1TEXTText #1R-255G-255B-255PRIMARY text colors (header body & charts)Text #2R-102G-204B-255幸敦泉抗要咐顾象锗婉敬郭苞教登少捎畅貌尝省消铰晰迄冈枷匈欢寝析刺凯雷对于金融服务业看法凯雷对于金融服务业看法Overview: Financial Services Industry - What Went Wrong & What Does it Mean?P. Olivier SarkozyManaging Director & Financial Services Group HeadOctober 3, 2008October 3, 2008氯芦熙艾笑叔淬鸭奸舌煮牺鲍扩淬制缄刁爪轰粤迄乖嘿瓦骗耐缸侍策明癌凯雷对于金融服务业看法凯雷对于金融服务业看法CHARTS&OBJECTSTEXT2TextBLACKBlackfor good contrast with bright background elementsText - OTHERR-255G-204B-0SECONDARYorange & bright Blue for headers or “important” textText #2BODY TEXTR-102G-204B-255Text #1HEADERR-255G-255B-255PRIMARY text colors (header body & charts)Color #1R-255G-255B-255Color #2Column 4Row 3Color #3Column 2Row 4Color #4Column 2Row 1Color #5Column 6Row 3Color #6Column 3Row 3Color #7Column 8Row 3Color #8Column 6Row 4TheColumn/Rowvaluesarecanbefoundinthe“area”colorchoicesectionforchoosingpie&columnchartcolorsImportant InformationThis presentation is made available on a confidential basis to sophisticated investors for the purpose of providing certain information about TC Group, L.L.C. and its affiliates (“Carlyle”) and Carlyle-sponsored investment funds (each, a “Fund”). This presentation does not constitute an offer to sell or a solicitation of an offer to purchase interests in any Fund. Any such offer or solicitation shall only be made pursuant to a confidential private placement memorandum of Fund, which qualifies in its entirety the information set forth herein and which should be read carefully prior to investment in any Fund for a description of the merits and risks of an investment in the Fund. An investment in a Fund entails a high degree of risk and no assurance can be given that a funds investment objective will be achieved or that investors will receive a return of their capital.As used throughout this document, and unless otherwise indicated, “gross IRR” shall mean an aggregate, annual, compound, gross internal rate of return on investments. In the case of portfolios of realized and unrealized investments, the gross IRRs are based on realizations and internal valuations of Carlyle as of the applicable date. Gross IRRs do not reflect management fees, carried interest, taxes, transaction costs and other expenses to be borne by investors in the Fund, which will reduce returns and in the aggregate are expected to be substantial; for a description of such management fees and carried interest, please see the final confidential private placement memorandum. While Carlyle believes that projected returns for unrealized investments are based on assumptions and valuation methodologies that are reasonable under the circumstances, the actual realized returns on Carlyles unrealized investments will depend on, among other factors, future operating results, the value of the assets and market conditions at the time of disposition, any related transaction costs and the timing and manner of sale, all of which may differ from the assumptions on which the valuations used in the prior performance data contained herein are based. Accordingly, the actual realized return on these unrealized investments may differ materially from the projected returns indicated herein. Investors are encouraged to contact Carlyle representatives to discuss the procedures and methodologies used to calculate the investment returns and other information provided herein, and may upon request obtain an illustration of the effect of fees, expenses and other charges in the gross IRRs presented. Past, targeted or projected performance is not necessarily indicative of future results and there can be no assurance that targeted or projected returns will be achieved or that the Fund will achieve comparable results.References to portfolio companies are presented to illustrate the application of Carlyles investment process only and should not be considered a recommendation of any particular security or portfolio company. Information about recommendations over the last year is available upon request. It should not be assumed that recommendations made in the future will be profitable or will equal the performance of past recommendations.Certain information contained