2011 KKR Investor Day. March 15, 2011

Transcription

1 2011 KKR Investor Day March 15, 2011

2 Legal Disclosures This presentation is prepared for KKR & Co. L.P. (NYSE: KKR) for the benefit of its public unitholders. This presentation is solely for informational purposes in connection with evaluating the business, operations and financial results of KKR & Co. L.P. and its consolidated subsidiaries (collectively, KKR ). Any discussion of specific KKR entities is provided solely to demonstrate such entities role within the KKR organization and their contributions to the business, operations and financial results of KKR & Co. L.P. This presentation is not and shall not be construed as an offer to purchase or sell, or the solicitation of an offer to purchase or sell, any securities, any investment funds, vehicles or accounts, any investment advice, or any other service by any KKR entities, including Kohlberg Kravis Roberts & Co. L.P., KKR Asset Management LLC or KKR Capital Markets LLC. Nothing in this presentation constitutes the provision of any tax, accounting, financial, investment, regulatory, legal or other advice by KKR or its advisors. This presentation may not be referenced, quoted or linked by website, in whole or in part, except as agreed to in writing by KKR & Co. L.P. This presentation contains certain forward-looking statements pertaining to KKR, including certain investment funds, vehicles and accounts that are managed by KKR. Forward-looking statements relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. These forward-looking statements are based on KKR s beliefs, assumptions and expectations of future performance, taking into account all information currently available to it. These beliefs, assumptions and expectations can change as a result of many possible events or factors, not all of which are known to KKR or are within its control. If a change occurs, KKR s business, financial condition, liquidity and results of operations, including but not limited to assets under management, fee paying assets under management, fee related earnings, economic net income, committed dollars invested, uncalled commitments and book value, may vary materially from those expressed in the forward-looking statements. The following factors, among others, could cause actual results to vary from the forward-looking statements: the general volatility of the capital markets; failure to realize the benefits of or changes in KKR's business strategies; availability, terms and deployment of capital; availability of qualified personnel and expenses of recruiting and retaining such personnel; changes in the asset management industry, interest rates or the general economy; underperformance of KKR's investments and decreased ability to raise funds; and the degree and nature of KKR s competition. KKR does not undertake any obligation to update any forward-looking statements to reflect circumstances or events that occur after the date on which such statements were made except as required by law. In addition, KKR s business strategy is focused on the long-term and financial results are subject to significant volatility. Additional information about factors affecting KKR, including a description of risks that may be important to a decision to purchase or sell any common units of KKR & Co. L.P., can be found in KKR & Co. L.P. s Annual Report on Form 10-K filed with the SEC and its other filings with the SEC, which are available at The statements contained in this presentation are made as of March 10, 2011, unless another time is specified in relation to them, and access to this presentation at any given time shall not give rise to any implication that there has been no change in the facts set forth in this presentation since that date. All financial information in this presentation is as of December 31, 2010 unless otherwise indicated. Certain information presented in this presentation have been developed internally or obtained from sources believed to be reliable; however, KKR does not give any representation or warranty as to the accuracy, adequacy, timeliness or completeness of such information, and assumes no responsibility for independent verification of such information. For additional important information, please see the section entitled Important Information located in Appendix III at the end of this presentation. 2

3 Table of Contents Presentations Page Number Welcome 4 Introduction 7 Private Equity Overview 13 North American Private Equity 32 European Private Equity 45 Asian Private Equity 56 Driving Value 71 Energy & Infrastructure 87 Global Public Affairs 109 Business Development & Strategy 117 KKR Asset Management 128 KKR Capital Markets 144 Client & Partner Group 159 Financial Overview 172 Positioning KKR for the Future 186 Appendices Appendix I: Supplemental Financial Information 202 Appendix II: Speaker Biographies 214 Appendix III: Important Information 224 3

4 4 Welcome

5 Unit Price Performance Since KKR/KPE Combination 100% KKR Total Return (1) : 88% SPX Total Return: 26% Performance % Price Since Performance KPE Transaction 80% 60% 40% 20% 0% KKR Public on Euronext KKR Relists on NYSE 5-20% 9/30/ /30/2009 3/30/2010 6/30/2010 9/30/ /30/2010 Note: Stock price performance as of 3/10/2011. Past performance is no guarantee of future results. See Important Information for additional disclosures. (1) Incorporates dividends paid up to 3/10/2011.

6 Agenda for the Day Time Presentation Presenter(s) Location 8:00 AM Welcome 8:05 Introduction 8:35 Private Equity Overview 8:50 North American Private Equity 9:05 European Private Equity 9:20 Asian Private Equity 9:35 Driving Value Scott C. Nuttall Global Head of Capital and Asset Management George R. Roberts and Henry R. Kravis Co-Founders, Co-Chairmen, and Co-CEOs Alexander Navab Co-Head of North American Private Equity Michael W. Michelson Co-Head of North American Private Equity Johannes P. Huth Head of KKR Europe Joseph Y. Bae Head of KKR Asia Dean B. Nelson Global Head of KKR Capstone Cotillion Room Cotillion Room Cotillion Room Cotillion Room Cotillion Room Cotillion Room Cotillion Room 10:05 Break Regency Room 10:25 Energy & Infrastructure 10:55 Global Public Affairs 11:10 Business Development & Strategy 11:30 KKR Asset Management Marc S. Lipschultz Global Head of Energy and Infrastructure Kenneth B. Mehlman Global Head of Public Affairs Scott C. Nuttall Global Head of Capital and Asset Management William C. Sonneborn Global Head of KKR Asset Management Cotillion Room Cotillion Room Cotillion Room Cotillion Room 12:15 PM Lunch Wedgwood Room 1:20 KKR Capital Markets 1:50 Client & Partner Group 2:20 Financial Overview Craig J. Farr Global Head of KKR Capital Markets Suzanne O. Donohoe Global Head of the Client & Partner Group William J. Janetschek Chief Financial Officer Cotillion Room Cotillion Room Cotillion Room 3:05 Break Regency Room 3:25 Positioning KKR for the Future Todd A. Fisher Chief Administrative Officer Cotillion Room 3:55 Q&A Management Team Cotillion Room 5:00 Cocktail Reception Wedgwood Room 6

7 Introduction George R. Roberts 7

8 Introduction Henry R. Kravis 8

9 Our Reporting Segments Private Markets $46 bn AUM Private Equity Natural Resources Infrastructure Public Markets $15 bn AUM Liquid Credit Mezzanine Special Situations Equity Strategies Capital Markets & Principal Activities $4.8 bn of investments Capital Markets Balance Sheet Note: 9 Figures as of 12/31/2010. See Important Information for our calculation of assets under management.

10 How Unitholders Participate in Our Success Fee Related Earnings Significant recurring portion Carried Interest Substantial upside opportunity from profit participation Balance Sheet Investment Income Substantial upside opportunity from 100% of investment gains 10

11 Prospects for Growth k Evolving and Growing Building and Scaling Private Equity Liquid Credit Natural Resources/ Infrastructure Mezzanine/ Special Situations Long/Short Equity 11

12 Macro Trends Augmenting Our Opportunities Investors seeking return More dollars allocated to alternatives Consolidation of general partner relationships 12

13 Private Equity Overview Alexander Navab 13

14 Private Equity Overview Leading Global Franchise Strong Historical Returns Distinctive Strategy and Resources 34 years, 185+ investments, $49+ bn of equity deployed Highly experienced investment team $28 bn raised across last fundraising cycle with $11+ bn dry powder today 2.4x gross MOIC, 26% gross IRR, and 20% net IRR on fully invested funds (1) S&P 500 outperformance of 7.6% on a net basis across 16 private equity funds raised since firm s inception Vast global sourcing network Substantial resources in operations, capital markets, and stakeholder management, plus senior advisors Use of firm-wide brain to find and act on ideas Aligned with Investors Biggest investor in our own funds and deals with over $6 bn invested or committed (2) Note: Data as of 12/31/2010. Past performance is no guarantee of future results. See Important Information for details regarding returns and indices. (1) Fully invested funds include the 1976 Fund through the European Fund II. (2) Includes over $5 bn of balance sheet capital invested in or committed to our funds and transactions and $1 bn of personal investments by KKR principals. 14

15 Growing Private Equity AUM Global franchise with $45 bn in AUM Over $11 bn in dry powder $31.9 bn 21% CAGR $36.5 bn $31.8 bn $38.8 bn $44.8 bn $14.4 bn $19.7 bn Invested Dry Powder Note: 15 See Important Information for our calculation of assets under management.

16 Decades of Experience and Decades Investing Together Deep, tenured team with extensive experience Private Equity Investment Committee: over 30 years average industry experience per member for a total of nearly 250 years of experience Members, Managing Directors, Directors: 22 years average experience KKR Capstone: founded in 2000; deep operational/managerial experience Additional resources: 30 senior advisors globally; stakeholder engagement through Global Public Affairs; capital markets expertise through KKR Capital Markets Private Equity Investment Professionals KKR Capstone Note: 16 KKR Capstone is owned and controlled by its senior management and not KKR.

17 History of Innovation and Creativity First Billion-Dollar Buyout First Public Company Buyout by Tender Offer Largest Buyouts Across Many Regions Worldwide (1) Pioneer in Complex Industries (1) Examples include, among others, the largest completed North American buyout (Energy Future Holdings), European buyout (Alliance Boots), and South Korean buyout (Oriental Brewery). 17

18 Strong Historical Performance 26% gross and 19% net IRRs since 1976 inception Outperformed S&P 500 by ~8% on a net basis 3.3x multiple of invested capital for realized/partially realized investments (1) No fully realized funds have returned less than a 2.0x multiple of capital Realized/Partially Realized (1) All Investments 95 companies 152 companies 2.0x 3.3x $98 bn $64 bn $49 bn $19 bn Capital Invested Value Realized Capital Invested Total Value Note: Data includes all private equity funds since inception. Past performance does not guarantee future results. See Important Information for additional disclosures. (1) Capital invested and value realized are based on fully realized investments, the realized portion of partially realized investments, and written-off investments through 12/31/2010. Value realized does not include dividends received from companies where KKR has not sold any portion of its original equity. 18

19 Performance in Periods of Dislocation Period 3-Year % Change in S&P 500 KKR Net IRR S&P 500 (1) IRR KKR Outperformance Great Recession 9/11 & corporate scandals (e.g., Enron, WorldCom) Largest one-day percentage drop in DJIA % 16.0% 7.3% 8.7% % 2.3% -1.3% 3.6% % 0.5% -1.3% 1.8% % 2.8% -1.0% 3.8% % 17.3% 2.4% 14.9% % 37.9% 7.6% 30.3% % 26.1% 7.5% 18.6% % 15.6% 2.7% 12.9% % 6.4% -0.6% 7.0% % 19.0% 14.9% 4.1% % 6.0% 11.9% -5.9% % 29.7% 13.0% 16.7% % 28.0% 18.4% 9.6% % 25.1% 18.1% 7.0% % 32.9% 15.9% 17.0% Note: The table above presents net internal rates of returns calculated as of 12/31/2010 for KKR private equity investments that were made during threeyear periods in which the S&P 500 returned less than 10%. Internal rates of return are computed on a dollar-weighted basis, which takes into account the timing of cash flows, the amounts invested at any given time and unrealized values as of the valuation date. KKR Net IRR is calculated after the general partner s profit participation. Past performance is no guarantee of future results. Please see Important Information for additional disclosures. (1) Market indices include dividends reinvested. The market index returns assume that on the day a portfolio investment is made, a hypothetical investment in a matching amount is made in the given index. For each date on which either a portion or all of the portfolio investment is sold, a hypothetical index multiple (factor) is calculated by comparing the change in index value between the two dates. The cost of the investment sold (or portion of cost sold) is multiplied by this factor, resulting in a hypothetical index value. The return is calculated using these dates of investment and hypothetical value(s) generated. 19

20 Portfolio Built on Patient, Selective Investing Thoughtful investment process means a small fraction of evaluated investments are made Other business lines Senior advisors Industry expertise KKR relationships ~900 investments evaluated in 2010 Prioritization by industry team ~320 investments discussed at Investment Committee (1) Iteration with Investment Committee and involvement of KKR Capstone, Capital Markets, Public Affairs 16 completed (2) Note: Data represents global private equity deal flow for 2010; includes a small number of opportunities related to infrastructure transactions. (1) Most investments are presented to the Investment Committee numerous times throughout the diligence process; however, this count includes each unique investment opportunity once and does not include subsequent presentations. (2) Includes transactions announced or closed in

21 Sourcing Network Leads to Unique Opportunities Strong reputation, decades of relationship-building, and resources valued by management teams yield investments not available to others Limited Process (1) 35% Proprietary 48% 21 Auction 17% Note: Data in the chart above reflects all private equity investments announced or completed from the inception of the Millennium Fund in 2002 through (1) Limited process is defined as three or fewer parties, including KKR.

