BlackRock Private Equity Partners Private Equity Asset Class Discussion and Market Overview

Stephen J. Kelly Managing Director

Table of Contents 1.

Asset Class Discussion • What is Private Equity? • Who invests in Private Equity? • Why invest in Private Equity? • How much should one invest in Private Equity? • How does Private Equity work in practice?   

Structures Cashflow Mechanics J-Curve

• What are some risks associated with Private Equity?

2. Private Equity Market Overview •

Current Macro Environment — —

Capital Raised Credit Markets

•

Fund of Funds Environment

•

Is the Party Over? — —

Historical Performance Across Market Cycles Outlook for the Future

2 CONFIDENTIAL. THIS DOCUMENT MAY NOT BE REPRODUCED OR COPIED IN ANY FORM.

Private Equity Asset Class Discussion

3 CONFIDENTIAL. THIS DOCUMENT MAY NOT BE REPRODUCED OR COPIED IN ANY FORM.

What is Private Equity? Private equity represents investments in private or unlisted companies:

• Traditionally thought of as an alternative asset class • Is a sizeable asset class in its own right • Generally includes investments in the following categories: VENTURE CAPITAL

SEED

EARLY STAGE

EXPANSION STAGE

BUYOUTS / RESTRUCTURING

LATER STAGE

PRE-IPO

DEVELOPMENT CAPITAL

4 CONFIDENTIAL. THIS DOCUMENT MAY NOT BE REPRODUCED OR COPIED IN ANY FORM.

LEVERAGED BUYOUT

MANAGEMENT RESTRUCTURING MEZZANINE BUYOUT

Value Creation – How do PE Firms Make Money ? Private Equity returns are driven by three basic premises:

BUY

1) How well do you purchase the asset?

CHANGE

2) How well do you develop the asset?

5 CONFIDENTIAL. THIS DOCUMENT MAY NOT BE REPRODUCED OR COPIED IN ANY FORM.

SELL

3) How well do you exit the asset?

How is Private Equity Investing Different than Buying Public Equities?

•

Level of Due Diligence – PE has access to proprietary information BUY

•

Entry Valuations – Private firms typically trade at a discount

•

Control of Investment – PE investors take board seats as majority owners

•

Value-Added Investing – PE investors are operators vs. passive observers

•

Time horizon – Longer-term investing

CHANGE

SELL

•

Exit Options – PE investing has flexibility across IPOs, M&As and ReCaps

6 CONFIDENTIAL. THIS DOCUMENT MAY NOT BE REPRODUCED OR COPIED IN ANY FORM.

6

Who Invests in Private Equity? Investors in Private Equity Based on Available Dry Powder Family Offices / Foundations

Endowments 6.0%

6.0% Sovereign

Public Pensions

Wealth Funds/

30.0%

Government 10.0% Financial Institutions 15.0%

Insurance Non-Public

17.0%

Pensions 16.0%

Fund of Funds represent approximately 10-15% of LP commitments to PE firms.*

7

* Fund of Funds, asset managers and secondary fund of funds excluded from study because they are intermediaries. Source: “Driving the Shakeout in Private Equity, The Role of Investors in the Industry’s Renaissance,” The Boston Consulting Group, July 2009.

CONFIDENTIAL. THIS DOCUMENT MAY NOT BE REPRODUCED OR COPIED IN ANY FORM.

How Much Should One Invest in Private Equity?

•

Investors in private equity seek higher long-term return and risk diversification

•

Returns typically are above those available in the public markets ― Investments made in companies at the start of an anticipated

period of rapid growth

― Potential premium for illiquidity •

Diversification ― Many of the factors that drive returns to private equity investors

are unrelated to what is happening in the public markets

8 CONFIDENTIAL. THIS DOCUMENT MAY NOT BE REPRODUCED OR COPIED IN ANY FORM.

8

Private Equity Has Outperformed Public Equity and Fixed Income, However… 15-year Annualized IRR