in this presentation, including the values given for some assets, is non-public, proprietary and highly confidential information. Accordingly, by accepting and using this presentation, you will be deemed to agree not to disclose any information contained herein except as may be required by law. In addition, certain information contained in this presentation has been obtained from published and non-published sources prepared by other parties, which in certain cases have not been updated through the date hereof. While such information is believed to be reliable for the purpose used in this presentation, Carlyle does not assume any responsibility for the accuracy or completeness of such information and such information has not been independently verified by Carlyle. Except where otherwise indicated herein, the information provided in this presentation is based on matters as they exist as of the date of preparation and not as of any future date, and will not be updated or otherwise revised to reflect information that subsequently becomes available, or circumstances existing or changes occurring after the date hereof.Certain information contained herein constitutes “forward-looking statements,” which can be identified by the use of terms such as “may”, “will”, “should”, “expect”, “anticipate”, “project”, “estimate”, “intend”, “continue,” “target” or “believe” (or the negatives thereof) or other variations thereon or comparable terminology. Due to various risks and uncertainties, actual events or results or actual performance of the Fund may differ materially from those reflected or contemplated in such forward-looking statements. As a result, investors should not rely on such forward-looking statements in making their investment decisions. No representation or warranty is made as to future performance or such forward-looking statements. 纶题锯跨卿仿梁绒放源法划臀细热鸿泳娩骚邱盘重际叮萨履遵号颊煮援蛋凯雷对于金融服务业看法凯雷对于金融服务业看法CHARTS&OBJECTSTEXT3TextBLACKBlackfor good contrast with bright background elementsText - OTHERR-255G-204B-0SECONDARYorange & bright Blue for headers or “important” textText #2BODY TEXTR-102G-204B-255Text #1HEADERR-255G-255B-255PRIMARY text colors (header body & charts)Color #1R-255G-255B-255Color #2Column 4Row 3Color #3Column 2Row 4Color #4Column 2Row 1Color #5Column 6Row 3Color #6Column 3Row 3Color #7Column 8Row 3Color #8Column 6Row 4TheColumn/Rowvaluesarecanbefoundinthe“area”colorchoicesectionforchoosingpie&columnchartcolorsExecutive SummaryI.What Happened?II.What Role Will Private Equity Play?垂览曲几啮钨碱涡鸯舅淀羽圃感字埂轿腰跌遍骄少腾吼讨嗅普占空危晚忽凯雷对于金融服务业看法凯雷对于金融服务业看法CHARTS&OBJECTSTEXT4TextBLACKBlackfor good contrast with bright background elementsText - OTHERR-255G-204B-0SECONDARYorange & bright Blue for headers or “important” textText #2BODY TEXTR-102G-204B-255Text #1HEADERR-255G-255B-255PRIMARY text colors (header body & charts)Color #1R-255G-255B-255Color #2Column 4Row 3Color #3Column 2Row 4Color #4Column 2Row 1Color #5Column 6Row 3Color #6Column 3Row 3Color #7Column 8Row 3Color #8Column 6Row 4TheColumn/Rowvaluesarecanbefoundinthe“area”colorchoicesectionforchoosingpie&columnchartcolorsI. What Happened? A Crisis by Many Names“Sub Prime”“Leveraged Lending”“Credit Crunch”“Structured Products!”“Super Senior!”“Mono Lines”“Bear Stearns”“Residential Real Estate”“Fannie/Freddie”August 2007August 2007TodayTodayTo ComeMoney Market FundsMoney Market FundsAuto LoansAuto LoansCredit Card Lending Credit Card Lending Commercial Real Estate Commercial Real Estate LiquidityLiquidityand One Underlying Common ThemeLEHLEHAIG AIG WaMuWaMuWachoviaWachoviaHypo REHypo REFortisFortisB&BB&BDexiaDexiaTARP?TARP?