KKR Global Private Equity Overview - North America

July 17, 2017 | Author: Ravi Chaurasia | Category: Private Equity, Leveraged Buyout, Financial Markets, Investing, Financial Economics
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KKR Global Private Equity Overview Michael W. Michelson Joseph Y. Bae Johannes P. Huth July 16, 2012

CONFIDENTIAL AND PROPRIETARY For Investment Professionals Only

North American Private Equity Michael W. Michelson

KKR’s Private Equity Team in North America

Deep bench of 92 experienced investment and operations professionals More than three decades of experience investing in North America Extensive additional resources through KKR Capital Markets, Senior Advisors, Public Affairs & Communications, the Client & Partner Group and Global Macro and Asset Allocation

Note:

The figure cited above includes KKR Capstone and other individuals that also may provide services to other investment teams across KKR including in our international offices. KKR Capstone is owned and controlled by its senior management and not KKR.

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North America PE Investment Team • Our investment team is led by 19 private equity members who have an average of 17 years of tenure with KKR and 24 years of industry experience – 19 Members who have been at KKR for nearly 17 years on average – 3 Managing Directors who have 27 years of industry experience on average – 4 Directors who have 11 years of industry experience on average – An additional 12 Principals and 27 Associates

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North America PE Investment Team • Focus on 8 industries – Facilitates in-depth industry knowledge and a network of industry experts – Enables us to create proprietary investment opportunities Industry Team Leadership Consumer Products

Energy, Infrastructure & Natural Resources

Simon Brown, Member

Marc Lipschultz, Member

Jonathan Smidt, Member

Raj Agrawal, Member

Financial Services

Sir Deryck Maughan, Member

Healthcare

Tagar Olson, Mike Michelson, Jim Member Member, Co-Head Momtazee, NA Private Equity Member

Industrials

Media & Communications

Tom Uger, Jamie Greene, Pete Stavros, Alex Navab, Member Member Member, Co-Head Member NA Private Equity

Retail

Mike Calbert, Member

Technology

Adam Clammer, Member

David Kerko, Member

Herald Chen, Member

Industry Team Members Max Alper Lilah Hume Anthony Lee Elissa Leechawengwongs Samson Mesghena Sunny Patel Sagar Sanghvi

John Bookout Claire Farley David Rockecharlie Robert Antablin Brandon Freiman Ravi Gupta Dash Lane Frank Spelman Ash Upadhyaya Lilah Hume Amanda Lee Brian Niemczak Preston Powell Zohair Rashid Alex Shih Brian Telesmanich

Chris Harrington Brian Hinkes Vittal Kadapakkam Amanda Lee Anthony Lee Zohair Rashid

Ali Satvat Max Lin Justin Sabet-Peyman Scott Arnold Felix Gernburd Yasser Ghanchi Zach Greenberg Vishal Patel Mahdi Yousif

Josh Weisenbeck Brandon Brahm Emily Goergen Brian Hinkes Alex Shih

Herald Chen Webster Chua Brandon Brahm Samson Mesghena Sunny Patel Peter Sundheim

Nate Taylor Adam Waglay Scott Arnold Felix Gernburd Yasser Ghanchi Eli Horton Vishal Patel Brandon Van Buren

Brittany Bagley Kenan Basha Prabh Chandhoke Zach Greenberg Eli Horton Brandon Van Buren Harish Venkatesh Mahdi Yousif Marius Haas

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KKR’s Private Equity Team in North America KKR Capstone

Dean Nelson, Member & Head of KKR Capstone

(as of July 2012)

AJ Brohinsky

Todd Cooper

Sarah Dickens Chad Fargason

Adam Fless

Chris Hsu

Craig Kessler

Thomas Kim

Matt King

Vini Letteri

Andrew Low Ah Kee

Kyle Matter

Karr Narula

Paolo Notarnicola

Brian O'Neill

Ivo Parashkevov

Rushi Patel

Derick Prelle

Steven Schepps

Matthew Skaruppa

Jon Winny

Charlie Young

Michael Linford Jeff Livingston

Scott Wagner, Member

• 9 senior operating professionals who have been at KKR Capstone for more than 7 years on average

– Collectively, these executives have 165+ years of industry experience • An additional 11 Principals and 7 Associates complete the team Note:

KKR Capstone is owned and controlled by its senior management and not KKR. The individuals above also may provide services to other investment teams across KKR including in our international offices.

