KKR Private Equity Investors and KKR & Co. Agree to Business Combination

GUERNSEY, Channel Islands--(BUSINESS WIRE)--KKR Private Equity Investors, L.P. (Euronext Amsterdam: KPE) and KKR & Co. L.P. (collectively with its consolidated affiliates, “KKR”) announced today that they have entered into an agreement providing for the acquisition of all of the assets, and assumption of all of the liabilities, of KPE by KKR. In conjunction with this transaction, KKR will become publicly listed on the New York Stock Exchange (the “NYSE”) under the symbol KKR.

Under the terms of the agreement, KPE unitholders and related depositary units would receive equity interests in KKR, after which KPE would be dissolved and delisted from Euronext Amsterdam. Upon completion of the transaction, those interests would constitute 21% of the equity in the combined business. The remaining 79% of the equity in the combined entity would be retained by KKR executives. In addition, KPE unitholders would receive a contingent value interest providing consideration of up to an additional 6% of the equity in the combined company as of the completion of the transaction to the extent that KKR units trade below a specified threshold, tied to KPE’s June 30, 2008 net asset value, three years after completion of the transaction.

The transaction does not involve the payment of any cash consideration or involve an offering of any newly issued securities directly to the public for cash. KKR executives are not selling any equity interests in the transaction.

The agreement was unanimously approved by the board of directors of KPE’s general partner, acting upon the unanimous recommendation of the directors of KPE’s general partner who are independent of KKR under NYSE standards. Completion of the transaction is subject to approval by KPE unitholders holding a majority of KPE’s common units (excluding for such purpose units whose vote is controlled by KKR and its affiliates) and other customary closing conditions.

Henry R. Kravis and George R. Roberts, co-founders of KKR, said, “This transaction offers substantial benefits for KPE unitholders, and it builds KKR for the long-term. Going forward, KPE unitholders will benefit by being owners in a diversified asset management business that generates regular distributions of cash earnings. For KKR, this transaction provides us with additional capital for our business. Moving forward with a public listing will allow KKR to do what we do best -- grow companies around the world and produce solid returns for our investors from a larger platform and a deeper capital base.”

The independent directors of KPE issued the following statement relating to the transaction: “KPE’s independent directors unanimously approve this transaction and we believe that it is in the best interests of KPE unitholders. The transaction will create a partnership with a more diverse asset base in terms of strategies, geographies and companies; allow for the regular distribution of cash earnings; and facilitate the purchase and sale of stock in a more liquid market. Through the transaction, KPE unitholders will benefit from direct access to KKR’s entire business as it builds upon its private equity foundation, while retaining significant participation through the contingent value interests should there be a shortfall in the expected value of the combined company.”

Preliminary unaudited pro forma segment information for the combined business for the twelve months ended December 31, 2007 and the three months ended March 31, 2008, which pro forma information gives effect to the KPE transaction and related internal restructuring transactions and which also includes an expected range of economic net income for KKR’s total reportable segments on a historic basis for the six months ended June 30, 2008, is set forth on Annex A to this press release. KKR also announced today that it expects its assets under management as of June 30, 2008 to be approximately $60.8 billion, up from $53.2 billion on December 31, 2007. Separately today, KPE publicly announced its financial results for the quarter and six months ended June 30, 2008.

Additional details regarding the terms and conditions of the transaction are set forth on Annex B to this press release. In addition, the presentation made available by KPE and KKR announcing the transaction is set forth on Annex C to this press release.

Completion of the transaction is expected to occur during the fourth quarter of 2008. Until then, KPE units will continue to trade on Euronext Amsterdam. Solicitation of consents from KPE unitholders is anticipated to commence during the fourth quarter of 2008.

Citi is acting as sole financial advisor to KPE. Lazard is acting as financial advisor to the independent directors and Bredin Prat is acting as lead legal counsel to KPE and the independent directors. Citi and Lazard have each delivered to the independent directors their respective opinions to the effect that, as of the date of such opinion and based upon and subject to the qualifications and assumptions disclosed in such opinion, the exchange ratio of the number of KKR common units and contingent value interests to be received in the transaction for each KPE common unit is fair, from a financial point of view, to the holders of KPE common units (other than KKR and its affiliates). The full texts of each written opinion will be disclosed in the consent solicitation materials provided to holders of KPE common units.

Goldman Sachs and Morgan Stanley are acting as financial advisors to KKR and Simpson Thacher & Bartlett LLP is acting as lead legal counsel to KKR.