绥侯诅诀县达坊蝶荒猩显陵旁侵丁庇变喳绞吟孵渣陋穿领兔帮诞纪簧缝伍凯雷对于金融服务业看法凯雷对于金融服务业看法CHARTS&OBJECTSTEXT5TextBLACKBlackfor good contrast with bright background elementsText - OTHERR-255G-204B-0SECONDARYorange & bright Blue for headers or “important” textText #2BODY TEXTR-102G-204B-255Text #1HEADERR-255G-255B-255PRIMARY text colors (header body & charts)Color #1R-255G-255B-255Color #2Column 4Row 3Color #3Column 2Row 4Color #4Column 2Row 1Color #5Column 6Row 3Color #6Column 3Row 3Color #7Column 8Row 3Color #8Column 6Row 4TheColumn/Rowvaluesarecanbefoundinthe“area”colorchoicesectionforchoosingpie&columnchartcolorsLeverage!1.Reversal of Glass-Steagall in 1999 set off a leverage race on Wall Street2.Leverage outside the banking system largely unregulated / misunderstood3.Explosion of credit markets allowed each segment of risk to be isolated and further leveraged4.Tiering of risk allowed for multiple layers of leverage with limited transparency 5.Investors became complacent while regulators became overwhelmed浦贤景瑞捏贵赏缴料德哼拇情黍等唐诞荔价秃肤椰裙酿雕走势孽藏迂逆拴凯雷对于金融服务业看法凯雷对于金融服务业看法CHARTS&OBJECTSTEXT6TextBLACKBlackfor good contrast with bright background elementsText - OTHERR-255G-204B-0SECONDARYorange & bright Blue for headers or “important” textText #2BODY TEXTR-102G-204B-255Text #1HEADERR-255G-255B-255PRIMARY text colors (header body & charts)Color #1R-255G-255B-255Color #2Column 4Row 3Color #3Column 2Row 4Color #4Column 2Row 1Color #5Column 6Row 3Color #6Column 3Row 3Color #7Column 8Row 3Color #8Column 6Row 4TheColumn/Rowvaluesarecanbefoundinthe“area”colorchoicesectionforchoosingpie&columnchartcolorsWhile Current Crisis in Many Ways Mirrors Past Credit CyclesInflated housing & realestate valuesLax monetary policy that lasted too longFlat yield curve Cheap credit compounded by loss of investor disciplineWeak regulatory frameworkLoss of confidence讹拖菜殿悟赌衅强喉碳粒顽裳唁铜嗡疯珠泞镶桶噪弓侈自姐捌虱滁矣惹齿凯雷对于金融服务业看法凯雷对于金融服务业看法CHARTS&OBJECTSTEXT7TextBLACKBlackfor good contrast with bright background elementsText - OTHERR-255G-204B-0SECONDARYorange & bright Blue for headers or “important” textText #2BODY TEXTR-102G-204B-255Text #1HEADERR-255G-255B-255PRIMARY text colors (header body & charts)Color #1R-255G-255B-255Color #2Column 4Row 3Color #3Column 2Row 4Color #4Column 2Row 1Color #5Column 6Row 3Color #6Column 3Row 3Color #7Column 8Row 3Color #8Column 6Row 4TheColumn/Rowvaluesarecanbefoundinthe“area”colorchoicesectionforchoosingpie&columnchartcolorsExtent of Leverage is a Differentiating Feature of this Particular CycleGovernment Debt 1Federal and Consumer Debt as % of GDP 2$0$1,000$2,000$3,000$4,000$5,000$6,000$7,000$8,000$9,000$10,000193819421946195019541958196219661970197419781982198619901994199820022006Federal Debt ($ bil)0%50%100%150%200%250%300%19431947195119551959196319671971197519791983198719911995199920032007Percent of GDPTotal Consumer DebtTotal Federal Debt(1) Office of Management and Budget, Budget of the United States, FY 2007(2) U.S. Chamber of Commerce as of 8/27/08涤形壶瓤播闻洒蹈轴喷婶炭髓诵访聪氮碰穷促炳敷什嘿泻饰虑细型闲躬滇凯雷对于金融服务业看法凯雷对于金融服务业看法CHARTS&OBJECTSTEXT8TextBLACKBlackfor good contrast with bright background elementsText - OTHERR-255G-204B-0SECONDARYorange & bright Blue for headers or “important” textText #2BODY TEXTR-102G-204B-255Text #1HEADERR-255G-255B-255PRIMARY text colors (header body & charts)Color #1R-255G-255B-255Color #2Column 4Row 3Color #3Column 2Row 4Color #4Column 2Row 1Color #5Column 6Row 3Color #6Column 3Row 3Color #7Column 8Row 3Color #8Column 6Row 4TheColumn/Rowvaluesarecanbefoundinthe“area”colorchoicesectionforchoosingpie&columnchartcolorsBank Leverage 2%Extent of Leverage is a Differentiating Feature of this Particular CycleShare of Intermediation Through Banks & Securities Markets 1 (1) Morgan Stanley. “Levered Losses: Lessons Learned from the Mortgage Market Meltdown” 2/08(2) SNL Financial. Data as of 7/31/0820%25%30%35%40%45%50%55%60%19801982198419861988199019921994199619982000200220042006Intermediated Through Securities MarketsIntermediated Through Depository Institutions01234567%1998199920002001200220032004200520062007Reserves/LoansTCE/TA6.4%1.8%1.2%5.2%歧洗约奇耀急涛氨为肩欠跑内等漂隶六做嚼惭毯杭造乳蘑迹孤纠赴私动枫凯雷对于金融服务业看法凯雷对于金融服务业看法CHARTS&OBJECTSTEXT9TextBLACKBlackfor good contrast with bright background elementsText - OTHERR-255G-204B-0SECONDARYorange & bright Blue for headers or “important” textText #2BODY TEXTR-102G-204B-255Text #1HEADERR-255G-255B-255PRIMARY text colors (header body & charts)Color #1R-255G-255B-255Color #2Column 4Row 3Color #3Column 2Row 4Color #4Column 2Row 1Color #5Column 6Row 3Color #6Column 3Row 3Color #7Column 8Row 3Color #8Column 6Row 4TheColumn/Rowvaluesarecanbefoundinthe“area”colorchoicesectionforchoosingpie&columnchartcolorsTotal Assets of Top 5 Brokers 1($ tril)6% CAGR16% CAGR(1) SNL Financial. Top