22 Expertise Across Transaction Sizes Over 90% of our 185+ private equity transactions have had transaction values less than $5 bn; ~80% less than $2 bn (1) All Transactions by Enterprise Value (1) Current Portfolio by Type (2) $10-20 bn 3% $5-10 bn 3% >$20 bn 3% $2-5 bn 11% JV/Growth/ Structured Equity 29% Large Buyout (>$5 bn) 21% $1-2 bn 16% <$1 bn 64% Small to Medium Buyout (<$5 bn) 50% (1) Includes announced and completed transactions from inception to 12/31/2010. (2) Reflects portfolio as of 12/31/

23 Global Portfolio 62 Companies ~$200 bn in Aggregate Annual Revenue ~900,000 Employees 15 Industries 18 Countries Bharti Infratel Modern Dairy Hilcorp Resources TC Energy KKR Debt Investors Note: 23 Portfolio companies as of 12/31/2010 in funds subsequent to the 1996 Fund, which was not contributed to KKR in the Combination Transaction. Excludes Weld North and RPM Energy Partners, two companies to which KKR has committed capital but which have not yet been funded.

24 Strong Operating Performance at Portfolio Aggregate Portfolio Revenue Aggregate Portfolio EBITDA 7% 15% $191 bn $204 bn $38 bn $33 bn Note: 24 Includes all portfolio companies as of 12/31/2010 in funds subsequent to the 1996 Fund, which was not contributed to KKR in the Combination Transaction. Data for last 12 months ended 12/31/2010 except for portfolio companies with publicly traded securities which have non-calendar fiscal years, in which case last 12 months data as of the latest reported fiscal quarter is shown. Data not included for CICC, Dalmia Cement, El Paso Midstream, Hilcorp Resources/TC Energy, KKR Debt Investors, Rundong Auto Group, Tianrui, VATS, and Visma either because these are recent investments/data is not available or because metrics are not relevant. Past performance is no guarantee of future results.

25 Focus on Capital Structure Leverage reductions driven by increased cash flow, debt paydown, and refinancings Aggregate Portfolio Deleveraging $46 bn refinanced across global KKR portfolio in 2009 and % ~80% of portfolio maturities due in 2014 and thereafter 5.5x 4.8x Note: 25 Chart reflects net debt/ltm EBITDA for all portfolio companies as of 12/31/2010 in funds subsequent to the 1996 Fund, which was not contributed to KKR in the Combination Transaction. As of 12/31/2010 except for public portfolio companies with non-calendar fiscal years, in which case data as of the latest reported fiscal quarter is shown. Data not included for CICC, Dalmia Cement, El Paso Midstream, Hilcorp Resources/TC Energy, KKR Debt Investors, Rundong Auto Group, Tianrui, VATS, and Visma either because these are recent investments/data is not available or because metrics are not relevant. Past performance is no guarantee of future results.

26 Our Post-Investment Approach: Drive Value Industry Expertise Extensive understanding Strong networks Portfolio Management Oversight and monitoring Experienced senior advisors Global Public Affairs Active management of responsibilities to stakeholders Global Resources Drive Value KKR Capstone 100-Day Plans Active value creation KKR Capital Markets Acquisition financing and syndication assistance Exit and strategic refinancing plans 26

27 Recent Momentum LP Dollars Invested (1) $3.1 bn $3.2 bn Cash Back to LPs $3.6 bn $1.4 bn $0.5 bn $0.8 bn Increases in Fund Values Relative 2010 Performance 33% 47% 48% 51% 39% 26% 29% 15% (1) Limited partner private equity dollars invested, including follow-on investments. Excludes bridge and recyclable capital. See Important Information for additional disclosures. (2) The general partner of the 1996 Fund was not contributed to KKR in the Combination Transaction, and KKR will not benefit from its investment returns. 27 (2) 1996 European Millennium European II 2006 Asian 2% European III KKR PE Funds Gross S&P 500

28 Monetization Events Continuing in 2011 Over $2 bn in limited partner distributions from 2011 activity IPO Secondary Strategic Sale Tianrui (1) Avago Nielsen Maxeda (2) DSD Seven Media (1) Legrand HCA Note: Past performance is no guarantee of future results. Portfolio companies identified above may not be representative of the entire portfolio, and results may not be typical. Distributions from certain of these transactions may not generate distributable cash carry to KKR unitholders. (1) Partial sale. (2) Strategic sale of Fashion division. 28

29 Post-Recession Story Playing Out We are optimistic about the current deal environment Off to a strong start with investments made in the last three years New Investments, 2008 to 2010 (1) $6.8 bn of equity invested 1.3x gross MOIC 21% gross IRR $9.1 bn of value (1) As of 12/31/2010. Includes all initial and follow-on investments made in transactions completed between 1/1/2008 and 12/31/2010; does not include any follow-ons in transactions whose original investment occurred prior to 1/1/2008. Past performance is no guarantee of future results. See Important Information for details regarding return calculations. 29

30 Significant Levers for Continued Growth Proven record of developing our business to capture increasing volume of investment activity and better serve our investors Meaningful Regional Successor Funds Strategy-Specific Funds Regional Expansion Successor funds to each regional fund North America Asia Europe Strategy-specific funds capitalizing on market trends China Growth Exploring opportunities in Latin America 30

31 Well Positioned to Capitalize on a Strong PE Environment Long history of innovation and growth Proven team Strong returns Differentiated approach World-class portfolio $11+ bn of dry powder Strong and accelerating momentum Recovering economy Open credit markets Strengthening equity markets Attractive fundamentals for private equity on a global basis Great opportunity for KKR in private equity 31

32 North American Private Equity Michael W. Michelson 32

33 Bright Prospects in North America Resource Depth and Breadth Experience and Results Attractive Environment 33

34 North American Private Equity Team Deep team of 89 investment and operating professionals with $25 bn of AUM More than three decades of experience investing in North America Extensive additional resources through KKR Capital Markets, Global Public Affairs, senior advisors, and the Client & Partner Group North American PE Investment Professionals North American KKR Capstone Team Note: 34 As of 12/31/2010. KKR Capstone is owned and controlled by its senior management and not KKR.

35 Deep Industry Expertise Facilitates in-depth industry knowledge and a network of industry experts Enables us to create proprietary investment opportunities Consumer Products Energy & Infrastructure Financial Services Helps identify trends early so we can capitalize on emerging investment themes Industrials Healthcare Allows us to see value creation opportunities others do not Media & Communications Retail Technology Note: 35 Portfolio companies identified above may not be representative of the entire portfolio.

36 Sourcing Model ~450 North American investment opportunities evaluated in-depth in 2010 ~200 discrete opportunities discussed with the PE Investment Committee (1) 5 investments committed to or closed (2) >70% of opportunities reviewed at IC were proprietary or limited process (3) By Sourcing By Size By Industry Energy 10% Retail 10% Auction 29% <$1 bn 45% $1-5 bn 44% Financials 9% Industrial 7% Healthcare 11% Infra 3% Proprietary or Limited Process 71% (3) >$5 bn 11% Other 4% Media & Comm. 23% Consumer 11% Tech 12% Note: Data represents North America private equity deal flow for 2010; includes a small number of opportunities related to infrastructure transactions. Pie charts based on all opportunities evaluated. (1) Most investments are presented to the Investment Committee numerous times throughout the diligence process; however, this count includes each unique investment opportunity once and does not include subsequent presentations. (2) Includes transactions announced or closed in (3) Limited process is defined as three or fewer parties, including KKR. 36

37 Current North American Private Equity Portfolio Strong portfolio of world-class franchises (1) Hilcorp Resources TC Energy KKR Debt Investors Note: Portfolio companies identified above may not be representative of the entire portfolio, and results from these companies may not be typical. (1) North American portfolio companies as of 12/31/2010 in funds subsequent to the 1996 Fund, which was not contributed to KKR in the Combination Transaction. Excludes Weld North and RPM Energy Partners, two companies to which KKR has committed capital but which have not yet been funded. 37

38 Portfolio Performance Driven by Strong Operations Team Aggregate Revenue ~70% of portfolio companies increased revenue Aggregate EBITDA ~85% of portfolio companies increased EBITDA Aggregate Leverage (1) ~72% of portfolio companies decreased net leverage 3% 10% -9% $122 bn $125 bn $22 bn $24 bn 6.0x 5.5x Note: Includes all North American portfolio companies as of 12/31/2010 in funds subsequent to the 1996 Fund, which was not contributed to KKR in the Combination Transaction. Data for last 12 months ended 12/31/2010 except for portfolio companies with publicly traded securities which have noncalendar fiscal years, in which case last 12 months data as of the latest reported fiscal quarter is shown. Data not included for El Paso Midstream, Hilcorp Resources/TC Energy, and KKR Debt Investors either because these are recent investments/data is not available or because metrics are not relevant. Past performance is no guarantee of future results. See Important Information for additional disclosures. (1) Reflects net debt/ltm EBITDA. 38

39 Focus on Improving Capital Structures North American portfolio companies refinanced ~$43 bn of debt in 2009 and 2010 ~84% of debt now matures in or after 2014 Size (mm) Description $760 Revolver, Senior Notes $8,398 Amend & Extend, Bonds $5,087 Amend & Extend, Loan, Notes, Tender Offer $1,400 Amend & Extend, Tender Offer $6,311 ABL Extension, Senior Notes $498 Complete Recapitalization $4,670 Amend & Extend $1,550 Amend & Extend, Dividend Recapitalization $7,546 Senior Notes, Exchange Offer $6,500 Amend & Extend, Bonds Note: 39 Portfolio companies identified above may not be representative of the entire portfolio, and results may not be typical. Past performance is no guarantee of future results.