10-year Annualized IRR US PE Top Quartile Mean

US PE Top Quartile Mean

Europe PE Top Quartile Mean

Europe PE Top Quartile Mean

World Equities Top Quartile Mean

World Equities Top Quartile Mean

US Equities Top Quartile Mean

US Equities Top Quartile Mean

Europe PE Mean

US PE Mean

US PE Mean

Europe PE Mean

World Government Bond

US Equities

World Equities

World Equities

US Equities

World Government Bond

-10%

0%

10%

20%

30%

40%

50%

60%

0%

10%

20%

30%

Data as of December 31, 2008. Includes performance of all private equity funds in every vintage. All Asset Classes except for private equity are sourced from Thomson DataStream, using ready made indexes: MSCI USA-Index (USD); MSCI World Index (USD); S&P/Citigroup W. Gov. Bond Index (USD). Index performance assumes reinvestment of all distributions for the period ended December 31, 2008. “Top Quartile Mean” represents the average of the top quartile population. Private equity returns shown above are investment horizon pooled IRR returns, calculated on a total return basis, for the 10- and 15-year periods ended December 31, 2008, compounded annually, net to investors of all fees, expenses and carried interest. Private equity returns are derived from the Venture Economics VentureXpert database as of May 15, 2009 which contains a representative sample of the private equity universe. Cash flows collected from investors and general partners are used to calculate IRRs based on cash-in/cash-out returns, with consideration of the net asset value of the remaining partnership holdings. The IRR is an annualized compounded rate of return calculated using monthly cash flows and annual valuations. Public market returns are typically stated as timeweighted returns, while private equity returns are stated as internal rates of return, or dollar weighted returns. Thus, care must be taken when making direct comparisons of public and private market performance. Please see accompanying End Notes for additional information on quartile rankings. Performance data reflects past performance and does not guarantee future results. The returns shown are not predictive of the Fund’s future returns.

9 CONFIDENTIAL. THIS DOCUMENT MAY NOT BE REPRODUCED OR COPIED IN ANY FORM.

40%

50%

…Manager Selection Is Critical to Generate Superior Returns Persistent, wide disparity between median and top-quartile private equity returns in the United States and Europe

U.S. Private Equity ($)

Difference Between 15-Year Top- and Bottom-Quartile Performance1 21%

European Private Equity (€)

Difference Between 15-Year Top- and Bottom-Quartile Performance1 21%

17.4%

15.9% 16%

16% 11.5%

11%

11%

6.2%

6.6%

6%

5.3%

6% 0.9%

1%

16.3%

0.5%

2.9%

1% -1.1%

-4% -4%

-1.6%

-9% -6.2%

-9% Buyout

Top Quartile

-1.2%

Venture Capital

Median

-8.2%

-14% Mezzanine

Bottom Quartile

Buyout

Top Quartile

Venture Capital

Median

1 Venture Economics Information Services, Cumulative Vintage Year Composite Performance IRRs for the 15-year periods ended December 31, 2008 for US and Europe PE. Private equity returns are internal rates of return net to investors after fees and carried interest. Private equity returns are derived from the Venture Economics VentureXpert database as of May 15, 2009, which contains a representative sample of the Private equity universe. Cash flows collected from investors and General Partners are used to calculate IRRs based on cash-in/cash-out returns, with consideration of the net asset value of the remaining partnership holdings. The IRR is an annualized compounded rate of return calculated using monthly cash flows and annual valuations. Please see accompanying End Notes for additional information on quartile rankings. Performance data reflects past performance and does not guarantee future results. The returns shown are not predictive of the Fund’s returns.

10 CONFIDENTIAL. THIS DOCUMENT MAY NOT BE REPRODUCED OR COPIED IN ANY FORM.

Bottom Quartile

PE Return Dispersion: All US Private Equity Funds (Vintages 1969 through 2008) Annual Net IRRs (%) Vintage Year 1969-75 1976-79 1980 1980-83 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