brokers traded on the NYSE and NASDAQ(2) Source: Lehman Brothers. Data provided 8/28/08Global Issuance of Structured Finance Products 2 Extent of Leverage is a Differentiating Feature of this Particular Cycle-1002003004005006007008009001,0001995Q11996Q11997Q11998Q11999Q12000Q12001Q12002Q12003Q12004Q12005Q12006Q12007Q12008Q1(in $ bil)Total CDOTotal ABS使丸摩讶彪笨指啼琢栽讶效戚尾砷菊痴赊拆菏孵咨渐菌咙检管腋锣夫嫁喂凯雷对于金融服务业看法凯雷对于金融服务业看法CHARTS&OBJECTSTEXT10TextBLACKBlackfor good contrast with bright background elementsText - OTHERR-255G-204B-0SECONDARYorange & bright Blue for headers or “important” textText #2BODY TEXTR-102G-204B-255Text #1HEADERR-255G-255B-255PRIMARY text colors (header body & charts)Color #1R-255G-255B-255Color #2Column 4Row 3Color #3Column 2Row 4Color #4Column 2Row 1Color #5Column 6Row 3Color #6Column 3Row 3Color #7Column 8Row 3Color #8Column 6Row 4TheColumn/Rowvaluesarecanbefoundinthe“area”colorchoicesectionforchoosingpie&columnchartcolorsAnecdotes of Leverage$2.3 tril in “AAA” guarantees supported by six monolines with less than $20 bil in equity (0.8%)(1)In June 2007, financials made up 20.9% of S&P 500In June 2007, financials made up 20.9% of S&P 500 Implies that approximately 30% of every dollar earned by an S&P 500 Implies that approximately 30% of every dollar earned by an S&P 500 company was earned by a financial services firmcompany was earned by a financial services firm Total assets of the top 5 brokerage houses in the U.S. equaled Total assets of the top 5 brokerage houses in the U.S. equaled approximately 35% of the total U.S. annual GDP. Balance sheets approximately 35% of the total U.S. annual GDP. Balance sheets were levered on average 30:1were levered on average 30:1(3)(3)In 1998, failure of Long Term Capital brought markets to their In 1998, failure of Long Term Capital brought markets to their knees, based on a loss of $4.6 bil.knees, based on a loss of $4.6 bil.(4)(4) To-date system has incurred To-date system has incurred approximately 75xapproximately 75x(5)(5) this amount. Industrys capital base this amount. Industrys capital base increased by only 2.5x that during this timeincreased by only 2.5x that during this time(6)(6) (1)Pershing Square Capital Management. “How to Save the Bond Insurers,” 11/07(2)Company Reports. Data as of Q4 2007(3)SNL Financial. Data as of Q4 2007(4)Financial Times. “Bank bailout shows need to intervene,” 6/08(5)Loss estimate to-date of $460 bil provided by Goldman Sachs. Data provided on 8/28/08. Inflation data provided by the U.S. department of Labor.(6)SNL Financial. As measured by tangible capital base of top 25 U.S. financial institutions (excluding insurance companies, from 1998 to Q2 2008)铱瑞抽扇厩苍屁蝗唱陆黎赋寸嘎啃曳膏饲硬撵己咳览淡昧锭硅知等土藕彬凯雷对于金融服务业看法凯雷对于金融服务业看法CHARTS&OBJECTSTEXT11TextBLACKBlackfor good contrast with bright background elementsText - OTHERR-255G-204B-0SECONDARYorange & bright Blue for headers or “important” textText #2BODY TEXTR-102G-204B-255Text #1HEADERR-255G-255B-255PRIMARY text colors (header body & charts)Color #1R-255G-255B-255Color #2Column 4Row 3Color #3Column 2Row 4Color #4Column 2Row 1Color #5Column 6Row 3Color #6Column 3Row 3Color #7Column 8Row 3Color #8Column 6Row 4TheColumn/Rowvaluesarecanbefoundinthe“area”colorchoicesectionforchoosingpie&columnchartcolorsMortgagesMortgagesMortgagesCashCashCash & FeesAAACashCashAA BelowNotesCash10 to 150 to 1 (Warehouse)50 to 115 to 130 to 1ConsumerLoan OriginationWall StreetStructured ABSRatings Agencies70%FNMAFHLMC30% BankInsuranceCompaniesCDOsAAAs, AA, A, BBB, BBEquityWall StreetSource: Wachovia Securities, “Lifestyles of the Rich and Living Rich,A Tale of Two Consumers,” 2005400 to 1LeverageThe Leverage GameNotwithstanding the existing underlying leverage, banks Notwithstanding the existing underlying leverage, banks could lever AAA securities by over 100:1!could lever AAA securities by over 100:1!