40 Strong Long-Term Track Record ~$22.5 bn invested through nine mature private equity funds in North America (1) 26.1% gross IRR and 2.8x gross MOIC across these funds Every mature fund has generated a gross MOIC of 2.0x or greater North American Private Equity Returns Since Inception (1) 26.1% 19.9% 12.8% 12.4% KKR North American PE Funds Gross KKR North American PE Funds Net S&P 500 (2) Russell 3000 (2) Note: Returns reflect performance from inception through 12/31/2010. Past performance does not guarantee future results. MOIC stands for multiple of invested capital. See Important Information for additional disclosures. (1) KKR s mature North American private equity funds are those which have been fully invested and include the 1976, 1980, 1982, 1984, 1986, 1987, 1993, 1996, and Millennium Funds. (2) Includes reinvestment of dividends. 40

41 Recent Performance Recent North American fund outperformance translates into ~$11 bn in incremental value versus the same amounts invested in the S&P 500 Outperformance vs. S&P 500 (1) 1517 bps 1065 bps 662 bps (1) All data as of 12/31/2010. Past performance is no guarantee of future results. See Important Information for more details. (2) The general partner of the 1996 Fund was not contributed to KKR in the Combination Transaction, and KKR will not benefit from its investment returns. (3) Includes reinvestment of dividends. See Important Information for additional disclosures. 41 (2) 1996 Fund Millennium Fund 2006 Fund Net IRR: 13.30% 18.35% 4.31% S&P 500 (3) : 2.65% 3.18% (2.31%) Gross MOIC: 2.07x 1.97x 1.22x

42 2010 Valuation Changes Significant outperformance in active North American private equity funds during 2010 $3.3 bn of distributions from the 1996, Millennium, and 2006 Funds in % 26.5% 28.7% 15.1% (1) 1996 Fund Millennium Fund 2006 Fund S&P 500 (2) (1) The general partner of the 1996 Fund was not contributed to KKR in the Combination Transaction, and KKR will not benefit from its investment returns. (2) Includes reinvestment of dividends. See Important Information for additional disclosures. 42

43 Attractive Fundamentals for Buyouts Great macro backdrop for private equity Attractive Credit Markets Reasonable Equity Valuations $481 bn Leveraged Loan Issuance $536 bn High Yield Issuance (1) (1) 30x S&P 500 Trailing Price-to-Earnings Ratio (2) 25x $144 bn $155 bn $144 bn $69 bn $75 bn $166 bn $287 bn $234 bn 20x 15x Companies Priced Off Trough Earnings 10x Dec-90 Dec-95 Dec-00 Dec-05 Dec-10 Worst of Recession Over 90 Annual S&P 500 Operating Earnings (3) 65 Consumer Confidence (4) Note: Historic market trends may not be predictive of future market performance or results. (1) S&P LCD News, (2) Bloomberg. (3) Standard & Poor s, February (4) Morgan Stanley research, December Conference Board University of Michigan 12/2008 6/ /2009 6/ /

44 North American Private Equity: Well Positioned for the Future Resource Depth and Breadth World-class team of professionals Differentiated strengths Experience and Results Impressive track record Strong portfolio Attractive Environment Improving economic and capital markets conditions 44

45 European Private Equity Johannes P. Huth 45

46 Strong European Presence KKR has been investing in Europe since 1996 Private Equity, Infrastructure, Mezzanine, Credit, KKR Capital Markets (KCM), Client & Partner Group, KKR Capstone $15.3 bn of capital in the region (1) Raised four funds with over $15 bn in capital commitments 33 completed European transactions since European operations began in 1996 across 11 industries in 13 countries KKR European investment footprint Note: KKR Capstone is owned and controlled by its senior management and not KKR. (1) Figures as of 12/31/2010. Reflects market value of investments in European funds and companies plus uncalled commitments from European funds. 46

47 Significant Investment Growth in Europe Since 1996 (1) European Private Equity Investments and Commitments Annex Fund European Fund III European Fund II European Fund I European Investments through Other KKR Funds $3.3 bn $3.9 bn 35% CAGR $4.9 bn $4.9 bn $4.8 bn $5.4 bn $11.4 $11.0 $10.8 $10.2 bn bn bn bn $12.9 bn $15.3 bn $0.2 bn $0.4 bn $0.7 bn Note: As of 12/31/2010. Investments and commitments calculated as market value of investments in a given period plus uncalled commitments. European Investments through Other KKR Funds reflects values of European investments made prior to the European funds creation, and other European coinvestments made by global funds subsequent to the European funds establishment. Figures include general partner investments and commitments as well as investments and commitments made by KPE. See Important Information for additional disclosures. (1) Newsquest was KKR s first investment in Europe, occurring in Four investments predate the 1999 inception of the first dedicated European Fund. 47

48 Resource Build-Out Across Europe Private equity and operational professionals supported by broader resources of the firm European KKR Capstone Team European PE Investment Professionals Note: 48 KKR Capstone is owned and controlled by its senior management and not KKR.

49 Deep Industry and Country Expertise Industry and country expertise allows us to see value creation opportunities others do not, and enables us to create proprietary investment opportunities Core European Industries Core Geographic Coverage Business Services Consumer Products and Retail UK France Benelux Energy and Infrastructure Financial Services Industrials, Building Materials, and Chemicals Media and Communications Germany Scandinavia Southern Europe Healthcare Technology Note: 49 As of 12/31/2010. Portfolio companies identified above may not be representative of the entire portfolio.

50 European Portfolio Performance Aggregate Revenue Aggregate EBITDA Aggregate Leverage (1) 13% 20% -24% $60 bn $68 bn $9 bn $11 bn 5.1x 3.9x Note: Includes all European portfolio companies as of 12/31/2010 in funds subsequent to the 1996 Fund, which was not contributed to KKR in the Combination Transaction, except Visma, a recently closed acquisition. Past performance is no guarantee of future results. See Important Information for additional disclosures. (1) Reflects net debt/ltm EBITDA. 50

51 Capital Returned in 2009 and 2010 $1.6 bn returned in 2009 and 2010 across European funds and investments, with a further $1.7 bn expected in the first quarter of 2011 (1) Avago DSD Legrand Maxeda (2) IPO Secondary Strategic Sale Rockwood (3) TDC Note: Past performance is no guarantee of future results. Portfolio companies identified above may not be representative of the entire portfolio, and results may not be typical. Certain distributions from these transactions may not generate distributable cash carry to KKR unitholders. (1) Of capital returned in 2009 and 2010, $1.1 bn was attributable to European funds. Of expected first quarter 2011 distributions, $1.0 bn is attributable to European funds. (2) Strategic sale of Fashion division. (3) Dynamit Nobel, originally a European Fund investment, was merged into Rockwood in July Rockwood remains a partially realized position in the European and 1996 Funds. Please note that the general partner of the 1996 Fund was not contributed to KKR in the Combination Transaction, and KKR will not benefit from these investment returns. 51

52 European Fund Annual Valuation Changes European Fund European Fund II Annex Fund European Fund III 53.2% 47.8% 30.2% 38.9% 27.4% N/A N/A N/A 10.8% 2.2% -35.8% -53.3% Note: 52 Past performance is no guarantee of future results.

53 European Private Equity Performance Since Inception 25.8% KKR Outperformance (1) 15.9% 13.0% 12.0% 2.9% 3.9% KKR European Investments Gross KKR European Investments Net S&P 500 MSCI S&P 500 MSCI Note: Includes the entire European portfolio beginning with the 1996 Newsquest investment through the Annex Fund as of 12/31/2010. Excludes investments in European funds which were made outside of the European region. Past performance is no guarantee of future results. Historic market trends may not be predictive of future market performance or future results. See Important Information for additional disclosures. (1) On net return. 53

54 New Acquisitions in 2009 and 2010 Transaction Value in mm EV/ EBITDA Net Debt/ EBITDA 161 (1) 9.5x (2) N/A (2) x 5.4x 1, x (3) 2.0x $135 (4) 7.1x (4) N/A x 5.4x x 5.0x 1,375 (5) 12.2x 4.2x Note: Portfolio companies identified above may not be representative of the entire portfolio, and results may not be typical. (1) KKR has committed to further investments to support the growth of BMG transactions include Cherry Lane, Stage 3, Evergreen, and Chrysalis. (2) Multiple based on LTM net publisher share ( NPS ). Net debt not relevant due to net cash position. (3) Based on effective entry multiple. Lower effective multiple results from vendor note. (4) Follow-on investment related to KKR portfolio company Northgate s acquisition of Convergys. (5) Transaction value of NOK 11,000 mm. 54

55 European Summary 2010 macroeconomic recovery more positive than expected European Portfolio Improving (1) Accelerating Distributions and Investments 2011 Outlook Appears Positive European Fund: 2.8x from 2.5x at YE 2009 Europe II: 0.9x from 0.7x at YE 2009 Europe III: 1.0x from 0.7x at YE 2009 Returned $1.6 bn in 2009 and 2010 (2) ~$1.7 bn expected to be distributed in first quarter of 2011 (2) Invested $2.2 bn in Europe during 2009 and 2010 Macroeconomic environment Portfolio companies New transactions Note: Historic market trends may not be predictive of future market performance or results. (1) As of 12/31/2010. (2) Across European funds and investments. Of capital returned in 2009 and 2010, $1.1 bn was attributable to European funds. Of expected first quarter 2011 distributions, $1.0 bn is attributable to European funds. Certain distributions from these transactions may not generate distributable cash carry to KKR unitholders. 55

56 Asian Private Equity Joseph Y. Bae 56

57 History of KKR Asia KKR Asia begins operation; Hong Kong office opens Sydney office opens; $4.0 bn Asian Fund raised Mumbai office opens China Growth Fund reaches $1.0 bn hard cap Tokyo office opens Beijing office opens; KKR Capstone, Capital Markets, and Client & Partner Group begin in Asia Seoul office opens 57

58 KKR Asia Team Experienced local investment teams with established track records are integrated with KKR s global industry teams 6 regional offices 41 private equity investors 11 KKR Capstone professionals Generalists 8 KKR Capstone Greater China-Focused 14 Private Equity 3 KKR Capstone India-Focused 7 Private Equity Korea-Focused 4 Private Equity SE Asia-Focused 5 Private Equity Japan-Focused 6 Private Equity Australia-Focused 5 Private Equity Note: 58 KKR Capstone is owned and controlled by its senior management and not KKR.

59 Large and Growing Pool of Dedicated Capital to Invest in Asia Asian Private Equity Investments and Commitments 81% CAGR $5.6 bn $5.1 bn $6.2 bn 4.1 $8.4 bn $0.4 bn $1.4 bn Pre-Asian Fund Asian Fund China Growth Fund Note: 59 As of 12/31/2010. Pre-Asian Fund indicates Asian investments made prior to the Asian Fund s creation, and other Asian co-investments made by global funds subsequent to the Asian Fund s establishment. China Growth Fund reached its hard cap of $1 bn subsequent to 12/31/2010. Figures include general partner investments and commitments as well as investments and commitments made by KPE. See Important Information for additional disclosures.

60 Asian Investment Timeline 2005 $427mm 2006 $915mm $424mm $725mm $634mm 2010 $904mm Bharti Infratel Follow-On Follow-On Modern Dairy Pre-Asian Fund Asian Fund China Growth Fund Note: 60 Portfolio companies identified above may not be representative of the entire portfolio, and results may not be typical.

61 Diversified Portfolio By Geography By Industry Australia 12% Korea 11% Japan 4% Singapore 33% Telecom 4% Recruitment 4% Manufacturing 5% Financial 8% Mining 3% Retail 1% Technology 30% India 17% Greater China 23% Media 9% Precision Manufacturing 14% Consumer 21% By Structure (1) Non-Control 30% Control 70% Note: Based on remaining fair value as of 12/31/2010. Portfolio includes all Asian investments across all private equity funds. (1) Control indicates buyout or joint venture transactions where KKR, along with other financial investors if applicable, collectively holds equity ownership of 50% or more. Non-control indicates growth or minority investments. 61

62 Traditional Buyout Investing Core Markets Australia Korea Outsourced logistics services provider to mining sector Multimedia group of TV, magazine, and online properties One of Korea s two major breweries Singapore Designer, developer, and global supplier of fabless semiconductors Precision engineering manufacturer of HDD, non-hdd, and capital equipment Global provider of high-precision components Japan Comprehensive recruitment services provider India Communications industry software solutions provider Note: 62 Portfolio companies identified above may not be representative of the entire portfolio, and results may not be typical.

