alex navab - overview of private equity
DESCRIPTION
Alex Navab, Member & Co-Head of North American Private Equity and Head of Media and Communications Team at KKR, gives us an overview of private equity.TRANSCRIPT
OverviewȱofȱPrivateȱEquity
AlexȱNavabAprilȱ2010
1
Let’sȱSetȱtheȱStage
•
PrivateȱEquityȱisȱaȱsignificantȱcomponentȱofȱwhatȱisȱbroadlyȱcalledȱ
alternativeȱassets
•
Alternativeȱassetsȱincludeȱmultipleȱstrategies–
PrivateȱEquityȱ(primaryȱandȱsecondaryȱfunds)–
VentureȱCapitalȱ–
HedgeȱFunds–
RealȱAssetsȱ(eg.,ȱrealȱestate,ȱtimber,ȱinfrastructure)–
Mezzanine,ȱDistressedȱDebt
•
Theseȱtypesȱofȱstrategiesȱshareȱseveralȱcommonȱattributes–
Higherȱexpectedȱreturnsȱthanȱmostȱpublicȱmarketȱstrategies–
Commensurateȱhigherȱrisk–
Typicallyȱlessȱliquidȱthanȱpublicȱmarketȱinvestmentsȱandȱlongerȱ
timeȱhorizonȱtoȱgenerateȱreturns
2
•
Alternativeȱassetȱstrategiesȱtypicallyȱpursuedȱtoȱproduceȱ“alpha”•
LongȬtermȱexpectedȱreturnsȱinȱexcessȱofȱpublicȱmarketȱbenchmarks
RoleȱofȱAlternativeȱAssetsȱinȱanȱInvestmentȱ Portfolio
LongȬte
rmȱre
turn
Fixedȱincome Alternativeȱ
investmentsEquities
MarketȬbasedȱstrategiesSkillȬbasedȱ
strategies
Upperȱ
quartile
Median
Lowerȱ
quartile
BankȱLoans
Mezzanine
HighȱYield
Infrastructure
PrivateȱEquity
DistressedOilȱ&ȱGas
Risk
TargetedȱN
etȱReturn
Riskȱvs
ReturnȱFramework
Note:ȱTheȱinformationȱinȱthisȱslideȱisȱintendedȱtoȱbeȱgenerallyȱindicativeȱofȱmarketȱopportunitiesȱbasedȱonȱKKRȇsȱexperience,ȱitsȱbeliefȱasȱtoȱcurrentȱmarketȱconditionsȱandȱitsȱexpectationsȱas
toȱmarketȱconditionsȱinȱtheȱ
nearȱfuture.ȱActualȱopportunitiesȱmayȱdifferȱsubstantiallyȱfromȱtheȱinformationȱhereinȱandȱthereȱcanȱbeȱnoȱguaranteeȱthatȱactual
opportunitiesȱwillȱcorrespondȱwithȱKKRȇsȱexpectations.ȱNothingȱsetȱforthȱhereinȱisȱorȱshallȱ
beȱdeemedȱtoȱbeȱinvestmentȱadviceȱorȱtheȱofferȱofȱinvestmentȱadviceȱtoȱanyȱrecipientȱhereof.ȱTargetedȱnetȱreturnsȱreferredȱtoȱhereinȱhaveȱbeenȱdeterminedȱbyȱKKRȱonȱtheȱbasisȱofȱestimatesȱandȱassumptionsȱaboutȱ
performanceȱbelievedȱtoȱbeȱreasonableȱinȱlightȱofȱbothȱcurrentȱmarketȱconditionsȱandȱKKR’sȱviewsȱonȱfutureȱmarketȱconditions.ȱInȱevaluatingȱpotentialȱreturns,ȱKKRȱwillȱconsiderȱaȱnumberȱofȱfactors,ȱincluding,ȱforȱ
example,ȱprojectedȱcashȱflows,ȱprojectedȱfutureȱvaluationsȱofȱtargetȱassetsȱandȱbusinesses,ȱrelevantȱotherȱmarketȱdynamicsȱ(includingȱinterestȱrateȱandȱcurrencyȱmarkets),ȱanticipatedȱcontingencies,ȱandȱregulatoryȱissues.ȱ
Actualȱresultsȱandȱeventsȱmay,ȱhowever,ȱdifferȱmateriallyȱfromȱtheȱassumptionsȱunderlyingȱsuchȱanalysis.ȱSuchȱreturnsȱareȱsubjectȱtoȱsignificantȱeconomic,ȱmarket,ȱandȱotherȱuncertaintiesȱthatȱmayȱadverselyȱaffectȱtheȱ