亏择缘吓交抚既鼠淫研岭实砖惟丙卒绚否则燎读但纤缕菇赞给柏横翼骡矫凯雷对于金融服务业看法凯雷对于金融服务业看法CHARTS&OBJECTSTEXT12TextBLACKBlackfor good contrast with bright background elementsText - OTHERR-255G-204B-0SECONDARYorange & bright Blue for headers or “important” textText #2BODY TEXTR-102G-204B-255Text #1HEADERR-255G-255B-255PRIMARY text colors (header body & charts)Color #1R-255G-255B-255Color #2Column 4Row 3Color #3Column 2Row 4Color #4Column 2Row 1Color #5Column 6Row 3Color #6Column 3Row 3Color #7Column 8Row 3Color #8Column 6Row 4TheColumn/Rowvaluesarecanbefoundinthe“area”colorchoicesectionforchoosingpie&columnchartcolorsRisk vs. InformationOriginatorWarehouse ProviderSenior BondsMezzanine BondsSub BondsResidual NotesCDO EquityPerformance RiskUnderlying Collateral KnowledgeLeastMostLeastMostEfficient FrontierSource: Wachovia Securities, “Lifestyles of the Rich and Living Rich,A Tale of Two Consumers,” 2005Those who knew the most held the least amount of the riskwhile those who knew the least ended up holding the most risk镣蛊颧十程绝缆陀浑袜略继四改势涤靛榜宣侥及涕壶雪辙茄元恤甸谭一免凯雷对于金融服务业看法凯雷对于金融服务业看法CHARTS&OBJECTSTEXT13TextBLACKBlackfor good contrast with bright background elementsText - OTHERR-255G-204B-0SECONDARYorange & bright Blue for headers or “important” textText #2BODY TEXTR-102G-204B-255Text #1HEADERR-255G-255B-255PRIMARY text colors (header body & charts)Color #1R-255G-255B-255Color #2Column 4Row 3Color #3Column 2Row 4Color #4Column 2Row 1Color #5Column 6Row 3Color #6Column 3Row 3Color #7Column 8Row 3Color #8Column 6Row 4TheColumn/Rowvaluesarecanbefoundinthe“area”colorchoicesectionforchoosingpie&columnchartcolorsAs shown by the inability of the nations 10 largest banks to deleverage, transition will take timeMake No Mistake We Are at the Beginning of This CrisisCredit markets point towards significantly more pain to comeConsumer slow to react & has yet to adjust to new realitiesWe are not even talking about large looming issues: autos, credit card & commercial REWeak political leadership will prolong recoveryTotal Assets of Top 10 Banks$ (tril)Source: SNL; Top banks traded on the NYSE and NASDAQ$辗讽骸魄终句咳皱涎踌遁僧淋怪驰坝昨操返运嗅毛片蜀赖宪都燃钎口吸伎凯雷对于金融服务业看法凯雷对于金融服务业看法CHARTS&OBJECTSTEXT14TextBLACKBlackfor good contrast with bright background elementsText - OTHERR-255G-204B-0SECONDARYorange & bright Blue for headers or “important” textText #2BODY TEXTR-102G-204B-255Text #1HEADERR-255G-255B-255PRIMARY text colors (header body & charts)Color #1R-255G-255B-255Color #2Column 4Row 3Color #3Column 2Row 4Color #4Column 2Row 1Color #5Column 6Row 3Color #6Column 3Row 3Color #7Column 8Row 3Color #8Column 6Row 4TheColumn/Rowvaluesarecanbefoundinthe“area”colorchoicesectionforchoosingpie&columnchartcolorsStill in Early InningsIndustry has taken less than 50% of losses estimated by most responsible analystsIMF$0.9 tril(1) Pimco 1.0(2) Federal Reserve1.2(3) Paulson & Co. 1.3(4) (1)International Monetary Fund, “Global Financial Stability Report,” 4/08 (2)Bill Gross of Pimco. “Investment Outlook: Mooooooo!” 7/08(3)Federal Reserve Board, “Foreign Exposure to Asset-Backed Securities of U.S. Origin” 8/08 (4)Bloomberg, “Paulson & Co. Says Writedowns May Reach $1.3 Trillion,” 6/08Source: Goldman Sachs Research. Data provided 9/26/08Losses Realized To-date Loss Estimates(figures in $bil)U.S.EuropeRest of worldTotalBrokers93761170Banks9710914221Specialty Finance37-37Insurance & Asset Mgr397-45Total26619115473棚吞韭咆溶资队蔷置厄雅酷缄爱鸭祟景清康摩舜耙籍郸娄势阉茂楼蹲九慰凯雷对于金融服务业看法凯雷对于金融服务业看法CHARTS&OBJECTSTEXT15TextBLACKBlackfor good contrast with bright background elementsText - OTHERR-255G-204B-0SECONDARYorange & bright Blue for headers or “important” textText #2BODY TEXTR-102G-204B-255Text #1HEADERR-255G-255B-255PRIMARY text colors (header body & charts)Color #1R-255G-255B-255Color #2Column 4Row 3Color #3Column 2Row 4Color #4Column 2Row 1Color #5Column 6Row 3Color #6Column 3Row 3Color #7Column 8Row 3Color #8Column 6Row 4TheColumn/Rowvaluesarecanbefoundinthe“area”colorchoicesectionforchoosingpie&columnchartcolors29614331380102030405060701964-19671973-19751979-19821986-19912006- PresentMonthsHousing Market Weakness To PersistDuration of Housing Downtown from Peak to Trough as Measured by Housing StartsWith Demand Dropping off Faster than Production,the Number of Vacant Units Ballooned?Housing market still materially weak due to significant over-supply Resets have yet to impact numbers (2009 / 2010 issue) nor has the full Resets have yet to impact numbers (2009 / 2010 issue) nor has the full impact of foreclosures been built into supply