63 Growth Investing Greater China and India China Leading investment bank Market-leading SME financing company Bharti Infratel India Leading global independent telecom tower company Modern Dairy Dairy group operating large-scale cow farms Leading food and beverage retailer Strong regional cement producer Leading private cement company Leading regional car dealership Taiwan Leading high-end liquor store chain operator World-class passive component provider Note: 63 Portfolio companies identified above may not be representative of the entire portfolio, and results may not be typical.

64 Strong Portfolio Performance Aggregate Revenue Aggregate EBITDA 2010 Change in Value 51.0% 27% 46% 44.8% $10 bn $3 bn $8 bn $2 bn All Asian Investments Asian Fund Investments Note: 64 Revenue and EBITDA include all Asian investments as of 12/31/2010. Data not included for CICC, Dalmia Cement, Rundong Auto Group, Tianrui, and VATS either because these are recent investments/data is not available or because metrics are not relevant. Past performance is no guarantee of future results. See Important Information for additional disclosures.

65 Asian Investment Performance Operating growth has driven meaningful portfolio appreciation Every investment in the Asian Fund is at or above cost as of YE 2010 Asian Fund All Asian Investments 1.4x 1.7x 1.1x 1.3x YE 2009 YE 2010 YE 2009 YE 2010 Gross MOIC (1) Note: Past performance is no guarantee of future results. (1) See Important Information for details regarding multiples of invested capital. 65

66 Improving Exit Environment IPO Market Trends (1) (bn) Asia IPOs Americas IPOs $174 $37 $100 $84 $74 $71 $53 $60 $48 $49 $53 $38 $32 $ Asia M&A Volume as a Percent of Global M&A Volume (2) 8% 12% 9% 11% 14% 19% 17% Note: Historic market trends may not be predictive of future market performance or results. (1) ECM Analytics. All announced deals as of 12/24/2010. (2) In US dollars per SDC Thomson Financial. Includes all announced M&A deals as of 12/24/2010. Excludes equity carve-outs, exchange offers, and open market purchases.

67 Asia s Increasing Influence on the Global Economy Contribution to Global GDP Growth 6% 4% 2% 0% P 2015P Rest of World China United States Other advanced economies Note: Source: 67 Reflects three-year moving averages. Historic market trends may not be predictive of future market performance or results. International Monetary Fund, World Economic Outlook, April Aggregates are computed on the basis of purchasing-power-parity (PPP) weights.

68 Investment Outlook in Asia Flexible pan-asian capital to capture opportunities across countries Public-to- Privates Structured Minority Australia China India Japan Korea SE Asia Growth Corporate Divestitures Cross-Border M&A Valuation LT Outlook Note: 68 See Important Information for additional disclosures.

69 Asian Private Equity Market Asian private equity industry nascent relative to other regions Growth in small funds focused on non-buyout opportunities Aggregate Asia-Focused PE Funds Asia-Focused PE Funds Raised 19% CAGR $291 bn $266 bn $324 bn Buyout Non-Buyout $137 bn $169 bn $212 bn $15 bn $10 bn $19 bn $13 bn $30 bn $14 bn $36 bn $18 bn $17 bn $8 bn $28 bn $6 bn Source: 69 Year-End Asian Private Equity Review. Historical market trends may not be predictive of future market performance or results.

70 Where Do We Go from Here? Further build out private equity in region Continue focus on portfolio Launch region-specific businesses and raise larger successor funds Support expansion of other parts of firm to Asia to capitalize on opportunities in this high-growth region 70

71 Driving Value Dean B. Nelson 71

72 Operational Improvements are Core Drive returns through operational improvement Transform good companies in good industries into great companies Identifying opportunities is straightforward Implementing them is hard work KKR Capstone partners with management to drive sustained improvement Note: 72 KKR Capstone is owned and controlled by its senior management and not KKR.

73 Revenue Growth Drives Long-Term Returns Double-digit EBITDA growth typically requires revenue growth Primary focus is on growing revenue Portfolio Companies with Revenue Growth >3% per Year 22% 12% 6% Revenue Growth EBITDA Growth IRR Note: 73 Portfolio companies located in Western Europe and the US with annual revenue greater than $500 mm, original investment made between 4/2004 and 7/2007, and little to no change in business portfolio since investment. Portfolio companies included may not be representative of the entire portfolio, and results may not be typical.

74 Our Extensive Experience and Team Size Differentiate Us KKR Capstone is a global team of 59 executives Americas Europe Asia 74

75 Significant Operational Resources One Capstone team and a global approach across seven KKR offices Supported by 30 senior advisors: former CEOs and industry leaders Broad 2010 Portfolio Efforts North America Europe Asia 75

76 We Work Broadly Across the Portfolio KKR Capstone partnered with 90%+ of KKR s portfolio (1) Modern Dairy Note: Portfolio companies identified above may not representative of the entire portfolio, and results may not be typical. (1) Percentage calculated by dollars of KKR equity invested rather than by number of KKR portfolio companies. Includes companies in funds subsequent to the 1996 Fund, which was not contributed to KKR in the Combination Transaction, with greater than $100 mm in revenue at close and where KKR holds a control position, either alone or with other partners. 76

77 The Impact of Operational Improvements Drive Trajectory-Changing Results in the Portfolio Build capability to sustain improvement On-the-ground, months Accountability plus aligned incentives Operational diligence: better investments, immediate ramp-up of value creation $800 million EBITDA impact of projects where we partnered with management in 2010 (1) Broad Range of Cross-Portfolio Services Note: Past performance is no guarantee of future results. (1) Aggregate run-rate EBITDA impact of work performed at portfolio companies during 2010 with direct involvement of KKR Capstone. Company totals based on 2010 financial results, budgeted plans for 2011, management forecasts, and team estimates. 77

78 Value Creation at Dollar General The largest small-box discount retailer in the US Attractive fundamentals KKR invested in 2007 Note: 78 Portfolio company identified above may not be representative of the entire portfolio, and results from this company may not be typical.

79 Dollar General: Key Initiatives Revamped store merchandising Refined pricing strategy and execution Reduced out-of-stocks Improved working capital Improved store standards Reduced shrink Optimized store site selections 79

80 Dollar General: Revamp Private Label Old Products New Products 80

81 Dollar General: Significant Sustained Improvement Revenue Growth Improved Profitability 20% Dollar General Competitor Adjusted EBITDA Margin Capstone involvement begins 440 bps 11.6% 10% 7.2% 0% Q1 '07 Q2 '07 Q3 '07 Q4 '07 Q1 '08 Q2 '08 Q3 '08 Q4 '08 Q1 '09 Q2 '09 Q3 '09 Q4 '09 Q1 '10 Q2 '10 Q3 '10-10% 2007 Q LTM Valued at 3.5x cost at 12/31/2010 Note: 81 Past performance is no guarantee of future results.

82 Value Creation at Oriental Brewery Opportunity #2 player in Korean beer market KKR Capstone key role in diligence KKR invested in Oriental Brewery in 2009 Value Creation New wholesaler management program Consistent sales practices across organization Re-launch of Cass Light brand beer Expanded procurement practices to reduce costs Reduced inventory Note: 82 Portfolio company identified above may not be representative of the entire portfolio, and results from this company may not be typical.

83 Oriental Brewery: Results Market Share Growth 40.6% 350 bps 44.1% Improved Profitability 33.7% EBITDA Margin 110 bps 34.8% FY 2008 FY 2010 FY 2008 FY 2010 Valued at 1.9x (1) cost at 12/31/2010 Note: Past performance is no guarantee of future results. (1) On a US dollar basis. 83

84 Functional Expertise Drives Value in the Portfolio 1 2 Work on-site to drive significant value at specific companies Procurement Information technology Sustainability Biggest value creation opportunities in company-specific efforts Create long-term value by building tools and capabilities at companies Over $330 mm of ongoing benefit from direct procurement efforts Procurement Value Creation: US Foodservice Second-largest food distributor in US 18-month work effort Centralized procurement New tools: quick, easy, repeatable Built a team Results: $100 mm in run-rate savings Note: 84 Portfolio company identified above may not be representative of the entire portfolio, and results from this company may not be typical.

85 Examples of Cross-Portfolio Impact Impactful Range of Cross- Portfolio Services Indirect Sourcing Benefits/Wellness Centralized purchasing across portfolio for improved terms 120+ spend categories from small parcel to medical plans Results $150+ mm in run-rate savings IT Policies/Procurement Sustainability (Environmental Defense Fund partnership) Corporate Insurance Reducing environmental impact and improving efficiency Results Avoided 345K metric tons of greenhouse emissions, 1.2 tons of waste, and 8,500 tons of paper $150+ mm in total cost savings Cross-Portfolio Metrics Management 85

86 Strong Operating Performance at Portfolio Aggregate Portfolio Revenue ~83% of portfolio companies increased revenue Aggregate Portfolio EBITDA ~87% of portfolio companies increased EBITDA 7% 15% $191 bn $204 bn $38 bn $33 bn Note: Includes all portfolio companies as of 12/31/2010 in funds subsequent to the 1996 Fund, which was not contributed to KKR in the Combination Transaction. Data for last 12 months ended 12/31/2010 except for portfolio companies with publicly traded securities which have non-calendar fiscal years, in which case last 12 months data as of the latest reported fiscal quarter is shown. Data not included for CICC, Dalmia Cement, El Paso Midstream, Hilcorp Resources/TC Energy, KKR Debt Investors, Rundong Auto Group, Tianrui, VATS, and Visma either because these are recent investments/data is not available or because metrics are not relevant. Past performance is no guarantee of future results.

87 Energy & Infrastructure Marc S. Lipschultz 87

88 Industry Dynamics Create Enormous Opportunity Compelling outlook for energy investing over the next 10 years Global demand expected to grow substantially over time Strong supply + weak current demand = accelerating and attractive opportunities in 2011 and beyond Global supply composition changing radically Low natural gas prices pressuring energy companies 88

89 Global Energy Demand Expected to Grow Significantly Historical and Projected Global Energy Demand (mmtoe) OECD Non-OECD Note: Source: 89 Historic market trends may not be predictive of future market performance or future results. IEA World Energy Outlook Totals include international marine and aviation bunkers (not included in regional amounts).