11

Max IRR

Upper Quartile

Median

Lower Quartile Min IRR

36.20

24.50

19.90

12.50

74.10

43.80

31.20

14.00

7.80 3.20

41.10

21.60

13.70

9.10

-1.90 -57.50

146.70

13.30

7.50

0.90

40.20

14.80

10.10

0.10

-3.30

13.50

9.10

4.20

0.10

-21.40

146.70

13.00

6.90

1.40

-57.50

124.80

12.40

4.20

1.00

-18.40

54.70

16.80

11.80

3.40

-41.50

64.50

13.00

7.10

3.80

-11.20

65.10

17.10

8.20

0.70

-69.80

42.70

18.50

10.50

1.80

-10.20

71.30

21.80

11.20

4.40

-42.20

74.90

19.30

10.30

-0.10

-25.30

61.30

25.60

14.10

4.20

-0.70

116.30

37.00

15.70

10.30

-47.20

98.60

28.90

12.60

3.60

-25.00

112.90

28.60

14.90

1.20

-47.90

247.80

32.20

10.50

2.10

-28.60

454.90

39.90

8.10

0.30

-16.30

296.00

25.20

8.50

-1.10

-27.90

721.00

10.40

3.50

-3.20

-44.80

140.00

5.70

-1.70

-10.60

-100.00

112.10

7.80

-1.20

-5.50

-25.50

58.80

12.90

2.40

-3.10

-24.10

54.60

13.10

1.30

-2.20

-19.10

41.60

13.60

5.80

2.00

-7.60

60.80

9.40

1.50

-7.60

-35.20

29.80

7.90

0.70

-5.50

-18.80

19.90

2.00

-8.70

-19.00

-67.70

78.40

-10.40

-21.50

-32.30

-68.70

24.10

-24.70

-38.90

-57.00

-91.70

Source: Venture Economics Information Services, Cumulative Vintage Year Performance for all US Private Equity funds through the period ending December 31, 2008. Private Equity returns are compounded annually, net to investors after fees and carried interest. Private Equity returns are derived from the Venture Economics VentureXpert database as of August 31, 2009, which contains a representative sample of the Private Equity universe. Cash flows collected from investors and general partners are used to calculate IRRs based on cash-in/cash-out returns, with consideration of the net asset value of the remaining partnership holdings. The IRR is an annualized compounded rate of return calculated using monthly cash flow and annual valuations. Performance data reflects past performance and is not indicative of future results. The returns shown are not predictive of the Fund’s returns.

CONFIDENTIAL. THIS DOCUMENT MAY NOT BE REPRODUCED OR COPIED IN ANY FORM.

Diversification Within PE is Also Important

140.0 120.0

Annualized IRR (%)

100.0 80.0 60.0 40.0 20.0 0.0 -20.0

1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

-40.0 -60.0 US VC 1st Quartile

12

US Buyout 1st Quartile

Data Source: VentureXpert database from Thomson Venture Economics, Cumulative Vintage Year Performance as of December 31, 2008.

CONFIDENTIAL. THIS DOCUMENT MAY NOT BE REPRODUCED OR COPIED IN ANY FORM.

How Much Should One Invest in Private Equity?

• Set allocation target as a % of the overall plan. Factors to consider include: ― Risk appetite ― Liquidity ― Plan liability profile ― Time horizon ― Level of diversification sought ― Be a consistent investor; do not try to “time the market” ― Achieve appropriate levels of diversification •

Institutional research suggests an allocation of 5% to 15% to alternative assets does not significantly increase volatility

13 CONFIDENTIAL. THIS DOCUMENT MAY NOT BE REPRODUCED OR COPIED IN ANY FORM.

13

How Much Should One Invest In Private Equity? Average Asset Allocation to Private Equity by U.S. Institutional Investors (1995-2005)

14

12.6

12

(% of Total Assets)

10 8

6.9 5.8

6 4 2 0 Endowment/Foundation

Corporate Pension

Source: Russell Survey on Alternative Investing 2006.

14 CONFIDENTIAL. THIS DOCUMENT MAY NOT BE REPRODUCED OR COPIED IN ANY FORM.

Public Pension

How Does One Invest in Private Equity?

Direct investment into private companies

Ways to Invest in PE Include:

Private Equity Funds Quoted Closed-End Private Equity Funds (primarily in Europe) Private Equity Fund of Funds

15 CONFIDENTIAL. THIS DOCUMENT MAY NOT BE REPRODUCED OR COPIED IN ANY FORM.

How Does One Invest in Private Equity? Mechanics of Traditional Funds and Fund of Funds Traditional Fund Structure

Fund of Funds Structure

Investors (Limited Partners) Cash investment

Cash returns

Fund Manager (General Partner) Investment A

Investors (Limited Partners)

Investment B

Cash investment

Cash returns

Fund of Funds Manager (General Partner)

Investment C

Fund Manager A

A

B

Investment in underlying company or fund Return from underlying company or fund

16 CONFIDENTIAL. THIS DOCUMENT MAY NOT BE REPRODUCED OR COPIED IN ANY FORM.

C

Fund Manager B

A

B

C

Direct CoInvestment A

Direct CoInvestment B

How Does One Invest in Private Equity? Mechanics of Traditional Funds and Fund of Funds • Limited Partnerships are legal contracts ― Generally 10 years ― Provisions to extend, usually in one to two year increments

• Investment minimum is typically $5 million or greater • Investments are made over three to five years ― Capital is drawn from investors “as needed” to fund individual investments ― Typically 10 days notice

• Investments are made in 10 to 30 portfolio companies, depending on the type of fund (VC or LBO) • Thereafter, investments are managed and gradually realized • Distributions, if any, are made either in cash or stock to limited partners 17 CONFIDENTIAL. THIS DOCUMENT MAY NOT BE REPRODUCED OR COPIED IN ANY FORM.

