K o h l b e r g K r a v i s R o b e r t s & C o.

2008 Annual Review

Can value still be created?

Contents

Letter from Our Founders 1

Operational and Strategic Review 8
KKR’s Integrated Approach to Value Creation 28
Dedicated Process for Value Creation 30
KKR Portfolio Company Case Studies 49
Investments of the KKR Private Equity Funds 61
In the wake of the events of 2008, we asked ourselves
a difficult question: Can value still be created?
The answer is yes. This Annual Review shows how.

letter from our founders

Two thousand eight was a year of severe dislocation and

extraordinary challenge. It began with many predicting an
economic slowdown and ended, as far fewer anticipated,
with the economy mired in the worst financial contraction
since the 1930s.
There were many ramifications of the year’s turmoil,
including a sharp increase in unemployment, a widespread
decline in asset prices, a fall in global industrial activity
and the dismantling of institutions once thought to be
indispensable to capital formation. Even more traumatic
was the erosion of trust in financial institutions, in business
and in capitalism itself. Capitalism relies on confidence:
confidence that markets are efficient, that economic
behavior is rational, that risk can be assessed and managed
and, most importantly, that measures of value accurately
represent actual underlying value. The events of 2008
undermined this confidence and, with it, many of the
investment community’s deepest convictions. It will take
the collective efforts of many organizations to restore
the trust necessary for capitalism to flourish once again.
Know that at KKR, we strive to earn your trust each day
and intend to maintain your confidence through good
times and bad.
As we write this letter in April 2009, the financial and
economic outlook remains sobering. Industrial activity,
consumer spending, the housing market and unemploy-
ment figures, together, indicate a long and protracted
global slowdown. Global debt and equity markets con-
tinue to experience turbulence. While progress has been
made by governments to stabilize markets, significant
work remains to be done. Although the challenges are
daunting, we remain confident that they will be overcome
through the efforts of the public and private sectors
working together. KKR is committed to helping craft
solutions to the problems facing global markets in
close cooperation with other institutions.
U n i q u e , I n t e g r at e d a n d M u lt i fa c e t e d
A p p r o a c h to Va l u e C r e at i o n
In the wake of the events of 2008, we asked ourselves
a difficult question: Can value still be created? The answer
is yes. This Annual Review shows how.
As we have run and grown KKR since its founding in
1976, we have invested through many cycles. Some of
these have been rough going. Others have been less
grueling. All of them have taught us that for our firm to
create lasting value, we must be rigid enough to stick
to what we know while being flexible enough to adapt
to a changing future.
Our breadth of experience in successfully returning
value to investors in all economic cycles is one of KKR’s
important differentiators. Many of our professionals who
achieved strong returns during challenging periods in
the late 1970s, early 1980s, early 1990s and in 2001 remain
at KKR today. Collectively, we have deployed capital
through recessions, credit curtailments, banking crises
and bear markets, helping KKR to consistently outperform
the S&P 500 Index and other leading benchmarks.
These experiences provide important lessons about when
to invest, how best to help our companies and optimal
times for exit that are indispensable to our investors and
companies today.
Over 33 years, KKR has created value for investors
by having a deep understanding of the companies and
industries in which we invest, selecting the right assets
for long-term outperformance, focusing meticulously on
operational improvement initiatives for our current invest-
ments, adhering to strict processes and procedures for
monitoring our investments, working with our clients and
partners to help them achieve their investment goals and
being a trustworthy, dependable partner.
Throughout KKR’s existence, we have learned that
challenging times yield interesting investment opportuni-
ties up and down companies’ capital structures. We are
capitalizing on these opportunities to create value by
carefully evolving our business to encompass asset classes
and strategies contiguous to and synergistic with private
equity, including infrastructure, fixed income, mezzanine
and capital markets, We have also created value by
consistently bringing the knowledge of our entire firm
to bear on every investment decision that we make.
Our executives possess tremendous insight into compa-
nies, industries, sectors, economies and business processes
due to their experiences at KKR, as well as our experi-
ences prior to joining the firm. We share this insight with
each other and it is a key part of our decision making.
Because we believe so firmly that any investment that
we make benefits from the collective knowledge, insight
and experience of all of our professionals across asset
classes and around the world, we have built businesses
that are completely integrated and have access to profes-
sionals across the entire firm. There are no silos at KKR.

2
George R. Roberts (left) and Henry R. Kravis (right), photographed flanked by the skyscrapers
of midtown Manhattan and the trees of Central Park, lead KKR into its thirty-third year as one of
the world’s preeminent investment management firms.
3
Our private equity and infrastructure professionals, our
capital markets professionals and our credit and mezza-
nine professionals work seamlessly together, subject to
appropriate information-sharing processes, to make the
most informed investment decisions that we can. The
world has changed over the past year and it is changing as
we write. It will no longer be possible to invest success-
fully without this integration. Ours is a unique approach
but we are confident that as we evolve our business, it will
allow us to invest in a smarter and more nimble way that
will benefit our clients and partners over the long term.

2 0 0 8 : A Y e a r o f F o c u s a n d Evo l u t i o n
Our most urgent and focused priority in 2008 was active
oversight and management of our current private equity
portfolio. After 33 years, we understand that value creation
is heavily dependent on the hard work that is done every
day to make our portfolio companies successful. We are
helping our companies to weather the current economic
storm by managing cost structures, controlling cash flows,
deleveraging, and, with the help of our capital markets
team, opportunistically accessing the capital markets.
As always, we are focused on growing EBITDA, generating
cash and paying down debt across our portfolio. Many of
our companies also took advantage of the market disloca-
tion of 2008 to consolidate and grow market share,
in many cases solidifying competitive advantages and
leadership positions and making acquisitions.
Our KKR Capstone operational teams, credit team,
capital markets team, global public affairs team, Senior
Advisors and talent management team are critical to these
efforts, and we significantly enhanced the resources
available through all of these groups during 2008. We are
now among the very few firms worldwide with the ability
to have dedicated experts in strategy, financial manage-
ment, information technology, procurement, human
resources, debt and equity capital markets, regulatory
analysis and stakeholder engagement and Lean Sigma,
to name several capabilities, available to our portfolio
companies. All of these capabilities strengthen our private
equity efforts by deepening our ability to both find and
execute transactions in the current environment and to
add value to our companies once we invest in them.
They also yield unparalleled insight into current market
dynamics, enabling us to better understand and capitalize
on market dislocations. We continue, as we have for
decades, to be grateful to the leaders and employees of
our private equity portfolio companies, who understand
what it means to think and act as owners and who accept
the responsibilities that accompany ownership.
The 12 case studies at the end of this Annual Review
provide examples of the numerous ways we are working
with our North American, European and Asian portfolio
companies to create durable value. As a result of ongoing
operational and productivity improvements and new
product and service initiatives, these companies have
4
shown strong progress and have become significant
contributors to economic growth.
The intense focus on the portfolio was not at the
expense of pursuing investment opportunities during
2008, and we are prepared in 2009 to take advantage
of opportunities created by the market dislocation.
Across asset classes, we remain well-positioned to act
on transactions that meet our strict investment criteria,
no matter the size. We added a number of world-class
companies to our private equity portfolio in 2008,
making traditional private equity control transactions
as well as growth equity transactions, ranging in size
from $100.0 million to well over $1.0 billion. As we always
have, we focused on companies with leading market
positions, high and sustainable barriers to entry, stable and
predictable cash flows, proven management teams and
prudently-designed capital structures.
Global equity market valuations have become more
attractive, and we expect companies to welcome the
option of becoming private as a shield from the current
volatility. We also continue to see that the turbulence in
the financing markets causes companies to look for non-
traditional sources of capital to grow and, in many cases,
survive. In a world where anxiety reigns and capital is no
longer a commodity, we believe that there will be very
attractive investments to make, and we have positioned
our team accordingly.
In addition to continuing to strengthen our industry
knowledge, our operational capabilities and our global
relationships, we are also building new strengths in how
we access capital through our capital markets efforts and
how we create differentiation through a focus on manag-
ing regulatory and stakeholder issues.
Our capital markets business represents a natural
outgrowth of our experience in helping our portfolio
companies manage their balance sheets. We understand
intricately that global equity and debt market knowledge
and differentiated access to capital will be critical drivers
of success for investment management firms in the future.
Given the broken architecture of global finance, expertise
in structuring and directly accessing debt capital, raising
incremental equity capital and serving as a source of
market expertise are of paramount importance. We are
pursuing an integrated effort to help our investors and our
companies access both new opportunities and capital.
While it has always been relevant, attention to stake-
holders is no longer optional. Within the current climate,
the ability of our portfolio companies and investors to
understand and manage increased levels of government
regulation and public scrutiny around the world can
materially impact our return on investment. At the same
time, there will be significant opportunities for private
investors to partner with government authorities in
strengthening financial institutions and building infra-
structure. Recognizing both these new challenges and
opportunities, we established an in-house global public
5
affairs capability to ensure that our firm as a whole, a s s e t s u n d e r m a n ag e m e n t 2 0 0 4 – 2 0 0 8

including current investments in our portfolio and our Billions of Dollars

future investments across asset classes, employs best
$60
practices in managing environmental, social and regulatory $53.2

issues. Paying attention to these issues will also, in many $50

3 3.
6 %
$43.9
$11.0 $48.5
$13.2
r:
circumstances, allow us to differentiate ourselves at the $40 c
ag $5.2
$42.2
front end of a transaction. $38.7
$35.3
$30
$23.4
Enhancing Our Credit and $20
$15.2 $3.7
$0.8 $19.7
I n f r a s t r u c t u r e I n v e s t m e n t P l at f o r m s
$14.4
In addition to further developing our private equity $10

efforts, we have prudently and deliberately sought to $0

2004 2005 2006 2007 2008
leverage our core aptitudes over the last several years into
asset classes adjacent to private equity, thereby enhancing  private equity
the natural synergies of these asset classes and maximizing  credit
our potential for value creation. We believe that this
will serve us well in the current environment by providing
us with new opportunities to build relationships, new
opportunities to find direct sources of capital and new
opportunities to build businesses. We made significant
progress on this long-term strategic goal in 2008.
The formalization of our KKR Asset Management
business represents a recognition that investors are looking
for new and tailored solutions across the capital structure.
Thirty three years of investing in industries we know have
provided us with an understanding of where industries
are heading and what companies need. Investing up and
down the capital structure, in companies we know well,
makes sense in all environments, but particularly today.
Given the dislocation in the markets, patient investors
are in a unique position to achieve attractive returns in
an ever-expanding group of asset classes, many of which
offer less risk and greater structural protection than have
historically been available to private equity investors.
In credit, we have been pursuing initiatives to expand
our assets under management and deploy capital in
senior secured term loans and high yield debt since 2004.
These assets are trading near all-time lows in the second-
ary market and new issues are being structured and priced
with better risk/return characteristics than have been
available to debt investors in several years. Our develop-
ment of a separately managed account platform
acknowledges that many of our investors have unique
needs which necessitate customized debt investment
portfolios. We have made mezzanine investments since
the inception of our credit platform and continue to see
mezzanine finance positioned to become an increasingly
attractive form of financing for companies given the
constrained credit environment and resulting corporate
deleveraging.
In a similar vein, our dedicated infrastructure effort
represents our response to an area where we see a great
need which can benefit from our approach and experience.
This initiative recognizes the fact that the global demand
for infrastructure investment is enormous, with studies
estimating a need for more than $3.0 trillion in annual
6
infrastructure projects. We have been investing in infra-
structure assets for many years through our private equity
energy team, but the current need for capital has risen so
significantly that we have designated a separate initiative
to target these opportunities.
We are a global firm with 13 offices worldwide, and we
firmly believe that our geographic reach gives us a com-
petitive advantage across our businesses. Understanding
the compelling demographics and economic growth of
China, India, the Middle East and Australia, we deepened
our presence in these regions during 2008 by growing
our teams and expanding our capabilities. Within the past
18 months we have opened offices in Beijing, Mumbai,
Sydney and Dubai. We believe that these regions will
provide superior long-term investment opportunities to
us in many asset classes.

Conclusion
So much has changed in the past year. What has not
changed is our culture and who we are. We continue to
adhere to our core competencies and to the proper align-
ment of interests with our investors. Ours will always
be a skill-based asset class. Yet in the face of fundamental
change to investment management as it has been prac-
ticed – and to capitalism itself – KKR is evolving and
extending our aptitudes with new strategic initiatives.
We have every confidence that this evolution will benefit
you, our clients and partners, and that it will allow KKR
to remain a leader in value creation for years to come.
In these challenging times, nothing is more important
than a robust and honest dialogue with our clients and
partners. In order to enhance that dialogue and continue
to provide you with industry-leading service, we made
significant investments in our relationship management
efforts during 2008, adding new, seasoned leadership
and professionals to our team as well as increasing the
frequency and caliber of our communications.
Please do not hesitate to ask us if there is anything we
can be doing to be helpful to you. In our experience, it is
times like these when friendships are made, partnerships
are deepened and character is revealed. We look forward
to helping you in any way we can and finding new ways to
work together to capitalize on what we believe will prove
to be one of the most exciting investing environments in
our 40 years in the business.

Thank you.

Sincerely,

H e n ry r . K r av i s G e o r g e r . R o b e rt s

April 2009
7
At KKR, we are working to build a business
that is unique. Our vision is that any invest-
ment we make in any business anywhere in the
world benefits from the collective knowledge,
insight and experience of all of our executives
globally. Most asset management firms operate
in silos. At KKR we are different.

o p e r at i o n a l a n d s t r at e g i c r e v i e w

KKR’s investment activities are conducted through

three key global business segments: Private Equity, Asset
Management and Infrastructure. In turn, these business
segments are supported by a global platform with sophisti-
cated capabilities in capital markets, communications,
compliance, finance, human resources, information tech-
nology, legal, public affairs, risk management and tax.
Resources were added in all of these support areas during
2008 to allow KKR to meet the increased level of invest-
ment opportunity it identified across asset classes, as well
as to enable it to continue to operate with globally coordi-
nated support functions across all of its key businesses.
As we grow, we continue to professionalize KKR as an
institution, as we see the processes by which we make and
monitor investment decisions, develop the careers of our
professionals, use and share information and maintain the
unique culture of the firm as core competitive advantages.
We have also implemented dedicated, formal global
compliance oversight to monitor information barriers and
the handling of confidential information and to respond
in a nimble manner to more frequent regulatory filings,
inquiries and assessments.

8
kk r p r i vat e e q u i t y p o rt f o l i o : Global Private Equity Group
fa i r va l u e b y g e o g r a p h y

As of December 31, 2008 KKR’s Global Private Equity Group sponsors and
0.2%
manages private equity funds and co-investment vehicles
1.0%
1.2%
that make equity investments for long-term appreciation,
2.0% either through controlling ownership of a company or
2.3%
2.7% strategic minority positions. Since 1976, KKR has raised
3.4%
3.9% 14 traditional private equity funds with approximately
5.1% $59.4 billion of capital commitments. The firm has also
developed innovative private equity products that have
10.7%
56.6% allowed a broader base of investors to participate in KKR
transactions and have, in turn, increased the amount
10.9%
of capital available to the firm to commit to transactions.
The mission of the Global Private Equity Group is
 america  india to make primarily control-oriented investments at attrac-
 france  netherlands tive prices in companies ascertained as having the ability
 england  australia to generate substantial long-term returns. In so doing,
 singapore  china Global Private Equity Group investment professionals:
 denmark  turkey • Identify companies that KKR, through its active
 germany  taiwan governance model, can help to become more competi-
tive, more profitable and more sustainable enterprises;
• Work with portfolio company management teams
to improve company performance, and profitably
drive growth, generate cash and aggressively pursue
kk r p r i vat e e q u i t y p o rt f o l i o : strategic goals;
fa i r va l u e b y i n d u s t ry
• Develop and implement prudent capital structures
As of December 31, 2008 that allow portfolio companies to invest for growth and
0.1%
withstand economic downturns;
1.0%
1.3%
• Work with company management to ensure that
1.6%
2.5%
companies engage constructively with key stakeholders
2.6%
5.4%
18.7%
impacted by their operations, including employees,
7.2%
the communities in which they operate and the envi-
ronment; and
8.1% 14.4%
• Provide portfolio companies with access to a global
network of resources and relationships to strengthen
11.8%
12.7%
their operations.
12.6%

The Global Private Equity Group consists of over

 health care  energy 120 investment professionals who are predominantly
 retail  telecom organized by industry to allow for the development
 technology  education of specialized knowledge and experience. Each industry
 financial services  recycling team is responsible for mastering its industry, developing
 manufacturing  consumer products a network of industry experts, identifying attractive
 media/  chemicals investment opportunities within that industry, and proac-
communications
 transportation tively sharing ideas and information with peer groups.
 hotels/leisure KKR firmly believes that this focused, disciplined,
multi-sector approach yields the depth of knowledge
and relationships necessary to achieve long-term success
in private equity.
The Global Private Equity Group industry teams
apply rigorous standards of due diligence when making
investment decisions, implement strategic and operational
changes that drive value creation in acquired businesses,
carefully monitor investments during KKR’s ownership
and make highly informed decisions when developing

9
Nigel Newman (left), Store Manager of the Boots Pharmacy in Sedley Place, London and
Dominic Murphy (right), who heads the European health care group in KKR’s private equity team,
discuss Sedley Place store operations amidst displays for No7 Protect & Perfect beauty products,
perennial favorites with customers and exclusively available at Boots.