90 Oil and Gas Not Produced Where They are Consumed North America Reserves: 5% Consumption: 26% Europe and Eurasia Reserves: 20% Consumption: 27% Middle East Reserves: 53% Consumption: 13% South/Central America Reserves: 9% Consumption: 6% Africa Reserves: 8% Consumption: 3% Asia Pacific Reserves: 5% Consumption: 25% Note: Red text reflects a significant deficit. Source: BP Statistical Review of World Energy

91 Global Infrastructure Investment Requirements are Vast Some sources estimate a need as high as approximately $3 trillion annually (1) Expanded EU $305 bn per year (2) Russia/FSU $56 bn per year (2) North America $422 bn per year (2) Middle East $56 bn per year (2) China $200 bn per year (2) Latin America $45 bn per year (2) Africa $10 bn per year (2) Asia ex-china $200 bn per year (2) (1) Infrastructure to 2030 by the OECD. (2) 2009 Report Card for America s Infrastructure authored by ASCE (American Society of Civil Engineers). 91

92 Key Investment Themes in Energy & Infrastructure Corporate Opportunities Oil and gas companies with good assets Companies with unconventional growth opportunities Gathering and processing with substantial new investment requirements Oil & Gas Assets North American conventional oiland gas-producing assets Unconventional field development International oil and gas fields Infrastructure Utilities Contracted power Renewables Midstream Select transport areas 92

93 Where We Were: Limited Actionability All Energy and Infrastructure Businesses Buyouts 93

94 Where We Are: A Complete Platform to Address the Industry Pipelines Special Situations Third-Party Joint Venture KKR Asset Management KKR Capital Markets Infrastructure Dedicated Strategy All Energy and Infrastructure Businesses North American Producing Oil & Gas Dedicated Strategy International Oil & Gas Buyouts/Growth Partnerships North American Unconventional Oil & Gas Joint Venture Private Equity RPM Energy Opportunity Capital Pool 94

95 Long History of Energy Investing UNION TEXAS PETROLEUM 7/ /2007 EBR Properties 9/2010 ConocoPhillips Properties 12/2010 2/2003 6/2009 TC Energy 10/2010 AOT/Battrum Properties 2/ /2000 7/2008 Energy Bubble Bursts 9/ /2010 (1) 12/2004 6/2010 Hilcorp Resources 10/2010 Note: Portfolio companies identified above may not be representative of the entire portfolio, and results from these companies may not be typical. (1) Unconventional oil and gas partnership to which capital has been committed but not yet funded. 95

96 Energy & Infrastructure Platform KKR and the post-energy bubble opportunity Private Equity Holdings EFH Hilcorp Resources RPM Texas Crude El Paso Midstream AOT/Battrum Equity Investment/ Commitments (1) Undrawn Capital $2.0 bn N/A Infrastructure Colonial Pipeline $1.1 bn $0.5 bn Natural Resources (2) EBR Gulf Coast Conoco Barnett $0.1 bn $0.4 bn Other Not disclosed $0.1 bn N/A TOTAL $3.3 bn $0.9 bn $4.2 bn Note: Investments identified above may not be representative of the entire portfolio, and results from these companies may not be typical. (1) Includes committed but not yet funded capital as well as syndicated co-invest capital as of 3/10/2011. Investment component reflects unrealized value. (2) Includes commitment of $250 mm from KKR Financial Holdings ( KFN ). 96

97 East Resources Encapsulates the Strategy East Resources Asset Map Onondaga Madison Orleans Monroe Schoharie Niagara Otsego Ontario Genesee Cayuga Cortland New York Chenango Yates Wyoming Tompkins Erie Delaware Schuyler Broome Steuben Tioga Chemung Allegany Sullivan Cattaraugus Susquehanna Wayne Chautauqua Bradford Tioga Wyoming Potter Lackawanna Pike Erie McKean Sullivan Warren Lycoming Luzerne Lackawanna Crawford Forest Elk Ashtabula Clinton Columbia Lake Montour Carbon Venango Northampton Geauga Mercer Clarion Northumberland Clearfield Centre Schuylkill Lehigh ahoga Jefferson Trumbull Snyder Berks Bucks Mahoning Butler Armstrong Lebanon Montgomery Dauphin na Perry Indiana Pennsylvania Philadelp Columbiana Blair Stark Beaver Cambria Huntingdon Lancaster ChesterDelaware ayne Carroll Hancock Allegheny Westmoreland York mes Bedford Fulton Franklin Adams Harrison Brooke octon Ohio Washington Ohio Somerset Fayette Belmont Guernsey Greene Morgan Berkeley uskingum Monongalia Monroe Jefferson Noble Wetzel Marion Preston Hampshire y Tyler Morgan Harrison Tucker Grant Hardy Barbour Athens Wood Ritchie Operating Areas Lewis Meigs Wirt Gilmer Calhoun Pendleton Northern WV Jackson Braxton Mason Roane Webster Western PA Putnam Clay West Kanawha Nicholas Virginia NW PA / SW NY Cabell Lincoln Fayette Greenbrier North-Central PA / Southern NY yne Boone Additional East Acreage Raleigh Mingo Logan Smmers Monroe Additional Marcellus Acreage Summit Portage Tuscarawas Washington Jefferson Pleasants Lawrence Marshall Doddridge Upshur Taylor Randolph Pocahontas Mineral Livingston Cameron Mifflin Seneca Juniata Cumberland 2008: Targeted Marcellus 2009: Invested $330 mm 2010: Realized $1.5 bn Note: 97 Former investment identified above may not be representative of the entire portfolio, and investment returns from this company may not be typical.

98 The Opportunity: Producing Oil and Gas in North America Recent market dynamics have left conventional assets out of favor, leading to compelling opportunities for investors Public market valuation premiums for shales Capital intensity of unconventional development Conventional properties becoming non-core Declining production profile of conventional assets Attractive assets with limited buyer universe 98

99 The Response: KKR Natural Resources ( KNR ) Opportunity sourcing Opportunity sourcing Financial diligence and deal execution Technical diligence Strategic oversight Post-acquisition asset optimization 99

100 KKR Natural Resources: Latest Developments Over $500 mm committed to platform today (1) Two attractive acquisitions made for ~$177 mm (2) : EBR Gulf Coast assets closed October 2010 Conoco Barnett assets closed December 2010 Substantial long-term growth potential Note: Investments identified above may not be representative of the entire portfolio, and results may not be typical. (1) Includes commitment of $250 mm from KFN. (2) Reflects total purchase price of assets. 100

101 The Opportunity: US Shale Development Shales have altered the US oil and gas landscape and generated substantial capital need More than $1 trillion needed to develop the shales Future Development Requirements by Shale Play Example: Marcellus Capital Requirements Total Future Capital Need Wells to Be Drilled $387 bn $149 bn $308 bn 93,750 $114 bn $124 bn $105 bn $59 bn $78 bn $70 bn 37,500 12,500 31,250 21,818 12,500 Barnett (Core) Eagle Ford Fayetteville Haynesville Marcellus Woodford Majors & Large Independents Mid-Cap Independents Small-Caps & Private Companies Source: 101 Jefferies & Co. and KKR estimates based on public sources.

102 The Response: RPM Energy Formed partnership with RPM Energy, a privately owned oil and gas exploration and development company, to invest in unconventional properties in a wide range of basins KKR Scale/large capital pools Commercial and financial capabilities Differentiated industry relationships Experience investing in shales The Shale Opportunity RPM Energy Technical, commercial, and financial capabilities Experienced executives that industry participants want to do business with 102

103 The Opportunity: Pipelines Unconventional natural gas supply resources key source of production growth in North America Growth of Unconventional Gas (Bcf/d) (1) Conventional Offshore Tight Gas Shale CBM Other Development of resource plays in new areas Shift in resource base and resulting need for new infrastructure investment Supply-Driven Pipeline Capacity Additions (Mcf/d) 44, Shale Gas Ubiquity in the US 35,444 31,018 23,571 12,848 9,262 8,460 6,517 6,983 10,423 7,661 8,198 14,859 12, Source: US Energy Information Administration reports. (1) Other category includes AD gas, Alaska, and net imports P 2010P 2011P

104 The Response: El Paso Midstream Investment Joint Venture Transaction Overview Partnered with El Paso Corporation to form El Paso Midstream Investment Company, a joint venture focused on US natural gas midstream sector JV attractive to El Paso given quantum of capital/relationships required El Paso gave KKR a first look at opportunity and ultimately exclusivity Investment Thesis Significant midstream capital required in emerging shale plays to support robust long-term drilling outlook El Paso had incumbency advantage Attractive existing asset Leading midstream management team with experience building/operating a highly successful midstream MLP Platform upsides Note: 104 Portfolio company identified above may not be representative of the entire portfolio, and results may not be typical.

105 The Opportunity: Global Infrastructure Massive need for infrastructure capital around the world Traditional sources of capital very constrained (both public and private) Budget crises in US and Europe will require public-private partnership solutions Infrastructure investors badly bruised in prior generation of funds: need for version

106 Infrastructure Investing Must Evolve to Version 2.0 Investors expected but received version 1.0 Need for version 2.0 Low risk Conservative leverage Inflation protection Low correlation with GDP and other investments Long duration Transaction-oriented Sector-based asset selection Maximal leverage on individual assets Focus on asset accumulation Reactive stakeholder approach Experienced team Disciplined asset selection Asset-appropriate leverage Focus on operational engagement Stakeholder management as a core competence 106

107 The Response: KKR Infrastructure Strategy Our Strategy Target assets with limited commercial, financial, and operating risk Drive value creation through: Disciplined investment selection Deep operational engagement Active stakeholder management 107

108 KKR Infrastructure Platform: Latest Developments Over $500 mm of committed uninvested capital $1.1 bn of invested capital through a separately managed account Infrastructure platform at $1.6 bn 108

109 KKR Energy & Infrastructure The future of the platform 109

110 Global Public Affairs Kenneth B. Mehlman 110

111 The World is Watching Heightened scrutiny of global businesses and investors Uneven economic recovery stokes populism Sovereign debt issues Empowered NGOs Increased regulation, taxation, trade scrutiny around the world...all can impact our bottom line 111

112 Our Strategy Incorporate stakeholder and regulatory focus into processes Build proactive efforts around Investment Committees Portfolio management Best practices Environment/sustainability Responsible sourcing Anti-corruption Labor/employee engagement Transparency Other issues relevant to specific companies 112

113 A Leader in Our Efforts Managing environmental, social and governance issues including relationships with key stakeholders is an increasingly important part of the value proposition of private equity. Signing the PRI and joining our network demonstrates KKR s leadership in this area, and is another sign that KKR recognizes the importance of responsible investing. We look forward to working with KKR on practical implementation and hope we can do so in a way that will encourage other firms to follow. James Gifford PRI Executive Director February 19,

114 Progress in 2010 Train and educate KKR executives Establish network of external partners Communicate our commitment to portfolio companies Communities of best practice for portfolio company personnel Responsible contracting policy for infrastructure business Build sustainability and sourcing efforts Environmental-social-governance roundtables with limited partners Annual report will discuss our efforts on sustainability We look forward to further progress in

115 Our Strategy at Work: Green Portfolio Program Recycling at Dollar General Financial Savings Environmental Savings ~$40 mm ~10.8 mm cubic yards of waste Fleet Efficiency at US Foodservice and Sealy Financial Savings Environmental Savings ~$18 mm 58,000+ metric tons of CO 2 emissions Note: 115 More information available at Portfolio companies identified above may not be representative of the entire portfolio, and results may not be typical.