17

How Does One Invest in Private Equity? Cash Flow Example • Representative cash flows on a $100 commitment to a 10-year partnership assuming a 2.5x return, a 5-year investment period, and a gross IRR of 33% Year 1 Year 2 Drawn Cash $ (5) $ (25) Cash Returned Net Cash Flow $ (5) $ (25) Cumulative Cash Flow $

Year 3 $ (35) $ 10 $ (25)

Year 4 $ (30) $ 25 $ (5)

Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 $ (5) $ 35 $ 45 $ 60 $ 50 $ 20 $ 5 $ 30 $ 45 $ 60 $ 50 $ 20 $ 5

(5) $ (30) $ (55) $ (60) $ (30) $

15

$

75

$ 125

$ 145

Total $ (100) $ 250 $ 150

$ 150

• Capital is drawn as needed during years 1 through 5 • Capital is returned as investments are realized (typically years 3 through 10) • In this example, 100% of committed capital is drawn (not always the case) • Due to “netting” of cash flows, investor is only out-of-pocket $60 in year 4

* This graph is provided for illustrative purposes only and does not necessarily reflect the future results of any specific private equity fund or fund of funds. Private equity funds are long term investments and, although they seek to appreciate in value, there is no guarantee that investors will recover all or a part of their capital contributions or that the investment will follow this pattern of returns. The results of the Fund may differ materially from the results shown in the graph above.

18 CONFIDENTIAL. THIS DOCUMENT MAY NOT BE REPRODUCED OR COPIED IN ANY FORM.

18

Historical Valuation of Private Companies • Underlying investments are illiquid, so valuations are necessarily subjective • Value of underlying investment is only certain when realized • Interim valuations tend to be quite conservative (e.g., cost) and write-downs are not uncommon due to restructuring, growth and changes within an investment, especially in the early stages • Investments generally are written up from cost upon the occurrence of a valuation event (e.g., a subsequent financing round or IPO) • FAS 157 is rapidly changing the landscape

19 CONFIDENTIAL. THIS DOCUMENT MAY NOT BE REPRODUCED OR COPIED IN ANY FORM.

Fees and Carried Interest • The annual management fee for a fund is roughly 2% to 2.5% of committed capital for venture funds, 1.5% to 2% for buyout funds • “Carried interest” is the General Partner’s share of partnership profits (i.e., performance fees): ― Most often set at 20% of capital gains, typically after committed capital is returned

• Most funds offer a preferred return (or a hurdle) of 5% to 10% per annum before the General Partner begins to receive carried interest

20 CONFIDENTIAL. THIS DOCUMENT MAY NOT BE REPRODUCED OR COPIED IN ANY FORM.

What is the “J-Curve” in Private Equity ? Successful private equity investment returns typically follow a “J curve” pattern Hypothetical Private Equity Return

Illustrative data only.

21

Note: Chart does not reflect actual data. This graph is provided for illustrative purposes only and does not necessarily reflect the future results of any specific private equity fund, or fund of funds. Private equity funds are long-term investments and, although they seek to appreciate in value, there is no guarantee that investors will recover all or a part of their capital contributions or that the investment will follow this pattern of returns. The results of a private equity investment may differ materially from the results shown in the graph above.

CONFIDENTIAL. THIS DOCUMENT MAY NOT BE REPRODUCED OR COPIED IN ANY FORM.

What are the Risks in Private Equity Investing? •

Not diversifying across all segments of the market

•

Not diversifying over time

•

Investing in immature markets

•

Not being in a position to accept inherent illiquidity of the investment

•

Greatest risk is choice of fund given wide dispersion between the bottom and top quartile returns

22 CONFIDENTIAL. THIS DOCUMENT MAY NOT BE REPRODUCED OR COPIED IN ANY FORM.

Private Equity Conclusions •

Private equity has the potential to enhance returns and provide diversification for long-term equity investors

•

Benefits of private equity investing are realized over the long term, so investors should be patient

•

Care in the choice of individual funds is vital as top performers significantly outperform the median

•

It is crucial to build a diversified portfolio when investing in private equity

•

A long-term strategic commitment is key as private equity cannot be easily timed: ― Keeps true to strategic commitment through the cycle ―

Leaves specific timing decision to General Partners

23 CONFIDENTIAL. THIS DOCUMENT MAY NOT BE REPRODUCED OR COPIED IN ANY FORM.

BlackRock Private Equity Partners Market Overview

24 CONFIDENTIAL. THIS DOCUMENT MAY NOT BE REPRODUCED OR COPIED IN ANY FORM.

Historical Commitments to Private Equity U.S. and European Commitments to Private Equity 1990 to 2008 600

117.4

113.8

$ in billions

400

107.8 65.8

77.8

200 24.7 2.5

0

5.3

6.5

11.1 21.0

76.8 4.6 9.6 1.7 44.4 52.3 35.4 22.8 18.2 13.8 9.9

432.6

463.3

30.5 25.6

218.2

121.5143.9

50.1 26.4

29.6 29.8 66.9 64.7

189.7

245.2

102.8

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

U.S. Commitments

European Commitments

Source: Venture Economics VentureXpert US and Europe Commitments Per Fund Raising (by year) All Private Equity as of December 31, 2008.