performanceȱofȱindividualȱinvestments.ȱ
3
Advantages
•
LongȬtermȱreturnȱprofileȱcanȱmatchȱlongȬtermȱfundingȱ requirements
•
TopȱquartileȱmanagersȱhaveȱhistoricallyȱoutȬperformedȱpublicȱ benchmarks
•
Structural,ȱgovernanceȱandȱinformationalȱadvantagesȱincreaseȱaȱ manager’sȱabilityȱtoȱdriveȱreturns
Risks
•
Illiquidity•
Performanceȱcanȱvaryȱwidelyȱamongȱmanagers–
Topȱquartileȱselectionȱisȱcritical
•
MarkȬtoȬmarketȱaccountingȱhasȱrecentlyȱresultedȱinȱgreaterȱ volatilityȱofȱunrealizedȱreturns
AdvantagesȱandȱRisksȱofȱAlternativeȱAssets
4
FocusȱonȱPrivateȱEquity
5
2006Ȭ2007Easyȱcredit,ȱlargeȱ
poolsȱofȱcapitalȱ=ȱ
largeȱdeals.ȱTXU,ȱ
largestȱcompletedȱ
buyout
1979Firstȱlargeȱ
buyoutȱofȱaȱ
publicȱcompany,ȱ
Houdaille
Industries
1963FirstȱLBOȱ
completed,ȱ
Orkinȱ
Exterminating
1984Firstȱ$1ȱbillionȱ
buyoutȱfundȱandȱ
firstȱ$1ȱbillionȱ
LBO,ȱWometco
TheȱEvolutionȱofȱPrivateȱEquity•
Leverageȱbuyoutsȱareȱnotȱaȱnewȱphenomena•
Fourȱdecadesȱofȱgrowth;ȱtodayȱaȱrecognizedȱcorporateȱfinanceȱtoolȱandȱ
coreȱassetȱclassȱforȱinstitutionalȱinvestors•
Demandȱforȱandȱsupplyȱofȱprivateȱcapitalȱexpectedȱtoȱgrow•
Multipleȱstrategiesȱfromȱsmallȱbuyoutsȱtoȱlarge,ȱandȱacrossȱgeographies
1995Secondaryȱmarketȱ
forȱprivateȱequityȱ
fundsȱestimatedȱtoȱ
exceedȱ$1ȱbillionȱforȱ
theȱfirstȱtime
1958SmallȱBusinessȱActȱ
allowsȱlicensedȱfirmsȱtoȱ
borrowȱmoneyȱfromȱtheȱ
governmentȱatȱbelowȬ
marketȱinterestȱratesȱtoȱ
investȱinȱentrepreneurialȱ
ventures
1980sPrivateȱequityȱ
becomesȱanȱ
acceptedȱ
corporateȱ
financeȱtool
2000sPostȱ2001,ȱeconomicȱ
expansionȱdrivesȱ
significantȱgrowthȱ
inȱtheȱassetȱclass
2008Ȭ2009Difficultȱcreditȱ
environmentȱ
andȱrecessionȱ
6Source:ȱPreqin,ȱPrivateȱEquityȱCouncil,ȱ2009ȱDataȱfromȱThomsonȱReuters
PrivateȱEquityȱTransactionȱActivityȱ($bn)
$66$111
$144
$246
$295
$685$659
$190
$134
–
$100
$200
$300
$400
$500
$600
$700
$800
2001 2002 2003 2004 2005 2006 2007 2008 2009
RecentȱHistory
7
4.1x 4.1x
4.7x4.9x
5.4x 5.5x
6.2x
4.9x
4.0x
0.0x
1.0x
2.0x
3.0x
4.0x
5.0x
6.0x
7.0x
2001 2002 2003 2004 2005 2006 2007 2008 2009
Source:ȱS&PȱLCDȱLeverageȱLoanȱReview,ȱleverageȱdataȱforȱU.S.ȱlargeȱcorporateȱLBOs
(issuerȱwithȱEBITDAȱ>$50million)
TotalȱDebtȱ/ȱEBITDA
Leverageȱmultiplesȱ
increasedȱbyȱ50%ȱ
fromȱ2001ȱtoȱ2007
Subsequently,ȱ
decreasedȱtoȱ2001ȱ
levels
RecentȱHistoryȱ(cont’d)
8
Source:ȱS&PȱLCDȱLeverageȱLoanȱReview,ȱPreqin
Ltd.(1)ȱRepresentsȱaverageȱproȱrataȱspreadȱofȱleveragedȱbuyoutȱloans(2)ȱDataȱforȱU.S.ȱlargeȱcorporateȱLBOs
withȱproȱformaȱtrailingȱEBITDAȱ>$50million(3)ȱDataȱforȱallȱU.S.ȱLBOs
AsȱaȱResultȱ.ȱ.ȱ.
