Business Overview

Throughout our history, we have consistently been a leader in the private equity industry, having completed more than 185 private equity investments with a total transaction value in excess of $435 billion. In recent years, we have grown our firm not only by expanding our geographical presence, but by building complementary businesses in areas such as fixed income, capital markets, infrastructure, and natural resources. These newer efforts build on our core competencies and industry expertise, allowing us to leverage the intellectual capital and synergies in our businesses to capitalize on a broader range of the opportunities we source.

Private Markets

Private Equity

We are a world leader in private equity, having raised 16 funds with approximately $60.4 billion of capital commitments through December 31, 2010. We invest in industry-leading franchises which attract world-class management teams. Our investment approach leverages our capital base, sourcing advantage, global network and industry knowledge. It also leverages our sizeable team of operating consultants who work exclusively with our portfolio companies, as well as our senior advisors, many of whom are former chief executive officers and leaders of the business community.

From our inception in 1976 through December 31, 2010, our investment funds with at least 36 months of investment activity generated a cumulative gross IRR of 25.8%, compared to the 11.6% gross IRR achieved by the S&P 500 Index over the same period, despite the cyclical and sometimes challenging environments in which we have operated.

Infrastructure

We manage investments in infrastructure assets in order to capitalize on the growing demand for global infrastructure investment. We believe that the global infrastructure market provides an opportunity for the firm’s combination of private investment, operational improvement, and stakeholder engagement skills. This strategy seeks to achieve returns through the acquisition and operational improvement of assets important to the functioning of the economy and also to provide current income to investors.

Natural Resources

We manage direct investments in natural resources assets, such as oil and natural gas properties. This strategy seeks to generate returns through the production of the underlying natural resources while providing investors with exposure to commodity prices. As of December 31, 2010, we had received $250 million of commitments to this strategy.

Public Markets

Through our Public Markets segment, we manage a specialty finance company, a number of investment funds, structured finance vehicles and separately managed accounts that invest capital in liquid credit strategies, such as leveraged loans and high yield bonds, and less liquid credit products such as mezzanine debt and special situations investments. These funds, vehicles and accounts are managed by KKR Asset Management LLC. We intend to continue to grow this business by leveraging our global investment platform, experienced investment professionals and the ability to adapt our investment strategies to different market conditions to capitalize on investment opportunities that may arise at every level of the capital structure and across market cycles.

KKR Asset Management LLC manages specialty finance company KKR Financial Holdings LLC (NYSE: KFN), whose majority-owned subsidiaries finance and invest in financial assets, including below investment grade corporate debt, marketable equity securities and private equity. Additionally, KFN has and may make additional investments in other asset classes including natural resources and real estate.

As of December 31, 2010, this segment had $14.8 billion of AUM, comprised of $1.4 billion of assets managed in KFN, $7.9 billion of assets managed in structured finance vehicles and $5.5 billion of assets managed in other types of investment vehicles and separately managed accounts.

Capital Markets and Principal Activities

Capital Markets

Our capital markets business supports our firm, our portfolio companies and our clients by providing tailored capital markets advice and developing and implementing both traditional and nontraditional capital solutions for investments and companies seeking financing. Our capital markets services include arranging debt and equity financing for transactions, placing and underwriting securities offerings, structuring new investment products and providing capital markets services. To allow us to carry out these activities, we are registered or authorized to carry out certain broker-dealer activities in various countries in North America, Europe and Asia.

Principal Activities

Principal Activities refers to other principal activities at our firm, which include investments in our private equity funds as well as co-investments in certain portfolio companies of those funds. Together, these investments provide us with a significant source of capital to further grow and expand our business, increase our participation in our existing port- folio of businesses and further align our interests with those of our investors and other stakeholders. We believe that the market experience and skills of professionals in our capital markets business and the investment expertise of professionals in our Private Markets and Public Markets segments will allow us to continue to grow and diversify this asset base over time.