25 CONFIDENTIAL. THIS DOCUMENT MAY NOT BE REPRODUCED OR COPIED IN ANY FORM.

Leveraged Loan Spreads Volatile Amidst Credit Crisis Average Secondary Spreads by Rating

Source: Standard and Poor’s LCD and S&P/LSTA Leveraged Loan Index Excludes all loans trading at 70% of par or less and facilities in default 1997 – 8/21/09

L+3600

Assumes discount from par is amortized evenly over a three-year life.

L+3300 L+3000

B Loans

L+2700

All BB/B Loans

L+2400 L+2100

BB Loans

L+1800 L+1500 L+1200 L+900 L+600 L+300

Ja Apn-9 r 7 Ju -97 O c l- 9 7 Ja t-9 n- 7 Ap 9 r 8 Ju -98 O c l- 9 8 Ja t-9 8 n A p -9 r 9 Ju -99 O c l- 9 9 Ja t-9 n- 9 Ap 0 r 0 Ju -00 O c l- 0 0 Ja t-0 0 n A p -0 r 1 Ju -01 O c l- 0 1 Ja t-0 n- 1 Ap 0 r 2 Ju -02 O c l- 0 2 Ja t-0 2 n A p -0 r 3 Ju -03 O c l- 0 3 Ja t-0 n- 3 Ap 0 r 4 Ju -04 O c l- 0 4 Ja t-0 4 n A p -0 r 5 Ju -05 O c l- 0 5 Ja t-0 5 Apn-0 r 6 Ju -06 O c l- 0 6 Ja t-0 n- 6 Ap 0 r 7 Ju -07 O c l- 0 7 Ja t-0 7 Apn-0 r 8 Ju -08 O c l- 0 8 Ja t-0 n- 8 Ap 0 r 9 Ju -09 l- 0 9

L+0

Source: Standard & Poor’s LCD. Data as of 21 August 2009.

26 CONFIDENTIAL. THIS DOCUMENT MAY NOT BE REPRODUCED OR COPIED IN ANY FORM.

Leveraged Loan Secondary Prices Plummet; Distressed Players Line-Up Average Bid and Ask

Source: Standard and Poor’s LCD and S&P/LSTA Leveraged Loan Index Selected Large Institutional Flow Loans

105.00 100.00 95.00 90.00

Ask

85.00 80.00

Bid

75.00 70.00 65.00

Pr e 12 -9/ /1 11 2 03 /2 /1 0 0 1 2 06 /2 /0 0 0 3 3 08 /2 /2 0 0 8 3 11 /2 /2 0 0 0 3 02 /2 /2 0 0 4 3 05 /2 /1 0 0 8 4 08 /2 /1 0 0 0 4 11 /2 /0 0 0 4 4 02 /2 /0 0 0 8 4 05 /2 /0 0 0 3 5 07 /2 /2 0 0 6 5 10 /2 /1 0 0 8 5 01 /2 /1 0 0 7 5 04 /2 /1 0 0 1 6 07 /2 /0 0 0 6 6 09 /2 /2 0 0 8 6 12 /2 /2 0 0 7 6 03 /2 /2 0 0 2 6 06 /2 /1 0 0 4 7 09 /2 /1 0 0 1 7 12 /2 /0 0 0 6 7 03 /2 /1 0 0 1 7 06 /2 /0 0 0 3 8 10 /2 /1 0 0 0 8 04 /2 /0 0 0 9/ 8 20 09

60.00

Source: Standard and Poor’s LCD. As of 21 August 2009.

27 CONFIDENTIAL. THIS DOCUMENT MAY NOT BE REPRODUCED OR COPIED IN ANY FORM.

Covenant-Lite Transactions Evaporate

Covenant-Lite Transaction Volume $100

$96.6

$90 $80

$ in billions

$70 $60 $50 $40 $30

$23.6

$20 $10

$1.8

$3.1

1997

1998

$0.3

$0.3

$0.0

$0.0

$0.5

$0.1

1999

2000

2001

2002

2003

2004

$0

28

Source: S&P (PMDZone). As of 30 June 2009

CONFIDENTIAL. THIS DOCUMENT MAY NOT BE REPRODUCED OR COPIED IN ANY FORM.