PrivateȱEquityȱ
Fundraising
CostȱofȱDebt(1)
PurchaseȱPriceȱ
Multiples(2)
Equityȱasȱaȱ%ȱofȱ
TotalȱSources(3)
2001ȱ–
2007 2008ȱ–
2009
Increasedȱ~235%ȱfromȱ2001ȱ
levelsȱtoȱ$646ȱbillionȱinȱ2007
Decreasedȱ~60%ȱfromȱ2007ȱ
levelsȱtoȱ$246ȱbillionȱinȱ2009
Averageȱ270bpsȱoverȱLIBOR Spikedȱtoȱ565bpsȱoverȱ
LIBORȱ(whenȱavailable)
Roseȱtoȱanȱaverageȱofȱ9.8xȱ
(comparedȱtoȱ6.1xȱinȱ2001)
Fellȱalmostȱ2xȱtoȱanȱaverageȱ
ofȱ7.9xȱ
Declinedȱtoȱ~30% Climbedȱtoȱ~45%
9
WhereȱDoesȱThatȱLeaveȱUsȱToday?
10
•
FinancingȱMarkets–
Pricing,ȱleverageȱandȱtermsȱwillȱlikelyȱrevertȱtoȱpreȬpeakȱlevelsȱ
–
Largeȱdealsȱwillȱrevertȱtoȱ$1Ȭ5ȱbillionȱTEVȱ–
Investorsȱwillȱcontinueȱtoȱresistȱaggressiveȱcapitalȱstructures
•
PEȱReturns–
Quickȱflipsȱwillȱbecomeȱrarer
–
Longerȱholdingȱperiodsȱexpectedȱforȱportfolioȱcompanies–
Strategicȱbuyersȱmayȱbecomeȱmoreȱcompetitiveȱacquirers
WhileȱtheȱOutlookȱforȱPrivateȱEquityȱMayȱ AppearȱChallengingȱ.ȱ.ȱ.ȱ
.ȱ.ȱ.weȱrememberȱtheȱfollowing
11
1)ȱPrivateȱEquityȱisȱCyclical
1984ȱ–
1988
“Financialȱ
Engineeringȱ
Era”
1989ȱ–
1993ȱ
“Slowdownȱ
Era”
1994ȱ–
1998
“GrowthȱEra”
1999ȱ–
2001
“T&TȱBubble”
2002ȱ–
2007
“GoldenȱEra”
2008ȱ–
2009
“Marketȱ
Meltdown”
PEȱGlobalȱ
DealȱVolumeȱ
(Avg/Year)
$40ȱbn $12ȱbn $38ȱbn $97ȱbn $357ȱbn $162ȱbn
%ȱEquityȱ
inȱDealsȱ
(LastȱYear)
10% 22% 30% 38% 33% 45%
Approximateȱȱ
IRRs
(1) 50% 20% 35% 13% 37% ???
