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8/10/2019 KKR Overview and Organizational Summary
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July 16, 2012
KKR Overview and OrganizationalSummaryTodd A. Fisher
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Important InformationThis presentation is furnished on a confidential basis exclusively to the named recipient of this presentation (the Recipient) and is not for redistributionor public use. The data and information presented are for informational purposes only. The information contained herein should be treated in aconfidential manner and may not be transmitted, reproduced or used in whole or in part for any other purpose, nor may it be disclosed without the priorwritten consent of Kohlberg Kravis Roberts & Co. L.P. (together with its affiliates, KKR) . By accepting this material, the Recipient agrees not todistribute or provide this information to any other person. The information is qualified in its entirety by reference to the Limited Partnership Agreement,
Confidential Private Placement Memorandum and Subscription Agreement of each Fund (as defined below), each as amended and/or restated from time totime (the Fund Documents) .
The interests in the funds referenced herein (collectively, the Funds) advised by KKR (the Interests) have not been approved or disapproved by theU.S. Securities and Exchange Commission (the SEC) or by the securities regulatory authority of any state or of any other jurisdiction. The Interestshave not been registered under the U.S. Securities Act of 1933, as amended (the Securities Act), the securities laws of any other state or the securitieslaws of any other jurisdiction, nor is such registration contemplated. None of the Funds will be registered as an investment company under theInvestment Company Act of 1940, as amended (the 1940 Act) . Consequently, limited partners of the Funds are not afforded the protections of the1940 Act.
This presentation shall not constitute an offer to sell or the solicitation of any offer to buy Interests, which may only be made at the time a qualifiedofferee receives a Confidential Private Placement Memorandum describing the offering and related subscription agreement. These securities shall not beoffered or sold in any jurisdiction in which such offer, solicitation or sale would be unlawful until the requirements of the laws of such jurisdiction havebeen satisfied.
The information in this presentation is only as current as the date indicated, and may be superseded by subsequent market events or for other reasons.Nothing contained herein constitutes investment, legal, tax or other advice nor is it to be relied on in making an investment or other decision. Thispresentation should not be viewed as a current or past recommendation or a solicitation of an offer to buy or sell any securities or to adopt anyinvestment strategy.
Private funds, such as the Funds, are speculative investments and are not suitable for all investors, nor do they represent a complete investmentprogram. Private funds are available only to qualified investors who are comfortable with the substantial risks associated with investing in private funds.An investment in a private fund includes the risks inherent in an investment in securities. There can be no assurance that an investment strategy will besuccessful.
Investors in a private fund, such as the Funds, may have no right to or a limited right to redeem or transfer their interests in a private fund. No Interestswill be listed on an exchange and it is not expected that there will be a secondary market for any Interests.
The information in this presentation may contain projections or other forward-looking statements regarding future events, targets or expectationsregarding the Funds or the strategies described herein, and is only current as of the date indicated. There is no assurance that such events or targets willbe achieved, and may be significantly different from that shown here. The information in this Presentation, including statements concerning financialmarket trends, is based on current market conditions, which will fluctuate and may be superseded by subsequent market events or for other r easons.
This presentation is distributed by KKR Capital Markets LLC (KCM), a broker-dealer registered with the U.S. Securities and Exchange Commission and amember of FINRA and SIPC.
In this presentation, references to assets under management or AUM represent the assets as to which KKR is entitled to receive a fee or carriedinterest and general partner capital. KKRs calculation of AUM may differ from the calculations of other asset managers and, as a result, KKRs measurements of its AUM may not be comparable to similar measures presented by other asset managers. KKRs definition of AUM is not based on anydefinition of AUM that is set forth in the agreements governing the Funds or any KKR products or calculated pursuant to any regulatory requirements.
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Important Information (contd) References to KKR Capstone or Capstone are to all or any of Capstone Consulting LLC, Capstone Europe Limited, and KKR Capstone Asia Limited, eachof which is owned and controlled by their senior management and not by KKR. KKR Capstone uses the KKR name under license from KKR. KKRCapstone is not a subsidiary or other affiliate of KKR.
General discussions contained within this presentation regarding the market or market conditions represent the view of either the source cited or KKR.
Nothing contained herein is intended to predict the performance of any investment. There can be no assurance that actual outcomes will match theassumptions or that actual returns will match any expected returns. The information contained herein is as of March 31, 2011, unless otherwiseindicated, is subject to change, and KKR assumes no obligation to update the information herein.
This presentation is only being distributed to and is only directed at (A) persons who are outside of the United Kingdom or (B) persons who are (i)investment professionals falling within both Article 14 of the Financial Services and Markets Act 2000 (Promotion of Collective Investment Schemes)(Exemptions) Order 2001 (the CIS Promotion Order) and Article 19 of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2001(the Financial Promotions Order), (ii) high net worth companies and other persons falling within both Article 22 of the CIS Promotion Order and Article49 of the Financial Promotion Order, (iii) other persons who fall within an exemption both in the CIS Promotion Order and of the Financial PromotionOrder or (iv) other persons to whom both an invitation or inducement to engage in investment activity (within the meaning of section 21 FinancialServices and Markets Act 2000 (FSMA)) and an invitation or inducement to participate in a collective investment scheme (within the meaning of section238 FSMA) can lawfully be communicated. The persons specified in (B)(i), (ii), (iii) and (iv) above are collectively referred to as Relevant Persons . Anyperson in the United Kingdom who is not a Relevant Person should not act or rely on this Presentation or any of its contents.
This presentation is being made available by KKR MENA Limited on a confidential basis solely to professional clients (as defined by the Dubai FinancialServices Authority) on a one -on- one basis for the purpose of providing certain information about Kohlberg Kravis Roberts & Co. L.P. (together with itsaffiliates, KKR) and certain investment funds and other investment vehicles and products managed by KKR. KKR MENA Limited is a Dubai InternationalFinancial Centre company which is regulated by the Dubai Financial Services Authority.
In Australia, this presentation is being distributed by KKR Australia Pty Limited (A.C.N 126 516 336 A.F.S.L 336127) and is directed to wholesale clientsonly as defined by Corporations Act 2001. The distribution of the information in jurisdictions outside Australia may be restricted by law and persons intowhose possession the information comes should inform themselves about, and observe, any such restrictions. Any failure to comply with theserestrictions may constitute a violation of the laws of an applicable jurisdiction. KKR and its directors or employees advise that they and personsassociated with them may have an interest in the financial products discussed and that they may receive brokerage, commissions, fees and other benefitsand advantages, whether pecuniary or not and whether direct or indirect, in connection with certain investment funds and other investment vehicles andproducts managed by KKR.
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Program Overview
Program Participants
38 new Associates/Analysts in the full training program 15 Private Equity (4 NYO, 3 MPO, 1 Houston, 3 Europe/MENA, 4 Asia-Pacific)
5 Asset Management (3 NYO, 1 SFO, 1 Europe/MENA)
3 Capital Markets (2 NYO, 1 Asia-Pacific)
6 CPG (4 NYO, 1 SFO, 1 Europe/MENA)
7 Capstone (1 NYO, 2 MPO, 2 Europe/MENA, 2 Asia-Pacific)
2 TRS (Teacher Retirement System of Texas)
Presenters / Session Leaders / Social Event Hosts
~85 executives across KKRs businesses, functions and offices
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Who Are We?
Leading investment firmPrivate Equity, Infrastructure & Natural Resources,Credit Strategies, Alternative Credit, Equity Strategies
Global presence Offices in 14 major cities in 9 countries across 4 continents
One - firm culture that evolves, learns, and innovates Adaptive to change
Relationship-driven approachSourcing investment opportunities
Partnering with clients
Aligned with our partnersEat our own cooking
Economic incentives driven by resultsFocused on managing stakeholder interests
Assets Under Management As of March 31, 2012
($ in billions)
Established in 1976, Kohlberg Kravis Roberts & Co. L.P. (KKR) is a leading globalinvestment firm with industry-leading investment experience, in-depth industry
knowledge, sophisticated processes for growing and improving businesses, and a strongculture committed to teamwork
Note: Please see Important Information for a description of Assets Under Management calculation.
$46.0
$16.3
Private Markets Public Markets
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KKR Timeline
1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 Today
KKR Capstone
Industry group focus
European privateequity business
2000 - 2004
KKR Asset Management(KAM)
KKR Private Equity Investors(KPE)
KKR Capital Markets (KCM)
Client & Partner Group Global expansion into Asia,
Australia and Middle East
2004 - 2009
Business combinationwith KPE
Publicly-traded onEuronext Amsterdam
10.01.09
North Americanprivate equity firm
1980s - 1990s
KKR Founded
1976
Publicly-tradedon NYSE
07.15.10
Mezzanine / SpecialSituations
Infrastructure
Natural Resources
KKR Equity Strategies
Real Estate
2010 - 2011
Pendingacquisition ofPrisma CapitalPartners
2012
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$5.2 bn of
Segment NAV
KKR Today
$46 bn AUM
Private Equity
Natural Resources
Infrastructure
Real Estate
$24 bn AUM
Leveraged Credit
Mezzanine/DirectLending
Special Situations
Equity Strategies Hedge Fund of Funds
Public MarketsPrivate Markets Capital Markets &Principal Activities
Capital Markets
Balance Sheet
Total Book Value of$8.67 per Adjusted
Unit
Note: Market capitalization as of July 6, 2012. Segment figures and unitholder information as of March 31, 2012 (pro forma for pending Prisma acquisition).
