that we may make under the tax receivable agreement will be substantial. Assuming no material changes in the relevant tax law and that we earn significant taxable income to realize the full tax benefit of the increased amortization of our assets, we expect that future payments under the tax receivable agreement in respect of the initial sale will aggregate $                      million and range from approximately $                      million to $                      million per year over the next 15 years. Future payments under the tax receivable agreement in respect of subsequent exchanges would be in addition to these amounts and are expected to be substantial. The payments under the tax receivable agreement are not conditioned upon our existing owners' continued ownership of us.

        In addition, the tax receivable agreement provides that upon certain mergers, asset sales, other forms of business combinations or other changes of control, the corporate taxpayers' (or their successors') obligations with respect to exchanged or acquired units (whether exchanged or acquired before or after such transaction) would be based on certain assumptions, including that the corporate taxpayers would have sufficient taxable income to fully utilize the deductions arising from the increased tax deductions and tax basis and other benefits related to entering into the tax receivable agreement. Upon a subsequent actual exchange, any additional increase in tax deductions, tax basis and other benefits in excess of the amounts assumed at the change of control will also result in payments under the tax receivable agreement.

        Decisions made by our existing owners in the course of running our business, such as with respect to mergers, asset sales, other forms of business combinations or other changes of control, may influence

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the timing and amount of payments that are received by an exchanging or selling existing owner under the tax receivable agreement. For example, the earlier disposition of assets following an exchange or acquisition transaction will generally accelerate payments under the tax receivable agreement and increase the present value of such payments, and the disposition of assets before an exchange or acquisition transaction will increase an existing owner's tax liability without giving rise to any rights of an existing owner to receive payments under the tax receivable agreement.

        Although we are not aware of any issue that would cause the IRS to challenge a tax basis increase, the corporate taxpayers will not be reimbursed for any payments previously made under the tax receivable agreement. As a result, in certain circumstances, payments could be made under the tax receivable agreement in excess of the corporate taxpayers' cash tax savings.

Registration Rights Agreement

        We will enter into a registration rights agreement with our existing owners pursuant to which we will grant them, their affiliates and certain of their transferees the right, under certain circumstances and subject to certain restrictions, to require us to register under the Securities Act our common units (and other securities convertible into or exchangeable or exercisable for our common units) held or acquired by them. Under the registration rights agreement, the registration rights holders have the right to request us to register the sale of their common units and may require us to make available shelf registration statements permitting sales of common units into the market from time to time over an extended period. In addition, the registration rights holders will have the ability to exercise certain piggyback registration rights in connection with registered offerings requested by other registration rights holders or initiated by us.

Blackstone Holdings Partnership Agreements

        As a result of the Reorganization and the Offering Transactions, The Blackstone Group L.P. will be a holding partnership and, through wholly-owned subsidiaries, hold equity interests in Blackstone Holdings I L.P., Blackstone Holdings II L.P., Blackstone Holdings III L.P., Blackstone Holdings IV L.P. and Blackstone Holdings V L.P., which we refer to collectively as "Blackstone Holdings." Wholly-owned subsidiaries of The Blackstone Group L.P. will be the sole general partner of each of the Blackstone Holdings partnerships. Accordingly, The Blackstone Group L.P. will operate and control all of the business and affairs of Blackstone Holdings and, through Blackstone Holdings and its operating entity subsidiaries, conduct our business. Through its wholly-owned subsidiaries, The Blackstone Group L.P. will have unilateral control over all of the affairs and decision making of Blackstone Holdings. Furthermore, the wholly-owned subsidiaries of The Blackstone Group L.P. cannot be removed as the general partners of the Blackstone Holdings partnerships without their approval. Because our general partner, Blackstone Group Management L.L.C., will operate and control the business of The Blackstone Group L.P., the board of directors and officers of our general partner will accordingly be responsible for all operational and administrative decisions of Blackstone Holdings and the day-to-day management of Blackstone Holdings' business.

        Pursuant to the partnership agreements of the Blackstone Holdings partnerships, the wholly-owned subsidiaries of The Blackstone Group L.P. which are the general partners of those partnerships have the right to determine when distributions will be made to the partners of Blackstone Holdings and the amount of any such distributions. If a distribution is authorized, such distribution will be made to the partners of Blackstone Holdings pro rata in accordance with the percentages of their respective partnership interests, except that The Blackstone Group L.P.'s wholly-owned subsidiaries will be entitled to priority allocations of income through December 31, 2009 as described under "Cash Distribution Policy".

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        Each of the Blackstone Holdings partnerships will have an identical number of partnership units outstanding, and we use the terms "Blackstone Holdings partnership unit" or "partnership unit in/of Blackstone Holdings" to refer, collectively, to a partnership unit in each of the Blackstone Holdings partnerships. The holders of partnership units in Blackstone Holdings, including The Blackstone Group L.P.'s wholly-owned subsidiaries, will incur U.S. federal, state and local income taxes on their proportionate share of any net taxable income of Blackstone Holdings. Net profits and net losses of Blackstone Holdings will generally be allocated to its partners (including The Blackstone Group L.P.'s wholly-owned subsidiaries) pro rata in accordance with the percentages of their respective partnership interests, except that The Blackstone Group L.P.'s wholly-owned subsidiaries will be entitled to priority allocations of income through December 31, 2009 as described under "Cash Distribution Policy". The partnership agreements of the Blackstone Holdings partnerships will provide for cash distributions, which we refer to as "tax distributions," to the partners of such partnerships if the wholly-owned subsidiaries of The Blackstone Group L.P. which are the general partners of the Blackstone Holdings partnerships determine that the taxable income of the relevant partnership will give rise to taxable income for its partners. Generally, these tax distributions will be computed based on our estimate of the net taxable income of the relevant partnership allocable to a partner multiplied by an assumed tax rate equal to the highest effective marginal combined U.S. federal, state and local income tax rate prescribed for an individual or corporate resident in New York, New York (taking into account the nondeductibility of certain expenses and the character of our income). Tax distributions will be made only to the extent all distributions from such partnerships for the relevant year were insufficient to cover such tax liabilities.

        Our existing owners will receive Blackstone Holdings partnership units in the Reorganization in exchange for the contribution of their equity interests in our operating subsidiaries to Blackstone Holdings. Subject to the vesting and minimum retained ownership requirements and transfer restrictions set forth in the partnership agreements of the Blackstone Holdings partnerships, these partnership units may be exchanged for The Blackstone Group L.P. common units as described under "—Exchange Agreement" below.

        The Blackstone Holdings partnership units received by our existing owners in the Reorganization have the following vesting provisions:

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An existing owner who is our employee will generally forfeit all unvested partnership units once he or she is no longer in our employ, except that in the case of Blackstone personnel who retire and are eligible to do so under the standards specified above under "Management—Non-Competition, Non-Solicitation and Confidentiality Agreements", 50% of their unvested units will vest immediately upon retirement and their remaining units will be forfeited. Blackstone personnel who leave our firm to accept specified types of positions in government service for an extended period of time will continue to vest in units as if they had not left our firm during their period of government service. In addition, upon the death or permanent disability of an existing owner all of his or her unvested partnership units held at that time will vest immediately.

        All vested and unvested Blackstone Holdings partnership units (and The Blackstone Group L.P. common units received in exchange for such Blackstone Holdings partnership units) held by an existing owner will be immediately forfeited in the event he or she materially breaches any of his or her restrictive covenants set forth in the non-competition, non-solicitation and confidentiality agreement outlined under "—Non-Competition, Non-Solicitation and Confidentiality Agreements".

        See "Management—Minimum Retained Ownership Requirements and Transfer Restrictions" for a discussion of minimum retained ownership requirements and transfer restrictions applicable to the Blackstone Holdings partnership units. The generally applicable vesting and minimum retained ownership requirements and transfer restrictions are outlined above and in the section referenced in the preceding sentence. There may be some different arrangements for some individuals in isolated instances, none of which are expected to be material.

        The partnership agreements of the Blackstone Holdings partnerships will also provide that substantially all of our expenses, including substantially all expenses solely incurred by or attributable to The Blackstone Group L.P. such as expenses incurred in connection with this offering but not including obligations incurred under the tax receivable agreement by The Blackstone Group L.P.'s wholly-owned subsidiaries, income tax expenses of The Blackstone Group L.P.'s wholly-owned subsidiaries and payments on indebtedness incurred by The Blackstone Group L.P.'s wholly-owned subsidiaries, will be borne by Blackstone Holdings.

Exchange Agreement

        In connection with the Reorganization, we will enter into an exchange agreement with the holders of partnership units in Blackstone Holdings (other than The Blackstone Group L.P.'s wholly-owned subsidiaries). Under the exchange agreement, subject to the vesting and minimum retained ownership requirements and transfer restrictions set forth in the partnership agreements of the Blackstone Holdings partnerships, each such holder of Blackstone Holdings partnership units (and certain transferees thereof) may at any time and from time to time exchange these partnership units for The Blackstone Group L.P. common units on a one-for-one basis, subject to customary conversion rate adjustments for splits, unit distributions and reclassifications. Under the exchange agreement, to effect an exchange a holder of partnership units in Blackstone Holdings must simultaneously exchange one partnership unit in each of the Blackstone Holdings partnerships. As a holder exchanges its Blackstone Holdings partnership units, our interest in the Blackstone Holdings partnerships will be correspondingly increased. The Blackstone Group L.P. common units received upon such an exchange would be subject to all restrictions applicable to the exchanged Blackstone Holdings partnership units, including minimum retained ownership requirements, vesting requirements and transfer restrictions. See

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"Management—Minimum Retained Ownership Requirements and Transfer Restrictions" and "—Blackstone Holdings Partnership Agreements" above.

Firm Use of Our Founders' Private Aircraft

        Mr. Schwarzman owns an airplane and Messrs. Schwarzman and Peterson jointly own a helicopter that we use for business purposes in the course of our operations. Messrs. Schwarzman and Peterson paid for the purchase of these aircraft themselves and bear all operating, personnel and maintenance costs associated with their operation. The hourly payments we made to Mr. Schwarzman and Mr. Peterson for such use were based on current market rates for chartering private aircraft. We paid $1,544,320, $1,037,925 and $1,032,170 to Mr. Schwarzman in 2006, 2005 and 2004, respectively, for the use of his airplane and we paid $158,500, $306,210 and $198,905 to Mr. Schwarzman and Mr. Peterson in 2006, 2005 and 2004, respectively, for the use of their jointly-owned helicopter.

Expense Reimbursements

        As a privately-owned firm, we have initially incurred or made payments for certain personal expenses on behalf of Messrs. Schwarzman and Peterson, which expenses were reimbursed by the executives. The maximum amounts outstanding under these arrangements in 2006 were $906,972 for Mr. Schwarzman, $350,878 for Mr. Peterson and $120,731 for Mr. James. No such amounts remain outstanding and the firm will no longer incur or make similar payments in respect of personal expenses.

Side-By-Side and Other Investment Transactions

        Our executive officers are permitted to invest their own capital in side-by-side investments with our carry funds. Side-by-side investments are investments in portfolio companies or other assets on the same terms and conditions as those acquired by the applicable fund, except that these side-by-side investments are not subject to management fees or carried interest. In addition, our executive officers are permitted to invest their own capital in our hedge funds, in most instances not subject to management fees or carried interest. These investment opportunities are available to all of our senior managing directors and to those of our employees whom we have determined to have a status that reasonably permits us to offer them these types of investments in compliance with applicable laws. See "Business—Structure and Operation of Our Investment Funds—Capital Invested In and Alongside Our Investment Funds". None of our executive officers received net distributions from Blackstone-managed investment vehicles during the year ended December 31, 2006.

Statement of Policy Regarding Transactions with Related Persons

        Prior to the completion of this offering, the board of directors of our general partner will adopt a statement of policy regarding transactions with related persons, which we refer to as our "related person policy." Our related person policy requires that a "related person" (as defined as in paragraph (a) of Item 404 of Regulation S-K) must promptly disclose to the Chief Administrative Officer and Chief Legal Officer of our general partner any "related person transaction" (defined as any transaction that is reportable by us under Item 404(a) of Regulation S-K in which we were or are to be a participant and the amount involved exceeds $120,000 and in which any related person had or will have a direct or indirect material interest) and all material facts with respect thereto. The Chief Administrative Officer and Chief Legal Officer will then promptly communicate that information to the board of directors of our general partner. No related person transaction will be consummated or will continue without the approval or ratification of the board of directors of our general partner or any committee of the board of directors consisting exclusively of at least three disinterested directors. It is our policy that directors interested in a related person transaction will recuse themselves from any vote of a related person transaction in which they have an interest.

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Indemnification of Directors and Officers

        Under our partnership agreement, in most circumstances we will indemnify the following persons, to the fullest extent permitted by law, from and against all losses, claims, damages, liabilities, joint or several, expenses (including legal fees and expenses), judgments, fines, penalties, interest, settlements or other amounts: our general partner; any departing general partner; any person who is or was an affiliate of a general partner or any departing general partner; any person who is or was a member, partner, tax matters partner, officer, director, employee, agent, fiduciary or trustee of us or our subsidiaries, the general partner or any departing general partner or any affiliate of us or our subsidiaries, the general partner or any departing general partner; any person who is or was serving at the request of a general partner or any departing general partner or any affiliate of a general partner or any departing general partner as an officer, director, employee, member, partner, agent, fiduciary or trustee of another person; or any person designated by our general partner. We have agreed to provide this indemnification unless there has been a final and non-appealable judgment by a court of competent jurisdiction determining that these persons acted in bad faith or engaged in fraud or willful misconduct. We have also agreed to provide this indemnification for criminal proceedings. Any indemnification under these provisions will only be out of our assets. Unless it otherwise agrees, the general partner will not be personally liable for, or have any obligation to contribute or loan funds or assets to us to enable it to effectuate, indemnification. We may purchase insurance against liabilities asserted against and expenses incurred by persons for our activities, regardless of whether we would have the power to indemnify the person against liabilities under our partnership agreement.

        We will also indemnify any of our employees who personally becomes subject to a "clawback" obligation to one of our investment funds in respect of carried interest that we have received. See "Business—Structure and Operation of Our Investment Funds—Incentive Arrangements / Fee Structure".

Non-Competition, Non-Solicitation and Confidentiality Agreements

        In connection with this offering, we will enter into a non-competition, non-solicitation and confidentiality agreement with each of our professionals and other senior employees, including each of our executive officers. See "Management—Non-Competition, Non-Solicitation and Confidentiality Agreements" for a description of the material terms of each such agreement.

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PRINCIPAL UNITHOLDERS

        The following table sets forth information regarding the beneficial ownership of The Blackstone Group L.P. common units and Blackstone Holdings partnership units by (1) each person known to us to beneficially own more than 5% of any class of the outstanding voting securities of The Blackstone Group L.P., (2) each of the directors and named executive officers of our general partner and (3) all directors and executive officers of our general partner as a group.

        The number of common units and Blackstone Holdings partnership units outstanding and percentage of beneficial ownership before this offering set forth below is based on the number of our common units and Blackstone Holdings partnership units to be issued and outstanding immediately prior to the consummation of this offering after giving effect to the Reorganization. The number of common units and Blackstone Holdings partnership units and percentage of beneficial ownership after this offering set forth below is based on common units and Blackstone Holdings partnership units to be issued and outstanding immediately after this offering of common units.

        Beneficial ownership is determined in accordance with the rules of the SEC. The address of each beneficial owner set forth below is c/o The Blackstone Group L.P., 345 Park Avenue, New York, New York 10154.

 
   Common Units Beneficially Owned†
    
    
    
    
    
    
    
    
    
    
 
   Blackstone Holdings Partnership Units Beneficially Owned†
    
    
    
    
 
    
    
    
   % After
this
Offering
Assuming
the
Underwriters
Option Is
Exercised
in Full
    
    
    
    
 
    
    
   % After
this
Offering
Assuming
the
Underwriters
Option Is Not
Exercised
    
    
   After this Offering
Assuming the
Underwriters'
Option Is
Not Exercised
    
    
    
    
    
    
 
    
    
    
    
   After this Offering Assuming the Underwriters' Option is Exercised in Full
   Number of
Special
Voting
Units
Beneficially
Owned‡
    
    
    
 
    
    
    
    
   % of
Voting
Power of
The Blackstone
Group L.P. Limited Partners prior to this Offering
    
    
 
    
    
   Prior to this Offering
    
    
Name of Beneficial
Owner
    
   % Prior
to this
Offering
   % of Voting Power of The Blackstone Group L.P.
Limted Partners After this Offering Assuming the Underwriters' Option is Not Exercised
   % of Voting Power of The Blackstone Group L.P.
Limited Partners After this Offering Assuming the Underwriters's Option Is Exercised in Full
  Number
   Number
   %
   Number
   %
   Number
   %
Stephen A. Schwarzman   —   —   —   —                                        
Peter G. Peterson   —   —   —   —                                        
Hamilton E. James   —   —   —   —                                        
J. Tomilson Hill   —   —   —   —                                        
Michael A. Puglisi   —   —   —   —                                        
Directors and executive officers as a group (6 persons)   —   —   —   —                                        
†
Subject to certain requirements and restrictions, the partnership units of Blackstone Holdings are exchangeable for common units of The Blackstone Group L.P. on a one-for-one basis. See "Certain Relationships and Related Person Transactions—Exchange Agreement". Beneficial ownership of Blackstone Holdings partnership units reflected in this table has not been also reflected as beneficial ownership of the common units of The Blackstone Group L.P. for which such units may be exchanged.

‡
On those few matters that may be submitted for a vote of the limited partners of The Blackstone Group L.P., the special voting units of The Blackstone Group L.P. issued to holders of partnership units in Blackstone Holdings provide the holder with a number of votes that is equal to the aggregate number of partnership units of Blackstone Holdings that they then hold and entitle such holder to participate in the vote on the same basis as our common unitholders. See "Material Provisions of The Blackstone Group L.P. Partnership Agreement—Meetings; Voting".

        We intend to use approximately $             billion of the net proceeds from this offering, or approximately $             billion if the underwriters exercise in full their option to purchase additional common units, to purchase vested Blackstone Holdings partnership units from our existing owners. See "Organizational Structure—Offering Transactions". Of this amount, we expect that approximately $            will be paid to Mr. Peterson, approximately $            (or $            if the underwriters exercise in full their option to purchase additional common units) will be paid to Mr. James, approximately $            (or $            if the underwriters exercise in full their option to purchase additional common units) will be paid to Mr. Hill and approximately $            (or $            if the underwriters exercise in full their option to purchase additional common units) will be paid to Mr. Puglisi. We will not purchase any Blackstone Holdings partnership units from Mr. Schwarzman with proceeds from the firm commitment offering, but he has agreed to sell to us up to $              of his Blackstone Holdings partnership units, based on the initial public offering price per common unit in this offering, if the underwriters exercise their option to purchase additional common units. The beneficial ownership reflected in the foregoing table after this offering reflects this application of net proceeds from this offering.

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CONFLICTS OF INTEREST AND FIDUCIARY RESPONSIBILITIES

Conflicts of Interest

        Conflicts of interest exist and may arise in the future as a result of the relationships between our general partner and its affiliates (including its owners) on the one hand, and our partnership and our limited partners, on the other hand.

        Whenever a potential conflict arises between our general partner or its affiliates, on the one hand, and us or any other partner, on the other hand, our general partner will resolve that conflict. Our partnership agreement contains provisions that reduce and eliminate our general partner's duties (including fiduciary duties) to the common unitholders. Our partnership agreement also restricts the remedies available to common unitholders for actions taken that without those limitations might constitute breaches of duty (including fiduciary duties).

        Under our partnership agreement, our general partner will not be in breach of its obligations under the partnership agreement or its duties to us or our common unitholders if the resolution of the conflict is:

        Our general partner may, but is not required to, seek the approval of such resolution from the conflicts committee or our common unitholders. If our general partner does not seek approval from the conflicts committee or our common unitholders and its board of directors determines that the resolution or course of action taken with respect to the conflict of interest satisfies either of the standards set forth in the third and fourth bullet points above, then it will be presumed that in making its decision the board of directors acted in good faith, and in any proceeding brought by or on behalf of any limited partner or us or any other person bound by the partnership agreement, the person bringing or prosecuting such proceeding will have the burden of overcoming such presumption. Unless the resolution of a conflict is specifically provided for in our partnership agreement, our general partner or the conflicts committee may consider any factors it determines in good faith to consider when resolving a conflict. Our partnership agreement provides that our general partner will be conclusively presumed to be acting in good faith if our general partner subjectively believes that the decision made or not made is in the best interests of the partnership.

        Conflicts of interest could arise in the situations described below, among others.

Actions taken by our general partner may affect the amount of adjusted cash flow from operations to our common unitholders.

        The amount of adjusted cash flow from operations that is available for distribution to our common unitholders is affected by decisions of our general partner regarding such matters as:

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        In addition, borrowings by us and our affiliates do not constitute a breach of any duty owed by our general partner to our common unitholders. The partnership agreement of The Blackstone Group L.P. provides that we and our subsidiaries may borrow funds from our general partner and its affiliates on terms that are fair and reasonable to us, provided however that such borrowings will be deemed to be fair and reasonable if (1) they are approved in accordance with the terms of the partnership agreement, (2) the terms are no less favorable to us than those generally being provided to or available from unrelated third parties or (3) the terms are fair and reasonable to us, taking into account the totality of the relationship between the parties involved (including other transactions that may be or have been particularly favorable or advantageous to us).

We will reimburse our general partner and its affiliates for expenses.

        We will reimburse our general partner and its affiliates for costs incurred in managing and operating us. For example, we do not elect, appoint or employ any directors, officers or other employees. All such persons are elected, appointed or employed by our general partner on our behalf. Our partnership agreement provides that our general partner will determine the expenses that are allocable to us.

Our general partner intends to limit its liability regarding our obligations.

        Our general partner intends to limit its liability under contractual arrangements so that the other party has recourse only to our assets, and not against our general partner, its assets or its owners. Our partnership agreement provides that any action taken by our general partner to limit its liability or our liability is not a breach of our general partner's fiduciary duties, even if we could have obtained more favorable terms without the limitation on liability.

Common unitholders will have no right to enforce obligations of our general partner and its affiliates under agreements with us.

        Any agreements between us on the one hand, and our general partner and its affiliates on the other, will not grant to the common unitholders, separate and apart from us, the right to enforce the obligations of our general partner and its affiliates in our favor.

Contracts between us, on the one hand, and our general partner and its affiliates, on the other, will not be the result of arm's-length negotiations.

        Our partnership agreement allows our general partner to determine in its sole discretion any amounts to pay itself or its affiliates for any services rendered to us. Our general partner may also enter into additional contractual arrangements with any of its affiliates on our behalf. Neither the partnership agreement nor any of the other agreements, contracts and arrangements between us on the one hand, and our general partner and its affiliates on the other, are or will be the result of arm's-length negotiations.

        Our general partner will determine the terms of any of these transactions entered into after this offering on terms that are fair and reasonable to us.

        Our general partner and its affiliates will have no obligation to permit us to use any facilities or assets of our general partner and its affiliates, except as may be provided in contracts entered into

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specifically dealing with that use. There will not be any obligation of our general partner and its affiliates to enter into any contracts of this kind.

Common units are subject to our general partner's limited call right.

        Our general partner may exercise its right to call and purchase common units as provided in our partnership agreement or assign this right to one of its affiliates or to us. Our general partner may use its own discretion, free of fiduciary duty restrictions, in determining whether to exercise this right. As a result, a common unitholder may have his common units purchased from him at an undesirable time or price. See "Material Provisions of the Blackstone Holdings Partnership Agreements—Limited Call Right".

We may not choose to retain separate counsel for ourselves or for the holders of common units.

        The attorneys, independent accountants and others who have performed services for us regarding this offering have been retained by our general partner. Attorneys, independent accountants and others who will perform services for us are selected by our general partner or the conflicts committee, and may perform services for our general partner and its affiliates. We may retain separate counsel for ourselves or the holders of our common units in the event of a conflict of interest between our general partner and its affiliates on the one hand, and us or the holders of our common units on the other, depending on the nature of the conflict, but are not required to do so.

Our general partner's affiliates may compete with us.

        The partnership agreement provides that our general partner will be restricted from engaging in any business activities other than those incidental to its ownership of interests in us. Except as provided in the non-competition, non-solicitation and confidentiality agreements to which our senior managing directors are subject, affiliates of the general partner, including its owners, are not prohibited from engaging in other businesses or activities, including those that might be in direct competition with us.

Certain of our subsidiaries have obligations to investors in our investment funds and clients of our advisory business that may conflict with your interests.

        Our subsidiaries that serve as the general partners of our investment funds have fiduciary and contractual obligations to the investors in those funds and certain of our subsidiaries engaged in our advisory business have contractual duties to their clients. As a result, we expect to regularly take actions with respect to the allocation of investments among our investment funds (including funds that have different fee structures), the purchase or sale of investments in our investment funds, the structuring of investment transactions for those funds, the advice we provide or otherwise that comply with these fiduciary and contractual obligations. In addition, our senior managing directors have made personal investments in a variety of our investment funds, which may result in conflicts of interest among investors in our funds or our common unitholders regarding investment decisions for these funds. Some of these actions might at the same time adversely affect our near-term results of operations or cash flow.

U.S. federal income tax considerations of our senior managing directors may conflict with your interests.

        Because our senior managing directors hold their Blackstone Holdings partnership units directly or through entities that are not subject to corporate income taxation and The Blackstone Group L.P. holds Blackstone Holdings partnership units through wholly-owned subsidiaries, some of which are subject to corporate income taxation, conflicts may arise between our senior managing directors and The Blackstone Group L.P. relating to the selection and structuring of investments. Our limited partners will be deemed to expressly acknowledge that our general partner is under no obligation to consider the

181


separate interests of our limited partners (including without limitation the tax consequences to limited partners) in deciding whether to cause us to take (or decline to take) any actions.

Fiduciary Duties

        Our general partner is accountable to us and our common unitholders as a fiduciary. Fiduciary duties owed to common unitholders by our general partner are prescribed by law and our partnership agreement. The Delaware Revised Uniform Limited Partnership Act, which we refer to in this prospectus as the Delaware Limited Partnership Act, provides that Delaware limited partnerships may in their partnership agreements expand, restrict or eliminate the duties (including fiduciary duties) otherwise owed by a general partner to limited partners and the partnership.

        Our partnership agreement contains various provisions modifying, restricting and eliminating the duties (including fiduciary duties) that might otherwise be owed by our general partner. We have adopted these restrictions to allow our general partner or its affiliates to engage in transactions with us that would otherwise be prohibited by state-law fiduciary duty standards and to take into account the interests of other parties in addition to our interests when resolving conflicts of interest. Without these modifications, the general partner's ability to make decisions involving conflicts of interest would be restricted. These modifications are detrimental to the common unitholders because they restrict the remedies available to common unitholders for actions that without those limitations might constitute breaches of duty (including fiduciary duty), as described below, and permit our general partner to take into account the interests of third parties in addition to our interests when resolving conflicts of interest. The following is a summary of the material restrictions of the fiduciary duties owed by our general partner to the limited partners:


State law fiduciary duty standards
 
Fiduciary duties are generally considered to include an obligation to act in good faith and with due care and loyalty. In the absence of a provision in a partnership agreement providing otherwise, the duty of care would generally require a general partner to act for the partnership in the same manner as a prudent person would act on his own behalf. In the absence of a provision in a partnership agreement providing otherwise, the duty of loyalty would generally prohibit a general partner of a Delaware limited partnership from taking any action or engaging in any transaction that is not in the best interests of the partnership where a conflict of interest is present.
         

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Partnership agreement modified standards
 
Our partnership agreement contains provisions that waive or consent to conduct by our general partner and its affiliates that might otherwise raise issues about compliance with fiduciary duties or applicable law. For example, our partnership agreement provides that when our general partner, in its capacity as our general partner, is permitted to or required to make a decision in its "sole discretion" or "discretion" or that it deems "necessary or appropriate" or "necessary or advisable," then our general partner will be entitled to consider only such interests and factors as it desires, including its own interests, and will have no duty or obligation (fiduciary or otherwise) to give any consideration to any interest of or factors affecting us or any limited partners, and will not be subject to any different standards imposed by the partnership agreement, the Delaware Limited Partnership Act or under any other law, rule or regulation or in equity. In addition, when our general partner is acting in its individual capacity, as opposed to in its capacity as our general partner, it may act without any fiduciary obligation to us or the common unitholders whatsoever. These standards reduce the obligations to which our general partner would otherwise be held.

 
 
In addition to the other more specific provisions limiting the obligations of our general partner, our partnership agreement further provides that our general partner and its officers and directors will not be liable to us, our limited partners or assignees for errors of judgment or for any acts or omissions unless there has been a final and non-appealable judgment by a court of competent jurisdiction determining that the general partner or its officers and directors acted in bad faith or engaged in fraud or willful misconduct.
         

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Special provisions regarding affiliated transactions. Our partnership agreement generally provides that affiliated transactions and resolutions of conflicts of interest not involving a vote of common unitholders and that are not approved by the conflicts committee of the board of directors of our general partner or by our common unitholders must be:

 
 
•
 
on terms no less favorable to us than those generally being provided to or available from unrelated third parties; or

 
 
•
 
"fair and reasonable" to us, taking into account the totality of the relationships between the parties involved (including other transactions that may be particularly favorable or advantageous to us).

 
 
If our general partner does not seek approval from the conflicts committee or our common unitholders and the board of directors of our general partner determines that the resolution or course of action taken with respect to the conflict of interest satisfies either of the standards set forth in the bullet points above, then it will be presumed that in making its decision the board of directors, acted in good faith, and in any proceeding brought by or on behalf of any limited partner or the partnership or any other person bound by the partnership agreement, the person bringing or prosecuting such proceeding will have the burden of overcoming such presumption. These standards reduce the obligations to which our general partner would otherwise be held.

Rights and remedies of common unitholders
 
The Delaware Limited Partnership Act generally provides that a limited partner may institute legal action on behalf of the partnership to recover damages from a third-party where a general partner has refused to institute the action or where an effort to cause a general partner to do so is not likely to succeed. In addition, the statutory or case law of some jurisdictions may permit a limited partner to institute legal action on behalf of himself and all other similarly situated limited partners to recover damages from a general partner for violations of its fiduciary duties to the limited partners.

        By purchasing our common units, each common unitholder automatically agrees to be bound by the provisions in our partnership agreement, including the provisions discussed above. This is in accordance with the policy of the Delaware Limited Partnership Act favoring the principle of freedom of contract and the enforceability of partnership agreements. The failure of a common unitholder to sign the partnership agreement does not render the partnership agreement unenforceable against that person.

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        We have agreed to indemnify our general partner and any of its affiliates and any member, partner, tax matters partner, officer, director, employee, agent, fiduciary or trustee of our partnership, our general partner or any of our affiliates and certain other specified persons, to the fullest extent permitted by law, against any and all losses, claims, damages, liabilities, joint or several, expenses (including legal fees and expenses), judgments, fines, penalties, interest, settlements or other amounts incurred by our general partner or these other persons. We have agreed to provide this indemnification unless there has been a final and non-appealable judgment by a court of competent jurisdiction determining that these persons acted in bad faith or engaged in fraud or willful misconduct. We have also agreed to provide this indemnification for criminal proceedings. Thus, our general partner could be indemnified for its negligent acts if it met the requirements set forth above. To the extent these provisions purport to include indemnification for liabilities arising under the Securities Act, in the opinion of the SEC such indemnification is contrary to public policy and therefore unenforceable. See "Material Provisions of The Blackstone Group L.P. Partnership Agreement—Indemnification".

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DESCRIPTION OF COMMON UNITS

Common Units

        Our common units represent limited partner interests in us. The holders of our common units are entitled to participate in our distributions and exercise the rights or privileges available to limited partners under our partnership agreement. For a description of the relative rights and preferences of holders of our common units in and to our distributions, see "Cash Distribution Policy". For a description of the rights and privileges of limited partners under our partnership agreement, including voting rights, see "Material Provisions of The Blackstone Group L.P. Partnership Agreement".

        Unless our general partner determines otherwise, we will issue all our common units in uncertificated form.

Transfer of Common Units

        By acceptance of the transfer of our common units in accordance with our partnership agreement, each transferee of our common units will be admitted as a common unitholder with respect to the common units transferred when such transfer and admission is reflected in our books and records. Additionally, each transferee of our common units:

        A transferee will become a substituted limited partner of our partnership for the transferred common units automatically upon the recording of the transfer on our books and records. Our general partner will cause any transfers to be recorded on our books and records no less frequently than quarterly.

        Common units are securities and are transferable according to the laws governing transfers of securities. In addition to other rights acquired upon transfer, the transferor gives the transferee the right to become a substituted limited partner in our partnership for the transferred common units.

        Until a common unit has been transferred on our books, we and the transfer agent, notwithstanding any notice to the contrary, may treat the record holder of the common unit as the absolute owner for all purposes, except as otherwise required by law or stock exchange regulations. A beneficial holder's rights are limited solely to those that it has against the record holder as a result of any agreement between the beneficial owner and the record holder.

Transfer Agent and Registrar

                                                    will serve as registrar and transfer agent for our common units. You may contact the registrar and transfer agent at the following address:

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MATERIAL PROVISIONS OF THE BLACKSTONE GROUP L.P.
PARTNERSHIP AGREEMENT

        The following is a summary of the material provisions of the Amended and Restated Agreement of Limited Partnership of The Blackstone Group L.P. The Amended and Restated Agreement of Limited Partnership of The Blackstone Group L.P. as it will be in effect at the time of this offering, which is referred to in this prospectus as our partnership agreement, is included in this prospectus as Appendix A, and the following summary is qualified by reference thereto.

        We summarize the following provisions of our partnership agreement elsewhere in this prospectus:

General Partner

        Our general partner, Blackstone Group Management L.L.C., will manage all of our operations and activities. Our general partner is authorized in general to perform all acts that it determines to be necessary or appropriate to carry out our purposes and to conduct our business. Blackstone Group Management L.L.C. is wholly-owned by our senior managing directors and controlled by our founders. See "Management—Composition of the Board of Directors after this Offering". Our common unitholders have only limited voting rights on matters affecting our business and therefore have limited ability to influence management's decisions regarding our business.

Organization

        We were formed on March 12, 2007 and have a perpetual existence.

Purpose

        Under our partnership agreement we are permitted to engage, directly or indirectly, in any business activity that is approved by our general partner and that lawfully may be conducted by a limited partnership organized under Delaware law.

Power of Attorney

        Each limited partner, and each person who acquires a limited partner interest in accordance with our partnership agreement, grants to our general partner and, if appointed, a liquidator, a power of attorney to, among other things, execute and file documents required for our qualification, continuance, dissolution or termination. The power of attorney also grants our general partner the authority to amend, and to make consents and waivers under, our partnership agreement and certificate of limited partnership, in each case in accordance with our partnership agreement.

Capital Contributions

        Our common unitholders are not obligated to make additional capital contributions, except as described below under "—Limited Liability".

Limited Liability

        Assuming that a limited partner does not participate in the control of our business within the meaning of the Delaware Limited Partnership Act and that he otherwise acts in conformity with the provisions of our partnership agreement, his liability under the Delaware Limited Partnership Act will

187


be limited, subject to possible exceptions, to the amount of capital he is obligated to contribute to us for his common units plus his share of any undistributed profits and assets. If it were determined however that the right, or exercise of the right, by the limited partners as a group:

constituted "participation in the control" of our business for the purposes of the Delaware Limited Partnership Act, then our limited partners could be held personally liable for our obligations under the laws of Delaware to the same extent as our general partner. This liability would extend to persons who transact business with us who reasonably believe that the limited partner is a general partner. Neither our partnership agreement nor the Delaware Limited Partnership Act specifically provides for legal recourse against our general partner if a limited partner were to lose limited liability through any fault of our general partner. While this does not mean that a limited partner could not seek legal recourse, we know of no precedent for this type of a claim in Delaware case law.

        Under the Delaware Limited Partnership Act, a limited partnership may not make a distribution to a partner if after the distribution all liabilities of the limited partnership, other than liabilities to partners on account of their partnership interests and liabilities for which the recourse of creditors is limited to specific property of the partnership, would exceed the fair value of the assets of the limited partnership. For the purpose of determining the fair value of the assets of a limited partnership, the Delaware Limited Partnership Act provides that the fair value of property subject to liability for which recourse of creditors is limited will be included in the assets of the limited partnership only to the extent that the fair value of that property exceeds the non-recourse liability. The Delaware Limited Partnership Act provides that a limited partner who receives a distribution and knew at the time of the distribution that the distribution was in violation of the Delaware Limited Partnership Act will be liable to the limited partnership for the amount of the distribution for three years. Under the Delaware Limited Partnership Act, a substituted limited partner of a limited partnership is liable for the obligations of his assignor to make contributions to the partnership, except that such person is not obligated for liabilities unknown to him at the time he became a limited partner and that could not be ascertained from the partnership agreement.

        Moreover, if it were determined that we were conducting business in any state without compliance with the applicable limited partnership statute, or that the right or exercise of the right by the limited partners as a group to remove or replace our general partner, to approve some amendments to our partnership agreement or to take other action under our partnership agreement constituted "participation in the control" of our business for purposes of the statutes of any relevant jurisdiction, then the limited partners could be held personally liable for our obligations under the law of that jurisdiction to the same extent as our general partner under the circumstances. We intend to operate in a manner that our general partner considers reasonable and necessary or appropriate to preserve the limited liability of the limited partners.

Issuance of Additional Securities

        Our partnership agreement authorizes us to issue an unlimited number of additional partnership securities and options, rights, warrants and appreciation rights relating to partnership securities for the consideration and on the terms and conditions established by our general partner in its sole discretion without the approval of any limited partners.

        In accordance with the Delaware Limited Partnership Act and the provisions of our partnership agreement, we may also issue additional partnership interests that have designations, preferences, rights, powers and duties that do not apply to the common units.

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Distributions

        Distributions will be made to the partners pro rata according to the percentages of their respective partnership interests. See "Cash Distribution Policy".

Amendment of the Partnership Agreement

        Amendments to our partnership agreement may be proposed only by or with the consent of our general partner. To adopt a proposed amendment, other than the amendments that require limited partner approval discussed below, our general partner must seek approval of a majority of our outstanding units required to approve the amendment or call a meeting of the limited partners to consider and vote upon the proposed amendment. On any matter that may be submitted for a vote of our common unitholders, the limited partners of Blackstone Holdings (other than AIG) will hold special voting units in The Blackstone Group L.P. that provide them with a number of votes that is equal to the aggregate number of partnership units of Blackstone Holdings that they then hold and entitle them to participate in the vote on the same basis as our common unitholders. See "—Meetings; Voting".

        No amendment may be made that would:

        The provision of our partnership agreement preventing the amendments having the effects described in clauses (1) or (2) above can be amended upon the approval of the holders of at least 90% of the outstanding voting units.

        Our general partner may generally make amendments to our partnership agreement or certificate of limited partnership without the approval of any limited partner to reflect:

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        In addition, our general partner may make amendments to our partnership agreement without the approval of any limited partner if those amendments, in the discretion of our general partner:

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        Our general partner will not be required to obtain an opinion of counsel that an amendment will not result in a loss of limited liability to the limited partners if one of the amendments described above under "—No Limited Partner Approval" should occur. No other amendments to our partnership agreement (other than an amendment pursuant to a merger, sale or other disposition of assets effected in accordance with the provisions described under "—Merger, Sale or Other Disposition of Assets") will become effective without the approval of holders of at least 90% of the outstanding common units, unless we obtain an opinion of counsel to the effect that the amendment will not affect the limited liability under the Delaware Limited Partnership Act of any of our limited partners.

        In addition to the above restrictions, any amendment that would have a material adverse effect on the rights or preferences of any type or class of partnership interests in relation to other classes of partnership interests will also require the approval of the holders of at least a majority of the outstanding partnership interests of the class so affected.

        In addition, any amendment that reduces the voting percentage required to take any action must be approved by the affirmative vote of limited partners whose aggregate outstanding voting units constitute not less than the voting requirement sought to be reduced.

Merger, Sale or Other Disposition of Assets

        Our partnership agreement generally prohibits our general partner, without the prior approval of the holders of a majority of the voting power of our outstanding voting units, from causing us to, among other things, sell, exchange or otherwise dispose of all or substantially all of our assets in a single transaction or a series of related transactions, including by way of merger, consolidation or other combination, or approving on our behalf the sale, exchange or other disposition of all or substantially all of the assets of our subsidiaries. However, our general partner in its sole discretion may mortgage, pledge, hypothecate or grant a security interest in all or substantially all of our assets (including for the benefit of persons other than us or our subsidiaries) without that approval. Our general partner may also sell all or substantially all of our assets under any forced sale of any or all of our assets pursuant to the foreclosure or other realization upon those encumbrances without that approval.

        If conditions specified in our partnership agreement are satisfied, our general partner may convert or merge us or any of our subsidiaries into, or convey some or all of our assets to, a newly formed entity if the sole purpose of that merger or conveyance is to effect a mere change in our legal form into another limited liability entity. The common unitholders are not entitled to dissenters' rights of appraisal under our partnership agreement or the Delaware Limited Partnership Act in the event of a merger or consolidation, a sale of substantially all of our assets or any other transaction or event.

Election to be Treated as a Corporation

        If our general partner determines that it is no longer in our best interests to continue as a partnership for U.S. federal income tax purposes, our general partner may elect to treat us as an association or as a publicly traded partnership taxable as a corporation for U.S. federal (and applicable state) income tax purposes.

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Dissolution

        We will dissolve upon:

        Upon a dissolution under clause (4), the holders of a majority of the voting power of our outstanding voting units may also elect, within specific time limitations, to continue our business without dissolution on the same terms and conditions described in the partnership agreement by appointing as a successor general partner an individual or entity approved by the holders of a majority of the voting power of the outstanding voting units, subject to our receipt of an opinion of counsel to the effect that:

Liquidation and Distribution of Proceeds

        Upon our dissolution, unless we are continued as a new limited partnership, the liquidator authorized to wind up our affairs will, acting with all of the powers of our general partner that the liquidator deems necessary or appropriate in its judgment, liquidate our assets and apply the proceeds of the liquidation first, to discharge our liabilities as provided in the partnership agreement and by law and thereafter to the partners pro rata according to the percentages of their respective partnership interests as of a record date selected by the liquidator. The liquidator may defer liquidation of our assets for a reasonable period of time or distribute assets to partners in kind if it determines that an immediate sale or distribution of all or some of our assets would be impractical or would cause undue loss to the partners.

Withdrawal or Removal of the General Partner

        Except as described below, our general partner has agreed not to withdraw voluntarily as the general partner prior to June 30, 2017 without obtaining the approval of the holders of at least a majority of the outstanding common units, excluding common units held by our general partner and its affiliates (including us), and furnishing an opinion of counsel regarding tax and limited liability matters. On or after June 30, 2017, our general partner may withdraw as general partner without first obtaining approval of any common unitholder by giving 90 days' advance notice, and that withdrawal will not constitute a violation of the partnership agreement. Notwithstanding the foregoing, our general partner may withdraw at any time without common unitholder approval upon 90 days' advance notice to the limited partners if at least 50% of the outstanding common units are beneficially owned or owned of record or controlled by one person and its affiliates other than our general partner and its affiliates.

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        Upon the withdrawal of our general partner under any circumstances, the holders of a majority of the voting power of our outstanding voting units may select a successor to that withdrawing general partner. If a successor is not elected, or is elected but an opinion of counsel regarding limited liability and tax matters cannot be obtained, we will be dissolved, wound up and liquidated, unless within 180 days after that withdrawal, the holders of a majority of the voting power of our outstanding voting units agree in writing to continue our business and to appoint a successor general partner. See "—Termination and Dissolution" above.