Source:ȱMorganȱStanley,ȱS&PȱLCDȱLeverageȱLoanȱReview,ȱPreqin,ȱPrivateȱEquityȱCouncil,ȱ2009ȱDataȱfromȱThomsonȱReutersȱ
(1)ȱȱApproximateȱgrossȱIRRsȱofȱvintageȱyearȱdealsȱbyȱselectedȱlargeȱfunds;ȱ“GoldenȱEra”
IRRȱrepresentedȱbyȱapproximateȱnetȱIRRȱofȱvintageȱyearȱfunds
12
“FinancialȱEngineering”
Approach
~24%ȱNetȱIRR ~27%ȱNetȱIRR
PurchaseȱPrice:
8.0xȱEBITDA
Leverage:
5.5xȱEBITDA
Avg.ȱCostȱofȱDebt:
8.0%
EBITDAȱGrowth:
5.0%
ExitȱMultiple:
10.0xȱEBITDA
Note:ȱTheseȱreflectȱKKRȱestimatesȱbasedȱonȱourȱexperienceȱinȱthe
privateȱequityȱbusinessȱandȱareȱhypotheticalȱonly.ȱTheseȱdoȱnot
reflectȱanyȱactualȱterms,ȱstructureȱorȱreturnsȱofȱanyȱpast,ȱpresentȱorȱ
futureȱinvestments.
PurchaseȱPrice:
8.0xȱEBITDA
Leverage:ȱ
4.5xȱEBITDA
Avg.ȱCostȱofȱDebt:
10.0%
EBITDAȱGrowth:
15.0%
ExitȱMultiple:
8.0xȱEBITDA
“ValueȱCreation”
Approach
2)ȱPrivateȱEquityȱisȱAdaptable
•
Asȱtheȱworldȱinȱwhichȱweȱoperateȱchanges,ȱprivateȱequityȱcan,ȱ andȱdoes,ȱchangeȱitsȱapproachȱandȱbusinessȱmodel
•
Weȱbelieveȱtoday’sȱmodelȱisȱaboutȱdrivingȱoperationalȱvalue
13
3)ȱOperationalȱValueȱCreationȱisȱtheȱ“Gameȱ Changer”
•
Controlȱpositionsȱenableȱprivateȱequityȱinvestorsȱtoȱexertȱmoreȱ
influence
onȱtheȱperformanceȱofȱtheirȱportfolioȱcompanies
•
Sourcesȱofȱvalueȱcreationȱinclude:
ȭ
Newȱrevenueȱopportunities
ȭ
Controllingȱexpensesȱandȱimprovingȱsalesforce
effectiveness
ȭ
Managementȱofȱcapitalȱbudgetsȱandȱbalanceȱsheets
ȭ
Managingȱstakeholder/brandȱissuesȱeffectivelyȱwhichȱsupportsȱ
allȱofȱtheȱabove;ȱand� Employees� Customers� Regulators� ProspectiveȱInvestors
14
3.0%
13.8%
11.4%
(5.4%)
1.0%
(0.2%)
(10.0%)
(5.0%)
0.0%
5.0%
10.0%
15.0%
3ȱYear 5ȱYear 10ȱYear
PrivateȱEquity S&Pȱ500
4)ȱPrivateȱEquity,ȱOverȱtheȱLongȬTerm,ȱHasȱ HistoricallyȱOutperformedȱPublicȱMarkets
Source:ȱ
CambridgeȱAssociatesȱLLCȱBenchmarkȱStatistics,ȱGlobalȱ(ExȬUS)ȱVentureȱCapitalȱ&ȱPrivateȱEquityȱIndex,ȱSeptemberȱ30,ȱ2009.
(1)ȱ
S&Pȱ500ȱIndexȱincludesȱreinvestmentȱofȱdividends,ȱandȱdoesȱnotȱincludeȱdeductionȱforȱanyȱtaxes,ȱexpenses,ȱtransactionȱcostsȱorȱadvisoryȱfees.