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Note: PE designation includes private equity, infrastructure, and natural resources executives.* Includes certain other KKR executives working in legal, compliance, IT, IR, and financial, tax and accounting functions, who are not represented on the
above map.
PEKCMKAMKESCPG
KKR CapstoneGMAA
New York
KAM
CPG
San Francisco
PEKKR Capstone
Menlo Park
HoustonPublic Affairs
Washington DC
PEKCM
KAMCPGKKR Capstone
London
PE
Paris
CPG
DubaiPE
KCMKKR Capstone
Mumbai
PEKKR Capstone
Sydney
PEKCMCPG
KKR Capstone
Hong Kong
PECPG
KKR Capstone
Beijing
PECPG
KKR Capstone
Tokyo
Over 600 Executives and Professionals around the globe*~150 in private equity, infrastructure and real estate~60 in credit, mezzanine and equity strategies~80 in capital markets and client service~60 operations executives in KKR Capstone~80 executives in Business Operations~200 professionals
KKR Private Equity (PE)KKR Capital Markets (KCM)KKR Asset Management (KAM)KKR Equity Strategies (KES)Client & Partner Group (CPG)KKR CapstonePublic AffairsGlobal Macro & Asset Allocation (GMAA)
Global Presence of:
KKR: A Global Investment Firm
PEKKR Capstone
PE
Seoul
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Units % of % of Unitholder (MM) Total Public
Lexington 19.5 2.9% 8.4%Waddell & Reed 15.1 2.2% 6.5%Fidelity 10.0 1.5% 4.3%Ariel 6.5 0.9% 2.8%Credit Suisse 6.3 0.9% 2.7%Omega 5.4 0.8% 2.3%Wellington 0.7 0.1% 0.3%Swiss Re 4.4 0.6% 1.9%MSSB 3.7 0.5% 1.6%Serengeti 4.0 0.6% 1.7%
Top 10 Unitholders 75.5 11.0% 32.6%
Other Unitholders 156.2 22.9% 67.4%Public Unitholders 231.7 33.9% 100.0%
KKR Executives 451.7 66.1%Total KKR 683.4 100.0%
KKR as a Public Company
Ownership Today
Note: Market data and estimates as of June 20, 2012. Estimates reflect full analyst coverage universe for KKR. Ownership data based on Ipreo surveillance
as of June 20, 2012. Todays unit counts reflect basic units outstanding.
KKR Capitalization($ in millions except stock price)
Stock Price (6-20-2012) $12.74Fully Diluted Shares 701.0
Market Cap $8,931.3Plus: Debt 500.0Less: Cash (855.5)Less: Investments (5,023.0)Less: Net Carried Interest (599.6)
Enterprise Value $2,953.1
2012E ENI per Share $2.252013E ENI per Share $2.20
2012E P/E 5.7x2013E P/E 5.8x
2012E Distribution $0.712013E Distribution $1.01
2012E Dividend Yield 5.6%2013E Dividend Yield 7.9%
Market capitalization: $8.9 bn
Book value per unit: $8.67
Public unitholders: 33.9%
Credit ratings: A- by S&P, A by Fitch
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Culture
TEAMWORKINTEGRITY
RELATIONSHIP-DRIVENACCOUNTABILITY
INNOVATIONEXCELLENCE
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Culture
TEAMWORKINTEGRITY
RELATIONSHIP-DRIVEN
ACCOUNTABILITY
INNOVATION
EXCELLENCE
We pride ourselves on our one - firm approach;
Every person at KKR owns equity and shares inour success
Our reputations as individuals and as a firm are paramount; Our word is our bond
People do business with people they like andtrust; Arrogance kills
We embrace the obligation to speak up andsay what we think; We also have the fortitude
to say no, even at the eleventh hour
We work passionately to retain the
entrepreneurial spirit that created our firm andto fight against politics and bureaucracy
We aspire to be the best at what we do andlead by example; Our focus on impact and
results creates a vibrant and meritocraticenvironment
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Industry Expertise/Sourcing
Comprehensive industry coverage
across global markets in both privateequity and credit
Deep relationships supporting amulti-sector investment approach
Holistic discussions across the capitalstructure
Investment Experience
36-year history of quality investing (1)
35 senior-most private equityinvestment professionals have beenwith KKR for an average of over 13years
26 senior-most asset managementinvestment professionals have anaverage of nearly 17 yearsexperience
KKR Capstone Captive team of ~60 senior
operations professionals
Work side-by-side with portfoliocompany senior managers tohelp identify and implementoperational improvements
KKR Capital Markets
Dedicated resource
Manages all capital marketsactivities for the firm
Assists with capital structures,refinancings, IPOs
Client & Partner Group
Team of ~45 professionalsfocused on building,maintaining, and expandingclient relationships
Delivers solutions to investors
across the KKR platform
Stakeholder Management Integrated into investment
decision and transactionprocesses
Focus on alignment of interestsand sustainability
Share best practices acrossKKRs portfolios
Peopleand
Culture
Why We Are Different
(1) As of May 1, 2012.
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CreditStrategies
KKR Global Business Model
IndustryExpertise
ValueCreation
Capabilities
StakeholderManagement
PrivateEquity
CapitalMarkets
Access toCapital
Client & LPPartnerships
Best In ClassProcesses
Global One-Firm
Platform
People &Values
Network /Relationships Experience
O u r
D i f f e
r e n t i a t o r s
O u r
B u s
i n e s s e s
O u r
I d e n t i t y
Innovation& Flexibility
Mezzanine &Special
SituationsHedge Funds
Infrastructure,Natural
Resources
RealEstate
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KKR Organizational Chart
Kravis/Roberts
GlobalPrivate Equity
(Bae, Huth,Michelson,
Navab)
Global Capital& Asset
Management
(Nuttall)
GlobalInfrastructure/
NaturalResources
(Lipschultz)
Global ChiefAdministrative
Officer
(Fisher)
Global PortfolioManagement
(Raether)
KKR Capstone
Asia/Pacific
(Bookmyer)
Europe/MENA
(Cornog)
NorthAmerica(Nelson)
Industry/Functional/Regional Teams
Europe/MENA(Huth)
NorthAmerica
(Michelson/Navab)
Asia/Pacific(Bae)
Industry/Regional Teams
Management Committee (MC)
Investment Committees (ICs)
Other Governance Committees(e.g. Conflicts, Risk, Balance Sheet)
Public Affairs(Mehlman)
Legal andCompliance
(Sorkin)
Finance(Janetschek)
InformationTechnology(Brandman)
HumanResources(Gottlieb)
Industry/Functional Teams
Note: Participation of KKR Private Equity, KKR Capital Markets, and KKR Capstone personnel in the public markets investment process is subject toapplicable law and inside information barrier policies and procedures, which may limit the involvement of KKR Private Equity, KKR Capital Markets, andKKR Capstone personnel in certain circumstances. Discussions with Senior Advisors and employees of KKRs managed portfolio c ompanies are alsosubject to the inside information barrier p olicies and procedures, which may restrict or limit di scussions and/or collaborations with KAM.
Note: KKR Capstone is owned and controlled by its senior management and not KKR.