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KKR’s Private Equity Team in North America (continued) KKR Capital Markets

Craig Farr, Member & Head of KKR Capital Markets

(as of July 2012)

Akhil Bansal

Mark Basile

Douglas Brody

Richard Chand

James Connolly

Corey Flood

Peter Glaser

Gregory Guest

Philip Kim

Matthew Kretzman

Edward Law

Joshua Lederman

George Mueller

Jeffrey Rowbottom

Chris Rulon-Miller

Neil Shah

Paul Sigfusson

Adam Smith

Cade Thompson

• 31 executives worldwide, including 20 in North America – Collectively, these executives have 200+ years of experience Execution Success Across the Capital Structure PE Syndication

Note:

Acquisition Financing

Debt Underwriting

IPOs

Follow-Ons

KKR Capital Markets is a broker-dealer registered with the U.S. Securities and Exchange Commission, a member of FINRA and a member of SIPC. The individuals above also may provide services to other investment teams across KKR including in our international offices. The portfolio companies identified above represent the four most recent North America private equity investments where KKR Capital Markets was engaged in each transaction type. At the time of investment, and currently from a KKR monitoring standpoint, Avago has been classified as a North American investment based on a specific criteria met. However, given Avago has significant operations in Asia, Avago is also included in the Asian portfolio slides. 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 investments identified were or will be profitable.

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KKR’s Private Equity Team in North America (continued) Senior Advisors

Note:

Michael D. Capellas

Former CEO of First Data Corporation, Compaq Computer and WorldCom

David Cote

Chairman and CEO of Honeywell

Lewis M. Eisenberg

Former Chairman Port Authority of New York and New Jersey and former General Partner and Co-Head of Equity Division at Goldman Sachs & Company

George M.C. Fisher

Former Chairman and CEO of Motorola, Inc. and Eastman Kodak Company

Joe W. Forehand

Former Chairman and CEO of Accenture

Kenneth W. Freeman

Allen Questrom Professor and Dean of the School of Management at Boston University and former Chairman and CEO of Quest Diagnostics Incorporated

R. Clint Johnstone

Former Director and CFO of the Bechtel Group

John Mack

Former CEO and former Chairman of the Board of Morgan Stanley

Paul J. Norris

Former Chairman and CEO of W.R. Grace & Co.

James W. Owens

Caterpillar Chairman and CEO Emeritus

Lee Raymond

Former Chairman and CEO of Exxon Mobil

Arun Sarin

Former CEO of Vodaphone Group Plc.

Richard Sarnoff

Former Co-Chairman of Bertelsmann, Inc. and Supervisory Board Member of Bertelsmann AG

The individuals above also may provide services to other investment teams across KKR including in our international offices.

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KKR’s Private Equity Team in North America (continued) Public Affairs and Communications

Ken Mehlman, Member & Head of Public Affairs

Note:

Travers Garvin Jennifer Hanley Kristi Huller Elizabeth Seeger Bryan Bridges Jenny Farrelly Jill Henderlight Alexandra Hartman

The individuals above also may provide services to other investment teams across KKR including in our international offices.

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KKR’s Private Equity Team in North America (continued) Global Macro and Asset Allocation Frances Lim David McNellis

Henry McVey, Managing Director & Head of Global Macro and Asset Allocation

Note:

The individuals above also may provide services to other investment teams across KKR including in our international offices.

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KKR’s Private Equity Team in North America (continued)

Private Equity & Related Executives(1) 3.9 Executives per Company 3.7 Executives per Company 2.2 Executives per Company

34 Portfolio Companies*

26 Portfolio Companies

25 Portfolio Companies

134 97

56

2005 (1) (2) *

2007

Today

(2)

Related Executives including KKR Capstone, KKR Capital Markets, a broker-dealer registered with the U.S. Securities and Exchange Commission, a member of FINRA and a member of SIPC, North American Senior Advisors, Global Macro and Asset Allocation, and Public Affairs & Communications. These individuals also may provide services to other investment teams across KKR including in our international offices. As of June 2012. Includes Aricent and Avago. At the time of investment and currently from a KKR monitoring standpoint, Aricent and Avago are classified as North American investments based on specific criteria; given the companies however have significant operations in Asia, we also include the companies in our Asian private equity portfolio.

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KKR’s Private Equity Team in North America (continued) Client & Partner Group

Suzanne Donohoe, Member & Head of Client & Partner Group

(as of July 2012)

Ari Barkan

Jacqueline Barrett

Conway Bate

James Burns

Ryan Carlson

Janice Cook Roberts

Monica Davis

Kate De Mul

Ralph DeBernardo

Christina Fang

Nicole Fay

Saleena Goel

Annette Guarnaccio

Henry Hager

Beth Hammond

Tony Hass

Katie Hotze

JB Kiley

Amy Lesch

John Massad

Daniel McLaughlin

Rick Moreno

John Morrison

Sean Nelson

Lesley Nurse

Zachary Pack

Daniel Parant

Jessica Polkow

Jeffrey Schachter

Jessica Siebel

Amy Stuart

Wilson Tong

Mariko Uyeda

Lynette Vanderwarker

Alisa Wood

Tiffany Yu Note:

The individuals above also may provide services to other investment teams across KKR including in our international offices.