(1)
CambridgeȱAssociatesȱGlobalȱPrivateȱEquityȱIndex
~1,000bpsȱ
outperformance
15
.ȱ.ȱ.ȱparticularlyȱemergingȱfromȱaȱrecession
RecessionȱPeriod
5)ȱImportantȱtoȱStayȱtheȱCourseȱonȱVintageȱ YearȱDiversificationȱ.ȱ.ȱ.
RecessionȱPeriod37.5%
13.1%
21.8%
12.3%
21.6%
15.4%
9.9% 9.7%
14.0%
18.0%20.1%
11.8%
16.0%
18.7%
24.8%
26.4%
21.7%
11.4%
25.9%
29.8%
14.2%
30.5%
0%
10%
20%
30%
40%
1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
VintageȱYear
NetȱIRR
Source:ȱ
ThomsonȱReutersȱVenturExpert
Database.ȱReflectsȱcumulativeȱvintageȱyearȱperformanceȱforȱtopȬquartileȱU.S.ȱbuyoutȱfundsȱasȱofȱJuneȱ30,ȱ2009.ȱReturnsȱareȱnetȱofȱallȱmanagementȱandȱ
performanceȬrelatedȱfees.Note:ȱ
Pastȱperformanceȱisȱnotȱaȱguaranteeȱofȱfutureȱresults.
16
CurrentȱOutlook
17
•
CreditȱmarketsȱreȬopenedȱinȱ2009,ȱaȱpreȬrequisiteȱforȱbuyoutȱactivity’sȱ
recovery
•
Corporateȱactivityȱincreasingȱasȱeconomyȱimprovesȱleadingȱtoȱmoreȱ
divestitureȱactivity
•
Investmentȱopportunitiesȱinclude:–
Leveragedȱcompaniesȱneedingȱtoȱsellȱassets–
Publicȱtoȱprivatesȱofȱundervaluedȱbusinesses–
Corporationsȱneedingȱcapitalȱforȱacquisitions–
Structuredȱminorityȱinvestments–
CompaniesȱfacingȱnearȬtermȱdebtȱmaturitiesȱ– “goodȱbusinesses,ȱ
badȱbalanceȱsheets”
PrivateȱEquityȱOpportunitiesȱToday
Forȱtheȱrightȱcompany
inȱtheȱrightȱindustry
withȱtheȱ rightȱsponsor,ȱfinancingȱisȱavailable
Forȱtheȱrightȱcompany
inȱtheȱrightȱindustry
withȱtheȱ rightȱsponsor,ȱfinancingȱisȱavailable
18
2009ȱandȱ2010ȱYTDȱAnnouncedȱGlobalȱPEȱ DealsȱOverȱ$1ȱbillion
•
Despiteȱlimitedȱactivity,ȱPEȱfundsȱhaveȱbeenȱableȱtoȱdeployȱ capitalȱopportunistically,ȱandȱinȱsize,ȱinȱ2009ȱandȱYTD
Source: Dealogic as of March 15, 2010.
Announced Target Industry Acquiror Value ($mm)
1/2/2009 IndyMac Bank FSB U.S. bank IMB; MSD; Soros; JC Flowers, Stone Point 1,550.0 3/19/2009 Immoeast Immobilien Anlagen Austrian property company Vienna Capital Partners; Apollo 2,617.5 3/19/2009 USJ Co. Ltd. Japanese theme park operator Goldman Sachs; MBK Partners; Owl Creek 1,375.7 3/30/2009 Fifth Third Processing U.S. financial services Advent Investment Group 1,811.0 4/7/2009 New City Residence Inv. Japanese REIT Lone Star Funds 1,115.6 5/6/2009 Allco Finance Australian aviation business Hainan Airlines; Bravia Capital Partners 2,986.0 5/7/2009 Oriental Brewery South Korean brewery KKR.; Affinity 1,810.0