Real Estate(Rosenberg)
LeveragedCredit(Falk/
Sheldon)
Mezzanine(Goltz)
SpecialSituations(Weinstein/
Zilkha)
PublicEquities
(Howard)
KKR Credit Strategies(Goltz)
AssetManagement(Sonneborn)
Other:Corporate
Development,New Products)
Client andPartner Group
(Donohoe)
CapitalMarkets
(Farr)
Macro AssetAllocation(McVey)
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2009 2010 2011CAGR
'09-'11
Fee Paying AUM ($B) $43 $46 $46 4.14%
Revenues $618 $735 $912 21%Expenses ($371) ($416) ($495) 15%
Fee Related Earnings $247 $318 $417 30%margin 40% 43% 46%
ENI $1,954 $2,139 $751
Cash Carry, gross $0 $388 $520
Headcount 640 757 879 17%Distribution per share $0.60 $0.74Book Value per share $6.08 $8.38 $8.29 17%
The last 3 years by the numbers
09 - 10 10 - 11
16%
29%31%
18%
We have grownmaterially over time
and have done so in ameasured manner
Fee Related EarningsHeadcount
y / y
c h
a n g
e
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New and expanding businesses have helped fuel this growth
Private Markets
2010
Public Markets
2011
$912
$618
$735
2009
Capital Markets
Revenues by Business Unit($M)
CAGR(09 - 11)
8%
51%
124%
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Weve innovated and diversified our service offering
2009
PrivateMarkets
2011
PublicMarkets
CapitalMarkets
North America PE Asia PE Europe PE
Bank Loans & High Yield
Portfolio Refinancing Syndication
North America PE Asia PE Europe PE China Growth Infrastructure KNR Royalties Real Estate
Bank Loans & High Yield Direct Lending Mezzanine Special Situations KES
Portfolio Refinancing Syndication Equity Underwriting 3 rd Party Business NBFC
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Our business portfolio in 2012 -weve cultivated a pipeline of businesses
2012: Maturity of existing businesses
Nascent Growth Mature
PrivateMarkets
PublicMarkets
CapitalMarkets
Real Estate Drilling Royalties
Public Equities
e.g. Latin America,Credit Hedge
Fund
R&D
Natural Resources
Asia PE
Infrastructure
Mezzanine Special Situations
3 rd Party business NBFC
NA PE Europe PE
Liquid Credit
Portfolio Refinancing
Portfolio Underwriting
China Growth
Equity Syndication
Direct Lending
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Strategic Goals
1. Maximize Performance Across Our Businesses through Intense Focus andan Active Ownership Approach
2. Continue to Evolve Private Equity Business Model and Effectively DeployMeaningful Capital
3. Aggressively Build our non PE Businesses (Fixed Income, Mezzanine,Infrastructure, Special Situations, Natural Resources, Real Estate, HedgeFunds) into Industry Leaders
4. Increase Our Effectiveness at Capital Raising and Expand Our InvestorBase to Drive Meaningful New Capital
5. Leverage KCM to Create Differentiated Access to Capital and EnhanceFirm Profitability
6. Build Liquidity and Diversity on Our Balance Sheet and Employ it toMaximum Strategic Effect
7. Retain Strong Emphasis on People, Culture and Values and OperateEffectively and Efficiently as one Integrated Team
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Strategic Goals
1. Maximize Performance Across Our Businesses through Intense Focus andan Active Ownership Approach
2. Continue to Evolve Private Equity Business Model and Effectively DeployMeaningful Capital
3. Aggressively Build our non PE Businesses (Fixed Income, Mezzanine,Infrastructure, Special Situations, Natural Resources, Real Estate, HedgeFunds) into Industry Leaders
4. Increase Our Effectiveness at Capital Raising and Expand Our InvestorBase to Drive Meaningful New Capital
5. Leverage KCM to Create Differentiated Access to Capital and EnhanceFirm Profitability
6. Build Liquidity and Diversity on Our Balance Sheet and Employ it toMaximum Strategic Effect
7. Retain Strong Emphasis on People, Culture and Values and OperateEffectively and Efficiently as one Integrated Team
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Its All About Performance
KKR PE Portfolio Performancevs Benchmarks (09 - 11)
KAM Strategy Performance vsBenchmark (3 yr returns)
Note: 3 year performance is as of end of 2011 (12/31/2011); PE performance analysis conducted on samestores basis for investments made prior to Ja nuary 1, 2009 to ensure comparability of analysis (1) Benchmark: S&P/LSTA Loan Index.(2) Benchmark: Merrill Lynch High Yield Master II Index.(3) Benchmark: Merrill Lynch High Yield Master II Index.
OpportunisticCredit
23.7%
32.5%
High YieldCarveout
23.7%
36.0%
SecuredCredit(unlevered)
19.5%20.6%
Benchmark
KAM (Gross Return)
(1) (2) (3)KKR PEPortfolio MSCIWorld
Index
S&P 500
39.6%
48.6%
76.0%
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KKRs Global Macro and Asset Allocation team (GMAA) provides the Firm with marketcommentary and outlooks on the changing dynamics in the global economy
Global Macro and Asset Allocation
The Team The team is led by Henry McVey, who has 24
years of experience evaluating macroeconomictrends and asset allocation topics
Henry McVey, David McNellis and Frances Limwork in partnership with various investment teamsFirm-wide to assist in better decision-making andenhanced performance regarding current andpotential investments
Primary Activities Help KKR and its clients assess global macro
issues and trends across all of its investmentdisciplines, including private equity, hedge fundsand public investing
Provide thought leadership through periodicwritten content that engages employees andclients as it relates to macro trends and assetallocation decisions
Analyze insight into the business environmentfrom data and trends gleaned from KKRs diverseportfolio
Over time, help the Firm build out its global macroand tactical asset allocation capabilities
An archive of GMAAs macroeconomic insights pieces isavailable at http://www.kkrinsights.com
Recent Macroeconomic Insights Pieces
April 8, 2012
March 5, 2012
http://pa.kkr.com/sites/all/modules/civicrm/extern/url.php?u=65&qid=21292http://pa.kkr.com/sites/all/modules/civicrm/extern/url.php?u=65&qid=212928/10/2019 KKR Overview and Organizational Summary
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Strategic Goals
1. Maximize Performance Across Our Businesses through Intense Focus andan Active Ownership Approach
2. Continue to Evolve Private Equity Business Model and Effectively DeployMeaningful Capital
3. Aggressively Build our non PE Businesses (Fixed Income, Mezzanine,Infrastructure, Special Situations, Natural Resources, Real Estate, HedgeFunds) into Industry Leaders
4. Increase Our Effectiveness at Capital Raising and Expand Our InvestorBase to Drive Meaningful New Capital
5. Leverage KCM to Create Differentiated Access to Capital and EnhanceFirm Profitability
6. Build Liquidity and Diversity on Our Balance Sheet and Employ it toMaximum Strategic Effect
7. Retain Strong Emphasis on People, Culture and Values and OperateEffectively and Efficiently as one Integrated Team
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Biggest investor in our own funds and deals with ~$5.5 bn invested or committed (2)
Vast global sourcing network
Substantial resources in operations, capital markets,stakeholder management, global macro and assetallocation, plus senior advisors
Use of firm- wide brain to find and act on ideas
3.1x gross MOIC, 26% gross IRR, and 20% net IRR onour eight realized private equity funds (1)
S&P 500 outperformance of 7.4% on a net basis acrossour first 14 private equity funds raised since firmsinception
Private Equity Overview
36 years, 200+ investments, $53+ bn of equity deployed
Highly experienced investment team
Leading
GlobalFranchise
StrongHistoricalReturns
DistinctiveStrategy andResources
Aligned withInvestors
Note: Data as of 3/31/2012. Past performance is no guarantee of future results. See Important Information for details regarding returns and indices.(1) Includes all investments of KKRs eight realized private equity funds from inception to March 31, 2012. The 1996 Fund has two remaining investments with a cost basi s of
$46mm which are valued at $0. It is anticipated that these investments will be written off in 2012. For purposes of this analysis the 1996 Fund is considered fully realized.
(2) Includes ~$4.4 bn of balance sheet capital invested in or committed to our funds and transactions and ~$1.2 bn of personal investments by KKR principals.
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(1) Represents a network of senior executives that work with KKR and KKR portfolio companies.(2) As of May 2012.
DeepIndustry Knowledge
Extensive
Global Network
LeadingReputation & Brand
KKRs Sourcing Capabilities Lead to Differentiated, Proprietary Opportunities
Extensive network developed from the significant experience ofour over 400 executives
~30 Senior Advisors (1) evaluating investment opportunities,serving on the boards of portfolio companies, and providingguidance based on industry and management expertise
In- depth understanding of industries and a corporations capitalstructure
Strong network of industry experts, cultivating government,
company, and management relationships Broadly diversified portfolios across industries and geographies
serve as eyes and ears on emerging industry trends
36 years of investment experience having completed over 200private equity investments with over $465 billion of totalenterprise value, and managing a portfolio of approximately 550 (2) credits and approximately 700 actively tracked credits
Reputation of integrity and excellence creates differentiatedtransaction opportunities
Sourcing Capabilities Across the Platform
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Disciplined and structuredapproach to value creation
Delineates operationalissues to be addressedimmediately afteracquisition
100-Day Plan KKR Capstone
Exclusive relationship Experienced team of senior
operators Focused on results-oriented
execution
Portfolio ManagementCommittee
Allows KKR portfoliocompanies to benefit fromaccumulated experience ofcommittee members
High Quality Resources and Processes Focused on Value Creation
Strategy Development Optimize OrganizationOperational Excellence
Product/market strategies Regional strategies Partnership strategies
Acquisition strategies Positioning for exit
Secure, retain, andincentivize top and middlemanagement
Optimize organizationalstructure Train and motivate broad
employee base
Top-line improvement(e.g., sales force, pricing)
Cost reduction
Working/operational capitalreduction IT master plan R&D master plan
Sustainable Operational Improvement and Added Value
KKR implements a highly structured approach to driving operational improvements
Value Creation in Private Equity
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Businesses face increased attention, regulation and scrutiny from governments andstakeholders around the world. KKR has a dedicated team to navigate these increasinglycomplex issues
Note: The portfolio companies represented are shown as examples of KKRs regulatory and stakeholder engagement and include Nort h American portfolio companies withover $15 million of environmental cost savings. The specific portfolio companies identified are not representative of all of the portfolio companies purchased, soldor recommended for KKR Funds, and it should not be assumed that the investment in the portfolio companies identified was or will be profitable.