$2.4

2005

2006

2007

$2.5

$0.3

2008

1H 2009

Credit Market Correction Forces Down PE Leverage Multiples… Average Total Debt/EBITDA for US and European Transactions

7.0x

6.0x

5.0x

4.0x

3.0x

2.0x 2001

2002

2003

2004

2005 US

29

2006

2007

Europe

Source: S&P (PMDZone). As of 30 June 2009. Average Debt Multiples of Large Corporate LBO Loans for US (Defined as Issuers with EBITDA of more than $50M). US data as of 30 June 2009 is not available due to small sample size.

CONFIDENTIAL. THIS DOCUMENT MAY NOT BE REPRODUCED OR COPIED IN ANY FORM.

2008

1H 2009

…And Leveraged Loan Volume Global New-Issue Leveraged Loan Volume $900 762.0

$800 $700

650.5

$600 $500

448.1

$400 $300

340.2 256.0

264.0

238.3

201.1

$200

177.2

233.9

218.8

$100

45.6

$0 1998

30

1999

2000

2001

2002

2003

2004

Source: S&P (PMDZone). As of 30 June 2009

CONFIDENTIAL. THIS DOCUMENT MAY NOT BE REPRODUCED OR COPIED IN ANY FORM.

2005

2006

2007

2008

1H 2009

LBO Valuations Starting to Moderate US LBO: EV/EBITDA Multiples Paid

EU LBO: EV/EBITDA Multiples Paid

11.0x 10.0x

11.0x

9.0x

10.0x

8.0x

9.0x 8.0x

7.0x

7.0x

6.0x

6.0x

5.0x

5.0x

4.0x

4.0x

3.0x

6/ 30 /0 9

20 08

LT M

20 07

20 06

20 05

20 04

20 02

20 08

20 07

0.0x 20 06

0.0x 20 05

1.0x

20 04

1.0x

20 03

2.0x

20 02

2.0x

20 03

3.0x

31

Source: Standard and Poors (PMDzone). Data as of 30 June 2009. US data as of 30 June 2009 is not available due to small sample size.

CONFIDENTIAL. THIS DOCUMENT MAY NOT BE REPRODUCED OR COPIED IN ANY FORM.

M&A and LBO Activity Has Followed Suit EU & US M&A Announced Volume $1,000

EU & US LBOs $700

$900

$600

$800 $500

$ in billions

$700 $600

$400

$500 $300

$400 $300

$200

$200 $100

$100 $0

$0

2007

32

2008

1H09

2007

Source: Thomson Reuters League Tables, Global M&A Financial Advisory Report, and Standard and Poors (PMDzone). Data as of 30 June 2009.

CONFIDENTIAL. THIS DOCUMENT MAY NOT BE REPRODUCED OR COPIED IN ANY FORM.

2008

1H09

Default Rates Reaching Record Levels Default Rate by Principal Amount 10.0% 9.0% 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0%

33

Source: Standard and Poors (PMD Zone) as of 30 June 2009.

CONFIDENTIAL. THIS DOCUMENT MAY NOT BE REPRODUCED OR COPIED IN ANY FORM.

Jun-09

Dec-08

Jun-08

Dec-07

Jun-07

Dec-06

Jun-06

Dec-05

Jun-05

Dec-04

Jun-04

Dec-03

Jun-03

Dec-02

Jun-02

Dec-01

Jun-01

Dec-00

Jun-00

Dec-99

Jun-99

Dec-98

0.0%

BlackRock Private Equity Partners Fund of Funds Market Overview

34 CONFIDENTIAL. THIS DOCUMENT MAY NOT BE REPRODUCED OR COPIED IN ANY FORM.

Historical Commitments to Private Equity Fund of Funds 35000

$32,432

30000 $25,064

$24,912

$ in thousands

25000

$21,611

$20,720

20000 15000

$16,612 $13,067

$12,498

$12,840

$12,441

$11,299 $9,688

$9,345

10000

$7,700

$7,294 $6,800

$5,882

$3,711

$3,577

5000

$8,703

$5,855 $4,145

0 1998

1999

2000

2001

2002

Total Raised by Fund of Funds

2003

2004

2005

2006

2007

Total Raised by the Five Larget Funds of Funds

Source: Private Equity Analyst

35 CONFIDENTIAL. THIS DOCUMENT MAY NOT BE REPRODUCED OR COPIED IN ANY FORM.

2008

Key Fund of Funds Competitors US-based Fund of Funds Managers by AUM

Global Fund of Funds Managers by AUM Rank

Management Firm

AUM ($ Mil)

Rank

Management Firm

AUM ($ Mil)