5/29/2009 Enel Rete Gas Italian natural gas distributor F2i Fondi Italiani per le infrastrutture; AXA 1,714.7 9/1/2009 Skype Technologies Internet-calling unit Silver Lake; CPPIB; Others 2,025.0 9/7/2009 Chartered Semiconductor Singaporean semiconductor manufacturer Advanced Technology Investment Company 3,904.0
9/30/2009 Invitel Holdings Hungarian telecommunications provider Mid Europa Partners 1,110.9 10/7/2009 Busch Entertainment Corp. U.S. theme park operator Blackstone 2,300.0
10/12/2009 Constantia Packaging Austrian flexible packaging One Equity Partners 1,206.3 10/15/2009 Anheuser-Busch InBev (CEE division) Central European brewing operations CVC 3,031.0 10/21/2009 Gatwick Airport Ltd. U.K. airport Global Infrastructure Partners 2,476.4 11/5/2009 IMS Health Inc. U.S. healthcare data company TPG; CPPIB 5,203.4 11/8/2009 TASC Inc. U.S. government consulting business KKR; General Atlantic 1,650.0
11/15/2009 Bellsystem24 Inc. Japanese telemarketer Bain 1,115.6 12/8/2009 Marken Ltd. U.K. healthcare services Apax Partners LP 1,602.0
12/11/2009 Springer Science + Business Media German academic publisher EQT; GIC 3,387.0 12/16/2009 Cedar Fair LP U.S. amusement park operator Apollo 2,314.4 1/27/2010 Pets At Home Ltd U.K. pet retailer KKR 1,545.9 2/4/2010 KNM Group Bhd Malaysian industrial equipment manufacturer BlueFire; GS; Mettiz 1,285.0
2/12/2010 SkillSoft Plc U.S.-based e-learning and training Berkshire; Bain; Advent Investment Group 1,095.2 2/23/2010 Ambea AB (75%) Nordic healthcare company Triton 1,156.7 3/2/2010 Styron Corp Plastics unit of Dow Chemical Bain 1,630.0 3/5/2010 RCN Corp U.S. cable company Abry Partners 1,211.8
3/12/2010 Willcom Inc Japanese mobile phone carrier Advantage Partners 1,449.4
19
IndustryȱExpertiseȱ/ȱSourcing
•Deepȱindustryȱspecializationȱ•Focusedȱeffortȱonȱbuildingȱ
relationshipsȱwithȱindustryȱ
CEOsȱandȱotherȱexperts
InvestmentȱExperience
•Investmentȱjudgmentȱhonedȱoverȱ
multipleȱeconomicȱcycles
•ProvenȱlongȬtermȱtrackȬrecord
OperationalȱCapability
•Abilityȱtoȱworkȱwithȱ
portfolioȱcompanyȱmanagersȱ
toȱhelpȱidentifyȱandȱ
implementȱoperationalȱ
improvementsȱ
CapitalȱMarkets
•Expertiseȱinȱcapitalȱ
structures,ȱrefinancings,ȱ
IPOsȱinȱorderȱtoȱaidȱ
portfolioȱcompanyȱ
recapitalizations