10
investment exit strategies. The teams also build partner-
ships with motivated management teams, who put their
own capital at risk alongside KKR and our investors. These
disciplined approaches to private equity investing are a
hallmark of KKR and have contributed to KKR’s leading
position in private equity and investment management.
The Global Private Equity Group approach leverages the
full scope of KKR resources, including KKR’s capital
markets and asset management teams and KKR Senior
Advisors, during all stages of the investment process.
KKR Capstone executives are fully integrated into
KKR’s Global Private Equity Group, working closely with
the investment professionals to ensure the long-term
success of private equity investments. The KKR Capstone
team, comprised of nearly 50 operating executives and
functional specialists with expertise in procurement,
information technology and Lean Sigma, is skilled at
identifying new ways to improve companies for the long
term. For nearly a decade, this team has been a critical
part of KKR’s comprehensive value creation strategy.
We expanded the size of the KKR Capstone team in 2008
and increased the number of portfolio companies with
which the team was involved.
A critical focus of the Global Private Equity Group
in 2008 was ensuring that operations of current portfolio
companies were positioned for an extended period of
dramatically slower global growth. The Global Private
Equity Group industry teams, KKR Capstone teams,
portfolio company management teams and capital markets
team were critical to this effort. Expansion in each of
these areas permitted more executive oversight of our
portfolio. The combined KKR team focused on controlling
costs and working capital, closely monitoring liquidity
and compliance with financial covenants and, where
needed, conducting refinancing activities to enable
portfolio companies to meet their existing obligations
and strengthen their balance sheets for the future.
During 2008, as part of this enhanced oversight of our
current portfolio and future investments, Mike Michelson
and Alex Navab were named co-heads of KKR’s North
American Private Equity business. Mr. Michelson and
Mr. Navab are both senior investment professionals,
serve on the Private Equity Investment Committee and
lead industry teams. Their appointments ensure that
best practices are being shared and deployed across our
portfolio during this difficult time. These appointments
also make the North American practice congruent
with Europe and Asia, where Private Equity is led by
Johannes Huth and Joe Bae, respectively. Mr. Michelson,
Mr. Navab, Mr. Huth and Mr. Bae work closely with
Paul Raether, who heads our Global Portfolio
Management Committee.

11
 Given the increasing size and scope of the Global
Private Equity business, and the importance of carefully
managing the current portfolio while seeking new oppor-
tunities and continuing to focus by industry, we made a
number of appointments and changes during 2008 to the
team around the world. These included naming four new
Members of the firm in Private Equity, Simon Brown,
Sir Deryck Maughan, Jim Momtazee and Justin Reizes;
the appointment of Sanjay Nayar as CEO of KKR in India,
where the firm opened an office in Mumbai; hiring
Makram Azar to spearhead our efforts in the Middle East,
where KKR opened an office in Dubai; a number of
changes to industry team heads, including Sir Deryck
Maughan to oversee the North American financial institu- kk r ’ s t r a c k r e c o r d f r o m i t s f o u n d i n g

tions industry team; the appointment of Sir John Bond as i n 1 9 7 6 to d e c e m b e r 3 1 , 2 0 0 8 ( a l l f u n d s )

Chairman of KKR Asia; further building out the Private Billions of Dollars
Equity team in Beijing; and the appointment of Senior $77.8
$80
Advisors in North America, Europe and Asia.
$70

$60
C u r r e n t P r i vat e E q u i t y P o rt f o l i o
Since KKR’s founding in 1976 through December 31, $50
$44.4

2008, our more mature private equity funds (including $40

funds from 1976 through the Millennium Fund) have $30

generated a compounded annual gross return of 26.1% and $20

a 2.6 gross multiple of invested capital (net return and net $10

multiple of 19.8% and 2.2x, respectively). We achieved $0

these results through dramatically different economic
cycles by employing a disciplined and adaptable approach  amount invested
to investing, by staying rigorously focused on the long  total value
term and by learning from our experiences during 33 years
of investing.
As of December 31, 2008, our entire private equity
portfolio, held among a number of private equity funds $17.7

and co-investment vehicles, consisted of 49 companies

with more than $200.0 billion of aggregate annual revenues
and 850,000 employees worldwide. These companies are
headquartered in 13 countries and operate in 14 different
industry groups. Each company in the private equity
portfolio is independently managed and financed,
and each has its own board of directors, including KKR
representatives. $60.1

 realized value
 unrealized value

12
 New Investments
While vigilantly maintaining oversight of current
portfolio companies, the Global Private Equity Group
made approximately $2.6 billion of new investments
during 2008, identifying instances where companies could
benefit from KKR’s management, expertise and resources.
The pace of investment activity in 2008 was slower
than in the two preceding years. However, we remain
confident that, based on our experience in previous
economic downturns, there will be a significant number of
attractive investment opportunities that can be priced
and structured properly. We firmly believe that a carefully
selected, diversified portfolio of investments can with-
KKR currently manages three traditional private stand the effects of the global slowdown and can prosper
equity funds that are in their investment periods over the long term.
as well as a number of other funds that are fully As careful investors, we invest in a very small percent-
invested. The three active funds are geographically
differentiated and consist of the KKR 2006
age of the opportunities that we evaluate in a given year.
Fund L.P., the KKR Asian Fund L.P. and the Consequently, these are investments that we thoroughly
KKR European Fund III, Limited Partnership. understand, sometimes following them for years before
investing. In difficult economic markets, we acquire
KKR 2006 Fund L.P. companies with an eye towards a future turn in the busi-
Vintage: 2006 ness cycle. We believe that retaining our capital to take
Size: $17.6 billion
advantage of these future opportunities will ultimately
Geographic Focus: Invests principally in
North American businesses benefit our investors. Consequently, as of December 31,
2008, we had available approximately $15.0 billion of
KKR Asian Fund L.P. committed, but not yet invested, private equity capital
Vintage: 2007 across our private equity funds.
Size: $4.0 billion New investments in 2008 included both traditional
Geographic Focus: Invests in Asian
businesses with its main focus in Greater China,
private equity control transactions as well as growth equity
Japan and Australia transactions. KKR has historically undertaken the latter to
fund special investment opportunities when the firm has
KKr European Fund III, Limited Partnership identified high-caliber management teams and strong
Vintage: 2008 long-term growth prospects. The newest additions to the
Size: $6.8 billion
KKR private equity portfolio span a range of industry
Geographic Focus: Invests across Europe with
its main focus in Western Europe including sectors, including consumer products, financial services,
Germany, France, Scandinavia, the Netherlands, information technology and telecommunications.
the U.K. and Southern Europe They were also, in keeping with new market realities,
smaller in size than in the recent past, a trend that
we anticipate will continue and for which we are ably
equipped given our past experience, as well as
current capabilities.
The 2008 investments included: Legg Mason, Inc.,
Bharti Infratel Limited., KKR Debt Investors 2006 S.à.r.l.,
Northgate Information Solutions Limited, Unisteel
Technology Limited and Ma Anshan Modern Farming
Co. Ltd.

13
Chad Fargason (left) and Vikas Parekh (middle) of KKR Capstone discuss Biomet’s minimally
invasive system for implants with Mark Valentine (right), SVP, Sales and Sales Operations, in a
Biomet laboratory in Parsippany, New Jersey.

14
Legg Mason, Inc.
KKR invested $603.5 million of equity in a $1.25 billion
convertible debt security issued by Legg Mason, Inc.
(Legg Mason) in January 2008, with the remaining capital
provided by other financing sources. The $1.25 billion
seven-year convertible senior notes bear interest at a rate
of 2.5% per year and are convertible into shares of Legg
Mason common stock. Founded in 1899 as a brokerage
firm in Baltimore, Maryland, Legg Mason has evolved into
one of the largest asset management firms in the world,
serving individual and institutional investors in 190
countries on six continents and managing approximately
$698.0 billion as of December 31, 2008. Our investment in
Legg Mason represented an opportunity to invest in a
leading franchise in the asset management sector utilizing
a structure that provided significant upside while minimiz-
ing downside risk. We are working closely with Legg
Mason’s management team to optimize distribution,
efficiencies and alignment across all of the company’s
affiliates.

B h a rt i I n f r at e l L i m i t e d
In March 2008, KKR invested $247.6 million in Bharti
Infratel Limited (Bharti Infratel) as part of a larger growth
equity financing round consisting of $1.35 billion. KKR
and Temasek Holding are the co-lead investors and the
only investors with Board representation and preferential
governance rights. KKR’s investment in Bharti Infratel
was driven by the following key theses:
• Creation of the market leader in Indian wireless
infrastructure with the largest portfolio of towers of any
company in the world and the most comprehensive
offering across India. In addition, through Bharti
Infratel and the Indus joint venture, Bharti Infratel
gained access to relationships with three of India’s
leading wireless operators;
• Strong mobile infrastructure growth fundamentals,
with India’s wireless penetration still only standing at
33% (versus greater than 100% for more developed
markets) and with the market adding greater than10
million subscribers per month. In addition, there have
been a number of new license and spectrum awards
made to both existing and new operators, and addi-
tional upside is expected from the soon-to-be held
auctions for 3G and Wimax auctions;
• Attractive risk/return profile with low fundamental
business risk due to the long-term infrastructure
contracts with solid mobile businesses, combined with
exposure to one of the fastest-growing wireless markets
in the world; and
• Excellent management team and promoter (Airtel) with
a proven track record of value creation.

15
K K R D e b t I n v e s to r s 2 0 0 6 S . à . r . l .
KKR invested $500.0 million in KKR Debt Investors
2006 S.à.r.l. (KKR Debt Investors) in April 2008 with the
objective of generating attractive risk-adjusted returns
through investments principally in corporate debt. As of
December 31, 2008, the KKR Debt Investors portfolio
included concentrated positions in credits managed by
credit professionals in KKR Asset Management, including
senior unsecured bonds, subordinated bonds, first lien
term loans, second lien term loans, mezzanine loans and
senior secured bonds. We believe that the potential
returns for KKR Debt Investors are attractive, especially
relative to the risk.

N o rt h g at e I n f o r m at i o n S o l u t i o n s L i m i t e d
In March 2008, KKR closed the £1.1 billion acquisition
of Northgate Information Solutions Limited (Northgate).
In total, the KKR funds invested $831.9 million. Northgate
is a U.K.-based provider of specialist software and out-
sourcing solutions to the global human resources and U.K.
public service sectors. The company has a presence
in over 30 countries and has essential local knowledge to
deliver human resources solutions across more than 50
countries. Northgate serves a collection of large and
growing markets (e.g., human resources business
process outsourcing globally, U.K. public sector) with a
portfolio of unique software and associated services.
The attractiveness of the investment rested initially on a
view, borne out by the progress made to date, that these
sectors would provide significant growth opportunities,
but also be defensive in the case of a global economic
downturn. Further, the KKR team believed that Northgate
had all of the ingredients to achieve a market leadership
position. A number of operational improvement areas were
identified early on, and tackled in a broad scope transfor-
mation program, led by the CEO with active support from
KKR Capstone.

16
Unisteel Technology Limited
KKR invested $326.6 million in the $605.0 million
acquisition of Unisteel Technology Limited (Unisteel)
in September 2008. Unisteel is a precision engineering
solutions provider with multidisciplinary competencies in
the areas of fastening systems, stamped, cold forged and
machined metal components, optical plastics and surface
treatment technology. Key tenets of KKR’s investment
in Unisteel include:
• Significant barriers to entry and significant competitive
advantages;
• Excellent growth opportunities into new industries and
the development of relationships with new customers;
• Identifiable operational improvement and cost-saving
opportunities; and
• Robust cash flow dynamics.

KKR is actively involved in developing a comprehen-

sive revenue build-out plan with Unisteel’s senior
management and sales force in order to target specific
subsets of key industries. We have also identified mean-
ingful opportunities for cost rationalization, including
reducing labor costs by optimizing capacity in low-cost
locations, shifting procurement to a centralized and
strategic effort and continuous improvement in cost
management. A rigorous performance management
system is being put in place to track progress against each
key initiative and to tie the impact of each initiative to
Unisteel’s financial performance.

17
M a A n s h a n M o d e r n Fa r m i n g C o. Lt d.
In December 2008, KKR made a minority investment
of $99.2 million in Ma Anshan Modern Farming Co. Ltd.
(Modern).Modern is a leading dairy cow farming company
in China, whose main business is operating large-scale
dairy farms to raise dairy cows and sell raw milk to
branded dairy companies to be processed into consumer
dairy products. China’s dairy farming sector, currently
dominated by over one million individual farmers with
five to ten cows each on average, is shifting to large scale
farms which have significantly higher operational effi-
ciency, higher milk productivity and lower collection cost
for dairy processors, and produce milk with higher nutri-
tional quality. Furthermore, large scale farms such as
Modern maintain strict control over the entire manufactur-
ing process and therefore ensure product safety.
Modern is using the proceeds from KKR to set up new
farms at selected strategic locations in China in order to
capitalize on the attractive growth potential driven by the
increasing dairy consumption and the supply chain shift
opportunity in China. The KKR team has been focused on
helping Modern improve its operation to international
best practices, by bringing in additional outstanding senior
management team members and global leading experts
specialized in the dairy farming business, enhancing
its financial management capability and setting up
a long-term incentive plan for the management team.
Additionally, KKR has helped Modern complete
an acquisition of another leading dairy farm in China
to further expand its operations.

F o l l ow- O n I n v e s t m e n t s
During 2008, KKR made follow-on investments
in private equity portfolio companies including
Arcient Inc., A.T.U. Auto-Teile-Unger Holding GmbH,
Jazz Pharmaceuticals, Inc., Laureate Education, Inc.,
ProSiebenSat.1 Media AG, Tianrui Group Cement Co.,
Ltd. and Yageo Corportion. In aggregate, these follow-
on investments totaled approximately $500.0 million.

N ota b l e E x i t s a n d R e a l i z at i o n s o f Va l u e
Distributions made during 2008 totaled $605.5 million,
the majority of which were derived from the final sale of
Demag Holdings S.à.r.l. and a secondary sale of Rockwood
Holdings, Inc. common stock.

18
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nisseniamet landrem vullan lorperos nullam ilit wis nibh euis alis alit
prat. Elessi te esto con hendre venis vel ipsuscing ullan ver sumsand-
Biomet, Inc. iam do volor sed dolor illamco nsequis nulputatue duipisl henim
zzriusci tat num duis nulput nit illam. Veros ae doluptat dignit lor vent
Biomet designs, manufactures and markets et duis, eraestrud molortie mincin faciliquat.
orthopedic medical devices, including reconstructive Um lor siscil exero nulla facilit, quametum nit ea iusto odolore
products such as hip and knee implants as well magnim aut et, ad iureet nullamc. Onullan heniam quam vulluptat
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medical specialists. An affiliate of KKR entered nonsequatue facil aliquat, vulputat feugueril ulla. Consequ ipsuscing
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Blackstone Group, Goldman Sachs Capital velisl. Onullan heniam quam vulluptat praesto lut dolore magniatum
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transaction closed on September 25, 2007. utem.
Nonullum del do consenibh erit, nullutat te commodi psummy
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ad dunt utet lut alit wisi tat nulla corem et utem. Veros ae doluptat
dignit lor vent et duis, eraestrud molortie mincin faciliquat.
kk r va l u e c r e at i o n i m pa c t
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 Strengthen customer relationships between a quis autat, niam ea nos augue. Commole dit facil
leading developer and producer of medical nismodolor augiamet utate vel ipisi.
devices and physicians Euis exer senibh elisisit praesequat, praessisis amet at quis autat,
 Contribute to continued strong consolidated niam nos augue do et. Commole nismodolor augiamet utate etue vel
EBITDA growth and free c ash flow generation ipisi. Ummy nullam wisi zzrit lut alit, si tat ipisl dunt nis nullaor
for Biomet overall, up [13.0%] and [16.0%], eriliquisl utetue tie diam dionsed ipsuscing ullan er senis
respectively, for the first half of Fiscal Year 2009 niamconsenim.
versus the first half of Fiscal Year 2008, thereby Um lor siscil exero nulla facilit, quametum nit ea iusto odolore
enabling significant deleveraging magnim aut et, ad iureet nullamc. Onullan heniam quam vulluptat
praesto dolore magniatum quamcon, ullutpat sequis ad dunt utet
lut alit wisi tat nulla corem et utem. Venibh ilisci blaorpe velenit ea
autpat nonsequatue facil aliquat, vulputat feugueril ulla. Consequ
ipsuscing ese con vent iliquis modipit vel ut nulput iusto do prating
dolore magniatum quamcon, ullutpat sequis ad dunt utet lut alit wisi
At BIS headquarters in North Sydney, Australia, tat nulla Nino
corem etFasolo,
utem. Chief Information Officer, BIS (left)
discusses how operational data collected and analyzed by the OSCAR information technology
system can improve the on-site performance of coal haulage contracts with Justin Reizes (middle),
who leads KKR’s private equity team in Australia, and Matt Davies (right),of the Australian private
equity team. OSCAR, an acronym for “Operational System for Capture, Analysis and Reporting,”
is being developed to assist in business improvement across the full spectrum of BIS services.

19
Asset Management Group kk r a s s e t m a n a g e m e n t p o rt f o l i o :
fa i r va l u e b y a s s e t t y p e

In December 2008, KKR Asset Management (KAM) As of December 31, 2008

was launched to consolidate the credit investing business 6%
that KKR started in 2004 into a platform that allows
for scaled growth, as well as the future addition of new 14%

market-based asset classes. KKR believes that the experi-

ence of our people, global platform, collaborative culture,
and ability to source, research and diligence different
investments create a unique competitive advantage.
This advantage allows the firm to capitalize on investment
80%
opportunities throughout a company’s capital structure.
In 2004, KKR actively began pursuing corporate credit  senior secured loans
investments as a separate asset class. The firm now  high yield bonds
manages across the spectrum of corporate credit invest-  second lien and mezzanine
ments – senior secured term loans, high yield, debtor-
in-possession financing, mezzanine and structured credit.
The assets under management initially consisted of a
publicly-traded permanent capital vehicle, KKR Financial
Holdings LLC (KFN), launched in July 2004, several
private investment funds and structured finance vehicles.
During 2008, KKR launched a separately managed account
platform to manage the assets of individual investors in
a manner tailored to their specific investment objectives,
needs and risk objectives. KAM also offers fund structures kk r a s s e t m a n a g e m e n t p o rt f o l i o :

for investors that do not meet the minimum size require- fa i r va l u e b y i n d u s t ry

ments for separately managed accounts. As of December 31, 2008

In 2008, KKR established a dedicated global mezzanine
2%
effort as an integrated effort within its asset management 3%
4% 14%
platform. Mezzanine securities are privately negotiated 5%

debt instruments located in the middle of a company’s 6%

12%
capital structure, senior to common or preferred equity 6%
but subordinate to senior secured bank debt. Generally,
mezzanine securities take the form of privately negotiated 7%
12%

subordinated debt, with some form of equity participation. 9%

A substantial portion of the return is generated through 10%

10%

a current cash coupon. The ongoing dislocation in the

credit markets has created an environment where liquidity  industrials  energy
and capital resources are increasingly scarce. Banks and  financial services  diversified services
other traditional sources of credit have been significantly  retail  telecom
impacted and their ability to provide financing has been  utilities  consumer
greatly reduced. During 2008, mezzanine capital increas-  health care discretionary

ingly became a necessary component of many leveraged  consumer staples  printing/publishing

private equity transactions, since the amount of senior  broadcasting/  automobile
debt capital available for these transactions as a percent- entertainment

age of the acquisition price has been reduced and other

markets for junior capital (i.e., the high yield market)
have been essentially closed.