        Our general partner may not be removed unless that removal is approved by the vote of the holders of at least 662/3% of the outstanding voting units and we receive an opinion of counsel regarding limited liability and tax matters. Any removal of our general partner is also subject to the approval of a successor general partner by the vote of the holders of a majority of the voting power of our outstanding voting units. Upon completion of this offering, our senior managing directors and other existing owners who are our employees will have            % of the voting power in any vote of our unitholders and will accordingly be able to prevent the removal of our general partner. See "—Meetings; Voting" below.

        In the event of removal of a general partner under circumstances where cause exists or withdrawal of a general partner where that withdrawal violates our partnership agreement, a successor general partner will have the option to purchase the general partner interest of the departing general partner for a cash payment equal to its fair market value. Under all other circumstances where a general partner withdraws or is removed by the limited partners, the departing general partner will have the option to require the successor general partner to purchase the general partner interest of the departing general partner for a cash payment equal to its fair market value. In each case, this fair market value will be determined by agreement between the departing general partner and the successor general partner. If no agreement is reached within 30 days of the general partner's departure, an independent investment banking firm or other independent expert selected by the departing general partner and the successor general partner will determine the fair market value. If the departing general partner and the successor general partner cannot agree upon an expert within 45 days of the general partner's departure, then an expert chosen by agreement of the experts selected by each of them will determine the fair market value.

        If the option described above is not exercised by either the departing general partner or the successor general partner, the departing general partner's general partner interest will automatically convert into common units pursuant to a valuation of those interests as determined by an investment banking firm or other independent expert selected in the manner described in the preceding paragraph.

        In addition, we are required to reimburse the departing general partner for all amounts due the departing general partner, including without limitation all employee-related liabilities, including severance liabilities, incurred for the termination of any employees employed by the departing general partner or its affiliates for our benefit.

Transfer of General Partner Interests

        Except for transfer by our general partner of all, but not less than all, of its general partner interests in us to another entity as part of the merger or consolidation of our general partner with or into another entity or the transfer by our general partner of all or substantially all of its assets to another entity, our general partner may not transfer all or any part of its general partner interest in us to another person prior to June 30, 2017 without the approval of the holders of at least a majority of the voting power of our outstanding voting units, excluding voting units held by our general partner and its affiliates. On or after June 30, 2017, our general partner may transfer all or any part of its general partner interest without first obtaining approval of any common unitholder. As a condition of this transfer, the transferee must assume the rights and duties of the general partner to whose interest that

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transferee has succeeded, agree to be bound by the provisions of our partnership agreement and furnish an opinion of counsel regarding limited liability matters. At any time, the members of our general partner may sell or transfer all or part of their limited liability company interests in our general partner without the approval of the common unitholders.

Limited Call Right

        If at any time less than 10% of the then issued and outstanding limited partner interests of any class (other than special voting units), including our public common units, are held by persons other than our general partner and its affiliates, our general partner will have the right, which it may assign in whole or in part to any of its affiliates or to us, to acquire all, but not less than all, of the remaining limited partner interests of the class held by unaffiliated persons as of a record date to be selected by our general partner, on at least ten but not more than 60 days notice. The purchase price in the event of this purchase is the greater of:

        As a result of our general partner's right to purchase outstanding limited partner interests, a holder of limited partner interests may have his limited partner interests purchased at an undesirable time or price. The tax consequences to a common unitholder of the exercise of this call right are the same as a sale by that common unitholder of his common units in the market. See "Material U.S. Federal Tax Considerations United States Taxes—Consequences to U.S. Holders of Common Units—Sale or Exchange of Common Units".

Sinking Fund; Preemptive Rights

        We have not established a sinking fund and we have not granted any preemptive rights with respect to our limited partner interests.

Meetings; Voting

        Except as described below regarding a person or group owning 20% or more of The Blackstone Group L.P. common units then outstanding, record holders of common units or of the special voting units to be issued to holders of Blackstone Holdings partnership units on the record date will be entitled to notice of, and to vote at, meetings of our limited partners and to act upon matters as to which holders of limited partner interests have the right to vote or to act.

        Except as described below regarding a person or group owning 20% or more of The Blackstone Group L.P. common units then outstanding, each record holder of a common unit of The Blackstone Group L.P. is entitled to a number of votes equal to the number of common units held. In addition, we will issue special voting units to each holder of partnership units in Blackstone Holdings (other than AIG) that provide them with a number of votes that is equal to the aggregate number of partnership units of Blackstone Holdings that they then hold and entitle them to participate in the vote on the same basis as our common unitholders. We refer to our common units and our special voting units as "voting units." If the ratio at which Blackstone Holdings partnership units are exchangeable for our common units changes from one-for-one as described under "Certain Relationships and Related Person Transactions—Exchange Agreement", the number of votes to which the holders of the special voting units are entitled will be adjusted accordingly. Additional limited partner interests having special voting rights could also be issued. See "—Issuance of Additional Securities" above.

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        In the case of common units held by our general partner on behalf of non-citizen assignees, our general partner will distribute the votes on those common units in the same ratios as the votes of partners in respect of other limited partner interests are cast. Our general partner does not anticipate that any meeting of common unitholders will be called in the foreseeable future. Any action that is required or permitted to be taken by the limited partners may be taken either at a meeting of the limited partners or without a meeting, without a vote and without prior notice if consents in writing describing the action so taken are signed limited partners owning not less than the minimum percentage of the voting power of the outstanding limited partner interests that would be necessary to authorize or take that action at a meeting. Meetings of the limited partners may be called by our general partner or by limited partners owning at least 50% or more of the voting power of the outstanding limited partner interests of the class for which a meeting is proposed. Common unitholders may vote either in person or by proxy at meetings. The holders of a majority of the voting power of the outstanding limited partner interests of the class for which a meeting has been called outstanding common units, represented in person or by proxy, will constitute a quorum unless any action by the limited partners requires approval by holders of a greater percentage of such limited partner interests, in which case the quorum will be the greater percentage.

        However, if at any time any person or group (other than our general partner and its affiliates, or a direct or subsequently approved transferee of our general partner or its affiliates) acquires, in the aggregate, beneficial ownership of 20% or more of any class of The Blackstone Group L.P. common units then outstanding, that person or group will lose voting rights on all of its common units and the common units may not be voted on any matter and will not be considered to be outstanding when sending notices of a meeting of common unitholders, calculating required votes, determining the presence of a quorum or for other similar purposes. Common units held in nominee or street name account will be voted by the broker or other nominee in accordance with the instruction of the beneficial owner unless the arrangement between the beneficial owner and his nominee provides otherwise.

Status as Limited Partner

        By transfer of common units in accordance with our partnership agreement, each transferee of common units will be admitted as a limited partner with respect to the common units transferred when such transfer and admission is reflected in our books and records. Except as described under "—Limited Liability" above, in our partnership agreement or pursuant to Section 17-804 of the Delaware Limited Partnership Act (which relates to the liability of a limited partner who receives a distribution of assets upon the winding up of a limited partnership and who knew at the time of such distribution that it was in violation of this provision) or the partnership agreement, the common units will be fully paid and non-assessable.

Non-Citizen Assignees; Redemption

        If we are or become subject to federal, state or local laws or regulations that in the determination of our general partner create a substantial risk of cancellation or forfeiture of any property in which the partnership has an interest because of the nationality, citizenship or other related status of any limited partner, we may redeem the common units held by that limited partner at their current market price. To avoid any cancellation or forfeiture, our general partner may require each limited partner to furnish information about his nationality, citizenship or related status. If a limited partner fails to furnish information about his nationality, citizenship or other related status within 30 days after a request for the information or our general partner determines, with the advice of counsel, after receipt of the information that the limited partner is not an eligible citizen, the limited partner may be treated as a non-citizen assignee. A non-citizen assignee does not have the right to direct the voting of his common units and may not receive distributions in kind upon our liquidation.

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Indemnification

        Under our partnership agreement, in most circumstances we will indemnify the following persons, to the fullest extent permitted by law, from and against all losses, claims, damages, liabilities, joint or several, expenses (including legal fees and expenses), judgments, fines, penalties, interest, settlements or other amounts:

        We have agreed to provide this indemnification unless there has been a final and non-appealable judgment by a court of competent jurisdiction determining that these persons acted in bad faith or engaged in fraud or willful misconduct. We have also agreed to provide this indemnification for criminal proceedings. Any indemnification under these provisions will only be out of our assets. Unless it otherwise agrees, the general partner will not be personally liable for, or have any obligation to contribute or loan funds or assets to us to enable it to effectuate, indemnification. We may purchase insurance against liabilities asserted against and expenses incurred by persons for our activities, regardless of whether we would have the power to indemnify the person against liabilities under our partnership agreement.

Books and Reports

        Our general partner is required to keep appropriate books of the partnership's business at our principal offices or any other place designated by our general partner. The books will be maintained for both tax and financial reporting purposes on an accrual basis. For tax and fiscal reporting purposes, our year ends on December 31 each year.

        We will make available to record holders of common units, within 120 days after the close of each fiscal year, an annual report containing audited financial statements and a report on those financial statements by our independent public accountants. Except for our fourth quarter, we will also make available summary financial information within 90 days after the close of each quarter. Under our partnership agreement, we will be deemed to have made such annual reports and quarterly financial information available to each record holder of common units if we have either (i) filed the report or information with the SEC via its Electronic Data Gathering, Analysis and Retrieval system and such report or information is publicly available on such system or (ii) made such report or information available on any publicly available website maintained by us.

        As soon as reasonably practicable after the end of each fiscal year, we will furnish to each partner tax information (including Schedule K-1), which describes on a U.S. dollar basis such partner's share of our income, gain, loss and deduction for our preceding taxable year. It will most likely require longer than 90 days after the end of our fiscal year to obtain the requisite information from all lower-tier entities so that K-1s may be prepared for The Blackstone Group L.P. Consequently, holders of common

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units who are U.S. taxpayers should anticipate the need to file annually with the IRS (and certain states) a request for an extension past April 15 or the otherwise applicable due date of their income tax return for the taxable year. In addition, each partner will be required to report for all tax purposes consistently with the information provided by us. See "Material U.S. Federal Tax Considerations—United States Taxes—Administrative Matters—Information Returns".

Right to Inspect Our Books and Records

        Our partnership agreement provides that a limited partner can, for a purpose reasonably related to his interest as a limited partner, upon reasonable written demand and at his own expense, have furnished to him:

        Our general partner may, and intends to, keep confidential from the limited partners trade secrets or other information the disclosure of which our general partner believes is not in our best interests or which we are required by law or by agreements with third parties to keep confidential.

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COMMON UNITS ELIGIBLE FOR FUTURE SALE

        Prior to this offering, there has been no public market for our common units. We cannot predict the effect, if any, future sales of common units, or the availability for future sale of common units, will have on the market price of our common units prevailing from time to time. The sale of substantial amounts of our common units in the public market, or the perception that such sales could occur, could harm the prevailing market price of our common units.

        Upon completion of this offering we will have a total of                        of our common units outstanding, or                        common units assuming the underwriters exercise in full their option to purchase additional common units. All of the common units will have been sold in this offering and will be freely tradable without restriction or further registration under the Securities Act by persons other than our "affiliates." Under the Securities Act, an "affiliate" of a company is a person that directly or indirectly controls, is controlled by or is under common control with that company.

        In addition, subject to certain limitations and exceptions, pursuant to the terms of an exchange agreement we will enter into with our existing owners, holders of partnership units in Blackstone Holdings (other than The Blackstone Group L.P.'s wholly-owned subsidiaries) may from time to time exchange partnership units in Blackstone Holdings for our common units on a one-for-one basis, subject to customary conversion rate adjustments for splits, unit distributions and reclassifications. Upon consummation of this offering, our existing owners will beneficially own                        partnership units in Blackstone Holdings, all of which will be exchangeable for our common units. The common units we issue upon such exchanges would be "restricted securities" as defined in Rule 144 unless we register such issuances. However, we will enter into a registration rights agreement with our existing owners that would require us to register under the Securities Act these common units. See "—Registration Rights" and "Certain Relationships and Related Person Transactions—Registration Rights Agreement".

        Under the terms of the partnership agreements of the Blackstone Holdings partnerships, the Blackstone Holdings partnership units received by our existing owners in the Reorganization (or The Blackstone Group L.P. common units that may be received in exchange for such Blackstone Holdings partnership units) will be subject to vesting and minimum retained ownership requirements and transfer restrictions, as described in "Management—Minimum Retained Ownership Requirements and Transfer Restrictions for Existing Owners" and "Certain Relationships and Related Person Transactions—Blackstone Holdings Partnership Agreements".

        In addition, at the time of this offering we intend to grant                        unvested restricted common units to our non-senior managing director employees under our 2007 Equity Incentive Plan that will settle in common units. These restricted common units will generally vest, and the underlying common units be delivered, in five equal annual installments commencing one year after the grant date. We intend to file one or more registration statements on Form S-8 under the Securities Act to register common units issued or covered by our 2007 Equity Incentive Plan (including pursuant to automatic annual increases). Any such Form S-8 registration statements will automatically become effective upon filing. Accordingly, common units registered under such registration statements will be available for sale in the open market. We expect that the initial registration statement on Form S-8 will cover                         common units.

        Our partnership agreement authorizes us to issue an unlimited number of additional partnership securities and options, rights, warrants and appreciation rights relating to partnership securities for the consideration and on the terms and conditions established by our general partner in its sole discretion without the approval of any limited partners. See "Material Provisions of the Puma Group L.P. Partnership Agreement—Issuance of Additional Securities".

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Registration Rights

        We will enter into a registration rights agreement with our existing owners pursuant to which we will grant them, their affiliates and certain of their transferees the right, under certain circumstances and subject to certain restrictions, to require us to register under the Securities Act our common units (and other securities convertible into or exchangeable or exercisable for our common units) held or acquired by them. Securities registered under any such registration statement will be available for sale in the open market unless restrictions apply. See "Certain Relationships and Related Person Transactions—Registration Rights Agreement".

Lock-Up Arrangements

        We and all of the directors and officers of our general partner have agreed that without the prior written consent of Morgan Stanley & Co. Incorporated and Citigroup Global Markets Inc. on behalf of the underwriters, we and they will not, during the period ending 120 days after the date of this prospectus:

whether any such transaction described above is to be settled by delivery of common units or such other securities, in cash or otherwise. In addition, we have agreed that, without the prior written consent of Morgan Stanley & Co. Incorporated and Citigroup Global Markets Inc. on behalf of the underwriters, we will not file any registration statement with the SEC relating to the offering of any common units or any securities convertible into or exercisable or exchangeable for common units (other than any registration statement on Form S-8 to register common units issued or covered by our 2007 Equity Incentive Plan). All of the directors and officers of our general partner have also agreed that, without the prior written consent of Morgan Stanley & Co. Incorporated and Citigroup Global Markets Inc. on behalf of the underwriters, they will not during the period ending 120 days after the date of this prospectus, make any demand for, or exercise any right with respect to, the registration of any common units or any securities convertible into or exercisable or exchangeable for common units.

        The 120-day restricted period described in the preceding paragraph will be extended if:

in which case the restrictions described in the preceding paragraph will continue to apply until the expiration of the 18-day period beginning on the issuance of the earnings release or the occurrence of the material news or material event.

        These restrictions do not apply to:

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provided that in the case of transactions described in the fourth, fifth, sixth, seventh and eighth clauses above, each donee or other transferee agrees to be subject to the restrictions on transfer described above.

        Morgan Stanley & Co. Incorporated and Citigroup Global Markets Inc. do not have any current intention to release common units or other securities subject to the lock-up agreements. In addition, the partnership agreements of the Blackstone Holdings partnerships and related agreements will contractually restrict our existing owners' ability to transfer the Blackstone Holdings partnership units or the common units they hold. We have agreed that we will not waive, modify or amend such transfer restrictions during the period ending 120 days after the date of this prospectus.

        We also have instituted an internal policy that prohibits all of our employees from selling short or trading in derivative securities relating to the common units.

Rule 144

        In general, under Rule 144 a person (or persons whose common units are aggregated), including any person who may be deemed our affiliate, is entitled to sell within any three-month period a number of restricted securities that does not exceed the greater of 1% of the then outstanding common units and the average weekly trading volume during the four calendar weeks preceding each such sale, provided that at least one year has elapsed since such common units were acquired from us or any affiliate of ours and certain manner of sale, notice requirements and requirements as to availability of current public information about us are satisfied. Any person who is deemed to be our affiliate must comply with the provisions of Rule 144 (other than the one-year holding period requirement) in order to sell common units which are not restricted securities (such as common units acquired by affiliates either in this offering or through purchases in the open market following this offering). In addition, under Rule 144(k), a person who is not our affiliate, and who has not been our affiliate at any time during the 90 days preceding any sale, is entitled to sell common units without regard to the foregoing limitations, provided that at least two years have elapsed since the common units were acquired from us or any affiliate of ours.

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MATERIAL U.S. FEDERAL TAX CONSIDERATIONS

United States Taxes

        This summary discusses the material United States federal tax considerations related to the purchase, ownership and disposition of our common units as of the date hereof. This summary is based on provisions of the Internal Revenue Code, on the regulations promulgated thereunder and on published administrative rulings and judicial decisions, all of which are subject to change at any time, possibly with retroactive effect. This discussion is necessarily general and may not apply to all categories of investors, some of which, such as banks, thrifts, insurance companies, persons liable for the alternative minimum tax, dealers and other investors that do not own their common units as capital assets, may be subject to special rules. Tax-exempt organizations and mutual funds are discussed separately below. The actual tax consequences of the purchase and ownership of common units will vary depending on your circumstances.

        For purposes of this discussion, a "U.S. Holder" is a beneficial holder of a common unit that is for U.S. federal income tax purposes (1) an individual citizen or resident of the United States; (2) a corporation (or other entity treated as a corporation for U.S. federal income tax purposes) created or organized in or under the laws of the United States, any state thereof or the District of Columbia; (3) an estate the income of which is subject to U.S. federal income taxation regardless of its source or (4) a trust which either (A) is subject to the primary supervision of a court within the United States and one or more United States persons have the authority to control all substantial decisions of the trust or (B) has a valid election in effect under applicable Treasury regulations to be treated as a United States person. A "non-U.S. Holder" is a holder that is not a U.S. Holder.

        If a partnership holds common units, the tax treatment of a partner in the partnership will generally depend upon the status of the partner and the activities of the partnership. If you are a partner of a partnership holding our common units, you should consult your tax advisors. This discussion does not constitute tax advice and is not intended to be a substitute for tax planning.

        Prospective holders of common units should consult their own tax advisors concerning the U.S. federal, state and local income tax and estate tax consequences in their particular situations of the purchase, ownership and disposition of a common unit, as well as any consequences under the laws of any other taxing jurisdiction.

Taxation of our Partnership and the Blackstone Holdings Partnerships

        An entity that is treated as a partnership for U.S. federal income tax purposes is not a taxable entity and incurs no U.S. federal income tax iability. Instead, each partner is required to take into account its allocable share of items of income, gain, loss and deduction of the partnership in computing its U.S. federal income tax liability, regardless of whether cash distributions are made. Distributions of cash by a partnership to a partner are generally not taxable unless the amount of cash distributed to a partner is in excess of the partner's adjusted basis in its partnership interest.

        An entity that would otherwise be classified as a partnership for U.S. federal income tax purposes may nonetheless be taxable as a corporation if it is a "publicly traded partnership," unless an exception applies. An entity that would otherwise be classified as a partnership is a publicly traded partnership if (i) interests in the partnership are traded on an established securities market or (ii) interests in the partnership are readily tradable on a secondary market or the substantial equivalent thereof. We will be publicly traded. However, an exception to taxation as a corporation, referred to as the "Qualifying Income Exception," exists if at least 90% of such partnership's gross income for every taxable year consists of "qualifying income" and the partnership is not required to register under the 1940 Act. Qualifying income includes certain interest income, dividends, real property rents, gains from the sale or other disposition of real property, and any gain from the sale or disposition of a capital asset or other property held for the production of income that otherwise constitutes qualifying income.

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        We intend to manage our affairs so that we will meet the Qualifying Income Exception in each taxable year. We believe we will be treated as a partnership and not as a corporation for U.S. federal income tax purposes. Simpson Thacher & Bartlett LLP will provide an opinion to us based on factual statements and representations made by us, including statements and representations as to the manner in which we intend to manage our affairs and the composition of our income, that we will be treated as a partnership and not as an association or publicly traded partnership (within the meaning of Section 7704 of the Code) subject to tax as a corporation for U.S. federal income tax purposes. However, opinions of counsel are not binding upon the IRS or any court, and the IRS may challenge this conclusion and a court may sustain such a challenge.

        If we fail to meet the Qualifying Income Exception, other than a failure that is determined by the IRS to be inadvertent and that is cured within a reasonable time after discovery, or if we are required to register under the 1940 Act, we will be treated as if we had transferred all of our assets, subject to liabilities, to a newly formed corporation, on the first day of the year in which we fail to meet the Qualifying Income Exception, in return for stock in that corporation, and then distributed the stock to the holders of common units in liquidation of their interests in us. This contribution and liquidation should generally be tax-free to holders so long as we do not have liabilities in excess of the tax basis of our assets. Thereafter, we would be treated as a corporation for U.S. federal income tax purposes.

        If we were treated as a corporation in any taxable year, either as a result of a failure to meet the Qualifying Income Exception or otherwise, our items of income, gain, loss and deduction would be reflected only on our tax return rather than being passed through to holders of common units, and we would be subject to U.S. corporate income tax on our taxable income. Distributions made to holders of our common units would be treated as either taxable dividend income, which may be eligible for reduced rates of taxation, to the extent of our current or accumulated earnings and profits, or in the absence of earnings and profits, as a nontaxable return of capital, to the extent of the holder's tax basis in the common units, or as taxable capital gain, after the holder's basis is reduced to zero. In addition, in the case of non-U.S. Holders, income that we receive with respect to investments may be subject to a higher rate of U.S. withholding tax. Accordingly, treatment as a corporation could materially reduce a holder's after-tax return and thus could result in a substantial reduction of the value of the common units.

        If at the end of any taxable year we fail to meet the Qualifying Income Exception, we may still qualify as a partnership if we are entitled to relief under the Code for an inadvertent termination of partnership status. This relief will be available if (i) the failure is cured within a reasonable time after discovery, (ii) the failure is determined by the IRS to be inadvertent, and (iii) we agree to make such adjustments (including adjustments with respect to our partners) or to pay such amounts as are required by the IRS. It is not possible to state whether we would be entitled to this relief in any or all circumstances. It also is not clear under the Code whether this relief is available for our first taxable year as a publicly traded partnership. If this relief provision is inapplicable to a particular set of circumstances involving us, we will not qualify as a partnership for federal income tax purposes. Even if this relief provision applies and we retain our partnership status, we or the holders of our common units (during the failure period) will be required to pay such amounts as are determined by the IRS.

        The remainder of this section assumes that we and the Blackstone Holdings partnerships will be treated as partnerships for U.S. federal income tax purposes.

Blackstone Holdings I GP Inc.

        Blackstone Holdings I GP Inc. is taxable as a corporation for U.S. federal income tax purposes and therefore, as the holder of Blackstone Holdings I GP Inc.'s common stock, we will not be taxed directly on earnings of entities we hold through Blackstone Holdings I GP Inc. Distributions of cash or other property that Blackstone Holdings I GP Inc. pays to us will constitute dividends for U.S. federal income tax purposes to the extent paid from its current or accumulated earnings and profits (as

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determined under U.S. federal income tax principles). If the amount of a distribution by Blackstone Holdings I GP Inc. exceeds its current and accumulated earnings and profits, such excess will be treated as a tax-free return of capital to the extent of our tax basis in Blackstone Holdings I GP Inc.'s common stock, and thereafter will be treated as a capital gain.

        As general partner of Blackstone Holdings I L.P., Blackstone Holdings I GP Inc. will incur U.S. federal income taxes on its proportionate share of any net taxable income of Blackstone Holdings I L.P. In accordance with the applicable partnership agreement, we will cause Blackstone Holdings I L.P. to distribute cash on a pro rata basis to holders of its units (that is, Blackstone Holdings I GP Inc. and our existing owners) in an amount at least equal to the maximum tax liabilities arising from their ownership of such units, if any.

Blackstone Holdings II GP Inc.

        Blackstone Holdings II GP Inc. is taxable as a corporation for U.S. federal income tax purposes and therefore, as the holder of Blackstone Holdings II GP Inc.'s common stock, we will not be taxed directly on earnings of entities we hold through Blackstone Holdings II GP Inc. Distributions of cash or other property that Blackstone Holdings II GP Inc. pays to us will constitute dividends for U.S. federal income tax purposes to the extent paid from its current or accumulated earnings and profits (as determined under U.S. federal income tax principles). If the amount of a distribution by Blackstone Holdings II GP Inc. exceeds its current and accumulated earnings and profits, such excess will be treated as a tax-free return of capital to the extent of our tax basis in Blackstone Holdings II GP Inc.'s common stock, and thereafter will be treated as a capital gain.

        As general partner of Blackstone Holdings II L.P., Blackstone Holdings II GP Inc. will incur U.S. federal income taxes on its proportionate share of any net taxable income of Blackstone Holdings II L.P. In accordance with the applicable partnership agreement, we will cause Blackstone Holdings II L.P. to distribute cash on a pro rata basis to holders of its units (that is, Blackstone Holdings II GP Inc. and our existing owners) in an amount at least equal to the maximum tax liabilities arising from their ownership of such units, if any.

Blackstone Holdings III GP L.P.

        Blackstone Holdings III GP L.P. is a wholly-owned limited partnership. Blackstone Holdings III GP L.P. will be treated as an entity disregarded as a separate entity from us. Accordingly, all the assets, liabilities and items of income, deduction and credit of Blackstone Holdings III GP L.P. will be treated as our assets, liabilities and items of income, deduction and credit.

        We anticipate that Blackstone Holdings III GP L.P. will invest directly or indirectly in a variety of assets and otherwise engage in activities and derive income that is consistent with the qualifying income exception discussed above, such as investments in entities treated as domestic corporations for U.S. federal income tax purposes.

Blackstone Holdings IV GP L.P.

        Blackstone Holdings IV GP L.P. is a wholly-owned limited partnership. Blackstone Holdings IV GP L.P. will be treated as an entity disregarded as a separate entity from us. Accordingly, all the assets, liabilities and items of income, deduction and credit of Blackstone Holdings IV GP L.P. will be treated as our assets, liabilities and items of income, deduction and credit.

        We anticipate that Blackstone Holdings IV GP L.P. will invest directly or indirectly in a variety of assets and otherwise engage in activities and derive income that is consistent with the qualifying income exception discussed above, such as investments in entities treated as domestic corporations for U.S. federal income tax purposes.

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Blackstone Holdings V GP L.P.

        Blackstone Holdings V GP L.P. is a wholly-owned limited partnership organized in Alberta. Blackstone Holdings V GP L.P. is taxable as a foreign corporation for U.S. federal income tax purposes. Blackstone Holdings V GP L.P. is expected to be operated so as not to produce ECI. Its income will not be subject to U.S. federal income tax to the extent it has a foreign source and is not treated as ECI. Its assets, liabilities and items of income, deduction and credit will not be treated as our assets, liabilities and items of income, deduction and credit.

Personal Holding Companies

        Blackstone Holdings I GP Inc. or Blackstone Holdings II GP Inc. could be subject to additional U.S. federal income tax on a portion of its income if it is determined to be a personal holding company, or PHC, for U.S. federal income tax purposes. A U.S. corporation generally will be classified as a PHC for U.S. federal income tax purposes in a given taxable year if (i) at any time during the last half of such taxable year, five or fewer individuals (without regard to their citizenship or residency and including as individuals for this purpose certain entities such as certain tax-exempt organizations and pension funds) own or are deemed to own (pursuant to certain constructive ownership rules) more than 50% of the stock of the corporation by value and (ii) at least 60% of the corporation's adjusted ordinary gross income, as determined for U.S. federal income tax purposes, for such taxable year consists of PHC income (which includes, among other things, dividends, interest, royalties, annuities and, under certain circumstances, rents). The PHC rules do not apply to non-U.S. corporations.

        Due to applicable attribution rules, it is likely that five or fewer individuals or tax-exempt organizations will be treated as owning actually or constructively more than 50% of the value of units in Blackstone Holdings I GP Inc. Consequently, Blackstone Holdings I GP Inc. or Blackstone Holdings II GP Inc. could be or become a PHC, depending on whether it fails the PHC gross income test. If as a factual matter, the income of Blackstone Holdings I GP Inc. or Blackstone Holdings II GP Inc. fails the PHC gross income test, it will be a PHC. Certain aspects of the gross income test cannot be predicted with certainty. Thus, no assurance can be given that Blackstone Holdings I GP Inc. or Blackstone Holdings II GP Inc. will not become a PHC following this offering or in the future.

        If Blackstone Holdings I GP Inc. or Blackstone Holdings II GP Inc. is or were to become a PHC in a given taxable year, it would be subject to an additional 15% PHC tax on its undistributed PHC income, which generally includes the company's taxable income, subject to certain adjustments. For taxable years beginning after December 31, 2010, the PHC tax rate on undistributed PHC income will be equal to the highest marginal rate on ordinary income applicable to individuals (currently 35%). If Blackstone Holdings I GP Inc. or Blackstone Holdings II GP Inc. were to become a PHC and had significant amounts of undistributed PHC income, the amount of PHC tax could be material; in that event, distribution of such income would generally cause the PHC tax not to apply.

Certain State, Local and Non-U.S. Tax Matters

        We and our subsidiaries may be subject to state, local or non-U.S. taxation in various jurisdictions, including those in which we or they transact business, own property or reside. For example, we and our subsidiaries may be subject to New York City unincorporated business tax. We may be required to file tax returns in some or all of those jurisdictions. The state, local or non-U.S. tax treatment of us and our holders may not conform to the U.S. federal income tax treatment discussed herein. We will pay non-U.S. taxes, and dispositions of foreign property or operations involving, or investments in, foreign property may give rise to non-U.S. income or other tax liability in amounts that could be substantial. Any non-U.S. taxes incurred by us may not pass through to common unitholders as a credit against their U.S. federal income tax liability.

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Consequences to U.S. Holders of Common Units

        The following is a summary of the material U.S. federal income tax consequences that will apply to you if you are a U.S. Holder of common units.

        With respect to U.S. Holders who are individuals, certain dividends paid by a corporation, including certain qualified foreign corporations, to us and that are allocable to such U.S. Holders prior to January 1, 2011 may be subject to reduced rates of taxation. A qualified foreign corporation includes a foreign corporation that is eligible for the benefits of specified income tax treaties with the United States. In addition, a foreign corporation is treated as a qualified corporation on shares that are readily tradable on an established securities market in the United States. Among other exceptions, a U.S. Holder who is an individual will not be eligible for reduced rates of taxation on any dividend if the payer is a PFIC (as defined below) in the taxable year in which such dividend is paid or in the preceding taxable year or on any income required to be reported by the U.S. Holder as a result of a QEF election (as defined below) that is attributable to a dividend received by an entity that is a PFIC and in which the fund holds a direct or indirect interest. Prospective investors should consult their own tax advisors regarding the application of the foregoing rules to their particular circumstances.

        For U.S. federal income tax purposes, your allocable share of our items of income, gain, loss, deduction or credit, and our allocable share of those items of Blackstone Holdings, will be governed by the limited partnership agreements for our partnership and Blackstone Holdings if such allocations have "substantial economic effect" or are determined to be in accordance with your interest in our partnership. We believe that for U.S. federal income tax purposes, such allocations will be given effect as being in accordance with your interest in The Blackstone Group L.P., and our general partner intends to prepare tax returns based on such allocations. If the IRS successfully challenged the allocations made pursuant to the limited partnership agreements, the resulting allocations for U.S. federal income tax purposes might be less favorable than the allocations set forth in the limited partnership agreements.

        We may derive taxable income from an investment that is not matched by a corresponding distribution of cash. This could occur, for example, if we used cash to make an investment or to reduce debt instead of distributing profits. In addition, special provisions of the Code may be applicable to certain of our investments, and may affect the timing of our income, requiring us to recognize taxable income before we receive cash attributable to such income. Accordingly, it is possible that the U.S. federal income tax liability of a holder with respect to its allocable share of our income for a particular taxable year could exceed the cash distribution to the holder for the year, thus giving rise to an out-of-pocket tax liability for the holder.

Basis

        You will have an initial tax basis for your common unit equal to the amount you paid for the common unit plus your share of our liabilities, if any. That basis will be increased by your share of our income and by increases in your share of our liabilities, if any. That basis will be decreased, but not below zero, by distributions from us, by your share of our losses and by any decrease in your share of our liabilities.

        Holders who purchase common units in separate transactions must combine the basis of those units and maintain a single adjusted tax basis for all those units. Upon a sale or other disposition of less than all of the common units, a portion of that tax basis must be allocated to the common units sold.

Limits on Deductions for Losses and Expenses

        Your deduction of your share of our losses will be limited to your tax basis in your common units and, if you are an individual or a corporate holder that is subject to the "at risk" rules, to the amount for which you are considered to be "at risk" with respect to our activities, if that is less than your tax

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basis. In general, you will be at risk to the extent of your tax basis in your common units, reduced by (1) the portion of that basis attributable to your share of our liabilities for which you will not be personally liable and (2) any amount of money you borrow to acquire or hold your common units, if the lender of those borrowed funds owns an interest in us, is related to you or can look only to the common units for repayment. Your at risk amount will generally increase by your allocable share of our income and gain and decrease by cash distributions to you and your allocable share of losses and deductions. You must recapture losses deducted in previous years to the extent that distributions cause your at risk amount to be less than zero at the end of any taxable year. Losses disallowed or recaptured as a result of these limitations will carry forward and will be allowable to the extent that your tax basis or at risk amount, whichever is the limiting factor, subsequently increases. Any excess loss above that gain previously suspended by the at risk or basis limitations may no longer be used. It is not entirely free from doubt whether you would be subject to additional loss limitations imposed by newly enacted Section 470 of the U.S. Internal Revenue Code. The IRS has not yet issued final guidance limiting the scope of this anti-abuse provision. You should therefore consult your own tax advisors about the possible effect of this provision.

        We will not generate income or losses from "passive activities" for purposes of Section 469 of the Code. Accordingly, income allocated by us to a holder may not be offset by the Section 469 passive losses of such holder and losses allocated to a holder generally may not be used to offset Section 469 passive income of such holder. In addition, other provisions of the Code may limit or disallow any deduction for losses by a holder of our common units or deductions associated with certain assets of the partnership in certain cases, including potentially Section 470 of the Code. Holders should consult with their tax advisors regarding their limitations on the deductibility of losses under applicable sections of the Code.

Limitations on Deductibility of Organizational Expenses and Syndication Fees

        In general, neither we nor any U.S. Holder may deduct organizational or syndication expenses. An election may be made by our partnership to amortize organizational expenses over a 15-year period. Syndication fees (which would include any sales or placement fees or commissions or underwriting discount payable to third parties) must be capitalized and cannot be amortized or otherwise deducted.

Limitations on Interest Deductions

        Your share of our interest expense is likely to be treated as "investment interest" expense. If you are a non-corporate taxpayer, the deductibility of "investment interest" expense is generally limited to the amount of your "net investment income." Your share of our dividend and interest income will be treated as investment income, although "qualified dividend income" subject to reduced rates of tax in the hands of an individual will only be treated as investment income if you elect to treat such dividend as ordinary income not subject to reduced rates of tax. In addition, state and local tax laws may disallow deductions for your share of our interest expense.

        The computation of your investment interest expense will take into account interest on any margin account borrowing or other loan incurred to purchase a common unit. Net investment income includes gross income from property held for investment and amounts treated as portfolio income under the passive loss rules less deductible expenses, other than interest, directly connected with the production of investment income, but generally does not include gains attributable to the disposition of property held for investment. For this purpose, any long-term capital gain or qualifying dividend income that is taxable at long-term capital gain rates is excluded from net investment income, unless the U.S. holder elects to pay tax on such gain or dividend income at ordinary income rates.

Deductibility of Partnership Investment Expenditures by Individual Partners and by Trusts and Estates

        Subject to certain exceptions, all miscellaneous itemized deductions of an individual taxpayer, and certain of such deductions of an estate or trust, are deductible only to the extent that such deductions

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exceed 2% of the taxpayer's adjusted gross income. Moreover, the otherwise allowable itemized deductions of individuals whose gross income exceeds an applicable threshold amount are subject to reduction by an amount equal to the lesser of (1) 3% of the excess of the individual's adjusted gross income over the threshold amount, or (2) 80% of the amount of the itemized deductions, such reductions to be reduced on a phased basis through 2009. The operating expenses of Blackstone Holdings, including the management fee and management fees paid with respect to private funds managed by Blackstone to the extent these private funds are treated as partnerships for U.S. federal income tax purposes, may be treated as miscellaneous itemized deductions subject to the foregoing rule. Alternatively, it is possible that we will be required to capitalize the management fees. Accordingly, if you are a non-corporate U.S. Holder, you should consult your tax advisors with respect to the application of these limitations.

Sale or Exchange of Common Units

        You will recognize gain or loss on a sale of common units equal to the difference, if any, between the amount realized and your tax basis in the common units sold. Your amount realized will be measured by the sum of the cash or the fair market value of other property received plus your share of our liabilities, if any.

        Gain or loss recognized by you on the sale or exchange of a common unit will generally be taxable as capital gain or loss and will be long-term capital gain or loss if the common unit was held for more than one year on the date of such sale or exchange. Assuming we have not made an election, referred to as a "QEF election," to treat our interest in a PFIC as a "qualified electing fund," or "QEF," gain attributable to such investment in a PFIC would be taxable as ordinary income and would be subject to an interest charge. See "—Passive Foreign Investment Companies". In addition, certain gain attributable to "unrealized receivables" or "inventory items" would be characterized as ordinary income rather than capital gain. For example, if we hold debt acquired at a market discount, accrued market discount on such debt would be treated as "unrealized receivables." The deductibility of capital losses is subject to limitations.

        Holders who purchase units at different times and intend to sell all or a portion of the units within a year of their most recent purchase are urged to consult their tax advisors regarding the application of certain "split holding period" rules to them and the treatment of any gain or loss as long-term or short-term capital gain or loss.

Foreign Tax Credit Limitations

        You will generally be entitled to a foreign tax credit with respect to your allocable share of creditable foreign taxes paid on our income and gains. Complex rules may, depending on your particular circumstances, limit the availability or use of foreign tax credits. Gains from the sale of our investments may be treated as U.S. source gains. Consequently, you may not be able to use the foreign tax credit arising from any foreign taxes imposed on such gains unless such credit can be applied (subject to applicable limitations) against tax due on other income treated as derived from foreign sources. Certain losses that we incur may be treated as foreign source losses, which could reduce the amount of foreign tax credits otherwise available.

Section 754 Election

        We and Blackstone Holdings currently intend to make the election permitted by Section 754 of the U.S. Internal Revenue Code. The election is irrevocable without the consent of the IRS. The election generally requires us to adjust the tax basis in our assets, or "inside basis," attributable to a transferee of common units under Section 743(b) of the Internal Revenue Code to reflect the purchase price of the common units paid by the transferee. However, this election does not apply to a person who purchases common units directly from us, including in this offering. For purposes of this discussion, a transferee's inside basis in our assets will be considered to have two components: (1) the transferee's

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share of our tax basis in our assets, or "common basis," and (2) the Section 743(b) adjustment to that basis.

        Generally, a Section 754 election would be advantageous to the transferee of common units if the purchase price of those common units is higher than the common units' share of the aggregate tax basis of our assets immediately prior to the transfer. In that case, as a result of the election, the transferee of common units would have a higher tax basis than the common units' share of the aggregate tax basis of our assets immediately prior to the transfer for purposes of calculating, among other items, the transferee's share of any gain or loss on a sale of our assets. Conversely, a Section 754 election is disadvantageous to the transferee of common units if the purchase price of the transferee's common units is lower than those common units' share of the aggregate tax basis of our assets immediately prior to the transfer. Thus, the fair market value of the common units may be affected either favorably or adversely by the election.

        Even if we were not to make the Section 754 election, if common units were transferred at a time when we had a "substantial built-in loss" inherent in our assets, we would be obligated to reduce the tax basis in the portion of such assets attributable to such common units.

        The calculations under Section 754 of the Code are complex, and there is little legal authority concerning the mechanics of the calculations, particularly in the context of publicly traded partnerships. To help reduce the complexity of those calculations and the resulting administrative costs to us, we will apply certain conventions in determining and allocating basis adjustments. For example, we may apply a convention in which we deem the price paid by a holder of common units to be the lowest quoted trading price of the common units during the month in which the purchase occurred, irrespective of the actual price paid. Nevertheless, the use of such conventions may result in basis adjustments that do not exactly reflect a holder's purchase price for its common units, including less favorable basis adjustments to a holder who paid more than the lowest quoted trading price of the common units for the month in which the purchase occurred. It is possible that the IRS will successfully assert that the conventions we use do not satisfy the technical requirements of the Code or the Treasury Regulations and thus will require different basis adjustments to be made. If the IRS were to sustain such a position, a holder of common units may have adverse tax consequences. Moreover, the full benefits of a Section 754 election may not be realized with respect to any Blackstone entity in which we may invest that does not have in effect a Section 754 election. You should consult your tax advisor as to the effects of the Section 754 election.

Uniformity of Common Units

        Because we cannot match transferors and transferees of common units, we will adopt depreciation, amortization and other tax accounting positions that may not conform with all aspects of existing Treasury regulations. A successful IRS challenge to those positions could adversely affect the amount of tax benefits available to our common unitholders. It also could affect the timing of these tax benefits or the amount of gain on the sale of common units and could have a negative impact on the value of our common units or result in audits of and adjustments to our common unitholders' tax returns.

Foreign Currency Gain or Loss

        Our functional currency will be the U.S. dollar, and our income or loss will be calculated in U.S. dollars. It is likely that we will recognize "foreign currency" gain or loss with respect to transactions involving non-U.S. dollar currencies. In general, foreign currency gain or loss is treated as ordinary income or loss. You should consult your tax advisor with respect to the tax treatment of foreign currency gain or loss.

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Passive Foreign Investment Companies

        You may be subject to special rules applicable to indirect investments in foreign corporations, including an investment in a PFIC.

        A PFIC is defined as any foreign corporation with respect to which either (1) 75% or more of the gross income for a taxable year is "passive income" or (2) 50% or more of its assets in any taxable year (generally based on the quarterly average of the value of its assets) produce "passive income." There are no minimum stock ownership requirements for PFICs. Once a corporation qualifies as a PFIC it is, subject to certain exceptions, always treated as a PFIC, regardless of whether it satisfies either of the qualification tests in subsequent years. Any gain on disposition of stock of a PFIC, as well as income realized on certain "excess distributions" by the PFIC, is treated as though realized ratably over the shorter of your holding period of common units or our holding period for the PFIC. Such gain or income is taxable as ordinary income and, as discussed above, dividends paid by a PFIC to an individual will not be eligible for the reduced rates of taxation that are available for certain qualifying dividends. In addition, an interest charge would be imposed on you based on the tax deferred from prior years.

