KKR as a Public Company

KKR as a Public Company Craig Larson Sara Giedgowd July 17, 2012

CONFIDENTIAL

Evolution of KKR

KKR founded

1976

• KKR Capstone • Industry group focus • European private equity business

1980s-90s

North American private equity firm

2

2000-04

• Business combination with KPE • Publicly traded on Euronext Amsterdam

2004-09

10/1/2009

• KKR Asset Management, KKR Financial, and liquid credit products • KKR Private Equity Investors (KPE) • KKR Capital Markets • Client & Partner Group • Global expansion into Asia, Australia, and Middle East

• • • • •

Mezzanine Infrastructure Natural Resources China Growth Special Situations

7/15/2010

• Publicly traded on NYSE

2010 2011/2012

• NAXI • KKR Equity Strategies • Real estate • Direct senior lending • Long/short credit • Energy income • Fund of funds

KKR-KPE Transaction • On October 1, 2009, KKR combined businesses with KKR Private Equity Investors (KPE); combined company publicly traded on Euronext • Principals did not sell any equity or otherwise receive any distributions as a result of the business combination or the relisting on the NYSE • Principals and public unitholders own substantially same type of interest After Combination/Relisting

Before Transaction KKR Principals

KPE Unitholders 100% Ownership of 205 mm units

100% Ownership KKR (Private Alternative Asset Manager) Fees & Carry • • • (1) (2)

3

Private Markets Public Markets Capital Markets

Fees & Carry

KKR Private Equity Investors (KPE) (Publicly Listed Guernsey LP)

KKR Principals 70% ownership(1) (478 mm units)

30% ownership(1) (205 mm units)

KKR (Public Alternative Asset Manager with Significant Balance Sheet Portfolio) Fee Earnings Carried Interest(2) Investment Income

Investment Income

Primarily KKRManaged Private Equity Funds and Investments

KKR Unitholders (Formerly KPE Holders)

• •

Private Markets Public Markets

• •

Capital Markets Principal Activities

Ownership percentages reflect amount as of effective date of combination transaction. Current ownership split reflected on page 10. With respect to active/future investment funds/co-investment vehicles providing for carried interest, we will allocate to principals, other professionals, and selected other individuals who work in these operations a portion of the carried interest earned in relation to these funds as part of its carry pool.

Where We are Today • Market capitalization: $8.9 bn • Public unitholders: 33.9% • Credit ratings: A- by S&P, A by Fitch

Private Markets

Public Markets

$46 bn AUM

$16 bn AUM

Capital Markets & Principal Activities

$5 bn of Investments

• Private Equity

• Liquid Credit

• Capital Markets

• Natural Resources

• Mezzanine

• Balance Sheet

• Infrastructure

• Special Situations

• Real Estate

• Equity Strategies

• Book Value of $8.67 per Adjusted Unit

Note:

4

Market capitalization and unitholder information as of June 20, 2012. Segment figures as of March 31, 2012.

Key Financial Metrics Assets Under Management (AUM) Fee Paying Assets Under Management (FPAUM)

• Represents the assets from which we are entitled to receive fee income or a carried interest and general partner capital • Excludes investments and commitments acquired from KPE • Represents only those assets from which we receive fees • Differs from AUM in that it excludes: i. ii. iii. iv.

MTM on PE funds GP capital carry-only vehicles assets on which we are entitled to receive fees, but do not (e.g., CLOs)

• Excludes investments and commitments acquired from KPE

Fee Related Earnings (FRE) Economic Net Income (ENI) Cash Available for Distribution Book Value 5

• Segment operating revenues less segment operating expenses • Excludes non-recurring charges, carried interest and investment income •

Profitability measure comprised of i. ii. iii.

FRE accrued carry (net of comp load) investment income, less NCI

• We intend to distribute substantially all of the cash earnings of our asset management business each quarter, but to retain the gains on our balance sheet investments • Used to calculate a “dividend” yield • Represents the net asset value of KKR’s balance sheet

Sources of Earnings by Segment Private Markets Management Fees (Cash) • 100-200 bps on committed capital(2) Monitoring Fees (Cash) • 80/20 fee sharing with limited partners • No fee sharing on syndicated equity Transaction Fees (Cash) • 80/20 fee share with limited partners • No fee sharing on syndicated equity Carried Interest (Mark to Market)

Capital Markets & Principal Activities Capital Markets Fees (Cash)

• KFN: 175 bps on NAV

• Equity underwriting

• Liquid Credit: 50-100 bps on NAV

• Debt underwriting

• Alternative Investments: 75-150 bps on committed/invested capital(3)

• Private equity syndication

Incentive Fees—KFN (Cash) • 25% carry over 8% hurdle Transaction Fees—Alternative Investments (Cash) • Various fee sharing arrangements Carried Interest—Alternative Investments (Mark to Market) • 10-20% of gains

• No hurdle rate in most existing funds

• 8% hurdle rate

Operating Expenses (Cash)

6

Management Fees (Cash)

• Generally 20% of gains

• 40% of carry allocated to KKR executives

(1) (2) (3)

Public Markets(1)

• 40% of carry allocated to KKR executives Operating Expenses (Cash)

Public Markets segment also receives a 50 bps management fee on one of the CLOs that it manages. Post-investment period fee typically 0.75% of remaining cost. Annex Fund does not pay a management fee. Lower fees on uninvested capital in certain vehicles.