116 Responsible Sourcing Initiative Program launched to promote socially and environmentally responsible global sourcing better business practices for portfolio companies and their suppliers Context Activities to Date Results Real risks and changing expectations Need for best practices Partnered with Business for Social Responsibility to develop guidelines Conducted webinars for Chief Procurement Officers and General Counsels 116

117 KKR and our Portfolio: Part of the Solution Taking Action on Sustainability Productive Engagement with Employees Proactively Engaged in Understanding Public Policy Promoting Transparency and Good Governance 117

118 Business Development & Strategy Scott C. Nuttall 118

119 Observation #1 Under-utilizing investment ideas and relationships Build new investing businesses Infrastructure, Natural Resources, Liquid Credit, Mezzanine, Special Situations, China Growth 119

120 Observation #2 Valuable content we source should be delivered to our own relationships Build global, multi-product capital markets business KKR Capital Markets 120

121 Observation #3 Too few investor relationships Build broader, global relationship/distribution team Client & Partner Group 121

122 KKR Approach Investment Team Old World Source buyouts New World Listen to companies needs Deliver best principal solution from our product set Call colleagues with opportunities Relationship Team Raise episodic funds (blind pool, fixed terms) Cover the entire institution Listen to clients needs Deliver all KKR products and design new solutions Be open-minded and flexible Goal Be relevant to all relationships Invest behind more ideas 122

123 Observation #4 Permanent capital would help create better alignment and help accelerate growth KKR/KPE Combination Transaction Now our own largest investor; $5.7 bn of permanent capital 123

124 Why Permanent Capital? Build New Businesses Infrastructure Natural Resources Mezzanine Special Situations China Growth Up next: real estate, long/short equity Support Growth of KKR Capital Markets Initial public offerings Secondary equity offerings Term loans/revolvers High yield Structured debt/equity Private equity 124

125 Tests Applied to New Ideas Benefit from one-firm approach? Is there investor demand? Does it fit culturally? Yes to all three Up next: long/short equity, real estate 125

126 Opportunity Old World New World Buyouts $912 bn Buyouts $912 bn High Yield ~1,200 Leveraged Loans ~1,000 Mezzanine ~70 Distressed PE ~150 Hedge Funds ~1,600 Real Estate ~1,000 Other ~100 Market Opportunity $912 bn Market Opportunity ~$6,000 bn Note: 126 Market opportunity represents approximate market size for identified strategies based on Preqin, JP Morgan, and KKR estimates. Actual size may vary.

127 Is It Working? 2005 Today (1) Private equity Infrastructure Ways to Invest Private equity Bank loans Bank loans High yield Mezzanine Natural resources China growth Long/short equity Special situations Real estate Non-PE AUM $4 bn $16 bn Capital Markets Fees $0 $105 mm Number of LPs Balance Sheet <$100 mm (2) $5.7 bn Offices/Countries 6/4 14/9 Total AUM $23 bn $61 bn (1) Dollar amounts as of 12/31/2010. Other figures as of 3/10/2011. (2) Excludes general partner interests held by KKR principals. 127

128 Momentum Invest more behind ideas and relationships Capture more from content we create Bring ideas and products to more investors Invest our own capital/seed new efforts Multiplier Effect 128

129 KKR Asset Management William C. Sonneborn 129

130 KKR Asset Management ( KAM ) (1) Overview Demonstrated ability to leverage KKR s intellectual capital for growth $7.8 bn of fee paying AUM ($14.8 bn in total AUM) More than 100 dedicated employees, including ~45 investment professionals Non-FPAUM AUM Growth (2) FPAUM 64% CAGR $7 bn $9 bn $7 bn $7 bn $2 bn $3 bn $1 bn $2 bn $2 bn $4 bn $4 bn $6 bn $8 bn (1) Represents Public Markets segment. (2) As of 12/31/2010. See Important Information for our calculation of assets under management (AUM) and fee paying AUM (FPAUM).

131 Expansion of the KAM Business Successful record of developing and growing new businesses ~25% of 2010 management fees from businesses started in the last two years 04-08: Established Presence, Primarily Liquid Credit 08-10: Built Out Diversified Credit Platform 11 & Beyond: New Asset Classes and Geographies Bank loans & high yield; first mezzanine investments KFN launch Mezzanine launch Special situations launch Long/short equity launch New strategies Beyond San Francisco team established New York team established London team established New geographies 131

132 KAM Business Model Today A virtuous circle that yields strong returns and access to a large addressable market Invest in asset classes where we can leverage the existing intellectual capital of KKR (1) which enables us to make better investment decisions INTEGRATED One-Firm APPROACH and then creates new intellectual capital for the firm and may yield strong returns and solutions for our investors (1) Participation of private equity, KKR Capital Markets, and KKR Capstone personnel in the KAM investment process is subject to applicable inside information barrier policies and procedures, which may limit the involvement of these personnel in certain circumstances. 132

133 KAM s Competitive Edge Strong Performance Strong track record across all strategies One-firm sourcing and diligence (1) Expanding Investing Platform Growing Capital Base Scalable Business Model Growing offering of strategies and products Disciplined and flexible investment approach $7.8 bn in FPAUM today Long-term, flexible capital ~55% of investors in last two years are new to KKR High degree of embedded operating leverage Significant profit contribution from incremental revenue Revenue yield on FPAUM improving Attractive Financial Outlook New businesses are still young Sizable untapped new product areas (1) Participation of private equity, KKR Capital Markets, and KKR Capstone personnel in the KAM investment process is subject to applicable inside information barrier policies and procedures, which may limit the involvement of these personnel in certain circumstances. 133

134 Strong Performance: Bank Loans & High Yield Expertise across bank loan and high yield asset classes, with top-decile performance since inception in each strategy Gross & Net Return vs. Benchmark Since Inception Gross Net Benchmark 19.9% 18.2% 7.1% 6.3% 5.2% 11.1% 10.5% 8.2% 12.2% 11.4% 9.4% 11.0% Secured Credit Model High Yield Carve-Out Bank Loans + High Yield Opportunistic Credit Inception: 9/2004 Inception: 9/2004 Inception: 7/2008 Inception: 5/2008 Note: 134 Data as of 12/31/2010. Peer comparison data is from evestment Alliance and is based on the universe of Bank Loan and High Yield managers as self-defined by each manager. Secured Credit Model and High Yield Carve-Out performance presented is supplemental to the Secured Credit Levered Composite. Past performance is no guarantee of future results. See Important Information for information on benchmarks and returns.

135 Strong Performance: Mezzanine Since 2010, we have deployed approximately $500 mm in mezzanine investments Partnered with experienced sponsors like KKR, Bain Capital, Advent International, Providence Equity, Golden Gate Capital, and Triton Recent Mezzanine Experience (1) Note: Portfolio companies identified above may not be representative of the entire portfolio, and results may not be typical. (1) Reflects mezzanine deals completed in Includes one deal that closed in the first quarter of

136 Strong Performance: Special Situations Special situations platform is outpacing key benchmarks and showing strong momentum Historical Track Record Since Inception (1) 20.3% 15.2% 14.9% 13.4% 7.1% Gross Net 50% S&P 500 / 50% MSCI EAFE Merrill Lynch High Yield Master II HFRX Distressed Securities Index Note: Past performance is no guarantee of future results. See Important Information for information on benchmarks and returns. (1) Data as of 12/31/2010. Inception date of 2/19/2010. Since period is less than one year, returns are not annualized. Net returns based on assetweighted institutional fee of accounts in the composite. Strategy returns are based on an internal rate of return (IRR) calculation. 136

137 Expanding Investment Platform KAM initially launched with a focus on below-investment-grade credit, but today has a diversified business across strategies and client vehicles KAM Strategies Marketable Securities Bank Loans High Yield Bank Loans Plus High Yield Opportunistic Credit Alternative Investments Mezzanine Special Situations Long/Short Equity Multiple Client Delivery Platforms 137

138 Growing Capital Base $7.8 bn of differentiated, long-term fee-paying capital across strategies and accounts By Account Type By Strategy (1) By Duration By Fee Structure (2) Funds 27% Accounts 73% Other 5% Special Situations 14% Mezzanine 13% High Yield 17% Bank Loan 51% Permanent 18% Subject to Long-Term Lock-Up 39% Subject to Periodic Redemptions 43% PE-Like Fee Structure 24% Hedge Fund Fee Structure 17% Management Fee Only 59% FPAUM growth of 24% in 2010 Note: Data represents fee-paying AUM as of 12/31/2010. See Important Information for our calculation of assets under management. (1) Figures represent estimates based on target allocations across all accounts as of 12/31/2010. (2) PE-Like Fee Structure category includes mezzanine and special situations funds and separately managed accounts. 138

139 KKR Financial Holdings ( KFN ) KFN provides access to a range of KKR strategies KFN s Evolution Growth in Managed Assets On FPAUM from KFN (1) $1,366 mm $813 mm $872 mm REIT Structure Corporate Credit Extended Opportunities Extend Existing Capabilities for Growth and Capital Preservation KKR Incentives Aligned with KFN Performance (1) See Important Information for additional disclosures. 139

140 A Scalable Core One-firm approach drives scalability in KAM s core business without adding significant incremental resources 74% flow-through on incremental 2010 revenue (1) $61.1 mm $45.1 mm INTEGRATED One-Firm APPROACH Creating Operating Leverage Incremental Revenue Incremental FRE Note: Participation of private equity, KKR Capital Markets, and KKR Capstone personnel in the KAM investment process is subject to applicable inside information barrier policies and procedures, which may limit the involvement of these personnel in certain circumstances. (1) Represents management fees, transaction fees, and incentive allocations. Excludes carried interest payments. Incremental revenue adjusted to exclude management fees received from structured finance vehicles in lieu of expense reimbursements in both 2009 and See Important Information about fee related earnings (FRE) vs. 2009

141 Driving Additional Growth Through New Businesses Approach to addressing a large universe of potential new business opportunities Replicable New Business Development Processes Phase 1: Assess Market Opportunity and Make Targeted Hires to Establish Capability Phase 2: Selectively Allocate to Strategy and Build Track Record Phase 3: Raise Dedicated Capital Phase 4: Drive Superior Investment Performance over Market Cycle Phase 1 Phase 2 Phase 3 Phase 4 Public Equities Special Situations Mezzanine Bank Loan + HY Note: 141 See Important Information about economic net income (ENI) and fee related earnings (FRE). Information regarding KAM s public equity platform (KKR Equity Strategies) is provided for discussion purposes only as the strategy is currently in development.

142 Case Study: Mezzanine Growth of mezzanine platform highlights KAM s ability to commercialize a market opportunity Mezzanine Evolution: Cumulative Invested Capital 2011 & Beyond $1,039 mm $1,141 mm Dedicated capital US/Europe/Asia $0 $25 mm $148 mm $357 mm $565 mm $661 mm Attractive economics through management fees and carried interest generation # of Deals: Opportunistic allocations No sourcing capabilities US only 2010 to Today Dedicated capital Proprietary sourcing US/Europe Note: 142 Two add-on investments in 2010 included with the original 2009 investments data includes one investment committed to as of 12/31/2010 that closed in the first quarter of Past performance is no guarantee of future results.

143 Attractive Financial Profile 2010 was a strong year for growth, and we continue to invest in the business Total Fee Income Fee Related Earnings Margin $55.1 mm 86% $102.7 mm 21.4% 55.5% Effective Fee Rate (1) Committed Dollars Invested (2) 1.40% $697.6 mm 1.00% $ (1) Effective fee rate defined as (management fees + incentive fees) / average FPAUM. (2) Represents the aggregate amount of capital commitments invested by carry-yielding funds and co-investment vehicles. Includes general partner capital.

144 Long-Term Value Creation KAM is well positioned today The Right People The Right Strategy Strong Track Record More than 100 dedicated employees, including ~45 investment professionals Expanding investment capabilities Multiple client delivery platforms Diversified capital base All KAM strategies demonstrating strong relative and absolute performance One-Firm Approach Leverages the intellectual capital of KKR Provides for a highly scalable core Long Runway for Growth New businesses still early in life cycle Significant untapped market potential Note: 144 Participation of private equity, KKR Capital Markets, and KKR Capstone personnel in the KAM investment process is subject to applicable inside information barrier policies and procedures, which may limit the involvement of these personnel in certain circumstances.