20
 This commitment to the mezzanine financing market
leverages the full resources of KKR, including the strong
experience in credit investing, workouts and restructuring
resident in the KAM investment team. The team utilizes
the broader KKR network to access local market relation-
ships, knowledge and expertise in order to effectively
source, assess and execute mezzanine investments. The
mezzanine effort is lead by Frederick Goltz, who has 13
years of experience structuring private equity investments
at KKR, including several of the firm’s most complex
financial and regulatory transactions.
KAM consists of over 70 professionals worldwide,
32 of whom are investment professionals. The investment
professionals have significant experience in the credit
markets and are organized into industry teams correspond-
ing to the Global Private Equity Group structure.
This organization provides these investment professionals
with a deep understanding of global industries, capabili-
ties of management teams and critical business drivers.
While the vast majority of companies are not appropriate
for traditional private equity, investing in their capital
structures may offer attractive risk-adjusted returns
for KKR and our investors. Particularly in today’s capital-
constrained environment, KKR believes that investors
with access to capital, who understand key industries and
companies and who possess a disciplined investment
process, are in a strong position to benefit from attractive
investment opportunities.
Investing up and down the capital structure, in indus-
tries and companies where KKR has differentiated insight,
is a good approach in all environments, but it particularly
makes sense today. Patient investors are in a unique
position to achieve attractive returns in an increasing
number of asset classes, many of which offer reduced
levels of risk and greater structural protection than
have historically been available to equity investors.
KKR’s approach to making debt investments focuses
on creating investment portfolios that generate attractive
risk-adjusted returns on invested capital by:
• Selecting high-quality investments that may be made
at attractive prices;
• Applying rigorous standards of due diligence when
making investment decisions (involving, where appro-
priate, all of KKR’s resources); and
• Subjecting investments to regular monitoring and
oversight.

21
 Where appropriate, other resources of the firm (i.e.,
KKR Capstone and Senior Advisors) are utilized to maxi-
mize the value of investments. Investment decisions
and monitoring are made using a very similar approach
to KKR’s private equity business, including the use of
an investment committee. Debt investments are sourced
through a variety of channels, including KKR’s private
equity, asset management and capital markets profession-
als and KKR’s global network of relationships at major
corporations, banks, financial intermediaries and other
investment advisory institutions. Investments in KKR-
affiliated companies are governed by strict conflict
of interest mitigation policies and procedures.
As of December 31, 2008, KAM had assets under
management of $13.2 billion focused on credit, including
$12.4 billion in separately managed accounts, private
funds and structured finance vehicles and approximately
$800.0 million at KFN. During 2008, KKR recruited
William Sonneborn to lead KAM. Prior to joining KKR, Mr.
Sonneborn was President and COO of The TCW Group,
Inc., an investment management firm with approximately
$130.0 billion in assets under management.

22
Global Infrastructure Group
KKR recognizes the increasingly important role that
infrastructure plays in the growth of both developed and
developing countries. The global investment demand for
infrastructure is enormous, with studies estimating a need
for more than $3.0 trillion in annual infrastructure projects.
The firm believes that the global infrastructure market
provides an opportunity for KKR’s unique combination of
investment, operational improvement and regulatory and
stakeholder management experience and skills. In May
2008, KKR announced plans to launch a dedicated initia-
tive to invest in infrastructure assets on a global basis.
The launch of the Global Infrastructure Group was
a natural outgrowth of KKR’s expertise in managing
investments in large, complex and regulated businesses
– including Dayton Power & Light, International
Transmission Company, Oncor Electric Delivery and
Texas Genco – and the firm’s record of driving operational
improvements in a wide range of industries. We believe
that infrastructure presents an opportunity to generate
attractive risk-adjusted returns through both income and
capital appreciation and to create significant value for
communities around the world.
KKR’s infrastructure investment strategy focuses
on utilities, energy and transportation assets, and also
includes communications, social infrastructure and infra-
structure-related assets. Investments will be considered
globally with a focus on North America and Europe and
positions of significant influence in companies will be
sought to insure the ability to drive value creation in the
investment. KKR’s strategy is founded on certain core
strengths, which we believe provide a competitive advan-
tage in infrastructure investing, including:
• The experience of the investment professionals in
the Global Infrastructure Group;
• Skills at driving operational improvement;
• Stakeholder and regulatory management expertise; and
• Global reach and investment sourcing capabilities.

The Global Infrastructure Group is headed by Marc

Lipschultz, whose tenure with KKR spans 13 years and
who is currently the head of the Global Private Equity
Group energy industry team.

23
While Doug Brody (left) and Rich Chand (right) monitor developments in global debt and
equity markets, colleagues Aren LeeKong (middle left), Mariko Uyeda (middle) and Bill Lyons
(middle right) discuss financing strategies on the KKR Capital Markets desk in New York.

24
Capital Markets
KKR Capital Markets (KCM) works closely with and
advises all of KKR’s investment businesses, including
private equity, infrastructure and asset management. As an
integrated part of KKR, KCM plays an important role in
the investment process and is a central provider of current
market intelligence to the firm and its portfolio compa-
nies, clients, partners and executives globally. The KCM
team consists of 15 professionals with longstanding
experience in primary and secondary markets and unique
structuring expertise. KCM operates under broker dealer
licenses in the U.S., U.K., Canada, Japan, Dubai and
a number of Western European countries, and has com-
mitted long-term funding that allows it to underwrite
transactions for KKR and its portfolio companies. KCM
is headed by Craig Farr, a former managing director at
Citigroup Global Markets and co-head of North American
Equity Capital Markets.
KCM’s activities complement the firm’s traditional
capital raising capabilities and the services provided
to KKR by investment banks. Much of its work builds
on the natural sourcing abilities of the firm and the
intellectual capital and relationships of its people. In a
capital-constrained environment such as the present,
KCM’s activities have increased significance for our value
creation process, as they facilitate the sourcing of capital
from both traditional and non-traditional sources and
allow our professionals to take greater control over capital
formation and the manner in which our investments are
structured and exited.
The KCM team amasses a wealth of information and
data on global capital markets through its daily interaction
with KKR portfolio companies, financial institutions
and market participants, making it uniquely positioned
to provide the firm’s external and internal constituents
with current insights on global capital markets. Due to its
centrality in the firm and the experience and expertise
of its people, we believe that KCM is ideally positioned to
help structure and deliver appropriate tailored products
to investors across a broad range of asset classes.

25
 During 2008, KCM worked closely with Global Private
Equity Group investment professionals on initiatives
to strengthen the balance sheets of KKR private equity
portfolio companies by monitoring liquidity outlooks and
projected compliance with financial covenants. The teams
anticipated deteriorating credit markets and sought to
proactively address any potential refinancing issues that
could impact the firm’s private equity portfolio, even
though 88% of KKR portfolio company indebtedness has
maturities extending beyond 2012 and 79% have maturi-
ties extending beyond 2013. Through these initiatives,
a number of our portfolio companies identified opportuni-
ties to refinance their debt and improve their financial
position in a challenging market.
KCM’s involvement with our portfolio companies is
broad and can take many forms, including raising addi-
tional equity or debt financing in public and private
transactions, providing capital markets advice, assisting
with hedging strategies and identifying creative opportu-
nities and structures to deleverage or fund growth
initiatives. With a global capital markets platform and
source of long-term funding, KCM is also well positioned
to underwrite securities offerings and provide an addi-
tional source of committed financing for issuers pursuing
transactions.
During 2008, KCM participated as an underwriter,
arranger and placement agent or finance provider
in a number of transactions. Two examples include
the following:
• S u n G a r d Data Sy s t e m s , I n c . KCM provided
committed bridge financing on an expedited basis to
help the company finance its acquisition of GL Trade
and acted as an initial purchaser in the bond offering
that was used to take out the bridge. KCM’s willingness
to commit capital served as an additional validation
of the proposed acquisition and sent a positive signal to
other financing providers, helping ensure a successful
execution in a difficult market environment.
• N o rt h g at e I n f o r m at i o n s o l u t i o n s
l i m i t e d KCM acted as an arranger of mezzanine
financing for Northgate in connection with its original
public-to-private acquisition and in a subsequent
“bolt-on” acquisition completed by the company.
The initial placement of mezzanine financing lowered
transaction risk for the company by eliminating
pricing and structural flex provisions from its financing
package, as well as providing attractive overall cost,
while the subsequent placement provided the
company with capital to close a highly synergistic
and strategic acquisition.

26
Client and Partner Group
Frequent and direct communication is critical in
challenging times. To that end, we significantly enhanced
our Client and Partner Group (CPG) resources and capa-
bilities during 2008.
CPG manages investor relations and capital activities
with partners and clients of KKR. Working on a global
basis, the executives in CPG serve as the conduit of
information between the firm and KKR investors, making
the full capabilities of KKR available to address investors’
needs and meet their particular investment goals.
The core of CPG is a group of relationship managers,
who address investors’ broad need for alpha and become
their solutions provider across the full range of KKR
products, including Private Equity, Asset Management
and Infrastructure. Relationship managers maintain close
contact with investors, addressing investor inquiries,
organizing investor meetings and conferences, responding
to investor requests and sourcing new investor relationships.
Supporting the relationship managers are KKR product
specialists, who are available to provide specialized
consulting on particular KKR products and customized
product delivery; a globally integrated support team, with
24-hour data and information availability for investors; and
KCM, with the ability to provide direct product delivery
capability to investors interested in direct equity and debt
investing. CPG team members have access to the entire
firm to help address client and partner issues and develop
advice and solutions.
KKR’s approach to investor relations is premised on
honest, direct, frequent communication with investors and
best-in-class solutions and idea-driven distribution capa-
bilities. The firm’s integrated approach, which leverages
all KKR executives and resources globally, has allowed the
firm to become a trusted advisor to a wide range of organi-
zations. KKR’s partners and clients include public and
private pension funds, endowments, charitable organiza-
tions, corporations, family offices, sovereign wealth funds,
investment consultants, insurance companies, financial
institutions, government entities, mutual funds, fund of
funds and hedge funds, among others.
Suzanne Donohoe joined us in April 2009 as Global
Head of CPG. Prior to joining KKR, Ms. Donohoe was a
Partner at Goldman Sachs Group, Inc., where she worked
for nearly 17 years, most recently as Head of Goldman
Sachs Asset Management International.

27
KKR’s Integrated Approach to Value Creation
At KKR, we are working to build a business that is unique. Our vision is that any investment we make in
any business anywhere in the world benefits from the collective knowledge, insight and experience of all of
our executives globally.
Most asset management firms operate in silos. They add products that they believe they can sell and their
investing process for new products often does not benefit from interaction with other investing teams. At KKR
we are different.
We only want to build businesses that we can make special. Our experience investing globally across
industries and cycles makes us unique, as do the the longevity of our investment teams and tenure of our
senior management.
We view KKR as an institution that has a “big brain” that we can access, as appropriate, to make informed
investing decisions across the capital structure, asset classes and geographies. We are building businesses
that are completely integrated and have access to the entire firm to inform market assessments and investing
decisions. The following are some examples of how this works:

KKR Asset Management head Bill Sonneborn (left) discusses global credit markets with
Suzanne Donohoe, head of KKR’s Client and Partner Group, and Chris Sheldon, Portfolio Manager
at KKR Asset Management, at KKR Asset Management’s office in San Francisco.

28
P r i v at e E q u i t y / I n f r a s t r u c t u r e :
When a private equity transaction is sourced, a team is staffed comprised of the following:
Private Equity/infrastructure Investment Team Includes all private equity/infrastructure investment
professionals globally who have relevant experience in the industry or a background with the company;
Senior Advisors Work with the investment teams to provide their insights and in many cases work on due
diligence with the investment team to provide operational input;
KKR Capstone Team Works together on due diligence with the investment team to jointly assess value
creation opportunities so that these opportunities may be incorporated into a 100-Day Plan with continuity;
kkr capital markets Team Works with the investment team to assess capital structure alternatives, advise as
to what can get done in the market and in some cases places debt and equity for the transaction directly
with KKR investors who have a specific interest in direct equity and debt investing opportunities;
kkr asset management Team Relevant industry group will be brought “over the wall,” as appropriate,
in many instances to assess the specific investment opportunity, give a read of how the market will think
about a situation and in some cases put in an early order for debt in the transaction if the team likes the
opportunity; and
client and partner group Works with KKR Capital Markets team and investing team to reach out to KKR
investors who have expressed an interest in direct debt or equity investment opportunities so we can deliver
specific live-time deal opportunities to our partners with direct investing efforts.

kk r a s s e t m a n a g e m e n t :
When KKR Asset Management is working to source a debt or mezzanine investment, the teams work
together in a similar manner. A typical KKR Asset Management due diligence would include the following:
kkr asset management Mezzanine Team Develops relationships with corporates and sponsors who need
capital to finance acquisitions or refinance existing balance sheets and focuses on negotiating and structuring
mezzanine investments;
kkr asset management Credit Team KKR Asset Management’s credit analysts are segmented by industry
group just like their private equity counterparts. However, they are credit experts that can invest up and
down the capital structure from senior debt through mezzanine. The KKR Asset Management credit teams
are involved in all of our credit investments and work in an integrated fashion with our KKR Asset
Management mezzanine origination team to analyze opportunities;
Private Equity/infrastructure Investment Team The KKR Asset Management team has access to all
of KKR’s private equity and infrastructure professionals, Senior Advisors, KKR Capstone professionals and
portfolio company management teams. If anyone in the private equity or infrastructure business has a
view on the potential opportunity or can leverage an existing relationship to help KKR Asset Management,
we make sure, subject to appropriate information sharing procedures, that input is part of the decision
making and deal process;
kkr capital markets Team Works with the KKR Asset Management team to provide insight on market
pricing and with the Client and Partner Group to help syndicate co-investment opportunities to KKR
investors in situations where the capital required is greater than that we have to invest from our vehicles; and
client and partner group Reaches out to KKR investors that have expressed an interest in direct debt
investment opportunities so that we can deliver specific live-time deal opportunities to our partners in debt
and mezzanine investments.

All of these parts of the firm work together to ensure that we make the most informed investments we
can and that we access, as appropriate, anyone in the firm, the current portfolio, former portfolio company
management teams and the like who may have an informed view of the opportunity. We source more invest-
ments and make better investment decisions for all of our investments, across all asset classes and around
the world, by working together.
It is this unique approach that makes us confident that as we build new businesses and expand our efforts,
you, our partners, are getting the benefit of everything we know in everything we do.
That is why we know you can trust us to do things the right way.
We appreciate your trust and support as we build what we believe is a truly unique business and approach
to asset management.

29
Value creation at KKR begins with responsible
ownership, ownership that embodies the
firm’s commitment to invest in and continually
improve its portfolio companies.

d e d i c at e d p r o c e s s f o r va l u e c r e at i o n

Thirty-three years of experience in up and down

markets, combined with unsurpassed industry knowledge,
enables KKR to make careful and prudent asset selection
decisions. Once a company is within the KKR private
equity, infrastructure or asset management portfolio, it
benefits from the firm’s integrated approach
to its investments. The entire firm’s experience and
knowledge is at the disposal of portfolio companies,
a synergistic approach ensuring that world-class manage-
ment techniques and international best practices are
deployed in the creation of value.
In the KKR model, the path to ownership starts with
rigorous and substantial due diligence. When a company is
under review as a potential addition to the KKR portfolio,
the KKR industry team, KKR Capstone team, KKR’s
Senior Advisors, KKR’s dedicated talent management
team and a public affairs team conduct a comprehensive
due diligence review. This review encompasses not only
the financial and operational condition of the potential
investment, but also the company’s management team,
the industry in which it competes, the cyclical and
secular forces acting within the industry, macroeconomic
developments likely to impact the company and relevant

30
environmental, social, regulatory and governance issues.
All of these components are closely examined and care-
fully evaluated. During the due diligence phase, KKR
focuses on a company’s past and present performance,
as well as on future growth and development. Before KKR
invests in a company, we devote significant time and
resources to understanding the opportunities for opera-
tional improvement and risks the company could face,
quantifying both, and developing an action plan for real
value enhancement and risk mitigation.
Once an investment has been made, the process of
operating and improving a business or “value creation”
begins in earnest. Over the last three decades, KKR has
developed a disciplined approach to value creation
that includes:
• A crisp and clear investment thesis;
• A 100-Day Plan, prepared jointly with portfolio
company management teams, laying out objectives
and key priorities;
• Unique operational expertise, through the KKR
Capstone operating team and KKR’s Senior Advisors,
who work closely with management teams to accelerate
operational change and execute the thesis for the
100-Day Plan;
• Organizational and human resource expertise,
through KKR’s dedicated talent management group,
which assists companies in recruiting and developing
world-class talent in key executive roles;
• Proactive monitoring and governance, through KKR’s
Portfolio Management Committee; and
• Stakeholder expertise, through understanding and
managing key regulations likely to impact the company
and through constructive engagement with stakeholders
impacted by the company’s operations.

While all these elements work together to create

value, a closer look at KKR Capstone, KKR’s Senior
Advisors, the KKR talent management team, the KKR
Portfolio Management Committee and the public
affairs team helps to understand KKR’s value proposition.
In many ways, these key functions are critical parts in the
engine that drives KKR’s productive, active engagement
with its portfolio companies and investors — a skill-based
engagement that differentiates it from other, more passive
investors.

31
Exiting a cab in front of KKR’s New York offices, Webster Chua (left) and Mike Kuharski (middle),
who cover financial institutions as part of KKR’s private equity team, discuss First Data’s GO-Tag™
Solution with Dom Morea, the SVP of Mobile Commerce Solutions at First Data. Mr. Morea leads
the team that developed and launched GO-Tag™, a mobile payments product that can be used
to conduct transactions in a contactless manner, making everyday payments – such as cab rides –
fast, secure and convenient.