        Although it may not always be possible, we expect to make a QEF election where possible with respect to each entity treated as a PFIC to treat such non-U.S. entity as a QEF in the first year we hold shares in such entity. A QEF election is effective for our taxable year for which the election is made and all subsequent taxable years and may not be revoked without the consent of the IRS. If we make a QEF election under the Internal Revenue Code with respect to our interest in a PFIC, in lieu of the foregoing treatment, we would be required to include in income each year a portion of the ordinary earnings and net capital gains of the QEF called "QEF Inclusions," even if not distributed to us. Thus, holders may be required to report taxable income as a result of QEF Inclusions without corresponding receipts of cash. However, a holder may elect to defer, until the occurrence of certain events, payment of the U.S. federal income tax attributable to QEF Inclusions for which no current distributions are received, but will be required to pay interest on the deferred tax computed by using the statutory rate of interest applicable to an extension of time for payment of tax. However, net losses (if any) of a non-U.S. entity owned through Blackstone Holdings III GP L.P. or Blackstone Holdings IV GP L.P. that is treated as a PFIC will not pass through to us or to holders and may not be carried back or forward in computing such PFIC's ordinary earnings and net capital gain in other taxable years. Consequently, holders may over time be taxed on amounts that as an economic matter exceed our net profits. Our tax basis in the shares of such non-U.S. entities, and a holder's basis in our common units, will be increased to reflect QEF Inclusions. No portion of the QEF Inclusion attributable to ordinary income will be eligible for reduced rates of taxation. Amounts included as QEF Inclusions with respect to direct and indirect investments generally will not be taxed again when actually distributed. You should consult your tax advisors as to the manner in which QEF Inclusions affect your allocable share of our income and your basis in your common units.

        Alternatively, in the case of a PFIC that is a publicly-traded foreign portfolio company, an election may be made to "mark to market" the stock of such foreign portfolio company on an annual basis. Pursuant to such an election, you would include in each year as ordinary income the excess, if any, of the fair market value of such stock over its adjusted basis at the end of the taxable year. You may treat as ordinary loss any excess of the adjusted basis of the stock over its fair market value at the end of the year, but only to the extent of the net amount previously included in income as a result of the election in prior years.

        We may make certain investments, including for instance investments in specialized investment funds or investments in funds of funds through non-U.S. corporate subsidiaries of Blackstone Holdings or through other non-U.S. corporations. Such an entity may be a PFIC for U.S. federal income tax purposes. In addition, certain of our investments could be in PFICs. Thus, we can make no assurance that some of our investments will not be treated as held through a PFIC or as interests in PFICs or

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that such PFICs will be eligible for the "mark to market" election, or that as to any such PFICs we will be able to make QEF elections.

        For purposes of determining whether we meet the Qualifying Income Exception, income we must include as a result of our interest in a QEF may constitute qualifying income only to the extent there is a distribution out of the earnings and profits of the taxable year attributable to the amounts so included.

        If we do not make a QEF election with respect to a PFIC, Section 1291 of the Code will treat all gain on a disposition by us of shares of such entity, gain on the disposition of common units by a holder at a time when we own shares of such entity, as well as certain other defined "excess distributions," as if the gain or excess distribution were ordinary income earned ratably over the shorter of the period during which the holder held its common units or the period during which we held our shares in such entity. For gain and excess distributions allocated to prior years, (i) the tax rate will be the highest in effect for that taxable year and (ii) the tax will be payable generally without regard to offsets from deductions, losses and expenses. Holders will also be subject to an interest charge for any deferred tax. No portion of this ordinary income will be eligible for the favorable tax rate applicable to "qualified dividend income" for individual U.S. persons.

Controlled Foreign Corporations

        A non-U.S. entity will be treated as a CFC if it is treated as a corporation for U.S. federal income tax purposes and if more than 50% of (i) the total combined voting power of all classes of stock of the non-U.S. entity entitled to vote or (ii) the total value of the stock of the non-U.S. entity is owned by U.S. Shareholders on any day during the taxable year of such non-U.S. entity. For purposes of this discussion, a "U.S. Shareholder" with respect to a non-U.S. entity means a U.S. person that owns 10% or more of the total combined voting power of all classes of stock of the non-U.S. entity entitled to vote.

        When making investment or other decisions, Blackstone Holdings III GP L.P. and Blackstone Holdings IV GP L.P. will consider whether an investment will be a CFC and the consequences related thereto. If we are a U.S. Shareholder in a non-U.S. entity that is treated as a CFC, each common unitholder generally may be required to include in income its allocable share of the CFC's "Subpart F" income reported by us. Subpart F income generally includes dividends, interest, net gain from the sale or disposition of securities, non-actively managed rents and certain other generally passive types of income. The aggregate Subpart F income inclusions in any taxable year relating to a particular CFC are limited to such entity's current earnings and profits. These inclusions are treated as ordinary income (whether or not such inclusions are attributable to net capital gains). Thus, an investor may be required to report as ordinary income its allocable share of the CFC's Subpart F income reported by us without corresponding receipts of cash and may not benefit from capital gain treatment with respect to the portion of our earnings (if any) attributable to net capital gains of the CFC.

        The tax basis of our shares of such non-U.S. entity, and a holder's tax basis in our common units, will be increased to reflect any required Subpart F income inclusions. Such income will be treated as income from sources within the United States, for certain foreign tax credit purposes, to the extent derived by the CFC from U.S. sources. Such income will not be eligible for the reduced rate of tax applicable to "qualified dividend income" for individual U.S. persons. See "—Consequences to U.S. Holders of Common Units". Amounts included as such income with respect to direct and indirect investments generally will not be taxable again when actually distributed.

        Regardless of whether any CFC has Subpart F income, any gain allocated to a common unitholder from our disposition of stock in a CFC will be treated as ordinary income to the extent of the holder's allocable share of the current and/or accumulated earnings and profits of the CFC. In this regard, earnings would not include any amounts previously taxed pursuant to the CFC rules. However, net

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losses (if any) of a non-U.S. entity owned by us that is treated as a CFC will not pass through to our holders.

        If a non-U.S. entity held by us is classified as both a CFC and a PFIC during the time we are a U.S. Shareholder of such non-U.S. entity, a holder will be required to include amounts in income with respect to such non-U.S. entity pursuant to this subheading, and the consequences described under the subheading "Passive Foreign Investment Companies" above will not apply. If our ownership percentage in a non-U.S. entity changes such that we are not a U.S. Shareholder with respect to such non-U.S. entity, then common unitholders may be subject to the PFIC rules. The interaction of these rules is complex, and prospective holders are urged to consult their tax advisors in this regard.

        For purposes of determining whether we meet the Qualifying Income Exception, income we must include as a result of our interest in a CFC may constitute qualifying income only to the extent there is a distribution out of the earnings and profits of the taxable year attributable to the amounts so included. It is expected that Blackstone Holdings V GP L.P. will be a CFC subject to the above rules.

Investment Structure

        To manage our affairs so as to meet the "qualifying income" exception for the publicly traded partnership rules (discussed above) and comply with certain requirements in our Limited Partnership Agreement, we may need to structure certain investments through an entity classified as a corporation for U.S. federal income tax purposes. Such investment structures will be entered into as determined in the sole discretion of the general partner in order to create a tax structure that generally is efficient for our common unitholders. However, because our common unitholders will be located in numerous taxing jurisdictions, no assurances can be given that any such investment structure will be beneficial to all our common unitholders to the same extent, and may even impose additional tax burdens on some of our common unitholders. As discussed above, if the entity were a non-U.S. corporation it may be considered a PFIC. If the entity were a U.S. corporation, it would be subject to U.S. federal income tax on its operating income, including any gain recognized on its disposal of its investments. In addition, if the investment involves U.S. real estate, gain recognized on disposition would generally be subject to such tax, whether the corporation is a U.S. or a non-U.S. corporation.

Taxes in Other State, Local, and non-U.S. Jurisdictions

        In addition to U.S. federal income tax consequences, you may be subject to potential U.S. state and local taxes because of an investment in us in the U.S. state or locality in which you are a resident for tax purposes or in which we have investments or activities. You may also be subject to tax return filing obligations and income, franchise or other taxes, including withholding taxes, in state, local or non-U.S. jurisdictions in which we invest, or in which entities in which we own interests conduct activities or derive income. Income or gains from investments held by us may be subject to withholding or other taxes in jurisdictions outside the United States, subject to the possibility of reduction under applicable income tax treaties. If you wish to claim the benefit of an applicable income tax treaty, you may be required to submit information to tax authorities in such jurisdictions. You should consult your own tax advisors regarding the U.S. state, local and non-U.S. tax consequences of an investment in us.

Transferor/Transferee Allocations

        In general, our taxable income and losses will be determined and apportioned among investors using conventions we regard as consistent with applicable law. As a result, if you transfer your common units, you may be allocated income, gain, loss and deduction realized by us after the date of transfer.

        Although Section 706 of the U.S. Internal Revenue Code generally provides guidelines for allocations of items of partnership income and deductions between transferors and transferees of partnership interests, it is not clear that our allocation method complies with its requirements. If our convention were not permitted, the IRS might contend that our taxable income or losses must be

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reallocated among the investors. If such a contention were sustained, your respective tax liabilities would be adjusted to your possible detriment. Our general partner is authorized to revise our method of allocation between transferors and transferees (as well as among investors whose interests otherwise vary during a taxable period).

U.S. Federal Estate Taxes

        If common units are included in the gross estate of a U.S. citizen or resident for U.S. federal estate tax purposes, then a U.S. federal estate tax might be payable in connection with the death of such person. Prospective individual U.S. Holders should consult their own tax advisors concerning the potential U.S. federal estate tax consequences with respect to our common units.

U.S. Taxation of Tax-Exempt U.S. Holders of Common Units

        A holder of common units that is a tax-exempt organization for U.S. federal income tax purposes and therefore generally exempt from U.S. federal income taxation, may nevertheless be subject to "unrelated business income tax" to the extent, if any, that its allocable share of our income consists of UBTI. A tax-exempt partner of a partnership that regularly engages in a trade or business which is unrelated to the exempt function of the tax-exempt partner must include in computing its UBTI its pro rata share (whether or not distributed) of such partnership's gross income derived from such unrelated trade or business. Moreover, a tax-exempt partner of a partnership could be treated as earning UBTI to the extent that such partnership derives income from "debt-financed property," or if the partnership interest itself is debt financed. Debt-financed property means property held to produce income with respect to which there is "acquisition indebtedness" (that is, indebtedness incurred in acquiring or holding property).

        Because we are under no obligation to minimize UBTI, tax-exempt U.S. Holders of common units should consult their own tax advisors regarding all aspects of UBTI.

Investments by U.S. Mutual Funds

        U.S. mutual funds that are treated as regulated investment companies, or "RICs," for U.S. federal income tax purposes are required, among other things, to meet an annual 90% gross income and a quarterly 50% asset value test under Section 851(b) of the U.S. Internal Revenue Code to maintain their favorable U.S. federal income tax status. The treatment of an investment by a RIC in common units for purposes of these tests will depend on whether we are treated as a "qualifying publicly traded partnership." If our partnership is so treated, then the common units themselves are the relevant assets for purposes of the 50% asset value test and the net income from the common units is the relevant gross income for purposes of the 90% gross income test. RICs may not invest greater than 25% of their assets in one or more qualifying publicly traded partnerships. All income derived from a qualifying publicly traded partnership is considered qualifying income for purposes of the RIC 90% gross income test above. However, if we are not treated as a qualifying publicly traded partnership for purposes of the RIC rules, then the relevant assets for the RIC asset test will be the RIC's allocable share of the underlying assets held by us and the relevant gross income for the RIC income test will be the RIC's allocable share of the underlying gross income earned by us. Whether we will qualify as a "qualifying publicly traded partnership" depends on the exact nature of our future investments, but it is likely that we will not be treated as a "qualifying publicly traded partnership." RICs should consult their own tax advisors about the U.S. tax consequences of an investment in common units.

Consequences to Non-U.S. Holders of Common Units

U.S. Income Tax Consequences

        In light of our intended investment activities, we may be or may become engaged in a U.S. trade or business for U.S. federal income tax purposes, in which case some portion of our income would be treated as ECI with respect to non-U.S. Holders. If a non-U.S. Holder were treated as being engaged

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in a U.S. trade or business in any year because of an investment in our common units in such year, such non-U.S. Holder generally would be (1) subject to withholding by us on any actual distributions, (2) required to file a U.S. federal income tax return for such year reporting its allocable share, if any, of income or loss effectively connected with such trade or business, including certain income from U.S. sources not related to The Blackstone Group L.P. and (3) required to pay U.S. federal income tax at regular U.S. federal income tax rates on any such income. Moreover, a corporate non-U.S. Holder might be subject to a U.S. branch profits tax on its allocable share of its ECI. Any amount so withheld would be creditable against such non-U.S. Holder's U.S. federal income tax liability, and such non-U.S. Holder could claim a refund to the extent that the amount withheld exceeded such non-U.S. Holder's U.S. federal income tax liability for the taxable year. Finally, if we were treated as being engaged in a U.S. trade or business, a portion of any gain recognized by a holder who is a non-U.S. Holder on the sale or exchange of its common units could be treated for U.S. federal income tax purposes as ECI, and hence such non-U.S. Holder could be subject to U.S. federal income tax on the sale or exchange.

        Although each non-U.S. Holder is required to provide an IRS Form W-8, we may not be able to provide complete information related to the tax status of our investors to Blackstone Holdings for purposes of obtaining reduced rates of withholding on behalf of our investors. Accordingly, to the extent we receive dividends from a U.S. corporation through Blackstone Holdings and its investment vehicles, your allocable share of distributions of such dividend income will be subject to U.S. withholding tax at a rate of 30%, unless relevant tax status information is provided. Distributions to you may also be subject to withholding to the extent they are attributable to the sale of a U.S. real property interest or if the distribution is otherwise considered fixed or determinable annual or periodic income under the Internal Revenue Code, provided that an exemption from or a reduced rate of such withholding may apply if certain tax status information is provided. If such information is not provided and you would not be subject to U.S. tax based on your tax status or are eligible for a reduced rate of U.S. withholding, you may need to take additional steps to receive a credit or refund of any excess withholding tax paid on your account, which may include the filing of a non-resident U.S. income tax return with the IRS. Among other limitations, if you reside in a treaty jurisdiction which does not treat our partnership as a pass-through entity, you may not be eligible to receive a refund or credit of excess U.S. withholding taxes paid on your account. You should consult your tax advisors regarding the treatment of U.S. withholding taxes.

        Special rules may apply in the case of a non-U.S. Holder that (1) has an office or fixed place of business in the U.S., (2) is present in the U.S. for 183 days or more in a taxable year or (3) is a former citizen of the U.S., a foreign insurance company that is treated as holding a partnership interests in us in connection with their U.S. business, a PFIC or a corporation that accumulates earnings to avoid U.S. federal income tax. You should consult your tax advisors regarding the application of these special rules.

U.S. Federal Estate Tax Consequences

        The U.S. federal estate tax treatment of our common units with regards to the estate of a non-citizen who is not a resident of the United States is not entirely clear. If our common units are includable in the U.S. gross estate of such person, then a U.S. federal estate tax might be payable in connection with the death of such person. Prospective individual non-U.S. Holders who are non-citizens and not residents of the United States should consult their own tax advisors concerning the potential U.S. federal estate tax consequences with regard to our units.

Administrative Matters

Taxable Year

        We currently intend to use the calendar year as our taxable year for U.S. federal income tax purposes. Under certain circumstances which we currently believe are unlikely to apply, a taxable year other than the calendar year may be required for such purposes.

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Tax Matters Partner

        Our general partner will act as our "tax matters partner." As the tax matters partner, the general partner will have the authority, subject to certain restrictions, to act on our behalf in connection with any administrative or judicial review of our items of income, gain, loss, deduction or credit.

Information Returns

        We have agreed to furnish to you, as soon as reasonably practicable after the close of each calendar year, tax information (including Schedule K-1), which describes on a U.S. dollar basis your share of our income, gain, loss and deduction for our preceding taxable year. It will most likely require longer than 90 days after the end of our fiscal year to obtain the requisite information from all lower-tier entities so that K-1s may be prepared for the Partnership. Consequently, holders of common units who are U.S. taxpayers should anticipate the need to file annually with the IRS (and certain states) a request for an extension past April 15 or the otherwise applicable due date of their income tax return for the taxable year. In addition, each partner will be required to report for all tax purposes consistently with the information provided by us for the taxable year.

        In preparing this information, we will use various accounting and reporting conventions, some of which have been mentioned in the previous discussion, to determine your share of income, gain, loss and deduction. The IRS may successfully contend that certain of these reporting conventions are impermissible, which could result in an adjustment to your income or loss.

        We may be audited by the IRS. Adjustments resulting from an IRS audit may require you to adjust a prior year's tax liability and possibly may result in an audit of your own tax return. Any audit of your tax return could result in adjustments not related to our tax returns as well as those related to our tax returns.

Tax Shelter Regulations

        If we were to engage in a "reportable transaction," we (and possibly you and others) would be required to make a detailed disclosure of the transaction to the IRS in accordance with recently issued regulations governing tax shelters and other potentially tax-motivated transactions. A transaction may be a reportable transaction based upon any of several factors, including the fact that it is a type of tax avoidance transaction publicly identified by the IRS as a "listed transaction" or that it produces certain kinds of losses in excess of $2 million. An investment in us may be considered a "reportable transaction" if, for example, we recognize certain significant losses in the future. In certain circumstances, a common unitholder who disposes of an interest in a transaction resulting in the recognition by such holder of significant losses in excess of certain threshold amounts may be obligated to disclose its participation in such transaction. Our participation in a reportable transaction also could increase the likelihood that our U.S. federal income tax information return (and possibly your tax return) would be audited by the IRS. Certain of these rules are currently unclear and it is possible that they may be applicable in situations other than significant loss transactions.

        Moreover, if we were to participate in a reportable transaction with a significant purpose to avoid or evade tax, or in any listed transaction, you may be subject to (i) significant accuracy-related penalties with a broad scope, (ii) for those persons otherwise entitled to deduct interest on federal tax deficiencies, nondeductibility of interest on any resulting tax liability, and (iii) in the case of a listed transaction, an extended statute of limitations.

        Common unitholders should consult their tax advisors concerning any possible disclosure obligation under the regulations governing tax shelters with respect to the dispositions of their interests in us.

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Constructive Termination

        Subject to the electing large partnership rules described below, we will be considered to have been terminated for U.S. federal income tax purposes if there is a sale or exchange of 50% or more of the total interests in our capital and profits within a 12-month period.

        Our termination would result in the close of our taxable year for all holders of common units. In the case of a holder reporting on a taxable year other than a fiscal year ending on our year-end, the closing of our taxable year may result in more than 12 months of our taxable income or loss being includable in the holder's taxable income for the year of termination. We would be required to make new tax elections after a termination, including a new tax election under Section 754 of the Code. A termination could also result in penalties if we were unable to determine that the termination had occurred. Moreover, a termination might either accelerate the application of, or subject us to, any tax legislation enacted before the termination.

Elective Procedures for Large Partnerships

        The U.S. Internal Revenue Code allows large partnerships to elect streamlined procedures for income tax reporting. This election would reduce the number of items that must be separately stated on the Schedules K-1 that are issued to the common unitholders, and such Schedules K-1 would have to be provided to common unitholders on or before the first March 15 following the close of each taxable year. In addition, this election would prevent us from suffering a "technical termination" (which would close our taxable year) if within a 12-month period there is a sale or exchange of 50 percent or more of our total interests. It is possible we might make such an election, if eligible. If we make such election, IRS audit adjustments will flow through to holders of the common units for the year in which the adjustments take effect, rather than the holders of common units in the year to which the adjustment relates. In addition, we, rather than the holders of the common units individually, generally will be liable for any interest and penalties that result from an audit adjustment.

Backup Withholding

        For each calendar year, we will report to you and to the IRS the amount of distributions that we pay, and the amount of tax (if any) that we withhold on these distributions. Under the backup withholding rules, you may be subject to backup withholding tax (at the applicable rate, currently 28%) with respect to distributions paid unless: (1) you are a corporation or come within another exempt category and demonstrate this fact when required or (2) you provide a taxpayer identification number, certify as to no loss of exemption from backup withholding tax and otherwise comply with the applicable requirements of the backup withholding tax rules. If you are an exempt holder, you should indicate your exempt status on a properly completed IRS Form W-9. A non-U.S. Holder may qualify as an exempt recipient by submitting a properly completed IRS Form W-8BEN. Backup withholding is not an additional tax. The amount of any backup withholding from a payment to you will be allowed as a credit against your U.S. federal income tax liability and may entitle you to a refund.

        If you do not timely provide us (or the clearing agent or other intermediary, as appropriate) with IRS Form W-8 or W-9, as applicable, or such form is not properly completed, we may become subject to U.S. backup withholding taxes in excess of what would have been imposed had we received certifications from all investors. Such excess U.S. backup withholding taxes may be treated by us as an expense that will be borne by all investors on a pro rata basis (since we may be unable to allocate any such excess withholding tax cost to the holders that failed to timely provide the proper U.S. tax certifications).

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Nominee Reporting

        Persons who hold an interest in our partnership as a nominee for another person are required to furnish to us:

        Brokers and financial institutions are required to furnish additional information, including whether they are U.S. persons and specific information on common units they acquire, hold or transfer for their own account. A penalty of $50 per failure, up to a maximum of $100,000 per calendar year, is imposed by the Internal Revenue Code for failure to report that information to us. The nominee is required to supply the beneficial owner of the common units with the information furnished to us.

New Legislation or Administrative or Judicial Action

        The rules dealing with U.S. federal income taxation are constantly under review by persons involved in the legislative process, the IRS and the U.S. Treasury Department, frequently resulting in revised interpretations of established concepts, statutory changes, revisions to regulations and other modifications and interpretations. No assurance can be given as to whether, or in what form, any proposals affecting us or our common unitholders will be enacted. The IRS pays close attention to the proper application of tax laws to partnerships. The present U.S. federal income tax treatment of an investment in our common units may be modified by administrative, legislative or judicial interpretation at any time, and any such action may affect investments and commitments previously made. For example, changes to the U.S. federal income tax laws and interpretations thereof could make it more difficult or impossible to meet the qualifying income exception for us to be treated as a partnership that is not taxable as a corporation for U.S. federal income tax purposes, or could tax carried interest as ordinary income rather than as capital gains. We and our common unitholders could be adversely affected by any such change in, or any new, tax law, regulation or interpretation. Our organizational documents and agreements permit the board of directors to modify the amended and restated operating agreement from time to time, without the consent of the common unitholders, in order to address certain changes in U.S. federal income tax regulations, legislation or interpretation. In some circumstances, such revisions could have a material adverse impact on some or all of our common unitholders.

        THE FOREGOING DISCUSSION IS NOT INTENDED AS A SUBSTITUTE FOR CAREFUL TAX PLANNING. THE TAX MATTERS RELATING TO BLACKSTONE AND ITS UNITHOLDERS ARE COMPLEX AND ARE SUBJECT TO VARYING INTERPRETATIONS. MOREOVER, THE EFFECT OF EXISTING INCOME TAX LAWS, THE MEANING AND IMPACT OF WHICH IS UNCERTAIN AND OF PROPOSED CHANGES IN INCOME TAX LAWS WILL VARY WITH THE PARTICULAR CIRCUMSTANCES OF EACH PROSPECTIVE HOLDER AND IN REVIEWING THIS PROSPECTUS THESE MATTERS SHOULD BE CONSIDERED. PROSPECTIVE UNITHOLDERS SHOULD CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE FEDERAL, STATE, LOCAL AND OTHER TAX CONSEQUENCES OF ANY INVESTMENT IN THE COMMON UNITS.

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UNDERWRITERS

        Morgan Stanley & Co. Incorporated and Citigroup Global Markets Inc. are acting as global coordinators and representatives of the underwriters and, together with Merrill Lynch, Pierce, Fenner & Smith Incorporated, Credit Suisse Securities (USA) LLC, Lehman Brothers Inc. and Deutsche Bank Securities Inc., are acting as joint book-running managers of this offering.

        We and the underwriters named below have entered into an underwriting agreement covering the common units to be sold in this offering. Subject to the terms and conditions of the underwriting agreement, we have agreed to sell to the underwriters, and each underwriter has severally agreed to purchase, at the initial public offering price less the underwriting discounts and commissions set forth on the cover page of this prospectus, the number of common units listed next to its name in the following table:

Underwriters
   Number of
Common Units
Morgan Stanley & Co. Incorporated    
Citigroup Global Markets Inc.    
Merrill Lynch, Pierce, Fenner & Smith
                  Incorporated		    
Credit Suisse Securities (USA) LLC    
Lehman Brothers Inc.    
Deutsche Bank Securities Inc.    
   
  Total    
   

        The underwriters are offering the common units subject to their acceptance of the common units from us and subject to prior sale. The underwriting agreement provides that the obligations of the several underwriters to pay for and accept delivery of the common units offered by this prospectus are subject to the approval of certain legal matters by their counsel and to certain other conditions. The underwriters are obligated to take and pay for all of the common units offered by this prospectus if any such common units are taken. However, the underwriters are not required to take or pay for the common units covered by the underwriters' over-allotment option described below.

        The underwriters initially propose to offer part of the common units directly to the public at the public offering price listed on the cover page of this prospectus and part to certain dealers at a price that represents a concession not in excess of $            a unit under the public offering price. After the initial offering of the common units, the offering price and other selling terms may from time to time be varied by the representatives.

        We have granted to the underwriters an option, exercisable for 30 days from the date of this prospectus, to purchase up to an aggregate of                        additional common units at the public offering price listed on the cover page of this prospectus, less underwriting discounts. The underwriters may exercise this option solely for the purpose of covering over-allotments, if any, made in connection with the offering of the common units offered by this prospectus. To the extent the option is exercised, each underwriter will become obligated, subject to specified conditions, to purchase approximately the same percentage of common units as the number listed next to the underwriter's name in the preceding table bears to the total number of common units listed next to the names of all underwriters in the preceding table. If the underwriters' option is exercised in full, the total price to the public would be $            , the total underwriters' discounts would be $            and the total proceeds to us would be $            .

        The underwriters have informed us that they do not expect sales to discretionary accounts to exceed five percent of the total number of common units offered.

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        We and all of the directors and officers of our general partner have agreed that without the prior written consent of Morgan Stanley & Co. Incorporated and Citigroup Global Markets Inc. on behalf of the underwriters, we and they will not, during the period ending 120 days after the date of this prospectus:

        whether any such transaction described above is to be settled by delivery of common units or such other securities, in cash or otherwise. In addition, we have agreed that, without the prior written consent of Morgan Stanley & Co. Incorporated and Citigroup Global Markets Inc. on behalf of the underwriters, we will not file any registration statement with the SEC relating to the offering of any common units or any securities convertible into or exercisable or exchangeable for common units (other than any registration statement on Form S-8 to register common units issued or reserved for issuance under our 2007 Equity Incentive Plan). All of the directors and officers of our general partner have also agreed that, without the prior written consent of Morgan Stanley & Co. Incorporated and Citigroup Global Markets Inc. on behalf of the underwriters, they will not during the period ending 120 days after the date of this prospectus, make any demand for, or exercise any right with respect to, the registration of any common units or any securities convertible into or exercisable or exchangeable for common units.

        The 120-day restricted period described in the preceding paragraph will be extended if:

in which case the restrictions described in the preceding paragraph will continue to apply until the expiration of the 18-day period beginning on the issuance of the earnings release or the occurrence of the material news or material event. These restrictions do not apply to certain sales, issuances, distributions and transfers. See "Common Units Eligible for Future Sale—Lock-Up Arrangements".

        The following table shows the per common unit and total underwriting discounts payable by us. The amounts are shown assuming both no exercise and full exercise of the underwriters' option to purchase up to an additional                        common units.

 
   Paid by Us
 
   No Exercise
   Full Exercise
Per common unit   $     $  
Total   $     $  

        In addition, we estimate that the expenses of this offering payable by us, other than underwriting discounts, will be approximately $            .

        In order to facilitate the offering of the common units, the underwriters may engage in transactions that stabilize, maintain or otherwise affect the price of the common units. The underwriters may sell more common units than they are obligated to purchase under the underwriting agreement, creating a short position. A short sale is covered if the short position is no greater than the

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number of common units available for purchase by the underwriters under their over-allotment option. The underwriters can close out a covered short sale by exercising their over-allotment option or purchasing common units in the open market. In determining the source of common units to close out a covered short sale, the underwriters will consider, among other things, the open market price of common units compared to the price available under their over-allotment option. The underwriters may also sell common units in excess of their over-allotment option, creating a naked short position. The underwriters must close out any naked short position by purchasing common units in the open market. A naked short position is more likely to be created if the underwriters are concerned that there may be downward pressure on the price of the common units in the open market after pricing that could adversely affect investors who purchase in the offering. In addition, to stabilize the price of the common units, the underwriters may bid for and purchase common units in the open market. Finally, the underwriting syndicate may reclaim selling concessions allowed to an underwriter or a dealer for distributing the common units in the offering, if the syndicate repurchases previously distributed common units to cover syndicate short positions or to stabilize the price of the common units. These activities may raise or maintain the market price of the common units above independent market levels or prevent or retard a decline in the market price of the common units. The underwriters are not required to engage in these activities, and may end any of these activities at any time.

        We intend to apply to list the common units on the New York Stock Exchange under the symbol "            ."

        Affiliates of some of the underwriters own limited partnership interests in some of our investment funds. Affiliates of the underwriters have participated, or in the future may participate, in co-investments with our investment funds in portfolio companies of these investment funds. In addition, each of the underwriters or their respective affiliates have performed, and are likely to continue in the future to perform, various investment banking, financial advisory and lending services for us, our investment funds and our funds' portfolio companies, for which they have received and are likely to continue in the future to receive customary fees and such fees in the aggregate may be substantial.

        We intend to use approximately $             million of the net proceeds from this offering to repay all outstanding borrowings under our revolving credit facility. Affiliates of Citigroup Global Markets Inc. and Credit Suisse Securities (USA) LLC are participating lenders in our revolving credit facility and will indirectly receive $             million of the proceeds used to repay these borrowings.

        A prospectus in electronic format may be made available on the websites maintained by one or more underwriters. The representatives may agree to allocate a number of common units to underwriters for sale to their online brokerage account holders. Internet distributions will be allocated by the representatives to underwriters that may make Internet distributions on the same basis as other allocations. Other than the prospectus in electronic format, the information on any underwriter's or selling group member's website and any information contained in any other website maintained by an underwriter or selling group member is not part of the prospectus or the registration statement of which this prospectus forms a part, has not been approved or endorsed by us or any underwriter or selling group member in its capacity as underwriter or selling group member and should not be relied upon by investors.

        We and the underwriters have agreed to indemnify each other against certain liabilities, including liabilities under the Securities Act.

Directed Sale Program

        At our request, the underwriters have reserved for sale, at the initial public offering price, up to                        common units offered in this prospectus for our non-senior managing director, employees, limited partners in our investment funds and others having a significant business relationship with Blackstone. Persons who purchase such reserved common units will be required to

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agree, during the period ending 120 days after purchasing such common units, not to sell, transfer, assign, pledge or hypothecate such common units. This lock-up period will be extended if during the last 17 days of the lock-up period we issue a release about earnings or material news or events relating to us occurs, or, prior to the expiration of the lock-up period, we announce that we will release earnings results during the 16-day period beginning on the last day of the lock-up period, in which case the restrictions described above will continue to apply until the expiration of the 18-day period beginning on the issuance of the release or the occurrence of the material news or material event.

        The number of common units available for sale to the general public will be reduced to the extent such persons purchase such reserved common units. Any reserved common units that are not so purchased will be offered by the underwriters to the general public on the same basis as the other common units offered in this prospectus.

Pricing of the Offering

        Prior to this offering, there has been no public market for our common units. The initial public offering price will be determined by negotiations between us and the representatives. Among the factors to be considered in determining the initial public offering price will be our future prospects and those of our industry in general, our sales, earnings and other financial operating information in recent periods, and the price-earnings ratios, price-sales ratios, market prices of securities and financial and operating information of companies engaged in activities similar to ours. The estimated initial public offering price range set forth on the cover page of this preliminary prospectus is subject to change as a result of market conditions and other factors.


LEGAL MATTERS

        The validity of the common units will be passed upon for us by Simpson Thacher & Bartlett LLP, New York, New York. An investment vehicle composed of certain partners of Simpson Thacher & Bartlett LLP, members of their families, related parties and others own an interest representing less than 1% of the capital commitments of investment funds managed by Blackstone. Certain legal matters in connection with this offering will be passed upon for the underwriters by Skadden, Arps, Slate, Meagher & Flom LLP, New York, New York.


EXPERTS

        The statement of financial condition of The Blackstone Group L.P. as of March 19, 2007, included in this prospectus has been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their report appearing herein, and has been so included in reliance upon the report of such firm given upon their authority as experts in accounting and auditing.

        The statement of financial condition of Blackstone Group Management L.L.C. as of March 19, 2007, included in this prospectus has been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their report appearing herein, and has been so included in reliance upon the report of such firm given upon their authority as experts in accounting and auditing.

        The combined financial statements of Blackstone Group as of December 31, 2005 and 2006, and for each of the three years in the period ended December 31, 2006, included in this prospectus have been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their report appearing herein, and have been so included in reliance upon the report of such firm given upon their authority as experts in accounting and auditing.

220



WHERE YOU CAN FIND MORE INFORMATION

        We have filed with the Securities and Exchange Commission a registration statement on Form S-1 under the Securities Act with respect to the common units offered in this prospectus. This prospectus, filed as part of the registration statement, does not contain all of the information set forth in the registration statement and its exhibits and schedules, portions of which have been omitted as permitted by the rules and regulations of the Securities and Exchange Commission. For further information about us and our common units, we refer you to the registration statement and to its exhibits and schedules. Statements in this prospectus about the contents of any contract, agreement or other document are not necessarily complete and in each instance we refer you to the copy of such contract, agreement or document filed as an exhibit to the registration statement, with each such statement being qualified in all respects by reference to the document to which it refers. Anyone may inspect the registration statement and its exhibits and schedules without charge at the public reference facilities the Securities and Exchange Commission maintains at 100 F Street, N.E., Washington, D.C. 20549. You may obtain copies of all or any part of these materials from the Securities and Exchange Commission upon the payment of certain fees prescribed by the Securities and Exchange Commission. You may obtain further information about the operation of the Securities and Exchange Commission's Public Reference Room by calling the Securities and Exchange Commission at 1-800-SEC-0330. You may also inspect these reports and other information without charge at a website maintained by the Securities and Exchange Commission. The address of this site is http://www.sec.gov.

        Upon completion of this offering, we will become subject to the informational requirements of the Securities Exchange Act of 1934, as amended, and will be required to file reports and other information with the Securities and Exchange Commission. You will be able to inspect and copy these reports and other information at the public reference facilities maintained by the Securities and Exchange Commission at the address noted above. You also will be able to obtain copies of this material from the Public Reference Room of the Securities and Exchange Commission as described above, or inspect them without charge at the Securities and Exchange Commission's website. We intend to make available to our common unitholders annual reports containing consolidated financial statements audited by an independent registered public accounting firm.

221


INDEX TO FINANCIAL STATEMENTS

 
   Page
The Blackstone Group L.P.:    

Report of Independent Registered Public Accounting Firm
 
F-2
Statement of Financial Condition as of March 19, 2007   F-3
Notes to Statement of Financial Condition   F-3

Blackstone Group Management L.L.C.:
 
 

Report of Independent Registered Public Accounting Firm
 
F-4
Statement of Financial Condition as of March 19, 2007   F-5
Notes to Statement of Financial Condition   F-5

Blackstone Group*:
 
 

Report of Independent Registered Public Accounting Firm
 
F-6
Combined Financial Statements—December 31, 2006, 2005 and 2004:    
  Combined Statements of Financial Condition as of December 31, 2006 and 2005   F-7
  Combined Statements of Income for the Years Ended December 31, 2006, 2005 and 2004   F-8
  Combined Statements of Changes in Partners' Capital for the Years Ended December 31, 2006, 2005 and 2004   F-9
  Combined Statements of Cash Flows for the Years Ended December 31, 2006, 2005 and 2004   F-10
  Notes to Combined Financial Statements   F-11
*
The combined financial statements reflect the historical results of operations and financial position of Blackstone Group for all periods presented. Accordingly, the historical financial statements do not reflect what the results of operations and financial position of Blackstone Group would have been had Blackstone Group been a stand-alone, public company for the periods presented. Please see Unaudited Pro Forma Financial Information.

F-1


Report of Independent Registered Public Accounting Firm

To the Partners of The Blackstone Group L.P.:

        We have audited the accompanying statement of financial condition of The Blackstone Group L.P. (the "Partnership"), as of March 19, 2007. This financial statement is the responsibility of the Partnership's management. Our responsibility is to express an opinion on this financial statement based on our audit.

        We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statement is free of material misstatement. The Partnership is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Partnership's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statement, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

        In our opinion, such financial statement presents fairly, in all material respects, the financial position of The Blackstone Group L.P. as of March 19, 2007, in conformity with accounting principles generally accepted in the United States of America.

/s/ Deloitte & Touche LLP

New York, New York
March 21, 2007

F-2


THE BLACKSTONE GROUP L.P.

Statement of Financial Condition

As of March 19, 2007

Assets    
  Cash   $1
   
Partners' Capital    
  Partners' Capital   $1
   


Notes to Statement of Financial Condition

1.    ORGANIZATION

        The Blackstone Group L.P. (the "Partnership") was formed as a Delaware limited partnership on March 12, 2007. Pursuant to a reorganization into a holding partnership structure, the Partnership will become a holding partnership and its sole assets are expected to be a controlling equity interest through wholly-owned subsidiary entities in Blackstone Holdings I L.P., Blackstone Holdings II L.P., Blackstone Holdings III L.P., Blackstone Holdings IV L.P. and Blackstone Holdings V L.P. (collectively, "Blackstone Holdings"). Through wholly-owned subsidiary entities, the Partnership will be the sole general partner of Blackstone Holdings and will operate and control all of the businesses and affairs of Blackstone Holdings and, through Blackstone Holdings and its subsidiaries, continue to conduct the business now conducted by these subsidiaries. Blackstone Group Management L.L.C. is the general partner of the Partnership.

2.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

        Basis of Accounting—The Statement of Financial Condition has been prepared in accordance with accounting principles generally accepted in the United States of America. Separate Statements of Income, Changes in Partners' Capital and of Cash Flows have not been presented in the financial statement because there have been no activities of this entity.

3.    PARTNERS' CAPITAL

        Blackstone Group Limited Partner L.L.C., a wholly-owned subsidiary of Blackstone Group Management L.L.C., is the organizational limited partner of the Partnership, and contributed $1 to the Partnership on the date of formation.

F-3


Report of Independent Registered Public Accounting Firm

To the Members of Blackstone Group Management L.L.C.:

        We have audited the accompanying statement of financial condition of Blackstone Group Management L.L.C. (the "Company") as of March 19, 2007. This financial statement is the responsibility of the Company's management. Our responsibility is to express an opinion on this financial statement based on our audit.

        We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statement is free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statement, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

        In our opinion, such financial statement presents fairly, in all material respects, the financial position of Blackstone Group Management L.L.C. as of March 19, 2007, in conformity with accounting principles generally accepted in the United States of America.

/s/ Deloitte & Touche LLP

New York, New York
March 21, 2007

F-4


BLACKSTONE GROUP MANAGEMENT L.L.C.

Statement of Financial Condition

As of March 19, 2007

Assets      
  Cash   $ 1
   
Members' Capital      
  Members' Capital   $ 1
   


Notes to Statement of Financial Condition

1.    ORGANIZATION

        Blackstone Group Management L.L.C. (the "Company") was formed as a Delaware limited liability company on March 12, 2007. The Company has been established to be the general partner of The Blackstone Group L.P.

2.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

        Basis of Accounting—The Statement of Financial Condition has been prepared in accordance with accounting principles generally accepted in the United States of America. Separate Statements of Income, Changes in Members' Capital and of Cash Flows have not been presented in the financial statement because there have been no activities of this entity.

F-5


Report of Independent Registered Public Accounting Firm

To the Partners of Blackstone Group:

        We have audited the accompanying combined statements of financial condition of Blackstone Group (the "Company"), as of December 31, 2006 and 2005, and the related combined statements of income, changes in partners' capital and of cash flows for each of the three years in the period ended December 31, 2006. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

        We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

        In our opinion, such combined financial statements present fairly, in all material respects, the combined financial position of Blackstone Group as of December 31, 2006 and 2005, and the combined results of their operations and their combined cash flows for each of the three years in the period ended December 31, 2006, in conformity with accounting principles generally accepted in the United States of America.

/s/ Deloitte & Touche LLP

New York, New York
March 21, 2007

F-6


BLACKSTONE GROUP

Combined Statements of Financial Condition

(Dollars in Thousands)

 
   December 31,
 
   2006
   2005
Assets            
Cash and Cash Equivalents   $ 129,443   $ 86,414
Cash Held at Consolidated Entities     810,725     363,657
Investments, at Fair Value     31,263,573     20,072,582
Accounts Receivable     656,165     168,841
Due from Brokers     398,196     —
Investment Subscriptions Paid in Advance     280,917     214,437
Due from Affiliates     257,225     159,889
Other Assets     94,800     55,304
   
 
    Total Assets   $ 33,891,044   $ 21,121,124
   
 

Liabilities and Partners' Capital
 
 
 
 
 
 
Loans Payable   $ 975,981   $ 837,627
Amounts Due to Non-Controlling Interest Holders     647,418     1,043,914
Securities Sold, Not Yet Purchased     422,788     —
Due to Affiliates     103,428     42,122
Accrued Compensation and Benefits     66,301     46,044
Accounts Payable, Accrued Expenses and Other Liabilities     157,355     113,064
   
 
    Total Liabilities     2,373,271     2,082,771
   
 
Commitments and Contingencies            

Non-Controlling Interests in Consolidated Entities
 
 
28,794,894
 
 
17,213,408
   
 

Partners' Capital
 
 
 
 
 
 
  Partners' Capital     2,712,605     1,818,749
  Accumulated Other Comprehensive Income     10,274     6,196
   
 
    Total Partners' Capital     2,722,879     1,824,945
   
 
      Total Liabilities and Partners' Capital   $ 33,891,044   $ 21,121,124
   
 

See notes to combined financial statements.

F-7


BLACKSTONE GROUP

Combined Statements of Income

(Dollars in Thousands)

 
   Year Ended December 31,
 
   2006
   2005
   2004
Revenues                  
  Fund Management Fees   $ 852,283   $ 370,574   $ 390,645
  Advisory Fees     256,914     120,137     108,356
  Interest and Other     11,082     6,037     4,462
   
 
 
    Total Revenues     1,120,279     496,748     503,463
   
 
 
Expenses                  
  Employee Compensation and Benefits     250,067     182,605     139,512
  Interest     36,932     23,830     16,239
  Occupancy and Related Charges     35,862     30,763     29,551
  General, Administrative and Other     86,534     56,650     48,576
  Fund Expenses     143,695     67,972     43,123
   
 
 
    Total Expenses     553,090     361,820     277,001
   
 
 

Other Income
 
 
 
 
 
 
 
 
 
  Net Gains from Investment Activities     7,587,296     5,142,530     6,214,519
   
 
 
Income Before Non-Controlling Interests in Income of Consolidated Entities and Income Taxes     8,154,485     5,277,458     6,440,981

Non-Controlling Interests in Income of Consolidated Entities
 
 
5,856,345
 
 
3,934,535
 
 
4,901,547
   
 
 
Income Before Taxes     2,298,140     1,342,923     1,539,434

Income Taxes
 
 
31,934
 
 
12,260
 
 
16,120
   
 
 
    Net Income   $ 2,266,206   $ 1,330,663   $ 1,523,314
   
 
 

See notes to combined financial statements.