projectionsimpact of foreclosures been built into supply projections Vacant-for-sale homes are near a record-high share of the housing stockVacant-for-sale homes are near a record-high share of the housing stock Foreclosures at their highest levels since recordkeeping began in 1974 & Foreclosures at their highest levels since recordkeeping began in 1974 & likely to increaselikely to increase(1)(1) Mortgage rates have not fallen, contributing to continued softnessMortgage rates have not fallen, contributing to continued softnessSource: U.S. Census Bureau. Data as of July 2008(1) Nouriel Roubini, “Prospects for the U.S. and Global Economy in 2008 and Implications for Financial Markets” 4/08%Note: New home sales and housing completions include single-family units only. Sources: U.S. Census Bureau, New Residential Construction & Housing Vacancy Survey%Change2005-2007HousingCompletionsVacantHeldOffMarketVacantforSaleNewHomeSales翠伐令细阿坪殆男帘童笑岭达嗽陡晨郴搜郑赴熄恕雅悲侣呈锁靴荒召蹈抽凯雷对于金融服务业看法凯雷对于金融服务业看法CHARTS&OBJECTSTEXT16TextBLACKBlackfor good contrast with bright background elementsText - OTHERR-255G-204B-0SECONDARYorange & bright Blue for headers or “important” textText #2BODY TEXTR-102G-204B-255Text #1HEADERR-255G-255B-255PRIMARY text colors (header body & charts)Color #1R-255G-255B-255Color #2Column 4Row 3Color #3Column 2Row 4Color #4Column 2Row 1Color #5Column 6Row 3Color #6Column 3Row 3Color #7Column 8Row 3Color #8Column 6Row 4TheColumn/Rowvaluesarecanbefoundinthe“area”colorchoicesectionforchoosingpie&columnchartcolorsGovernment Intervention is IncreasingMacro measures: monetary & fiscal policyFed Funds: 5.25% to 2.0%Discount Rate 5.75% to 2.25%Bush stimulus plan / tax rebate: $168BLiquidityLiquidity New / expanding liquidity facilitiesNew / expanding liquidity facilities Expanding collateral categoriesExpanding collateral categoriesRegulatoryRegulatory Paulson PlanPaulson PlanAd hoc responsesAd hoc responses Bear StearnsBear Stearns Fannie Mae / Freddie MacFannie Mae / Freddie Mac AIGAIG WaMuWaMu WachoviaWachoviaPurchase $700B of troubled assetsRemove toxic / illiquid assets from systemFocus on residential and commercial real estate MBS and whole loansExpanding to include several additional asset classesPricing mechanism will be keyPricing mechanism will be key Reverse auction likely toolReverse auction likely toolPrimarily targeting US financial firmsPrimarily targeting US financial firmsPrevious ActionsPrevious ActionsProposed Treasury Bailout (TARP)Proposed Treasury Bailout (TARP)Additional MeasuresAdditional MeasuresMoney market fund guaranteeShort-selling banIncreasing PE ownership limits to Increasing PE ownership limits to attract additional capital into banksattract additional capital into banks蘸剐镜虱气梯甜市茅索疼板技倡壁菌蚁漳砧棺纫杂坍琵谢碍赖捉貉法嫡贷凯雷对于金融服务业看法凯雷对于金融服务业看法CHARTS&OBJECTSTEXT17TextBLACKBlackfor good contrast with bright background elementsText - OTHERR-255G-204B-0SECONDARYorange & bright Blue for headers or “important” textText #2BODY TEXTR-102G-204B-255Text #1HEADERR-255G-255B-255PRIMARY text colors (header body & charts)Color #1R-255G-255B-255Color #2Column 4Row 3Color #3Column 2Row 4Color #4Column 2Row 1Color #5Column 6Row 3Color #6Column 3Row 3Color #7Column 8Row 3Color #8Column 6Row 4TheColumn/Rowvaluesarecanbefoundinthe“area”colorchoicesectionforchoosingpie&columnchartcolorsUnintended ConsequencesGSEs GSEs TakeoverTakeoverLehman Lehman BrothersBrothersWaMuWaMuTARPTARPWhile dollar has been strong in the short term, have we created a longer term problem by doubling the size of the national debt?By focusing on avoiding the “moral hazard,” did we inadvertently create a run on the money market funds?Eradication of bank company debt forced Wachovia transaction and increased cost of funding system-wideTo be determined, but outlook is not good斤嗅爵途旅炯以疯偏隆雄趣斋踏憨膜恕辽诞亭蘸苍托辟曲绥盐逾搁畏丰裁凯雷对于金融服务业看法凯雷对于金融服务业看法CHARTS&OBJECTSTEXT18TextBLACKBlackfor good contrast with bright background elementsText - OTHERR-255G-204B-0SECONDARYorange & bright Blue for headers or “important” textText #2BODY TEXTR-102G-204B-255Text #1HEADERR-255G-255B-255PRIMARY text colors (header body & charts)Color #1R-255G-255B-255Color #2Column 4Row 3Color #3Column 2Row 4Color #4Column 2Row 1Color #5Column 6Row 3Color #6Column 3Row 3Color #7Column 8Row 3Color #8Column 6Row 4TheColumn/Rowvaluesarecanbefoundinthe“area”colorchoicesectionforchoosingpie&columnchartcolorsLandscape of the Financial Services Industry Will Look Markedly DifferentFinancial services industry will unwind, slowly and painfullyInvestment Banks, Specialty Finance Companies and Rating Agencies have the most to loseNon-traditional consumer borrowing will largely disappearWholesale funding models may never come backSector will shrink to be approximately 10% of the S&P 500Disintermediation will allow the banking industry to growDisintermediation will allow the banking industry to grow Consumer and commercial financeConsumer and commercial finance Rates will riseRates will riseFlight to quality will (has) force(d) high level of consolidationFlight to quality will (has) force(d) high level of consolidation Heightened levels of receivershipHeightened levels of receivership Those without differentiation will mergeThose without differentiation will merge骑锦眶鹏寝篆娟详权婴疥笆特煌炉害寡易椎呜泻伦项塘生吞俊拈絮冯铅潦凯雷对于金融服务业看法凯雷对于金融服务业看法CHARTS&OBJECTSTEXT19TextBLACKBlackfor good contrast with bright background elementsText - OTHERR-255G-204B-0SECONDARYorange & bright Blue for headers or “important” textText #2BODY TEXTR-102G-204B-255Text #1HEADERR-255G-255B-255PRIMARY text colors (header body & charts)Color #1R-255G-255B-255Color #2Column 4Row 3Color #3Column 2Row 4Color #4Column 2Row 1Color #5Column 6Row 3Color #6Column 3Row 3Color #7Column 8Row 3Color #8Column 6Row 4TheColumn/Rowvaluesarecanbefoundinthe“area”colorchoicesectionforchoosingpie&columnchartcolorsII. What Role Will Private Equity Play? A unique role in the recapitalization of theindustry High volatility / low transparency limits the role High volatility / low transparency limits the role of the public marketsof the public markets Equivalent of buying a lottery ticket absent an ability to Equivalent of buying a lottery ticket absent an ability to complete significant due diligencecomplete significant due diligence Private equity has the capacity, competency and Private equity has the capacity, competency and mandate to undertake due diligence & evaluate / mandate to undertake due diligence & evaluate / structure transactionsstructure transactions However, limited financial services expertise currently However, limited financial services expertise currently exists in the industryexists in the industry瞻楚竹甄药汾抉刊生书杉昨噬豪缠碳箩黔碑蹿吊沛后呜漱掌听宿恫揭琴所凯雷对于金融服务业看法凯雷对于金融服务业看法CHARTS&OBJECTSTEXT20TextBLACKBlackfor good contrast with bright background elementsText - OTHERR-255G-204B-0SECONDARYorange & bright Blue for headers or “important” textText #2BODY TEXTR-102G-204B-255Text #1HEADERR-255G-255B-255PRIMARY text colors (header body & charts)Color #1R-255G-255B-255Color #2Column 4Row 3Color #3Column 2Row 4Color #4Column 2Row 1Color #5Column 6Row 3Color #6Column 3Row 3Color #7Column 8Row 3Color #8Column 6Row 4TheColumn/Rowvaluesarecanbefoundinthe“area”colorchoicesectionforchoosingpie&columnchartcolorsPrivate Equity to Play a Unique RoleSupply / demand imbalance to allow for outsizedreturns Industry likely to need close to $500 bil in new equityIndustry likely to need close to $500 bil in new equity Top 3 PE funds dedicated to Financial Services have less Top 3 PE funds dedicated to Financial Services have less than $20 bil in capacitythan $20 bil in capacity While co-investment by LPs could increase available While co-investment by LPs could increase available capital by 2-3x, lack of available / advisable leverage limits capital by 2-3x, lack of available / advisable leverage limits available capitalavailable capital Should allow PE to be thoughtful and demanding (has not Should allow PE to be thoughtful and demanding (has not been the case to date)been the case to date) Importantly, PE shops able to instill confidence (in addition Importantly, PE shops able to instill confidence (in addition to injecting capital) will be able to charge dearly for to injecting capital) will be able to charge dearly for theircapitaltheircapital矮谋怨仓靖氛西丹宝焦水亲苫肠历窜魏傻龄坠媒泥屡寂霓挤匀求涅跑贰度凯雷对于金融服务业看法凯雷对于金融服务业看法CHARTS&OBJECTSTEXT21TextBLACKBlackfor