32
KKR Capstone
Formed in 2000 and expanded significantly in 2008,
KKR Capstone is a dedicated team of operating executives
who work with both KKR private equity industry groups
and portfolio company management teams to identify and
execute against the key operating improvements that
underpin KKR’s investment theses. KKR Capstone execu-
tives are fully integrated with KKR’s global private equity
business and, together with the private equity industry
teams, work with KKR portfolio companies over their
investment lifecycle: from due diligence, to a 100-Day
Plan formation, to on-the-ground execution with manage-
ment teams, to ongoing monitoring.
When involved in due diligence, KKR Capstone execu-
tives typically evaluate key market and competitive
trends and “pressure-test” potential operating improve-
ments that are critical to the successful execution of KKR’s
investment thesis. The industry-specific and functional
expertise of KKR Capstone executives complements that
of the KKR industry teams and provides additional insight
into the value and feasibility of potential improvements.
The KKR Capstone team helped shape operating
improvements critical to the investment thesis of the
following companies, among many others: Avago
Technologies Limited, Biomet, Inc., Dollar General
Corporation, Northgate Information Solutions Limited,
Maxeda B.V., Rockwood Holdings, Inc., Unisteel
Technology Limited, U.S. Foodservice, Inc. and Yellow
Pages Group Co.
When a transaction closes, a KKR team, usually
comprised of both KKR Capstone and KKR deal team
executives, partners with the company’s management
team to develop a 100-Day Plan. For approximately
four to eight weeks, KKR industry team investment
professionals and KKR Capstone executives work closely
with management to review key business units and
company functions. Their analysis encompasses every-
thing from sales and pricing practices to procurement
and manufacturing capabilities. The focus of this effort
is to pinpoint key operating priorities, resource require-
ments, performance objectives and tracking metrics
for the first major period of implementation – usually
12 to 24 months of KKR’s ownership.
The initial 12 to 24 months are critical for a new
investment because it is during this period that the overall
performance trajectory for an investment is generally
set. Consequently, it is at this point that KKR Capstone
becomes fully immersed in the portfolio company. During
this stage, KKR Capstone executives work on-the-ground
with company managers and employees to drive the
performance improvements set during due diligence and
delineated in the 100-Day Plan. Priorities are tailored
for each company and target those areas with the greatest

33
potential for financial impact. Among the more common
areas of focus are:
• Accelerating revenue growth through:
– More effective pricing and promotional strategies;
– Enhanced sales force effectiveness measures, such
as reallocating resources to underdeveloped territo-
ries or channels and implementing consistent sales
metrics;
– Refinement of product offers and distribution
approaches based on a deeper understanding of
customer segments;
– Increased new product innovation; and
– Rationalization of under-performing product
categories and re-deployment of savings into higher- 1 0 0 - day p l a n

return spending and products.

• Driving year-on-year productivity and cost reduction
improvements through:
– Accelerated procurement efforts;
– Improved manufacturing and supply chain
performance and Lean Sigma programs; and
– Moving companies to best-in-class general and
administrative cost structures.
• Increasing the return on investment of capital expendi-
tures and improving cash flow through better working
capital management practices.
• Creating effective and efficient organizational
structures.
• Developing new product, geographic-expansion,
and acquisition strategies and execution efforts.
KKR Capstone senior executive teams typically work
in-depth with one portfolio company at a time, displaying
a ‘nose-for-the money’ orientation toward the largest
potential opportunities and rolling up their sleeves to lead
critical initiatives and bottom-line directives. It is this
hands-on approach – more than simply developing strate-
gic plans and recommendations – combined with industry
expertise that results in accelerated operational improve-
ment at portfolio companies.
The KKR Capstone team, which has grown from three
professionals in 2000 to nearly 50 at the end of 2008,
is composed of general management executives and
functional specialists with expertise in areas such as
procurement, information technology and Lean Sigma.
For example, KKR Capstone professionals, prior to joining
KKR Capstone, headed energy and media businesses,
were partners in leading management consulting firms,
led businesses in Asia Pacific, served in the U.S. Army,
founded technology companies and oversaw supply chain
management at leading industrial manufacturers. KKR
Capstone’s compensation structure is similar to KKR’s,
including “dollars at work” in our funds. As a result, the
interests of KKR Capstone executives are aligned with
KKR fund investors, as well as with those of portfolio
company management teams and KKR employees.
One of the key components of KKR’s value creation
process is the 100-Day Plan. Developed by the
KKR industry professionals, KKR Capstone
professionals and the management team of a new
portfolio company, a 100-Day Plan details the
steps necessary for the team to achieve specific
strategic, financial and operational goals. How
will margins be improved? How will supply
chains be shortened? What departments need more
resources? Who will be accountable for what?
Line by line and business unit by business unit,
the 100-Day Plan charts a path to value creation
by ensuring that everyone involved in the running
of a portfolio company agrees upon a plan for
improvement, is committed to executing it and is
held accountable to it from day one.
Because they find the experience of forging and
adhering to the first 100-Day Plan so valuable,
KKR and portfolio company management teams
often develop and implement second and third
100-Day Plans. 100-Day Plans tend to focus on
identifying critical, forward-looking operating
metrics, such as customer satisfaction measures,
on-time delivery and sales pipelines. At times,
this enables KKR portfolio management team to
identify challenges facing a business before those
challenges are revealed in the financial data, thus
allowing teams to make difficult operational
decisions as early as possible in KKR’s ownership.

34
 While the majority of KKR Capstone’s work is per-
formed without taking a formal title within portfolio
companies, KKR Capstone executives can, in order to fill
capability gaps, assume management roles when situations
warrant. KKR Capstone executives have served as the
CEO of TDC A/S, Chief Marketing Officer at Sealy
Corporation, COO at Northgate Information Solutions
Limited and various senior roles at other companies.
Once initial progress has been made on key initiatives,
the KKR Capstone team focuses on developing clear
metrics, tracking tools and processes and ensuring that
the proper organizational structure and capabilities are in
place to deliver long-term, sustainable improvement. An
elegantly delineated plan that cannot be executed and
sustained for the long term is worthless. Likewise, a
capability that is new to a company will not take root and
grow over the long term without substantive early over-
sight. Therefore, the KKR Capstone team invests
significant time and energy to ensure that improvements
are sufficiently entrenched to endure over time. After
removing themselves from day-to-day involvement at
portfolio companies, KKR Capstone professionals remain
actively involved in monitoring success through monthly
and quarterly Portfolio Management Committee reviews
and ongoing management team and board discussions.
There is tight integration between KKR Capstone,
KKR’s private equity industry teams, Senior Advisors and
others at KKR. KKR Capstone leaders are members of
KKR’s Portfolio Management Committee, and KKR
Capstone senior executives participate with KKR industry
teams, KKR Asset Management and KKR’s infrastructure
initiative, continuing to share and build upon their areas
of expertise.
KKR Capstone executives are driven by the desire
to create long-term, sustainable value in KKR portfolio
companies. “The most rewarding aspect about working at
KKR Capstone,” says Bill Cornog, a senior KKR Capstone
executive, “is realizing results. Hitting a quota, making
a budget, getting to your target – when you take an
initiative from an idea, to a test or prototype and then on
to demonstrable results – and then you see that result
make a meaningful difference in a company’s overall
performance – that is the best part about being at KKR
Capstone.”

35
 Simon Brown (left) and Alex Navab (second from left), KKR investment professionals who are
responsible for the firm’s investment in the Nielsen Company, discuss Nielsen’s innovations in
“People Meter” technology used to measure the viewing habits of television and cable audiences
with Itzhak Fisher, Nielsen Head of Global Product Leadership, and Susan Whiting, Nielsen
Vice Chair.

36
Senior Advisors
KKR’s Senior Advisors have all held leading positions
in major corporations and public agencies in the U.S.,
Europe and Asia. They are critical to successful value
creation at KKR. Senior Advisors work in cooperation
with KKR industry teams, KKR Capstone executives and
portfolio company management teams throughout the
private equity investment process, from conception and
due diligence to operational improvement and exit. They
also serve on Boards of Directors and work in conjunction
with KKR’s talent management team to provide support
and executive coaching to senior leaders at KKR portfolio
companies.
The Senior Advisors of KKR include:
Sanjiv Ahuja, former CEO of Orange SA
Sir John Bond, former Group Chairman of HSBC
Holdings plc
John E. Bryson, former Chairman and CEO of Edison
International and former Chairman of the California State
Water Resources Control Board
Liu Chuanzhi, founder of the Lenovo Group and President
of Legend Holdings
Leigh Clifford, current Chairman of Qantas Airways
Limited and former CEO of Rio Tinto
David Cote, Chairman and CEO of Honeywell
Lewis M. Eisenberg, Co-Founder and Co-Chairman of
Granite Capital International Group, L.P.
George M.C . Fisher, former Chairman and CEO of Eastman
Kodak and Motorola
Joe W. Forehand, former Chairman and CEO of Accenture
Yoshiharu Fukuhara, Honorary Chairman of Shiseido
Paul M. Hazen, former Chairman and CEO of Wells Fargo
Lord Clive Hollick, former Chairman of SBS Broadcasting
and former Member of KKR
R. Clint Johnstone, former Director and CFO of the
Bechtel Group
Paul J. Norris, non-executive Chairman and former CEO of
W.R. Grace & Co.
Gianemilio Osculati, Chairman of Valore S.p.A. and
McKinsey’s Mediterranean Complex
Lee R. Raymond, former chairman and CEO of ExxonMobil
Edward Tian Suning, Founder and Chairman of China
Broadband Capital Partners, L.P., and Vice Chairman and
former CEO of China Netcom Group

37
Talent Management
During 2008, KKR launched a dedicated talent manage-
ment effort to ensure that best-in-industry management
teams and organizational capabilities were in place across
the firm’s private equity portfolio. Peter Fasolo, former
Chief Talent Officer at Johnson & Johnson, leads the
effort, working in cooperation with the KKR industry
teams, Senior Advisors and senior managers at portfolio
companies in all geographies, from North Sydney to
Nashville and from Sèvres to Singapore.
“Studies have proven that differences in the quality of
executive leadership have a direct impact on an organiza-
tion’s performance,” said Mr. Fasolo. “Companies with
enlightened talent management policies have higher
returns on sales, investments, assets and equity, and
individuals who work at these companies are generally
more engaged with their work and focused on long-term
outperformance. Talent management is an ever-widening
circle, bringing positive benefits to company leaders,
employees, communities and investors.”
The KKR talent management team focuses on the
following:
• Developing a 100-Day Plan for talent in new portfolio
companies;
• Ensuring that the right executives are recruited to
lead portfolio companies;
• Supporting these executives as they execute on the
100-Day Plan for the business with detailed develop-
ment plans, individual and team executive coaching,
networking and performance evaluation;
• Ensuring that compensation structures are aligned
with responsibilities and attract and retain superior
talent such that managers become owners, as KKR
is, of portfolio company businesses; and
• Implementing human resources practices that are
top-class in all portfolio companies and enable
the success of KKR’s long-term investment thesis.

Increasing the probability of selecting and retaining

managers, who substantially enhance value creation,
requires an honest, rigorous assessment framework involv-
ing multiple factors. Many executives have little or no
training in interviewing and can default to general, vague
characteristics of whether people are “good” or “not
good.” Talent management at KKR starts with portfolio
company priorities, the specific operating challenges
or targeted improvements and then determines whether
an individual candidate has the skills and experience
to accomplish those goals.

38
 Successful candidates to lead KKR private equity
portfolio companies must demonstrate a strong track
record of performance, learning and change agility, high
self-awareness, a lack of arrogance and congruence with
company culture. Candidates must also fit a private equity
ownership model, meaning that they can make decisions
with due speed, have extraordinary financial acumen,
take calculated risks with a sense of urgency, build rela-
tionships and have a transparent dialogue with the
board of directors.
A host of portfolio companies have already benefited
from the work of the talent management team.
During 2008, for example, the team worked with the
heads of human resources and senior management
team on recruiting the following individuals:
• Chief Merchandising Officer, Chief People Officer,
Chief Information Officer and Senior Vice President,
Global Sourcing to Dollar General Corporation;
• Senior Vice President, Operations & Supply Chain
to Accellent Inc.;
• CEO to Aricent Inc.;
• CFO and COO to Laureate Education, Inc.;
• CEO to Primedia Inc.; and
• President, Arcade and Vice President, Strategy &
Business Development to Visant Corporation.

The team also spearheaded projects with the CEOs and

heads of human resources at Rockwood Holdings, Inc.,
Sealy Corporation, U.S. Foodservice, Inc., Dollar General
Corporation and Visant Corporation on critical projects,
including reviews of management equity plans to ensure
alignment of top teams, analysis of leadership develop-
ment practices, assessments of senior level succession
and executive coaching.

39
Surrounded by coils of raw wire that will soon become precision micro-fasteners for the hard
disk drive industry, Kennie Tay (middle), Unisteel Operations Manager, and Jamie Bolton (left)
and Sam Allen (right) of KKR Capstone, examine tooling used to manufacture micro-fasteners
in Unisteel’s factory in Singapore.

40
Portfolio Monitoring
KKR’s Portfolio Management Committee (PMC) is
responsible for an additional layer of focused oversight and
experienced management of KKR’s private equity portfo-
lio. In executing this oversight, the PMC instills discipline
in the process of creating value in KKR’s private equity
portfolio companies and acts as an early warning system to
identify and address challenges. The PMC consists of 13
senior professionals drawn from KKR private equity
industry teams, KKR Capstone and KKR Senior Advisors.
The PMC holds conference calls and meetings to review
the portfolio. Both proceed according to strict agendas set
in advance and work off of detailed operational, strategic
and financial reports submitted by each industry team on
their portfolio companies. The intent is to advance the
team’s in-depth knowledge of the investment and to focus
on the factors that contribute to value creation. Each
portfolio company is put through a regular and systematic
review on the calls, with the PMC asking questions such as:
• How is the company currently performing?
• How does current performance compare to historical
performance?
• What is the forecast for the year? For the next several
years?
• What changes in the cost structure are we targeting to
improve margins?
• What is the liquidity situation?
• Are we complying with all financial covenants?
• What does the company’s counter-party risk look like?
• How is the company’s management team performing?
• How is KKR engaging with the company’s employees?
• Has the competitive landscape changed? How?
• Has the regulatory landscape changed? How?
• What environmental initiatives is the company
undertaking?

In addition, members of the PMC are engaged with

the KKR private equity portfolio companies on a near-
daily basis through conversations with KKR private equity
teams, KKR Capstone, portfolio company management
teams and other constituents. Both the degree of informa-
tion exchanged and the frequency of these exchanges
define KKR’s differentiated operational focus on
its portfolio.

41
Stakeholder Engagement
Thirty-three years of investing has taught us that value
creation, which comes through building better companies,
often requires active engagement with key stakeholders
on critical environmental, social, and governance (ESG)
issues. Today’s turbulent economic environment, coupled
with the explosive growth of communications, makes
effective stakeholder engagement more important than
ever. Around the world, companies are being held to a
different and more rigorous set of standards by investors,
customers, non-governmental organizations, activists and
governments who can instantaneously communicate
with each other and companies through a variety of social
media and other Internet Platforms. At the same time,
there are new opportunities to partner with governments
and other public entities to provide capital and expertise
to assist troubled financial institutions and build needed
infrastructure.
Over the past year, KKR has built regulatory, communi-
cation and stakeholder management into its investment
process and portfolio management. The firm has assem-
bled a global team of internal experts and outside advisors
to assist the firm and its portfolio companies to understand
ESG issues. The team is led by Ken Mehlman, who joined
KKR in 2008; prior to joining KKR, Mr. Mehlman led a
bipartisan practice focused on regulatory and legislative
issues, crisis management and sensitive transactions at the
international law firm Akin, Gump, Strauss, Hauer & Feld
LLP. He previously served as the Chairman of the U.S.
Republican National Committee and held senior positions
at the White House and in the U.S. government. KKR’s
approach is to identify regulatory and stakeholder issues
that may affect potential investments and portfolio
companies’ value and to develop effective approaches to
managing those issues. In today’s environment, the firm
recognizes that this approach to stakeholder issues is a
business necessity, but it also understands that it is the
right thing to do.

Investment Process
Regulatory and stakeholder screening is part and parcel
of KKR’s investment due diligence process. Early assess-
ment of ESG issues can help in two ways. First, it can
identify risks that can materially impact company value.
Second, it can uncover potential areas of improvement
that can enhance the success of an investment. Therefore,
for new investments and significant transactions involving
a portfolio company, KKR’s global public affairs team now
assesses regulatory and stakeholder issues, including
regulatory approvals required to complete the investment,
labor and employee relations issues, the company’s envi-
ronmental footprint and performance, the company’s
involvement in local communities and future regulatory
and legislative trends likely to impact the company and
industry, among other factors.
42
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While Nathan Wallen (foreground), Corporate doloreChef at U.S.
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Rosemont,
et utem. Illinois, Chris Hsu (left) and
Anne Arlinghaus (second from right) of KKR Capstone discuss the success of the Foundations
Sales Excellence program with Steve Horan (right), VP of Sales Excellence and Training at
U.S. Foodservice and Mark Eggerding (second from left), SVP Street Sales, U.S. Foodservice.
The Foundations Sales Excellence program has contributed to market share gains and improved
salesforce effectiveness in Street Sales, U.S. Foodservice’s most profitable business segment.

43
P o rt f o l i o M a n a g e m e n t
Around the world, governments are reforming laws
and regulations impacting financial services, health
care, energy and other areas. Many of these proposed
changes may well have a material impact on KKR and the
companies in which we invest. The global public affairs
team works with KKR portfolio company management
teams to assess these trends, ensuring that they under-
stand them, engage where appropriate with policymakers
and are positioned to fully comply, and where possible,
benefit for doing so. Oversight of these issues is built in
to the rigorous KKR portfolio management process.
KKR has also identified and engaged best-in-class
advisors who can help portfolio companies forecast
trends, resolve stakeholder disputes and, when relevant,
engage with the public or key stakeholders. For example,
former Congressman Richard Gephardt is an advisor to
KKR and several KKR portfolio companies on labor issues.
Through many years in the U.S. Congress, Congressman
Gephardt developed close working relationships with
many leaders and participants in the U.S. labor movement.
He is convinced that collaborative engagement and
creative “win-win” approaches are the right approach to
labor-management relations and assists KKR portfolio
companies to develop and implement these efforts.
As with KKR’s approach to new investments, the goal
is to provide portfolio companies with a competitive
advantage and to help them avoid material harm.
In addition, KKR became a signatory of the United
Nations Principles for Responsible Investment (UN PRI)
in 2008. While the firm has long considered environmen-
tal, social and governance issues as part of its investments,
becoming a signatory to the UN PRI is part of a more
conscious, systematic and comprehensive approach to
incorporate these issues into all aspects of KKR’s invest-
ment process going forward.