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KKR’s Integrated Value Creation Industry Expertise

Portfolio Management

• Extensive understanding

• Oversight and monitoring • Experienced Senior Advisors

• Strong networks

Public Affairs • Active management of responsibilities to stakeholders

Senior Advisors • Network of senior executives that work with KKR and KKR portfolio companies

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 12

KKR North American Portfolio Summary • Portfolio is made up of high quality assets with world-class management teams, strong competitive positions, and attractive capital structures • North America portfolio performed well overall and is carrying momentum into 2012 • We remain very active in de-risking the portfolio; ~70% of the portfolio debt matures in 2016 and thereafter • Returned $7.4bn in last 18 months across the North American Funds with approximately $3.8bn returned in 2011 and a further $3.6bn distributed 2012 YTD • Since December 31, 2010, the remaining value of the three most recent North American funds (1996, Millennium & 2006) increased by $2.6bn or 11.0%(1) – Millennium Fund marked at 2.03x on 3/31/12 – 2006 Fund marked at 1.31x on 3/31/12

Note: (1)

Past performance is no guarantee of future results. See Important Information about the calculation of returns. Includes investments made during the period.

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Current North American Private Equity Portfolio(1) – Strong portfolio of world-class franchises • Over $130 billion of annual revenues and over $27 billion of annual EBITDA • Employing over 465,000 people • Well diversified by industry

Note: (1)

The specific companies identified are not representative of all of the companies in KKR’s current or historical North American private equity portfolio, and it should not be assumed that an investment in the companies identified was or will be profitable. At the time of investment and currently from a KKR monitoring standpoint, Aricent and Avago are classified as North American investments based on specific criteria; given the companies, however, have significant operations in Asia, we also include the companies in our Asian private equity portfolio. As of June 2012. Reflects e2020 and Learning House, two investments of the Weld North platform. In May 2012, KKR announced its exit of the investment in Legg Mason. In June 2012, KKR closed its sale of the investment in El Paso Midstream.

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Industry Diversification by Total Deal Value as of 3/31/2012

Millennium Fund

2006 Fund

Recycling 1.7%

Media 22.0%

Transportation 0.2% Telecom 0.2%

Retail 8.3% Manufacturing 7.8% Technology 12.7% Hotels/Leisure 3.6%

Education 4.0%

Energy 13.8%

Technology 4.5%

Financial Services 15.9%

Telecom 1.2%

Chemicals 3.0%

Health Care 18.5% Energy 16.3%

Note:

Consumer Products 2.9%

Consumer Products 4.9%

Retail 31.3% Health Care 18.5% Media 3.9%

Manufacturing 4.8%

Pie chart above represents total value (i.e. realized value + unrealized value) of the Millennium Fund by industry.

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KKR North American Funds’ Performance North American Composite Private Equity Returns from Inception to March 31, 2012: 35.0% 30.0% 25.0% 20.0% 15.0%

10.0%

KKR PE C omposite Gross IRR 25.9%

KKR PE Composite Outperformance (On Net Return)

KKR PE C omposite Net IRR 19.4%

S&P 500 12.1%

Russell 3000 11.7% S&P 500 7.3%

Russell 3000 7.7%

5.0%

0.0%

Note:

Past performance is no guarantee of future results. See Important Information about the calculation of IRRs and MOIC and the use of market indices as benchmarks. KKR’s North American private equity funds include: KKR 1976, 1980, 1982, 1984, 1986, 1987, 1993, 1996, Millennium and 2006. Vintage years for these funds are 1977, 1980, 1983, 1984, 1986, 1987, 1993, 1997, 2002 and 2006, respectively.

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KKR North America Private Equity Deal Flow • We have been very active looking at investments over the past 15 months ~920: North American private equity opportunities that KKR deal teams spent significant time evaluating since 1/1/11 ~110: Discrete new private equity opportunities discussed with the Investment Committee(1) 10: Investments Committed or Closed(2)

Note: (1) (2)

Data represents North America based private equity deal flow for the period 1/1/11 to 3/31/12; includes a small number of opportunities related to existing KKR portfolio companies. 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. Includes transactions/commitments closed or announced for the period 1/1/11 to 3/31/12 (Weld North, Del Monte, Accelerated Oil Technologies, Capsugel, Ipreo, Academy Sports + Outdoors, Go Daddy, Santander Consumer USA, Samson Resources and Capital Safety).