F-8


BLACKSTONE GROUP

Combined Statements of Changes in Partners' Capital

(Dollars in Thousands)

 
   Partners' Capital
   Accumulated
Other
Comprehensive
Income (Loss)
   Total Partners'
Capital
  
Balance—at January 1, 2004   $ 1,087,942   $ (7,339 ) $ 1,080,603  
               
 
  Comprehensive Income                    
    Net Income     1,523,314           1,523,314  
    Other Comprehensive Income                    
      Currency Translation Adjustment           1,026     1,026  
      Net Unrealized Gain on Cash Flow Hedges           6,731     6,731  
               
 
  Total Comprehensive Income                 1,531,071  
  Capital Contributions     49,110           49,110  
  Capital Distributions     (724,353 )         (724,353 )
   
 
 
 
Balance—at December 31, 2004     1,936,013     418     1,936,431  
               
 
  Comprehensive Income                    
    Net Income     1,330,663           1,330,663  
    Other Comprehensive Income                    
      Currency Translation Adjustment           (2,045 )   (2,045 )
      Net Unrealized Gain on Cash Flow Hedges           7,823     7,823  
               
 
  Total Comprehensive Income                 1,336,441  
  Capital Contributions     119,151           119,151  
  Capital Distributions     (1,567,078 )         (1,567,078 )
   
 
 
 
Balance—at December 31, 2005     1,818,749     6,196     1,824,945  
               
 
  Comprehensive Income                    
    Net Income     2,266,206           2,266,206  
    Other Comprehensive Income                    
      Currency Translation Adjustment           4,098     4,098  
      Net Unrealized Loss on Cash Flow Hedges           (20 )   (20 )
               
 
  Total Comprehensive Income                 2,270,284  
  Capital Contributions     212,594           212,594  
  Capital Distributions     (1,584,944 )         (1,584,944 )
   
 
 
 
Balance—at December 31, 2006   $ 2,712,605   $ 10,274   $ 2,722,879  
   
 
 
 

See notes to combined financial statements.

F-9


BLACKSTONE GROUP

Combined Statements of Cash Flows

(Dollars in Thousands)

 
   Year Ended December 31,
  
 
   2006
   2005
   2004
  
Cash Flows from Operating Activities                    
  Net Income   $ 2,266,206   $ 1,330,663   $ 1,523,314  
  Adjustments to Reconcile Net Income to Net Cash (Used in) Provided By Operating Activities:                    
    Blackstone Funds Related                    
      Non-Controlling Interests in Income of Consolidated Entities     3,950,664     3,631,179     420,561  
      Net Realized Gains on Investments     (5,054,995 )   (4,918,364 )   (2,029,266 )
      Change in Unrealized Gains on Investments Allocable to Blackstone Group     (585,555 )   113,934     321,910  
    Other Non-Cash Amounts Included in Net Income     (41,929 )   (52,427 )   (62,815 )
  Cash Flows Due to Changes in Operating Assets and Liabilities                    
    Increase in Cash Held At Consolidated Entities     (447,068 )   (81,527 )   (46,997 )
    Increase in Due from Brokers     (398,196 )   —     —  
    (Increase) Decrease in Accounts Receivable     (431,044 )   150,215     (201,816 )
    (Increase) Decrease in Due from Affiliates     (76,700 )   3,328     (73,381 )
    (Increase) Decrease in Other Assets     (21,252 )   (9,143 )   5,336  
    Increase in Accrued Compensation and Benefits     20,257     11,355     4,827  
    Increase (Decrease) in Accounts Payable, Accrued Expenses and Other Liabilities     38,470     (65,298 )   78,026  
    Increase in Due to Affiliates     47,665     87     2,431  
    Increase (Decrease) in Amounts Due to Non-Controlling Interest Holders     113,188     (32,734 )   33,022  
    (Increase) Decrease in Cash Relinquished With Consolidation of Partnerships and Joint Ventures     —     19,578     (7,090 )
    Blackstone Funds Related                    
      Investments Purchased     (14,638,659 )   (5,791,376 )   (5,788,480 )
      Cash Proceeds from Sale of Investments     10,862,334     8,399,788     5,873,100  
   
 
 
 
    Net Cash (Used in) Provided By Operating Activities     (4,396,614 )   2,709,258     52,682  
   
 
 
 
Cash Flows from Investing Activities                    
  Purchase of Furniture, Equipment and Leasehold Improvements     (24,190 )   (7,353 )   (18,282 )
   
 
 
 
  Net Cash Used in Investing Activities     (24,190 )   (7,353 )   (18,282 )
   
 
 
 
Cash Flows from Financing Activities                    
  Distributions to Non-Controlling Interest Holders in Consolidated Entities     (6,653,590 )   (6,257,445 )   (4,256,548 )
  Contributions from Non-Controlling Interest Holders in Consolidated Entities     12,321,339     5,040,610     4,280,412  
  Contributions from Partners     212,594     119,151     49,110  
  Distributions to Partners     (1,551,957 )   (1,327,169 )   (720,114 )
  Proceeds from Loans Payable     7,634,786     2,623,231     3,123,458  
  Repayment of Loans Payable     (7,499,857 )   (2,936,728 )   (2,525,190 )
   
 
 
 
  Net Cash Provided By (Used in) Financing Activities     4,463,315     (2,738,350 )   (48,872 )
   
 
 
 
Effect of Exchange Rate Changes on Cash and Cash Equivalents     518     (2,832 )   1,594  
   
 
 
 
Net Increase (Decrease) in Cash and Cash Equivalents     43,029     (39,277 )   (12,878 )
Cash and Cash Equivalents, Beginning of Period     86,414     125,691     138,569  
   
 
 
 
Cash and Cash Equivalents, End of Period   $ 129,443   $ 86,414   $ 125,691  
   
 
 
 

Supplemental Disclosures of Cash Flow Information
 
 
 
 
 
 
 
 
 
 
  Payments for Interest   $ 79,469   $ 30,761   $ 22,661  
   
 
 
 
  Payments for Income Taxes   $ 19,669   $ 18,726   $ 16,597  
   
 
 
 

Supplemental Disclosure of Non-Cash Operating Activities
 
 
 
 
 
 
 
 
 
 
  Net Activities Related to Investment Transactions of Consolidated Blackstone Funds   $ 2,119,246   $ 1,752,904   $ 181,541  
   
 
 
 

Supplemental Non-Cash Financing Activities
 
 
 
 
 
 
 
 
 
 
  Non-Cash Distributions to Non-Controlling Interest Holders   $ 138,967   $ 948,651   $ 28,800  
   
 
 
 
  Non-Cash Distributions to Partners   $ 32,987   $ 239,909   $ 4,239  
   
 
 
 
  Net Activities Related to Capital Transactions of Consolidated Blackstone Funds   $ 2,241,660   $ 589,511   $ 45,743  
   
 
 
 

See notes to combined financial statements.

F-10


BLACKSTONE GROUP

Notes to Combined Financial Statements

(All Dollars Are in Thousands Except Where Otherwise Noted)

1.    ORGANIZATION AND BASIS OF PRESENTATION

        Blackstone Group is a leading global alternative asset manager and provider of financial advisory services based in New York. Our alternative asset management businesses include the management of corporate private equity funds, real estate funds, funds of hedge funds, mezzanine funds, senior debt funds, proprietary hedge funds and closed-end mutual funds, collectively referred to as the "Blackstone Funds." We also provide various financial advisory services, including mergers and acquisitions advisory, restructuring and reorganization advisory and fund placement services.

        Blackstone Group ("Blackstone" or the "Company") is comprised of all of the entities engaged in the above businesses under the common control of the two founders of Blackstone, Stephen A. Schwarzman and Peter G. Peterson, (the "Founders") and common ownership of the Founders, Blackstone's senior managing directors and selected other individuals engaged in some of our businesses and personal planning vehicles beneficially owned by the families of these individuals and a subsidiary of American International Group, Inc. ("AIG"), whom we refer to collectively as our "existing owners."

        Certain of the Blackstone Funds are consolidated into operating entities of the Company pursuant to accounting principles generally accepted in the United States of America as described in Note 2. Consequently, the Company's combined financial statements reflect the assets, liabilities, revenues, expenses and cash flows of the consolidated Blackstone Funds on a gross basis. The majority economic ownership interests in these funds are reflected as non-controlling interests in consolidated entities in the combined financial statements. The consolidation of these Blackstone Funds has no net effect on the Company's Net Income or Partners' Capital.

        The existing owners have a substantial investment in the Company, including required investments in the Company's operating entities, mandatory investments in Blackstone Funds, and other investments in the Blackstone Funds which the existing owners have made on a discretionary basis.

        The combined financial statements reflect the existing owners' investments, together with allocated earnings thereon, in the Company's operating entities and their committed capital investments ("GP Interests") in the Blackstone Funds as Partners' Capital. Investments made by AIG pursuant to its mandated limited partner capital commitments to specific Blackstone Funds and by existing owners made into the Blackstone Funds on a discretionary basis are reflected as non-controlling interests in consolidated entities. See Note 10 for a further discussion of the existing owners' interests.

2.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

        Basis of Accounting—The combined financial statements are prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP").

        Principles of Consolidation—The Company's policy is to combine, or consolidate, as appropriate, those entities in which it, through the existing owners, has control over significant operating, financial or investing decisions of the entity.

        For Blackstone Funds that are determined to be variable interest entities ("VIE"), the Company consolidates those entities where the Company absorbs a majority of the expected losses or a majority of the expected residual returns, or both, of such entities pursuant to the requirements of Financial Accounting Standards Board ("FASB") Interpretation No. 46 Consolidation of Variable Interest Entities

F-11


("FIN 46") as revised. In addition, the Company consolidates those entities it controls through a majority voting interest or otherwise, including those Blackstone Funds in which the general partners are presumed to have control over them pursuant to FASB Emerging Issues Task Force ("EITF") Issue No. 04-5, Determining Whether a General Partner, or the General Partners as a Group, Controls a Limited Partnership or Similar Entity When the Limited Partners Have Certain Rights ("EITF 04-5"). The provisions under both FIN 46 and EITF 04-5 have been applied retrospectively to prior periods. Intercompany transactions and balances have been eliminated.

        For operating entities over which the Company exercises significant influence but which do not meet the requirements for consolidation, the Company uses the equity method of accounting whereby it records its share of the underlying income or losses of these entities.

        In those cases where the Company's investment is less than 20%, 3% in the case of partnership interests, and significant influence does not exist, such investments are carried at fair value.

        Use of Estimates—The preparation of the combined financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the combined financial statements and the reported amounts of revenues, expenses and other income during the reporting periods. Actual results could differ from those estimates and such differences could be material to the combined financial statements.

        Fund Management Fees—Fund management fees are comprised of fees charged directly to funds, fund investors and fund portfolio companies (including management, transaction and monitoring fees). Such fees are based upon the contractual terms of investment advisory and related agreements and are recognized as earned over the specified contract period. In certain management fee arrangements, the Company is entitled to receive performance fees when the return on assets under management exceeds certain benchmark returns or other performance targets. In such arrangements, performance fees are accrued monthly or quarterly based on measuring account/fund performance to date versus the performance benchmark stated in the investment management agreement.

        Advisory Fees—Financial advisory fees consist of advisory retainer and transaction based fee arrangements related to mergers, acquisitions, restructurings, divestitures and fund placement services for alternative investment funds. Advisory retainer fees are recognized when services are rendered. Transaction fees are recognized when the services related to the underlying transactions are substantially completed in accordance with the terms of their engagement letters. Fund placement services revenue is recognized as earned upon the acceptance by a fund of capital or capital commitments.

        Cash and Cash Equivalents—The Company considers all highly liquid short term investments with original maturities of 90 days or less when purchased to be cash equivalents.

        Cash Held at Consolidated Entities—Cash Held at Consolidated Investment Entities consists of cash and cash equivalents held by the Blackstone Funds which, although not legally restricted, is not available to fund the general liquidity needs of the Company.

        Investments, at Fair Value—The Blackstone Funds are, for GAAP purposes, investment companies under the AICPA Audit and Accounting Guide Investment Companies. Thus, such funds reflect their

F-12


investments, including Securities Sold, Not Yet Purchased, on the Combined Statements of Financial Condition at their estimated fair value, with unrealized gains and losses resulting from changes in fair value reflected as a component of Other Income in the Combined Statements of Income. Fair value is the amount at which the investments could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. Additionally, these funds do not consolidate their majority-owned and controlled investments (the "Portfolio Companies"). The Company has retained the specialized accounting for the Blackstone Funds pursuant to EITF Issue No. 85-12 Retention of Specialized Accounting for Investments in Consolidation.

        The fair value of the Company's Investments and Securities Sold, Not Yet Purchased are based on observable market prices when available. Such prices are based on the last sales price on the date of determination, or, if no sales occurred on such day, at the "bid" price at the close of business on such day and if sold short at the "asked" price at the close of business on such day. Futures and options contracts are valued based on closing market prices. Forward and swap contracts are valued based on market rates or prices obtained from recognized financial data service providers.

        A significant number of the investments have been valued by the Company, in the absence of readily observable market prices, using the valuation methodologies described below. The determination of fair value may differ materially from the values that would have resulted if a ready market had existed. The Company estimates the fair value of investments for which market prices are not readily observable as follows.

        Corporate private equity, real estate and mezzanine investments—For investments for which readily observable market prices do not exist, such investments are carried at estimated fair value as determined by the Company. Fair value is determined after giving consideration to a range of factors, including but not limited to the price at which the investment was acquired, the nature of the investment, local market conditions, trading values on public exchanges for comparable securities, current and projected operating performance and financing transactions subsequent to the acquisition of the investment.

        Funds of hedge funds—Blackstone Funds' direct investments in underlying hedge funds ("Investee Funds") are stated at fair value, which is based on the Blackstone Funds' net contribution to the Investee Funds and its allocated share of the undistributed profits and losses, including realized and unrealized gains and losses, based on the information provided by the Investee Funds' management, which may include the audited financial statements of the Investee Fund.

        Certain Blackstone Funds sell securities that they do not own, and will therefore be obligated to purchase such securities at a future date. The value of an open short position is recorded as a liability, and the fund records unrealized appreciation or depreciation to the extent of the difference between the proceeds received and the value of the open short position. The applicable Blackstone Fund records a realized gain or loss when a short position is closed. By entering into short sales, the applicable Blackstone Fund bears the market risk of increases in value of the security sold short. The unrealized appreciation or depreciation as well as the realized gain or loss associated with short positions are included in the Combined Statements of Income as Net Gains from Investment Activities.

        Securities transactions are recorded on a trade date basis.

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        Accounts Receivable—Accounts Receivable consist primarily of redemptions from the underlying hedge funds in Blackstone's funds of hedge funds and receivables related to Advisory Fees.

        Investment Subscriptions Paid in Advance—Investment Subscriptions Paid in Advance by the Company represent cash paid prior to the effective date of an investment to facilitate the deployment of investment proceeds to affiliated and third party managers.

        Furniture, Equipment and Leasehold Improvements—Furniture, equipment and leasehold improvements consist primarily of leasehold improvements, furniture, fixtures and equipment, computer hardware and software and are recorded at cost less accumulated depreciation and amortization. Depreciation and amortization are calculated using the straight-line method over the assets' estimated useful lives, which for leasehold improvements are the lesser of the lease terms or the life of the asset, generally 15 years, and three to seven years for other fixed assets. The Company evaluates long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

        Non-Controlling Interests in Consolidated Entities—Non-controlling interests related to the corporate private equity, real estate and mezzanine funds are subject to on-going realizations and distributions of proceeds therefrom during the life of a fund with a final distribution at the end of each respective fund's term, which could occur under certain circumstances in advance of or subsequent to that fund's scheduled termination date. Non-controlling interests related to funds of hedge funds and hedge funds are generally subject to annual, semi-annual or quarterly withdrawal or redemption by investors in such funds following the expiration of a specified period of time when capital may not be withdrawn (typically between one and three years). When redeemed amounts become legally payable to investors on a current basis, they are reclassified as a liability.

        In many cases, the Company's GP Interests in the Blackstone Funds entitle the Company to an allocation of income (a "carried interest" or incentive fee/allocation) in the event that the fund achieves specified cumulative investment returns. The carried interest to the Company ranges from 15% to 20%. The incentive fees/allocations range from 5% to 20%. The Company records such allocations in the determination of the Non-Controlling Interests in Income of Consolidated Entities when the returns at the respective Blackstone Funds meet or exceed the cumulative investment returns to the limited partners established in the relevant agreements.

        Amounts Due to Non-Controlling Interest Holders—Amounts Due to Non-Controlling Interest Holders consist primarily of shareholder/investor redemptions and capital withdrawals payable by the Blackstone Funds.

        Derivatives and Hedging Activities—The Company enters into derivative financial instruments for investment purposes and to manage interest rate and foreign exchange risk arising from certain assets and liabilities. All derivatives are recognized as either assets or liabilities in the Combined Statements of Financial Condition and measured at fair value. Derivatives used in connection with investment activities are recorded at fair value and changes in value are recorded in income currently.

        Cash Flow Hedges—For qualifying cash flow hedges, the Company records the effective portion of changes in the fair value of derivatives designated as cash flow hedging instruments in Other Comprehensive Income, which is a component of Partners' Capital. Any ineffective portion of the cash

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flow hedges are included in current period income. The Company's hedging activities are immaterial to the combined financial statements.

        Foreign Currency Translation and Transactions—Non-U.S. dollar denominated assets and liabilities are translated at year-end rates of exchange, and Combined Statements of Income accounts are translated at rates of exchange in effect throughout the year. Foreign currency gains and losses resulting from transactions outside of the functional currency of an entity, which are not significant, are included in Net Income.

        Comprehensive Income—Comprehensive Income consists of Net Income and Other Comprehensive Income. The Company's Other Comprehensive Income is comprised of unrealized gains and losses on cash flow hedges and foreign currency cumulative translation adjustments.

        Income Taxes—No federal income taxes have been provided for by the Company in the accompanying combined financial statements as each entity of the group is either a partnership, a S corporation or a limited liability company classified as a partnership that is not subject to federal income taxes. However, certain entities of the Company are subject to a four percent (4%) New York City unincorporated business tax on their trade and business income activities conducted in New York City. Additionally, some entities of the Company are located in foreign jurisdictions that impose income taxes.

        The Company uses the asset and liability method of accounting for deferred income taxes pursuant to FASB Statement of Financial Accounting Standards ("SFAS") No. 109, Accounting for Income Taxes ("SFAS 109"). Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the combined financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the periods in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the period that includes the enactment date.

        Under SFAS 109, a valuation allowance is established when management believes it is more likely than not that a deferred tax asset will not be realized.

        Recent Accounting Pronouncements—In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements, ("SFAS 157"). SFAS 157 defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. The Company intends to early adopt SFAS 157 as of January 1, 2007. The adoption of SFAS 157 is not expected to have a material impact on the Company's combined financial statements.

        In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities, ("SFAS 159"). SFAS 159 permits entities to choose to measure many financial instruments and certain other items at fair value, with changes in fair value recognized in earnings. Blackstone intends to early adopt SFAS 159 as of January 1, 2007. Upon adoption of SFAS 159, Blackstone currently intends to elect to apply the fair value option to selected investments in non-consolidated investment entities, which would otherwise be accounted for under the equity method of accounting. In the event the Company elects to account for such investments at fair value, the initial

F-15


application of the fair value option to such interests is not expected to have a material cumulative effect on Partners' Capital or Investments, at Fair Value.

        The Company is currently planning a reorganization in contemplation of a future public offering. In connection with the reorganization, the Company intends to grant substantive kick-out, liquidating or other participating rights to the limited partners of its corporate private equity, real estate and selected other Blackstone Funds. The Company intends to apply SFAS 159 to all of its corporate private equity and real estate general partner interests in investment partnerships that are expected to be deconsolidated as part of the reorganization. As a consequence of electing the fair value option, Net Gains from Investment Activities would potentially increase by a material amount reflective of current market conditions at that time.

        In December 2004, the FASB issued SFAS No. 123(R), Share-Based Payment ("SFAS 123(R)"), which requires all equity-based payments to employees to be recognized using a fair value based method. On January 1, 2006, the Company adopted SFAS 123(R) using the modified prospective method and therefore prior period amounts will not be restated. The adoption of SFAS 123(R) did not have a material impact on the Company's combined financial statements.

        In September 2006, the FASB cleared the AICPA Statement of Position No. 07-1, Clarification of the Scope of the Audit and Accounting Guide Investment Companies and Accounting by Parent Companies and Equity Method Investors for Investments in Investment Companies ("SOP 07-1") for issuance. SOP 07-1 addresses whether the accounting principles of the AICPA Audit and Accounting Guide Investment Companies may be applied to an entity by clarifying the definition of an investment company and whether those accounting principles may be retained by a parent company in consolidation or by an investor in the application of the equity method of accounting. SOP 07-1 applies to the later of (i) reporting periods beginning on or after December 15, 2007 or (ii) the first permitted early adoption date of the FASB's fair value option statement. The adoption of SOP 07-1 is not expected to have a material impact on the Company.

        In June 2006, the FASB issued Interpretation No. 48, Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109 ("FIN 48"). FIN 48 requires companies to recognize the tax benefits of uncertain tax positions only where the position is "more likely than not" to be sustained assuming examination by tax authorities. The tax benefit recognized is the largest amount of benefit that is greater than 50 percent likely of being realized upon ultimate settlement. FIN 48 is effective for fiscal years beginning after December 15, 2006. The adoption of FIN 48 will not have a material impact on the Company's combined financial statements.

        In February 2006, the FASB issued SFAS No. 155, Accounting for Certain Hybrid Financial Instruments ("SFAS 155"), which amends SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, ("SFAS 133") and SFAS No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities. SFAS 155 provides, among other things, that (1) for embedded derivatives which would otherwise be required to be bifurcated from their host contracts and accounted for at fair value in accordance with SFAS 133, an entity may make an irrevocable election, on an instrument-by-instrument basis, to measure the hybrid financial instrument at fair value in its entirety, with changes in fair value recognized in earnings and (2) concentrations of credit risk in the form of subordination are not considered embedded derivatives. SFAS 155 is effective for all financial

F-16


instruments acquired, issued or subject to remeasurement after the beginning of an entity's first fiscal year that begins after September 15, 2006. Upon adoption, differences between the total carrying amount of the individual components of an existing bifurcated hybrid financial instrument and the fair value of the combined hybrid financial instrument should be recognized as a cumulative effect adjustment to beginning retained earnings. Prior periods are not restated. The adoption of SFAS 155 is not expected to have a material impact on the Company's combined financial statements.

        On September 13, 2006 the staff of the Securities and Exchange Commission ("SEC") issued Staff Accounting Bulletin No. 108 ("SAB 108"), which provides interpretive guidance on how the effects of the carryover or reversal of prior year misstatements should be considered in quantifying a current year misstatement. SAB 108 is effective for fiscal years ending after November 15, 2006. The adoption of SAB 108 did not have a material impact on the Company's financial statements.

3.    INVESTMENTS

Investments, at Fair Value

        Investments, at Fair Value, consist primarily of financial instruments held by consolidated Blackstone Funds.

 
   Fair Value
 
   December 31,
 
   2006
   2005
Investments of Consolidated Blackstone Funds   $ 31,066,974   $ 19,823,941
Equity Method Investments     133,335     155,770
Other Investments     63,264     92,871
   
 
    $ 31,263,573   $ 20,072,582
   
 

Investments of Consolidated Blackstone Funds

        The following table presents the Company's investments held by the consolidated Blackstone Funds. These investments are presented as a percentage of Investments of Consolidated Blackstone Funds.

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   Fair Value
   Percentage of
Investments of
Consolidated Blackstone Funds
  
 
   December 31,
  
Geographic Region/Instrument Type/
Industry Description or Investment Strategy
  
  2006
   2005
   2006
   2005
  
United States and Canada                      
Equity Securities, principally related to corporate private equity and real estate funds                      
  Real Estate, including Consumer Business   $ 7,346,221   $ 1,984,138   23.7 % 10.0 %
  Technology, Media and Telecommunications     4,250,454     2,583,998   13.7 % 13.0 %
  Manufacturing     3,119,359     2,402,947   10.0 % 12.1 %
  Life Sciences     1,818,875     738,827   5.9 % 3.8 %
  Financial Services     1,061,055     1,030,131   3.4 % 5.2 %
  Energy     359,627     1,985,642   1.2 % 10.0 %
  Other     667,285     445,857   2.1 % 2.3 %
   
 
 
 
 
Equity Securities Total (Cost: 2006 $11,896,979; 2005 $6,680,192)     18,622,876     11,171,540   60.0 % 56.4 %
   
 
 
 
 
Debt Instruments (Cost: 2006 $396,390; 2005 $418,438), principally related to mezzanine funds     385,140     389,887   1.2 % 2.0 %
   
 
 
 
 
Investment Funds, principally related to marketable alternative asset investments                      
  Equity     2,408,012     2,242,998   7.8 % 11.4 %
  Diversified Investments     2,145,729     1,216,132   6.9 % 6.1 %
  Credit Driven     870,350     1,036,107   2.8 % 5.2 %
  Other     473,908     937,255   1.5 % 4.7 %
   
 
 
 
 
Investment Funds Total (Cost: 2006 $4,864,068; 2005 $4,290,127)     5,897,999     5,432,492   19.0 % 27.4 %
   
 
 
 
 
United States and Canada Total                      
  (Cost: 2006 $17,157,437; 2005 $11,388,757)     24,906,015     16,993,919   80.2 % 85.8 %
   
 
 
 
 
Europe                      
Equity Securities, principally related to corporate private equity and real estate funds                      
  Technology, Media and Telecommunications     2,979,825     801,601   9.6 % 4.0 %
  Real Estate, including Consumer Business     1,994,798     1,135,803   6.4 % 5.7 %
  Other     871,003     733,081   2.8 % 3.7 %
   
 
 
 
 
Equity Securities Total (Cost: 2006 $4,750,959; 2005 $1,934,340)     5,845,626     2,670,485   18.8 % 13.4 %
Debt Instruments (Cost: 2006 $44,774; 2005 $28,764), principally related to mezzanine funds     46,086     60,978   0.1 % 0.3 %
   
 
 
 
 
Europe Total (Cost: 2006 $4,795,733; 2005 $1,963,104)     5,891,712     2,731,463   18.9 % 13.7 %
   
 
 
 
 
Asia, Africa and Other (Cost: 2006 $209,342; 2005 $67,343), principally related to corporate private equity     269,247     98,559   0.9 % 0.5 %
   
 
 
 
 
Total Investments of Consolidated Blackstone Funds
(Cost: 2006 $22,162,512; 2005 $13,419,204)		   $ 31,066,974   $ 19,823,941   100.0 % 100.0 %
   
 
 
 
 

        At December 31, 2005, the fair market value of investments exceeding 5% of the Investments of Consolidated Blackstone Funds consisted of Celanese Corporation, $1,028,253, and Texas Genco LLC, $1,410,466. At December 31, 2006 there were no such individual investments.

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        Securities Sold, Not Yet Purchased.    The following table presents the Company's Securities Sold, Not Yet Purchased held by the consolidated Blackstone Funds as of December 31, 2006, which are principally held by certain of Blackstone Group's hedge funds. These investments are presented as a percentage of Securities Sold, Not Yet Purchased. At December 31, 2005 there were no such investments.

 
   December 31, 2006
  
Geographic Region/Instrument Type/Industry Description
   Fair
Value
   %
  
United States—Equity Instruments            
  Manufacturing   $ 133,991   31.8 %
  Utilities     119,363   28.2 %
  Index Funds     51,313   12.1 %
  Chemicals     27,911   6.6 %
   
 
 
United States—Total (Proceeds: $330,605)     332,578   78.7 %
   
 
 
Europe—Equity Instruments            
  Utilities     34,331   8.1 %
  Manufacturing     19,082   4.5 %
   
 
 
Europe Total (Proceeds: $50,358)     53,413   12.6 %
   
 
 
All other regions—Equity Instruments—Manufacturing (Proceeds: $33,336)     36,797   8.7 %
   
 
 
Total (Proceeds: $414,299)   $ 422,788   100.0 %
   
 
 

        Realized and Net Change in Unrealized Gains from Blackstone Funds.    Net Gains from Investment Activities on the Combined Statements of Income include net realized gains from realizations and sales of investments and the net change in unrealized gains resulting from changes in fair value of the consolidated Blackstone Funds' investments. The following table presents Blackstone Group's realized and net change in unrealized gains held through the consolidated Blackstone Funds:

 
   Year Ended December 31,
 
   2006
   2005
   2004
Realized Gains   $ 5,054,995   $ 4,918,364   $ 2,029,266
Net Change in Unrealized Gains     2,491,236     189,422     4,159,076
   
 
 
    $ 7,546,231   $ 5,107,786   $ 6,188,342
   
 
 

        Investments in Variable Interest Entities.    The Company consolidates certain VIEs in addition to those consolidated entities under EITF 04-5, when it is determined that the Company is the primary beneficiary, either directly or indirectly, through a consolidated entity or affiliate. The assets of the consolidated VIEs are classified within Investments, at Fair Value. The liabilities of the consolidated VIEs are non recourse to the Company's general credit.

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        At December 31, 2006 and 2005, the Company was the primary beneficiary of VIEs whose gross assets were $2,182 million and $1,648 million, respectively, which is the carrying amount of such financial assets in the combined financial statements. The nature of these VIEs include investments in private equity, real estate and hedge fund assets.

        The Company is also a significant variable interest holder in other VIEs which are not consolidated, as the Company is not the primary beneficiary. These VIEs include certain Blackstone Funds investing in entities issuing collateralized debt obligations and those that are funds of hedge funds. At December 31, 2006 and 2005, gross assets of these entities are approximately $4,193 million and $3,130 million, respectively. The Company's aggregate maximum exposure to loss is approximately $252 million and $179 million as of December 31, 2006 and 2005, respectively. The Company's involvement with these entities began on the dates that they were formed, which range from July 2002 to November 2005.

Equity Method Investments

        The Company invests in corporate private equity funds, real estate funds, funds of hedge funds and hedge funds which are not required to be consolidated. The Company accounts for these investments under the equity method of accounting and the Company's share of operating income generated by these investments, which includes the unrealized gains or losses on a fair value basis, is recorded as a component of Net Gains from Investment Activities. Since these investments are not subject to income taxes, the Company has not recorded any provision for income taxes associated with these investments in the Combined Statements of Income.

 
   Equity Held
   Equity in Net Income
 
   December 31,
   Year Ended December 31,
 
   2006
   2005
   2006
   2005
   2004
Equity Method Investments   $ 133,335   $ 155,770   $ 31,760   $ 20,387   $ 17,101
   
 
 
 
 

Other Investments

        Other Investments consist primarily of investment securities held by the Company for its own account. The following table presents Blackstone Group's realized and net change in unrealized gains in other investments:

 
   Year Ended December 31,
 
   2006
   2005
   2004
Realized Gains   $ 6,791   $ 8,309   $ 1,373
Net Change in Unrealized Gains     2,514     6,048     7,703
   
 
 
    $ 9,305   $ 14,357   $ 9,076
   
 
 

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4.    FAIR VALUE OF FINANCIAL INSTRUMENTS

        The Company's financial instruments are recorded at fair value or at amounts that approximate fair value in the accompanying combined financial statements. Investments, at Fair Value and Securities Sold, Not Yet Purchased are recorded at fair value as described in Note 2. The carrying amounts of the Company's borrowings under its various agreements approximate fair value because such obligations bear interest at floating rates.

5.    CREDIT RISK

        Certain Blackstone Funds and the Investee Funds are subject to certain inherent credit risks arising from their transactions involving futures, options and securities sold under agreements to repurchase by exposure through its investments.

        Various entities of the Company invest substantially all of their excess cash in an open-end money market fund and a money market demand account, which are included in Cash and Cash Equivalents. The money market fund invests primarily in government securities and other short-term, highly liquid instruments with a low risk of loss. The Company continually monitors the fund's performance in order to manage any risk associated with these investments.

        Certain entities of the Company hold derivative instruments that contain an element of risk in the event that the counterparties may be unable to meet the terms of such agreements. The Company minimizes its risk exposure by limiting the counterparties with which it enters into contracts to banks and investment banks who meet established credit and capital guidelines. The Company does not expect any counterparty to default on its obligation and therefore does not expect to incur any loss due to counterparty default.

6.    DUE FROM BROKERS

        Certain Blackstone Funds conduct business with brokers for their investment activities. The clearing and custody operations for these investment activities are performed pursuant to agreements with prime brokers. The Due from Brokers balance represents cash balances at the brokers and net receivables and payables for unsettled security transactions. The applicable Blackstone Funds are required to maintain collateral with the brokers either in cash or securities equal to a certain percentage of the fair value of Securities Sold, Not Yet Purchased.

        The applicable Blackstone Funds are subject to credit risk to the extent any broker with which the funds conduct business is unable to deliver cash balances or securities, or clear security transactions on their behalf. The Company monitors the financial conditions of the brokers with which these funds conduct business and believes the likelihood of loss under the aforementioned circumstances is remote.

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7.    OTHER ASSETS

        Other assets consist of the following:

 
   December 31,
 
   2006
   2005
Other Assets            
  Furniture, Equipment and Leasehold Improvements, Net(a)   $ 43,679   $ 26,330
  Deposits for Pending Investments     23,534     19,312
  Prepaid Expenses     15,776     8,191
  Deferred Tax Assets     6,028     86
  Other Assets     5,783     1,385
   
 
    $ 94,800   $ 55,304
   
 
(a)
Net of accumulated depreciation and amortization of $46,879 and $39,865 for the years ended December 31, 2006 and 2005, respectively. Depreciation and amortization expense totaled $7,315, $8,527 and $6,733 for the years ended December 31, 2006, 2005 and 2004, respectively. Purchases of furniture, equipment and leasehold improvements totaled $24,190, $7,353 and $18,282 for the years ended December 31, 2006, 2005 and 2004, respectively.

8.    LOANS PAYABLE

        The Company enters into credit agreements for its general operating and investment purposes and certain Blackstone Funds borrow to meet the financing needs of their operating and investing activities. Borrowing facilities have been established for the benefit of selected funds within those business units. When a Blackstone Fund borrows from the facility in which it participates, the proceeds from the borrowing are strictly limited for its intended use by the borrowing fund and not available for other Company purposes. The Company's credit facilities consist of the following:

 
   December 31,
  
 
   2006
   2005
  
 
   Credit
Available
   Borrowings
Outstanding
   Weighted
Average
Interest
Rate
   Credit
Available
   Borrowings
Outstanding
   Weighted
Average
Interest
Rate
  
Revolving Credit Facility(a)   $ 1,000,000   $ 340,000   6.13 % $ 750,000   $ 485,000   5.05 %
On-lending and Bridge Facilities(b)     225,000     106,344   6.50 %   40,000     20,457   5.50 %
Corporate Debt Credit Facilities(c)     80,000     29,225   8.04 %   80,000     6,000   5.83 %
   
 
 
 
 
 
 
      1,305,000     475,569   6.33 %   870,000     511,457   5.07 %
   
 
 
 
 
 
 
Blackstone Funds Facilities (d)     2,109,000     500,412   6.13 %   711,700     326,170   4.76 %
   
 
 
 
 
 
 
    $ 3,414,000   $ 975,981   6.23 % $ 1,581,700   $ 837,627   4.95 %
   
 
 
 
 
 
 
(a)
Represents short-term borrowings under a revolving credit facility with proceeds used to fund the operating and investing activities of entities of the Company. Borrowings bear interest at an adjusted LIBOR rate. Each drawdown has a rollover maturity of not longer than six months. Any

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(b)
Represents borrowings under a loan and security agreement as well as a bridge loan facility, each bearing interest at an adjusted rate below the lending bank's prime commercial rate. Borrowings are available for (1) the Company to provide partial financing to certain Blackstone employees to finance the purchase of their equity investments in certain Blackstone Funds and (2) to fund, on a temporary basis, Blackstone's general partner commitment and optional co-investment for all investments made by the Blackstone Funds. The advances to Blackstone employees are secured by investor notes, paid back over a four-year period, and the related underlying investment, as well as full recourse to the employees' salaries, bonuses, returns from other Company investments.

(c)
Represents short-term borrowings under credit facilities established to finance investments in debt securities. Borrowings are made at the time of each investment and are required to be repaid at the earlier of (1) the investment's disposition or (2) 120 days after the borrowing. Borrowings under the facilities bear interest at an adjusted LIBOR rate. Borrowings are secured by the investments acquired with the proceeds of such borrowings. In addition, such credit facilities are supported by letters of credit.

(d)
Represents borrowing facilities for the various Blackstone Funds used to meet liquidity and investing needs. Certain borrowings under these facilities are used for bridge financing and general liquidity purposes. Other borrowings are used to finance the purchase of investments with the borrowing remaining in place until the disposition or refinancing event. Such borrowings have varying maturities and are rolled over until the disposition or a refinancing event. Due to the fact that the timing of such events is unknown and may occur in the near term, these borrowings are considered short-term in nature. Borrowings bear interest at spreads to market rates. Borrowings are secured according to the terms of each facility and are generally secured by the investment purchased with the proceeds of the borrowing and/or the uncalled capital commitment of each respective fund. Certain facilities have commitment fees. When a fund borrows, the proceeds are available only for use by that fund and are not available for the benefit of other funds. Collateral within each fund is also available only against the borrowings by that fund and not against the borrowings of other funds.

Scheduled principal payments for long-term borrowings at December 31, 2006 are as follows:


2007
 
$
15,002
2008     15,936
2009     15,232
2010     13,374
2011     5,280
Thereafter     —
   
    $ 64,824
   

F-23

9.    INCOME TAXES

        The Company has provided for New York City unincorporated business tax for certain entities based on a statutory rate of 4%. Certain entities that are part of the Company are subject to income tax of the foreign countries in which they conduct business. The Company's effective income tax rate was approximately 1.39%, 0.91% and 1.05% for the years ended December 31, 2006, 2005 and 2004, respectively.

        The provision for income taxes consists of the following:

 
   Year Ended December 31,
 
   2006
   2005
   2004
Current                  
  Foreign Income Tax   $ 3,433   $ 2,132   $ 1,514
  State and Local Income Tax     34,433     10,277     14,318
   
 
 
    Subtotal     37,866     12,409     15,832
   
 
 
Deferred                  
  State and Local Income Tax     (5,932 )   (149 )   288
   
 
 
    Subtotal     (5,932 )   (149 )   288
   
 
 
    Total Income Taxes   $ 31,934   $ 12,260   $ 16,120
   
 
 

        Income taxes are provided at the applicable statutory rates. The tax effects of the changes in the temporary differences in the areas listed below resulted in deferred tax assets and liabilities:

 
   December 31,
 
   2006
   2005
Deferred Tax Assets            
  Fund Management Fees   $ 5,834   $ —
  Depreciation and Amortization     139     12
  Other     55     74
   
 
    Total Deferred Tax Assets   $ 6,028   $ 86
   
 
Deferred Tax Liabilities            
  Unrealized Gains from Investments   $ 235   $ 225
   
 
    Total Deferred Tax Liabilities   $ 235   $ 225
   
 

        The Company's Deferred Tax Assets and Deferred Tax Liabilities are included in the combined financial statements within Other Assets and Accounts Payable, Accrued Expenses and Other Liabilities, respectively.

F-24

        The following table reconciles the provision for income taxes to the U.S. federal statutory tax rate:

 
   2006
   2005
   2004
  
Statutory U.S. Federal Income Tax Rate   35.00 % 35.00 % 35.00 %
Income Passed Through to Partners   (35.00 )% (35.00 )% (35.00 )%
Foreign Income Taxes   0.15 % 0.16 % 0.11 %
State and Local Income Taxes   1.24 % 0.75 % 0.94 %
   
 
 
 
Effective Income Tax Rate   1.39 % 0.91 % 1.05 %
   
 
 
 

10.    RELATED PARTY TRANSACTIONS

Affiliate Receivables and Payables

        Blackstone Group considers its existing owners, employees, the Blackstone Funds, and the Portfolio Companies to be affiliates. As of December 31, 2006 and 2005, Due from Affiliates and Due to Affiliates were comprised of the following:

 
   December 31,
 
   2006
   2005
Due from Affiliates            
  Payments made on behalf of existing owners and Company employees for investments in Blackstone Funds   $ 189,373   $ 112,521
  Payments made on behalf of non-consolidated entities     63,857     45,442
  Advances made to existing owners     3,995     1,926
   
 
    $ 257,225   $ 159,889
   
 
Due to Affiliates            
  Distributions received on behalf of non-consolidated entities   $ 54,911   $ 25,533
  Distributions received on behalf of existing owners and Company employees     47,732     15,492
  Payments made by non-consolidated entities     785     1,097
   
 
    $ 103,428   $ 42,122
   
 

Fund Management Fees

        Substantially all Fund Management Fees are earned, directly or indirectly, from affiliates.

Existing Owners' Interests

        AIG (through controlled entities), is a limited partner (the "AIG LP Investments") in certain Blackstone Funds in addition to its required participation in the GP Interests. These AIG LP Investments in Blackstone Funds are subject to fees on the same basis as other third party investors in the relevant Blackstone Fund. As of December 31, 2006 and 2005, AIG LP Investments in Blackstone Funds aggregated $943 million and $516 million, respectively, and AIG's share of the net Non-Controlling Interests in Income of Consolidated Entities on its AIG LP Investments aggregated

F-25


$232 million, $135 million and $168 million for the years ended December 31, 2006, 2005 and 2004, respectively.

        In addition, the existing owners and the Company's employees invest on a discretionary basis in the Blackstone Funds both directly and through consolidated entities. Their investments may be subject to preferential management fee arrangements. As of December 31, 2006 and 2005, the existing owners' and employees' investments aggregated $2,063 million and $1,308 million, respectively, and the existing owners' and employees' share of the Non-Controlling Interests in Income of Consolidated Entities aggregated $399 million, $236 million and $256 million for the years ended December 31, 2006, 2005 and 2004, respectively.

Loans to Affiliates

        Loans to affiliates consist of interest-bearing advances to certain Blackstone individuals to finance their investments in certain Blackstone Funds. These loans earn interest at the Company's cost of borrowing and such interest totaled approximately $6,953, $2,336 and $1,369, respectively, for the years ended December 31, 2006, 2005 and 2004.

Contingent Repayment Guarantee

        Company personnel who have received carried interest distributions have guaranteed payment on a several basis (subject to a cap), to the corporate private equity, real estate and mezzanine funds of any contingent repayment (clawback) obligation with respect to the excess carried interest allocated to the general partners of such funds and indirectly received thereby to the extent that the Company fails to fulfill its clawback obligation, if any.

Aircraft and Other Services

        In the normal course of business, Blackstone personnel have made use of aircraft owned as personal assets of the Founders and a Senior Managing Director ("Personal Aircraft"). In addition, on occasion, the Founders, Senior Managing Directors and their families have made use of an aircraft in which the Company owns a fractional interest, as well as other assets of the Company. The Founders and the Senior Managing Director paid for their respective purchases of the aircraft themselves and bear all operating, personnel and maintenance costs associated with their operation. In addition, the Founders are charged for their and their families' personal use of the Company assets based on market rates and usage. Payment by the Company for the use of the Personal Aircraft and among the other existing owners and the Company for their and their families' personal use of the Company resources are principally, but not always, made at market rates. The transactions described herein are not material to the combined financial statements.

Other

        In the ordinary course of business, Blackstone and the Blackstone Funds place certain of their insurance policies with entities controlled by AIG; all such arrangements are on a negotiated basis.

        The Company provided advisory services to certain of its affiliates totaling $44,046, $8,733 and $875 for the years ended December 31, 2006, 2005 and 2004, respectively.

F-26

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

11.    COMMITMENTS AND CONTINGENCIES

        Guarantees—The Company had approximately $175 million of letters of credit outstanding to satisfy various contractual requirements primarily related to Portfolio Companies at December 31, 2006.