44
 Guidelines for Responsible Investment
Consistent with KKR’s incorporation of regulatory and
stakeholder management into its investment process,
the firm worked with other members of the Private Equity
Council (PEC) to craft industry investment guidelines
regarding ESG matters. In accordance with these guide-
lines, KKR will:

1 Consider environmental, public health, safety and social
issues associated with target companies when evaluating
whether to invest in a particular company or entity, as well
as during the period of ownership.

2 Seek to be accessible to , and engage with, relevant
stakeholders either directly or through representatives of
portfolio companies, as appropriate.

3 Seek to grow and improve the companies in which
they invest for long-term sustainability and to benefit
multiple stakeholders, including on environmental,
social and governance issues. To that end, PEC members
will work through appropriate governance structures
(e.g., board of directors) with portfolio companies with
respect to environmental, public health, safety and social
issues, with the goal of improving performance and
minimizing adverse impacts in these areas.

4 Seek to use governance structures that provide
appropriate levels of oversight in the areas of audit,
risk management and potential conflicts of interest and
to implement compensation and other policies that align
the interests of owners and management.

5 Remain committed to compliance with applicable
national, state and local labor laws in the countries in
which they invest; support the payment of competitive
wages and benefits to employees; provide a safe and
healthy workplace in conformance with national and local
law; and, consistent with applicable law, will respect the
rights of employees to decide whether or not to join a
union and engage in collective bargaining.

6 Maintain strict policies that prohibit bribery and
other improper payments to public officials consistent
with the U.S. Foreign Corrupt Practices Act, similar laws
in other countries and the OECD Anti-Bribery Convention.

7 Respect the human rights of those affected by their
investment activities and seek to confirm that their
investments do not flow to companies that utilize child or
forced labor or maintain discriminatory policies.

8 Provide timely information to their limited partners
on the matters addressed herein, and work to foster
transparency about their activities.

9 Encourage their portfolio companies to advance these
same principles in a way which is consistent with their
fiduciary duties.

45
E n v i r o n m e n ta l D e f e n s e F u n d A l l i a n c e
Just as we work to share best practices on purchasing
and information technology across our portfolio, it is
also our goal to share creative approaches to ESG issues.
In May 2008, KKR announced a unique and historic
partnership with the Environmental Defense Fund (EDF)
to develop and implement best practices around environ-
mental performance. EDF has partnered with a number
of businesses to develop innovative tools and processes
that improve environmental performance, including
improving packaging materials, greening global supply
chains and jump starting a market transformation in the
commercial truck industry.
Through this alliance, KKR is working to identify best
practices to reduce energy use, water consumption, the
use of forest products and the generation of waste in key
portfolio companies. In additional to their environmental
impact, these environmental performance areas have been
selected because each can generate business benefits.
KKR’s approach is to work with portfolio company man-
agement and, where relevant, with KKR Capstone to
access a company’s environmental footprint in these areas
and to identify opportunities for improvements that may
also generate cost savings. Once this assessment is com-
pleted, KKR and EDF and the portfolio company work
together to establish specific environmental performance
goals that will also generate business benefits.
In the first nine months of this effort, the firm launched
a portfolio company-wide energy awareness campaign
called Green Savings that provides companies and their
employees with common sense tools to save energy and
cut costs at work and at home. An intranet site is under
development so that KKR portfolio companies can share
best practices for reducing energy use.
Other specific results in the early months of this
alliance include:
• U.S. Foodservice, Inc., one of the country’s premier
foodservice distributors, implemented new driver
policies, business processes and truck technologies to
improve its operational efficiency and reduce emissions
from its delivery fleet. During 2008, U.S. Foodservice
saved $8.2 million in fuel costs and avoided 22,000
metric tons of carbon dioxide emissions (equivalent to
more than 4,400 cars) by improving the efficiency of its
fleet (gallons/ton of product moved) by more than 4%
compared to a 2007 baseline. During 2009, Foodservice
plans to further improve fleet productivity by scaling up
successful initiatives, such as driver awareness programs,
automatic idle shutoff, maximum speed controls and
assessing and implementing new initiatives, including
improved trailer cooling practices and other technology
solutions.

46
• PRIMEDIA Inc ., a leading provider of print, Internet
and mobile solutions designed to enable consumers to
find a place to live, increased online efforts and resized
its publications to reduce its use of forest resources.
During 2008, PRIMEDIA saved $2.9 million in material
costs and reduced more than 3,000 tons of paper use
(equivalent to over 40,000 trees) by improving effi-
ciency (paper use/revenue) by 22% compared to a 2007
baseline. During 2009, PRIMEDIA plans to reduce
paper consumption an additional 20% by redesigning
publications and pursuing additional online strategies
and is exploring opportunities to expand publication
recycling programs currently encouraged at all loca-
tions. Also in 2009, PRIMEDIA will focus on measuring
and reducing its greenhouse gas emissions 10% by
improving sales and delivery routing and continuing
efforts to consolidate office and warehouse space.
• Sealy Corporation, the largest bedding manufacturer
in North America, recycled raw materials used for
producing bedding and improved delivery fleet effi-
ciency through improved driver policies and truck
technologies to reduce waste and decrease greenhouse
gas emissions. During 2008, Sealy saved $1.2 million
in fuel costs and avoided more than 3,000 metric tons
of carbon dioxide emissions (equivalent to more than
600 cars) by improving the efficiency of its fleet (gal-
lons/stop) by almost 9% compared to a 2007 baseline.
In addition, Sealy saved more than $4.0 million in
material costs and avoided 650 tons of solid waste
(equivalent to the capacity of more than 46 garbage
trucks) by reducing scrap per bed (pounds/unit) by 16%
compared to a 2007 baseline. During 2009, Sealy plans
to roll out improved fleet routing software, install speed
governors on its trucks, reduce idling time and incen-
tivize drivers to improve fuel economy. The company
will continue reducing solid waste by improving manu-
facturing processes and reducing packaging. In addition,
Sealy will focus on improving the energy efficiency of
its facilities.

KKR recently expanded this alliance at five additional

companies: Accellent Inc., Biomet, Inc., Dollar General
Corporation, HCA Inc. and SunGard Data Systems, Inc.
and is exploring expansion to several KKR portfolio
companies in Europe. The goal will be to develop metrics,
tools and best practices that can be shared, and drive
improved environmental and financial performance across
KKR’s entire portfolio. In addition, KKR and EDF will
share the tools and resources publicly to help drive
broader change across industries.

47
D i s c l o s u r e & T r a n s pa r e n c y
Another important area where public expectations have
changed involves transparency and disclosure. Over the
last two years, KKR has been working to increase the
transparency of its investments.
Lord Clive Hollick, a Senior Advisor to KKR, served as
a member of the working group that issued the “Guidelines
for Disclosure and Transparency in Private Equity,” known
as the Walker Report, which was issued in the U.K. in
November 2007. Today, KKR portfolio companies with
significant operations in the U.K., including Alliance Boots
GmbH and Northgate Information Solutions Limited,
release annual reports as part of KKR’s compliance with
Walker guidelines.
KKR is also actively involved in similar initiatives
across Europe, including initiatives that are currently being
undertaken by the German Private Equity and Venture
Capital Association (BVK) and the French Private Equity
Association (AFIC). KKR is committed to supporting
these initiatives and is pleased that senior KKR profession-
als actively serve on the BVK and AFIC working groups
that are responsible for developing and implementing
disclosure and transparency standards for those bodies.
Most recently, KKR launched a German language version
of its website, in keeping with the transparency commit-
ments made with the BVK. We expect to report further on
our engagement with key stakeholder issues at the end
of 2009 and on a regular basis going forward.