1

Goldman Sachs Asset Management

31,000

1

Goldman Sachs Asset Management

31,000

2

Credit Suisse Customized Funds

24,000

2

Credit Suisse Customized Funds

24,000

3

Pathway Capital

22,500

3

Pathway Capital

22,500

4

Partners Group

20,700

4

HarbourVest Partners

20,000

5

Capital Dynamics

20,000

5

Adams Street Partners

19,000

6

HarbourVest Partners

20,000

6

JP Morgan Investment

18,000

7

Pantheon Ventures

20,000

7

Commonfund Capital

11,500

8

Adams Street Partners

19,000

8

Horsley Bridge Partners

11,450

9

JP Morgan Investment

18,000

9

AIG Global

11,000

10

LGT Capital

12,500

10

NB Alternatives

10,000

11

Commonfund Capital

11,500

11

Siguler Guff

8,300

12

Horsley Bridge Partners

11,450

12

Morgan Stanley Alternatives

7,500

13

AIG Global

11,000

13

BlackRock Alternative Advisors (PEP)

6,100

14

NB Alternatives

10,000

15

Standard Life Investments

8,563

16

Siguler Guff

8,300

17

Morgan Stanley Alternatives

7,500

18

Sal Oppenheim Private Equity

6,796

19

BlackRock Alternative Advisors (PEP)

6,100

Total Universe # of managers Total AUM (mil)

Global

US-based

107

77

$424,969

$282,272

Of the top 18 managers, only 3 started on/after 1999, making BlackRock PEP a recent entrant to the marketplace. Source: Private Equity Insider, 20 May 2009. Operators of Private Equity Fund of Funds

36 CONFIDENTIAL. THIS DOCUMENT MAY NOT BE REPRODUCED OR COPIED IN ANY FORM.

Key Fund of Funds Market Trends Strategic Partnerships • Large plans (or UHNW family offices) recently entering or greatly expanding exposure to PE •

Targets have staffing limitations ― Need to outsource some discretionary management ― Seek advice on overall PE program ― May wish to develop in-house expertise

• Choose to partner with a firm willing to provide training, transparency and access to broader resources of the firm

37 CONFIDENTIAL. THIS DOCUMENT MAY NOT BE REPRODUCED OR COPIED IN ANY FORM.

Key Fund of Funds Market Trends Specialization • Sophisticated private equity investors with core private equity portfolios already built-out ― Targets may do core investing in-house or else have entrenched third party providers

• Seek discretionary managers for hard-to-access/analyze specialty private equity areas, e.g. ― Venture capital ― Small-market buyouts ― Direct co-investments ― Secondaries

38 CONFIDENTIAL. THIS DOCUMENT MAY NOT BE REPRODUCED OR COPIED IN ANY FORM.

Private Equity Performance Across Market Cycles: • Is The Party Over?

39 CONFIDENTIAL. THIS DOCUMENT MAY NOT BE REPRODUCED OR COPIED IN ANY FORM.

Economic Dislocations Benefit Private Equity, But… First Quartile

(25th

US Buyout Percentile) Vintage Year Returns

50.00 45.00 40.00

First Quartile Net IRR (%)

35.00 30.00 25.00 20.00 15.00 10.00 5.00 0.00 -5.00 -10.00 -15.00 -20.00

19 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 8083

Black Monday

Recession

Asian & Russian Financial Crisis

Dotcom Bubble Burst

9/11

Recession

Vintage Year US Buyout Performance data for US Buyout as of December 31, 2008. VentureXpert Venture Economics Cumulative Vintage Performance Report for US Buyouts, derived on September 3, 2009. Economic or market disruption data from National Bureau of Economic Research retrieved on January 29, 2008.

40 CONFIDENTIAL. THIS DOCUMENT MAY NOT BE REPRODUCED OR COPIED IN ANY FORM.

Credit Bubble

…Primarily in the Top Quartile US Buyout Vintage Year Returns: Net IRR Differential Top Quartile (25th Percentile) vs. Bottom Quartile (75th Percentile) 50.00 45.00 40.00

IRR Spread (%)

35.00 30.00 25.00 20.00 15.00 10.00 5.00 0.00 19 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 8083 Recession

Black Monday

Recession

Asian & Russian Financial Crisis

Vintage Year

Dotcom Bubble Burst

9/11

IRR Spread Performance data as of December 31, 2008. VentureXpert Venture Economics Cumulative Vintage Performance Report for US Buyouts, derived on September 3, 2009. Economic or market disruption data from National Bureau of Economic Research retrieved on January 29. 2008.

41 CONFIDENTIAL. THIS DOCUMENT MAY NOT BE REPRODUCED OR COPIED IN ANY FORM.

Credit Bubble

Commitments to PE Follow the Public Market, But…

S&P 500 Index Value vs. Annual Private Equity Commitments Raised (US Buyouts) 300,000

1,600 1,400

250,000

USD Mil

200,000

1,000

150,000

800 600

100,000

400 50,000

200

0

0 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Black Monday

Recession

Vintage Year

Asian & Russian Financial Crisis

US Buyout Commitments Raised

42

Dotcom Burst

S&P 500 Index Value

S&P 500 Index Value annual year-end index value from 1984-2006 sourced from Bloomberg. VentureXpert Venture Economics Fund Commitments Report for US Buyouts derived on September 3, 2009.