        Certain real estate funds guarantee payments to third parties in connection with the on-going business activities and/or acquisitions of their Portfolio Companies. At December 31, 2006, such guarantees amount to $2,482 million. Please see "Investment Commitments" below as respects additional guarantees.

        Debt Covenants—The Company's debt obligations contain various customary loan covenants. In management's opinion, these covenants do not materially restrict the Company's investment or financing strategy. The Company is in compliance with all of its loan covenants as of December 31, 2006.

        Investment Commitments—The Blackstone Funds had signed investment commitments with respect to investments representing commitments of $5,104 million as of December 31, 2006. Included in this is $4,594 million of signed investment commitments for Portfolio Company acquisitions in the process of closing. The Blackstone Funds have provided $1,568 million of guarantees related to signed investment commitments.

        The general partners of the Blackstone Funds had unfunded GP commitments to such funds totaling $338 million as of December 31, 2006.

        Certain of the Company's funds of hedge funds not consolidated in these combined financial statements, which act as asset allocation funds for the funds of hedge funds, have made investment commitments to unaffiliated hedge funds. The funds of hedge funds consolidated in these combined financial statements may, but are not required to, allocate assets to these allocation funds. The unfunded commitment as of December 31, 2006 is $89 million.

        Litigation—From time to time, the Company is named as a defendant in legal actions relating to transactions conducted in the ordinary course of business. After consultation with legal counsel, management believes the ultimate liability arising from such actions that existed as of December 31, 2006, if any, will not materially affect the Company's results of operations, financial position or cash flows.

        Operating Leases—The Company leases office space under non-cancelable lease and sublease agreements, which expire on various dates through 2024. Occupancy lease agreements, in addition to base rentals, generally are subject to escalation provisions based on certain costs incurred by the landlord. Rent expense for the years ended December 31, 2006, 2005 and 2004, was $23,905, $18,034 and $18,005, respectively. At December 31, 2006 and 2005, the Company maintained irrevocable standby letters of credit as security for the leases of $2,804 and $4,087, respectively. As of

F-27


December 31, 2006, the approximate aggregate minimum future payments, net of sublease income, required on the operating leases are as follows:


2007
 
$
18,311
2008     17,660
2009     18,138
2010     21,114
2011     23,109
Thereafter     237,730
   
Total   $ 336,062
   

        The Company has entered into various operating leases for the use of certain office equipment. For the years ended December 31, 2006, 2005 and 2004, rental expense for office equipment totaled $664, $820 and $803, respectively.

12.    SEGMENT REPORTING

        Blackstone Group conducts its alternative asset management and financial advisory businesses through four reportable segments:


        These business segments are differentiated by their various sources of income, with the Corporate Private Equity, Real Estate and Marketable Alternative Asset Management segments primarily earning their income from management fees and investment returns on assets under management, while the financial advisory segment primarily earns its income from fees related to investment banking services and advice and fund placement services.

        Economic Net Income ("ENI") is a key performance measure used by management. ENI represents Net Income excluding the impact of income taxes as well as the impact of non-cash charges related to vesting of equity based compensation. However, the historical combined financial statements do not include non-cash charges related to vesting of equity based compensation. Therefore, ENI is equivalent to Income Before Taxes in our historical combined financial statements. ENI is used by management for our segments in making resource deployment and employee compensation decisions.

F-28


        Management makes operating decisions and assesses the performance of each of the Company's business segments based on financial and operating metrics and data that is presented without the consolidation of any of the Blackstone Funds that are consolidated into the combined financial statements. Consequently, all segment data excludes the assets, liabilities and operating results related to the Blackstone Funds.

        The following table presents the financial data for the Company's four reportable segments as of and for the year ended December 31, 2006:

 
   December 31, 2006 and for the Year then Ended
 
   Corporate
Private
Equity
   Real
Estate
   Marketable
Alternative
Asset
Management
   Financial
Advisory
   Total
Reportable
Segments
Segment Revenues:                              
Fund Management Fees   $ 404,296   $ 263,130   $ 220,450   $ —   $ 887,876
Advisory Fees     —     —     —     256,914     256,914
Interest and Other     871     1,076     6,669     3,408     12,024
   
 
 
 
 
  Total Fee Related Revenues     405,167     264,206     227,119     260,322     1,156,814
Expenses     117,724     96,426     128,797     66,448     409,395
   
 
 
 
 
Fee Related Earnings     287,443     167,780     98,322     193,874     747,419
Net Gains from Investment Activities     722,410     734,964     93,347     —     1,550,721
   
 
 
 
 
Economic Net Income   $ 1,009,853   $ 902,744   $ 191,669   $ 193,874   $ 2,298,140
   
 
 
 
 
Total Assets   $ 2,260,475   $ 1,309,788   $ 746,612   $ 157,214   $ 4,474,089
   
 
 
 
 

        The following table reconciles the Total Reportable Segments to Blackstone Group Combined as of December 31, 2006 and for the year then ended:

 
   December 31, 2006 and for the Year then Ended
 
   Total
Reportable
Segments
   Consolidation
Adjustments
   Blackstone Group
Combined
Fee Related Revenues   $ 1,156,814   $ (36,535 )(a) $ 1,120,279
Expenses   $ 409,395   $ 143,695   (b) $ 553,090
Net Gains from Investment Activities   $ 1,550,721   $ 6,036,575   (c) $ 7,587,296
Total Assets   $ 4,474,089   $ 29,416,955   (d) $ 33,891,044
(a)
The Fee Related Revenues adjustment represents management fees earned from Blackstone Funds to arrive at Blackstone Group combined revenues which were eliminated in consolidation.

(b)
The Expenses adjustment represents the addition of expenses of the consolidated Blackstone Funds to the Blackstone Group unconsolidated expenses to arrive at Blackstone Group combined expenses.

F-29

(c)
The Net Gains from Investment Activities adjustment results from the following:

Fund Management Fees Eliminated in Consolidation   $ 36,535
Fund Expenses added in Consolidation     143,695
Non-Controlling Interests in Income of Consolidated Entities     5,856,345
   
  Total Consolidation Adjustments   $ 6,036,575
   
(d)
The Total Assets adjustment represents the addition of assets of the consolidated Blackstone Funds to the Blackstone Group unconsolidated assets to arrive at Blackstone Group combined assets.

        The following table presents the financial data for the Company's four reportable segments as of and for the year ended December 31, 2005:

 
   December 31, 2005 and for the Year then Ended
 
   Corporate
Private
Equity
   Real
Estate
   Marketable
Alternative
Asset
Management
   Financial
Advisory
   Total
Reportable
Segments
Segment Revenues:                              
Fund Management Fees   $ 175,772   $ 100,073   $ 129,638   $ —   $ 405,483
Advisory Fees     —     —     —     120,137     120,137
Interest and Other     1,666     835     2,345     749     5,595
   
 
 
 
 
  Total Fee Related Revenues     177,438     100,908     131,983     120,886     531,215
Expenses     78,247     68,428     92,809     54,364     293,848
   
 
 
 
 
Fee Related Earnings     99,191     32,480     39,174     66,522     237,367
Net Gains from Investment Activities     737,506     292,505     74,956     589     1,105,556
   
 
 
 
 
Economic Net Income   $ 836,697   $ 324,985   $ 114,130   $ 67,111   $ 1,342,923
   
 
 
 
 
Total Assets   $ 1,517,993   $ 355,104   $ 545,659   $ 104,510   $ 2,523,266
   
 
 
 
 

F-30

        The following table reconciles the Total Reportable Segments to Blackstone Group Combined as of December 31, 2005 and for the year then ended:

 
   December 31, 2005 and for the Year then Ended
 
   Total
Reportable
Segments
   Consolidation
Adjustments
   Blackstone Group
Combined
Fee Related Revenues   $ 531,215   $ (34,467 )(a) $ 496,748
Expenses   $ 293,848   $ 67,972   (b) $ 361,820
Net Gains from Investment Activities   $ 1,105,556   $ 4,036,974   (c) $ 5,142,530
Total Assets   $ 2,523,266   $ 18,597,858   (d) $ 21,121,124
(a)
The Fee Related Revenues adjustment represents management fees earned from Blackstone Funds to arrive at Blackstone Group combined revenues which were eliminated in consolidation.

(b)
The Expenses adjustment represents the addition of expenses of the consolidated Blackstone Funds to the Blackstone Group unconsolidated expenses to arrive at Blackstone Group combined expenses.

(c)
The Net Gains from Investment Activities adjustment results from the following:

Fund Management Fees Eliminated in Consolidation   $ 34,467
Fund Expenses added in Consolidation     67,972
Non-Controlling Interests in Income of Consolidated Entities     3,934,535
   
  Total Consolidation Adjustments   $ 4,036,974
   
(d)
The Total Assets adjustment represents the addition of assets of the consolidated Blackstone Funds to the Blackstone Group unconsolidated assets to arrive at Blackstone Group combined assets.

F-31

        The following table presents the financial data for the Company's four reportable segments as of and for the year ended December 31, 2004:

 
   December 31, 2004 and for the Year then Ended
 
   Corporate
Private
Equity
   Real
Estate
   Marketable
Alternative
Asset
Management
   Financial
Advisory
   Total
Reportable
Segments
Segment Revenues:                              
Fund Management Fees   $ 226,712   $ 86,113   $ 111,715   $ —   $ 424,540
Advisory Fees     —     —     179     108,178     108,357
Interest and Other     919     2,502     1,081     105     4,607
   
 
 
 
 
  Total Fee Related Revenues     227,631     88,615     112,975     108,283     537,504
Expenses     70,561     51,797     71,485     40,035     233,878
   
 
 
 
 
Fee Related Earnings     157,070     36,818     41,490     68,248     303,626
Net Gains from Investment Activities     871,891     296,439     67,478     —     1,235,808
   
 
 
 
 
Economic Net Income   $ 1,028,961   $ 333,257   $ 108,968   $ 68,248   $ 1,539,434
   
 
 
 
 
Total Assets   $ 1,517,960   $ 511,393   $ 549,577   $ 95,346   $ 2,674,276
   
 
 
 
 

        The following table reconciles the Total Reportable Segments to Blackstone Group Combined as of December 31, 2004 and for the year then ended:

 
   December 31, 2004 and for the Year then Ended
 
   Total
Reportable
Segments
   Consolidation
Adjustments
   Blackstone Group
Combined
Fee Related Revenues   $ 537,504   $ (34,041 )(a) $ 503,463
Expenses   $ 233,878   $ 43,123   (b) $ 277,001
Net Gains from Investment Activities   $ 1,235,808   $ 4,978,711   (c) $ 6,214,519
Total Assets   $ 2,674,276   $ 18,579,663   (d) $ 21,253,939
(a)
The Fee Related Revenues adjustment represents management fees earned from Blackstone Funds to arrive at Blackstone Group combined revenues which were eliminated in consolidation.

(b)
The Expenses adjustment represents the addition of expenses of the consolidated Blackstone Funds to the Blackstone Group unconsolidated expenses to arrive at Blackstone Group combined expenses.

(c)
The Net Gains from Investment Activities adjustment results from the following:

Fund Management Fees Eliminated in Consolidation   $ 34,041
Fund Expenses added in Consolidation     43,123
Non-Controlling Interests in Income of Consolidated Entities     4,901,547
   
  Total Consolidation Adjustments   $ 4,978,711
   

F-32

(d)
The Total Assets adjustment represents the addition of assets of the consolidated Blackstone Funds to the Blackstone Group unconsolidated assets to arrive at Blackstone Group combined assets.

13.    EMPLOYEE BENEFIT PLANS

        The Company provides a 401(k) plan (the "Plan") for eligible employees in the United States. For certain finance and administrative professionals who are participants in the Plan, the Company contributes 2% of such professional's pretax annual compensation up to a maximum of one thousand six hundred dollars. In addition, the Company will contribute 50% of the first 4% of pretax annual compensation contributed by such professional participants with a maximum matching contribution of one thousand six hundred dollars. For the years ended December 31, 2006, 2005 and 2004, the Company incurred expenses of $635, $532 and $484 in connection with such Plan.

        The Company provides a defined contribution plan for eligible employees in the United Kingdom ("UK Plan"). All United Kingdom employees are eligible to contribute to the Plan after three months of qualifying service. The Company contributes a percentage of an employee's annual salary, subject to United Kingdom statutory restrictions, on a monthly basis for administrative employees of the Company based upon the age of the employee. For the years ended December 31, 2006, 2005 and 2004, the Company incurred expenses of $191, $116 and $113 in connection with the UK Plan.

14.    REGULATED ENTITIES

        The Company has certain entities that are registered broker-dealers which are subject to the minimum net capital requirements of the Securities and Exchange Commission ("SEC"). The Company has continuously operated in excess of these requirements. The total net capital of these entities was $28 million at December 31, 2006, which exceeded the amount required by $27 million. The Company also has an entity based in London which is subject to the capital requirements of the U.K. Financial Services Authority. This entity has continuously operated in excess of its regulatory capital requirements.

        Certain other U.S. and non-U.S. entities are subject to various securities commodity pool and trader regulations. This includes a number of U.S. entities which are Registered Investment Advisors under the rules and authority of the SEC.

        The regulatory capital requirements referred to above may restrict the Company's ability to withdraw capital from its entities. At December 31, 2006, approximately $28 million of net assets of consolidated entities may be restricted as to the payment of cash dividends and advances to the Company.

F-33

Appendix A

AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP
OF
THE BLACKSTONE GROUP L.P.


TABLE OF CONTENTS

ARTICLE I DEFINITIONS   A-1

 
 
SECTION 1.1.
 
Definitions
 
A-1
    SECTION 1.2.   Construction   A-9

ARTICLE II ORGANIZATION
 
A-9

 
 
SECTION 2.1.
 
Formation
 
A-9
    SECTION 2.2.   Name   A-9
    SECTION 2.3.   Registered Office; Registered Agent; Principal Office; Other Offices   A-9
    SECTION 2.4.   Purpose and Business   A-10
    SECTION 2.5.   Powers   A-10
    SECTION 2.6.   Power of Attorney   A-10
    SECTION 2.7.   Term   A-11
    SECTION 2.8.   Title to Partnership Assets   A-12
    SECTION 2.9.   Certain Undertakings Relating to the Separateness of the Partnership   A-12

ARTICLE III RIGHTS OF LIMITED PARTNERS
 
A-12

 
 
SECTION 3.1.
 
Limitation of Liability
 
A-12
    SECTION 3.2.   Management of Business   A-12
    SECTION 3.3.   Outside Activities of the Limited Partners   A-13
    SECTION 3.4.   Rights of Limited Partners   A-13

ARTICLE IV CERTIFICATES; RECORD HOLDERS; TRANSFER OF PARTNERSHIP INTERESTS; REDEMPTION OF PARTNERSHIP INTERESTS
 
A-13

 
 
SECTION 4.1.
 
Certificates
 
A-13
    SECTION 4.2.   Mutilated, Destroyed, Lost or Stolen Certificates   A-14
    SECTION 4.3.   Record Holders   A-14
    SECTION 4.4.   Transfer Generally   A-15
    SECTION 4.5.   Registration and Transfer of Limited Partner Interests   A-15
    SECTION 4.6.   Transfer of the General Partner's General Partner Interest   A-15
    SECTION 4.7.   Restrictions on Transfers   A-16
    SECTION 4.8.   Citizenship Certificates; Non-citizen Assignees   A-16
    SECTION 4.9.   Redemption of Partnership Interests of Non-citizen Assignees   A-17

ARTICLE V CAPITAL CONTRIBUTIONS AND ISSUANCE OF PARTNERSHIP INTERESTS
 
A-18

 
 
SECTION 5.1.
 
Organizational Issuances
 
A-18
    SECTION 5.2.   Contributions by the General Partner and its Affiliates   A-18
    SECTION 5.3.   Contributions by the Underwriters   A-18
    SECTION 5.4.   Interest and Withdrawal   A-19
    SECTION 5.5.   Issuances and Cancellations of Special Voting Units   A-19
    SECTION 5.6.   Issuances of Additional Partnership Securities   A-19
    SECTION 5.7.   Preemptive Rights   A-20
    SECTION 5.8.   Splits and Combinations   A-20
    SECTION 5.9.   Fully Paid and Non-Assessable Nature of Limited Partner Interests   A-21

ARTICLE VI ALLOCATIONS AND DISTRIBUTIONS
 
A-21
             

A-i


 
 
SECTION 6.1.
 
Maintenance of Capital Accounts
 
A-21
    SECTION 6.2.   Allocations   A-21
    SECTION 6.3.   Requirement and Characterization of Distributions; Distributions to Record Holders   A-22

ARTICLE VII MANAGEMENT AND OPERATION OF BUSINESS
 
A-23

 
 
SECTION 7.1.
 
Management
 
A-23
    SECTION 7.2.   Certificate of Limited Partnership   A-25
    SECTION 7.3.   Restrictions on General Partner's Authority   A-25
    SECTION 7.4.   Reimbursement of the General Partner   A-25
    SECTION 7.5.   Outside Activities   A-26
    SECTION 7.6.   Loans from the General Partner; Loans or Contributions from the Partnership; Contracts with Affiliates; Certain Restrictions on the General Partner   A-27
    SECTION 7.7.   Indemnification   A-28
    SECTION 7.8.   Liability of Indemnitees   A-29
    SECTION 7.9.   Resolution of Conflicts of Interest; Standards of Conduct and Modification of Duties   A-30
    SECTION 7.10.   Other Matters Concerning the General Partner   A-32
    SECTION 7.11.   Purchase or Sale of Partnership Securities   A-32
    SECTION 7.12.   Reliance by Third Parties   A-32

ARTICLE VIII BOOKS, RECORDS, ACCOUNTING AND REPORTS
 
A-33

 
 
SECTION 8.1.
 
Records and Accounting
 
A-33
    SECTION 8.2.   Fiscal Year   A-33
    SECTION 8.3.   Reports   A-33

ARTICLE IX TAX MATTERS
 
A-34

 
 
SECTION 9.1.
 
Tax Returns and Information
 
A-34
    SECTION 9.2.   Tax Elections   A-34
    SECTION 9.3.   Tax Controversies   A-34
    SECTION 9.4.   Withholding   A-34
    SECTION 9.5.   Election to be Treated as a Corporation   A-34

ARTICLE X ADMISSION OF PARTNERS
 
A-35

 
 
SECTION 10.1.
 
Admission of Initial Limited Partners
 
A-35
    SECTION 10.2.   Admission of Additional Limited Partners   A-35
    SECTION 10.3.   Admission of Successor General Partner   A-35
    SECTION 10.4.   Amendment of Agreement and Certificate of Limited Partnership to Reflect the Admission of Partners   A-36

ARTICLE XI WITHDRAWAL OR REMOVAL OF PARTNERS
 
A-36

 
 
SECTION 11.1.
 
Withdrawal of the General Partner
 
A-36
    SECTION 11.2.   Removal of the General Partner   A-37
    SECTION 11.3.   Interest of Departing General Partner and Successor General Partner   A-38
    SECTION 11.4.   Withdrawal of Limited Partners   A-39

ARTICLE XII DISSOLUTION AND LIQUIDATION
 
A-39

 
 
SECTION 12.1.
 
Dissolution
 
A-39
             

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    SECTION 12.2.   Continuation of the Business of the Partnership After Event of Withdrawal   A-39
    SECTION 12.3.   Liquidator   A-40
    SECTION 12.4.   Liquidation   A-40
    SECTION 12.5.   Cancellation of Certificate of Limited Partnership   A-41
    SECTION 12.6.   Return of Contributions   A-41
    SECTION 12.7.   Waiver of Partition   A-41
    SECTION 12.8.   Capital Account Restoration   A-41

ARTICLE XIII AMENDMENT OF PARTNERSHIP AGREEMENT; MEETINGS; RECORD DATE
 
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SECTION 13.1.
 
Amendments to be Adopted Solely by the General Partner
 
A-41
    SECTION 13.2.   Amendment Procedures   A-43
    SECTION 13.3.   Amendment Requirements   A-43
    SECTION 13.4.   Special Meetings   A-44
    SECTION 13.5.   Notice of a Meeting   A-44
    SECTION 13.6.   Record Date   A-44
    SECTION 13.7.   Adjournment   A-44
    SECTION 13.8.   Waiver of Notice; Approval of Meeting; Approval of Minutes   A-45
    SECTION 13.9.   Quorum   A-45
    SECTION 13.10.   Conduct of a Meeting   A-45
    SECTION 13.11.   Action Without a Meeting   A-46
    SECTION 13.12.   Voting and Other Rights   A-46
    SECTION 13.13.   Participation of Special Voting Units in All Actions Participated in by Common Units   A-47

ARTICLE XIV MERGER
 
A-47

 
 
SECTION 14.1.
 
Authority
 
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    SECTION 14.2.   Procedure for Merger, Consolidation or Other Business Combination   A-48
    SECTION 14.3.   Approval by Limited Partners of Merger, Consolidation or Other Business Combination   A-49
    SECTION 14.4.   Certificate of Merger or Consolidation   A-49
    SECTION 14.5.   Amendment of Partnership Agreement   A-49
    SECTION 14.6.   Effect of Merger   A-50

ARTICLE XV RIGHT TO ACQUIRE LIMITED PARTNER INTERESTS
 
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SECTION 15.1.
 
Right to Acquire Limited Partner Interests
 
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ARTICLE XVI GENERAL PROVISIONS
 
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SECTION 16.1.
 
Addresses and Notices.
 
A-52
    SECTION 16.2.   Further Action   A-52
    SECTION 16.3.   Binding Effect   A-52
    SECTION 16.4.   Integration   A-52
    SECTION 16.5.   Creditors   A-53
    SECTION 16.6.   Waiver   A-53
    SECTION 16.7.   Counterparts   A-53
    SECTION 16.8.   Applicable Law   A-53
    SECTION 16.9.   Invalidity of Provisions   A-53
    SECTION 16.10.   Consent of Partners   A-53
    SECTION 16.11.   Facsimile Signatures   A-53

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AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP
OF
THE BLACKSTONE GROUP L.P.

        THIS AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF THE BLACKSTONE GROUP L.P. dated as of                        , 2007, is entered into by and among Blackstone Group Management L.L.C., a Delaware limited liability company, as the General Partner, together with any other Persons who become Partners in the Partnership or parties hereto as provided herein. In consideration of the covenants, conditions and agreements contained herein, the parties hereto hereby agree as follows:


ARTICLE I

DEFINITIONS

        SECTION 1.1    Definitions.    

        The following definitions shall be for all purposes, unless otherwise clearly indicated to the contrary, applied to the terms used in this Agreement.

        "Acquisition" means any transaction in which any Group Member acquires (through an asset acquisition, merger, stock acquisition or other form of investment) control over all or a portion of the assets, properties or business of another Person.

        "Affiliate" means, with respect to any Person, any other Person that directly or indirectly through one or more intermediaries controls, is controlled by or is under common control with, the Person in question. As used herein, the term "control" means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through ownership of voting securities, by contract or otherwise.

        "Agreement" means this Amended and Restated Agreement of Limited Partnership of The Blackstone Group L.P., as it may be amended, supplemented or restated from time to time.

        "Associate" means, when used to indicate a relationship with any Person, (a) any corporation or organization of which such Person is a director, officer or partner or is, directly or indirectly, the owner of 20% or more of any class of voting stock or other voting interest; (b) any trust or other estate in which such Person has at least a 20% beneficial interest or as to which such Person serves as trustee or in a similar fiduciary capacity; and (c) any relative or spouse of such Person, or any relative of such spouse, who has the same principal residence as such Person.

        "Beneficial Owner" has the meaning assigned to such term in Rules 13d-3 and 13d-5 under the Securities Exchange Act (and "Beneficially Own" shall have a correlative meaning).

        "Blackstone Holdings I" means Blackstone Holdings I L.P., a Delaware limited partnership, and any successors thereto.

        "Blackstone Holdings I General Partner" means Blackstone Holdings I GP Inc., a Delaware corporation and the general partner of Blackstone Holdings I, and any successors thereto.

        "Blackstone Holdings II" means Blackstone Holdings II L.P., a Delaware limited partnership, and any successors thereto.

        "Blackstone Holdings II General Partner" means Blackstone Holdings II GP Inc., a Delaware corporation and the general partner of Blackstone Holdings II, and any successors thereto.

        "Blackstone Holdings III" means Blackstone Holdings III L.P., an Alberta limited partnership, and any successors thereto.

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        "Blackstone Holdings III General Partner" means Blackstone Holdings III GP L.P., a Delaware limited partnership and the general partner of Blackstone Holdings III, and any successors thereto.

        "Blackstone Holdings IV" means Blackstone Holdings IV L.P., an Alberta limited partnership, and any successors thereto.

        "Blackstone Holdings IV General Partner" means Blackstone Holdings IV GP L.P., a Delaware limited partnership and the general partner of Blackstone Holdings IV, and any successors thereto.

        "Blackstone Holdings V" means Blackstone Holdings V L.P., an Alberta limited partnership, and any successors thereto.

        "Blackstone Holdings V General Partner" means Blackstone Holdings V GP L.P., an Alberta limited partnership and the general partner of Blackstone Holdings V, and any successors thereto.

        "Blackstone Holdings General Partners" means, collectively, Blackstone Holdings I General Partner, Blackstone Holdings II General Partner, Blackstone Holdings III General Partner, Blackstone Holdings IV General Partner and Blackstone Holdings V General Partner.

        "Blackstone Holdings Group" means, collectively, the Blackstone Holdings Partnerships and their respective Subsidiaries.

        "Blackstone Holdings Partnership Agreements" means, collectively, the Amended and Restated Limited Partnership Agreement of Blackstone Holdings I, the Amended and Restated Limited Partnership Agreement of Blackstone Holdings II, the Amended and Restated Limited Partnership Agreement of Blackstone Holdings III, the Amended and Restated Limited Partnership Agreement of Blackstone Holdings IV and the Amended and Restated Limited Partnership Agreement of Blackstone Holdings V, as they may each be amended, supplemented or restated from time to time.

        "Blackstone Holdings Partnership Unit" means, collectively, one partnership unit in each of Blackstone Holdings I, Blackstone Holdings II, Blackstone Holdings III, Blackstone Holdings IV and Blackstone Holdings V issued under their respective Blackstone Holdings Partnership Agreement.

        "Blackstone Holdings Partnerships" means, collectively, Blackstone Holdings I, Blackstone Holdings II, Blackstone Holdings III, Blackstone Holdings IV and Blackstone Holdings V.

        "Blackstone Holdings Limited Partner" means each Person that becomes a limited partner of the Blackstone Holdings Partnerships pursuant to the terms of the Blackstone Holdings Partnership Agreements.

        "Board of Directors" means, with respect to the Board of Directors of the General Partner, its board of directors or managers, as applicable, if a corporation or limited liability company, or if a limited partnership, the board of directors or board of managers of its general partner.

        "Business Day" means each day that is not a Saturday, Sunday or other day on which banking institutions in New York, New York are authorized or required by law to close.

        "Capital Account" has the meaning assigned to such term in Section 6.1.

        "Capital Contribution" means any cash or cash equivalents that a Partner contributes to the Partnership pursuant to this Agreement.

        "Carrying Value" means, with respect to any Partnership asset, the asset's adjusted basis for U.S. federal income tax purposes, except that the initial carrying value of assets contributed to the Partnership shall be their respective gross fair market values on the date of contribution as determined by the General Partner, and the Carrying Values of all Partnership assets shall be adjusted to equal their respective fair market values, in accordance with the rules set forth in United States Treasury Regulation Section 1.704-1(b)(2)(iv)(f), except as otherwise provided herein, as of: (a) the date of the

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acquisition of any additional Partnership Interest by any new or existing Partner in exchange for more than a de minimis Capital Contribution; (b) the date of the distribution of more than a de minimis amount of Partnership assets to a Partner; (c) the date a Partnership Interest is relinquished to the Partnership; or (d) any other date specified in the United States Treasury Regulations; provided however that adjustments pursuant to clauses (a), (b) (c) and (d) above shall be made only if such adjustments are deemed necessary or appropriate by the General Partner to reflect the relative economic interests of the Partners. In the case of any asset that has a Carrying Value that differs from its adjusted tax basis, Carrying Value shall be adjusted by the amount of depreciation calculated for purposes of the definition of "Net Income (Loss)" rather than the amount of depreciation determined for U.S. federal income tax purposes, and depreciation shall be calculated by reference to Carrying Value rather than tax basis once Carrying Value differs from tax basis.

        "Cause" means a court of competent jurisdiction has entered a final, non-appealable judgment finding the General Partner liable for actual fraud or willful misconduct in its capacity as a general partner of the Partnership.

        "Certificate" means a certificate issued in global form in accordance with the rules and regulations of the Depositary or in such other form as may be adopted by the General Partner, issued by the Partnership evidencing ownership of one or more Common Units or a certificate, in such form as may be adopted by the General Partner, issued by the Partnership evidencing ownership of one or more other Partnership Securities.

        "Certificate of Limited Partnership" means the Certificate of Limited Partnership of the Partnership filed with the Secretary of State of the State of Delaware as referenced in Section 2.1, as such Certificate of Limited Partnership may be amended, supplemented or restated from time to time.

        "Citizenship Certification" means a properly completed certificate in such form as may be specified by the General Partner by which a Limited Partner certifies that he (and if he is a nominee holding for the account of another Person, that to the best of his knowledge such other Person) is an Eligible Citizen.

        "Closing Date" means the first date on which Common Units are sold by the Partnership to the Underwriters pursuant to the provisions of the Underwriting Agreement.

        "Closing Price" has the meaning assigned to such term in Section 15.1(a).

        "Code" means the United States Internal Revenue Code of 1986, as amended and in effect from time to time. Any reference herein to a specific section or sections of the Code shall be deemed to include a reference to any corresponding provision of any successor law.

        "Combined Interest" has the meaning assigned to such term in Section 11.3(a).

        "Commission" means the U.S. Securities and Exchange Commission.

        "Common Unit" means a Partnership Interest representing a fractional part of the Partnership Interests of all Limited Partners having the rights and obligations specified with respect to Common Units in this Agreement.

        "Conflicts Committee" means a committee of the Board of Directors composed entirely of one or more directors or managers who meet the independence standards required to serve on an audit committee of a board of directors established by the Securities Exchange Act and the rules and regulations of the Commission thereunder and by the National Securities Exchange on which the Common Units are listed for trading.

        "Current Market Price" has the meaning assigned to such term in Section 15.1(a).

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        "Delaware Limited Partnership Act" means the Delaware Revised Uniform Limited Partnership Act, 6 Del. C. § 17-101, et seq., as amended, supplemented or restated from time to time, and any successor to such statute.

        "Departing General Partner" means a former General Partner from and after the effective date of any withdrawal or removal of such former General Partner pursuant to Sections 11.1 or 11.2.

        "Depositary" means, with respect to any Units issued in global form, The Depository Trust Company and its successors and permitted assigns.

        "Eligible Citizen" means a Person qualified to own interests in real property in jurisdictions in which any Group Member does business or proposes to do business from time to time, and whose status as a Limited Partner the General Partner determines in its sole discretion does not or would not subject such Group Member to a significant risk of cancellation or forfeiture of any of its properties or any interest therein.

        "Event of Withdrawal" has the meaning assigned to such term in Section 11.1(a).

        "Exchange Agreement" means one or more exchange agreements providing for the exchange of Blackstone Holdings Partnership Units or other securities issued by members of the Blackstone Holdings Group for Common Units, as contemplated by the Registration Statement.

        "Fiscal Year" has the meaning assigned to such term in Section 8.2.

        "General Partner" means Blackstone Group Management L.L.C., a Delaware limited liability company and its successors and permitted assigns that are admitted to the Partnership as general partner of the Partnership, in its capacity as a general partner of the Partnership (except as the context otherwise requires).

        "General Partner Interest" means the management and ownership interest of the General Partner in the Partnership (in its capacity as a general partner without reference to any Limited Partner Interest held by it), which is evidenced by General Partner Units, and includes any and all benefits to which a General Partner is entitled as provided in this Agreement, together with all obligations of a General Partner to comply with the terms and provisions of this Agreement.

        "General Partner Unit" means a fractional part of the General Partner Interest having the rights and obligations specified with respect to the General Partner Interest.

        "Group" means a Person that with or through any of its Affiliates or Associates has any contract, arrangement, understanding or relationship for the purpose of acquiring, holding, voting, exercising investment power or disposing of any Partnership Securities with any other Person that Beneficially Owns, or whose Affiliates or Associates Beneficially Own, directly or indirectly, Partnership Interests.

        "Group Member" means a member of the Partnership Group.

        "Indemnitee" means (a) the General Partner, (b) any Departing General Partner, (c) any Person who is or was an Affiliate of the General Partner or any Departing General Partner, (d) any Person who is or was a member, partner, Tax Matters Partner (as defined in the Code), officer, director, employee, agent, fiduciary or trustee of any Group Member, the General Partner or any Departing General Partner or any Affiliate of any Group Member, the General Partner or any Departing General Partner, (e) any Person who is or was serving at the request of the General Partner or any Departing General Partner or any Affiliate of the General Partner or any Departing General Partner as an officer, director, employee, member, partner, Tax Matters Partner (as defined in the Code), agent, fiduciary or trustee of another Person; provided that a Person shall not be an Indemnitee by reason of providing, on a fee-for-services basis, trustee, fiduciary or custodial services and (f) any Person the General Partner in its sole discretion designates as an "Indemnitee" for purposes of this Agreement.

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        "Initial Common Units" means the Common Units sold in the Initial Offering.

        "Initial Limited Partner" means each of the Organizational Limited Partner and the Underwriters or their designee(s), in each case upon being admitted to the Partnership in accordance with Section 10.1.

        "Initial Offering" means the initial offering and sale of Common Units to the public, as described in the Registration Statement.

        "Issue Price" means the price at which a Unit is purchased from the Partnership, net of any sales commissions or underwriting discounts charged to the Partnership.

        "Limited Partner" means, unless the context otherwise requires, each Initial Limited Partner, each additional Person that becomes a Limited Partner pursuant to the terms of this Agreement and any Departing General Partner upon the change of its status from General Partner to Limited Partner pursuant to Section 11.3, in each case, in such Person's capacity as a limited partner of the Partnership. For the avoidance of doubt, each holder of a Special Voting Unit shall be a Limited Partner. For purposes of the Delaware Limited Partnership Act, the Limited Partners shall constitute a single class or group of limited partners.

        "Limited Partner Interest" means the ownership interest of a Limited Partner in the Partnership, which may be evidenced by Common Units, Special Voting Units or other Partnership Securities or a combination thereof or interest therein, and includes any and all benefits to which such Limited Partner is entitled as provided in this Agreement, including voting rights, together with all obligations of such Limited Partner to comply with the terms and provisions of this Agreement.

        "Liquidation Date" means (a) in the case of an event giving rise to the dissolution of the Partnership of the type described in clauses (a) and (b) of the first sentence of Section 12.2, the date on which the applicable time period during which the holders of Outstanding Units have the right to elect to continue the business of the Partnership has expired without such an election being made, and (b) in the case of any other event giving rise to the dissolution of the Partnership, the date on which such event occurs.

        "Liquidator" means one or more Persons selected by the General Partner to perform the functions described in Section 12.3 as liquidating trustee of the Partnership within the meaning of the Delaware Limited Partnership Act.

        "Merger Agreement" has the meaning assigned to such term in Section 14.1.

        "National Securities Exchange" means an exchange registered with the Commission under Section 6(a) of the Securities Exchange Act or any successor thereto and any other securities exchange (whether or not registered with the Commission under Section 6(a) of the Securities Exchange Act) that the General Partner in its sole discretion shall designate as a National Securities Exchange for purposes of this Agreement.

        "Net Income (Loss)" for any Fiscal Period means the taxable income or loss of the Partnership for such period as determined in accordance with the accounting method used by the Partnership for U.S. federal income tax purposes with the following adjustments; (i) any income of the Partnership that is exempt from U.S. federal income taxation and not otherwise taken into account in computing Net Income (Loss) shall be added to such taxable income or loss; (ii) if the Carrying Value of any asset differs from its adjusted tax basis for U.S. federal income tax purposes, any depreciation, amortization or gain resulting from a disposition of such asset shall be calculated with reference to such Carrying Value; (iii) upon an adjustment to the Carrying Value of any asset, pursuant to the definition of Carrying Value, the amount of the adjustment shall be included as gain or loss in computing such taxable income or loss; and (iv) any expenditures of the Partnership not deductible in computing

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taxable income or loss, not properly capitalizable and not otherwise taken into account in computing Net Income (Loss) pursuant to this definition shall be treated as deductible items.

        "Non-citizen Assignee" means a Person whom the General Partner has determined in its sole discretion does not constitute an Eligible Citizen and as to whose Partnership Interest the General Partner has become the Limited Partner, pursuant to Section 4.8.

        "Notice of Election to Purchase" has the meaning assigned to such term in Section 15.1(b).

        "Opinion of Counsel" means a written opinion of counsel (who may be regular counsel to the Partnership or the General Partner or any of its Affiliates) acceptable to the General Partner.

        "Option Closing Date" means the date or dates on which any Common Units are sold by the Partnership to the Underwriters upon exercise of the Over-Allotment Option.

        "Organizational Limited Partner" means Blackstone Group Limited Partner L.L.C., a Delaware limited liability company and any successors thereto.

        "Outstanding" means, with respect to Partnership Securities, all Partnership Securities that are issued by the Partnership and reflected as outstanding on the Partnership's books and records as of the date of determination; provided however that if at any time any Person or Group (other than the General Partner or its Affiliates) Beneficially Owns 20% or more of any class of Outstanding Common Units, all Common Units owned by such Person or Group shall not be entitled to be voted on any matter and shall not be considered to be Outstanding when sending notices of a meeting of Limited Partners to vote on any matter (unless otherwise required by law), calculating required votes, determining the presence of a quorum or for other similar purposes under this Agreement, except that Common Units so owned shall be considered to be Outstanding for purposes of Section 11.1(b)(iv) (such Common Units shall not, however, be treated as a separate class of Partnership Securities for purposes of this Agreement); provided further that the foregoing limitation shall not apply (i) to any Person or Group who acquired 20% or more of any Outstanding Common Units of any class then Outstanding directly from the General Partner or its Affiliates, (ii) to any Person or Group who acquired 20% or more of any Outstanding Common Units of any class then Outstanding directly or indirectly from a Person or Group described in clause (i) provided that the General Partner shall have notified such Person or Group in writing that such limitation shall not apply or (iii) to any Person or Group who acquired 20% or more of any Common Units issued by the Partnership with the prior approval of the Board of Directors.

        "Over-Allotment Option" means the over-allotment option granted to the Underwriters by the Partnership pursuant to the Underwriting Agreement.

        "Partners" means the General Partner and the Limited Partners.

        "Partnership" means The Blackstone Group L.P., a Delaware limited partnership.

        "Partnership Group" means the Partnership and its Subsidiaries treated as a single consolidated entity.

        "Partnership Interest" means an interest in the Partnership, which shall include the General Partner Interests and Limited Partner Interests.

        "Partnership Security" means any equity interest in the Partnership (but excluding any options, rights, warrants and appreciation rights relating to an equity interest in the Partnership), including without limitation, Common Units, Special Voting Units and General Partner Units.

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        "Percentage Interest" means, as of any date of determination, (i) as to any holder of Common Units in its capacity as such, the product obtained by multiplying (a) 100% less the percentage applicable to the Units referred to in clause (iv) by (b) the quotient obtained by dividing (x) the number of Common Units held by such holder by (y) the total number of all Outstanding Common Units, (ii) as to any holder of General Partner Units in its capacity as such with respect to such General Partner Units, 0%, (iii) as to any holder of Special Voting Units in its capacity as such with respect to such Special Voting Units, 0%, and (iv) as to any holder of other Units in its capacity as such with respect to such Units, the percentage established for such Units by the General Partner as a part of the issuance of such Units.

        "Person" means an individual or a corporation, limited liability company, partnership, joint venture, trust, unincorporated organization, association (including any group, organization, co-tenanacy, plan, board, council or committee), government (including a country, state, county, or any other governmental or political subdivision, agency or instrumentality thereof) or other entity (or series thereof).

        "Pro Rata" means (a) when modifying Units or any class thereof, apportioned equally among all designated Units, and (b) when modifying Partners or Record Holders, apportioned among all Partners or Record Holders, as the case may be, in accordance with their relative Percentage Interests.

        "Purchase Date" means the date determined by the General Partner as the date for purchase of all Outstanding Units of a certain class (other than Units owned by the General Partner and its Affiliates) pursuant to Article XV.

        "Quarter" means, unless the context requires otherwise, a fiscal quarter of the Partnership, or with respect to the first fiscal quarter of the Partnership after the Closing Date the portion of such fiscal quarter after the Closing Date.

        "Record Date" means the date established by the General Partner in its sole discretion for determining (a) the identity of the Record Holders entitled to notice of, or to vote at, any meeting of Limited Partners or entitled to vote by ballot or give approval of Partnership action in writing without a meeting or entitled to exercise rights in respect of any lawful action of Limited Partners or (b) the identity of Record Holders entitled to receive any report or distribution or to participate in any offer.

        "Record Holder" means the Person in whose name a Common Unit is registered on the books of the Transfer Agent as of the opening of business on a particular Business Day, or with respect to other Partnership Interests, the Person in whose name any such other Partnership Interest is registered on the books which the General Partner has caused to be kept as of the opening of business on such Business Day.

        "Redeemable Interests" means any Partnership Interests for which a redemption notice has been given, and has not been withdrawn, pursuant to Section 4.9.

        "Registration Rights Agreement" means one or more registration rights agreements among the Partnership and the limited partners of the Blackstone Holdings Partnerships providing for the registration of Common Units, as contemplated by the Registration Statement.

        "Registration Statement" means the Registration Statement on Form S-1 (Registration No. 333-             ) as it has been or as it may be amended or supplemented from time to time, filed by the Partnership with the Commission under the Securities Act to register the offering and sale of the Common Units in the Initial Offering.

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        "Securities Act" means the U.S. Securities Act of 1933, as amended, supplemented or restated from time to time and any successor to such statute.

        "Securities Exchange Act" means the U.S. Securities Exchange Act of 1934, as amended, supplemented or restated from time to time and any successor to such statute.

        "Special Approval" means either (a) approval by the sole member or by a majority of the members of the Conflicts Committee, as applicable or (b) approval by the vote of the Record Holders of a majority of the voting power of the Voting Units (excluding Voting Units owned by the General Partner and its Affiliates).

        "Special Voting Unit" means a Partnership Interest having the rights and obligations specified with respect to Special Voting Units in this Agreement. For the avoidance of doubt, holders of Special Voting Units, in their capacity as such, shall not be entitled to receive distributions by the Partnership and shall not be allocated income, gain, loss, deduction or credit of the Partnership.

        "Subsidiary" means, with respect to any Person, (a) a corporation of which more than 50% of the voting power of shares entitled (without regard to the occurrence of any contingency) to vote in the election of directors or other governing body of such corporation is owned, directly or indirectly, at the date of determination, by such Person, by one or more Subsidiaries of such Person or a combination thereof, (b) a partnership (whether general or limited) in which such Person or a Subsidiary of such Person is, at the date of determination, a general or limited partner of such partnership, but only if more than 50% of the partnership interests of such partnership (considering all of the partnership interests of the partnership as a single class) is owned, directly or indirectly, at the date of determination, by such Person, by one or more Subsidiaries of such Person, or a combination thereof, (c) any other Person (other than a corporation or a partnership) in which such Person, one or more Subsidiaries of such Person, or a combination thereof, directly or indirectly, at the date of determination, has (i) at least a majority ownership interest or (ii) the power to elect or direct the election of a majority of the directors or other governing body of such Person or (d) any other Person the financial information of which is consolidated by such Person for financial reporting purposes under U.S. GAAP.