48
kk r p o rt f o l i o c o m pa n y c a s e s t u d i e s

49
 va l u e c r e at i o n c a s e s t u dy N o. 1
Alliance Boots GmbH
Alliance Boots is an international pharmacy-
led health and beauty group comprising over
3,100 outlets and a wholesale network of
warehouses serving over 120,000 pharmacies,
including Associates and JVs. Alliance Boots
also distributes healthcare and pharmaceutical
products and services.
kk r va l u e c r e at i o n i m pa c t
 Overall Transformation Program run-rate
EBITDA impact estimated at approximately £325
million, of which about half is attributable to
gross profit growth and half to cost savings
 Benefits incorporated in fiscal year-end 2009
forecast, as well as in 2010 budget and three-
year strategic plan
 Examples of project-specific impact include:
 Rebranding of Alliance-branded
pharmacies into Boots-branded pharmacies:
new stores are generally costing less
than budgeted and over-performing on
gross profit
 Procurement: Significant P&L impact in
fiscal year 2009 from multiple sourcing
initiatives in the U.K. with significant
potential from roll-out into Continental
Europe
 Extension of payment terms: Significant
cash and EBITDA contribution, greatly
exceeding the program target
50
AB Acquisitions Limited, a company controlled by funds advised by
KKR and Stefano Pessina, who currently serves as Executive Chairman,
entered into an agreement to acquire Alliance Boots in April 2007.
The transaction closed in July 2007.
A key element of our investment thesis for Alliance Boots concerned
the opportunity to strengthen the operations of the Alliance Boots
health and beauty division, comprising health and beauty retail and
pharmacy outlets across Europe.
Immediately after the transaction, a team of KKR private equity
investment professionals and KKR Capstone operational professionals,
in partnership with Mr. Pessina, created a transformation program office
charged with identifying the overall improvement potential for the
health and beauty business and launching specific initiatives aimed at
exploiting that potential. These initiatives target both gross profit
improvement opportunities and cost savings and span the value
creation spectrum including from the integration of multiple headquar-
ters, to the new range of products offered in the stores, to the new
supply chain masterplan.
The transformation program initiatives were all launched in the 100
days following the closing of the transaction. Post-launch execution
has been driven by management in partnership with KKR Capstone and
we are now entering the final phase where projects are being finally
transitioned into business-as-usual practices at Alliance Boots.
For instance, three key projects for the team since the close of the
transaction have included converting Alliance-branded pharmacies
into Boots-branded pharmacies, enhancing procurement practices and
extending payment terms with suppliers.
Regarding the first of these examples, because of the Boots history,
high brand recognition, trust in the Boots name on the part of consum-
ers particularly in the U.K. and potential for growth, KKR, Mr. Pessina
and the management team recognized that accelerating the re-branding
of Alliance pharmacies into Boots pharmacies was an opportunity to
increase revenue growth and enhance margins. Since the close of the
transaction, more than 300 Alliance stores have been converted into
Boots stores, with the full conversion of the remaining stores estimated
to be complete within a year.
Secondly, improving procurement systems across the health and
beauty division has also been a focus of the KKR and Alliance Boots
management team. Projects to date have targeted multiple areas
such as information technology, headquarters costs and more recently,
rent and other store-specific costs.
Finally, extending payment terms with suppliers, changing working
capital management and thoroughly reviewing the processes in place
for dealing with our partners in the value chain has also been a focus of
KKR and the Alliance Boots management team.
These initiatives are only three of several key transformation efforts
underway at Alliance Boots. Collectively, we believe that the work of
the Alliance Boots team, in partnership with KKR investment execu-
tives and KKR Capstone operational executives is driving positive
change, as Alliance Boots continues to validate our investment thesis
of owning a market leader in a defensive industry with significant
potential for revenue enhancement and cost savings.
 va l u e c r e at i o n c a s e s t u dy N o. 2
Avago Technologies
Limited
Avago has a 40-year history of innovation dating
back to origins within Hewlett-Packard. The
company designs, develops and supplies a broad
range of analog semiconductor devices globally.
Avago’s diversified end-market products include
cellular phones, data networking equipment,
enterprise storage and optical mice.
kk r va l u e c r e at i o n i m pa c t
 Recruited a world-class semiconductor team
 During the carve out process, designed and
implemented a best-in-class organizational
structure resulting in signific ant cost savings
 Created a highly efficient business model,
headquartered in Singapore, that is flexible,
asset-light and utilizes a low-cost footprint
 Streamlined the product portfolio through
non-core divestitures
 Re-focused R&D investment to accelerate top-
line growth and drive margin expansion
 Delevered the business by over 70% since the
acquisition through strong cash flow
generation and asset sale proceeds
 Positioned Avago to be a world class
semiconductor company
Avago was carved out of Agilent for $2.8 billion in December 2005
by KKR and Silver Lake Partners. Avago is a diversified, largely fabless,
analog company characterized by lower volatility, longer product life
cycles and higher barriers-to-entry relative to digital semiconductors.
These factors, along with the low cost footprint in Asia and carve-out
savings, contribute to a more stable, higher cash flow business.
Additionally, the ability to monetize non-core assets substantially
de-risked the investment.
Over the years, Avago has assembled an experienced team of
approximately 1,000 analog design engineers and has more than 5,000
U.S. and foreign patents and patent applications. Avago has a diversi-
fied and well-established customer base of approximately 40,000
customers including large original equipment manufacturers such as
Cisco Systems Inc., Hewlett-Packard Co.(HP), International Business
Machines Corp., Logitech International SA and Samsung Electronics
Co. Ltd.
While Avago inherited a strong intellectual property and product
portfolio at the time of carve-out, the company’s portfolio lacked
focus. In the first 12 months of KKR’s ownership, Avago sold three
non-core assets. With little impact on profitability, these asset sales
generated approximately $750.0 million of cash. KKR Capstone led
Avago’s carve-out from Agilent, including putting in place the initial
budget for operating expenses and the key outsourcing partnerships
with Automatic Data Processing, Inc., Oracle Corporation, Wipro
Limited and HP. Additionally, KKR Capstone drove the organizational
design which included moving many previously U.S.-based functions
to Singapore and Malaysia to improve efficiency. KKR Capstone’s
expertise allowed Avago to complete the carve-out in a timely and
cost-effective manner. Over $150.0 million of annual cost savings have
been achieved since closing. Management continues to streamline
operations with the aim of further simplifying Avago’s core business
processes.
The company reallocated and increased its R&D investment for
core target markets with more attractive growth and profitability
characteristics. In 2006, total R&D was $209.0 million (13.8% of sales):
by 2008, R&D had increased to $265.0 million (approximately15.6%
of sales). As a result, the company’s wireless and wired infrastructure
businesses generated substantial top-line growth, with revenues
growing in excess of 30% and 10%, respectively, in 2008 while Avago
expanded gross margins by over 300 basis points. The portfolio is now
well positioned, giving Avago the ability to acquire businesses and
technology that complement its existing portfolio.
Avago has a highly efficient operating model. The company is
headquartered in Singapore and has over 35 years of operating history
in Asia, where approximately 60% of employees are located. In addition
to providing a low-cost footprint, the presence in Asia allows for
close proximity to many customers and places Avago at the center
of worldwide electronics manufacturing. The business principally
utilizes third-party foundry, assembly and test capabilities. The resulting
outsourced manufacturing business model provides flexibility,
simplifies operations and reduces capital requirements. These factors
and an efficient tax structure allow Avago to generate strong, relatively
stable, cash flows. These cash flows, along with asset sale proceeds,
have allowed Avago to reduce net debt from approximately $1.7 billion
at the time of acquisition (approximately 5.3x net debt/EBITDA)
to approximately $500 million today (approximately 1.4x net debt/
EBITDA), which represents significant deleveraging.
The success of these initiatives and the business has largely been
driven by the management team recruited after closing. The team
at Avago, led by Hock Tan and Doug Bettinger, is comprised of a
seasoned group of semiconductor executives. Together, KKR and the
management team have increased efficiency through the carve-out and
outsourced business model, reduced risk and delevered the business
through non-core asset sales and positioned the company for growth
through R&D investment. Avago has become a world class semiconduc-
tor company well positioned for the future.
51
 va l u e c r e at i o n c a s e s t u dy N o. 3
Biomet, Inc.
Biomet designs, manufactures and markets
orthopedic medical devices, including reconstructive
products such as hip and knee implants, as well
as spine, trauma, dental and other products used
by orthopedic surgeons and other musculoskeletal
medical specialists. An affiliate of KKR entered
into an agreement to acquire Biomet with The
Blackstone Group, The Goldman Sachs Group,
Inc. and TPG in December 2006. The transaction
closed in September 2007.
kk r va l u e c r e at i o n i m pa c t
 Turn spine and trauma, a division with years of
negative financial performance, into a revenue-
generating division with significant long-term
growth opportunity
 Elevate the intellectual and professional
caliber of a sales force and rekindle morale,
thereby stemming attrition rates
 Raise product fill rates by over 30%
 Strengthen customer relationships between a
leading developer and producer of medical
devices and physicians
 Contribute to continued strong consolidated
EBITDA growth and free c ash flow generation
for Biomet overall, up 13.0% and 16.0%,
respectively, for the first half of Fiscal Year 2009
versus the first half of Fiscal Year 2008, thereby
enabling significant deleveraging
52
Since identifying Biomet as an attractive business, the KKR team,
including both KKR Capstone executives and KKR industry executives,
has undertaken a number of operational improvement initiatives in
cooperation with Biomet’s CEO, CFO and management team, as well as
the other partners in the transaction. These initiatives fall into two
broad categories:
Revenue Growth: Including initiatives to launch products with
cutting-edge technological capabilities, hire key senior managers,
increase sales force effectiveness, improve business planning and
reporting and reverse sales declines at Biomet’s spine and trauma
division.
Cost Savings: Including initiatives to deploy lean manufacturing
techniques, optimize manufacturing operations, develop a
company-wide procurement function and control global general
and administrative expenses.
An examination of KKR’s immersion in the spine and trauma
division demonstrates how KKR’s ownership can be the catalyst for
significant positive change in company operations.
Prior to Biomet’s acquisition, spine and trauma sales had declined
13%(1) from fiscal year 2006 to fiscal year 2007 (fiscal year ends in May).
Sales force attrition was over 40%, average sales tenure was declining,
product fill rates were below 60% and new products were not being
launched effectively. The divison’s underperformance threatened
Biomet’s positive performance and its otherwise strong growth from
orthopedic and dental implants. Therefore, it was critical to Biomet’s
overall success that the spine and trauma division be restored to health.
Working with the spine and trauma management team, the KKR
Capstone team conducted a comprehensive review of the division’s
operations and product offerings and identified key areas to stabilize
and re-build the business. They then formed a detailed plan for turning
what they had identified as challenges into viable, long-term, bottom-
line oriented solutions, and implemented a metrics-driven turnaround
plan pivoted on key initiatives including:
Adding dedicated sales resources to underperforming territories;
Developing sales force incentive plans to reduce attrition and attract
professionals with greater levels of sales experience and medical
device training;
Professionalizing the management of the sales force;
Hiring skilled leaders in critical functional areas including supply
chain management and surgeon relations;
Identifying opportunities to lower manufacturing costs, including
moving production of selected products to China, consolidating plant
and warehousing operations and consolidating vendors; and
Standardizing product launches and new product development.
To date, the turnaround has been a success. Sales force attrition
has fallen by 50%, the sales force has grown by 20%, fill rates ended
fiscal year 2008 at over 95% and new products have been greeted
with enthusiasm by the medical community. Importantly, following
six consecutive quarters of declining sales, Spine and Trauma sales
increased during fiscal year 2008 and have continued to accelerate,
with sales in the second and third quarters of fiscal year 2009 increasing
7% versus the same time period in fiscal year 2008.(1)
Glen Kashuba, President of Biomet’s spine and trauma division said:
“The KKR Capstone team and our management team worked together
to strengthen a business with declining revenues, which we have
now positioned for long-run success. The KKR Capstone team helped
us accomplish this turnaround by leading several critical, high-impact
efforts that allowed spine and trauma to drive better results in a
very short period of time. I found that the KKR Capstone executives
provided not only important expertise but were extremely practical
and milestone-driven. They have been terrific partners helping to turn
around this business.”
(1) Calculated as average fixation and spine segment domestic revenue growth
 va l u e c r e at i o n c a s e s t u dy N o. 4
BIS Industries Limited
BIS provides industrial logistics and services
to the Australian coal, metals and minerals and
steel industries. BIS specializes in performing
processes that are non-core but critical to
operations, including specialist on- and off-road
logistics solutions, on-site raw material and
customer product handling solutions, inventory
and stockpile management, coal pulverization
and coil and package handling. Funds advised
by KKR purchased BIS from Brambles Limited
in July 2006.
kk r va l u e c r e at i o n i m pa c t
 Structuring of an acquisition finance package
providing BIS with c apital to pursue growth
opportunities, including acquisitions
 Implementation of daily operating metrics
across all BIS sites
 Rationalization of overhead structure
 Leveraging KKR Capstone procurement expertise
and global network
 Achievement of strong financial performance
results, with Fiscal Year (June) 2008 EBITDA
growing approximately 12% versus 2007 EBITDA
 Negotiating the sale of Cleanaway (~50% of the
EBITDA of the combined business acquired) in May
2007 for 12.4x 2007E EBITDA
BIS’s business model is highly differentiated from other service
providers to the Australian mining sector given its focus on:
Contracting with blue-chip mining customers, including Rio Tinto
Limited, BHP Billiton Limited, Xstrata plc, Glencore International AG,
Onesteel and BlueScope Steel Limited, which comprise the majority
of BIS’s revenue and represent long-standing customer relationships;
Providing safety-centered services and highly value-added services
that are vital to customers and which have made BIS an industry leader
in safety performance, with a best practice lost-time-to-injury-fre-
quency rate;
Working at low-cost mine sites, which reduces the risk of shutdowns
during depressed pricing environments;
Providing services during the production phase of the mine lifecycle,
rather than the exploration phase, which reduces the cyclicality of
earnings to BIS;
Contracting for long time periods, ranging from 3 to 15 years
in duration;
Making innovative use of cutting-edge technologies, including dual
power road trains and automated guided vehicles; and
Pursuing best-in-class contract protections that generally include
a combination of cost pass-throughs, rise and fall provisions based on
volume and capital cost guarantees upon a mine shutdown.
This differentiation was a key factor in the strong performance
of BIS during 2008 and early 2009 despite a pullback in activity across
the Australian mining sector. It should also position BIS well as the
mining sector globally experiences what appears to be an extended
period of slower growth, as it enables BIS to benefit from the continu-
ing trend towards outsourcing and to capture medium to long-term
growth opportunities as customers place an increasing emphasis on
these capabilities.
As part of KKR’s due diligence process for BIS, the industry team
was focused on structuring an acquisition finance package that provided
BIS with capital required to pursue significant growth opportunities.
As part of the original acquisition, KKR negotiated an attractive and
flexible financing structure, which included a A$275 million revolving
capital expenditure facility with the capability to both fund growth
capital and acquisitions. This facility represents long-term, committed,
low-cost capital that provides BIS with a distinct competitive advantage,
particularly in the current environment where capital is constrained.
The KKR industry team and KKR Capstone team have worked
actively with BIS’s senior management since 2006 on a range
of initiatives, including growth projects and strategic mergers and
acquisitions, procurement efficiency, rationalization of the overhead
structure and implementation of operating metrics. Immediately
after the transaction closed, KKR Capstone began to work with the BIS
management team to develop a comprehensive and consistent set
of operating metrics. As each BIS site is unique, KKR Capstone worked
with the managers from each site to determine the relevant metrics.
Throughout, the focus was on providing the line managers with the
information needed to make timely and fact-based decisions. Once the
metrics were identified, KKR Capstone worked with the BIS team to
quickly develop and roll-out the tools to get the metrics in place and to
develop training materials and processes to ensure that the metrics are
used to drive meaningful improvements.
The KKR team is confident that these combined efforts will further
enhance BIS’s position as one of the leading industrial logistics and
services providers in Australia and position the company for long-term,
sustainable growth. To date, BIS’s performance has been strong with
fiscal year 2008 EBITDA growing approximately 12% versus 2007
EBITDA performance.
53
 va l u e c r e at i o n c a s e s t u dy N o. 6
First Data Corporation
First Data provides electronic commerce
and payment solutions for merchants, financial
institutions and card issuers globally.
The company has operations in 36 countries,
serving over 5.3 million merchants and 2,000
card issuers. With leading market positions in
its core businesses, First Data is well-positioned
to capitalize on the continued shift from cash to
electronic transactions. An affiliate of KKR
entered into an agreement to acquire First Data
in April 2007. The transaction closed in
September 2007.
kk r va l u e c r e at i o n i m pa c t
 Installation of a world-class management team
with decades of collective experience
in electronic commerce, payment processing and
leadership through periods of change
 Elimination of redundant costs, sparking
an overall reduction of the cost base by nearly
10%
 Reorientation to meet the needs of customers,
resulting in improved sales force effectiveness
 Dedication of resources and strategic
refocusing towards innovative technological
product development, resulting in products
designed to make everyday purchases faster,
more reliable and more efficient
54
KKR’s focus during the first full year of its ownership of First Data
included assembling a senior management team with the capabilities
and experience necessary to successfully reinvigorate First Data, as
well as reorganizing First Data’s business units to improve efficiencies,
eliminate redundancies and better meet the needs of customers.
The buildout of First Data’s management team began with the
hiring of Michael Capellas as Chairman and CEO. Mr. Capellas,
formerly the CEO and Chairman of Compaq Computer Corporation
and the President and CEO of MCI Inc., was selected by the KKR team
due to his proven ability to lead large, technology-driven companies
during periods of change. Following the hiring of Mr. Capellas,
First Data and KKR expanded the roles of several internal leaders
and supplemented existing talent with individuals hired from outside
the company, including the former CIO of The Home Depot, Inc.
and a former managing partner in the communications and technology
practice of Accenture Ltd. First Data’s senior management team has
significant industry experience in electronic commerce and payment
processing and a successful track record in acquisitions and post-
acquisition integrations.
With the senior leadership in place, First Data’s management and
KKR initiated a large-scale restructuring of First Data shortly after the
KKR investment was completed. The intent of the restructuring was
two-fold: first, to make First Data more attuned and responsive to the
needs of customers, and second, to reduce costs. During the restructur-
ing, business segments were reorganized and consolidated, and core
strategic functions were centralized and streamlined. Spending on
redundant overhead functions within each business unit was rational-
ized. In addition, the reorganization improved customer service
levels, reenergized the sales force and reduced the overall cost base
by nearly 10%.
First Data has reinvested the capital saved from the restructuring
towards initiatives geared at generating a higher level of organic growth.
These initiatives have primarily focused on shifting First Data’s
approach to technology from that of a cost center to that of an area of
differentiation. Whereas in the past, First Data distinguished itself
from peers through its scale and relied on acquisitions as gateways to
innovation, the KKR team and senior management saw an opportunity
for the company to create an internal, technology-based competitive
advantage. Product development has been a key area of focus for these
initiatives.
KKR and First Data management formed dedicated teams to
pursue technology development in key areas, and worked to streamline
in-house processes to bring new products to market quickly and
efficiently. Management identified four areas of strategic focus, Mobile
Commerce, Loyalty, Security and Fraud and Data Analytics to extend
the reach of the product development initiative and make product
development congruent with customer needs. One of the most exciting
products to emerge from these initiatives has been First Data’s GO -Tag™
Solution, an innovative contactless payment technology which debuted
at the U.S. 2008 Democratic National Convention. The GO -Tag™
Solution is a sticker attachable to personal items such as mobile phones,
employee badges and personal digital assistants. The sticker eliminates
the need to carry cash, as purchases can be made simply through
tapping the sticker against appropriately equipped point of sale
payment devices. The GO -Tag™ technology was developed solely
within First Data and is gaining significant momentum with both
consumers and merchants as it makes its way into the commercial
marketplace.
The assembly of a world-class management team and the reorgani-
zation effort helped to drive First Data’s strong growth in 2008, despite
the tumultuous economic conditions during the latter half of the year.
Revenues grew 5% during 2008 and adjusted EBITDA grew 7%,
signaling significant traction in operational improvements and position-
ing First Data for future success.
 va l u e c r e at i o n c a s e s t u dy N o. 7
Laureate Education, Inc.
Laureate Education is a leading international
provider of higher education services. Laureate
International Universities is the company’s global
network of 43 accredited campus-based and online
universities offering undergraduate and graduate
degree programs to nearly 500,000 students
across 20 countries and more than 100 campuses
throughout North America, Latin America, Europe
and Asia. An investor consortium led by Doug
Becker, Chairman and CEO, with an affiliate of
KKR as its largest investor, acquired Laureate
Education in August 2007.
kk r va l u e c r e at i o n i m pa c t
 Partnered with a world-class and proven
management team to address the rapidly
growing global demand for quality higher
education
 Raised attractive debt financing for the
transaction, which contains no maintenance
covenants and provides flexibility for funding
ongoing acquisitions
 Structured foreign exchange hedges to reduce
currency risk
 Partnered with the CEO to build out a
nimble global corporate finance function
by improving cash management, treasury
planning, cash repatriation techniques
and financial controls
 Supported global growth through acquisitions,
resulting in the purchase of 15 universities in 11
countries, including significant platform
acquisitions in Central and Latin America and
Asia
 Increased LTM Adjusted EBITDA from $270.0 million
at transaction close in 2007 to $370.0 million
at year-end 2008 through both organic and
acquisition-based enrollment growth
In many ways, the long-term success of a private equity investment
depends on the strength of the relationship between the sponsor and
a company’s senior management team, and the ability of that senior
management team to assess opportunity and drive operational change.
Laureate is a commendable example of the power of this directive.
“Doug Becker’s strategic leadership, coupled with his world-class
management team, is what attracted us to this investment,” said Brian
Carroll, the senior KKR private equity investment professional who
leads the Laureate investment. “Laureate has developed a significant
first-mover advantage in providing private post-secondary education
in developing markets. Doug and his team are able to identify attrac-
tive acquisition candidates around the world, work with the founders
of these academic institutions to ensure that Laureate is the right
custodian for their legacy, and then integrate these institutions into the
Laureate network by applying the company’s global best practices.”
The KKR team has focused on a number of financial and strategic
initiatives since closing the Laureate transaction. In corporate finance,
KKR executives have supported the expansion and strengthening of
Laureate’s global finance organization and partnered with management
to improve cash management, treasury planning, cash repatriation
techniques, financial controls and monthly reporting. As a result,
Laureate’s finance function is more efficient and is better able to