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Differentiated Sourcing of Transaction Activity – 2011–2012 YTD

# of Recent Transactions by Source

Auction 22%

Proprietary 22%

Limited Process 56%

Note:

Data represents North America based private equity investments/commitments announced and/or completed for the period 1/1/11 to 3/31/12 (Accelerated Oil Technologies, Weld North, Capsugel, Academy Sports + Outdoors, Ipreo, Go Daddy, Samson Resources, Santander Consumer USA and Capital Safety). Del Monte, which closed in February 2011, is a KKR-identified opportunity and is not included above.

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We Have Led Transactions with EV of $23.9bn and Have Committed $3.4bn in Total New Equity North American funds’ private equity commitments in 2011 / 2012 YTD

2012

2011

Investment(1)

Note: (1) (2)

KKR Fund Equity Invested

Type of Deal

EV/EBITDA Multiple at Acquisition

Leverage Multiple at Acquisition

$81mm

Limited Process – Partnership

N/A

N/A

$536mm

LBO

8.6x

6.1x

$467mm

Auction – LBO

11.3x

6.3x

$194mm

Auction – LBO

12.0x

6.3x

$437mm

Limited Process – LBO

10.8x

6.2x

$282mm

Limited Process – LBO

11.1x

6.1x

$100mm(2)

Proprietary – Build-Up

N/M

N/M

$209mm

Proprietary – Minority Investment

5.2x

N/M

$751mm

Limited Process – LBO

7.9x

3.6x

$362mm

Limited Process – LBO

11.1x

5.7x

All information as of March 31, 2012, unless otherwise noted. Past performance is no guarantee of future results. The specific companies identified are not representative of all of the companies in KKR’s current or historical North American private equity portfolio, and it should not be assumed that an investment in the identified companies was or will be profitable. The identified companies are those that are currently owned by a KKR-sponsored North America focused private equity fund and monitored by KKR private equity professionals located in North America. Represents two investments, e2020 and Learning House, made by the previously announced formation of Weld North Holdings, LLC, a platform created in 2009 to acquire, invest in and operate a variety of businesses in the consumer services, education, media, personal services and marketing sectors. KKR has committed to invest up to $315 million.

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Investing Behind Ongoing Themes • High-quality, industry-leading franchises with operational value creation opportunities • Global presence with significant exposure to developing world economies • Ongoing pursuit of energy themes • Partnering with world class, entrepreneurs and providing growth capital • Utilizing flexible, non-traditional investment structures (JV / Partnerships) Note:

The portfolio companies identified above represent North America private equity investments made since January 1, 2011. 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 investments identified were or will be profitable.

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Summary Contribution / Distribution Analysis • 2011-2012 YTD, KKR North American funds have distributed or announced distributions of approximately $4.0bn in excess of capital contributed Contributions

Distributions

($mm)

($mm)

Academy Sports AOT Capsugel Del Monte Foods Go Daddy Ipreo Holdings LLC MMI Holdings Samson Resources Santander Consumer U.N Ro-Ro Weld North Yageo Corporation

2011 $437.4 80.9 467.3 535.7 281.8 194.1 4.4 750.6 209.3 2.3 99.9 1.5 $3,065.2

AOT Capital Safety

$3,472.8mm

2012 YTD $45.5 362.1 $407.6

Avago BW Holdings Dollar General DSD HCA Hilcorp Resources Hotel del Coronado Legrand Maxeda Modern Dairy NXP Primedia Rockwood Holdings Seven Media Group Tarkett TDC A/S Texas Crude Tianrui Zhone

2011 $237.6 $46.4 798.0 13.8 349.4 527.8 13.8 514.0 68.3 7.8 67.8 183.9 559.8 319.2 10.3 32.0 34.6 8.5 4.4 $3,797.4

Dollar General DSD HCA Jazz Legg Mason Legrand Nielsen SCUSA Tianrui El Paso

Pending (Estimated) Alliance Boots

2012 YTD $1,129.3 5.6 137.5 147.6 665.2 111.9 132.7 24.4 3.4 186.9 $2,544.5

$1,094.9 $1,094.9 $3,639.4

$7,436.8mm Note:

Data as of June 28, 2012. Excludes unfunded commitments to Weld North and Accelerated Oil Technologies. Alliance Boots distribution (announced June 2012) pending (estimate provided).