ClientȱManagement
•Internalȱteamȱfocusedȱonȱ
building,ȱmaintainingȱandȱ
expandingȱinvestorȱ
relationships
StakeholderȱManagement
•Focusȱonȱalignmentȱofȱ
interestsȱwithȱbroadȱgroupȱ
ofȱstakeholders
•Integratedȱintoȱinvestmentȱ
decisionsȱandȱtransactionȱ
processes
Peopleȱ
andȱ
Culture
CriticalȱAttributesȱforȱSuccessȱinȱPrivateȱ Equity
20
ImportantȱInformationThisȱpresentationȱ(“Presentation”)ȱisȱbeingȱmadeȱforȱtheȱsoleȱpurposeȱofȱprovidingȱcertainȱinformationȱaboutȱKohlbergȱKravisȱRobertsȱ&ȱCo.ȱ(togetherȱ
withȱitsȱaffiliates,ȱ“KKR”)ȱandȱitsȱviewsȱofȱtheȱprivateȱequityȱindustry.ȱThisȱPresentationȱdoesȱnotȱconstituteȱanȱofferȱtoȱsellȱorȱaȱsolicitationȱofȱanȱofferȱ
toȱpurchaseȱanyȱsecurityȱofȱanyȱinvestmentȱvehicleȱorȱproductȱsponsoredȱorȱmanagedȱbyȱKKRȱ(each,ȱaȱ“KKRȱProduct”).ȱȱAnyȱsuchȱofferȱorȱsolicitationȱ
willȱonlyȱbeȱmadeȱpursuantȱtoȱtheȱfinalȱconfidentialȱprivateȱplacementȱmemorandumȱ(orȱitsȱequivalent)ȱissuedȱwithȱrespectȱtoȱaȱKKRȱProductȱ(each,ȱaȱ
“Memorandum”),ȱwhichȱqualifiesȱinȱitsȱentiretyȱtheȱinformationȱsetȱforthȱhereinȱandȱwhichȱshouldȱbeȱreadȱcarefullyȱpriorȱtoȱanyȱinvestmentȱinȱaȱKKRȱ
Productȱforȱaȱdescriptionȱofȱtheȱmeritsȱandȱrisksȱofȱsuchȱanȱinvestment.ȱȱAnȱinvestmentȱinȱanyȱKKRȱProductȱwillȱentailȱaȱhighȱdegreeȱofȱriskȱandȱnoȱ
assuranceȱ
canȱ
beȱ
givenȱ
thatȱ
investmentȱ
objectivesȱ
willȱ
beȱ
achieved.ȱ
Eachȱ
Memorandumȱ
willȱ
containȱ
aȱ
detailedȱ
descriptionȱ
ofȱ
theȱ
risksȱ
thatȱ
mayȱ
beȱ
involvedȱ
inȱ
investingȱ
inȱ
aȱ
KKRȱ
Product.ȱ
Thisȱ
Presentationȱ
isȱ
not
intendedȱ
toȱ
provideȱ
informationȱ
importantȱ
toȱ
aȱ
decisionȱ
toȱ
purchaseȱ
orȱ
sellȱ
anyȱ
commonȱunitsȱorȱrestrictedȱdepositaryȱunitsȱofȱKKRȱ&Co.ȱ(Guernsey)ȱL.P.
Informationȱ
providedȱ
inȱ
thisȱ
Presentationȱ
aboutȱ
anyȱ
KKRȱ
Productȱ
andȱ
investmentsȱ
madeȱ
byȱ
suchȱ
KKRȱ
Products,ȱ
includingȱ
pastȱ
performance,ȱ
isȱ
providedȱsolelyȱtoȱillustrateȱKKR’sȱinvestmentȱexperience,ȱandȱprocessesȱandȱstrategiesȱusedȱbyȱKKRȱinȱtheȱpastȱwithȱrespectȱtoȱsuchȱKKRȱProducts.ȱȱ
Hypotheticalȱ
performanceȱ
informationȱ
inȱ
thisȱ
Presentationȱ
relatingȱ
toȱ
investmentsȱ
isȱ
notȱ
intendedȱ
toȱ
beȱ
indicativeȱ
ofȱ
anyȱ
KKRȱ
Product’sȱ
futureȱ
results.ȱPastȱperformanceȱisȱnotȱindicativeȱofȱfutureȱresultsȱandȱthereȱcanȱbeȱnoȱassuranceȱthatȱanyȱKKRȱProductȱwillȱachieveȱcomparableȱresults.