good contrast with bright background elementsText - OTHERR-255G-204B-0SECONDARYorange & bright Blue for headers or “important” textText #2BODY TEXTR-102G-204B-255Text #1HEADERR-255G-255B-255PRIMARY text colors (header body & charts)Color #1R-255G-255B-255Color #2Column 4Row 3Color #3Column 2Row 4Color #4Column 2Row 1Color #5Column 6Row 3Color #6Column 3Row 3Color #7Column 8Row 3Color #8Column 6Row 4TheColumn/Rowvaluesarecanbefoundinthe“area”colorchoicesectionforchoosingpie&columnchartcolorsPrivate Equity to Play a Unique RoleAnatomy of successful investments relatively straight forward Recapitalization Recapitalization mustmust solve the problem subsequent solve the problem subsequent dilutiontoo expensive / onerousdilutiontoo expensive / onerous In order to ensure that new capital solves the problem, In order to ensure that new capital solves the problem, adequate due diligence adequate due diligence mustmust be performed be performed Convincing counterparties (investors, customers, regulators & Convincing counterparties (investors, customers, regulators & other liquidity providers) that problem has been fixed as other liquidity providers) that problem has been fixed as important as actually fixing the problem important as actually fixing the problem Which will place a premium on certain types of capital Which will place a premium on certain types of capital overothersoverothers In addition to capital & confidence, responsible private In addition to capital & confidence, responsible private equityshould be able to bring other elements to bear, equityshould be able to bring other elements to bear, including managementincluding management眶夺桓聪姚慑喂申梳师准俏左烛兄币肛九桐记邮胚禁遇旁阴哲炸监寺桓嘶凯雷对于金融服务业看法凯雷对于金融服务业看法CHARTS&OBJECTSTEXT22TextBLACKBlackfor good contrast with bright background elementsText - OTHERR-255G-204B-0SECONDARYorange & bright Blue for headers or “important” textText #2BODY TEXTR-102G-204B-255Text #1HEADERR-255G-255B-255PRIMARY text colors (header body & charts)Color #1R-255G-255B-255Color #2Column 4Row 3Color #3Column 2Row 4Color #4Column 2Row 1Color #5Column 6Row 3Color #6Column 3Row 3Color #7Column 8Row 3Color #8Column 6Row 4TheColumn/Rowvaluesarecanbefoundinthe“area”colorchoicesectionforchoosingpie&columnchartcolorsHowever, New Approach Is RequiredTraditional approval based on industrial experience simply does not workYouve gotgot to do the workMay be boring, but its a sine qua nonReestablishing counterparty confidence is as important, if not more important, than the capital being infusedGood bank/ bad bank structure, while difficult to execute, likely to be reinstated凰够轨帧氖建试猎陕溢崩器百嵌摆胀拌锌副渡仅甸区浙壕东沿贱越很稿遵凯雷对于金融服务业看法凯雷对于金融服务业看法CHARTS&OBJECTSTEXT23TextBLACKBlackfor good contrast with bright background elementsText - OTHERR-255G-204B-0SECONDARYorange & bright Blue for headers or “important” textText #2BODY TEXTR-102G-204B-255Text #1HEADERR-255G-255B-255PRIMARY text colors (header body & charts)Color #1R-255G-255B-255Color #2Column 4Row 3Color #3Column 2Row 4Color #4Column 2Row 1Color #5Column 6Row 3Color #6Column 3Row 3Color #7Column 8Row 3Color #8Column 6Row 4TheColumn/Rowvaluesarecanbefoundinthe“area”colorchoicesectionforchoosingpie&columnchartcolorsSome (Bold) PredictionsFinancials fall another 25%+At least 1, and possibly 2 to 3, top 20 U.S. financial institutions will fail over next 12 monthsEurope will go (is going) through the same issue as the U.S., just on a delayed time frame, and the consequences will be more pronounced due to the greater degree of leverage(1) Predictions made at Carlyle Investment Conference on 09/08/08Previous Predictions Already Materialized Previous Predictions Already Materialized (1)(1)Recent dollar strength is temporary Financials fall another 25%+Government intervention in inter-bank debt marketsAnother 2, and possibly 3, top 20 U.S. financial institutions will fail near-termProblems with commercial real estate and auto lending will be as big of a “story” as residential real estate has beenTARP will temporarily re-lubricate, but will fail to bring markets back towards equilibrium Still To ComeStill To Come抿初酮教啡拉逢僵唆邹溜汕硫瘤栽官愿诲遥桩奏丈凡潍装志谓罗惯埋饲跑凯雷对于金融服务业看法凯雷对于金融服务业看法