• Debt placement Capital Appreciation (Mark to Market) • Investment gains on principal assets Operating Expenses and Interest Expense (Cash)

Key Financial Highlights

• Stable base of recurring earnings from long-term capital

• Significant embedded carry generation potential • Meaningful opportunity for gains from balance sheet investments • Balance sheet capital to facilitate growth • Diversified earnings streams 7

Capitalization and Stock Price Performance KKR Capitalization

Since NYSE Listing

($ in millions except stock price) Stock Price (6-20-2012) Fully Diluted Shares Market Cap Plus: Debt Less: Cash Less: Investments Less: Net Carried Interest Enterprise Value 2012E ENI per Share 2013E ENI per Share 2012E P/E 2013E P/E

$12.74 701.0 $8,931.3 500.0 (855.5) (5,023.0) (599.6) $2,953.1 $2.25 $2.20 5.7x 5.8x

2012E Distribution 2013E Distribution

$0.71 $1.01

2012E Dividend Yield 2013E Dividend Yield

5.6% 7.9%

$20.00

$18.00

$16.00

$14.00 21% $12.00

$10.00

$8.00 Jul-10

Nov-10

Mar-11

Jun-11 NYSE:KKR

Note:

8

Market data and estimates as of June 20, 2012. Estimates reflect full analyst coverage universe for KKR.

Oct-11

Feb-12

Jun-12

Trading Volume and Liquidity Euronext-Listed

US-Listed(1)

Average Volume: 278k

Average Volume: 1.6 mm

2,000,000

2,000,000

1,000,000

1,000,000

0

0

Average Daily Volume

(1)

9

Average Since IPO

Ju l1 Se 0 p10 N ov -1 Ja 0 n1 M 1 ar -1 1 M ay -1 1 Ju l1 Au 1 g1 O 1 ct -1 D 1 ec -1 Fe 1 b1 Ap 2 r1 Ju 2 n12

3,000,000

M ay -0 6 S ep -0 Ja 6 nM 07 ay -0 7 S ep -0 Ja 7 nM 08 ay S 08 ep -0 Ja 8 nM 09 ay -0 9 S ep -0 Ja 9 nM 10 ay -1 0

3,000,000

Average Daily Volume

Average Since Relisting

For the period beginning July 15, 2010 and extending through June 20, 2012. Adjusted for anomalous trading days on which market traded ~4+x the average daily volume during the period. APO data since IPO.

Shareholder Diversification Ownership at Combination

Unitholder Franklin Templeton Lexington Eton Park Putnam RS Investments Fidelity ADIC Black River Morgan Stanley DB Alpha Top 10 Unitholders Other Unitholders Public Unitholders KKR Executives Total KKR

Note:

10

Units (MM) 23.1 19.5 16.0 12.8 12.8 11.3 8.0 7.9 6.0 4.7 122.2 82.7 204.9 478.1 683.0

% of Total 3.4% 2.9% 2.3% 1.9% 1.9% 1.7% 1.2% 1.2% 0.9% 0.7% 17.9% 12.1% 30.0% 70.0% 100.0%

% of Public 11.3% 9.5% 7.8% 6.3% 6.2% 5.5% 3.9% 3.9% 2.9% 2.3% 59.6% 40.4% 100.0%

Ownership Today

Unitholder Lexington Waddell & Reed Fidelity Ariel Credit Suisse Omega Wellington Swiss Re MSSB Serengeti Top 10 Unitholders Other Unitholders Public Unitholders KKR Executives Total KKR

Ownership data based on Ipreo surveillance as of June 20, 2012. Today’s unit counts reflect basic units outstanding.

Units (MM) 19.5 15.1 10.0 6.5 6.3 5.4 0.7 4.4 3.7 4.0 75.5 156.2 231.7 451.7 683.4

% of Total 2.9% 2.2% 1.5% 0.9% 0.9% 0.8% 0.1% 0.6% 0.5% 0.6% 11.0% 22.9% 33.9% 66.1% 100.0%

% of Public 8.4% 6.5% 4.3% 2.8% 2.7% 2.3% 0.3% 1.9% 1.6% 1.7% 32.6% 67.4% 100.0%

Relative Stock Price Performance Since NYSE Listing 200%

180%

160%

140% 124% 121% 120%

120%

100%

80% Jul-10

Nov-10 NYSE:KKR

Note:

11

Market data as of June 20, 2012.

Mar-11

Jun-11 NYSE:BX

Oct-11

Feb-12 S&P 500

Jun-12

Valuation Reminders • Our business model is pro-cyclical • We are viewed to be “leveraged” to the economic environment and capital markets • We are higher-beta and more volatile than the market • The market does not value carry at what we believe it is worth; however, our ability to consistently generate cash carry will improve our valuation • Diversifying our business (geographically and with new products) and building scale will mitigate volatility and improve our multiple 12

Key Issues on Investors’ Minds • How to value the firm, especially the carry component • Balance sheet strategy • Tax legislation and its impact on carry taxation and PTP structure • Differentiation from competitors • Fundraising (AUM growth) • New businesses and their potential future scale • Deal/realization environment • Fee compression and future returns in private equity • Impact of volatile markets on our business

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