* Results based on data reported from 2008 2010.
Regulatory and Stakeholder Engagement
Incorporate relevant stakeholder andregulatory considerations into our businessprocesses
Pre-investment asset selectionDetermine how to improve relevantenvironmental, social and governanceissues as part of due diligenceEvaluate changing regulatory trends likelyto affect industry
Portfolio ManagementShare best practices across our portfolioto seek to improve performance onenvironmental, labor and sustainabilityissuesHelp companies understand changingregulatory environment
Engage with key stakeholders
Focus on alignment of interests and realsustainability
Our efforts must simultaneously make financialsense and benefit stakeholders
Sharing Best Practices Environmental Impact*
$155 mm in avoided energy and fuel costs 386,000 metric tons of GHG emissions avoided 80% recycling efficiency improvement 19 mm cubic yards of waste avoided 345,000 tons of cardboard recycled 80% waste efficiency improvement
$30.6 mm in avoided energy and fuel costs 142,000 metric tons of GHG emissions avoided Improved fleet efficiency by 7% Increased distribution centers energy efficiency by 13%
$22.7 mm in avoided energy costs 6% GHG efficiency improvement 107,000 metric tons of GHG emissions avoided
$17.5 mm in waste costs avoided 35,000 metric tons of GHG emissions avoided 10% energy efficiency improvement 6.3 mm pounds of waste avoided
More information on KKRs Green Portfolio Program isavailable at http://green.kkr.com
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Strategic Goals
1. Maximize Performance Across Our Businesses through Intense Focus andan Active Ownership Approach
2. Continue to Evolve Private Equity Business Model and Effectively DeployMeaningful Capital
3. Aggressively Build our non PE Businesses (Fixed Income, Mezzanine,Infrastructure, Special Situations, Natural Resources, Real Estate, HedgeFunds) into Industry Leaders
4. Increase Our Effectiveness at Capital Raising and Expand Our InvestorBase to Drive Meaningful New Capital
5. Leverage KCM to Create Differentiated Access to Capital and EnhanceFirm Profitability
6. Build Liquidity and Diversity on Our Balance Sheet and Employ it toMaximum Strategic Effect
7. Retain Strong Emphasis on People, Culture and Values and OperateEffectively and Efficiently as one Integrated Team
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KKR Asset Management (KAM) Overview
KKR launched KAM as its credit investing business in 2004 KAM manages approximately $16.3 billion in assets
KAM has over 100 dedicated employees, including over 60 investment professionals KAMs business model focuses on leveraging the complete intellectual capital of
KKRs more than 800 people, advisors, and 77 PE portfolio companies
Marketable SecuritiesDivision
Alternative InvestmentsDivision
KAM AUM by Strategy (1)
($ in millions)
Bank Loans
High Yield
Bank Loans Plus High Yield
Opportunistic Credit
Mezzanine
Special Situations (Focuson Distressed and RescueFinance)
Long / Short Equity
Direct Lending
Capital Solutions(multi asset-class products spanning all KKR strategies)
KAM Strategies
Separately Managed Accounts
Funds
SpecialSituations
$1,366
Mezzanine$1,412Leveraged
Credit$12,239
Private Markets$919 Equities
Strategies$371
1) Data as of March 31, 2012. Please see Endnotes for important information regarding the calculation of AUM.Note: Please refer to Important Information on page 1 for further information on KKRs inside information barrier policies and procedure s, which may limit the involvement of personnel in certain investment processes and discussions.
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Successful record of developing and growing new businesses
~48% of our management fees for 2011 and 2012 to date are frombusinesses started since 2010
Expansion of the KAM Business
04 - 08: EstablishedPresence, Primarily Liquid
Credit
08 - 10: Built OutDiversified Credit Platform
11 & Beyond: New AssetClasses and Geographies
2008 2009 20112004
San Franciscoteam established
KFN launch
Bank loans & high yield; first
mezzanine investments
2007
New York teamestablished
London teamestablished
Newgeographies
Beyond
Mezzaninelaunch
Specialsituations
launch
Long/shortequitylaunch
Newstrategies
Directlendinglaunch
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KKR Energy and Infrastructure Platform
Infrastructure Private EquityProved, Developed
ProducingProperties
All OtherOpportunities
KKR Energy Platform
Energy Opportunity
Asset AllocationCriterion
Historical KKRTransactions
ColonialPipeline
Eagle FordORRI
TX CrudeFarm-In
Minerals JV
Midstream JV
EBR
East TX, LA and MSAssets
Asset-level investments,with predominance of valuefrom proved developedproducing (PDP) assets
Seek to Generate return viacurrent income
Oil and gas assets of lesserrisk than with developmentopportunities
Asset-level and/orstructured investments
Seek to Generate returnvia current income andcapital appreciation
Investments in goingconcern businesses
Seek to Generate returnvia growth and capitalappreciation
Infrastructure assets andbusinesses with limitedeconomic sensitivity
Investments in goingconcern businesses
Seek to Generate returnvia growth and capitalappreciation
Note: The specific portfolio companies identified are not representative of all of the portfolio companies purchased, sold or recommended for KKRFunds, and it should not be assumed that the investment in the portfolio companies identified were or will be profitable.
Equity Put to Work $550 million $1.3 billion$585 million
SabaInfraestructuras
KKRs Energy & Infrastructure platform manages ~$4 billion in non-private equityrelated assets
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KKR Real Estate
FinancialStructuring
OperatingCapabilities
Brand
Culture
DifferentiatedSourcing
IndustryVerticals
Senior Advisor /Platform Capabilities
Sourcing Execution
KKRs Real Estate group has 10 investment professionals located in the US and Europe Since launching the business in 2011, KKR has committed ~$155 million of equity to transactions Investing on behalf of both the KKR balance sheet and KFN, the group implements a thematic, bottoms
up and catalyst driven approach Our recently closed and pipeline of exclusively controlled deals illustrate the power of the KKR platform:
KKREdge
RecentlyClosedDeals
European Corporate Credit:Confidential
ExclusivePipeline
NNN PittsburghOffice Building
Resort HotelMezzanine Loan
Build-to-SuitDevelopment
Platform
Shale Oil-Related Housing
Development
In three years, our target is to have a global investment platform with a fully integratedcapital markets capability to effectuate equity and debt raises. Moreover, we intend toacquire or partner with a network of managers to build our independent operating capability
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Prisma is a leading customized hedge fund solutions platform with ~$8 billion in AUMthat KKR has agreed to acquire. The transaction is expected to close in Q4 2012.
