6.	Investments

Investments consist of the following:


	As of
	March 31, 2013		December 31, 2012
	(Dollars in millions)

Equity-method investments, excluding accrued performance fees	$	828.7	$	855.1
Trading securities and other investments		27.5		26.1

Total investments	$	856.2	$	881.2

Strategic Investment in NGP

On December 20, 2012, the Partnership entered into separate purchase agreements with ECM Capital, L.P. and Barclays Natural Resource Investments, a division of Barclays Bank PLC (“BNRI”), pursuant to which the Partnership agreed to invest in NGP Management Company, L.L.C. (“NGP Management” and, together with its affiliates, “NGP”). NGP is an Irving, Texas-based energy investor.

The Partnership’s equity interests in NGP Management entitle the Partnership to an allocation of income equal to 47.5% of the management fee-related revenues of the NGP entities that serve as the advisors to certain private equity funds, and future interests in the general partners of certain future carry funds advised by NGP that entitle the Partnership to an allocation of income equal to 7.5% of the carried interest received by such fund general partners. In addition, following the termination of the investment period of the NGP Natural Resources X, L.P. fund (“NGP X”), the Partnership will pay $7.5 million to acquire an additional 7.5% equity interest in NGP Management that, together with the initial interests described above, will entitle the Partnership to an allocation of income equal to 55% of the management fee-related revenues of the NGP entities that serve as the advisors to certain private equity funds.

The sellers also granted the Partnership options to purchase additional interests in NGP. Specifically, the Partnership acquired (1) an option, exercisable by the Partnership between July 1, 2014 and July 1, 2015, to purchase from BNRI, for a purchase price in cash that is estimated to be between $65.0 million to $74.0 million plus the net capital amount that has been contributed by BNRI, interests in the general partner of NGP X entitling the Partnership to an allocation of income equal to 40% of the carried interest received by such fund general partner; (2) an option, exercisable by the Partnership from December 20, 2012 until January 1, 2015, to purchase from BNRI, for a purchase price in cash that is estimated to be between $34.0 million to $38.0 million, additional interests in the general partners of all future carry funds advised by NGP entitling the Partnership to an additional equity allocation equal to 40% of the carried interest received by such fund general partners; and (3) an option, exercisable by the Partnership in approximately 13 years, to purchase from ECM Capital, L.P. and its affiliates, for a formulaic purchase price in cash based upon a measure of the earnings of NGP, the remaining equity interests in NGP Management.

In consideration for these interests and options, the Partnership paid an aggregate of $384.0 million in cash to ECM Capital, L.P. and BNRI, and issued 996,572 Carlyle Holdings partnership units to ECM Capital, L.P. which vest ratably over a period of five years. The Partnership will also pay consideration of $7.5 million upon the termination of the investment period of the NGP X fund. The transaction also includes contingent consideration payable to ECM Capital, L.P. of up to $45.0 million in cash, 597,944 Carlyle Holdings partnership units that were issued at closing but vest upon the achievement of performance conditions, and contingently issuable Carlyle Holdings partnership units up to $15.0 million that will be issued if the performance conditions are met. Additionally, the transaction includes contingent consideration payable to BNRI of up to $183.0 million, which will be payable partly in cash and partly by a promissory note issued by the Partnership, if the performance conditions are met. The contingent consideration is payable from 2015 through 2018, depending on NGP’s achievement of certain business performance goals.

The Partnership also entered into a senior advisor consulting agreement with the chief executive officer of NGP and granted deferred restricted common units to a group of NGP personnel who are providing the Partnership with consulting services.

The Partnership accounts for its investment in NGP Management under the equity method of accounting. The Partnership recorded its investment in NGP Management initially at cost, excluding any elements in the transaction that were deemed to be compensatory arrangements to NGP personnel. The Carlyle Holdings partnership units issued in the transaction, the contingently issuable Carlyle Holdings partnership units, and the deferred restricted common units were deemed to be compensatory arrangements; these elements are recognized as an expense under applicable U.S. GAAP.