145 KKR Capital Markets Craig J. Farr 145

146 The Capital Markets Opportunity in the Private Equity Industry In 2007, the global investment banking fee wallet was >$73 bn In 2007, private equity firms accounted for ~24% of the fee wallet Global capital markets business was dominated by five large players The few large players bundled capital, advice, and distribution services Source: 146 Dealogic.

147 Evolution of the Business We have evolved from a small team focused on syndicating excess private equity to a full-service, standalone business able to lead a variety of capital markets transactions globally and Today Large private equity checks Credit crisis closes markets Markets improve, opening door for new deals and exits Further improved capital markets KCM Professionals: 4 KCM Professionals: 10 KCM Professionals: 15 KCM Professionals:

148 KCM Today: Full-Service Capital Markets Advisory/Underwriting Acquisition Finance Ownership Exit PE co-invest syndication Mezzanine Credit facilities High yield Refinancing New issuance Exchange offers Amend-to-extend Buybacks Pre-IPO equity IPOs Follow-ons Equity-linked Expand capacity for private equity and mezzanine transactions Optimize cost of capital, enhance capital structure flexibility Maximize investor return in the long term 148

149 How KCM Creates Value: Key Pillars 149

150 Aligned Advice Drives Greater Access to Capital Led execution/marketing of IPO Valuation premium to closest peer Allocated to sticky" shareholder base, setting foundation for long-term monetizations Instrumental in developing unique backstopped discounted rights offering through 3 rd -lien PIK convertible notes Direct dialogue with ABL providers and 1 st -lien bond investors provided comfort on refinancing structure 160% Historical Stock Performance 500% Historical PIK Convert Performance 140% 400% 300% 120% +33% IPO-to-date 200% +236% since issuance 100% Nov-09 Feb-10 May-10 Aug-10 Nov-10 Feb % Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Note: 150 Stock price performance as of 3/9/2011. Dollar General IPO occurred on 11/12/2009. Sealy rights offering and third-lien convert issuance occurred on 5/27/2009. Historic market trends may not be predictive of future market performance or future results. Portfolio companies identified above may not be representative of the entire portfolio, and results may not be typical.

151 Holistic Risk Management KKR Portfolio Company Refinancing Volume $32 bn $14 bn (1) Reflects all KKR portfolio company refinancings including those in which KKR Capital Markets did not participate

152 Benefits Across Key Stakeholders Limited Partners Other Parts of KKR Public Unitholders Source larger, unique deals Flexible capital enhances upside Product flows for limited partners Better exits Allows PE to focus on industry specialization/corporate relationships Expands KAM mezzanine capabilities Improves CPG relationships Source of fee related earnings More carry derived from larger equity commitments Better capital structures enhance equity value Greater return on balance sheet capital More fund commitments from close limited partner relationships 152

153 Financial Results to Date: A High-Margin Business for KKR Fees Fee Related Earnings Headcount $105.3 mm 26 $79.1 mm 15 $18.2 mm 10 $5.3 mm $34.1 mm $18.7 mm Margins: 29.1% 54.7% 75.1% 153

154 How Does KCM Get Paid? Conventional Model KCM Participation Bank 4 Bank 1 KCM Bank 1 Bank 3 Bank 2 Bank 4 Bank 3 Bank 2 154

155 Synergy with Other Parts of KKR: Private Equity Situation Large maturity towers in 2014 through 2016 and a desire to proactively extend KCM Value-Add Negotiated with key bond holders Executed large-scale exchange Resulted in $6.5 bn of debt extended to Situation Visant had deleveraged and KKR was interested in returning some capital to LPs KCM Value-Add Dividend recapitalization with customized terms Developed anchor orders and committed capital to ensure strong market execution Note: 155 Portfolio companies identified above may not be representative of the entire portfolio, and results may not be typical.

156 Synergy with Other Parts of KKR: KAM Situation Company sought to refinance debt and desired capital structure to suit acquisition strategy KCM Value-Add Worked with KAM (which provided mezzanine note) to arrange senior credit facilities Aided with an amendment and incremental term loan to facilitate a strategic acquisition Situation Sponsors sought to raise 1.1 bn of committed financing to acquire an 80% stake in RBS WorldPay for 2.0 bn KCM Value-Add KCM committed 127 mm to a 300 mm mezzanine tranche Helped to position KAM Mandated as arranger on junior financing Note: 156 Portfolio companies identified above may not be representative of the entire portfolio, and results may not be typical.

157 Synergy with Other Parts of KKR: CPG Situation KKR and GA sought $900 mm of committed financing to acquire TASC from Northrop Grumman in the largest LBO of 2009 KCM Value-Add Direct dialogue geared towards mutually advantageous terms resulted in $100 mm allocation of term loan to a fund limited partner, while providing certainty of financing Note: 157 Situation Flextronics was looking to sell a PIK seller note, and was considering a range of buyers Portfolio companies identified above may not be representative of the entire portfolio, and results may not be typical. KCM Value-Add KCM and CPG placed note with a fund limited partner, ensuring placement with a long-term, aligned holder Limited partner and Asian Fund bought the note at substantial discount; investment marked at 1.5x cost at 12/31/2010

158 Synergy with Other Parts of KKR: Balance Sheet Situation KKR sought 485 mm of committed financing to purchase Pets at Home in a 1 bn acquisition KCM Value-Add KCM underwrote ~20% of the senior facilities and arranged 100% of the mezzanine With KCM s knowledge of the asset and investor relationships, KCM delivered more debt at a lower cost and better terms Situation NXP was nearing IPO launch and seeking to extend maturities, but desired price protection in a volatile market KCM Value-Add Partnered with underwriters to provide a $162.5 mm backstop on high yield execution Marketed the transaction to large existing bondholders and set stage for successful IPO Note: 158 Portfolio companies identified above may not be representative of the entire portfolio, and results may not be typical.

159 More Opportunities for KCM to Grow Drivers Commentary Recovering private equity and capital markets More acquisition finance mandates, refinancings, and exits Larger balance sheet Participate in more underwritings, generating more fees and good riskadjusted returns on capital Increased penetration of non-kkr opportunities Leverage the broader KKR platform to enhance our relationship with clients Strategic partnerships in origination and distribution Broaden capabilities and deal flow 159

160 Client & Partner Group Suzanne O. Donohoe 160

161 Why Build Distribution at KKR? KKR s World Today Greater Client Interaction Clients More Global in Scope Wider Application of Firm s Intellectual Capital More sophisticated servicing needed in a professionalized alternative asset management industry New sources of capital expand our geographic horizons Growing, diversifying firm demands broader calling effort 161

162 Building the Team Global team of 37 executives dedicated to capital raising and relationship management Continuing to build in the Middle East and high net worth Client & Partner Group Growth US International

163 Profile of Senior Professionals Industry Tenure of Relationship Managers and Product Specialists 20+ years 30% years 35% <10 Years 9% years 26% Former Employers AlpInvest BlackRock Goldman Sachs Citi JP Morgan Morgan Stanley UBS HSBC Deutsche Bank Arden Asset Management Morgan Creek Asset Management PineBridge Investments LBO France 163

164 Who is Our Team Talking To? Today, we have over 350 investors across all products on the KKR platform AUM by Investor Type AUM by Geography Sovereign Wealth Funds/ Other Government Entities 25% Corporate Pension 3% Financial Institution/ Insurance 20% Asia Pacific 19% Middle East 5% Family Office/HNW 6% Fund of Funds 8% Europe 15% North America 61% US Public Pension 37% Endowment/ Foundation 1% Note: 164 Percentages as of 12/31/2010. Based on the AUM of our Private Markets investment funds (1996 Fund onward), Private Markets co-investment vehicles, and Public Markets separately managed accounts and investment funds.

165 Evolving the Dialogue with Existing Investors and Prospects Private Equity Teams Private Equity Teams Private Equity Teams Private Equity Teams Mezzanine, Infrastructure Teams Mezzanine, Infrastructure, Real Assets Teams Mezzanine, Infrastructure, Real Assets Teams Chief Investment Officers ( CIOs ) CIOs CIOs Heads of Fixed Income Heads of Fixed Income Hedge Fund Allocators 165

166 Realizing Our Cross-Sell Potential Large opportunity to bring existing investors into other products on the KKR platform average mandates per investor (1) 2.0 target average mandates per investor (1) Defines successor funds in a particular geography as same strategy, but new geographies, new asset classes, or new strategies as cross-sell. 166

167 Growing Our Investor Franchise Investors/Mandates Today 350 x Average New Mandates per Year Existing Investors New Investors ~35/year over five years ~50-60/year over five years Aspirational Target Mandates ~1,

168 New vs. Existing Investors in Recent Fundraising 35% of capital raised in 2010 came from new investors Strategy Total Capital Raised (1) % New Investors (2) China Growth (3) $1,000 mm 40% Infrastructure $1,565 mm 14% Mezzanine $484 mm 77% Oil & Gas $250 mm 0% Other (4) $2,085 mm 44% Total Capital Raised in 2010 $5.4 bn 35% (1) Limited partner dollars only; excludes general partner commitments. (2) By dollars committed. (3) As of final close of fund, which occurred subsequent to 12/31/2010. (4) Includes all other strategies for which capital was raised: credit funds and separately managed account vehicles, private equity and private equity coinvestments, and multi-strategy mandates. 168

169 The Big Picture: Capital Raised in 2010 ~70% of capital raised in 2010 was for first-time strategies KKR s first-time strategies have generally had fundraising success relative to others in the market in 2010, for example China Growth Average China Fund 1 Fund 20 Funds $944 mm (1) $508 mm 3 Funds $166 mm Note: Past performance is no guarantee of future results. Source: Preqin; data as of 9/2010. KKR data as of 12/2010. (1) Subsequent to the end of 2010, KKR China Growth Fund held a final close at its hard cap of $1 bn. 169 Industry First-Time Funds China Growth Fund

170 Case Study: China Growth Fund Raised $1 bn in third-party capital for China Growth Fund Public pensions, funds-of-funds, and sovereign wealth funds/other government entities accounted for ~2/3 of total commitments 40% of our external commitments came from new investors Dollars Raised by Investor Type Dollars Raised by New/Existing Sovereign Wealth Funds/Other Government Entities 27% Endowment 2% US Public Pension 20% New Investors 40% Corporate 10% High Net Worth 16% Financial Institution 6% Fund-of- Funds 19% Existing Investors 60% Note: All figures shown as of final close on the China Growth Fund, which occurred during the first quarter of

171 Riding Some Powerful Waves Low-return environment focus on alternatives Emphasis on diversification of asset classes Concern over conflicts/transparency Aftermath of Volcker Rule Growth and diversification of sovereign wealth funds/other government entities Flight to quality managers and brands post-crisis Investors desire to scale relationships 171

172 The Result of Our Investment in Distribution KKR s World Tomorrow Professionalized Investor Acquisition and Servicing More Diversified Investor Base More Mandates Per Investor 90%+ of team >10 years experience Best-in-class sales, service, and holistic, solutions-driven approach Ability to continue to attract talent given brand/performance By geography By investor type By asset class Better leverages our calling effort Allows us to create stickier investors 172