Prisma Overview
FamilyOffice/HNW
8%
Other3%
Endowment/Foundation
6%PublicPension &
SWF43%
USCorporate
Pension11%
FinancialInstitution/Insurance
29%
Prisma AUM by Investor Type
SeparateAccount
63%
Commingled Fund
37%
Prisma AUM by Account Type
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Strategic Goals
1. Maximize Performance Across Our Businesses through Intense Focus andan Active Ownership Approach
2. Continue to Evolve Private Equity Business Model and Effectively DeployMeaningful Capital
3. Aggressively Build our non PE Businesses (Fixed Income, Mezzanine,Infrastructure, Special Situations, Natural Resources, Real Estate, HedgeFunds) into Industry Leaders
4. Increase Our Effectiveness at Capital Raising and Expand Our InvestorBase to Drive Meaningful New Capital
5. Leverage KCM to Create Differentiated Access to Capital and EnhanceFirm Profitability
6. Build Liquidity and Diversity on Our Balance Sheet and Employ it toMaximum Strategic Effect
7. Retain Strong Emphasis on People, Culture and Values and OperateEffectively and Efficiently as one Integrated Team
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The Team Global team of ~45 executives located in 7 offices
across 4 continents and in 7 countries Relationship managers in direct outreach to
clients Product specialists providing specific support
and expertise Junior resources serving in a generalist
capacity Relationship-focused, solutions-oriented approach
Able to deliver customized products
Primary Activities Facilitate client access to products and services
across KKRs platform Apply integrated approach by leveraging all KKR
executives and capabilities globally including:
Industry investment teams expertise KKR Capstones operational best practices KCM market perspectives
Work in partnership with KCM in thesyndication/distribution of product including:
Participation in debt or equity distributions Placement of mezzanine tranches Co-investment opportunities
KKRs Client & Partner Group (CPG) consists of experienced professionals with diversebackgrounds dedicated to developing and servicing KKRs global network of investors andclients
CPG connectsclients to
KKRs platform C
l i e n
tKKR
Client & Partner Group
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We are building a world-class fundraising engine
$9.3B
$5.4B$3.7B
201120102009
Total Capital Raised ($B)
Europe III Infrastructure Mezzanine PE SMA Credit SMA
Key Productsmarketed:
# Investors: 275 345 390
Infrastructure Mezzanine China Growth Oil & Gas KCCP Capital Solutions SMA Energy SMA Credit SMA
Infrastructure Mezzanine Oil & Gas KCCP NAXI KES PE SMA Energy SMA Credit SMA
Note: includes external capital raised only
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Strategic Goals
1. Maximize Performance Across Our Businesses through Intense Focus andan Active Ownership Approach
2. Continue to Evolve Private Equity Business Model and Effectively DeployMeaningful Capital
3. Aggressively Build our non PE Businesses (Fixed Income, Mezzanine,Infrastructure, Special Situations, Natural Resources, Real Estate, HedgeFunds) into Industry Leaders
4. Increase Our Effectiveness at Capital Raising and Expand Our InvestorBase to Drive Meaningful New Capital
5. Leverage KCM to Create Differentiated Access to Capital and EnhanceFirm Profitability
6. Build Liquidity and Diversity on Our Balance Sheet and Employ it toMaximum Strategic Effect
7. Retain Strong Emphasis on People, Culture and Values and OperateEffectively and Efficiently as one Integrated Team
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Note: KKR Capital Markets LLC is a broker-dealer registered with the U.S. Securities and Exchange Commission and is a member of FINRA and SIPC. Thecompanies identified above are shown as examples of KCMs transaction experience and represent KCMs largest transactions for KKRs portfoliocompanies (based on transaction size by issuer for each of the categories above) in 2011/2012 and third party
KKR Capital Markets (KCM) was launched in 2006 to facilitate and add expertise aroundinvestment structuring, financing and all capital markets-related issues
The Team Team of ~30 capital markets executives
Expertise in debt, equity, and structuredproducts
Ability to leverage direct relationships withinstitutional investors around the world
Highly integrated approach generatesdifferentiated solutions across KKRsportfolios
Primary Activities
Providing tailored capital markets adviceto portfolio companies, KKR investmentprofessionals and third party
Developing and implementing traditionaland non-traditional capital solutions forinvestments and companies seekingfinancing
Assisting KKR LPs in growing their directinvesting businesses
Structuring and underwriting equity anddebt financing (both public and private)
KKR Capital Markets
Selected Recent Transaction Experience
Public Equity
Public Debt
Private Equity
Private Debt
Third Party Equity
Third Party Debt
Senior Bookrunner on $1.6 billion Follow-onOffering
Joint-Lead Arranger on $3.2 billion Amendment &Extension of Senior Secured Credit Facility
Placement Agent on $1.05 billion Private EquitySyndication
Sole Placement & Syndication Agent on $125million Private High Yield Notes
Sole Placement & Syndication Agent on $85 millionof Equity via Private Placement
Sole Lead Arranger, Bookrunner and SyndicationAgent on $147 million of Senior Secured CreditFacilities
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How KCM Adds Value KCM should be viewed and positioned as our internal experts on all capital structure, financing, hedging and markets
related topics Call KCM early and often for any of these issues and across all businesses before any external advisor is called KCM continues to build direct relationships with key investors and proactively manages relationships with f inancing
groups at major banks Utilizing KCM has strengthened the Firms relationships with providers of capital, adding value to our portfolio and
improving KKRs productivity and profitability
From 2009 to 2012 YTD, KCM has earned more than $322 million in fees associated with KKR portfoliocompany deals fees that would have otherwise been paid to investment banks
Value Add IllustrativeTransaction
Likely OutcomeWithout KCM
KCM Led Outcome
1) Better Access toCapital: Morecapital at a lowercost and with morecertainty
Capsugel More expensivefinancing and lowerreturns
KCM arranged and negotiated the $1.5 bn capitalcommitment on highly attractive terms despitevolatile markets due to the Fukushimaearthquake/tsunami
Attractive execution and pricing relative to othersponsor transactions including covenant-lite andeuro debt commitments
2) Creative andaligned refinancingactivities
EFH andFirst Data
Less coordinatedcommunication withkey accounts
Extensive communication with key debt holdersensuring successful execution of key amend &extend transactions
3) Best execution DollarGeneral
No in -houseadvisory tostrategicallyexecute onmonetization plansover the long-term
KCM worked directly with Dollar Generalmanagement and sponsors since the IPO on therefinancing and monetization strategy, havingexecuted 6 follow-on and 2 debt offerings
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Strategic Goals
1. Maximize Performance Across Our Businesses through Intense Focus andan Active Ownership Approach
2. Continue to Evolve Private Equity Business Model and Effectively DeployMeaningful Capital
3. Aggressively Build our non PE Businesses (Fixed Income, Mezzanine,Infrastructure, Special Situations, Natural Resources, Real Estate, HedgeFunds) into Industry Leaders
4. Increase Our Effectiveness at Capital Raising and Expand Our InvestorBase to Drive Meaningful New Capital
5. Leverage KCM to Create Differentiated Access to Capital and EnhanceFirm Profitability
6. Build Liquidity and Diversity on Our Balance Sheet and Employ it toMaximum Strategic Effect
7. Retain Strong Emphasis on People, Culture and Values and OperateEffectively and Efficiently as one Integrated Team
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KKRs public listing strengthened alignment of interest with our LPs In our combination with KKR Private Equity Investors, KKR Principals did not
sell any equity but rather we acquired LP interests in our funds held by KPEresulting in KKR and its executives having over $6 billion invested in orcommitted to our own investment funds and portfolio companies
KKR Balance Sheet (1) KKR Principals (2)
Balance SheetInvestments
Unfunded CommitmentsTo Investment Funds
KKR PrincipalsPersonal Investments
KKR TotalExposure
$4.2
$0.6
$1.3 $6.1
Result = We are now our own largest investor
Note: Dollars in billions. Values shown at cost as of March 31, 2012. Numbers may differ due to rounding.(1) KKR executives own approximately 67% of KKR.(2) Investment and commitments made by individual employees and retained by those individuals personally.
Eating Our Own Cooking
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Through our combination with KPE and related public listing,we acquired a significant balance sheet providing us withpermanent capital for our business
Permanent Balance Sheet Capital to Facilitate Growth
General partnercommitments
Seed capital
Capital markets funding
Other organic/inorganicgrowth opportunities
Approximately $5 bn ofbalance sheet capitalinvested in or committedto our funds andtransactions
Permanent Capital toAccelerate Our Growth
Alignment of Interests withOur Limited Partners
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Balance Sheet Highlights
Sizable balance sheet
$6.1 bn of book equity value($8.67/adjusted unit (2) )
$5.0 bn of investments (~50%public securities)
Ample liquidity
$850 mm of cash
$750 mm of available revolvercapacity (3)
Well capitalized and minimalleverage
A- and A ratings from S&P andFitch, both with a stable outlook
$500 mm of senior notes is onlydebt outstanding
(1) Represents KKRs total reportable segment balance sheet. (2) Adjusted units represent the fully diluted unit count using the if-converted method.(3) Excludes $500 mm of undrawn revolver capacity for use in capital markets business.
Balance Sheet as of 3/31/2012 (1)
(in mm, except per unit)Private Equity Funds $1,547Co-Investments 2,656Other Investments 820
Total Investments $5,023
Cash and Cash Equivalents 856Unrealized Carry 600
Other Assets 297
Total Assets $6,775
6.375% Notes due 2020 $500Other Liabilties/Noncontrolling Interests 198
Partners' Capital $6,077
Adjusted Units Outstanding 701.0
Book Value/Adjusted Unit (2) $8.67
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Strategic Goals
1. Maximize Performance Across Our Businesses through Intense Focus andan Active Ownership Approach
2. Continue to Evolve Private Equity Business Model and Effectively DeployMeaningful Capital
3. Aggressively Build our non PE Businesses (Fixed Income, Mezzanine,Infrastructure, Special Situations, Natural Resources, Real Estate, HedgeFunds) into Industry Leaders
4. Increase Our Effectiveness at Capital Raising and Expand Our InvestorBase to Drive Meaningful New Capital
5. Leverage KCM to Create Differentiated Access to Capital and EnhanceFirm Profitability
6. Build Liquidity and Diversity on Our Balance Sheet and Employ it toMaximum Strategic Effect
7. Retain Strong Emphasis on People, Culture and Values and OperateEffectively and Efficiently as one Integrated Team
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Significant Investment in Human Capital
Headcount increasing most rapidly in new businesses and firminfrastructure to enable profitable and efficient growth
2006 2007 2008 2009 2010 2011 June 2012
Private MarketsPublic Markets
KKR CapstoneClient & Partner GroupCapital MarketsBusiness OperationsStaff
Note: Reflects number of people as of 6/30/2012. KKR Capstone is owned and controlled by its senior management and not KKR.