The Partnership records realized investment income for its equity income allocation from NGP, and also records, as a reduction of realized investment income, its share of any allocated expenses from NGP Management, expenses associated with the compensatory elements of the transaction, and the amortization of the basis differences related to the definitive-lived identifiable intangible assets of NGP Management. For the three months ended March 31, 2013, the Partnership recognized $1.0 million of realized net investment loss from the investment in NGP Management, comprised of investment earnings of $16.2 million less $17.2 million of expenses associated with the compensatory elements of the transaction and amortization of basis differences. The Partnership’s basis differences based on the underlying net assets of the entity were $244.9 million and $259.8 million as of March 31, 2013 and December 31, 2012, respectively; these differences are amortized over a period of ten years.

Equity-Method Investments

The Partnership’s equity method investments include its fund investments in Corporate Private Equity, Global Market Strategies and Real Assets, typically as general partner interests, and its investment in NGP Management (included within Real Assets), which are not consolidated but in which the Partnership exerts significant influence. Investments are related to the following segments:


	As of
	March 31, 2013		December 31, 2012
	(Dollars in millions)

Corporate Private Equity	$	245.0	$	251.6
Global Market Strategies		19.7		18.0
Real Assets		564.0		585.5

Total	$	828.7	$	855.1

The Partnership evaluates each of its equity method investments to determine if disclosure of summarized income statement information is required under Article 10 of Regulation S-X. As of March 31, 2013 and for the three months then ended, no individual equity method investment held by the Partnership was significant based on the disclosure criteria.

Investment Income (Loss)

The components of investment income (loss) are as follows:


	Three Months Ended March 31,
	2013			2012
	(Dollars in millions)

Income (loss) from equity investments	$	(2.8	)	$	21.5
Income from trading securities		3.3			2.1
Other investment loss		(0.1	)		(2.1	)

Total	$	0.4		$	21.5

Carlyle’s income (loss) from its equity-method investments is included in investment income (loss) in the condensed consolidated statements of operations and consists of:


	Three Months Ended March 31,
	2013			2012
	(Dollars in millions)

Corporate Private Equity	$	12.9		$	19.9
Global Market Strategies		1.1			0.8
Real Assets		(16.8	)		0.8

Total	$	(2.8	)	$	21.5

Trading Securities and Other Investments

Trading securities and other investments as of March 31, 2013 and December 31, 2012 primarily consisted of $27.5 million and $26.1 million, respectively, of investments in corporate mezzanine securities and bonds, as well as other cost method investments.

Investments of Consolidated Funds

On February 14, 2013 and March 28, 2013, the Partnership formed two new CLOs. The Partnership has concluded that these CLOs are VIEs and the Partnership is the primary beneficiary. As a result, the Partnership consolidated the financial positions and results of operations of the CLOs into its condensed consolidated financial statements beginning on their respective closing dates. As of March 31, 2013, the total assets of these CLOs included in the Partnership’s condensed consolidated financial statements were approximately $1.9 billion.

There were no individual investments with a fair value greater than five percent of the Partnership’s total assets for any period presented.

Interest and Other Income of Consolidated Funds

The components of interest and other income of Consolidated Funds are as follows:


	Three Months Ended March 31,
	2013		2012
	(Dollars in millions)

Interest income from investments	$	230.6	$	184.0
Other income		37.8		27.5

Total	$	268.4	$	211.5

Net Investment Gains (Losses) of Consolidated Funds

Net investment gains (losses) of Consolidated Funds include net realized gains (losses) from sales of investments and unrealized gains (losses) resulting from changes in fair value of the Consolidated Funds’ investments. The components of net investment gains (losses) of Consolidated Funds are as follows:


	Three Months Ended March 31,
	2013			2012
	(Dollars in millions)

Gains from investments of Consolidated Funds	$	599.4		$	1,031.1
Losses from liabilities of CLOs		(386.9	)		(159.2	)
Gains (losses) on other assets of CLOs		(1.0	)		0.2

Total	$	211.5		$	872.1

The following table presents realized and unrealized gains (losses) earned from investments of the Consolidated Funds:


	Three Months Ended March 31,
	2013		2012
	(Dollars in millions)

Realized gains	$	477.9	$	215.1
Net change in unrealized gains		121.5		816.0

Total	$	599.4	$	1,031.1