        "Surviving Business Entity" has the meaning assigned to such term in Section 14.2(b).

        "Tax Receivable Agreement" means the Tax Receivable Agreement to be entered into substantially concurrently with the Initial Offering among Blackstone Holdings I General Partner, Blackstone Holdings II General Partner, Blackstone Holdings V General Partner and the limited partners of the Blackstone Holdings Partnerships.

        "Trading Day" has the meaning assigned to such term in Section 15.1(a).

        "Transfer" has the meaning assigned to such term in Section 4.4(a).

        "Transfer Agent" means such bank, trust company or other Person (including the General Partner or one of its Affiliates) as shall be appointed from time to time by the Partnership to act as registrar and transfer agent for the Common Units; provided that if no Transfer Agent is specifically designated for any other Partnership Securities, the General Partner shall act in such capacity.

        "Underwriter" means each Person named as an underwriter in the Underwriting Agreement who purchases Common Units pursuant thereto.

        "Underwriting Agreement" means the Underwriting Agreement to be entered into in connection with the Initial Offering among the Partnership and the Underwriters, providing for the purchase of Common Units by such Underwriters.

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        "Unit" means a Partnership Interest that is designated as a "Unit" and shall include Common Units, Special Voting Units and General Partner Units.

        "Unitholders" means the holders of Units.

        "U.S. GAAP" means U.S. generally accepted accounting principles consistently applied.

        "Voting Unit" means a Common Unit, a Special Voting Unit and any other Partnership Interest that is designated as a "Voting Unit" from time to time.

        "Withdrawal Opinion of Counsel" has the meaning assigned to such term in Section 11.1(b).

        SECTION 1.2.    Construction.    

        Unless the context requires otherwise: (a) any pronoun used in this Agreement shall include the corresponding masculine, feminine or neuter forms, and the singular form of nouns, pronouns and verbs shall include the plural and vice versa; (b) references to Articles and Sections refer to Articles and Sections of this Agreement; and (c) the terms "include," "includes," "including" or words of like import shall be deemed to be followed by the words "without limitation;" and the terms "hereof," "herein" or "hereunder refer to this Agreement as a whole and not to any particular provision of this Agreement. The table of contents and headings contained in this Agreement are for reference purposes only, and shall not affect in any way the meaning or interpretation of this Agreement.


ARTICLE II

ORGANIZATION

        SECTION 2.1.    Formation.    

        The Partnership has been previously formed as a limited partnership pursuant to the filing of the Certificate of Limited Partnership with the Secretary of State of the State of Delaware on March 12, 2007, pursuant to the provisions of the Delaware Limited Partnership Act. Except as expressly provided to the contrary in this Agreement, the rights, duties (including fiduciary duties), liabilities and obligations of the Partners and the administration, dissolution and termination of the Partnership shall be governed by the Delaware Limited Partnership Act. All Partnership Interests shall constitute personal property of the owner thereof for all purposes and a Partner has no interest in specific Partnership property.

        SECTION 2.2.    Name.    

        The name of the Partnership shall be "The Blackstone Group L.P." The Partnership's business may be conducted under any other name or names as determined by the General Partner in its sole discretion, including the name of the General Partner. The words "Limited Partnership," "LP," "L.P.," "Ltd." or similar words or letters shall be included in the Partnership's name where necessary for the purpose of complying with the laws of any jurisdiction that so requires. The General Partner may change the name of the Partnership at any time and from time to time by filing an amendment to the Certificate of Limited Partnership (and upon any such filing this Agreement shall be deemed automatically amended to change the name of the Partnership) and shall notify the Limited Partners of such change in the next regular communication to the Limited Partners.

        SECTION 2.3.    Registered Office; Registered Agent; Principal Office; Other Offices.    

        Unless and until changed by the General Partner by filing an amendment to the Certificate of Limited Partnership (and upon any such filing this Agreement shall be deemed automatically amended

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to change the registered office and the registered agent of the Partnership) the registered office of the Partnership in the State of Delaware is located at 1209 Orange Street, Wilmington, Delaware 19801, and the registered agent for service of process on the Partnership in the State of Delaware at such registered office is The Corporation Trust Company. The principal office of the Partnership is located at 345 Park Avenue, New York, New York, 10154 or such other place as the General Partner in its sole discretion may from time to time designate by notice to the Limited Partners. The Partnership may maintain offices at such other place or places within or outside the State of Delaware as the General Partner deems necessary or appropriate. The address of the General Partner is 345 Park Avenue, New York, New York, 10154 or such other place as the General Partner may from time to time designate by notice to the Limited Partners.

        SECTION 2.4.    Purpose and Business.    

        The purpose and nature of the business to be conducted by the Partnership shall be to (a) engage directly in, or enter into or form any corporation, partnership, joint venture, limited liability company or other arrangement to engage indirectly in, any business activity that is approved by the General Partner in its sole discretion and that lawfully may be conducted by a limited partnership organized pursuant to the Delaware Limited Partnership Act and, in connection therewith, to exercise all of the rights and powers conferred upon the Partnership pursuant to the agreements relating to such business activity; and (b) do anything necessary or appropriate to the foregoing, including the making of capital contributions or loans to a Group Member. To the fullest extent permitted by law, the General Partner shall have no duty or obligation to propose or approve, and may decline to propose or approve, the conduct by the Partnership of any business free of any duty (including any fiduciary duty) or obligation whatsoever to the Partnership or any Limited Partner or Record Holder and, in declining to so propose or approve, shall not be deemed to have breached this Agreement, any other agreement contemplated hereby, the Delaware Limited Partnership Act or any other provision of law, rule or regulation or equity.

        SECTION 2.5.    Powers.    

        The Partnership shall be empowered to do any and all acts and things necessary, appropriate, proper, advisable, incidental to or convenient for the furtherance and accomplishment of the purposes and business described in Section 2.4 and for the protection and benefit of the Partnership.

        SECTION 2.6.    Power of Attorney.    

        (a)   Each Limited Partner and Record Holder hereby constitutes and appoints the General Partner and, if a Liquidator (other than the General Partner) shall have been selected pursuant to Section 12.3, the Liquidator, severally (and any successor to the Liquidator by merger, transfer, assignment, election or otherwise) and each of their authorized managers and officers and attorneys-in-fact, as the case may be, with full power of substitution, as his true and lawful agent and attorney-in-fact, with full power and authority in his name, place and stead, to:

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        Nothing contained in this Section 2.6(a) shall be construed as authorizing the General Partner to amend this Agreement except in accordance with Article XIII or as may be otherwise expressly provided for in this Agreement.

        (b)   The foregoing power of attorney is hereby declared to be irrevocable and a power coupled with an interest, and it shall survive and, to the maximum extent permitted by law, shall not be affected by the subsequent death, incompetency, disability, incapacity, dissolution, bankruptcy or termination of any Limited Partner or Record Holder and the transfer of all or any portion of such Limited Partner's or Record Holder's Partnership Interest and shall extend to such Limited Partner's or Record Holder's heirs, successors, assigns and personal representatives. Each such Limited Partner or Record Holder hereby agrees to be bound by any representation made by the General Partner or the Liquidator acting in good faith pursuant to such power of attorney; and each such Limited Partner or Record Holder, to the maximum extent permitted by law, hereby waives any and all defenses that may be available to contest, negate or disaffirm the action of the General Partner or the Liquidator taken in good faith under such power of attorney. Each Limited Partner and Record Holder shall execute and deliver to the General Partner or the Liquidator, within 15 days after receipt of the request therefor, such further designation, powers of attorney and other instruments as the General Partner or the Liquidator may request in order to effectuate this Agreement and the purposes of the Partnership.

        SECTION 2.7.    Term.    

        The term of the Partnership commenced upon the filing of the Certificate of Limited Partnership in accordance with the Delaware Limited Partnership Act and shall continue until the dissolution of the Partnership in accordance with the provisions of Article XII. The existence of the Partnership as a separate legal entity shall continue until the cancellation of the Certificate of Limited Partnership as provided in the Delaware Limited Partnership Act.

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        SECTION 2.8.    Title to Partnership Assets.    

        Title to Partnership assets, whether real, personal or mixed and whether tangible or intangible, shall be deemed to be owned by the Partnership as an entity, and no Partner, individually or collectively, shall have any ownership interest in such Partnership assets or any portion thereof. Title to any or all of the Partnership assets may be held in the name of the Partnership, the General Partner, one or more of its Affiliates or one or more nominees, as the General Partner may determine. The General Partner hereby declares and warrants that any Partnership assets for which record title is held in the name of the General Partner or one or more of its Affiliates or one or more nominees shall be held by the General Partner or such Affiliate or nominee for the use and benefit of the Partnership in accordance with the provisions of this Agreement; provided however, that the General Partner shall use reasonable efforts to cause record title to such assets (other than those assets in respect of which the General Partner in its sole discretion determines that the expense and difficulty of conveyancing makes transfer of record title to the Partnership impracticable) to be vested in the Partnership as soon as reasonably practicable; provided further that prior to the withdrawal or removal of the General Partner or as soon thereafter as practicable, the General Partner shall use reasonable efforts to effect the transfer of record title to the Partnership and, prior to any such transfer, will provide for the use of such assets in a manner satisfactory to the General Partner. All Partnership assets shall be recorded as the property of the Partnership in its books and records, irrespective of the name in which record title to such Partnership assets is held.

        SECTION 2.9.    Certain Undertakings Relating to the Separateness of the Partnership.    

        (a)   Separateness Generally. The Partnership shall conduct its business and operations separate and apart from those of any other Person (other than the General Partner) in accordance with this Section 2.9.

        (b)   Separate Records. The Partnership shall maintain (i) its books and records, (ii) its accounts, and (iii) its financial statements separate from those of any other Person except its consolidated Subsidiaries.

        (c)   No Effect. Failure by the General Partner or the Partnership to comply with any of the obligations set forth above shall not affect the status of the Partnership as a separate legal entity, with its separate assets and separate liabilities.


ARTICLE III

RIGHTS OF LIMITED PARTNERS

        SECTION 3.1.    Limitation of Liability.    

        The Limited Partners shall have no liability under this Agreement except as expressly provided in this Agreement or the Delaware Limited Partnership Act.

        SECTION 3.2.    Management of Business.    

        No Limited Partner, in its capacity as such, shall participate in the operation, management or control (within the meaning of the Delaware Limited Partnership Act) of the Partnership's business, transact any business in the Partnership's name or have the power to sign documents for or otherwise bind the Partnership. Any action taken by any Affiliate of the General Partner or any officer, director, employee, manager, member, general partner, agent or trustee of the General Partner or any of its Affiliates, or any officer, director, employee, manager, member, general partner, agent or trustee of a Group Member, in its capacity as such, shall not be deemed to be participation in the control of the business of the Partnership by a limited partner of the Partnership (within the meaning of

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Section 17-303(a) of the Delaware Limited Partnership Act) and shall not affect, impair or eliminate the limitations on the liability of the Limited Partners under this Agreement.

        SECTION 3.3.    Outside Activities of the Limited Partners.    

        Any Limited Partner shall be entitled to and may have business interests and engage in business activities in addition to those relating to the Partnership, including business interests and activities in direct competition with the Partnership Group. Neither the Partnership nor any of the other Partners shall have any rights by virtue of this Agreement in any business ventures of any Limited Partner.

        SECTION 3.4.    Rights of Limited Partners.    

        (a)   In addition to other rights provided by this Agreement or by applicable law, and except as limited by Section 3.4(b), each Limited Partner shall have the right, for a purpose reasonably related to such Limited Partner's interest as a Limited Partner in the Partnership, upon reasonable written demand stating the purpose of such demand and at such Limited Partner's own expense:

        (b)   The General Partner may keep confidential from the Limited Partners, for such period of time as the General Partner determines in its sole discretion, (i) any information that the General Partner reasonably believes to be in the nature of trade secrets or (ii) other information the disclosure of which the General Partner believes (A) is not in the best interests of the Partnership Group, (B) could damage the Partnership Group or its business or (C) that any Group Member is required by law or by agreement with any third party to keep confidential (other than agreements with Affiliates of the Partnership the primary purpose of which is to circumvent the obligations set forth in this Section 3.4).


ARTICLE IV

CERTIFICATES; RECORD HOLDERS; TRANSFER OF PARTNERSHIP INTERESTS;
REDEMPTION OF PARTNERSHIP INTERESTS

        SECTION 4.1.    Certificates.    

        Notwithstanding anything otherwise to the contrary herein, unless the General Partner shall determine otherwise in respect of some or all of any or all classes of Partnership Interests, Partnership Interests shall not be evidenced by certificates. Certificates that may be issued shall be executed on behalf of the Partnership by the General Partner (and by any appropriate officer of the General Partner on behalf of the General Partner).

        No Certificate evidencing Common Units shall be valid for any purpose until it has been countersigned by the Transfer Agent; provided however that if the General Partner elects to issue Certificates evidencing Common Units in global form, the Certificates evidencing Common Units shall be valid upon receipt of a certificate from the Transfer Agent certifying that the Certificates evidencing Common Units have been duly registered in accordance with the directions of the Partnership.

        SECTION 4.2.    Mutilated, Destroyed, Lost or Stolen Certificates.    

        (a)   If any mutilated Certificate evidencing Common Units is surrendered to the Transfer Agent or any mutilated Certificate evidencing other Partnership Securities is surrendered to the General Partner, the appropriate officers of the General Partner on behalf of the General Partner on behalf of the

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Partnership shall execute, and, if applicable, the Transfer Agent shall countersign and deliver in exchange therefor, a new Certificate evidencing the same number and type of Partnership Securities as the Certificate so surrendered.

        (b)   The appropriate officers of the General Partner on behalf of the General Partner on behalf of the Partnership shall execute and deliver, and, if applicable, the Transfer Agent shall countersign a new Certificate in place of any Certificate previously issued if the Record Holder of the Certificate:

        If a Record Holder fails to notify the General Partner within a reasonable period of time after he has notice of the loss, destruction or theft of a Certificate, and a transfer of the Limited Partner Interests represented by the Certificate is registered before the Partnership, the General Partner or the Transfer Agent receives such notification, the Record Holder shall be precluded from making any claim against the Partnership, the General Partner or the Transfer Agent for such transfer or for a new Certificate.

        (c)   As a condition to the issuance of any new Certificate under this Section 4.2, the General Partner may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Transfer Agent, if applicable) reasonably connected therewith.

        SECTION 4.3.    Record Holders.    

        The Partnership shall be entitled to recognize the Record Holder as the owner with respect to any Partnership Interest and, accordingly, shall not be bound to recognize any equitable or other claim to or interest in such Partnership Interest on the part of any other Person, regardless of whether the Partnership shall have actual or other notice thereof, except as otherwise provided by law or any applicable rule, regulation, guideline or requirement of any National Securities Exchange on which such Partnership Interests are listed for trading. Without limiting the foregoing, when a Person (such as a broker, dealer, bank, trust company or clearing corporation or an agent of any of the foregoing) is acting as nominee, agent or in some other representative capacity for another Person in acquiring and/or holding Partnership Interests, as between the Partnership on the one hand, and such other Persons on the other, such representative Person shall be the Record Holder of such Partnership Interest.

        SECTION 4.4.    Transfer Generally.    

        (a)   The term "transfer," when used in this Agreement with respect to a Partnership Interest, shall be deemed to refer to a transaction (i) by which the General Partner assigns its General Partner Units to another Person who becomes the General Partner, and includes a sale, assignment, gift, pledge, encumbrance, hypothecation, mortgage, exchange, or any other disposition by law or otherwise or (ii) by which the holder of a Limited Partner Interest assigns such Limited Partner Interest to another

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Person, and includes a sale, assignment, gift, exchange or any other disposition by law or otherwise, including any transfer upon foreclosure of any pledge, encumbrance, hypothecation or mortgage.

        (b)   No Partnership Interest shall be transferred, in whole or in part, except in accordance with the terms and conditions set forth in this Article IV. Any transfer or purported transfer of a Partnership Interest not made in accordance with this Article IV shall be null and void.

        (c)   Nothing contained in this Agreement shall be construed to prevent a disposition by any member of the General Partner of any or all of the issued and outstanding limited liability company or other interests in the General Partner.

        SECTION 4.5.    Registration and Transfer of Limited Partner Interests.    

        (a)   The General Partner shall keep or cause to be kept on behalf of the Partnership a register in which, subject to such reasonable regulations as it may prescribe and subject to the provisions of Section 4.5(b), the Partnership will provide for the registration and transfer of Limited Partner Interests. The Transfer Agent is hereby appointed registrar and transfer agent for the purpose of registering Common Units and transfers of such Common Units as herein provided. The Partnership shall not recognize transfers of Certificates evidencing Limited Partner Interests unless such transfers are effected in the manner described in this Section 4.5. Upon surrender of a Certificate for registration of transfer of any Limited Partner Interests evidenced by a Certificate, and subject to the provisions of Section 4.5(b), the appropriate officers of the General Partner on behalf of the General Partner on behalf of the Partnership shall execute and deliver, and in the case of Common Units, the Transfer Agent shall countersign and deliver, in the name of the holder or the designated transferee or transferees, as required pursuant to the holder's instructions, one or more new Certificates evidencing the same aggregate number and type of Limited Partner Interests as was evidenced by the Certificate so surrendered.

        (b)   Except as otherwise provided in Section 4.8, the Partnership shall not recognize any transfer of Limited Partner Interests evidenced by Certificates until the Certificates evidencing such Limited Partner Interests are surrendered for registration of transfer. No charge shall be imposed by the General Partner for such transfer; provided that as a condition to the issuance of any new Certificate under this Section 4.5, the General Partner may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed with respect thereto.

        (c)   Subject to (i) the foregoing provisions of this Section 4.5, (ii) Section 4.3, (iii) Section 4.7, (iv) with respect to any series of Limited Partner Interests, the provisions of any statement of designations or amendment to this Agreement establishing such series, (v) any contractual provisions binding on any Limited Partner and (vi) provisions of applicable law including the Securities Act, Limited Partnership Interests shall be freely transferable.

        SECTION 4.6.    Transfer of the General Partner's General Partner Interest.    

        (a)   Subject to Section 4.6(c) below, prior to June 30, 2017, the General Partner shall not transfer all or any part of its General Partner Interest (represented by General Partner Units) to a Person unless such transfer (i) has been approved by the prior written consent or vote of Limited Partners holding of at least a majority of the voting power of the Outstanding Voting Units (excluding Voting Units held by the General Partner or its Affiliates) or (ii) is of all, but not less than all, of its General Partner Interest to (A) an Affiliate of the General Partner (other than an individual) or (B) another Person (other than an individual) in connection with the merger or consolidation of the General Partner with or into another Person (other than an individual) or the transfer by the General Partner of all, but not less than all, of its General Partner Interest to another Person (other than an individual).

        (b)   Subject to Section 4.6(c) below, on or after June 30, 2017, the General Partner may transfer all or any part of its General Partner Interest without Unitholder approval.

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        (c)   Notwithstanding anything herein to the contrary, no transfer by the General Partner of all or any part of its General Partner Interest to another Person shall be permitted unless (i) the transferee agrees to assume the rights and duties of the General Partner under this Agreement and to be bound by the provisions of this Agreement and (ii) the Partnership receives an Opinion of Counsel that such transfer would not result in the loss of limited liability of any Limited Partner. In the case of a transfer pursuant to and in compliance with this Section 4.6, the transferee or successor (as the case may be) shall, subject to compliance with the terms of Section 10.3, be admitted to the Partnership as the General Partner effective immediately prior to the transfer of such General Partner Interest, and the business of the Partnership shall continue without dissolution.

        SECTION 4.7.    Restrictions on Transfers.    

        (a)   Except as provided in Section 4.7(c) below, but notwithstanding the other provisions of this Article IV, no transfer of any Partnership Interests shall be made if such transfer would (i) violate the then applicable U.S. federal or state securities laws or rules and regulations of the Commission, any state securities commission or any other governmental authority with jurisdiction over such transfer, (ii) terminate the existence or qualification of the Partnership under the laws of the jurisdiction of its formation, or (iii) cause the Partnership to be treated as an association taxable as a corporation or otherwise to be taxed as an entity for U.S. federal income tax purposes (to the extent not already so treated or taxed).

        (b)   The General Partner may impose restrictions on the transfer of Partnership Interests if it receives an Opinion of Counsel that such restrictions are necessary or advisable to avoid a significant risk of the Partnership becoming taxable as a corporation or otherwise becoming taxable as an entity for U.S. federal income tax purposes. The General Partner may impose such restrictions by amending this Agreement; provided however, that any amendment that would result in the delisting or suspension of trading of any class of Limited Partner Interests on the principal National Securities Exchange on which such class of Limited Partner Interests is then traded must be approved, prior to such amendment being effected, by the holders of at least a majority of the Outstanding Limited Partner Interests of such class.

        (c)   Nothing contained in this Article IV, or elsewhere in this Agreement, shall preclude the settlement of any transactions involving Partnership Interests entered into through the facilities of any National Securities Exchange on which such Partnership Interests are listed for trading.

        SECTION 4.8.    Citizenship Certificates; Non-citizen Assignees.    

        (a)   If any Group Member is or becomes subject to any law or regulation that, in the determination of the General Partner in its sole discretion, creates a substantial risk of cancellation or forfeiture of any property in which the Group Member has an interest based on the nationality, citizenship or other related status of a Limited Partner, the General Partner may request any Limited Partner to furnish to the General Partner, within 30 days after receipt of such request, an executed Citizenship Certification or such other information concerning his nationality, citizenship or other related status (or, if the Limited Partner is a nominee holding for the account of another Person, the nationality, citizenship or other related status of such Person) as the General Partner may request. If a Limited Partner fails to furnish to the General Partner within the aforementioned 30-day period such Citizenship Certification or other requested information or if upon receipt of such Citizenship Certification or other requested information the General Partner determines, with the advice of counsel, that a Limited Partner is not an Eligible Citizen, the Partnership Interests owned by such Limited Partner shall be subject to redemption in accordance with the provisions of Section 4.9. The General Partner also may require in its sole discretion that the status of any such Limited Partner be changed to that of a Non-citizen Assignee and, thereupon, the General Partner shall be substituted for such Non-citizen Assignee as the Limited Partner in respect of his Limited Partner Interests.

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        (b)   The General Partner shall, in exercising voting rights in respect of Limited Partner Interests held by it on behalf of Non-citizen Assignees, distribute the votes in the same ratios as the votes of Partners (including the General Partner) in respect of Limited Partner Interests other than those of Non-citizen Assignees are cast, either for, against or abstaining as to the matter.

        (c)   Upon dissolution of the Partnership, a Non-citizen Assignee shall have no right to receive a distribution in kind pursuant to Section 12.4 but shall be entitled to the cash equivalent thereof, and the Partnership shall provide cash in exchange for an assignment of the Non-citizen Assignee's share of the distribution in kind. Such payment and assignment shall be treated for Partnership purposes as a purchase by the Partnership from the Non-citizen Assignee of his Limited Partner Interest (representing his right to receive his share of such distribution in kind).

        (d)   At any time after he can and does certify that he has become an Eligible Citizen, a Non-citizen Assignee may, upon application to the General Partner, request that with respect to any Limited Partner Interests of such Non-citizen Assignee not redeemed pursuant to Section 4.9, such Non-citizen Assignee be admitted as a Limited Partner, and upon approval of the General Partner in its sole discretion, such Non-citizen Assignee shall be admitted as a Limited Partner and shall no longer constitute a Non-citizen Assignee and the General Partner shall cease to be deemed to be the Limited Partner in respect of the Non-citizen Assignee's Limited Partner Interests.

        SECTION 4.9    Redemption of Partnership Interests of Non-citizen Assignees.    

        (a)   If at any time a Limited Partner fails to furnish a Citizenship Certification or other information requested within the 30-day period specified in Section 4.8(a), or if upon receipt of such Citizenship Certification or other information the General Partner determines, with the advice of counsel, that a Limited Partner is not an Eligible Citizen, the General Partner, in its sole discretion, may cause the Partnership to, unless the Limited Partner establishes to the satisfaction of the General Partner that such Limited Partner is an Eligible Citizen or has transferred his Partnership Interests to a Person who is an Eligible Citizen and who furnishes a Citizenship Certification to the General Partner prior to the date fixed for redemption as provided below, redeem the Limited Partner Interest of such Limited Partner as follows:

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        (b)   The provisions of this Section 4.9 shall also be applicable to Limited Partner Interests held by a Limited Partner as nominee of a Person determined to be other than an Eligible Citizen.

        (c)   Nothing in this Section 4.9 shall prevent the recipient of a notice of redemption from transferring his Limited Partner Interest before the redemption date if such transfer is otherwise permitted under this Agreement. Upon receipt of notice of such a transfer, the General Partner shall withdraw the notice of redemption, provided the transferee of such Limited Partner Interest certifies to the satisfaction of the General Partner in a Citizenship Certification that he is an Eligible Citizen. If the transferee fails to make such certification, such redemption shall be effected from the transferee on the original redemption date.

ARTICLE V
CAPITAL CONTRIBUTIONS AND ISSUANCE OF PARTNERSHIP INTERESTS

        SECTION 5.1    Organizational Issuances.    

        Upon issuance by the Partnership of Common Units on the Closing Date of the Initial Offering, the Limited Partner Interests of the Partnership owned by the Organizational Limited Partner will be cancelled.

        SECTION 5.2    Contributions by the General Partner and its Affiliates.    

        The General Partner shall not be obligated to make any Capital Contributions to the Partnership.

        SECTION 5.3    Contributions by the Underwriters.    

        (a)   On the Closing Date and pursuant to the Underwriting Agreement, the Underwriters shall contribute to the Partnership cash in an amount equal to the Issue Price per Initial Common Unit multiplied by the number of Common Units specified in the Underwriting Agreement to be purchased by the Underwriters on the Closing Date. In exchange for such Capital Contributions by the Underwriters, the Partnership shall issue the number of Common Units specified in the Underwriting Agreement to be purchased by the Underwriters to the Underwriters or their designee(s) in accordance with the Underwriting Agreement, and such Underwriters or their designee(s) shall be admitted to the Partnership as Limited Partners.

        (b)   Upon the exercise, if any, of the Over-Allotment Option, on the Option Closing Date and pursuant to the Underwriting Agreement, the Underwriters shall contribute to the Partnership cash in an amount equal to the Issue Price per Initial Common Unit multiplied by the number of Common

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Units to be purchased by the Underwriters on the Option Closing Date. In exchange for such Capital Contributions by the Underwriters, the Partnership shall issue to the Underwriters or their designee(s) the number of Common Units subject to the Over-Allotment Option that are to be purchased by them in accordance with the Underwriting Agreement.

        (c)   For the avoidance of doubt, upon the further transfer of Common Units to Persons acquiring the same from the Underwriters as contemplated by the Underwriting Agreement, such transferees will be admitted as Limited Partners with respect to the Limited Partner Interests so transferred subject to and in accordance with Section 10.2.

        SECTION 5.4    Interest and Withdrawal.    

        No interest on Capital Contributions shall be paid by the Partnership. No Partner shall be entitled to the withdrawal or return of its Capital Contribution, except to the extent, if any, that distributions made pursuant to this Agreement or upon dissolution of the Partnership may be considered as such by law and then only to the extent provided for in this Agreement. Except to the extent expressly provided in this Agreement, no Partner shall have priority over any other Partner either as to the return of Capital Contributions or as to profits, losses or distributions. Any such return shall be a compromise to which all Partners agree within the meaning of Section 17-502(b) of the Delaware Limited Partnership Act.

        SECTION 5.5    Issuances and Cancellations of Special Voting Units.    

        (a)   The Partnership shall issue one (1) Special Voting Unit to each record holder of a Blackstone Holdings Partnership Unit (other than the Partnership and its Subsidiaries and American International Group, Inc.), whether or not such Blackstone Holdings Partnership Unit is vested. Upon the issuance to it of a Special Voting Unit, each holder thereof shall automatically and without further action be admitted to the Partnership as a limited partner of the Partnership. In the event that a holder of a Special Voting Unit shall cease to be the record holder of a Blackstone Holdings Partnership Unit, the Special Voting Unit held by such holder shall be automatically cancelled without any further action of any Person and such holder shall cease to be a Limited Partner with respect to the Special Voting Unit so cancelled.

        SECTION 5.6    Issuances of Additional Partnership Securities.    

        (a)   The Partnership may issue additional Partnership Securities and options, rights, warrants and appreciation rights relating to Partnership Securities for any Partnership purpose at any time and from time to time to such Persons for such consideration and on such terms and conditions as the General Partner shall determine in its sole discretion, all without the approval of any Limited Partners.

        (b)   Each additional Partnership Interest authorized to be issued by the Partnership pursuant to Section 5.6(a) may be issued in one or more classes, or one or more series of any such classes, with such designations, preferences, rights, powers and duties (which may be senior to existing classes and series of Partnership Securities), as shall be fixed by the General Partner in its sole discretion, including (i) the right to share in Partnership profits and losses or items thereof; (ii) the right to share in Partnership distributions; (iii) the rights upon dissolution and liquidation of the Partnership; (iv) whether, and the terms and conditions upon which, the Partnership may or shall be required to redeem the Partnership Security (including sinking fund provisions); (v) whether such Partnership Interest is issued with the privilege of conversion or exchange and, if so, the terms and conditions of such conversion or exchange; (vi) the terms and conditions upon which each Partnership Interest will be issued, evidenced by certificates and assigned or transferred; (vii) the method for determining the Percentage Interest as to such Partnership Security; and (viii) the right, if any, of the holder of each such Partnership Interest to vote on Partnership matters, including matters relating to the relative designations, preferences, rights, powers and duties of such Partnership Interest.

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        (c)   The General Partner is hereby authorized to take all actions that it determines to be necessary or appropriate in connection with (i) each issuance of Partnership Securities and options, rights, warrants and appreciation rights relating to Partnership Securities pursuant to this Section 5.6, including the admission of additional Limited Partners in connection therewith and any related amendment of this Agreement, and (ii) all additional issuances of Partnership Securities and options, rights, warrants and appreciation rights relating to Partnership Securities. The General Partner shall determine in its sole discretion the relative rights, powers and duties of the holders of the Units or other Partnership Securities or options, rights, warrants or appreciation rights relating to Partnership Securities being so issued. The General Partner is authorized to do all things that it determines to be necessary or appropriate in connection with any future issuance of Partnership Securities or options, rights, warrants or appreciation rights relating to Partnership Securities, including compliance with any statute, rule, regulation or guideline of any governmental agency or any National Securities Exchange on which the Units or other Partnership Securities or options, rights, warrants or appreciation rights relating to Partnership Securities are listed for trading.

        SECTION 5.7    Preemptive Rights.    

        Unless otherwise determined by the General Partner, in its sole discretion, no Person shall have any preemptive, preferential or other similar right with respect to the issuance of any Partnership Security, whether unissued, held in the treasury or hereafter created.

        SECTION 5.8    Splits and Combinations.    

        (a)   Subject to Section 5.8(d), the Partnership may make a Pro Rata distribution of Partnership Securities to all Record Holders or may effect a subdivision or combination of Partnership Securities so long as, after any such event, each Partner shall have the same Percentage Interest in the Partnership as before such event, and any amounts calculated on a per Unit basis or stated as a number of Units are proportionately adjusted retroactive to the beginning of the Partnership.

        (b)   Whenever such a distribution, subdivision or combination of Partnership Securities or options, rights, warrants or appreciation rights relating to Partnership Securities is declared, the General Partner shall select a Record Date as of which the distribution, subdivision or combination shall be effective and shall send notice thereof at least 20 days prior to such Record Date to each Record Holder as of a date not less than 10 days prior to the date of such notice. The General Partner also may cause a firm of independent public accountants selected by it to calculate the number of Partnership Securities or options, rights, warrants or appreciation rights relating to Partnership Securities to be held by each Record Holder after giving effect to such distribution, subdivision or combination. The General Partner shall be entitled to rely on any certificate provided by such firm as conclusive evidence of the accuracy of such calculation.

        (c)   Promptly following any such distribution, subdivision or combination, the Partnership may issue Certificates to the Record Holders of Partnership Securities or options, rights, warrants or appreciation rights relating to Partnership Securities as of the applicable Record Date representing the new number of Partnership Securities or options, rights, warrants or appreciation rights relating to Partnership Securities held by such Record Holders, or the General Partner may adopt such other procedures that it determines to be necessary or appropriate to reflect such changes. If any such combination results in a smaller total number of Partnership Securities Outstanding or outstanding options, rights, warrants or appreciation rights relating to Partnership Securities, the Partnership shall require, as a condition to the delivery to a Record Holder of any such new Certificate, the surrender of any Certificate held by such Record Holder immediately prior to such Record Date.

        (d)   The Partnership shall not be required to issue fractional Units upon any distribution, subdivision or combination of Units. If a distribution, subdivision or combination of Units would result in the issuance of fractional Units but for the provisions of this Section 5.8(d), the General Partner in

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its sole discretion may determine that each fractional Unit shall be rounded to the nearest whole Unit (and a 0.5 Unit shall be rounded to the next higher Unit).

        SECTION 5.9    Fully Paid and Non-Assessable Nature of Limited Partner Interests.    

        All Limited Partner Interests issued pursuant to, and in accordance with the requirements of, this Article V shall be fully paid and non-assessable Limited Partner Interests in the Partnership, except as such non-assessability may be affected by Sections 17-607 or 17-804 of the Delaware Limited Partnership Act or this Agreement.

ARTICLE VI
ALLOCATIONS AND DISTRIBUTIONS

        SECTION 6.1    Maintenance of Capital Accounts.    

        There shall be established for each Partner on the books of the Partnership as of the date such Partner becomes a Partner a capital account (each being a "Capital Account"). Each Capital Contribution by any Partner, if any, shall be credited to the Capital Account of such Partner on the date such Capital Contribution is made to the Partnership. In addition, each Partner's Capital Account shall be (a) credited with (i) such Partner's allocable share of any Net Income of the Partnership, and (ii) the amount of any Partnership liabilities that are assumed by the Partner or secured by any Partnership property distributed to the Partner, (b) debited with (i) the amount of distributions (and deemed distributions) to such Partner of cash or the fair market value of other property so distributed, (ii) such Partner's allocable share of Net Loss of the Partnership and expenditures of the Partnership described or treated under Section 704(b) of the Code as described in Section 705(a)(2)(B) of the Code, and (iii) the amount of any liabilities of the Partner assumed by the Partnership or which are secured by any property contributed by the Partner to the Partnership and (c) otherwise maintained in accordance with the provisions of the Code and the United States Treasury Regulations promulgated thereunder. Any other item which is required to be reflected in a Partner's Capital Account under Section 704(b) of the Code and the United States Treasury Regulations promulgated thereunder or otherwise under this Agreement shall be so reflected. The General Partner shall make such adjustments to Capital Accounts as it determines in its sole discretion to be appropriate to ensure allocations are made in accordance with a partner's interest in the Partnership. Interest shall not be payable on Capital Account balances. Notwithstanding anything to the contrary contained in this Agreement, the General Partner shall maintain the Capital Accounts of the Partners in accordance with the principles and requirements set forth in Section 704(b) of the Code and the United States Treasury Regulations promulgated thereunder. The Capital Account of each holder of General Partner Units or Special Voting Units shall at all times be zero, except to the extent such holder also holds Partnership Interests other than General Partner Units or Special Voting Units.

        SECTION 6.2    Allocations.    

        (a)   Net Income (Loss) of the Partnership for each Fiscal Period shall be allocated among the Capital Accounts of the Partners in a manner that as closely as possible gives economic effect the manner in which distributions are made to the Partners pursuant to the provisions of Sections 6.3 and 12.4, giving due regard to the penultimate sentence of Sections 6.1 and 6.2(b) and other relevant provisions hereof.

        (b)   All items of income, gain, loss, deduction and credit of the Partnership shall be allocated among the Partners for U.S. federal, state and local income tax purposes consistent with the manner that the corresponding constituent items of Net Income (Loss) shall be allocated among the Partners pursuant to this Agreement, except as may otherwise be provided herein or by the Code. Notwithstanding the foregoing, the General Partner in its sole discretion shall make such allocations for tax purposes as may be needed to ensure that allocations are in accordance with the interests of the Partners in the Partnership, within the meaning of the Code and United States Treasury Regulations.

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The General Partner shall determine all matters concerning allocations for tax purposes not expressly provided for herein in its sole discretion. For the proper administration of the Partnership and for the preservation of uniformity of Partnership Interests (or any portion or class or classes thereof), the General Partner may (i) amend the provisions of this Agreement as appropriate (x) to reflect the proposal or promulgation of United States Treasury Regulations under Section 704(b) or Section 704(c) of the Code or (y) otherwise to preserve or achieve uniformity of Partnership Interests (or any portion or class or classes thereof), and (ii) adopt and employ or modify such conventions and methods as the General Partner determines in its sole discretion to be appropriate for (A) the determination for tax purposes of items of income, gain, loss, deduction and credit and the allocation of such items among Partners and between transferors and transferees under this Agreement and pursuant to the Code and the United States Treasury Regulations promulgated thereunder, (B) the determination of the identities and tax classification of Partners, (C) the valuation of Partnership assets and the determination of tax basis, (D) the allocation of asset values and tax basis, (E) the adoption and maintenance of accounting methods and (F) taking into account differences between the Carrying Values of Partnership assets and such asset adjusted tax basis pursuant to Section 704(c) of the Code and the United States Treasury Regulations promulgated thereunder.

        (c)   Allocations that would otherwise be made to a Partner under the provisions of this Article VI shall instead be made to the beneficial owner of Partnership Interests held by a nominee in any case in which the nominee has furnished the identity of such owner to the Partnership in accordance with Section 6031(c) of the Code or any other method determined by the General Partner in its sole discretion.

        SECTION 6.3.    Requirement and Characterization of Distributions; Distributions to Record Holders.    

        (a)   The General Partner, in its sole discretion, may authorize distributions by the Partnership to the Partners, which distributions shall be made Pro Rata in accordance with the Partners' respective Percentage Interests.

        (b)   The General Partner may treat taxes paid by the Partnership on behalf of, or amounts withheld with respect to, all or less than all of the Partners, as a distribution of cash to such Partners.

        (c)   Notwithstanding Section 6.3(a), in the event of the dissolution of the Partnership, all receipts received during or after the Quarter in which the Liquidation Date occurs shall be applied and distributed solely in accordance with, and subject to the terms and conditions of, Section 12.4.

        (d)   Each distribution in respect of a Partnership Interest shall be paid by the Partnership, directly or through the Transfer Agent or through any other Person or agent, only to the Record Holder of such Partnership Interest as of the Record Date set for such distribution. Such payment shall constitute full payment and satisfaction of the Partnership's liability in respect of such payment, regardless of any claim of any Person who may have an interest in such payment by reason of an assignment or otherwise.

        (e)   Notwithstanding any provision to the contrary contained in this Agreement, the Partnership, and the General Partner on behalf of the Partnership, shall not be required to make a distribution to a Partner or a Record Holder if such distribution would violate the Delaware Limited Partnership Act or other applicable law.

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ARTICLE VII

MANAGEMENT AND OPERATION OF BUSINESS

        SECTION 7.1.    Management.    

        (a)   The General Partner shall conduct, direct and manage all activities of the Partnership. Except as otherwise expressly provided in this Agreement, all management powers over the business and affairs of the Partnership shall be exclusively vested in the General Partner, and no Limited Partner shall have any management power over the business and affairs of the Partnership. In addition to the powers now or hereafter granted a general partner of a limited partnership under applicable law or that are granted to the General Partner under any other provision of this Agreement, the General Partner, subject to Section 7.3, shall have full power and authority to do all things and on such terms as it determines, in its sole discretion, to be necessary or appropriate to conduct the business of the Partnership, to exercise all powers set forth in Section 2.5 and to effectuate the purposes set forth in Section 2.4, including without limitation the following:

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        (b)   In exercising its authority under this Agreement, the General Partner may, but shall be under no obligation to, take into account the tax consequences to any Partner (including the General Partner) of any action taken (or not taken) by it. The General Partner and the Partnership shall not have any liability to a Limited Partner for monetary damages or otherwise for losses sustained, liabilities incurred or benefits not derived by such Limited Partner in connection with such decisions so long as the General Partner has acted pursuant to its authority under this Agreement.

        (c)   Notwithstanding any other provision of this Agreement, the Delaware Limited Partnership Act or any applicable law, rule or regulation, each of the Partners and each other Person who may acquire an interest in Partnership Securities hereby (i) approves, ratifies and confirms the execution, delivery and performance by the parties thereto of the Underwriting Agreement, the Exchange Agreement, the Tax Receivable Agreement, the Registration Rights Agreement and the other agreements described in or filed as exhibits to the Registration Statement that are related to the transactions contemplated by the Registration Statement; (ii) agrees that the General Partner (on its own or through any officer of the Partnership) is authorized to execute, deliver and perform the agreements referred to in clause (i) of this sentence and the other agreements, acts, transactions and matters described in or contemplated by the Registration Statement on behalf of the Partnership without any further act, approval or vote of the Partners or the other Persons who may acquire an interest in Partnership Securities; and (iii) agrees that the execution, delivery or performance by the General Partner, any Group Member or any Affiliate of any of them, of this Agreement or any agreement authorized or permitted under this Agreement (including the exercise by the General Partner or any Affiliate of the General Partner of the rights accorded pursuant to Article XV), shall not constitute a breach by the General Partner of any duty that the General Partner may owe the Partnership or the Limited Partners or any other Persons under this Agreement (or any other agreements) or of any duty existing at law, in equity or otherwise.

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        SECTION 7.2.    Certificate of Limited Partnership.    

        The General Partner has caused the Certificate of Limited Partnership to be filed with the Secretary of State of the State of Delaware as required by the Delaware Limited Partnership Act and shall use all reasonable efforts to cause to be filed such other certificates or documents that the General Partner determines to be necessary or appropriate for the formation, continuation, qualification and operation of a limited partnership (or a partnership in which the limited partners have limited liability) in the State of Delaware or any other state in which the Partnership may elect to do business or own property. To the extent the General Partner determines such action to be necessary or appropriate, the General Partner shall file amendments to and restatements of the Certificate of Limited Partnership and do all things to maintain the Partnership as a limited partnership (or a partnership or other entity in which the limited partners have limited liability) under the laws of the State of Delaware or of any other state in which the Partnership may elect to do business or own property. Subject to the terms of Section 3.4(a), the General Partner shall not be required, before or after filing, to deliver or mail a copy of the Certificate of Limited Partnership, any qualification document or any amendment thereto to any Limited Partner.

        In the event that the General Partner determines the Partnership should seek relief pursuant to Section 7704(e) of the Code to preserve the status of the Partnership as a partnership for U.S. federal (and applicable state) income tax purposes, the Partnership and each Partner shall agree to adjustments required by the tax authorities, and the Partnership shall pay such amounts as required by the tax authorities, to preserve the status of the Partnership as a partnership.

        SECTION 7.3.    Restrictions on General Partner's Authority.    

        Except as provided in Articles XII and XIV, the General Partner may not sell, exchange or otherwise dispose of all or substantially all of the Partnership Group's assets, taken as a whole, in a single transaction or a series of related transactions without the approval of holders of a majority of the voting power of Outstanding Voting Units; provided however that this provision shall not preclude or limit the General Partner's ability, in its sole discretion, to mortgage, pledge, hypothecate or grant a security interest in all or substantially all of the assets of the Partnership Group (including for the benefit of Persons other than members of the Partnership Group, including Affiliates of the General Partner) and shall not apply to any forced sale of any or all of the assets of the Partnership Group pursuant to the foreclosure of, or other realization upon, any such encumbrance. Without the approval of holders of a majority of the voting power of Outstanding Voting Units, the General Partner shall not, on behalf of the Partnership, except as permitted under Sections 4.6, 11.1 and 11.2, elect or cause the Partnership to elect a successor general partner of the Partnership.