Unlessȱspecified,ȱanyȱviewsȱreflectedȱhereinȱareȱthoseȱofȱKKRȱandȱareȱsubjectȱtoȱchangeȱwithoutȱnotice.ȱȱCertainȱofȱtheȱinformationȱcontainedȱherein,ȱ
particularlyȱinȱrespectȱofȱmarketȱdataȱandȱeconomicȱandȱotherȱforecasts,ȱisȱfromȱthirdȱpartyȱsources.ȱȱKKRȱdoesȱnotȱrepresentȱthatȱsuchȱinformationȱisȱ
accurateȱorȱcomplete,ȱandȱKKRȱhasȱ
notȱundertakenȱanyȱindependent
reviewȱofȱ
suchȱ
information.ȱ ȱTheȱstatementsȱ
containedȱinȱ
thisȱPresentationȱ
areȱ
madeȱasȱatȱ
theȱ
dateȱ
ofȱ
thisȱPresentation,ȱunlessȱanotherȱ
timeȱis
specifiedȱinȱ
relationȱ
toȱ
them,ȱ
andȱ
theȱ
deliveryȱ
ofȱ
thisȱ
Presentationȱ
atȱ
anyȱ
givenȱ
timeȱ
shallȱ
notȱ
giveȱ
riseȱ
toȱ
anyȱ
implicationȱ
thatȱ
thereȱ
hasȱ
beenȱ
noȱ
changeȱ
inȱ
theȱ
factsȱ
setȱ
forthȱ
inȱ
thisȱ
Presentationȱ
sinceȱ
thatȱ
date.ȱ ȱKKRȱ
isȱ
underȱ
noȱ
obligationȱtoȱupdateȱorȱkeepȱ
currentȱ
theȱinformationȱ
containedȱ
hereinȱ
orȱ
toȱ
correctȱ
anyȱinaccuracyȱ
containedȱ
hereinȱexceptȱ
asȱexplicitlyȱ
requiredȱbyȱ
law.ȱNoȱpartȱofȱthisȱPresentationȱconstitutesȱinvestment,ȱlegal,
tax,ȱregulatory,ȱaccountingȱorȱotherȱadviceȱofȱanyȱkind.ȱ
Theȱ
S&Pȱ
500ȱ
Indexȱ
isȱ
aȱ
capitalizationȬweightedȱ
indexȱ
ofȱ
theȱ
largest,ȱ
publiclyȱ
tradedȱ
U.S.ȱ
companies,ȱ
andȱ
isȱ
usedȱ
forȱ
purposesȱ
ofȱ
comparisonȱ
toȱ
representȱ
broadlyȱ
theȱ
performanceȱ
ofȱ
theȱ
U.S.ȱ
stockȱ
market.ȱ ȱThe
returnȱ
figuresȱ
forȱ
thisȱ
indexȱ
takeȱ
intoȱ
accountȱ
changesȱ
inȱ
priceȱ
andȱ
grossȱ
cashȱ
dividendsȱ
paidȱ
byȱ
securitiesȱ
comprisingȱ
theȱindex.ȱȱTheȱ
returnȱ
figuresȱ
forȱ
theȱ
indexȱ
doȱ
notȱ
reflectȱ
theȱ
deductionȱ
ofȱ
anyȱ
taxes,ȱ
expenses,ȱ
transactionȱ
costs,ȱorȱadvisoryȱfees.ȱȱItȱisȱnotȱpossibleȱtoȱinvestȱdirectlyȱinȱanȱunmanagedȱindex.
Certainȱinformationȱ
containedȱinȱ
thisȱ
Presentationȱ
constitutesȱ
“forwardȬlookingȱ
statements,”
whichȱ
canȱ
beȱ
identifiedȱ
byȱ
theȱ
useȱ
ofȱ
forwardȬlookingȱ
terminologyȱ
suchȱ
asȱ
“may,”
“will,”
“should,”
“expect,”
“anticipate,”
“project,”
“estimate,”
“intend,”
“continue,”
“target,”
“believe,”
theȱ
negativesȱ
thereof,ȱotherȱvariationsȱthereonȱorȱcomparableȱterminology.ȱȱDueȱtoȱvariousȱrisksȱandȱuncertainties,ȱactualȱeventsȱorȱresultsȱorȱtheȱactualȱperformanceȱ
ofȱanyȱKKRȱProductȱmayȱdifferȱmateriallyȱfromȱthoseȱreflectedȱor
contemplatedȱinȱsuchȱforwardȬlookingȱstatements.
Thisȱ
Presentationȱ
andȱ
itsȱ
contentsȱ
areȱ
strictlyȱ
confidential.ȱ
By
acceptanceȱ
ofȱ
theseȱ
materials,ȱ
eachȱ
recipientȱ
agreesȱ
toȱ
keepȱ
thisȱ
Presentationȱ
andȱ
itsȱ
contentsȱconfidentialȱandȱnotȱtoȱreproduceȱorȱdiscloseȱthemȱtoȱanyȱpersonȱwithoutȱtheȱpriorȱwrittenȱconsentȱofȱKKR.ȱ