support the management team in monitoring, analyzing and managing
the business. KKR initiatives within Laureate have allowed manage-
ment to monitor and centrally control global cash balances on a real-time
basis, and to efficiently repatriate cash to the U.S. KKR executives have
also helped Laureate’s finance team implement foreign exchange
hedges to manage foreign currency exposure, which is critical to the
long-term success of a company whose revenue is derived from 14
different currencies.
Strategically, the KKR team has advised Laureate on optimizing its
capital structure and evaluating potential acquisition opportunities.
Since the close of the transaction, Laureate has made 15 acquisitions in
11 countries, raising an additional $477.0 million from investors to
support these growth initiatives.During 2008, the company completed
the largest acquisition in its history when it purchased Universidad
Tecnológica de México (UNITEC), a Mexican university with a 40-year
tradition of providing undergraduate and graduate education to over
30,000 students on campuses in Mexico City, Guadalajara and
Monterrey. As is the case with many Laureate institutions, UNITEC
holds the highest-available level of governmental accreditation.
Laureate also made a large platform acquisition in Brazil during 2008
when it purchased Centro Universitário do Norte, an institution
founded in 1994 which provides graduate and postgraduate education
to 20,000 students in Manaus, Amazonas. Universities in China and
Malaysia joined Laureate International Universities’ network in 2008,
and have provided a platform for further growth in a region with
attractive demographics and low post-secondary participation rates.
David Liu, a senior KKR private equity professional in Beijing, helped
structure the Asian acquisitions in keeping with local requirements as
well as Laureate’s desire to deepen relationships with local partners.
Simultaneous with expanding Laureate’s network around the world,
Mr. Becker and the senior management team have broadened
Laureate’s product offerings. During 2008, Laureate launched 15 new
online programs (including four health sciences programs), received
new medical school licenses in Spain, Mexico, and Ecuador and was
granted accreditation for two large campuses in Chile, thereby increas-
ing Laureate’s educational standing in the Chilean market and
qualifying enrolled students for government loans.
55
 va l u e c r e at i o n c a s e s t u dy N o. 8
The Nielsen Company B.V.
Nielsen is an information company providing
marketing and media measurement information,
analytics and industry expertise to clients. Nielsen
tracks sales of consumer products and reports on
television viewing habits and online usage trends
in countries representing over 60% of the world’s
population. KKR and a group of other sponsors
acquired Nielsen in August 2006.
kk r va l u e c r e at i o n i m pa c t
 Leadership by a largely new, focused and deeply
experienced senior management team
 Execution on investment thesis and 100-Day Plan
have contributed to increasing EBITDA over 30%
from 2006 through 2008
 Well-positioned to benefit from demand for
measurement services for new and alternative
media through strategic acquisitions completed
under KKR and sponsor stewardship
 Sale of non-strategic divisions has streamlined
focus and generated proceeds of over $400
million for deleveraging and re-investment
 Approximately $1.1 billion of capital deployed in
strategic investments, including NetRatings/
BuzzMetrics, Telephia and IAG Research
 Increased internal communication and
operational efficiency through re-energized
corporate culture, including the One
Nielsen initiative
 Re-invigorated outreach to service the
market research and media measurement needs
of customers has been met with positive
reaction from key customers
56
Prior to the take-private transaction, KKR had been following
Nielsen closely as part of the firm’s media efforts in the U.S. and
Europe, and was attracted to the company’s stable cash flow profile
and strong positions in key information services markets. KKR began
to evaluate a possible transaction with the company in early 2005 and
commenced formal interactions with Nielsen following the November
2005 termination of the company’s announced merger with IMS Health
Incorporated. Over the course of KKR’s due diligence, substantial
work by KKR, its equity partners and advisors confirmed the attractive-
ness of Nielsen’s core franchises and identified meaningful profit
improvement opportunities within the business, which formed an
additional core component of the investment thesis.
Since the acquisition, Nielsen management, KKR and the partners
in the sponsor group have worked together closely to implement the
key initiatives of the investment thesis and the 100-Day Plan.
An important part of the thesis around Nielsen was attracting a
world-class CEO. David Calhoun, former Vice Chairman of General
Electric Company (GE) and President and CEO of GE Infrastructure,
was selected following an extensive search. A strong team – including
Brian West (CFO, former CFO of GE Aviation), James Cuminale
(General Counsel, former General Counsel of PanAmSat, a prior KKR
portfolio company), Mitchell Habib (EVP – Global Business Services,
former CIO of Citigroup Inc.’s North American Consumer Business and
Credit Card Divisions), Roberto Llamas (Chief Human Resources and
Public Affairs Officer, former Head of Human Resources at Lehman
Brothers, GE Lighting, and GE Capital), John Burbank (CEO of Nielsen
Online, former Chief Marketing Officer at AOL and VP of Marketing at
AT&T Inc.), and Itzhak Fisher (Head of Global Product Leadership,
previously founder of Trendum and RSL Communications) – is in place
around Mr. Calhoun. This senior team is functioning very effectively
and is focused on executing the operating plan laid out at the time of
the acquisition.
Operational realignment activities identified during the initial
due diligence and through subsequent work by management and KKR
Capstone, as well as work by the sponsors with management on
procurement and six-sigma initiatives, have resulted in significant cost
savings and margin expansion at the company to date. In addition,
numerous organic and strategic growth initiatives are underway,
with recent merger and acquisition activity (including the acquisitions
of Telephia, IAG Research and outstanding minority interests in
NetRatings/BuzzMetrics) positioning the company to benefit from
strong demand for measurement services for new and alternative media.
KKR and its partners have also taken steps to rationalize the Nielsen
portfolio in non-strategic areas, completing the sale of Nielsen Business
Media Europe, which was identified as a non-core division during
initial due diligence, for $414.0 million in February 2007. A substantial
portion of these proceeds were used for deleveraging.
Finally, the introduction of the One Nielsen culture – with all the
parts of Nielsen now working together to provide integrated solutions
to customers – has permeated the business and is helping to dismantle
historical silos in the company, fostering better internal communication
and results for clients.
Customers are noticing the company’s re-invigorated efforts to
service their needs and are responding positively. Through a combina-
tion of these factors, Nielsen has been able to increase EBITDA by over
30% from 2006 through 2008. Overall, significant value is being created
for the investment in Nielsen through the comprehensive approach
to operational change being undertaken by Nielsen management, KKR
and the partners in the sponsor group, unlocking the potential identi-
fied within Nielsen by KKR.
 va l u e c r e at i o n c a s e s t u dy N o. 9
Northgate Information
Solutions Limited
Northgate is a global provider of specialist
software, outsourcing and systems integration
solutions to the human resources and public
sectors. Northgate operates three divisions:
NorthgateArinso, focused on human resources
solutions; Northgate Public Services,
focused on solutions to the U.K. public sector; and
Northgate Managed Services, focused
on information technology outsourcing solutions.
An affiliate of KKR entered into an agreement
to acquire Northgate in December 2007.
The transaction closed in March 2008.
kk r va l u e c r e at i o n i m pa c t
 Implemented business transformation program
covering product strategy, cost improvements,
balance sheet and c ash flow improvements,
organizational realignments and recruitment,
which contributed to revenue growth of 14% in
2008 and significant market share gains
 Proactively launched cost reduction and cash
improvement initiatives to counter
macroeconomic headwinds
 Developed Key Performance Indicator
dashboard, now used by executives consistently
on a monthly basis to track progress and impact
 Formal management role assumed by KKR
C apstone executive, who serves as COO
Together with Northgate management, the KKR team designed
and launched a business transformation program addressing key
strategic and operational improvement levers. Initiatives covered
product strategy, cost improvements, balance sheet and cash flow
improvements, organizational realignments and recruitment of senior
executives. During the design phase, KKR Capstone spearheaded the
structuring, detailed target-setting and resourcing of initiatives. The
program was launched by Northgate’s CEO one month after the
transaction closed. It mobilizes approximately 170 employees and its
detailed follow-up is a core element of Northgate’s monthly executive
committee meetings.
Within NorthgateArinso, the transformation program has addressed
three main value-creation drivers:
Clarifying the product/service strategy by confirming which products
and services would be sold in which geographies. As part of this strategy,
previously separate R&D organizations were merged, “on-demand”
versions of leading software products were launched and the interna-
tional expansion efforts were redirected towards North America,
a promising market.
Improving the effectiveness of the sales effort by overhauling pricing
processes and improving account management, including implementa-
tion of a global pipeline tracking and CRM tool and redeployment of
sales reps and account managers to priority customer segments.
Implementing a network of global delivery centers by standardizing
program management and operational processes and migrating work to
lower-cost offshore delivery hubs. NorthgateArinso has more than
doubled its headcount in low-cost centers in Asia and South America
and closed higher-cost delivery centers.
A number of senior executives were hired during KKR’s first year
of ownership and the organizational structures of the Asia-Pacific,
European and North American regions were aligned by separating cost
and profit centers and removing a layer of sub-regional managers.
Within the public services and managed services divisions,
the transformation program focused on the clarification of product
profitability, which sparked the discontinuation of several product
suites, the reallocation of sales resources, pricing revisions, the creation
of more efficient procurement and logistics platforms and the integra-
tion of an acquisition.
To counter gathering macroeconomic headwinds, the team also
proactively launched a number of focused cost reduction and cash
improvement initiatives. Throughout, tracking of progress and impact
has been monitored with an operational key performance indicator
dashboard, now used by executives consistently on a monthly basis.
Since June 2008, at the request of Northgate’s CEO, a senior
KKR Capstone executive, Jerome Losson, has been acting as interim
COO. He has been working on the transformation program’s implemen-
tation and taken direct responsibility for NorthgateArinso’s global
delivery platforms and research and development activities. Mr. Losson
has also onboarded senior executives who will gradually assume his
responsibilities.
The work executed during the first year of KKR’s ownership
contributed to Northgate growing revenues by 10% versus the previous
year, EBITDA faster than revenues and gaining market share.
“A lot of private equity firms talk about adding value to their
portfolio companies. KKR’s approach, which combines a well-
diligenced investment with experienced operating professionals,
has delivered enormous value to Northgate,” said Chris Stone,
CEO of Northgate. “We have been able to accelerate strategic and
operational improvement work that would have been difficult to
implement in a public company environment. The support we
have enjoyed from KKR Capstone has allowed us to complete work
thoroughly and swiftly, and the results of the work now underpin the
way we run the business. Working together has been a very positive
experience and we look forward to continued success in years to come.”
57
 va l u e c r e at i o n c a s e s t u dy N o. 1 0
SunGard Data
Systems, Inc.
SunGard provides software and processing
solutions and information availability services
globally through four segments: (1) financial
systems, serving financial services companies,
corporate and government treasury departments
and energy companies; (2) higher education; (3)
public sector, serving state/local governments and
K-12 education; and (4) availability services,
providing information availability and backup
across industry sectors. In August 2005, KKR
and a group of investors led a public-to-private
transaction of SunGard for $11.6 billion.
kk r va l u e c r e at i o n i m pa c t
 From 2005 to 2008, SunGard grew revenue and
operating income 11.8% and 9.3%, respectively, on
a compounded annual basis
 From 2006 to 2008, SunGard acquired 17 companies
for an aggregate $1.3 billion to complement
existing product platforms, extend into new
product areas and expand geographic ally
 A KKR Capstone team led the streamlining
of Financial Systems’ operations through the
consolidation of 65 business units into 14,
thereby eliminating $50.0 million of annual cost
redundancies and contributing to 2007 and 2008
organic revenue growth of 17% and 18%,
respectively
 In 2008, KKR Capstone and the Availability Services
President repositioned Availability Services to
better address emergent market developments by
restructuring the organization to a General
Manager-model, adding key leadership positions
and establishing comprehensive metrics to track
salesforce success and asset utilization
58
SunGard supports more than 25,000 customers in over 50
countries, including the world’s 25 largest financial services companies.
The company is highly diversified by end market, customer type and
geography, with leadership positions in nearly all of its fragmented
product and services markets. In addition, many of SunGard’s offerings,
including regulatory, compliance, risk management and real-time data
tools exhibit a great deal of “stickiness” and address customers’
mission-critical needs.
SunGard has a highly recurring and cash-flow generative business
model. Licenses, which are one-time product sales that are generally
very susceptible to market cyclicality, comprise only 5% of total
revenue and are significantly less penetrated than SunGard’s software
peers. The remaining business is substantially comprised of contracted
sales, as exemplified by availability services with over 90% contracted
revenue. SunGard’s extensive portfolio of businesses and the largely
recurring nature of its revenue across all segments have historically
reduced volatility in revenues and profitability. In addition, the compa-
ny’s proprietary technologies enable favorable pricing and its scale
drives strong operating leverage. In 2008, for example, the company
posted an operating margin of 21.6%. SunGard’s limited capital
expenditures and working capital requirements result in a strong cash
flow profile. In 2008, free cash flow, defined as EBITDA less capital
expenditures and working capital, was approximately $1.2 billion,
or 20.6% of sales, excluding adjustments related to the unwinding of
the accounts receivable facility.
KKR and the investor consortium have worked closely with CEO
Cris Conde to facilitate SunGard’s operational improvement initiatives.
Upon the close of the transaction, KKR led the creation and implemen-
tation of the 100-Day Plan, which drove several key measures including
the establishment of a new metrics package and a comprehensive
review of all key products to reallocate R&D dollars to areas of highest
productivity.
In addition, KKR Capstone has assisted SunGard on a range of value
creation opportunities including further metrics implementation for
improved sales, expense and capital tracking, acquisition integration
and offshore resource development. Most notably, KKR Capstone led a
reorganization of the financial systems segment to streamline opera-
tions, yielding substantial efficiency gains. Prior to KKR’s involvement
with SunGuard, financial systems had been formed through 135
separate acquisitions in under two decades, and operated as a loosely
integrated unit consisting of five group CEOs, 65 business units, 55
sales forces, 22 accounting centers and disparate human resource teams.
The management team and KKR Capstone executives designed and
implemented a more nimble organizational structure that consolidated
financial systems into 14 business units, each with a dedicated sales
function, as well as four accounting centers and one human resources
team. The initiatives enhanced customer focus through greater
sub-segment coordination and accelerated revenue growth, while also
eliminating $50.0 million in annual cost redundancies.
KKR and the investor consortium have worked closely with
SunGuard management to evaluate, execute and finance a number
of synergistic and strategic acquisitions. From 2006 to 2008, SunGard
acquired 17 businesses for an aggregate $1.3 billion, ranging from
add-on investments to augment existing product suites to market
transformative acquisitions. Despite the significant reinvestment
through these acquisitions, SunGard’s strong financial performance and
free cash flow production have enabled the company to delever
significantly, from 7.0x at the time of acquisition to 5.0x at 2008
year-end. Under the ownership of KKR and the investor consortium,
and with the strong leadership of its senior executives, SunGard has
emerged as a global player with deeper market positions, greater
geographic reach and improved product solutions. From 2005 to 2008,
revenue and operating income increased 11.8% and 9.3%, respectively,
on a compounded annual basis.
 va l u e c r e at i o n c a s e s t u dy N o. 1 1
Unisteel Technology
Limited
Unisteel is a precision engineering solutions
provider with competencies in the areas of fastening
systems, stamped, cold-forged and machined
metal components, plastics, optics and surface
treatment technology. Unisteel serves customers in
the hard disk drive, mobile telecommunications,
consumer electronics, industrial and automotive
sectors, and has manufacturing facilities in
Singapore, Malaysia and China. An affiliate of
KKR entered into an agreement to acquire
Unisteel in June 2008. The transaction
closed in September 2008.
kk r va l u e c r e at i o n i m pa c t
 Commencement of program to shorten business
cycle-time and increase customer responsiveness
 Implementation of weekly and monthly
performance reporting and a performance
management system for senior executives
 Reduction of working capital and ongoing
focus on inventory management
 Alignment of raw materials prices to current
market conditions and development of
alternate supply options
 Migration of production to lower cost
countries
 Improvement of operations planning
and metrics
 Creation of sales pipeline management
and implementation of account planning
techniques
Shortly after closing the transaction, KKR Capstone, working
with Unisteel management and the KKR private equity team, crafted
Unisteel’s first 100-Day plan. The plan highlighted a number of
opportunities for improvement, including:
Optimizing working capital and inventory management;
Reducing production costs through improved procurement practices
and relocation of operations to lower cost countries in Asia;
Improving sales performance by implementing pipeline management
and account planning processes; and
Developing a weekly performance reporting and management system
for senior executives that includes key forward-looking metrics across
functions.
The KKR Capstone and Unisteel management teams are working
together to drive these improvements forward. One of the critical
initiatives spearheaded by KKR Capstone involves supply chain
management. Jamie Bolton, a senior KKR Capstone executive who
previously ran the North Asia Supply Chain Practice for a leading
consulting firm, led a comprehensive review of Unisteel’s operations
and worked with management to identify high priority opportunities
for improvement. This review highlighted that coordination of sourcing
information across the group could be improved, and that there would
be benefits in adopting a more strategic approach to managing the
supply base and building a deeper sourcing capability within Unisteel.
Addressing these areas will help Unisteel improve costs and inventory
levels, build more flexibility in materials supply and support the
improvement of service levels to customers.
Working with the management team and individual business units,
the KKR Capstone team supported an initial set of strategic sourcing
efforts in key categories, such as chemicals, steel and aluminum, to
ensure sourcing costs were better aligned with market conditions and
to begin building the sourcing capability within the Unisteel organiza-
tion. Initial results have been encouraging, with improvement in cost
structure and establishing a foundation for a leaner and more respon-
sive supply chain.
Following the success of these initial activities, the KKR Capstone
team is currently working with the Unisteel management team to
develop a performance management system and metrics and processes
for tracking ongoing performance and productivity improvement.
“We are very fortunate to have KKR as our business partner and
equally fortunate that KKR has a dedicated operations team in KKR
Capstone that can work with us and bring the right skills and experi-
ence to help a local organization such as Unisteel grow and develop into
a potential multi-national corporation,” said Bernard Toh, Unisteel’s
CEO. “KKR Capstone has introduced the 100-Day Plan methodology
and a key part of this methodology is to work with our management
team and business units to appoint executive sponsor and initiative
owner of each initiative. We discuss the progress of both the process
and the results on a fortnightly basis. This rigorous process has
facilitated the successful implementation of the 100-Day Plan initia-
tives, the realization of benefits and has also resulted in the
identification of additional opportunities for the company. Given the
impact of this process, it has now lasted beyond the first 100 days and
will continue to be a key part of the Unisteel management approach.”
“Unisteel is a company that has benefited significantly from growth
in the hard disk drive business over the past few years and has posi-
tioned itself as a leader in fasteners and “niche” precision engineering,”
said KKR Capstone team member Sam Allen. “With the current
economic climate we see this as an opportunity to work with Unisteel
to help strengthen the “foundational” capabilities and performance
measures that will make the business leaner, more responsive,
more diversified and, therefore, better positioned in the future.”
59
 va l u e c r e at i o n c a s e s t u dy N o. 1 2
U.S. Foodservice, Inc.
U.S. Foodservice is the second largest broadline
foodservice distributor in the U.S., providing food
and related products to restaurants, healthcare
and hospitality customers, educational institutions,
and the government. An affiliate of KKR entered
into an agreement to acquire U.S. Foodservice with
Clayton, Dubilier & Rice, Inc. in May 2007, and
the transaction closed in July 2007.
kk r va l u e c r e at i o n i m pa c t
 Increased market share and net account
growth in Street Sales, the company’s most
profitable segment
 Successful development and deployment
of company wide sales growth and process
improvement program
 Implementation of performance management
scorecard and ranking system critical
to reinforcing performance on key metrics
 Selection, design and implementation of
customer relationship management system
 Creation and implementation of new
merchandising and promotion program to
generate incremental sales and market
share growth
 Development of a procurement approach to
leverage purchasing scale across operating
divisions to reduce cost of goods sold
60
During due diligence, KKR worked with U.S. Foodservice
management to assess the potential for operating improvements at
the company. KKR Capstone supported KKR in its assessment of the
operating initiatives and the long term potential for the business.
Of the major initiatives that were being implemented, improving sales
force effectiveness within the independent restaurant “street sales”
segment (the largest and most profitable business segment) was
identified as the highest priority in anticipation of the economy
moving into a challenging period.
A team of KKR Capstone executives worked with management to
determine the most important factors positively impacting Street Sales
profit growth. Simultaneously, they developed a performance manage-
ment scorecard and ranking system supported by a review process to
focus sales force representatives on key priorities. This allowed the
company to have a unified view and consistent tracking of street sales
performance across the company. KKR Capstone worked with sales
management to build a comprehensive sales growth and effectiveness
program to aid the sales force in acquiring new accounts, growing
current accounts and reducing account turnover. A success in several
pilot markets, this sales program is currently being deployed across the
country. To support this effort, a new customer relationship manage-
ment system was installed. Given the importance of this initiative,
a team of senior U.S. Foodservice employees has been recruited to
institutionalize the program by becoming experts in the program and
assuming the responsibility for training their colleagues. The manage-
ment team also worked with KKR Capstone on several other initiatives
including a new merchandising and promotion program to stimulate
sales growth and “cluster buying” to reduce purchase costs of products
for resale by leveraging scale across local operating divisions.
Results have been encouraging. In one of the most challenging
restaurant markets in decades, market share and net accounts in
the street sales segment increased. Customer account turnover has
declined, while critical performance gaps with the competition have
been significantly narrowed and the sales force has experienced a
rekindled sense of momentum.
“In my 30-year career in foodservice, I have rarely had the pleasure
of working closely with as talented, dedicated, responsive and diligent
a team as the KKR Capstone team,” said Mark Eggerding, Senior Vice
President, Street Sales. “Their ability to learn quickly, assimilate our
business and deliver meaningful programs that drive unprecedented
results is not only refreshing, but unique.”
“The U.S. Foodservice sales program is having a meaningful impact
on the organization and is key to delivering KKR’s investment thesis,”
said Vincent Letteri of KKR Capstone. “It has provided the company’s
5,000-plus person sales force the tools needed to win in today’s
environment as evidenced by recent share gains. The company is well
positioned for future growth.”
KKR is particularly effective in growing
businesses with real potential and revitalizing
companies facing change or transition because our
focus is on long-term value creation, not short
term gain. In today’s economy, this approach is
particularly important.