        SECTION 7.4.    Reimbursement of the General Partner.    

        (a)   Except as provided in this Section 7.4 and elsewhere in this Agreement, the General Partner shall not be compensated for its services as general partner or managing member of any Group Member.

        (b)   The General Partner shall be reimbursed on a monthly basis, or such other reasonable basis as the General Partner may determine, in its sole discretion, for (i) all direct and indirect expenses it incurs or payments it makes on behalf of the Partnership Group (including salary, bonus, incentive compensation and other amounts paid to any Person including Affiliates of the General Partner to perform services for the Partnership Group or for the General Partner in the discharge of its duties to the Partnership Group), and (ii) all other expenses allocable to the Partnership Group or otherwise incurred by the General Partner in connection with operating the Partnership Group's business (including expenses allocated to the General Partner by its Affiliates). The General Partner in its sole discretion shall determine the expenses that are allocable to the Partnership Group. Reimbursements pursuant to this Section 7.4 shall be in addition to any reimbursement to the General Partner as a result of indemnification pursuant to Section 7.7.

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        (c)   The General Partner may, in its sole discretion, without the approval of the Limited Partners (who shall have no right to vote in respect thereof), propose and adopt on behalf of the Partnership Group equity benefit plans, programs and practices (including plans, programs and practices involving the issuance of Partnership Securities or options, rights, warrants or appreciation rights relating to Partnership Securities), or cause the Partnership to issue Partnership Securities or options, rights, warrants or appreciation rights relating to Partnership Securities in connection with, or pursuant to, any such equity benefit plan, program or practice or any equity benefit plan, program or practice maintained or sponsored by the General Partner or any of its Affiliates in respect of services performed directly or indirectly for the benefit of the Partnership Group. The Partnership agrees to issue and sell to the General Partner or any of its Affiliates any Partnership Securities or options, rights, warrants or appreciation rights relating to Partnership Securities that the General Partner or such Affiliates are obligated to provide pursuant to any equity benefit plans, programs or practices maintained or sponsored by them. Expenses incurred by the General Partner in connection with any such plans, programs and practices (including the net cost to the General Partner or such Affiliates of Partnership Securities or options, rights, warrants or appreciation rights relating to Partnership Securities purchased by the General Partner or such Affiliates from the Partnership to fulfill options or awards under such plans, programs and practices) shall be reimbursed in accordance with Section 7.4(b). Any and all obligations of the General Partner under any equity benefit plans, programs or practices adopted by the General Partner as permitted by this Section 7.4(c) shall constitute obligations of the General Partner hereunder and shall be assumed by any successor General Partner approved pursuant to Section 11.1 or 11.2 or the transferee of or successor to all of the General Partner's General Partner Interest.

        SECTION 7.5.    Outside Activities.    

        (a)   After the Closing Date, the General Partner, for so long as it is a General Partner of the Partnership (i) agrees that its sole business will be to act as a general partner or managing member of the Partnership and any other partnership or limited liability company of which the Partnership is, directly or indirectly, a partner or member and to undertake activities that are ancillary or related thereto (including being a limited partner in the Partnership) and (ii) shall not engage in any business or activity or incur any debts or liabilities except in connection with or incidental to (A) its performance as general partner or managing member of one or more Group Members or as described in or contemplated by the Registration Statement or (B) the acquiring, owning or disposing of debt or equity securities in any Group Member.

        (b)   Except insofar as the General Partner is specifically restricted by Section 7.5(a), each Indemnitee shall have the right to engage in businesses of every type and description and other activities for profit and to engage in and possess an interest in other business ventures of any and every type or description, whether in businesses engaged in or anticipated to be engaged in by any Group Member, independently or with others, including business interests and activities in direct competition with the business and activities of any Group Member, and none of the same shall constitute a breach of this Agreement or any duty otherwise existing at law, in equity or otherwise to any Group Member or any Partner or Record Holder. None of any Group Member, any Limited Partner or any other Person shall have any rights by virtue of this Agreement or the partnership relationship established hereby in any business ventures of any Indemnitee.

        (c)   Subject to the terms of Section 7.5(a) and Section 7.5(b), but otherwise notwithstanding anything to the contrary in this Agreement, (i) the engaging in competitive activities by any Indemnitees (other than the General Partner) in accordance with the provisions of this Section 7.5 is hereby approved by the Partnership and all Partners, (ii) it shall be deemed not to be a breach of the General Partner's or any other Indemnitee's duties or any other obligation of any type whatsoever of the General Partner or any other Indemnitee for the Indemnitee (other than the General Partner) to engage in such business interests and activities in preference to or to the exclusion of any Group Member, (iii) the General Partner and the Indemnities shall have no obligation hereunder or as a result of any duty otherwise existing at law, in equity or otherwise to present business opportunities to any Group Member and (iv) the doctrine of "corporate opportunity" or other analogous doctrine shall not apply to any such Indemnitee.

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        (d)   The General Partner and any of its Affiliates may acquire Units or other Partnership Securities or options, rights, warrants or appreciation rights relating to Partnership Securities and, except as otherwise expressly provided in this Agreement, shall be entitled to exercise all rights of a General Partner or Limited Partner, as applicable, relating to such Units or Partnership Securities or options, rights, warrants or appreciation rights relating to Partnership Securities.

        SECTION 7.6.    Loans from the General Partner; Loans or Contributions from the Partnership; Contracts with Affiliates; Certain Restrictions on the General Partner.    

        (a)   The General Partner or any of its Affiliates may, but shall be under no obligation to, lend to any Group Member, and any Group Member may borrow from the General Partner or any of its Affiliates, funds needed or desired by the Group Member for such periods of time and in such amounts as the General Partner may determine, in each case on terms that are fair and reasonable to the Partnership; provided however that the requirements of this Section 7.6(a) conclusively shall be deemed satisfied and not a breach of any duty hereunder or existing at law, in equity or otherwise as to any transaction (i) approved by Special Approval, (ii) the terms of which are no less favorable to the Partnership than those generally being provided to or available from unrelated third parties or (iii) that is fair and reasonable to the Partnership, taking into account the totality of the relationships between the parties involved (including other transactions that may be or have been particularly favorable or advantageous to the Partnership).

        (b)   Any Group Member (including the Partnership) may lend or contribute to any other Group Member, and any Group Member may borrow from any other Group Member (including the Partnership), funds on terms and conditions determined by the General Partner. The foregoing authority shall be exercised by the General Partner in its sole discretion and shall not create any right or benefit in favor of any Group Member or any other Person.

        (c)   The General Partner may itself, or may enter into an agreement with any of its Affiliates to, render services to a Group Member or to the General Partner in the discharge of its duties as general partner of the Partnership. Any services rendered to a Group Member by the General Partner or any of its Affiliates shall be on terms that are fair and reasonable to the Partnership; provided however that the requirements of this Section 7.6(c) conclusively shall be deemed satisfied and not a breach of any duty hereunder or existing at law, in equity or otherwise as to any transaction (i) approved by Special Approval, (ii) the terms of which are no less favorable to the Partnership than those generally being provided to or available from unrelated third parties or (iii) that is fair and reasonable to the Partnership, taking into account the totality of the relationships between the parties involved (including other transactions that may be or have been particularly favorable or advantageous to the Partnership). The provisions of Section 7.4 shall apply to the rendering of services described in this Section 7.6(c).

        (d)   The Partnership may transfer assets to joint ventures, other partnerships, corporations, limited liability companies or other business entities in which it is or thereby becomes a participant upon such terms and subject to such conditions as are consistent with this Agreement and applicable law.

        (e)   The General Partner or any of its Affiliates may sell, transfer or convey any property to, or purchase any property from, the Partnership, directly or indirectly, pursuant to transactions that are fair and reasonable to the Partnership; provided however that the requirements of this Section 7.6(e) conclusively shall be deemed to be satisfied and not a breach of any duty hereunder or existing at law, in equity or otherwise as to (i) the transactions effected pursuant to Section 5.3 and any other transactions described in or contemplated by the Registration Statement, (ii) any transaction approved by Special Approval, (iii) any transaction, the terms of which are no less favorable to the Partnership than those generally being provided to or available from unrelated third parties, or (iv) any transaction that is fair and reasonable to the Partnership, taking into account the totality of the relationships between the parties involved (including other transactions that may be or have been particularly favorable or advantageous to the Partnership). With respect to any contribution of assets to the

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Partnership in exchange for Partnership Securities or options, rights, warrants or appreciation rights relating to Partnership Securities, the Conflicts Committee, in determining whether the appropriate number of Partnership Securities or options, rights, warrants or appreciation rights relating to Partnership Securities are being issued, may take into account, among other things, the fair market value of the assets, the liquidated and contingent liabilities assumed, the tax basis in the assets, the extent to which tax-only allocations to the transferor will protect the existing partners of the Partnership against a low tax basis, and such other factors as the Conflicts Committee deems relevant under the circumstances.

        (f)    The General Partner and its Affiliates will have no obligation to permit any Group Member to use any facilities or assets of the General Partner and its Affiliates, except as may be provided in contracts entered into from time to time specifically dealing with such use, nor shall there be any obligation on the part of the General Partner or its Affiliates to enter into such contracts.

        SECTION 7.7.    Indemnification.    

        (a)   To the fullest extent permitted by law but subject to the limitations expressly provided in this Agreement, all Indemnitees shall be indemnified and held harmless by the Partnership from and against any and all losses, claims, damages, liabilities, joint or several, expenses (including legal fees and expenses), judgments, fines, penalties, interest, settlements or other amounts arising from any and all threatened, pending or completed claims, demands, actions, suits or proceedings, whether civil, criminal, administrative or investigative, and whether formal or informal and including appeals, in which any Indemnitee may be involved, or is threatened to be involved, as a party or otherwise, by reason of its status as an Indemnitee whether arising from acts or omissions to act occurring before or after the date of this Agreement; provided that the Indemnitee shall not be indemnified and held harmless if there has been a final and non-appealable judgment entered by a court of competent jurisdiction determining that, in respect of the matter for which the Indemnitee is seeking indemnification pursuant to this Section 7.7, the Indemnitee acted in bad faith or engaged in fraud or willful misconduct. Notwithstanding the preceding sentence, except as otherwise provided in Section 7.7(j), the Partnership shall be required to indemnify a person described in such sentence in connection with any action, suit or proceeding (or part thereof) commenced by such person only if the commencement of such action, suit or proceeding (or part thereof) by such person was authorized by the General Partner in its sole discretion.

        (b)   To the fullest extent permitted by law, expenses (including legal fees and expenses) incurred by an Indemnitee who is indemnified pursuant to Section 7.7(a) in appearing at, participating in or defending any claim, demand, action, suit or proceeding shall, from time to time, be advanced by the Partnership prior to a final and non-appealable determination that the Indemnitee is not entitled to be indemnified upon receipt by the Partnership of an undertaking by or on behalf of the Indemnitee to repay such amount if it ultimately shall be determined that the Indemnitee is not entitled to be indemnified as authorized in this Section 7.7. Notwithstanding the preceding sentence, except as otherwise provided in Section 7.7(j), the Partnership shall be required to indemnify a person described in such sentence in connection with any action, suit or proceeding (or part thereof) commenced by such person only if the commencement of such action, suit or proceeding (or part thereof) by such person was authorized by the General Partner in its sole discretion.

        (c)   The indemnification provided by this Section 7.7 shall be in addition to any other rights to which an Indemnitee may be entitled under any agreement, pursuant to any vote of the holders of Outstanding Voting Units entitled to vote on such matter, as a matter of law, in equity or otherwise, both as to actions in the Indemnitee's capacity as an Indemnitee and as to actions in any other capacity (including any capacity under the Underwriting Agreement), and shall continue as to an Indemnitee who has ceased to serve in such capacity.

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        (d)   The Partnership may purchase and maintain (or reimburse the General Partner or its Affiliates for the cost of) insurance, on behalf of the General Partner, its Affiliates, the Indemnitees and such other Persons as the General Partner shall determine in its sole discretion, against any liability that may be asserted against, or expense that may be incurred by, such Person in connection with the Partnership's activities or such Person's activities on behalf of the Partnership, regardless of whether the Partnership would have the power to indemnify such Person against such liability under the provisions of this Agreement.

        (e)   For purposes of this Section 7.7, (i) the Partnership shall be deemed to have requested an Indemnitee to serve as fiduciary of an employee benefit plan whenever the performance by it of its duties to the Partnership also imposes duties on, or otherwise involves services by, it to the plan or participants or beneficiaries of the plan; (ii) excise taxes assessed on an Indemnitee with respect to an employee benefit plan pursuant to applicable law shall constitute "fines" within the meaning of Section 7.7(a); and (iii) any action taken or omitted by an Indemnitee with respect to any employee benefit plan in the performance of its duties for a purpose reasonably believed by it to be in the best interest of the participants and beneficiaries of the plan shall be deemed to be for a purpose that is in the best interests of the Partnership.

        (f)    Any indemnification pursuant to this Section 7.7 shall be made only out of the assets of the Partnership, it being agreed that the General Partner shall not be personally liable for such indemnification and shall have no obligation to contribute or loan any monies or property to the Partnership to enable it to effectuate such indemnification. In no event may an Indemnitee subject the Limited Partners to personal liability by reason of the indemnification provisions set forth in this Agreement.

        (g)   An Indemnitee shall not be denied indemnification in whole or in part under this Section 7.7 because the Indemnitee had an interest in the transaction with respect to which the indemnification applies if the transaction was otherwise permitted by the terms of this Agreement.

        (h)   The provisions of this Section 7.7 are for the benefit of the Indemnitees and their heirs, successors, assigns, executors and administrators and shall not be deemed to create any rights for the benefit of any other Persons.

        (i)    No amendment, modification or repeal of this Section 7.7 or any provision hereof shall in any manner terminate, reduce or impair the right of any past, present or future Indemnitee to be indemnified by the Partnership, nor the obligations of the Partnership to indemnify any such Indemnitee under and in accordance with the provisions of this Section 7.7 as in effect immediately prior to such amendment, modification or repeal with respect to claims arising from or relating to matters occurring, in whole or-in part, prior to such amendment, modification or repeal, regardless of when such claims may arise or be asserted.

        (j)    If a claim for indemnification (following the final disposition of the action, suit or proceeding for which indemnification is being sought) or advancement of expenses under this Section 7.7 is not paid in full within thirty (30) days after a written claim therefor by any Indemnitee has been received by the Partnership, such Indemnitee may file suit to recover the unpaid amount of such claim and, if successful in whole or in part, shall be entitled to be paid the expenses of prosecuting such claim, including reasonable attorneys' fees. In any such action the Partnership shall have the burden of proving that such Indemnitee is not entitled to the requested indemnification or advancement of expenses under applicable law.

        (k)   This Section 7.7 shall not limit the right of the Partnership, to the extent and in the manner permitted by law, to indemnify and to advance expenses to, and purchase and maintain insurance on behalf of, Persons other than Indemnitees.

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        SECTION 7.8.    Liability of Indemnitees.    

        (a)   Notwithstanding anything to the contrary set forth in this Agreement, no Indemnitee shall be liable to the Partnership, the Limited Partners or any other Persons who have acquired interests in the Partnership Securities, for any losses, claims, damages, liabilities, joint or several, expenses (including legal fees and expenses), judgments, fines, penalties, interest, settlements or other amounts arising as a result of any act or omission of an Indemnitee, or for any breach of contract (including breach of this Agreement) or any breach of duties (including breach of fiduciary duties) whether arising hereunder, at law, in equity or otherwise, unless there has been a final and non-appealable judgment entered by a court of competent jurisdiction determining that, in respect of the matter in question, the Indemnitee acted in bad faith or engaged in fraud or willful misconduct.

        (b)   The General Partner may exercise any of the powers granted to it by this Agreement and perform any of the duties imposed upon it hereunder either directly or by or through its agents, and the General Partner shall not be responsible for any misconduct or negligence on the part of any such agent appointed by the General Partner in good faith.

        (c)   Any amendment, modification or repeal of this Section 7.8 or any provision hereof shall be prospective only and shall not in any way affect the limitations on the liability of the Indemnitees under this Section 7.8 as in effect immediately prior to such amendment, modification or repeal with respect to claims arising from or relating to matters occurring, in whole or in part, prior to such amendment, modification or repeal, regardless of when such claims may arise or be asserted, and provided such Person became an Indemnitee hereunder prior to such amendment, modification or repeal.

        SECTION 7.9.    Resolution of Conflicts of Interest; Standards of Conduct and Modification of Duties.    

        (a)   Unless otherwise expressly provided in this Agreement, whenever a potential conflict of interest exists or arises between the General Partner or any of its Affiliates, on the one hand, and the Partnership, any Group Member or any Partner, on the other, any resolution or course of action by the General Partner or its Affiliates in respect of such conflict of interest shall be permitted and deemed approved by all Partners, and shall not constitute a breach of this Agreement, or any agreement contemplated herein or therein, or of any duty hereunder or existing at law, in equity or otherwise, if the resolution or course of action in respect of such conflict of interest is (i) approved by Special Approval, (ii) on terms no less favorable to the Partnership than those generally being provided to or available from unrelated third parties or (iii) fair and reasonable to the Partnership, taking into account the totality of the relationships between the parties involved (including other transactions that may be or have been particularly favorable or advantageous to the Partnership). The General Partner shall be authorized but not required in connection with its resolution of such conflict of interest to seek Special Approval of such resolution, and the General Partner may also adopt a resolution or course of action that has not received Special Approval. Failure to seek Special Approval shall not be deemed to indicate that a conflict of interest exists or that Special Approval could not have been obtained. If Special Approval is not sought and the Board of Directors determines that the resolution or course of action taken with respect to a conflict of interest satisfies either of the standards set forth in clauses (ii) or (iii) above, then it shall be presumed that, in making its decision, the Board of Directors acted in good faith, and in any proceeding brought by or on behalf of any Limited Partner, the Partnership or any other Person bound by this Agreement challenging such approval, the Person bringing or prosecuting such proceeding shall have the burden of overcoming such presumption. Notwithstanding anything to the contrary in this Agreement or any duty otherwise existing at law or equity, and without limitation of Section 7.6, the existence of the conflicts of interest described in or contemplated by the Registration Statement are hereby approved, and all such conflicts of interest are waived, by all Partners and shall not constitute a breach of this Agreement.

        (b)   Notwithstanding any other provision of this Agreement or otherwise applicable provision of law or equity, whenever in this Agreement or any other agreement contemplated hereby or otherwise

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the General Partner, in its capacity as the general partner of the Partnership, is permitted to or required to make a decision in its "sole discretion" or "discretion" or that it deems "necessary or appropriate" or "necessary or advisable" or under a grant of similar authority or latitude, then the General Partner, or such Affiliates causing it to do so, shall, to the fullest extent permitted by law, make such decision in its sole discretion (regardless of whether there is a reference to "sole discretion" or "discretion"), and shall be entitled to consider only such interests and factors as it desires, including its own interests, and shall have no duty or obligation (fiduciary or otherwise) to give any consideration to any interest of or factors affecting the Partnership or the Partners, and shall not be subject to any other or different standards imposed by this Agreement, any other agreement contemplated hereby, under the Delaware Limited Partnership Act or under any other law, rule or regulation or in equity. Whenever in this Agreement or any other agreement contemplated hereby or otherwise the General Partner is permitted to or required to make a decision in its "good faith" then for purposes of this Agreement, the General Partner, or any of its Affiliates that cause it to make any such decision, shall be conclusively presumed to be acting in good faith if such Person or Persons subjectively believe(s) that the decision made or not made is in the best interests of the Partnership.

        (c)   Whenever the General Partner makes a determination or takes or declines to take any other action, or any of its Affiliates causes it to do so, in its individual capacity as opposed to in its capacity as a general partner of the Partnership, whether under this Agreement or any other agreement contemplated hereby or otherwise, then the General Partner, or such Affiliates causing it to do so, are entitled, to the fullest extent permitted by law, to make such determination or to take or decline to take such other action free of any duty (including any fiduciary duty) or obligation, whatsoever to the Partnership, any Limited Partner, any Record Holder or any other Person bound by this Agreement, and the General Partner, or such Affiliates causing it to do so, shall not, to the fullest extent permitted by law, be required to act pursuant to any other standard imposed by this Agreement, any other agreement contemplated hereby or under the Delaware Limited Partnership Act or any other law, rule or regulation or at equity.

        (d)   Notwithstanding anything to the contrary in this Agreement, the General Partner and its Affiliates shall have no duty or obligation, express or implied, to (i) sell or otherwise dispose of any asset of the Partnership Group other than in the ordinary course of business or (ii) permit any Group Member to use any facilities or assets of the General Partner and its Affiliates, except as may be provided in contracts entered into from time to time specifically dealing with such use. Any determination by the General Partner or any of its Affiliates to enter into such contracts shall be in its sole discretion.

        (e)   Except as expressly set forth in this Agreement, to the fullest extent permitted by law, neither the General Partner nor any other Indemnitee shall have any duties or liabilities, including fiduciary duties, to the Partnership, any Limited Partner or any other Person bound by this Agreement, and the provisions of this Agreement, to the extent that they restrict or otherwise modify or eliminate the duties and liabilities, including fiduciary duties, of the General Partner or any other Indemnitee otherwise existing at law or in equity, are agreed by the Partners to replace such other duties and liabilities of the General Partner or such other Indemnitee.

        (f)    The Limited Partners, hereby authorize the General Partner, on behalf of the Partnership as a partner or member of a Group Member, to approve of actions by the general partner or managing member of such Group Member similar to those actions permitted to be taken by the General Partner pursuant to this Section 7.9.

        (g)   The Limited Partners expressly acknowledge that the General Partner is under no obligation to consider the separate interests of the Limited Partners (including, without limitation, the tax consequences to Limited Partners) in deciding whether to cause the Partnership to take (or decline to take) any actions, and that the General Partner shall not be liable for monetary damages for losses sustained, liabilities incurred or benefits not derived by Limited Partners in connection with such decisions.

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        SECTION 7.10.    Other Matters Concerning the General Partner.    

        (a)   The General Partner may rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, bond, debenture or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties.

        (b)   The General Partner may consult with legal counsel, accountants, appraisers, management consultants, investment bankers and other consultants and advisers selected by it, and any act taken or omitted to be taken in reliance upon the advice or opinion (including an Opinion of Counsel) of such Persons as to matters that the General Partner reasonably believes to be within such Person's professional or expert competence shall be conclusively presumed to have been done or omitted in good faith and in accordance with such advice or opinion.

        (c)   The General Partner shall have the right, in respect of any of its powers or obligations hereunder, to act through any of its duly authorized officers or any duly appointed attorney or attorneys-in-fact. Each such attorney shall, to the extent provided by the General Partner in the power of attorney, have full power and authority to do and perform each and every act and duty that is permitted or required to be done by the General Partner hereunder.

        SECTION 7.11.    Purchase or Sale of Partnership Securities.    

        The General Partner may cause the Partnership or any other Group Member to purchase or otherwise acquire Partnership Securities or options, rights, warrants or appreciation rights relating to Partnership Securities. The General Partner or any of its Affiliates may also purchase or otherwise acquire and sell or otherwise dispose of Partnership Securities or options, rights, warrants or appreciation rights relating to Partnership Securities for their own account, subject to the provisions of Articles IV and X.

        SECTION 7.12.    Reliance by Third Parties.    

        Notwithstanding anything to the contrary in this Agreement, any Person dealing with the Partnership shall be entitled to assume that the General Partner and any officer of the General Partner authorized by the General Partner to act on behalf of and in the name of the Partnership has full power and authority to encumber, sell or otherwise use in any manner any and all assets of the Partnership and to enter into any authorized contracts on behalf of the Partnership, and such Person shall be entitled to deal with the General Partner or any such officer as if it were the Partnership's sole party in interest, both legally and beneficially. Each Limited Partner hereby waives any and all defenses or other remedies that may be available against such Person to contest, negate or disaffirm any action of the General Partner or any such officer in connection with any such dealing. In no event shall any Person dealing with the General Partner or any such officer or its representatives be obligated to ascertain that the terms of this Agreement have been complied with or to inquire into the necessity or expedience of any act or action of the General Partner or any such officer or its representatives. Each and every certificate, document or other instrument executed on behalf of the Partnership by the General Partner or its representatives shall be conclusive evidence in favor of any and every Person relying thereon or claiming thereunder that (a) at the time of the execution and delivery of such certificate, document or instrument, this Agreement was in full force and effect, (b) the Person executing and delivering such certificate, document or instrument was duly authorized and empowered to do so for and on behalf of the Partnership and (c) such certificate, document or instrument was duly executed and delivered in accordance with the terms and provisions of this Agreement and is binding upon the Partnership.

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ARTICLE VIII

BOOKS, RECORDS, ACCOUNTING AND REPORTS

        SECTION 8.1.    Records and Accounting.    

        The General Partner shall keep or cause to be kept at the principal office of the Partnership or any other place designated by the General Partner in its sole discretion appropriate books and records with respect to the Partnership's business, including all books and records necessary to provide to the Limited Partners any information required to be provided pursuant to Section 3.4(a). Any books and records maintained by or on behalf of the Partnership in the regular course of its business, including the record of the Record Holders of Units or other Partnership Securities or options, rights, warrants or appreciation rights relating to Partnership Securities, books of account and records of Partnership proceedings, may be kept on, or be in the form of, computer disks, hard drives, magnetic tape, photographs, micrographics or any other information storage device; provided that the books and records so maintained are convertible into clearly legible written form within a reasonable period of time. The books of the Partnership shall be maintained, for financial reporting purposes, on an accrual basis in accordance with U.S. GAAP.

        SECTION 8.2.    Fiscal Year.    

        The fiscal year of the Partnership (each, a "Fiscal Year") shall be a year ending December 31. The General Partner in its sole discretion may change the Fiscal Year of the Partnership at any time and from time to time in each case as may be required or permitted under the Code or applicable United States Treasury Regulations and shall notify the Limited Partners of such change in the next regular communication to the Limited Partners.

        SECTION 8.3.    Reports.    

        (a)   As soon as practicable, but in no event later than 120 days after the close of each Fiscal Year, the General Partner shall cause to be made available to each Record Holder of a Unit as of a date selected by the General Partner in its sole discretion, an annual report containing financial statements of the Partnership for such Fiscal Year, presented in accordance with U.S. GAAP, including a balance sheet and statements of operations, Partnership equity and cash flows, such statements to be audited by a firm of independent public accountants selected by the General Partner in its sole discretion.

        (b)   As soon as practicable, but in no event later than 90 days after the close of each Quarter except the last Quarter of each Fiscal Year, the General Partner shall cause to be made available to each Record Holder of a Unit, as of a date selected by the General Partner in its sole discretion, a report containing unaudited financial statements of the Partnership and such other information as may be required by applicable law, regulation or rule of any National Securities Exchange on which the Units are listed for trading, or as the General Partner determines to be necessary or appropriate.

        (c)   The General Partner shall be deemed to have made a report available to each Record Holder as required by this Section 8.3 if it has either (i) filed such report with the Commission via its Electronic Data Gathering, Analysis and Retrieval system and such report is publicly available on such system or (ii) made such report available on any publicly available website maintained by the Partnership.

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ARTICLE IX

TAX MATTERS

        SECTION 9.1.    Tax Returns and Information.    

        As soon as reasonably practicable after the end of each Fiscal Year, the Partnership shall send to each Partner a copy of United States Internal Revenue Service Schedule K-1, and any comparable statements required by applicable U.S. state or local income tax law, with respect to such Fiscal Year. The Partnership also shall provide the Partners with such other information as may be reasonably requested for purposes of allowing the Partners to prepare and file their own U.S. federal, state and local tax returns. Each Partner shall be required to report for all tax purposes consistently with such information provided by the Partnership. The classification, realization and recognition of income, gain, losses and deductions and other items shall be on the accrual method of accounting for U.S. federal income tax purposes.

        SECTION 9.2.    Tax Elections.    

        The General Partner shall determine whether to make or refrain from making the election provided for in Section 754 of the Code, and any and all other elections permitted by the tax laws of the United States, the several states and other relevant jurisdictions, in its sole discretion.

        SECTION 9.3.    Tax Controversies.    

        Subject to the provisions hereof, the General Partner is designated as the Tax Matters Partner (as defined in the Code) and is authorized to represent the Partnership (at the Partnership's expense) in connection with all examinations of the Partnership's affairs by tax authorities, including resulting administrative and judicial proceedings, and to expend Partnership funds for professional services and costs associated therewith. Each Partner agrees to cooperate with the General Partner and to do or refrain from doing any or all things reasonably required by the General Partner to conduct such proceedings.

        SECTION 9.4.    Withholding.    

        Notwithstanding any other provision of this Agreement, the General Partner is authorized to take any action that may be required to be necessary or appropriate to cause the Partnership or any other Group Member to comply with any withholding requirements established under the Code or any other U.S. federal, state, local or non-U.S. law including, without limitation, pursuant to Sections 1441, 1442, 1445 and 1446 of the Code. To the extent that the Partnership is required or elects to withhold and pay over to any taxing authority any amount resulting from the allocation or distribution of income to any Partner (including, without limitation, by reason of Section 1446 of the Code), the General Partner may treat the amount withheld as a distribution of cash pursuant to Section 6.3 in the amount of such withholding from such Partner.

        SECTION 9.5.    Election to be Treated as a Corporation.    

        Notwithstanding anything to the contrary contained herein, if the General Partner determines in its sole discretion that it is no longer in the best interests of the Partnership to continue as a partnership for U.S. federal income tax purposes, the General Partner may elect to treat the Partnership as an association or as a publicly traded partnership taxable as a corporation for U.S. federal (and applicable state) income tax purposes.

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ARTICLE X

ADMISSION OF PARTNERS

        SECTION 10.1.    Admission of Initial Limited Partners.    

        Upon the issuance by the Partnership of Common Units to the Underwriters or their designee(s) as described in Section 5.3 in connection with the Initial Offering, the General Partner shall admit such parties to the Partnership as Initial Limited Partners in respect of the Common Units issued to them.

        SECTION 10.2.    Admission of Additional Limited Partners.    

        (a)   By acceptance of the transfer of any Limited Partner Interests in accordance with this Section 10.2 or the issuance of any Limited Partner Interests in accordance herewith (including in a merger, consolidation or other business combination pursuant to Article XIV), and except as provided in Section 4.8, each transferee or other recipient of a Limited Partner Interest (including any nominee holder or an agent or representative acquiring such Limited Partner Interests for the account of another Person) (i) shall be admitted to the Partnership as a Limited Partner with respect to the Limited Partner Interests so transferred or issued to such Person when any such transfer or issuance is reflected in the books and records of the Partnership, with or without execution of this Agreement, (ii) shall become bound by the terms of, and shall be deemed to have agreed to be bound by, this Agreement, (iii) shall become the Record Holder of the Limited Partner Interests so transferred or issued, (iv) represents that the transferee or other recipient has the capacity, power and authority to enter into this Agreement, (v) grants the powers of attorney set forth in this Agreement and (vi) makes the consents, acknowledgments and waivers contained in this Agreement. The transfer of any Limited Partner Interests and/or the admission of any new Limited Partner shall not constitute an amendment to this Agreement. A Person may become a Record Holder without the consent or approval of any of the Partners. A Person may not become a Limited Partner without acquiring a Limited Partner Interest. The rights and obligations of a Person who is a Non-citizen Assignee shall be determined in accordance with Section 4.8.

        (b)   The name and mailing address of each Limited Partner shall be listed on the books and records of the Partnership maintained for such purpose by the Partnership or the Transfer Agent. The General Partner shall update the books and records of the Partnership from time to time as necessary to reflect accurately the information therein (or shall cause the Transfer Agent to do so, as applicable). A Limited Partner Interest may be represented by a Certificate, as provided in Section 4.1.

        (c)   Any transfer of a Limited Partner Interest shall not entitle the transferee to share in the profits and losses, to receive distributions, to receive allocations of income, gain, loss, deduction or credit or any similar item or to any other rights to which the transferor was entitled until the transferee becomes a Limited Partner pursuant to Section 10.2(a).

        SECTION 10.3.    Admission of Successor General Partner.    

        A successor General Partner approved pursuant to Section 11.1 or 11.2 or the transferee of or successor to all of the General Partner Interest (represented by General Partner Units) pursuant to Section 4.6 who is proposed to be admitted as a successor General Partner shall be admitted to the Partnership as the General Partner effective immediately prior to the withdrawal or removal of the predecessor or transferring General Partner pursuant to Sections 11.1 or 11.2 or the transfer of such General Partner's General Partner Interest (represented by General Partner Units) pursuant to Section 4.6; provided however, that no such successor shall be admitted to the Partnership until compliance with the terms of Section 4.6 has occurred and such successor has executed and delivered such other documents or instruments as may be required to effect such admission. Any such successor is hereby authorized to and shall, subject to the terms hereof, carry on the business of the Partnership without dissolution.

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        SECTION 10.4.    Amendment of Agreement and Certificate of Limited Partnership to Reflect the Admission of Partners.    

        To effect the admission to the Partnership of any Partner, the General Partner shall take all steps necessary under the Delaware Limited Partnership Act to amend the records of the Partnership to reflect such admission and, if necessary, to prepare as soon as practicable an amendment to this Agreement and, if required by law, the General Partner shall prepare and file an amendment to the Certificate of Limited Partnership, and the General Partner may for this purpose, among others, exercise the power of attorney granted pursuant to Section 2.6.


ARTICLE XI

WITHDRAWAL OR REMOVAL OF PARTNERS

        SECTION 11.1.    Withdrawal of the General Partner.    

        (a) The General Partner shall be deemed to have withdrawn from the Partnership upon the occurrence of any one of the following events (each such event herein referred to as an "Event of Withdrawal"):

        If an Event of Withdrawal specified in Section 11.1(a)(iv), (v) or (vi)(A), (B), (C) or (E) occurs, the withdrawing General Partner shall give notice to the Limited Partners within 30 days after such occurrence. The Partners hereby agree that only the Events of Withdrawal described in this Section 11.1 shall result in the withdrawal of the General Partner from the Partnership.

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        (b) Withdrawal of the General Partner from the Partnership upon the occurrence of an Event of Withdrawal shall not constitute a breach of this Agreement under the following circumstances: (i) at any time during the period beginning on the Closing Date and ending at 12:00 midnight, New York City time, on June 30, 2017, the General Partner voluntarily withdraws by giving at least 90 days' advance notice of its intention to withdraw to the Limited Partners; provided that prior to the effective date of such withdrawal, the withdrawal is approved by Limited Partners holding at least a majority of the voting power of the Outstanding Voting Units (excluding Voting Units held by the General Partner and its Affiliates) and the General Partner delivers to the Partnership an Opinion of Counsel ("Withdrawal Opinion of Counsel") that such withdrawal (following the selection of the successor General Partner) would not result in the loss of the limited liability of any Limited Partner or cause the Partnership or any Group Member to be treated as an association taxable as a corporation or otherwise to be taxed as an entity for U.S. federal income tax purposes (to the extent not previously treated as such); (ii) at any time after 12:00 midnight, New York City time, on June 30, 2017, the General Partner voluntarily withdraws by giving at least 90 days' advance notice to the Unitholders, such withdrawal to take effect on the date specified in such notice; (iii) at any time that the General Partner ceases to be the General Partner pursuant to Section 11.1(a)(ii) or is removed pursuant to Section 11.2; or (iv) notwithstanding clause (i) of this sentence, at any time that the General Partner voluntarily withdraws by giving at least 90 days' advance notice of its intention to withdraw to the Limited Partners, such withdrawal to take effect on the date specified in the notice, if at the time such notice is given one Person and its Affiliates (other than the General Partner and its Affiliates) Beneficially Own or own of record or control at least 50% of the Outstanding Common Units. The withdrawal of the General Partner from the Partnership upon the occurrence of an Event of Withdrawal shall also constitute the withdrawal of the General Partner as general partner or managing member, to the extent applicable, of the other Group Members. If the General Partner gives a notice of withdrawal pursuant to Section 11.1(a)(i), the Limited Partners holding of a majority of the voting power of Outstanding Voting Units, may, prior to the effective date of such withdrawal, elect a successor General Partner. The Person so elected as successor General Partner shall automatically become the successor general partner or managing member, to the extent applicable, of the other Group Members of which the General Partner is a general partner or a managing member, and is hereby authorized to, and shall, continue the business of the Partnership and, to the extent applicable, the other Group Members without dissolution. If, prior to the effective date of the General Partner's withdrawal pursuant to Section 11.1(a)(i), a successor is not selected by the Unitholders as provided herein or the Partnership does not receive a Withdrawal Opinion of Counsel, the Partnership shall be dissolved in accordance with and subject to Section 12.1. Any successor General Partner elected in accordance with the terms of this Section 11.1 shall be subject to the provisions of Section 10.3.

        SECTION 11.2.    Removal of the General Partner.    

        The General Partner may be removed if such removal is approved by the Unitholders holding at least 662/3% of the voting power of the Outstanding Voting Units (including Voting Units held by the General Partner and its Affiliates). Any such action by such Unitholders for removal of the General Partner must also provide for the election of a successor General Partner by the Unitholders holding a majority of the voting power of Outstanding Voting Units (including Voting Units held by the General Partner and its Affiliates). Such removal shall be effective immediately following the admission of a successor General Partner pursuant to Section 10.3. The removal of the General Partner shall also automatically constitute the removal of the General Partner as general partner or managing member, to the extent applicable, of the other Group Members of which the General Partner is a general partner or a managing member. If a Person is elected as a successor General Partner in accordance with the terms of this Section 11.2, such Person shall, upon admission pursuant to Section 10.3, automatically become a successor general partner or managing member, to the extent applicable, of the other Group Members of which the General Partner is a general partner or a managing member, and is hereby authorized to, and shall, continue the business of the Partnership and the other Group Members

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without dissolution. The right of the Unitholders to remove the General Partner shall not exist or be exercised unless the Partnership has received an opinion opining as to the matters covered by a Withdrawal Opinion of Counsel. Any successor General Partner elected in accordance with the terms of this Section 11.2 shall be subject to the provisions of Section 10.3.

        SECTION 11.3.    Interest of Departing General Partner and Successor General Partner.    

        (a) In the event of (i) the withdrawal of a General Partner under circumstances where such withdrawal does not violate this Agreement or (ii) the removal of the General Partner by the Unitholders under circumstances where Cause does not exist, if a successor General Partner is elected in accordance with the terms of Sections 11.1 or 11.2, the Departing General Partner shall have the option exercisable prior to the effective date of the withdrawal or removal of such Departing General Partner to require its successor to purchase (x) its General Partner Interest (represented by General Partner Units) and (y) its general partner interest (or equivalent interest), if any, in the other Group Members ((x) and (y) collectively, the "Combined Interest") in exchange for an amount in cash equal to the fair market value of such Combined Interest, such amount to be determined and payable as of the effective date of its withdrawal or removal. If the General Partner is removed by the Unitholders under circumstances where Cause exists or if the General Partner withdraws under circumstances where such withdrawal violates this Agreement, and if a successor General Partner is elected in accordance with the terms of Section 11.1 or 11.2 (or if the business of the Partnership is continued pursuant to Section 12.2 and the successor General Partner is not the former General Partner), such successor shall have the option, exercisable prior to the effective date of the withdrawal or removal of such Departing General Partner, to purchase the Combined Interest of the Departing General Partner for such fair market value of such Combined Interest of the Departing General Partner. In either event, the Departing General Partner shall be entitled to receive all reimbursements due such Departing General Partner pursuant to Section 7.4, including any employee-related liabilities (including severance liabilities), incurred in connection with the termination of any employees employed by the Departing General Partner or its Affiliates (excluding any Group Member) for the benefit of the Partnership or the other Group Members.

        For purposes of this Section 11.3(a), the fair market value of a Departing General Partner's Combined Interest shall be determined by agreement between the Departing General Partner and its successor or, failing agreement within 30 days after the effective date of such Departing General Partner's departure, by an independent investment banking firm or other independent expert selected by the Departing General Partner and its successor, which, in turn, may rely on other experts, and the determination of which shall be conclusive as to such matter. If such parties cannot agree upon one independent investment banking firm or other independent expert within 45 days after the effective date of such departure, then the Departing General Partner shall designate an independent investment banking firm or other independent expert, the Departing General Partner's successor shall designate an independent investment banking firm or other independent expert, and such firms or experts shall mutually select a third independent investment banking firm or independent expert, which third independent investment banking firm or other independent expert shall determine the fair market value of the Combined Interest of the Departing General Partner. In making its determination, such third independent investment banking firm or other independent expert may consider the then current trading price of Units on any National Securities Exchange on which Common Units are then listed, the value of the Partnership's assets, the rights and obligations of the Departing General Partner and other factors it may deem relevant.

        (b) If the Combined Interest is not purchased in the manner set forth in Section 11.3(a), the Departing General Partner (or its transferee) shall become a Limited Partner and its Combined Interest shall be converted into Common Units pursuant to a valuation made by an investment banking firm or other independent expert selected pursuant to Section 11.3(a), without reduction in such Partnership Interest (but subject to proportionate dilution by reason of the admission of its successor).

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Any successor General Partner shall indemnify the Departing General Partner (or its transferee) as to all debts and liabilities of the Partnership arising on or after the date on which the Departing General Partner (or its transferee) becomes a Limited Partner. For purposes of this Agreement, conversion of the Combined Interest of the Departing General Partner to Common Units will be characterized as if the Departing General Partner (or its transferee) contributed its Combined Interest to the Partnership in exchange for the newly-issued Common Units.

        SECTION 11.4.    Withdrawal of Limited Partners.    

        No Limited Partner shall have any right to withdraw from the Partnership; provided however that when a transferee of a Limited Partner's Limited Partner Interest becomes a Record Holder of the Limited Partner Interest so transferred, such transferring Limited Partner shall cease to be a Limited Partner with respect to the Limited Partner Interest so transferred.


ARTICLE XII

DISSOLUTION AND LIQUIDATION

        SECTION 12.1.    Dissolution.    

        The Partnership shall not be dissolved by the admission of additional Limited Partners or by the admission of a successor General Partner in accordance with the terms of this Agreement. Upon the removal or withdrawal of the General Partner, if a successor General Partner is elected pursuant to Sections 10.3, 11.1, 11.2 or 12.2, the Partnership shall not be dissolved and such successor General Partner is hereby authorized to, and shall, continue the business of the Partnership. Subject to Section 12.2, the Partnership shall dissolve, and its affairs shall be wound up, upon:

        SECTION 12.2.    Continuation of the Business of the Partnership After Event of Withdrawal.    

        Upon an Event of Withdrawal caused by (a) the withdrawal or removal of the General Partner as provided in Sections 11.1(a)(i) or (iii) and the failure of the Partners to select a successor to such Departing General Partner pursuant to Sections 11.1 or 11.2, then within 90 days thereafter, or (b) an event constituting an Event of Withdrawal as defined in Sections 11.1(a)(iv), (v) or (vi), then, to the maximum extent permitted by law, within 180 days thereafter, the Unitholders holding a majority of the voting power of Outstanding Voting Units may elect to continue the business of the Partnership on the same terms and conditions set forth in this Agreement by appointing as the successor General Partner a Person approved by the Unitholders holding a majority of the voting power of Outstanding Voting Units. Unless such an election is made within the applicable time period as set forth above, the Partnership shall dissolve and conduct only activities necessary to wind up its affairs. If such an election is so made, then:

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provided that the right of the Unitholders holding a majority of the voting power of Outstanding Voting Units to approve a successor General Partner and to continue the business of the Partnership shall not exist and may not be exercised unless the Partnership has received an Opinion of Counsel (x) that the exercise of the right would not result in the loss of limited liability of any Limited Partner and (y) neither the Partnership nor any Group Member would be treated as an association taxable as a corporation or otherwise be taxable as an entity for U.S. federal income tax purposes upon the exercise of such right to continue (to the extent not so treated or taxed).