317
447
595644
757872 912
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Business Operations
Finance Information Technology
Public Affairs
Legal & Compliance
Human Resources
Stakeholder managementacross firm and portfolioPublic communicationsRegulatory expertise
Public company andlimited partner reportingBudgeting, planning,expense management
Enables better decisionsthrough better informationInfrastructure and ITcontrols
Transaction supportRegulatory/complianceconflict managementRisk mitigation
Professional development/training and mobilityPerformance/meritocracyRecruit, hire, integrate
Office OperationsOffice OperationsstandardsEfficiency and scalability,G&A reductionOffice build-outs
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SOX Compliance/Internal Audit
Global Risk Management
SAP/Investran Implementation
Public/Private Wall Management
KKR, CPG, Portfolio, KCM Central
KAM Trading & Risk System
Training Programs & Career Framework
360 and Interview-Based Review Process
Investor Relations
Green Portfolio Program
KKR Website/Rebranding
Procurement/Risk Subject Matter Experts
New SMAs
New offices: Beijing, Mumbai, Houston, etc
Internal External
Other Notable (but less visible) Achievements
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M o n
i t o r i n g
O v e r s
i g h t
Global Governance Structure
Formalized processes and functions in place to manage firm
Global decision-making process Separate committees by strategy
Investment Committees
Monitorinvestmentportfolios acrossthe firmsbusinesses
Portfolio Manage-
ment FunctionIdentifies andmonitors keyrisks to firm
Risk Committee
Reviews balance sheet investmentdecisions
Oversees firm capital structure andliquidity
Balance Sheet Committee
Coordinatequarterlyvaluations
Ensure consistentglobal process
Valuation
Committees
Management Committee
Other firm-level matters
Analyzes andaddresses new/potential conflictsof interest acrossbusinesses
Conflicts
Committee
T r a n s a c
t i o n
O v e r s
i g h t
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Implications of 3 year plan for all of us
Tremendous progress over the last 3 years Our strategy is working
Weve reached the top of the first mountain
2012 is about executing whats on our plate Execution, execution, execution is key
Budget/plan provides roadmap and accountability
Need to constantly look for incremental commercial opportunities (e.g. Samson II)
With just what is on our plate, there is a path to meaningful value creation Requires consistent execution and intense focus on commercial results
Investment performance is key $75B of fee-paying AUM and doubling of our stock price is attainable
And there are multiple breakout opportunities not in the plan that could propel us further Continue to invest in our business
Remain innovative, entrepreneurial, and nimble
As we drive forward, we must maintain our core culture and values and continuously
evolve our organization
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Our Individual Role
Live the Values of KKR
Speak Up! Dont Be Afraid to Offer Your Views and Ideas
Be Mindful of How Your Words and Actions are Perceived All of Us AreAmbassadors for KKR
Understand and Take Ownership for the Strategy and Your SpecificContribution
Embrace and Drive Change Recognize There is No Business asUsual
Build Bridges Across the Firm We are One Integrated Team
Reach Out and Create Internal Relationships Across the Firm
Constantly Ask Yourself, What Can I Do To Leverage the Firms MultipleCapabilities?
Be Creative and Entrepreneurial New Ideas, New Products, NewRelationships Proactively Identify Where You Can Contribute
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Q&A
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Appendix
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Culture
TEAMWORK: We pride ourselves on our one-firm approach, working proactively and collaborativelyacross businesses and geographies to achieve the best possible results. In keeping with this approach,every person at KKR is an owner of our firm and shares in our success.
INTEGRITY: Our word is our bond we say what we mean and we do what we say we will do. As alearning organization, we are self-critical- acknowledging our mistakes and trying always to learn fromthem.
RELATIONSHIP- DRIVEN: KKR is deeply committed to building and sustaining long-term partnerships internally and externally- grounded in trust and transparency. We work hard to understand and alignthe interests of all stakeholders, we treat others as we would like to be treated- with fairness,compassion and respect.
ACCOUNTABILITY: We accept accountability for our actions, inactions and decision, both individuallyand as a firm. KKR embraces the implied responsibilities of our one-firm approach: the obligation tospeak up and say what we think and to respect and listen to those who do the same. We deliver on ourcommitments- to our stakeholders, our partners and to one another.
INNOVATIVE: We question accepted wisdom, creating new ideas and new approaches, and neverresting on our laurels. We are self- starters with a can - do approach and a willingness to take prudentrisks.
EXCELLENCE: We set high standards- each of us as individuals and the firm as whole- and consistentlytry to exceed them. We attract self-motivated, highly capable, results-oriented people and invest heavilyin their development. KKR strives for diversity, recognizing that people with different backgrounds,experiences and perspectives make us a stronger and more effective organization.
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Values BEING HONEST : Always be honest with one another, and honest with anyone we work with outside the
firm. Our integrity is in the end all we really have. We can make all of the money possible, but if we don'thave integrity, we don't have anything.
TREATING EVERYONE HOW YOU WOULD LIKE TO BE TREATED : Be fair and consistent. Be politeand courteous. Show no arrogance towards others.
SHARING OPENLY : Share the results with as broad a group of KKR people as possible.
INSTILL TEAMWORK, AND CHOOSE THE RIGHT PEOPLE to join the team at KKR who are bright,thoughtful, honest, not arrogant, and who believe in the teamwork, not self-promotion.
HIRING SELF-STARTERS who are results oriented, analytical, and who have high intensity, integrity, andbelieve in teamwork.
BEING INNOVATIVE and not afraid to take prudent risks.
INVESTING IN PEOPLE AND IN COMPANIES where we would be proud to have this association.
HAVE THE FORTITUDE TO SAY NO . Even at 11:59 say no if we are uncomfortable about the integrityof our outside partner investing with us, or the management of a target company, or any other conditionsthat could emerge.
RELATIONSHIP BUILDING : It takes many years to build a solid reputation, but only a few minutes todestroy it. Be compassionate and thoughtful toward other people.
OUR WORD IS OUR BOND. OUR REPUTATION AS INDIVIDUALS AND AS KKR IS PARAMOUNT.
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Direct Lending Strategy
Provide financing solutions to middle market companies andsponsors that currently have limited alternatives
- Middle market PE activity is picking up substantially whilefinancing options remain constrained, thereby offeringlenders the opportunity to earn attractive risk-adjustedreturns
- Focus on mid-market companies; EBITDA in the $25-100million range typically
Target a wide global opportunity set including newsponsor deals, direct company financings, and
refinancings of existing sponsor companies KKR approach meets investor need for high current income
while appropriately matching structure of strategy with loanliquidity and maturity
- Targeting double-digit levels of current income
The Team
Managed by the Global Co-heads of Leveraged Creditplatform, Chris Sheldon and Erik Falk
Supported by global team of ~60 credit investment
professionals Integrated network of resources, including Private Equity,
KCM, KKR Capstone and approximately 30 Senior Advisors
KKR Value Proposition Global sourcing
Global network and integrated one firm sourcingcapabilities
Complementary to mezzanine sourcing efforts as KAM cannow provide financing across the capital structure
Diligence Private equity-like diligence supported by credit analysts in
industry verticals aligned with private equity teams Portfolio construction and management
- Intensive regular review of companies/instruments with highattention to governance issues and ability to be an activeinvestor
KKR Capital Markets participation Dedicated group of capital markets professionals who can
source deals, provide insight and help to syndicate largertransactions
Direct Lending Experience KAM has committed / invested in 43 deals representing ~$1.8
billion in direct lending transactions since 2005 Recent KKR secured deals include (1) :
Telx
MSX Education Management Corp. Aercap American Home Mortgage Aspen Dental BNY ConvergEx
KAMs direct lending business leverages the extensive firm -wide sourcing network andallows KAM to partner more broadly with middle market companies and sponsors
Direct Lending
Note: Participation of KKR Private Equity, KKR Capital Markets, and KKR Capstone personnel in the public markets investment process is subject to applicable law and inside informationbarrier policies and procedures, which may limit the involvement of KKR Private Equity, KKR Capital Markets, and KKR C apstone pe rsonnel in certain circumstances and KAMs ability toleverage such integration with KKR. Discussions with Senior Advisors and employees of the Firms managed portfolio companies ar e also subject to the inside information barrierpolicies and procedures, which may restrict or limit discussions and/or collaborations with Public Markets/KAM.