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Extending Debt Maturities through Refinancings • • • • •

~70% of debt now matures in or after 2016 In 2009, refinanced over $14bn In 2010, refinanced over $28bn In 2011, refinanced over $44bn In 2012 YTD, refinanced over $11bn North American Maturity Profile at 12/31/2008 ($ in bn)

North American Maturity Profile at 6/6/2012 Pro Forma ($ in bn) $106.7

Reduced 2014 & 2015+ maturities by 70%

$52.3 $44.0 $28.4

$9.7

$11.4

$17.5

$11.8

$10.9

$10.2

2013

2014

$3.1

2009-10

2011

2012

2013

2014

2015+

2012

2015

2016+

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Macro Orientation and Thematic Focus Systematic Coordination with Global Macro Team Combined with Broader NAPE Macro Themes…

1) Digitalization

A

Focus / Importance of Value

2) Demographic Shifts

B

Health / Wellness

C

Big Data

D

Economic / Housing Recovery

E

Exposure to Emerging Markets

F

Resurgence of U.S. Manufacturing

3) Bimodal Consumption 4) Budget Austerity 5) Housing Market 6) Inflation 7) Scarce Resources

…Pursued Alongside Industry-Specific Thematic Work Note:

Unless indicated, the above reflects the current market views, opinions and expectations of KKR based on its historic experience. Historic market trends are not reliable indicators of actual future market behavior or future performance of any particular investment or any KKR fund, vehicle or account which, may differ materially, and are not to be relied upon as such. There can be no assurance that investors in any KKR fund, vehicle or account will receive a return of capital.

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Macro Themes Application to Industry Groups • Industry-specific themes developed against the overall NAPE macro themes Scarce Resources

Inflation

Housing Market

Budget Austerity

Bimodal Consumption

Demographic Shift

Digitalization

Consumer Energy Financial Services Healthcare Industrials

Media & Communications Retail Technology

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Industry-Specific Investment Themes • Increased emphasis towards thematic-based investing

PE Industry Teams

Key Industry Themes Consumer



Health & Wellness



Bimodal Consumption

Energy



Unconventionals



Global Comm. Demand  New Supply Infrastructure

Financial Services



Differentiated Distribution



P&C Pricing Cycle



Underbanked Non-Prime

Healthcare



Insulated Sectors



Solving Cost Problems



Low Valuations

Industrials



Corp Carve-outs



Two Existing Platforms



Dist. in Upturn of Cycle

Media & Comm.



Digital Transition



Emerging Platforms



High ROI/Measurable

Retail



Value



Hispanization



eCommerce

Technology



Big Data



Cloud Computing



Mobility



Emerging Market Exposure

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Summary Considerations by Industry Industry

Near-Term Outlook

Long-Term Outlook

Valuation

Actionability

Consumer Energy Financials Health Care Industrials Media Retail Technology Note: Projections May Not Materialize. The information in this presentation may contain projections or other forward-looking statements regarding future events, targets, or expectations regarding the Funds or strategies, and is only current as of June 2012. There is no assurance that such events or targets will be achieved, and may be significantly different than that shown here. The information in this presentation, including statements concerning financial market trends, is based on current market conditions, which will fluctuate and may be superseded by subsequent market events or for other reasons.

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2012 Deal Opportunities • We are seeing attractive opportunities across all of our industry groups • Investment opportunities include: – Public-to-privates – Divestitures of non-core subsidiaries of larger corporate parents – (“carve-outs”) – Large, family-owned companies

– Structured minority investments with significant influence/governance – Joint ventures/partnerships with corporates seeking growth capital or leverage reduction – Build-up opportunities – Market dislocations

Note:

Unless indicated, the above reflects the current market views, opinions and expectations of KKR based on its historic experience. Historic market trends are not reliable indicators of actual future market behavior or future performance of any particular investment or any KKR fund, vehicle or account which, may differ materially, and are not to be relied upon as such. There can be no assurance that investors in any KKR fund, vehicle or account will receive a return of capital.

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KKR North America – Summary • Expect modest economic growth in the U.S. • Attractive environment for private equity investing • Deep bench of talented and seasoned professionals • Differentiated and integrated approach • Strong portfolio of world-class franchises • Continue to generate substantial liquidity • Excellent progress on operational value creation, balance sheet improvement • Portfolio carrying strong momentum into 2012 We are well-positioned to capitalize on this environment and deliver strong results Note:

Unless indicated, the above reflects the current market views, opinions and expectations of KKR based on its historic experience. Historic market trends are not reliable indicators of actual future market behavior or future performance of any particular investment or any KKR fund, vehicle or account which, may differ materially, and are not to be relied upon as such. There can be no assurance that investors in any KKR fund, vehicle or account will receive a return of capital.

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