Risk Factors Update Summary

• AIFMD II introduces more onerous delegation requirements, enhanced substance requirements, and additional liquidity management provisions for AIFMs managing open-ended AIFs.
• Increased assets under management by 14% to $426 billion and fee-earning assets under management by 15% to $307 billion.
• The company expects to allocate approximately 60% to 70% of future performance allocations to employees.
• Increased competition in asset management business, including private equity, hedge funds, and real estate development companies. Competition expected to rise, impacting fund performance.
• AlpInvest Partners Pte Limited is expected to receive a capital markets license from the Monetary Authority of Singapore.
• Increased dollar value of management fees from CLOs: $193 million in 2022 to $214.1 million in 2023.
• Addition of critical infrastructure data protection risks, including cloud environments, with a focus on cyber activity involving ransomware, extortion, and business email compromise.
• A decline in demand for leased aircraft may result in decreases in rental rates.
• AIFMD II may increase costs and complexity, slow fundraising, and limit operations, impacting the business.
• Change in ownership interest: Indirect controlling interest in Fortitude increased from 71.5% to 73.5%.
• A portion of performance-based bonuses for 2023 was paid in the form of restricted stock units.
• Management fees for carry funds in the Global Credit segment now range from 1.00% to 0.00% of net asset value.
• Raised $118 billion in new capital commitments in the last three years, with $2.0 billion additional third-party capital raised in 2023. Fundraising driven by strategic solutions business and Asia Buyout business.
• Carlyle holds an indirect controlling interest in Fortitude Re and Fortitude International Re, Bermuda insurers.
• CIM Europe may have to comply with IFR/IFD for MiFID top-ups; Luxembourg does not apply the regime.
• Added "net income" to the list of variable financial metrics, which now includes revenue, earnings, and cash flow.
• The number of shares of common stock reserved for issuance increased by 23,800,000 shares.
• AIFMD II imposes significant new requirements for funds originating loans, including leverage limits for funds with material loan origination activities.
• The European Commission proposed a 15% alternative minimum tax and a 1% excise tax.
• Real Assets Credit increased from $16.1 billion to $25.1 billion, and Infrastructure & Natural Resources decreased from $27 billion to $25 billion.
• Increased reliance on AI Technologies poses risks of data inaccuracy and cybersecurity threats.
• Changed the percentage of performance allocations allocated to employees from 45-50% to 60-70%.
• The total assets and liabilities increased from $7.2 billion to $7.9 billion.
• Carlyle's credit agreements totaled $2.8 trillion in 2023, a 21% decline from 2022, impacting future fundraising.
• Consumer Duty regime in the UK may impact Carlyle entities, potentially affecting funds from July 31, 2024.
• The OECD's BEPS 2.0 proposals could fundamentally change the international tax system.
• Accrued a giveback obligation of $44.9 million, with $23.7 million attributable to the company. Potential giveback could have been $1.6 billion after-tax, impacting financials.
• SEC's proposed rule finalized in July 2023 mandates disclosure of cybersecurity incidents and risk management.
• Assets under management for Global Credit increased from $146 billion to $187 billion.
• The commitment period for Global Investment Solutions vehicles may be extended for up to two years.
• AIFMD II introduces new conditions for non-EEA AIFMs to access national private placement regimes, potentially limiting capital raising from EEA investors.
• Enhanced regulatory scrutiny on insurance industry involvement may impact revenue, earnings, and cash flow.
• The company granted approximately $2 million in DEI Incentive Awards annually.
• Carlyle is expanding in Asia, seeking an investment advisory license for AlpInvest Partners in Hong Kong.
• Raised concerns about ongoing trade negotiations and potential regulatory reform affecting profitability, business sectors, and operations. Uncertainty around tariffs and geopolitical tensions.
• Raised $12.8 billion in new capital commitments for Global Investment Solutions, including launching new vintage co-investments and secondaries funds.
• Employees were awarded as DEI Incentive Award Changemakers in 2023.
• The European Commission published a proposal for a new directive governing credit servicers, credit purchasers, and collateral recovery.
• Raised $29.9 billion from Fortitude's transaction with Lincoln Financial Group, contributing to total fundraising of $37.1 billion.
• FCA proposal could remove exemption for products with certain minimum denomination, impacting Carlyle entities.
• The EU proposed a Directive to reduce the difference in tax rates among member countries.
• Changes in tax laws could negatively impact the effective tax rate and tax liability.
• Proposed amendments to the custody rule for SEC-registered investment advisers in 2023.
• Transition risks related to ESG rules in the EU could impact investments and require additional resources.
• The UK Financial Services and Markets Act 2023 provides a foundation for a major overhaul of the UK's regulatory framework post-Brexit.
• Increased interest rates eleven times since the start of the COVID-19 pandemic. Rising interest rates may negatively impact real estate prices, debt financing costs, and fund performance.
• Increased risks in the life sciences industry due to regulatory uncertainties and delays in product approvals.
• SEC's amendments to the fund names rule in September 2023 requiring ESG factor incorporation.
• Risks associated with significant leverage in investments, including challenges in completing acquisitions, lower valuations, and cash flow issues. Dependence on debt financing and potential negative impact on net income.
• Risks in the aviation leasing industry due to geopolitical events, governmental regulations, and economic conditions.
• The SEC adopted amendments to the Names Rule requiring funds suggesting ESG investments to invest at least 80% of assets consistently with this policy.
• SEC's proposed predictive data analytics rules in July 2023 could increase regulatory uncertainty.
• SEC's proposed changes to Regulation S-P in March 2023 regarding financial privacy rules.
• The SEC delayed final action on climate change disclosure rules until April 2024, impacting future reporting requirements and compliance costs.
• Risks related to valuation methodologies for assets, involving subjective judgments. Incorrect fair value determinations could lead to misstated fund performance and performance allocations.
• Risks associated with investments in infrastructure assets, including regulatory changes and operational risks.