(1) Portfolio companies presented illustrate KAMs experience in sourcing proprietary senior investments from the period January 1, 2010 March 31, 2012. The specific companiesidentified are not representative of all the companies purchased, sold or recommended for clients, and it should not be assumed that an investment in the companies identified was orwill be profitable. Actual holdings will vary for each KAM client and there is no guarantee that a particular KAM clients ac count will hold any or all of the companies listed. The portfoliocompanies presented are not prospective investments KAM contemplated for any KAM fund, vehicle or account. Note: All data as of March 31, 2012.
Eddie Bauer
KeyPoint OnCore Airvana Aspect Asset Acceptance California Pizza Kitchen
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Mezzanine Strategy
Seek opportunities to take advantage of attractivefundamentals identified in the market for mezzaninesecurities
Focus on mid- to large end of the market ($50-150million typical fund commitments)
Target a wide global opportunity set including newsponsor deals, direct company financings, andrefinancings of existing sponsor companies
Aim to capitalize upon significant supply/demandimbalance in mezzanine debt
The Team
Led by three senior mezzanine professionals with extensiveprincipal investing experience and supported by a globalteam of ~60 credit investment professionals
Integrated network of resources, including KKR Capstone
and approximately 30 Senior Advisors
KKR Value Proposition
Global sourcing Global network and integrated one firm sourcing
capabilities Diligence
Private equity-like diligence supported by credit analystsin industry verticals aligned with private equity teams
Portfolio construction and management Intensive regular review of companies/instruments with
high attention to governance issues and ability to be anactive investor
Mezzanine Experience KAM has committed / invested over $1 billion in mezzanine
transactions since 2005 KAMs most recent mezzanine investments include:
Altegrity/Kroll Ambea Capital Safety IMCD J.Jill Genesys Mast Industries
KAMs dedicated mezzanine business is a natural extension of KAMs leading sub -investment grade platform
Maxeda Norcell OpenLink Financial Pets at Home
RBS WorldPay Telx Group, Inc
Note: Participation of KKR Private Equity, KKR Capital Markets, and KKR Capstone personnel in the public markets investment process is subject to applicable law and inside informationbarrier policies and procedures, which may limit the i nvolvement of KKR Private Equity, KKR Capital Markets, and KKR Capstone pe rsonnel in certain circumstances and KAMs abilityto leverage such integration with KKR. Discussions with Senior Advisors and employees of the Firms managed portfolio companies are also subject to the inside information barrierpolicies and procedures, which may restrict or limit discussions and/or collaborations with Public Markets/KAM.
Note: The above mezzanine investments represent all KAMs mezzanine investments from 2010 through March 31, 2012. The specific securities identified are not representative of all ofthe securities purchased, sold or recommended for clients, and it should not be assumed that the investment in the securities identified was or will be profitable. Actual holdingswill vary for each client, and there is no guarantee that a particular clients account will hold any or all of the securitie s listed.
Mezzanine
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Special Situations Strategy
Our approach to special situations is designed to be flexible inorder to allow us to be nimble in capturing dislocations across theglobe
We are focused on directly originated / distressed for controlsituations, where we can create value through insolvency andrestructuring expertise and operational improvements
We seek to identify distressed and dislocated investments whichproduce what we consider to be attractive risk-adjusted returnsacross special situations investments
We focus on capital preservation and downside protection whileseeking to create upside optionality
We look to invest when there is a catalyst in the following wayswhere KKR believes it has a definable edge:
- Rescue Financing / Recapitalization
- Control-Oriented Opportunities
- Secondary Distressed
- Portfolio Purchases
The Team
Managed by the Global Co-heads of Special Situations platform,Jamie Weinstein and Nat Zilkha
Supported by global team of ~60 credit industry investment
professionals Integrated network of firm-wide resources, including PE, KCM,
KKR Capstone and Senior Advisors
KKR Value Proposition, KKR Edge "One-Firm" approach which integrates the private equity, public
investing and operating teams of the firm where it believes it willcreate a tangible "edge" across sourcing, due diligence and valuecreation
Global footprint and local expertise Integrated one firm sourcing capabilities Differentiated approach to diligence, supported by private equity
team and credit industry analysts Strong value creation capabilities through KKR Capstone
KKR Special Situations Performance vs. Comparables
(From 3/1/2010 to 3/31/2012)
Inception-to-date performance vs. benchmark by strategy, as of March31, 2012:
KAMs special situations team pursues investment opportunities primarily in distressedcredit where KKR believes it has a definable edge
Special Situations
21.9%
15.3%
11.3% 10.3%7.0%
1.0%
-5%
0%
5%
10%
15%
20%
25%
KKR SpecialSituations Gross
Hedged IRR
KKR SpecialSituations Net
Hedged IRR
BofA MerrillLynch Global
High Yield CCCand Lower
Rated
MSCI WORLD HennesseeDistressed
Index
HFRX ED:Special
Situations Index
(1) Gross Hedged IRR for these purposes means the aggregate, annual, compound, gross internal rate of return on investments. The aggregate Gross IRR for the Investment Experience is a hypothetical Gross IRR given that the investments includedtherein were not made as part of a single portfolio, but rather by separate funds, vehicles and accounts managed by KAM. Gross IRRs do not reflect management fees, carried interest, taxes, transaction costs in connection with the disposition ofunrealized investments, organizational expenses and other expenses to be borne by investors in the applicable fund, vehicle or account, which will reduce returns and in the aggregate are expected to be substantial. A general summary of such feesand carried interest is included in Part 2A of Form ADV maintained by KAM, a copy of which will be furnished upon request. Past performance does not guarantee future results. The Composite may invest in below investment grade or unrated debtinstruments, which are generally subject to more credit risk and a greater risk of loss of principal and interest than higher rated debt instruments.
(2) Net Hedged IRR" is consistent with the definition of Gross Hedged IRR, but is also inclusive of management fees, the effect of foreign exchange derivative contracts, carried interest, organizational costs and other fund expenses.Note: Market indices for BofA Merrill Lynch Global High Yield CCC and Lower Rated, MSCI World, Hennessee Distressed Index, and HFRX ED: Special Situations Index (collectively, the Indices) included dividends reinvested. The market index returns
assume that on the day a portfolio investment is made, a hypothetical investment in a matching amount i s 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 thesedates of investment and hypothetical value(s) generated. Broad based securities indices are unmanaged and are not subject to fees and expenses typically associated with managed accounts or investment funds. Investments cannot be madedirectly in an index. The Indices are shown for infor mational purposes only. The performance of the Indices represent unmanaged, passive buy-and-hold strategies, and investment characteristics that differ materially from any KKR funds or otherclient accounts, and an investment in a fund is not comparable to an investment in any of the Indices or in the securities that comprise the Indices. The risk/return profile of each of the Indices is also materially different from that of any KKR fund.Further, the Indices are not used or selected by KKR as an appropriate benchmark to compare relative to the performance of any KKR fund, but rather they are included herein solely because they are well-known and widely recognized indices.Participation of KKR Private Equity, KKR Capital Markets, and KKR Capstone personnel in the public markets investment process is subject to applicable law and inside information barrier policies and procedures, which may limit the involvement ofsuch personnel in certain circumstances and KAMs ability to leverage such integration with KKR. Discussions with Senior Advisors and employees of the Firms managed portfolio companies are also subject to the inside information barrier policiesand procedures, which may restrict or limit discussions and/or collaborations with Public Markets/KAM.
(1) (2)
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Long / Short Equity Strategy
Predominant focus on long/short equity strategy
Investment process driven by fundamental research and a one - team collaboration honed over 15 years as part ofGoldman Sachs Principal Strategies (GSPS)
Flexible geographic approach with a primary focus on theU.S. and an ability to make opportunistic allocations toCanada and Latin America (targeted Latin Americaexposure: 0 25%) (1)
Emphasis on relatively liquid large- and mid-cap stocks; noprivate side-pockets
Investment approach consistent with former experience
The Team
Led by Robert Howard, former Head of GSPS Americas
16 years of financial markets experience, including11 years of portfolio management expertise
Continuity of 11-person core investment team that workedtogether in GSPS Americas
A highly experienced and cohesive team situated within KAMs platform that employs adistinctive position-level hedging philosophy and collaborative investment process whileseeking additional alpha through leveraging KKRs proprietary intellectual capital
KKR Equity Strategies
Investment Approach
Top-down, research-driven industry overlay supplements abottom-up, in-depth fundamental analysis performed onindividual companies
Disciplined investment process includes structured weeklyand monthly team meetings, timely and thoroughdocumentation of each material investment decision aswell as active informal intra-team communication
Position-level hedging approach may enable expandedsources of investment opportunities and additional alpha inhedging
Generally 15 to 30 core positions that typically represent75% of the portfolio
Integration with KKR, including access to KKRs globalsourcing and knowledge network (2)
Disciplined Risk Management
Disciplined portfolio hedging and rigorous riskmanagement on both the individual position level andaggregate portfolio level
Continuity and integration of previous risk managementapproach from GSPS into KKRs existing risk organization
(1) The estimates provided herein, including target allocations, caps, and exposures, are subject to change. There is no assurance that these estimates will be achieved, and actualallocations, caps, exposures, and other estimates may be significantly different than that shown here.(2) Participation of KKR Private Equity, KKR Capital Markets, and KKR Capstone personnel in the public markets investment process is subject to applicable law and inside information barrierpolicies and procedures, which may limit the i nvolvement of KKR Private Equity, KKR Capital Markets, and KKR Capstone personnel in certain circumstances and KES ability to leverage suchintegration with KKR. Discussions with Senior Advisors and employees of KKRs managed portfolio companies are also subject t o the inside information barrier policies and procedures,which may restrict or limit discussions and/or collaborations with KAM.