i n v e s t m e n t s o f t h e kk r p r i vat e e q u i t y f u n d s

investment Accellent, Inc.

headquarters Wilmington, Massachusetts
2008 revenue $525 million
employees 3,229
chairman Kenneth W. Freeman
ceo Robert E. Kirby
y ear of investment 2005
business Leading provider of fully integrated
outsourced manufacturing and engineering
services to the medical device industry
website www.accellent.com

investment Alliance Boots gmbh

headquarters
Zug, Switzerland
2008 revenue
£15,304 million*
employees
110,000
e xecutive chairman
Stefano Pessina
y ear of investment
2007
business
Leading international pharmacy-led health
and beauty group with two core businesses:
pharmacy-led health and beauty retailing
and pharmaceutical wholesaling
website www.allianceboots.com

*Represents LTM revenue at fiscal year ended March 31, 2008.

61
62
 investment Aricent Inc .
headquarters Palo Alto, California
2008 revenue $382 million*
employees 8,000
chairman Joe Forehand
ceo Sudip Nandy
y ear of investment 2006
business Global innovation, technology, and services
company focused exclusively on communi-
cations, and a strategic supplier to the
world’s leading network and telecom
companies
website www.aricent.com

*Represents revenue at fiscal year ended March 31, 2008.

investment A.T.U. - Auto-Teile-Unger Holding GmbH

headquarters Weiden, Germany
2008 revenue €1,275 million
employees 12,495
chairman Reinhard Gorenflos
ceo Michael Kern
y ear of investment 2004
business Germany’s leading operator of automotive
retail stores and repair shops, with an
expanding international footprint
website www.atu.de

investment Avago Technologies limited

headquarters Singapore
San Jose, California
2008 revenue $1,699 million
employees 3,699
chairman Dick M. Chang
ceo Hock E. Tan
y ear of investment 2005
business Leading supplier of analog interface
components for communications, industrial
and consumer applications to approximately
40,000 end customers; Avago’s products
serve four diverse end markets: industrial
and automotive electronics, wired infra-
structure, wireless communications,
and consumer and computer peripherals
website www.avagotech.com

investment Bharti Infratel Limited

headquarters New Delhi, India
2008 revenue INR 41,271 million
employees 579
chairman Sunil Bharti Mittal
ceo Prem Pradeep
y ear of investment 2008
business Leading ‘Passive Telecom Infrastructure’
provider company in India owning
and operates more than 27,000 towers
for mobile services
website www.bharti-infratel.com

62
 investment Biomet, Inc.
headquarters Warsaw, Indiana
2008 revenue $2,383 million*
employees 6,903
ceo Jeffrey R. Binder
y ear of investment 2007
business Designer, manufacturer and marketer of
products used primarily by musculoskeletal
medical specialists in surgical and non-
surgical therapy
website www.biomet.com

*Represents revenue at fiscal year ended May 31, 2008.

investment BIS Industries Limited

headquarters North Sydney, Australia
2008 revenue A$495 million
employees 1,217
chairman Mark Luby
ceo Chris Berkefeld
y ear of investment 2006
business A leading outsourced supplier of on-site
and off-site materials handling and logistics
services to the minerals, metals, and coal
mining sectors
website www.bislimited.com

investment Capmark Financial Group Inc .

headquarters Horsham, Pennsylvania
2008 net revenue $1,071 million (excluding provisions and
gains/losses)
employees 1,945
chairman Dennis D. Dammerman
ceo Jay N. Levine
y ear of investment 2006
business Diversified company providing a broad
range of financial services to investors in
commercial real estate-related assets
website www.capmark.com

investment “Der Grüne Punkt”

Duales System Deutschland GmbH
headquarters Cologne, Germany
2008 revenue €822 million
employees 276
chairman Reinhard Gorenflos
ceo Stefan Schreiter
y ear of investment 2005
business Front-ranking provider of take-back
systems, including close-to-home collection
and recovery of sales packages, plus
eco-friendly, cost-efficient recycling of
used electrical and electronic equipment,
together with transport packaging,
facility-referenced disposal services
and deposit clearing
website www.gruener-punkt.de

63
 investment Dollar General Corporation
headquarters Goodlettsville, Tennessee
2008 revenue $10,458 million*
employees 71,714
chairman & ceo Richard W. Dreiling
y ear of investment 2007
business Discount retailer of basic consumable
merchandise and other home, apparel,
and seasonal products, with more than
8,400 small-box stores in 35 U.S. states
website www.dollargeneral.com

*Represents revenue at fiscal year ended January 31, 2009.

investment Energy Future Holdings Corp.

headquarters Dallas, Texas
2008 revenue $11,364 million
employees 8,400
non-executive
chairman Donald L. Evans
president & CEO John F. Young
y ear of investment 2007
business Energy holding company with a portfolio
of competitive and regulated energy
subsidiaries, including Luminant, TXU
Energy and Oncor
website www.energyfutureholdings.com

investment First Data Corporation

headquarters Greenwood Village, Colorado
2008 revenue $8,800 million
employees 26,000
chairman & ceo Michael D. Capellas
y ear of investment 2007
business A leader in powering the global economy
by making it easy, fast, and secure for
people and businesses to buy goods and
services using virtually any form of
electronic payment
website www.firstdata.com

investment Harman International Industries,

incorporated
headquarters Stamford, Connecticut
2008 revenue $4,100 million*
employees 10,500
chairman & ceo Dinesh C. Paliwal
y ear of investment 2007
business Designer, manufacturer and marketer of
a wide range of audio and infotainment
products for the automotive, consumer and
professional markets
website www.harman.com

*Represents revenue at fiscal year ended June 30, 2008.

64
 investment HCA Inc.
headquarters Nashville, Tennessee
2008 revenue $28,374 million
employees Over 183,000
chairman Jack Oliver Bovender, Jr.
ceo Richard Michael Bracken
y ear of investment 2006
business Leading provider of healthcare services,
composed of locally managed facilities that
include approximately 163 hospitals and
112 outpatient centers in 20 U.S. states and
England
website www.hcahealthcare.com

investment Jazz Pharmaceuticals, Inc .

headquarters Palo Alto, California
2008 revenue $68 million
employees 239
chairman & ceo Bruce C. Cozadd
y ear of investment 2004
business Specilaty pharmaceutical company that
identifies, develops, and commercializes
innovative treatments for important,
underserved markets in psychiatry and
neurology
website www.jazzpharmaceuticals.com

investment KION Group GmbH

headquarters Wiesbaden, Germany
2008 revenue €4,554 million
employees 21,168
chairman Johannes Huth
ceo Gordon Riske
y ear of investment 2006
business European market leader (globally #2) in
material handling products with its Linde,
STILL, OM and Baoli brands
website www.kiongroup.com

investment KSL Resorts

headquarters La Quinta, California
2008 revenue $150 million
employees 1,000
chairman & ceo Michael S. Shannon
y ear of investment 2003
business Owner and operator of the Hotel del
Coronado, a luxury resort in San Diego, CA
website www.kslresorts.com

65
 investment Laureate Education, Inc .
headquarters Baltimore, Maryland
2008 revenue $2,000 million
employees 46,087
chairman & ceo Douglas L. Becker
y ear of investment 2007
business Leading international provider of higher
education services. The Laureate
International Universities global network
of 43 campus-based and online universities
in 20 countries offers degree programs to
nearly 500,000 students
website www.laureate-inc.com

investment Legg Mason, Inc .

headquarters Baltimore, Maryland
2008 revenue $3,809 million
employees 4,014
chairman & ceo Mark R. Fetting
y ear of investment 2008
business Global asset management firm offering a
broad spectrum of investment solutions to
institutional, retail and wealth management
clients around the world
website www.leggmason.com

investment Legrand holdings s.a.

headquarters Limoges, France
2008 revenue €4,202 million
employees 34,830
chairman & ceo Gilles Schnepp
y ear of investment 2002
business Global specialist in products and systems
for electrical installations and information
networks where people live and work
website www.legrandelectric.com

investment Ma Anshan Modern Farming Co. Ltd.

headquarters Ma Anshan, China
2008 revenue RMB221 million
employees 1,419
chairman Jiuqiang Deng
ceo Lina Gao
business Leading dairy farming group in China
operating large-scale farms to raise dairy
cows, and selling raw milk to branded
dairy companies to be processed into
consumer dairy products
website www.xiandaimuye.com/en/

investment Masonite International corporation

headquarters Tampa, Florida
2008 revenue $1,816 million
employees 8,608*
chairman Kenneth W. Freeman
ceo Fred Lynch
y ear of investment 2005
business Leading global manufacturer of doors and
door components
website www.masonite.com

*Represents employees as of January 30, 2009. 66

 investment Maxeda B.V.
headquarters Amsterdam, the Netherlands
2008 revenue €2,979 million
employees 27,671
chairman & ceo Tony DeNunzio
y ear of investment 2004
business Leading non-food retailer in the
Netherlands, with 11 retail formats includ-
ing department, fashion and
“do-it-yourself” stores operating in 13
countries
website www.maxeda.com

investment MedCath Corporation

headquarters Charlotte, North Carolina
2008 revenue $620 million
employees 4,084
chairman John T. Casey
ceo O. Edwin French
y ear of investment 1998
business Healthcare provider focused on high
acuity services
website www.medcath.com

investment MMI Holdings Limited

headquarters Singapore
2008 revenue $542 million
employees 8,000
ceo Bong Lim Teh
y ear of investment 2007
business Precision machining and electro-mechanical
systems integration company serving global
market leaders in hard-disk drives, oil and
gas, aerospace and other industrial sectors
website www.mmi.com.sg

investment The Nielsen Company B.V.

headquarters New York, New York
Haarlem, the Netherlands
2008 revenue $5,012 million
employees 35,882
chairman & ceo David L. Calhoun
y ear of investment 2006
business Leading global information and media
company providing essential integrated
marketing and media measurement
information, analytics, and media expertise
to clients across the world
website www.nielsen.com

67
 investment Northgate Information Solutions limited
headquarters Hemel Hempstead, United Kingdom
2008 revenue £543 million*
employees 8,141
chairman Todd. A. Fisher
ceo Christopher Stone
y ear of investment 2008
business Market leader in providing specialist
software, outsourcing and information
technology services to the human resources,
local government, education and public
safety markets.
website www.northgate-is.com

*Represents LTM revenue at fiscal year ended April 30, 2008.

investment NuVox, Inc .

headquarters Greenville, South Carolina
2008 revenue $550 million
employees 1,800
chairman David L. Solomon
ceo James W. Akerhielm
y ear of investment 2000
business Provider of customized managed communi-
cations services, information technology,
data, security and voice solutions designed
specifically for business customers
website www.nuvox.com

investment NXP B.V.

headquarters
Eindhoven, the Netherlands
2008 revenue
$5,443 million
employees
30,174
chairman & ceo
Richard L. Clemmer
y ear of investment
2006
Leading semiconductor company founded
business
by Philips more than 50 years ago which
creates semiconductors, system solutions
and software that deliver better sensory
experiences in a wide range of electronic
devices
website www.nxp.com

investment PagesJaunes Groupe s.a.

headquarters Paris, France
2008 revenue €1,193 million
employees 5,284
chairman Jacques Garaïalde
ceo Michel Datchary
y ear of investment 2006
business Leading European publisher of directories
on the Internet (pagesjaunes.fr, qdq.com)
and the leading publisher of printed
directories in France (the PagesJaunes
directory and l’Annuaire)
website www.pagesjaunesgroupe.com

68
 investment PRIMEDIA Inc.
headquarters Atlanta, Georgia
2008 revenue $304 million
employees 1,004
chairman Dean Nelson
ceo Charles Stubbs
y ear of investment 1989
business Integrated media company that publishes
and distributes advertising-supported print
and online consumer guides for apartment
communities and other residential real
estate sectors
website www.primedia.com

investment ProSiebenSat.1 Media AG

headquarters Munich, Germany
2008 revenue €3,054 million
employees 5,847
chairman Götz Mäuser
ceo Thomas Ebeling
y ear of investment 2007
business The largest commercial television corpora-
tion in Germany and the second-largest
broadcasting group in Europe, operating
television, radio and online digital
services in 14 countries
website www.prosiebensat1.com

investment Rockwood Holdings, Inc .

headquarters Princeton, New Jersey
2008 revenue $3,380 million
employees 9,968
chairman & ceo Seifi Ghasemi
y ear of investment 2000
business Leading global specialty chemicals and
advanced materials company, focusing on
global niche segments of the specialty
chemicals, pigments and additives and
advanced materials markets
website www.rocksp.com

investment Sealy corporation

headquarters Trinity, North Carolina
2008 revenue $1,498 million*
employees 4,988
chairman Paul Norris
ceo Lawrence J. Rogers
y ear of investment 2004
business Through its subsidiaries, the largest
bedding manufacturer in North America
and producer of a diversified line
of mattress and foundation products
website www.sealy.com

*Represents revenue at fiscal year ended November 30, 2008.

69
 investment Seven Media Group
headquarters Sydney, Australia
2008 revenue A$1,600 million
employees 2,942
chairman Kerry Stokes
ceo David Leckie
y ear of investment 2006
business A 50/50 joint venture with Seven Network
Limited that consists of Australia’s leading
free-to-air TV network (Seven Network),
second-largest magazine business (Pacific
Magazines), and second most-visited
entertainment portal (Yahoo!7) through a
50/50 joint venture that was formed with
Yahoo in February 2006
website http://au.tv.yahoo.com/

investment SunGard Data Systems, Inc .

headquarters Wayne, Pennsylvania
2008 revenue $5,596 million
employees 20,000
chairman Glenn H. Hutchins
ceo Cristóbal Conde
y ear of investment 2005
business Global leader in software for financial
services, higher education and public sector
and information technology business
continuity solutions
website www.sungard.com

investment Tarkett S.A.

headquarters Nanterre, France
2008 revenue €2,069 million
employees 8,576
chairman Didier Deconinck
ceo Michel Giannuzzi
y ear of investment 2007
business Designer, manufacturer and retailer of PVC,
wood, laminate, sports and other specialty
flooring products, for the residential
and commercial markets in Europe and
North America
website www.tarkett.com

investment TDC A/S

headquarters Copenhagen, Denmark
2008 revenue €5,210 million
employees 14,745
chairman Vagn Sørensen
ceo Henrik Poulsen
y ear of investment 2006
business Leading provider of telecommunications
solutions in Denmark, the second-largest
full-range telecommunications provider in
the Swiss market with a significant presence
in the pan-Nordic market and Hungary
website www.tdc.com

70
 investment Tianrui Group Cement Company Limited
headquarters Henan, China
2008 revenue RMB 3,360 million
employees 4,000
chairman & ceo Xiao Jiaxiang
y ear of investment 2007
business One of China’s largest cement producers
with state-of-the-art production faclities and
leading positions in its two target markets
website www.trcement.com

investment Toys “R” Us, Inc

headquarters Wayne, New Jersey
2008 revenue $13,724 million
employees 91,445
chairman & ceo Gerald L. Storch
y ear of investment 2005
business The world’s leading dedicated toy and
baby products retailer, selling merchandise
through more than 1,500 stores in 33
countries and on its website www.toysrus.com
website www.toysrusinc.com

investment U.N Ro-Ro Isletmeleri A.S.

headquarters Istanbul, Turkey
2008 revenue €171 million
employees 328
chairman John Phillip Lindell Pfeffer
ceo Cüneyt Solakoglu
y ear of investment 2007
business Leading roll-on/roll-off (ro-ro) operator
in Turkey and one of the largest in
Mediterrenean Europe, operating 10 ro-ro
vessels between Turkey and Italy
website www.unroro.com.tr

investment Unisteel Technology

headquarters Singapore
2008 revenue $174 million
employees 1,869
ceo Bernard Toh Bee Yong
y ear of investment 2008
business Leading precision engineering solutions
provider with multi-disciplinary competen-
cies in the areas of fastening systems,
stamped, cold forged, and machined metal
components, plastics optics and surface
treatment technology
website www.unisteel.com.sg

71
 investment U.S. Foodservice, Inc .
headquarters Rosemont, Illinois
2008 revenue $19,800 million
employees 26,108
chairman Charles A. Banks
ceo Robert B. Aiken, Jr.
y ear of investment 2007
business One of the premier foodservice distributors
in the U.S., providing the finest quality
food and related products to restaurants,
hospitals, schools, hotels, government
entities and other eating establishments
website www.usfoodservice.com

investment Van Gansewinkel Group

headquarters Eindhoven, the Netherlands
2008 revenue €1,200 million
employees 6,000
chairman Reinhard Gorenflos
ceo Ruud Sondag
y ear of investment 2006
business Comprehensive waste and environmental
services company which is active in
eight countries
website www.vangansewinkelgroep.com

investment Visant corporation

headquarters Armonk, New York
2008 revenue $1,365 million*
employees 4,874
chairman & ceo Marc L. Reisch
y ear of investment 2004
business Through its subsidiaries, a leading market-
ing and publishing services enterprise
servicing the school affinity, direct market-
ing, fragrance and cosmetics sampling and
educational and trade publishing segments
website www.visant.net

*Represents revenue at fiscal year ended January 3, 2009.

investment Yageo Corporation

headquarters Taipei, Taiwan
2008 revenue NTD$22,477 million
employees 7,146
chairman & ceo Pierre T. M. Chen
y ear of investment 2007
business World-class provider of passive components
with production and sales facilities in Asia,
Europe and the Americas
website www.yageo.com

investment Zhone Technologies, Inc .

headquarters Oakland, California
2008 revenue $146 million
employees 375
chairman & ceo Morteza Ejabat
y ear of investment 1999
business Designer, developer and manufacturer
of communications network equipment for
telephone companies and cable operators
worldwide
website www.zhone.com
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kk r o f f i c e s

USA Asia

N e w Yo r k H o n g Ko n g
Kohlberg Kravis Roberts & Co. L.P. KKR Asia Limited
9 West 57th Street 25/F, AIG Tower
Suite 4200 1 Connaught Road, Central
New York, New York 10019 Hong Kong
+ 1 212 750-8300 + 852 3602-7300

M e n l o Pa r k To kyo
Kohlberg Kravis Roberts & Co. L.P. KKR Japan Limited
2800 Sand Hill Road 6F, Tokyo Ginko Kyokai Building
Suite 200 1-3-1, Marunouchi
Menlo Park, California 94025 Chiyoda-ku
+ 1 650 233-6560 Tokyo 100-0005
+ 81 3-6268-6000
San Francisco
KKR Asset Management Beijing
555 California Street KKR Investment Consultancy
50th Floor (Beijing) Company Limited
San Francisco, California 94104 15/F Beijing Yintai Office Tower C
+ 1 415 315-3620 No.2 Jianguomenwai Street
Chaoyang District
H o u s to n Beijing 100022, China
Kohlberg Kravis Roberts & Co. L.P. + 86 10 6563-7001
600 Travis Street
Suite 6270 Mumbai
Houston, Texas 77002 KKR India Advisors Private Limited
+ 1 713 343-5142 Trident Nariman Point
Suite 1201
Wa s h i n g to n , D. C . Nariman Point, Mumbai 400021,
Kohlberg Kravis Roberts & Co. L.P. India
101 Constitution Avenue N.W. + 91 22 4355-1300
Suite 800
Washington, D.C. 20001 Sy d n e y
+ 1 202 742-4430 KKR Australia Pty Limited
Level 42, Gateway Building,
Europe 1 Macquarie Place
Sydney NSW 2000
London Australia
Kohlberg Kravis Roberts & Co. Ltd. + 61 2 8298 5500
Stirling Square
7 Carlton Gardens Dubai
London SW1Y 5AD KKR (MENA) Limited
+ 44 20 7839 9800 Level 12, Gate Building
DIFC, P.O. Box 121208
Pa r i s Dubai, UAE
Kohlberg Kravis Roberts & Co. SAS + 971 4 401 9879
24 rue Jean Goujon
75008 Paris
+ 33 1 53 53 96 00

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w w w. kk r . c o m

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p h oto g r a p h yDan Bigelow: pages 10 and 36;

Tay Kay Chin: page 40; Jeff Corwin: pages 14, 24, 32 and 43;
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