173 Financial Overview William J. Janetschek 173

174 Consistent AUM Growth with Increasing Diversification Private Markets Private Equity Natural Resources Infrastructure Public Markets Liquid Credit Mezzanine Special Situations Equity Strategies Capital Markets & Principal Activities Capital Markets Balance Sheet Assets $23.4 bn $15.1 bn Third-Party AUM Business 26% CAGR $61.0 bn $52.2 bn $47.2 bn $44.9 bn 14.8 $37.0 bn CAGR: 64% CAGR: 21% $6.08 $6.93 $7.37 $ % y-o-y growth $ Private Markets AUM Public Markets AUM Dec-09 Mar-10 Jun-10 Sep-10 Dec-10 Book Value/Adjusted Unit (1) Note: Assets under management (AUM) are presented pro forma for the combination with KPE and therefore exclude the net asset value (NAV) of KPE and its former commitments to KKR s investment funds. See Important Information for additional disclosures. (1) Adjusted units represent the fully diluted unit count using the if-converted method. See Appendix I for a reconciliation to the comparable GAAP metric. 174

175 Evolving Mix of Assets and Earnings AUM Fee Related Earnings (FRE) Economic Net Income (ENI) Public Markets 5% Public Markets 9% Public Markets <1% 2004 Private Markets 95% Private Markets 91% Private Markets >99%% 2010 Public Markets 24% Private Markets 76% Capital Markets/ Principal Activities 25% Private Public Markets 18% Markets 57% Capital Markets/ Principal Activities 60% Private Markets 37% Public Markets 3% 175

176 2010 Sources of Earnings FY 2010 % of Total Fee Related Earnings $318 mm 15% Net Carried Interest $608 mm 28% Other Investment Income (1) $1,214 mm 57% Economic Net Income $2,140 mm 100% Note: See Important Information for additional disclosures. (1) Reduced by income attributable to noncontrolling interests. 176

177 2010 GAAP to Segment Bridge Income (Loss) Before Taxes $7,852 GAAP (1) - (Income) Loss from Noncontrolling Interests in Consolidated Entities (6,544) + Non-Cash Equity Based Charges Amortization of Intangibles and Other, Net 8 Economic Net Income $2,140 Segment + Income (Loss) Attributable to Noncontrolling Interests 4 - Net Carried Interest (608) - Other Investment Income (1,218) Fee Related Earnings $318 Segment (1) Presented before noncontrolling interests held by KKR Holdings and therefore represents 100% of the KKR business. 177

178 Sources of Earnings: Drivers Private Markets Public Markets Capital Markets & Principal Activities Management fees Management fees Transaction fees Fee Related Earnings Monitoring fees Transaction fees Operating expenses Incentive fees Transaction fees Operating expenses Operating expenses Gross carried interest Gross carried interest Not applicable Net Carried Interest Allocation to KKR carry pool Management fee refunds Allocation to KKR carry pool Other Investment Income Not meaningful Not meaningful Gains/losses on principal assets Interest expense 178

179 Long-Duration, Stable Asset Base Contractual Life of FPAUM (1) Fee Paying Asset Base Permanent 3% <10 Years 7% NAV 12% Years 90% Committed/ Invested Capital 88% Note: Based on fee paying assets under management (FPAUM) as of 12/31/2010. (1) Time periods are measured from the time of a fund, account, or vehicle s inception. 179

180 Long-Term Committed AUM Leads to Recurring, Predictable FRE Highly predictable management and monitoring fees, with upside from transaction fees, incentive fees, and termination payments (1) (2) Management and Base Monitoring Fees Other Fees Fee Related Earnings $510 $524 $540 $247 $259 $318 $151 $169 $ PF 2009 PF 2010 FRE Margin: 28% 40% 43% Note: Dollars in millions and 2009 figures presented pro forma for the elimination of KPE management fees and certain other adjustments related to the Combination Transaction. Fee related earnings are net of fee credits and expenses. FRE margin is based on total fees, net of fee credits. (1) Base monitoring fees exclude monitoring fee termination payments and are presented before fee credits to limited partners. (2) Other fees include transaction fees, monitoring fee termination payments, and incentive fees earned at KFN. Presented before fee credits to limited partners.

181 Significant Opportunity for Carried Interest Substantial capital entitled to receive carry $36 bn of invested capital $14 bn of dry powder No hurdles in current private equity funds Carried interest is mark-to-market on P&L; cash carry paid on realized gains Timing differences between carry on P&L and receipt of carry in cash MTM carry and realized cash carry are the same over the life of a fund Traditional Private Equity Funds Accruing Carry Paying Carry Remaining Cost (mm) Fair Value (mm) European Fund Yes Yes $492 $2,249 Millennium Fund Yes Yes 3,965 5,743 Asian Fund Yes Yes 2,416 3,442 European Fund III Yes Close 2,247 2, Fund Yes No 11,837 13,410 European Fund II No No 5,336 4,594 Unrealized gain of $5.5 bn 181

182 Historical Realized Gross Carried Interest Over $4.0 bn of Carry Realized Since 2000 Realized Carried Interest ($ mm) $800 $700 $600 $500 $400 $300 $200 $100 $0 $723 $709 $558 $536 $443 $394 $370 $190 $97 $54 $ Realized Carried Interest AUM $70 $60 $50 $40 $30 $20 $10 $0 AUM ($ bn) Note: 182 The 2001 carried interest figure includes two large realizations from Duracell/Gillette and FleetBoston Financial, which contributed approximately 90% of the carried interest for that year. Both investments had been held for approximately ten years before being fully exited in Past performance is no guarantee of future results.

183 Distribution Policy Our policy is to distribute substantially all of our fee related earnings and realized cash carry Carry distributions have been limited in recent quarters, but have been the primary source of cash flow over a longer historical period 2010 Distribution Historical Distributable Earnings (1) Distribution per Unit % of Total Fee Related Earnings $ % Net Carried Interest $ % Normal Distribution Additional Distribution $ % $0.13 Total Distribution $0.60 Carried Interest 69% Fee Related Earnings 31% (1) Based on aggregate figures for the period from Fee related earnings figures based on reported fee related earnings figures for and a comparable internal metric for KKR s Public Markets business began generating fees in 2004 and KKR s capital markets business began generating fees in 2008; historical data may not be indicative of future results. 183

184 Permanent Balance Sheet Capital to Facilitate Growth Through the combination with KPE, KKR acquired a significant balance sheet Permanent Capital to Accelerate Our Growth General partner commitments Seed capital Capital markets funding Other organic/inorganic growth opportunities Alignment of Interests with Our Limited Partners $5.3 bn of balance sheet capital invested in or committed to our funds and transactions 184

185 Balance Sheet Highlights Sizable balance sheet $5.7 bn of book equity value ($8.38/adjusted unit (2) ) $4.8 bn of investments (~35% public securities) Ample liquidity Over $750 mm of cash $1.6 bn of available revolver capacity (3) Well capitalized and minimal leverage A- and A ratings from S&P and Fitch, both with a stable outlook $500 mm of senior notes is only debt outstanding Balance Sheet as of 12/31/2010 (1) (in mm, except per unit) Private Equity Funds $2,049 Co-Investments 2,305 Other Investments 478 Total Investments $4,832 Cash and Cash Equivalents 756 Unrealized Carry 526 Other Assets 287 Total Assets $6, % Notes due 2020 $500 Other Liabilties/Noncontrolling Interests 175 Partners' Capital $5,726 Adjusted Units Outstanding Book Value/Adjusted Unit (2) $8.38 (1) Represents KKR s total reportable segment balance sheet. (2) Adjusted units represent the fully diluted unit count using the if-converted method. (3) Pro forma for 2/2011 amendment on Corporate Credit Facility. Excludes $500 mm of undrawn revolver capacity for use in capital markets business. 185

186 Key Takeaways Strong AUM growth through expansion of private equity franchise and extension into new businesses Stable management and monitoring fees supported by long-term, locked-up capital Upside potential from transaction fees and monitoring fee termination payments in healthy capital markets environment Opportunity for significant realized carried interest as the environment for exits continues to improve $5.7 bn balance sheet to support growth Opportunity for strong earnings and increased cash distributions 186

187 Positioning KKR for the Future Todd A. Fisher 187

188 Overview We ve organized KKR to support our diversified, global, and growing business Clear management structure Centralized governance framework with a particular emphasis on risk management Significant enhancement of firm infrastructure Meaningful investment in human capital Focus on talent development to prepare future leaders Compensation structure that aligns employees with firm culture, one another, limited partners, and unitholders 188

189 Global Presence and People Over 700 people and 14 offices, including a global presence for each business and function San Francisco Public Markets Client & Partner Group New York & London Private Markets KKR Capstone Public Markets Capital Markets Client & Partner Group Paris Private Markets Dubai Seoul Private Markets Private Markets Client & Partner Group Tokyo Private Markets Client & Partner Group Mumbai Private Markets Capital Markets Menlo Park Houston Washington, DC Hong Kong Beijing Private Markets KKR Capstone Private Markets KKR Capstone Private Markets KKR Capstone Capital Markets Client & Partner Group Private Markets KKR Capstone Client & Partner Group Sydney Private Markets Client & Partner Group Note: 189 KKR Capstone is owned and controlled by its senior management and not KKR.

190 Significant Investment in Human Capital Headcount increasing most rapidly in new businesses and firm infrastructure to enable profitable and efficient growth Private Markets Public Markets KKR Capstone Client & Partner Group Capital Markets Firm Infrastructure Staff Note: 190 Reflects number of people at year-end. KKR Capstone is owned and controlled by its senior management and not KKR.

191 Management Structure Co-CEOs Kravis & Roberts Private Markets Public Markets Capital Markets & Principal Activities Private Equity Energy & Infrastructure KKR Asset Management Capital Markets Balance Sheet North America Europe/ MENA Asia/ Pacific Leveraged Credit Public Equities KKR Capstone (1) Mezzanine Special Situations Client & Partner Group Public Affairs Legal & Compliance Finance Information Technology Human Resources (1) KKR Capstone is owned and controlled by its senior management and not KKR. KKR Capstone is presented here only to illustrate the KKR businesses that they support. 191

192 Global Governance Structure Formalized processes and functions in place to manage firm Transaction Oversight Investment Committees Global decision-making process Separate committees by strategy Management Committee Other firm-level matters Balance Sheet Committee Reviews balance sheet investment decisions Oversees firm capital structure and liquidity Monitoring Oversight Portfolio Management Function Monitor investment portfolios across the firm s businesses Risk Committee Identifies and monitors key risks to firm Conflicts Committee Analyzes and addresses new/ potential conflicts of interest across businesses Valuation Committees Coordinate quarterly valuations Ensure consistent global process 192

193 34-Year History of Managing Risk Limited Partners Strategic Unitholders Debt Holders Employees Portfolio Companies On behalf of many constituents Risk Committee Across many themes Reputational Legal Operational Financial and Liquidity Culture People Under strong oversight Public Company/Independent Board Registered Investment Adviser Regulated Broker-Dealer Activities 193

194 Firm Infrastructure Finance Public company and limited partner reporting Budgeting, planning, expense management Public Affairs Stakeholder management across firm and portfolio Public communications Regulatory expertise Information Technology Enables better decisions through better information Infrastructure and IT controls Legal & Compliance Transaction support Regulatory/compliance conflict management Risk mitigation Human Resources Professional development/ training and mobility Performance/meritocracy Recruit, hire, integrate 194

195 Support Functions Enabling Firm Success: Portfolio Central Support functions are simplifying work across the firm, making us more efficient and driving bottom-line value Portfolio Central is a perfect example of how our IT team has streamlined private equity portfolio monitoring Monthly review of revenue, EBITDA, cash flow, and leverage Covenant headroom alerts Margin monitoring Note: 195 Data shown is for illustrative purposes only and does not represent actual performance.