        SECTION 12.3.    Liquidator.    

        Upon dissolution of the Partnership, unless the Partnership is continued pursuant to Section 12.2, the General Partner shall select in its sole discretion one or more Persons (which may be the General Partner) to act as Liquidator. If other than the General Partner, the Liquidator (1) shall be entitled to receive such compensation for its services as may be approved by Unitholders holding at least a majority of the voting power of the Outstanding Voting Units voting as a single class, (2) shall agree not to resign at any time without 15 days' prior notice and (3) may be removed at any time, with or without cause, by notice of removal approved by Unitholders holding at least a majority of the voting power of the Outstanding Voting Units voting as a single class. Upon dissolution, removal or resignation of the Liquidator, a successor and substitute Liquidator (who shall have and succeed to all rights, powers and duties of the original Liquidator) shall within 30 days thereafter be approved by holders of at least a majority of the voting power of the Outstanding Voting Units voting as a single class. The right to approve a successor or substitute Liquidator in the manner provided herein shall be deemed to refer also to any such successor or substitute Liquidator approved in the manner herein provided. Except as expressly provided in this Article XII, the Liquidator approved in the manner provided herein shall have and may exercise, without further authorization or consent of any of the parties hereto, all of the powers conferred upon the General Partner under the terms of this Agreement (but subject to all of the applicable limitations, contractual and otherwise, upon the exercise of such powers, other than the limitation on sale set forth in Section 7.3) necessary or appropriate to carry out the duties and functions of the Liquidator hereunder for and during the period of time required to complete the winding up and liquidation of the Partnership as provided for herein.

        SECTION 12.4.    Liquidation.    

        The Liquidator shall proceed to dispose of the assets of the Partnership, discharge its liabilities, and otherwise wind up its affairs in such manner and over such period as the Liquidator determines to be in the best interest of the Partners, subject to Section 17-804 of the Delaware Limited Partnership Act and the following:

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        SECTION 12.5.    Cancellation of Certificate of Limited Partnership.    

        Upon the completion of the distribution of Partnership cash and property as provided in Section 12.4 in connection with the liquidation of the Partnership, the Certificate of Limited Partnership and all qualifications of the Partnership as a foreign limited partnership in jurisdictions other than the State of Delaware shall be canceled and such other actions as may be necessary to terminate the Partnership shall be taken.

        SECTION 12.6.    Return of Contributions.    

        The General Partner shall not be personally liable for, and shall have no obligation to contribute or loan any monies or property to the Partnership to enable it to effectuate, the return of the Capital Contributions of the Limited Partners or Unitholders, or any portion thereof, it being expressly understood that any such return shall be made solely from Partnership assets.

        SECTION 12.7.    Waiver of Partition.    

        To the maximum extent permitted by law, each Partner hereby waives any right to partition of the Partnership property.

        SECTION 12.8.    Capital Account Restoration.    

        No Partner shall have any obligation to restore any negative balance in its Capital Account upon liquidation of the Partnership.


ARTICLE XIII

AMENDMENT OF PARTNERSHIP AGREEMENT; MEETINGS; RECORD DATE

        SECTION 13.1.    Amendments to be Adopted Solely by the General Partner.    

        Each Partner agrees that the General Partner, without the approval of any Partner, any Unitholder or any other Person, may amend any provision of this Agreement and execute, swear to, acknowledge, deliver, file and record whatever documents may be required in connection therewith, to reflect:

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        SECTION 13.2.    Amendment Procedures.    

        Except as provided in Sections 5.6, 13.1, 13.3 and 14.5, all amendments to this Agreement shall be made in accordance with the following requirements. Amendments to this Agreement may be proposed only by the General Partner; provided however that, to the fullest extent permitted by law, the General Partner shall have no duty or obligation to propose any amendment to this Agreement and may decline to do so free of any duty (including any fiduciary duty) or obligation whatsoever to the Partnership or any Limited Partner or other Person bound by this Agreement and, in declining to propose an amendment to the fullest extent permitted by law, shall not be required to act in good faith or pursuant to any other standard imposed by this Agreement, any other agreement contemplated hereby or under the Delaware Limited Partnership Act or any other law, rule or regulation or at equity. A proposed amendment shall be effective upon its approval by the General Partner and the Unitholders holding a majority of the voting power of the Outstanding Voting Units, unless a greater or different percentage is required under this Agreement or by Delaware law. Each proposed amendment that requires the approval of the holders of a specified percentage of the voting power of Outstanding Voting Units shall be set forth in a writing that contains the text of the proposed amendment. If such an amendment is proposed, the General Partner shall seek the written approval of the requisite percentage of the voting power of Outstanding Voting Units or call a meeting of the Unitholders to consider and vote on such proposed amendment, in each case in accordance with the other provisions of this Article XIII. The General Partner shall notify all Record Holders upon final adoption of any such proposed amendments.

        SECTION 13.3.    Amendment Requirements.    

        (a)   Notwithstanding the provisions of Sections 13.1 and 13.2, no provision of this Agreement that requires the vote or consent of Unitholders holding, or holders of, a percentage of the voting power of Outstanding Voting Units (including Voting Units deemed owned by the General Partner and its Affiliates) required to take any action shall be amended, altered, changed, repealed or rescinded in any respect that would have the effect of reducing such voting percentage unless such amendment is approved by the written consent or the affirmative vote of Unitholders or holders of Outstanding Voting Units whose aggregate Outstanding Voting Units constitute not less than the voting or consent requirement sought to be reduced.

        (b)   Notwithstanding the provisions of Sections 13.1 and 13.2, no amendment to this Agreement may (i) enlarge the obligations of any Limited Partner without its consent, unless such shall be deemed to have occurred as a result of an amendment approved pursuant to Section 13.3(c), or (ii) enlarge the obligations of, restrict in any way any action by or rights of, or reduce in any way the amounts distributable, reimbursable or otherwise payable to the General Partner or any of its Affiliates without the General Partner's consent, which consent may be given or withheld in its sole discretion.

        (c)   Except as provided in Sections 13.1 and 14.3, any amendment that would have a material adverse effect on the rights or preferences of any class of Partnership Interests in relation to other classes of Partnership Interests (treating the Common Units as a separate class for this purpose) must be approved by the holders of not less than a majority of the Outstanding Partnership Interests of the class affected.

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        (d)   Notwithstanding any other provision of this Agreement, except for amendments pursuant to Section 13.1 and except as otherwise provided by Section 14.3(b), no amendments shall become effective without the approval of Unitholders holding at least 90% of the voting power of the Outstanding Voting Units unless the Partnership obtains an Opinion of Counsel to the effect that such amendment will not affect the limited liability of any Limited Partner under the Delaware Limited Partnership Act.

        (e)   Except as provided in Section 13.1, this Section 13.3 shall only be amended with the approval of the Unitholders holding of at least 90% of the voting power of the Outstanding Voting Units.

        SECTION 13.4.    Special Meetings.    

        All acts of Limited Partners to be taken pursuant to this Agreement shall be taken in the manner provided in this Article XIII. Special meetings of the Limited Partners may be called by the General Partner or by Limited Partners owning 50% or more of the voting power of the Outstanding Limited Partner Interests of the class or classes for which a meeting is proposed. (For the avoidance of doubt, the Common Units and the Special Voting Units shall not constitute separate classes for this purpose.) Limited Partners shall call a special meeting by delivering to the General Partner one or more requests in writing stating that the signing Limited Partners wish to call a special meeting and indicating the general or specific purposes for which the special meeting is to be called. Within 60 days after receipt of such a call from Limited Partners or within such greater time as may be reasonably necessary for the Partnership to comply with any statutes, rules, regulations, listing, agreements or similar requirements governing the holding of a meeting or the solicitation of proxies for use at such a meeting, the General Partner shall send a notice of the meeting to the Limited Partners either directly or indirectly through the Transfer Agent. A meeting shall be held at a time and place determined by the General Partner in its sole discretion on a date not less than 10 days nor more than 60 days after the mailing of notice of the meeting. Limited Partners shall not vote on matters that would cause the Limited Partners to be deemed to be taking part in the management and control of the business and affairs of the Partnership so as to jeopardize the Limited Partners' limited liability under the Delaware Limited Partnership Act or the law of any other state in which the Partnership is qualified to do business.

        SECTION 13.5.    Notice of a Meeting.    

        Notice of a meeting called pursuant to Section 13.4 shall be given to the Record Holders of the class or classes of Limited Partner Interests for which a meeting is proposed in writing by mail or other means of written communication in accordance with Section 16.1. The notice shall be deemed to have been given at the time when deposited in the mail or sent by other means of written communication.

        SECTION 13.6.    Record Date.    

        For purposes of determining the Limited Partners entitled to notice of or to vote at a meeting of the Limited Partners or to give approvals without a meeting as provided in Section 13.11 the General Partner may set a Record Date, which shall not be less than 10 nor more than 60 days before (a) the date of the meeting (unless such requirement conflicts with any rule, regulation, guideline or requirement of any National Securities Exchange on which the Limited Partner Interests are listed for trading, in which case the rule, regulation, guideline or requirement of such National Securities Exchange shall govern) or (b) in the event that approvals are sought without a meeting, the date by which Limited Partners are requested in writing by the General Partner to give such approvals. If the General Partner does not set a Record Date, then (a) the Record Date for determining the Limited Partners entitled to notice of or to vote at a meeting of the Limited Partners shall be the close of business on the day immediately preceding the day on which notice is given, and (b) the Record Date for determining the Limited Partners entitled to give approvals without a meeting shall be the date the first written approval is deposited with the Partnership in care of the General Partner in accordance with Section 13.11.

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        SECTION 13.7.    Adjournment.    

        When a meeting is adjourned to another time or place, notice need not be given of the adjourned meeting and a new Record Date need not be fixed, if the time and place thereof are announced at the meeting at which the adjournment is taken, unless such adjournment shall be for more than 45 days. At the adjourned meeting, the Partnership may transact any business which might have been transacted at the original meeting. If the adjournment is for more than 45 days or if a new Record Date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given in accordance with this Article XIII.

        SECTION 13.8.    Waiver of Notice; Approval of Meeting; Approval of Minutes.    

        The transactions of any meeting of Limited Partners, however called and noticed, and whenever held, shall be as valid as if it had occurred at a meeting duly held after regular call and notice if a quorum is present either in person or by proxy. Attendance of a Limited Partner at a meeting shall constitute a waiver of notice of the meeting, except (i) when the Limited Partner attends the meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business at such meeting because the meeting is not lawfully called or convened, and (ii) that attendance at a meeting is not a waiver of any right to disapprove the consideration of matters required to be included in the notice of the meeting, but not so included, if the disapproval is expressly made at the meeting.

        SECTION 13.9.    Quorum.    

        The Limited Partners holding of a majority of the voting power of the Outstanding Limited Partner Interests of the class or classes for which a meeting has been called (including Limited Partner Interests deemed owned by the General Partner) represented in person or by proxy shall constitute a quorum at a meeting of Limited Partners of such class or classes unless any such action by the Limited Partners requires approval by Limited Partners holding a greater percentage of the voting power of such Limited Partner Interests, in which case the quorum shall be such greater percentage. (For the avoidance of doubt, the Common Units and the Special Voting Units shall not constitute separate classes for this purpose.) At any meeting of the Limited Partners duly called and held in accordance with this Agreement at which a quorum is present, the act of Limited Partners holding Outstanding Limited Partner Interests that in the aggregate represent a majority of the voting power of the Outstanding Limited Partner Interests entitled to vote and be present in person or by proxy at such meeting shall be deemed to constitute the act of all Limited Partners, unless a greater or different percentage is required with respect to such action under this Agreement, in which case the act of the Limited Partners holding Outstanding Limited Partner Interests that in the aggregate represent at least such greater or different percentage of the voting power shall be required. The Limited Partners present at a duly called or held meeting at which a quorum is present may continue to transact business until adjournment, notwithstanding the withdrawal of enough Limited Partners to leave less than a quorum, if any action taken (other than adjournment) is approved by the required percentage of the voting power of Outstanding Limited Partner Interests specified in this Agreement (including Outstanding Limited Partner Interests deemed owned by the General Partner). In the absence of a quorum any meeting of Limited Partners may be adjourned from time to time by the affirmative vote of Limited Partners holding at least a majority of the voting power of the Outstanding Limited Partner Interests entitled to vote at such meeting (including Outstanding Limited Partner Interests deemed owned by the General Partner) represented either in person or by proxy, but no other business may be transacted, except as provided in Section 13.7.

        SECTION 13.10.    Conduct of a Meeting.    

        The General Partner shall have full power and authority concerning the manner of conducting any meeting of the Limited Partners or solicitation of approvals in writing, including the determination of Persons entitled to vote, the existence of a quorum, the satisfaction of the requirements of Section 13.4, the conduct of voting, the validity and effect of any proxies and the determination of any controversies, votes or challenges arising in connection with or during the meeting or voting. The General Partner

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shall designate a Person to serve as chairman of any meeting and shall further designate a Person to take the minutes of any meeting. All minutes shall be kept with the records of the Partnership maintained by the General Partner. The General Partner may make such other regulations consistent with applicable law and this Agreement as it may deem necessary or advisable concerning the conduct of any meeting of the Limited Partners or solicitation of approvals in writing, including regulations in regard to the appointment of proxies, the appointment and duties of inspectors of votes and approvals, the submission and examination of proxies and other evidence of the right to vote, and the revocation of approvals, proxies and votes in writing.

        SECTION 13.11.    Action Without a Meeting.    

        If authorized by the General Partner, any action that may be taken at a meeting of the Limited Partners may be taken without a meeting, without a vote and without prior notice, if an approval in writing setting forth the action so taken is signed by Limited Partners owning not less than the minimum percentage of the voting power of the Outstanding Limited Partner Interests (including Limited Partner Interests deemed owned by the General Partner) that would be necessary to authorize or take such action at a meeting at which all the Limited Partners were present and voted (unless such provision conflicts with any rule, regulation, guideline or requirement of any National Securities Exchange on which the Limited Partner Interests or a class thereof are listed for trading, in which case the rule, regulation, guideline or requirement of such exchange shall govern). Prompt notice of the taking of action without a meeting shall be given to the Limited Partners who have not approved in writing. The General Partner may specify that any written ballot, if any, submitted to Limited Partners for the purpose of taking any action without a meeting shall be returned to the Partnership within the time period, which shall be not less than 20 days, specified by the General Partner in its sole discretion. If a ballot returned to the Partnership does not vote all of the Limited Partner Interests held by the Limited Partners, the Partnership shall be deemed to have failed to receive a ballot for the Limited Partner Interests that were not voted. If approval of the taking of any action by the Limited Partners is solicited by any Person other than by or on behalf of the General Partner, the written approvals shall have no force and effect unless and until (a) they are deposited with the Partnership in care of the General Partner, (b) approvals sufficient to take the action proposed are dated as of a date not more than 90 days prior to the date sufficient approvals are deposited with the Partnership and (c) an Opinion of Counsel is delivered to the General Partner to the effect that the exercise of such right and the action proposed to be taken with respect to any particular matter (i) will not cause the Limited Partners to be deemed to be taking part in the management and control of the business and affairs of the Partnership so as to jeopardize the Limited Partners' limited liability, and (ii) is otherwise permissible under the state statutes then governing the rights, duties and liabilities of the Partnership and the Partners. Nothing contained in this Section 13.11 shall be deemed to require the General Partner to solicit all Limited Partners in connection with a matter approved by the requisite percentage of the voting power of Limited Partners or other holders of Outstanding Voting Units acting by written consent without a meeting.

        SECTION 13.12.    Voting and Other Rights.    

        (a)   Only those Record Holders of the Limited Partner Interests on the Record Date set pursuant to Section 13.6 (and also subject to the limitations contained in the definition of "Outstanding") shall be entitled to notice of, and to vote at, a meeting of Limited Partners or to act with respect to matters as to which the holders of the Outstanding Limited Partner Interests have the right to vote or to act. All references in this Agreement to votes of, or other acts that may be taken by, the Outstanding Limited Partner Interests shall be deemed to be references to the votes or acts of the Record Holders of such Outstanding Limited Partner Interests. Each Common Unit shall entitle the holder thereof to one vote for each Common Unit held of record by such holder as of the relevant Record Date.

        (b)   With respect to Limited Partner Interests that are held for a Person's account by another Person (such as a broker, dealer, bank, trust company or clearing corporation, or an agent of any of the

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foregoing), in whose name such Limited Partner Interests are registered, such other Person shall, in exercising the voting rights in respect of such Limited Partner Interests on any matter, and unless the arrangement between such Persons provides otherwise, vote such Limited Partner Interests in favor of, and at the direction of, the Person who is the Beneficial Owner, and the Partnership shall be entitled to assume it is so acting without further inquiry. The provisions of this Section 13.12(b) (as well as all other provisions of this Agreement) are subject to the provisions of Section 4.3.

        SECTION 13.13.    Participation of Special Voting Units in All Actions Participated in by Common Units.    

        (a)   Notwithstanding any other provision of this Agreement, the Delaware Limited Partnership Act or any applicable law, rule or regulation, each of the Partners and each other Person who may acquire an interest in Partnership Securities hereby agrees that the holders of Special Voting Units (other than the Partnership and its Subsidiaries) shall be entitled to receive notice of, be included in any requisite quora for and participate in any and all approvals, votes or other actions of the Partners on an equivalent basis as, and treating such Persons for all purposes as if they are, Limited Partners holding Common Units (including, without limitation, the notices, quora, approvals, votes and other actions contemplated by Sections 4.6(a), 7.3, 7.7(c), 7.9(a), 11.1(b), 11.2, 12.1(b), 12.2, 12.3, 13.2, 13.3, 13.4, 13.5, 13.6, 13.8, 13.9, 13.10, 13.11, 13.12, 14.3 and 16.1 hereof), including any and all notices, quora, approvals, votes and other actions that may be taken pursuant to the requirements of the Delaware Limited Partnership Act or any other applicable law, rule or regulation. This Agreement shall be construed in all cases to give maximum effect to such agreement.

        Each holder of a Special Voting Unit (other than the Partnership and its Subsidiaries) shall be entitled, as such, to a number of Limited Partner votes that is equal to the aggregate number of Blackstone Holdings Partnership Units held of record by such holder as of the relevant Record Date. The number of votes to which each holder of a Special Voting Unit shall be entitled shall be adjusted accordingly if (i) a Limited Partner holding Common Units, as such, shall become entitled to a number of votes other than one for each Common Unit held and/or (ii) under the terms of the Exchange Agreement the holders of Blackstone Holdings Partnership Units party thereto shall become entitled to exchange each such unit for a number of Common Units other than one. The holders of Special Voting Units shall vote together with the Limited Partners holding Common Units as a single class and, to the extent that the Limited Partners holding Common Units shall vote together with the holders of any other class of Partnership Interest, the holders of Special Voting Units shall also vote together with the holders of such other class of Partnership Interests on an equivalent basis as the Limited Partners holding Common Units.

        (b)   Notwithstanding anything to the contrary contained in this Agreement, and in addition to any other vote required by the Delaware Limited Partnership Act or this Agreement, the affirmative vote of the holders of at least a majority of the voting power of the Special Voting Units (excluding Special Voting Units held by the Partnership and its Subsidiaries) voting separately as a class shall be required to alter, amend or repeal this Section 13.13 or to adopt any provision inconsistent therewith.


ARTICLE XIV

MERGER

        SECTION 14.1.    Authority.    

        The Partnership may merge or consolidate or otherwise combine with or into one or more corporations, limited liability companies, statutory trusts or associations, real estate investment trusts, common law trusts or unincorporated businesses, including a partnership (whether general or limited (including a limited liability partnership or a limited liability limited partnership)), formed under the laws of the State of Delaware or any other state of the United States of America, pursuant to a written agreement of merger, consolidation or other business combination ("Merger Agreement") in accordance with this Article XIV.

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        SECTION 14.2.    Procedure for Merger, Consolidation or Other Business Combination.    

        Merger, consolidation or other business combination of the Partnership pursuant to this Article XIV requires the prior consent of the General Partner, provided however that, to the fullest extent permitted by law, the General Partner shall have no duty or obligation to consent to any merger, consolidation or other business combination of the Partnership and, to the fullest extent permitted by law, may decline to do so free of any duty (including any fiduciary duty) or obligation whatsoever to the Partnership, any Limited Partner or any other Person bound by this Agreement and, in declining to consent to a merger, consolidation or other business combination, shall not be required to act pursuant to any other standard imposed by this Agreement, any other agreement contemplated hereby or under the Delaware Limited Partnership Act or any other law, rule or regulation or at equity. If the General Partner shall determine, in the exercise of its sole discretion, to consent to the merger, consolidation or other business combination, the General Partner shall approve the Merger Agreement, which shall set forth:

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        SECTION 14.3.    Approval by Limited Partners of Merger, Consolidation or Other Business Combination.    

        (a)   Except as provided in Section 14.3(d), the General Partner, upon its approval of the Merger Agreement, shall direct that the Merger Agreement and the merger, consolidation or other business combination contemplated thereby be submitted to a vote of Limited Partners, whether at a special meeting or by written consent, in either case in accordance with the requirements of Article XIII. A copy or a summary of the Merger Agreement shall be included in or enclosed with the notice of a special meeting or the written consent.

        (b)   Except as provided in Section 14.3(d), the Merger Agreement and the merger, consolidation or other business combination contemplated thereby shall be approved upon receiving the affirmative vote or consent of the holders of a majority of the voting power of Outstanding Voting Units.

        (c)   Except as provided in Section 14.3(d), after such approval by vote or consent of the Limited Partners, and at any time prior to the filing of the certificate of merger or consolidation or similar certificate pursuant to Section 14.4, the merger, consolidation or other business combination may be abandoned pursuant to provisions therefor, if any, set forth in the Merger Agreement.

        (d)   Notwithstanding anything else contained in this Article XIV or in this Agreement, the General Partner is permitted, without Limited Partner approval, to convert the Partnership or any Group Member into a new limited liability entity, to merge the Partnership or any Group Member into, or convey all of the Partnership's assets to, another limited liability entity, which shall be newly formed and shall have no assets, liabilities or operations at the time of such conversion, merger or conveyance other than those it receives from the Partnership or other Group Member; provided that (A) the General Partner has received an Opinion of Counsel that the merger or conveyance, as the case may be, would not result in the loss of the limited liability of any Limited Partner, (B) the sole purpose of such conversion, merger or conveyance is to effect a mere change in the legal form of the Partnership into another limited liability entity and (C) the governing instruments of the new entity provide the Limited Partners and the General Partner with substantially the same rights and obligations as are herein contained.

        SECTION 14.4.    Certificate of Merger or Consolidation.    

        Upon the required approval by the General Partner and the Unitholders of a Merger Agreement and the merger, consolidation or business combination contemplated thereby, a certificate of merger or consolidation or similar certificate shall be executed and filed with the Secretary of State of the State of Delaware in conformity with the requirements of the Delaware Limited Partnership Act.

        SECTION 14.5.    Amendment of Partnership Agreement.    

        Pursuant to Section 17-211(g) of the Delaware Limited Partnership Act, an agreement of merger, consolidation or other business combination approved in accordance with this Article XIV may (a) effect any amendment to this Agreement or (b) effect the adoption of a new partnership agreement for a limited partnership if it is the Surviving Business Entity. Any such amendment or adoption made pursuant to this Section 14.5 shall be effective at the effective time or date of the merger, consolidation or other business combination.

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        SECTION 14.6.    Effect of Merger.    

        (a) At the effective time of the certificate of merger or consolidation or similar certificate:

        (b)   A merger, consolidation or other business combination effected pursuant to this Article shall not be deemed to result in a transfer or assignment of assets or liabilities from one entity to another.


ARTICLE XV

RIGHT TO ACQUIRE LIMITED PARTNER INTERESTS

        SECTION 15.1.    Right to Acquire Limited Partner Interests.    

        (a)   Notwithstanding any other provision of this Agreement, if at any time less than 10% of the total Limited Partner Interests of any class then Outstanding (other than Special Voting Units) is held by Persons other than the General Partner and its Affiliates, the General Partner shall then have the right, which right it may assign and transfer in whole or in part to the Partnership or any Affiliate of the General Partner, exercisable in its sole discretion, to purchase all, but not less than all, of such Limited Partner Interests of such class then Outstanding held by Persons other than the General Partner and its Affiliates, at the greater of (x) the Current Market Price as of the date three days prior to the date that the notice described in Section 15.1(b) is mailed and (y) the highest price paid by the General Partner or any of its Affiliates for any such Limited Partner Interest of such class purchased during the 90-day period preceding the date that the notice described in Section 15.1(b) is mailed. As used in this Agreement, (i) "Current Market Price" as of any date of any class of Limited Partner Interests means the average of the daily Closing Prices per limited partner interest of such class for the 20 consecutive Trading Days immediately prior to such date; (ii) "Closing Price" for any day means the last sale price on such day, regular way, or in case no such sale takes place on such day, the average of the closing bid and asked prices on such day, regular way, in either case as reported in the principal consolidated transaction reporting system with respect to securities listed or admitted for trading on the principal National Securities Exchange on which such Limited Partner Interests of such class are listed or admitted to trading or, if such Limited Partner Interests of such class are not listed or admitted to trading on any National Securities Exchange, the last quoted price on such day or, if not so quoted, the average of the high bid and low asked prices on such day in the over-the-counter market, as reported by the primary reporting system then in use in relation to such Limited Partner Interest of such class, or, if on any such day such Limited Partner Interests of such class are not quoted by any such organization, the average of the closing bid and asked prices on such day as furnished by a professional market maker making a market in such Limited Partner Interests of such class selected by the General

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Partner in its sole discretion, or if on any such day no market maker is making a market in such Limited Partner Interests of such class, the fair value of such Limited Partner Interests on such day as determined by the General Partner in its sole discretion; and (iii) "Trading Day" means a day on which the principal National Securities Exchange on which such Limited Partner Interests of any class are listed or admitted to trading is open for the transaction of business or, if Limited Partner Interests of a class are not listed or admitted to trading on any National Securities Exchange, a day on which banking institutions in New York City generally are open.

        (b)   If the General Partner, any Affiliate of the General Partner or the Partnership elects to exercise the right to purchase Limited Partner Interests granted pursuant to Section 15.1(a), the General Partner shall deliver to the Transfer Agent notice of such election to purchase (the "Notice of Election to Purchase") and shall cause the Transfer Agent to mail a copy of such Notice of Election to Purchase to the Record Holders of Limited Partner Interests of such class (as of a Record Date selected by the General Partner) at least 10, but not more than 60, days prior to the Purchase Date. Such Notice of Election to Purchase shall also be published for a period of at least three consecutive days in at least two daily newspapers of general circulation printed in the English language and circulated in the Borough of Manhattan, New York. The Notice of Election to Purchase shall specify the Purchase Date and the price (determined in accordance with Section 15.1(a)) at which Limited Partner Interests will be purchased and state that the General Partner, its Affiliate or the Partnership, as the case may be, elects to purchase such Limited Partner Interests (in the case of Limited Partner Interests evidenced by Certificates, upon surrender of Certificates representing such Limited Partner Interests) in exchange for payment at such office or offices of the Transfer Agent as the Transfer Agent may specify or as may be required by any National Securities Exchange on which such Limited Partner Interests are listed or admitted to trading. Any such Notice of Election to Purchase mailed to a Record Holder of Limited Partner Interests at his address as reflected in the records of the Transfer Agent shall be conclusively presumed to have been given regardless of whether the owner receives such notice. On or prior to the Purchase Date, the General Partner, its Affiliate or the Partnership, as the case may be, shall deposit with the Transfer Agent cash in an amount sufficient to pay the aggregate purchase price of all of such Limited Partner Interests to be purchased in accordance with this Section 15.1. If the Notice of Election to Purchase shall have been duly given as aforesaid at least 10 days prior to the Purchase Date, and if on or prior to the Purchase Date the deposit described in the preceding sentence has been made for the benefit of the holders of Limited Partner Interests subject to purchase as provided herein, then from and after the Purchase Date, notwithstanding that any Certificate shall not have been surrendered for purchase, all rights of the holders of such Limited Partner Interests (including any rights pursuant to Articles IV, V, VI, and XII) shall thereupon cease, except the right to receive the purchase price (determined in accordance with Section 15.1(a)) for Limited Partner Interests therefor, without interest (in the case of Limited Partner Interests evidenced by Certificates, upon surrender to the Transfer Agent of the Certificates representing such Limited Partner Interests) and such Limited Partner Interests shall thereupon be deemed to be transferred to the General Partner, its Affiliate or the Partnership, as the case may be, on the record books of the Transfer Agent and the Partnership, and the General Partner or any Affiliate of the General Partner, or the Partnership, as the case may be, shall be deemed to be the owner of all such Limited Partner Interests from and after the Purchase Date and shall have all rights as the owner of such Limited Partner Interests (including all rights as owner of such Limited Partner Interests pursuant to Articles IV, V, VI and XII).

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ARTICLE XVI

GENERAL PROVISIONS

        SECTION 16.1.    Addresses and Notices.    

        Any notice, demand, request, report or proxy materials required or permitted to be given or made to a Partner under this Agreement shall be in writing and shall be deemed given or made when delivered in person or when sent by first class United States mail or by other means of written communication to the Partner at the address described below.

        Any notice, payment or report to be given or made to a Partner hereunder shall be deemed conclusively to have been given or made, and the obligation to give such notice or report or to make such payment shall be deemed conclusively to have been fully satisfied, upon sending of such notice, payment or report to the Record Holder of such Partnership Securities at his address as shown on the records of the Transfer Agent or as otherwise shown on the records of the Partnership, regardless of any claim of any Person who may have an interest in such Partnership Securities by reason of any assignment or otherwise.

        Notwithstanding the foregoing, if (i) a Partner shall consent to receiving notices, demands, requests, reports or proxy materials via electronic mail or by the Internet or (ii) the rules of the Commission shall permit any report or proxy materials to be delivered electronically or made available via the Internet, any such notice, demand, request, report or proxy materials shall be deemed given or made when delivered or made available via such mode of delivery.

        An affidavit or certificate of making of any notice, payment or report in accordance with the provisions of this Section 16.1 executed by the General Partner, the Transfer Agent or the mailing organization shall be prima facie evidence of the giving or making of such notice, payment or report. If any notice, payment or report given or made in accordance with the provisions of this Section 16.1 is returned marked to indicate that such notice, payment or report was unable to be delivered, such notice, payment or report and, in the case of notices, payments or reports returned by the United States Postal Service (or other physical mail delivery mail service outside the United States of America), any subsequent notices, payments and reports shall be deemed to have been duly given or made without further mailing (until such time as such Record Holder or another Person notifies the Transfer Agent or the Partnership of a change in his address) or other delivery if they are available for the Partner at the principal office of the Partnership for a period of one year from the date of the giving or making of such notice, payment or report to the other Partners. Any notice to the Partnership shall be deemed given if received by the General Partner at the principal office of the Partnership designated pursuant to Section 2.3. The General Partner may rely and shall be protected in relying on any notice or other document from a Partner or other Person if believed by it to be genuine.

        SECTION 16.2.    Further Action.    

        The parties shall execute and deliver all documents, provide all information and take or refrain from taking action as may be necessary or appropriate to achieve the purposes of this Agreement.

        SECTION 16.3.    Binding Effect.    

        This Agreement shall be binding upon and inure to the benefit of the parties hereto and their heirs, executors, administrators, successors, legal representatives and permitted assigns. The Indemnitees and their heirs, executors, administrators and successors shall be entitled to receive the benefits of this Agreement.

        SECTION 16.4.    Integration.    

        This Agreement constitutes the entire agreement among the parties hereto pertaining to the subject matter hereof and supersedes all prior agreements and understandings pertaining thereto.

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        SECTION 16.5.    Creditors.    

        None of the provisions of this Agreement shall be for the benefit of, or shall be enforceable by, any creditor of the Partnership.

        SECTION 16.6.    Waiver.    

        No failure by any party to insist upon the strict performance of any covenant, duty, agreement or condition of this Agreement or to exercise any right or remedy consequent upon a breach thereof shall constitute waiver of any such breach of any other covenant, duty, agreement or condition.

        SECTION 16.7.    Counterparts.    

        This Agreement may be executed in counterparts, all of which together shall constitute an agreement binding on all the parties hereto, notwithstanding that all such parties are not signatories to the original or the same counterpart. Each party shall become bound by this Agreement immediately upon affixing its signature hereto or, in the case of a Person acquiring a Limited Partner Interest pursuant to Section 10.2(a), without execution hereof.

        SECTION 16.8.    Applicable Law.    

        This Agreement shall be construed in accordance with and governed by the laws of the State of Delaware, without regard to the principles of conflicts of law.

        SECTION 16.9.    Invalidity of Provisions.    

        If any provision of this Agreement is or becomes invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not be affected thereby.

        SECTION 16.10.    Consent of Partners.    

        Each Partner hereby expressly consents and agrees that, whenever in this Agreement it is specified that an action may be taken upon the affirmative vote or consent of less than all of the Partners, such action may be so taken upon the concurrence of less than all of the Partners and each Partner shall be bound by the results of such action.

        SECTION 16.11.    Facsimile Signatures.    

        The use of facsimile signatures affixed in the name and on behalf of the transfer agent and registrar of the Partnership on certificates representing Common Units is expressly permitted by this Agreement.

[Remainder of Page Intentionally Left Blank]

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        IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first written above:

    GENERAL PARTNER:

 
 
BLACKSTONE GROUP MANAGEMENT L.L.C.

 
 
By:
Name:
Title:

 
 
LIMITED PARTNERS:

 
 
All Limited Partners now and hereafter admitted as Limited Partners of the Partnership, pursuant to powers of attorney now and hereafter executed in favor of, and granted and delivered to the General Partner or without execution hereof pursuant to Section 10.2(a).

 
 
BLACKSTONE GROUP MANAGEMENT L.L.C.

 
 
By:
Name:
Title:

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LOGO


PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13.    OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

        The following table sets forth the expenses payable by the Registrant in connection with the issuance and distribution of the common units being registered hereby. All of such expenses are estimates, other than the filing and listing fees payable to the Securities and Exchange Commission, the National Association of Securities Dealers, Inc. and the New York Stock Exchange.

Filing Fee—Securities and Exchange Commission   $ 122,800
Fee—National Association of Securities Dealers     75,500
Listing Fee—New York Stock Exchange     250,000
Fees and Expenses of Counsel     *
Printing Expenses     *
Fees and Expenses of Accountants     *
Blue Sky Fees and Expenses     *
Transfer Agent Fees and Expenses     *
Miscellaneous Expenses     *
   
  Total     *
   
*
To be provided by amendment.

ITEM 14.    INDEMNIFICATION OF DIRECTORS AND OFFICERS.

        The section of the prospectus entitled "Material Provisions of The Blackstone Group L.P. Partnership Agreement—Indemnification" discloses that we will generally indemnify our general partner, officers, directors and affiliates of the general partner and certain other specified persons to the fullest extent permitted by the law against all losses, claims, damages or similar events and is incorporated herein by this reference. Subject to any terms, conditions or restrictions set forth in the partnership agreement, Section 17-108 of the Delaware Revised Uniform Limited Partnership Act empowers a Delaware limited partnership to indemnify and hold harmless any partner or other persons from and against all claims and demands whatsoever.

        We currently maintain liability insurance for our directors and officers. In connection with this offering, we will obtain additional liability insurance for our directors and officers. Such insurance would be available to our directors and officers in accordance with its terms.

        Reference is made to the form of underwriting agreement to be filed as Exhibit 1.1 hereto for provisions providing that the underwriters are obligated under certain circumstances to indemnify our directors, officers and controlling persons against certain liabilities under the Securities Act of 1933, as amended.

ITEM 15.    RECENT SALES OF UNREGISTERED SECURITIES.

        Not applicable.

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ITEM 16.    EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

1.1   Underwriting Agreement*

3.1
 
Certificate of Limited Partnership of The Blackstone Group L.P.

3.2
 
Form of Amended and Restated Agreement of Limited Partnership of The Blackstone Group L.P. (included as Appendix A to the prospectus)

5.1
 
Opinion of Simpson Thacher & Bartlett LLP regarding validity of the common units registered*

8.1
 
Opinion of Simpson Thacher & Bartlett LLP regarding certain tax matters*

10.1
 
Form of Limited Partnership Agreement of Blackstone Holdings I L.P.*

10.2
 
Form of Limited Partnership Agreement of Blackstone Holdings II L.P.*

10.3
 
Form of Limited Partnership Agreement of Blackstone Holdings III L.P.*

10.4
 
Form of Limited Partnership Agreement of Blackstone Holdings IV L.P.*

10.5
 
Form of Limited Partnership Agreement of Blackstone Holdings V L.P.*

10.6
 
Form of Tax Receivable Agreement*

10.7
 
Form of Exchange Agreement*

10.8
 
Form of Registration Rights Agreement*

10.9
 
Form of 2007 Equity Incentive Plan*

21.1
 
Subsidiaries of The Blackstone Group L.P.*

23.1
 
Consent of Deloitte & Touche LLP

23.2
 
Consent of Simpson Thacher & Bartlett LLP (included as part of Exhibit 5.1)*

24.1
 
Power of Attorney (included on signature pages to this Registration Statement)
*
To be filed by amendment.

ITEM 17.    UNDERTAKINGS

(1)
The undersigned Registrant hereby undertakes to provide to the underwriters at the closing specified in the underwriting agreements certificates in such denominations and registered in such names as required by the underwriter to permit prompt delivery to each purchaser.

(2)
Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act of 1933 and will be governed by the final adjudication of such issue.

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(3)
The undersigned Registrant hereby undertakes that:

(A)
For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective.

(B)
For the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

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SIGNATURES

        Pursuant to the requirements of the Securities Act of 1933, as amended, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in New York, New York, on the 22nd day of March, 2007.

    THE BLACKSTONE GROUP L.P.
    By: Blackstone Group Management L.L.C., its general partner

 
 
By:
/s/  STEPHEN A. SCHWARZMAN      
Name: Stephen A. Schwarzman
Title: Chairman and Chief Executive Officer


POWER OF ATTORNEY

        Know all men by these presents, that the undersigned directors and officers of the general partner of Registrant, which is filing a Registration Statement on Form S-1 with the Securities and Exchange Commission, Washington, D.C. 20549 under the provisions of the Securities Act of 1933 hereby constitute and appoint Stephen A. Schwarzman, Hamilton E. James, Michael A. Puglisi and Robert L. Friedman, and each of them, the individual's true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for the person and in his or her name, place and stead, in any and all capacities, to sign such registration statement and any or all amendments, including post-effective amendments to the registration statement, including a prospectus or an amended prospectus therein and any registration statement for the same offering that is to be effective upon filing pursuant to Rule 462(b) under the Securities Act, and all other documents in connection therewith to be filed with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact as agents or any of them, or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

        Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed by the following persons in the capacities indicated on the 22nd day of March, 2007.

Signature
   Title

 
 
 
/s/  STEPHEN A. SCHWARZMAN      
Stephen A. Schwarzman		   Chairman and Chief Executive Officer and Director
(principal executive officer)

/s/  PETER G. PETERSON      
Peter G. Peterson
 
Director

/s/  HAMILTON E. JAMES      
Hamilton E. James
 
Director
     

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/s/  J. TOMILSON HILL      
J. Tomilson Hill
 
Director

/s/  MICHAEL A. PUGLISI      
Michael A. Puglisi
 
Chief Financial Officer

/s/  DENNIS WALSH      
Dennis Walsh
 
Principal Accounting Officer

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QuickLinks

Table of Contents
SUMMARY
Blackstone
Investment Risks
Organizational Structure
The Offering
Summary Historical Financial and Other Data
Summary Pro Forma Financial Data
RISK FACTORS
FORWARD-LOOKING STATEMENTS
MARKET AND INDUSTRY DATA
ORGANIZATIONAL STRUCTURE
USE OF PROCEEDS
CAPITALIZATION
DILUTION
CASH DISTRIBUTION POLICY
UNAUDITED PRO FORMA FINANCIAL INFORMATION
Unaudited Condensed Consolidated Pro Forma Statement of Financial Condition
Unaudited Condensed Consolidated Pro Forma Statement of Income
SELECTED HISTORICAL FINANCIAL DATA
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
INDUSTRY
U.S. Corporate Private Equity Funds Raised
Global Real Estate Funds Raised
Hedge Fund Assets Under Management
Aggregate Fund of Hedge Fund Assets Under Management
U.S. Leveraged Loan Arbitrage CDO Activity
Dollar Volume of Global M&A
BUSINESS
Assets Under Management by Fund Category
Investors by Category
Growth in Net Capital Flows
MANAGEMENT
CERTAIN RELATIONSHIPS AND RELATED PERSON TRANSACTIONS
PRINCIPAL UNITHOLDERS
CONFLICTS OF INTEREST AND FIDUCIARY RESPONSIBILITIES
DESCRIPTION OF COMMON UNITS
MATERIAL PROVISIONS OF THE BLACKSTONE GROUP L.P. PARTNERSHIP AGREEMENT
COMMON UNITS ELIGIBLE FOR FUTURE SALE
MATERIAL U.S. FEDERAL TAX CONSIDERATIONS
UNDERWRITERS
LEGAL MATTERS
EXPERTS
WHERE YOU CAN FIND MORE INFORMATION
INDEX TO FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm
THE BLACKSTONE GROUP L.P. Statement of Financial Condition As of March 19, 2007
Notes to Statement of Financial Condition
Report of Independent Registered Public Accounting Firm
BLACKSTONE GROUP MANAGEMENT L.L.C. Statement of Financial Condition As of March 19, 2007
Notes to Statement of Financial Condition
Report of Independent Registered Public Accounting Firm
BLACKSTONE GROUP Combined Statements of Financial Condition (Dollars in Thousands)
BLACKSTONE GROUP Combined Statements of Income (Dollars in Thousands)
BLACKSTONE GROUP Combined Statements of Changes in Partners' Capital (Dollars in Thousands)
BLACKSTONE GROUP Combined Statements of Cash Flows (Dollars in Thousands)
BLACKSTONE GROUP Notes to Combined Financial Statements (All Dollars Are in Thousands Except Where Otherwise Noted)
TABLE OF CONTENTS
AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF THE BLACKSTONE GROUP L.P.
ARTICLE I
DEFINITIONS
ARTICLE II
ORGANIZATION
ARTICLE III RIGHTS OF LIMITED PARTNERS
ARTICLE IV CERTIFICATES; RECORD HOLDERS; TRANSFER OF PARTNERSHIP INTERESTS; REDEMPTION OF PARTNERSHIP INTERESTS
ARTICLE VII MANAGEMENT AND OPERATION OF BUSINESS
ARTICLE VIII BOOKS, RECORDS, ACCOUNTING AND REPORTS
ARTICLE IX TAX MATTERS
ARTICLE X ADMISSION OF PARTNERS
ARTICLE XI
WITHDRAWAL OR REMOVAL OF PARTNERS
ARTICLE XII
DISSOLUTION AND LIQUIDATION
ARTICLE XIII
AMENDMENT OF PARTNERSHIP AGREEMENT; MEETINGS; RECORD DATE
ARTICLE XIV
MERGER
ARTICLE XV
RIGHT TO ACQUIRE LIMITED PARTNER INTERESTS
ARTICLE XVI
GENERAL PROVISIONS
PART II
SIGNATURES
POWER OF ATTORNEY