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Global Portfolio Overview
77 currently held portfolio companies with more than $210billion of annual revenues and over 900,000 employees Select examples across global portfolio include:
KKR has a 36-year track record of quality private equity investing having completed over200 transactions with over $465 billion of total enterprise value in 25 industries
KKR PE CompositeOutperformanceon Net Returns
The Strategy
Seek out companies with strong business franchises,attractive growth prospects, defensible market positions,and the ability to generate attractive risk-adjustedreturns
Focus on where we believe the value of the business canbe enhanced through our active involvement
The Team Global team of ~150 investment professionals Regionally focused and aligned by industry sector
Private Equity
$34.3
$72.0
Unrealized Value
Realized Value
~2.0x
Private Equity Composite Track Record
As of March 31, 2012, $ in billions
Note: The specific portfolio companies identified are not representative of all of the portfolio companies purchased, sold or recommended for KKR Funds, and it should not be assumed that the investment in the portfoliocompanies identified were or will be profitable. The companies identified above are shown as examples of KKRs investments i n i ts private equity portfolio and represent KKRs largest active investments (based onKKRs commitment size) in North America, Europe, and Asia. These examples would not necessarily correlate with the performan ce of any KKR fund or strategy. Past performance is no guarantee of future results.See Important Information for how our performance is calculated, details regarding indices presented as benchmarks and the calculation of Assets under Management. Date of inception is April 7, 1977.
(1) The KKR gross IRR, net IRR, and market indices are calculated based on our first 14 private equity funds which represent all of our private equity funds that have invested for at least 36 months prior to March 31,2012. Neither the E2 Investors or China Growth Fund had been investing for at least 36 months as of March 31, 2012. We have therefore not calculated gross IRRs and net IRRs with respect to those funds.
KKR Overall Private Equity Composite Returns (1)
From inception to March 31, 2012
$53.4
$106.3
$0.0
$20.0
$40.0
$60.0
$80.0
$100.0
$120.0
AmountInvested
Total Value
KKR PE CompositeGross IRR
25.7%
KKR PE CompositeNet IRR19.0%
S&P 50011.6%
Russell 300011.2%
S&P 5007.4%
Russell 30007.8%
0.0%
10.0%
20.0%
30.0%
http://www.inaer.com/homehttp://www.nxp.com/http://www.avagotech.com/8/10/2019 KKR Overview and Organizational Summary
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Infrastructure
The Investment Opportunity Massive and growing global demand for infrastructure
capital vastly exceeds governmental and othertraditional sources of supply of capital
Infrastructure assets can bring crucial benefits to aninvestment portfolio such as inflation protection, yield,long duration, and insulation from economic and marketvolatility
Infrastructure Strategy Value-added investment strategy consisting of three
critical components: Disciplined investment selection Deep operational engagement Active stakeholder management
Target infrastructure assets with limited commercial,financial, and operating risk
Focus on utilities, midstream and contracted energy,
and select transportation sub-sectors Target leading companies, high quality assets, andstrong management teams
Seek majority ownership/control positions, focusedon brownfield with opportunity for value-add
The KKR Team Global team combining skills across private equity,
operations, and the consulting/advisory sectors Six senior investment professionals with significant
experience in investing and operating infrastructureassets
Supported by a platform of:Ten junior investment professionalsFour Senior Advisors with deep relationshipnetworks, operating/management knowledge,and experience across multiple infrastructuresectorsFull complement of KKR resources
Infrastructure Experience KKR has a decade of experience investing in and exiting
infrastructure related assets Strong investment record in North America and Europe
and investment experience in North America, Europe, andAsia through a total of fifteen infrastructure andinfrastructure-related investments over the last decade
History of value creation through active management 12% average annual EBITDA growth for realized
infrastructure investments since inception (1)
(1) Average annual EBITDA growth calculation represents the arithmetic average across realized investments for EBITDA growth between the time of investment entry and exit.
KKRs differentiated investment strategy, high quality team, and infrastructureexperience together with the KKR institutional platform creates a specializedinfrastructure product offering
l
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KKR expects there to be a number of compellingopportunities to acquire conventional oil and gas assets
Producers shifting focus to unconventional developmentactivities, which require tremendous amounts of capitalinvestment
At the same time, the oil and gas industry is facingbalance sheet and funding challenges driven by thecommodity price environment
Producers are seeking to sell conventional assets to meettheir funding needs
Deal team comprised of 22 investment professionals withsignificant energy and oil and gas investing experience
Very strong relationships with both Majors andIndependents
Executive suite-level relationships Two Senior Advisors with CEO experience at leading
energy firms KKR plans to focus on investment sourcing, acquisition
execution, capital allocation decisions, and financing
KKRs partnership with Premier Natural Resources (PNR) marries KKRs investmentexpertise, industry knowledge and sourcing advantages with PNRs operating experienceand execution skills to acquire conventional oil- and gas-producing assets in North
AmericaThe Investment Opportunity The Market Opportunity
The KKR Investment Team The PNR Operating Team
Comprised of a subset of the former employees of VintagePetroleum
Operations and technical expertise with core competenciesin:
Identifying/diligencing acquisitions Optimizing operations/properties
PNR will drive technical due diligence and be responsiblefor operations and incremental value creation through theexploitation of assets post-acquisition
Aim to acquire non-core producing oil and gas propertieswith significant proved component
Attempt to improve production and operationalperformance in order to develop low-risk proved reservesin a cost-effective manner
Employ modest leverage/hedging Seek to realize value through production and distribute
excess cash flow to investors through periodicdistributions
Note: As of March 31, 2012 unless otherwise noted.
Natural Resources
Management Committee
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Management Committee
* Denotes Committee Chairman.
Current members of the Management Committee:
Henry Kravis Member, KKR George Roberts Member, KKR
Paul Raether Member, KKR
Mike Michelson Member, KKR
Todd Fisher Member, KKR*
Alex Navab Member, KKR
Johannes Huth Member, KKR
Joe Bae Member, KKR
David Sorkin Member, KKR
Scott Nuttall Member, KKR
Marc Lipschultz Member, KKR
Bill Janetschek Member, KKR
Craig Farr Member, KKR
Bill Sonneborn Member, KKR
Regional Private Equity Investment Committees
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Regional Private Equity Investment Committees
Note: As of March 2012. China Growth Fund IC Members include Henry Kravis - Member, George Roberts - Member, Joe Ba e Member, David Liu Member, and Ming Lu Member
Current Members of theNorth American IC:
Current Members of theEuropean IC:
Current Members of theAsian IC:
Henry Kravis Member, KKR
George Roberts Member, KKR
Paul Raether Member, KKR
Mike Michelson Member, KKR
Johannes Huth Member & Co-Chairman of IC, KKR
Todd Fisher Member, KKR
Alex Navab Member & Co-Chairman of IC, KKR
Mike Calbert Member, KKR
Henry Kravis Member, KKR
George Roberts Member, KKR
Mike Michelson Member, KKR
Johannes Huth Member & Co-Chairman of IC, KKR
Alex Navab Member & Co-Chairman of IC, KKR
Mike Calbert Member, KKR
Brian Carroll - Member, KKR
Dominic Murphy Member, KKR
Henry Kravis Member, KKR
George Roberts Member, KKR
Mike Michelson Member, KKR
Johannes Huth Member & Co-Chairman of IC, KKR
Alex Navab Member & Co-Chairman of IC, KKR
Mike Calbert Member, KKR
Joe Bae Member, KKR
David Liu Member, KKR
Ming Lu Member, KKR
There remains strong consistency in membership across each of theregional committees as shown by the shaded names above
The Private Equity Investment Committee (IC) is the main decision making forum for all newprivate equity investments
The Portfolio Management Committee (PMC) instills discipline in the process of building value inour private equity portfolio companies and acts as an early warning system to identify problemsand then address them
Regional Private Equity Portfolio Management Committees
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Current Members of theNorth American PMC:
Current Members of theEuropean PMC:
Current Members of theAsian PMC:
Henry Kravis Member, KKR
George Roberts
Member, KKR
Paul Raether Member & Chairman ofPMC, KKR
Mike Michelson Member, KKR
Alex N