GLOBAL ALTERNATIVE CASE STUDY How Carlyle Creates Value Deep industry expertise. Global scale and presence. Extensive network of Operating Executives. And a wealth of investment portfolio data; we call it The Carlyle Edge. These are the four pillars of Carlyle’s value creation model. By leveraging these core capabilities and resources—Carlyle has established a 26-year overall track record of investing in companies, working to make them better and serving our investors’ needs.

Despite difficult economic conditions, Carlyle helped philosophy to triple its retail distribution and nearly double its weekly production between 2007 and 2010, resulting in strong, highly profitable growth.

AT A GLANCE About Philosophy and the Transaction The Carlyle Group invested in philosophy, Inc. in March 2007 and exited the philosophy, Inc. investment through a sale to Coty Inc., a global beauty company, in December 2010. philosophy was founded in 1996 and is a developer, manufacturer and Industry: Consumer & Retail marketer of premium skin care, fragrance, bath & body care and cosmetics products. During Carlyle’s ownership, philosophy more than tripled its retail dis- Region/Country: tribution footprint, nearly doubled its average weekly production and increased Fund: Carlyle Partners IV, L.P. employment. Acquired: March 2007

Status: Exited Key Value Creation Metrics • Assembled an experienced senior management team with in-depth industry and functional experience and created new key positions to support chan- nel expansion and to enhance product development processes. • Improved production planning capabilities and customer service levels through new systems and a new logistics center in Phoenix, AZ. • Upgraded philosophy.com, the Company’s most profitable sales channel, to improve the customer interface and to support greater transaction volume. • Completed a targeted retail expansion strategy focused on growing philoso- phy’s presence in attractive retail channels. • During Carlyle’s ownership, the Company increased retail distribution by 3.5x and more than doubled brand awareness.

THE CARLYLE GROUP 1001 PENNSYLVANIA AVENUE, NW WASHINGTON, DC 20004-2505 202-729-5626 WWW.CARLYLE.COM Building a Scalable Organization During our ownership, Carlyle worked with philosophy to strengthen the man- increase agement team and grow the organization. To support product development 30% and channel expansion efforts, Carlyle helped to recruit additional managerial With Carlyle’s assistance, talent, including philosophy’s first Chief Creative Officer, Head of E-Commerce and Vice President of Integrated Marketing. The Company also increased capital philosophy’s retail distribution spending to integrate a new Oracle enterprise resource planning system and to increased by more than 30% in redesign the Company’s website to manage larger order flow, creating a better 2010, despite challenging market customer experience. Further, philosophy made strategic real estate investments conditions. in Phoenix, AZ, opening a new logistics center with double the capacity of the previous facility at a lower cost.

Managing the Business Through the Recession and Positioning it for Growth Soon after Carlyle’s investment, the economic environment weakened, causing a sharp contraction in consumer spending. The adverse economic outlook in 2008 ABOUT THE CARLYLE GROUP translated into weaker-than-expected sales and negatively impacted philosophy’s The Carlyle Group (: CG) is a global alternative asset manager with $185 billion of profitability. Despite the difficult economic conditions, the Company remained across 122 funds focused on product development, operational improvements and expanding and 81 vehicles as of September retail distribution. 30, 2013. Carlyle’s purpose is to invest wisely and create value on behalf of its investors, Beginning in 2009, the Company’s investments in people, product and infra- many of whom are public pensions. Carlyle structure began to yield results despite the continued depressed economic envi- invests across four segments – Corporate ronment. In 2010, CEO Ken Stevens and his management team launched a highly , Real Assets, Global Market successful new line of anti-aging products called Miracle Worker. Miracle Worker Strategies and Solutions – in Africa, Asia, Australia, Europe, the Middle East, North was one of the most successful and coordinated product launches in Company America and South America. Carlyle has history, resulting in record first-year sales results. Management also continued with expertise in various industries, including: its international expansion strategy in 2010, bringing philosophy to continental aerospace, defense & government services, Europe through QVC Germany and Sephora France retail stores. consumer & retail, energy, , healthcare, industrial, technology & business Investments in analytical systems in 2008 and 2009 facilitated improvements services, & media and in production planning and customer service levels. The Company’s improved transportation. The Carlyle Group employs planning capabilities and increased production capacity allowed philosophy to more than 1,450 people in 34 offices across six continents. expand its retail distribution presence by over 30% in 2010. The Company also

Carlyle believes these selected case studies should be considered deepened its relationships with key customers such as Sephora and Ulta, specialty as a reflection of Carlyle’s investment process, and references to these particular portfolio companies should not be considered a beauty retailers in the United States. While maintaining high service levels with its recommendation of any particular security, investment, or port- folio company. The information provided about these portfolio other retail partners, philosophy placed its full product line in more than 300 Ulta companies is intended to be illustrative, and is not intended to be used as an indication of the current or future performance of locations during the year, a six-fold increase from 2009. philosophy’s consistently Carlyle’s portfolio companies. The investments described in the selected case studies were not made by any single fund or other strong performance and exciting product launches were acknowledged in 2010 as product and do not represent all of the investments purchased or sold by any fund or other product. The information provided in the Company was awarded the Vendor of the Year accolade by its important retail these case studies is for informational purposes only and may not be relied on in any manner as advice or as an offer to sell or a solic- partner, QVC. itation of an offer to buy interests in any fund or other product sponsored or managed by Carlyle or its affiliates. Any such offer or solicitation shall only be made pursuant to a final confidential private placement memorandum, which will be furnished to quali- fied investors on a confidential basis at their request.