CONFIDENTIAL. THIS DOCUMENT MAY NOT BE REPRODUCED OR COPIED IN ANY FORM.

9/11

Credit Bubble

Index Value

1,200

...Returns and Commitments Are Not Correlated (US) US Buyout First Quartile Percentile) Vintage Year Returns vs. Annual Buyout Funds Raised (25th

300,000

50.00 40.00

250,000

30.00 20.00 150,000 10.00 100,000 0.00 50,000

-10.00

0

-20.00 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Black Monday

Recession

Vintage Year

Asian & Russian Financial Crisis

US Buyout Commitments Raised

Dotcom Burst

9/11

First Quartile IRR

Performance data as of December 31, 2008. VentureXpert Venture Economics Cumulative Vintage Performance Report for US Buyouts and Fund Commitments for US Buyout Funds, derived on September 3, 2009. Economic or market disruption data from National Bureau of Economic Research retrieved on January 29, 2008.

43 CONFIDENTIAL. THIS DOCUMENT MAY NOT BE REPRODUCED OR COPIED IN ANY FORM.

Credit Bubble

IRR (%)

USD Mil

200,000

Our Response to Current Market Conditions • While the market is correcting, there is more to come ― Prices are still high ― Leverage is difficult to find ― Default rates—after an extended period below historical levels— are rising quickly • Helped by “covenant-lite” structures • Distress will come when borrowers default on Interest and/or when refinancing comes due in 2013-2014

• Things will likely get worse before they get better

44

The information and opinions expressed are those of Private Equity Partners as of September 12, 2008 and do not necessarily reflect the views of BlackRock as a whole, or of any other group within BlackRock.

CONFIDENTIAL. THIS DOCUMENT MAY NOT BE REPRODUCED OR COPIED IN ANY FORM.

Private Equity Conclusions • As always, take a diversified, long-term approach to private equity investing ― Diversifying by region, investment focus, vintage year, industry and manager helps to mitigate market risk ― Be positioned to sell into hot markets and buy into markets currently out-of-favor

• Invest with quality PE firms that demonstrate buying discipline ― In volatile periods, top-performers significantly outperform

• While we don’t “time the market” history suggests we are entering a prime buying opportunity ― Falling asset prices 45 CONFIDENTIAL. THIS DOCUMENT MAY NOT BE REPRODUCED OR COPIED IN ANY FORM.

Outlook For Future Private Equity Returns • Private Equity returns will still outperform public markets •

Private Equity industry returns will come down ― Magnitude will vary across segments ― Capital calls will slow ― Distributions become a trickle ― Holding periods increase

•

Gap between top performers vs. average performers vs. poor performers will widen The views expressed are those of Private Equity Partners and do not necessarily reflect the view of BlackRock as a whole, or of any other group within BlackRock. The information and opinions expressed are as of September 1, 2009, and may change as subsequent conditions vary. The information and opinions contained in this material are derived from proprietary and non-proprietary sources deemed by BlackRock to be reliable, are not necessarily all inclusive and are not guaranteed as to accuracy. There is no guarantee that any forecasts made will come to pass. Reliance upon information in this material is at the sole discretion of the reader.

46 CONFIDENTIAL. THIS DOCUMENT MAY NOT BE REPRODUCED OR COPIED IN ANY FORM.

Outlook For Future Private Equity Returns • FAS 157 will introduce additional volatility into Private Equity returns in the US •

Average premium over public markets will narrow ― But could vary by segment

•

Conclusion: — Private Equity is still an attractive option compared to broader financial markets — It is still important today to be with people who have the experience and proven track record

The views expressed are those of Private Equity Partners and do not necessarily reflect the view of BlackRock as a whole, or of any other group within BlackRock. The information and opinions expressed are as of September 1, 2009, and may change as subsequent conditions vary. The information and opinions contained in this material are derived from proprietary and non-proprietary sources deemed by BlackRock to be reliable, are not necessarily all inclusive and are not guaranteed as to accuracy. There is no guarantee that any forecasts made will come to pass. Reliance upon information in this material is at the sole discretion of the reader.

47 CONFIDENTIAL. THIS DOCUMENT MAY NOT BE REPRODUCED OR COPIED IN ANY FORM.

BlackRock

Private Equity Partners

48 CONFIDENTIAL. THIS DOCUMENT MAY NOT BE REPRODUCED OR COPIED IN ANY FORM.