Information for Investors – Teleconference and Webcast

KPE and KKR will discuss this business combination on a teleconference to be broadcast live on the Internet on Monday, July 28, 2008 at 2:00 p.m. CET (Amsterdam) / 1:00 p.m. GMT (Guernsey/London) / 8:00 a.m. EDT (New York City). A webcast (listen only) of the teleconference can be accessed via the Investor Relations section of KPE’s website at www.kkrprivateequityinvestors.com as well as on KKR’s website at www.kkr.com.

About KPE

KKR Private Equity Investors, L.P. (Euronext Amsterdam: KPE) is a Guernsey limited partnership that seeks to create long-term value by participating in private equity and opportunistic investments selected, evaluated, structured, monitored and exited by investment professionals of Kohlberg Kravis Roberts & Co. (“KKR”). As of June 30, 2008, over 90% of KPE’s $5.4 billion portfolio was comprised of limited partner interests in six KKR private equity funds, co-investments in 13 companies alongside the private equity funds and negotiated equity investments. The remainder of KPE’s portfolio as of June 30, 2008 was invested in opportunistic and temporary investments. KPE is governed by its general partner’s board of directors, which has a majority of independent directors, and makes its investments as the sole limited partner of another Guernsey limited partnership, KKR PEI Investments, L.P.

The common units and related restricted depositary units of KPE are subject to a number of ownership and transfer restrictions. Information concerning these ownership and transfer restrictions is included in the Investor Relations section of KPE’s website at www.kkrprivateequityinvestors.com.

About KKR

Established in 1976, KKR is a leading global alternative asset manager. The core of the firm’s franchise is sponsoring and managing funds that make private equity investments in North America, Europe, and Asia. Throughout its history, KKR has brought a long-term investment approach to portfolio companies, focusing on working in partnership with management teams and investing for future competitiveness and growth. Additional funds that KKR sponsors include KKR Financial (NYSE: KFN) and the KKR Strategic Capital Funds, which make investments in debt transactions. KKR has offices in New York, Menlo Park, San Francisco, Houston, London, Paris, Hong Kong, Tokyo, Beijing and Sydney. More information about KKR is available at: www.kkr.com.

Forward-Looking Statements

This release contains certain forward-looking statements. Forward-looking statements relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. The forward-looking statements are based on KPE’s and KKR’s beliefs, assumptions and expectations of their future performance, taking into account all information currently available to them. These beliefs, assumptions and expectations can change as a result of many possible events or factors, not all of which are known to KPE and KKR or are within their control. If a change occurs, KPE’s and KKR’s business, financial condition, liquidity and results of operations may vary materially from those expressed in the forward-looking statements. The following factors, among others, could cause actual results to vary from the forward-looking statements: general volatility of the capital markets; changes in KPE’s and KKR’s business strategy; availability, terms and deployment of capital; availability of qualified personnel and expense of recruiting and retaining such personnel; changes in the asset management industry, interest rates or the general economy; underperformance of KKR’s investments and decreased ability to raise funds; increased rates of default and/or decreased recovery rates on KPE’s investments; and the degree and nature of KPE’s and KKR’s competition. Neither KPE nor KKR undertakes any obligation to update any forward-looking statements to reflect circumstances or events that occur after the date on which such statements were made except as required by law. In addition, KKR’s and KPE’s business strategy is focused on the long-term and financial results are subject to significant volatility. Historically year-to-year results have varied dramatically and have not be subject to reliable forecasting. Additional factors that could cause performance, returns or results to differ materially from the forward-looking statements can be found in KKR’s Registration Statement on Form S-1 (file no. 333-144335) filed with the Securities and Exchange Commission.

Additional Information About the Transaction and Where to Find It

This release is being made in respect of the proposed transaction involving KKR and KPE. In connection with the proposed transaction, KKR will file with the SEC an amendment to its existing Registration Statement on Form S-1 (file no. 333-144335) and will be filing other documents regarding the proposed transaction with the SEC. INVESTORS AND SECURITY HOLDERS OF KPE ARE URGED TO READ THE REGISTRATION STATEMENT AND OTHER DOCUMENTS FILED WITH THE SEC CAREFULLY IN THEIR ENTIRETY WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTION. The final prospectus contained in the registration statement will be mailed or otherwise disseminated to the holders of KPE’s common units. Holders of KPE’s common units will be able to obtain free copies of the final prospectus (when available) and other documents filed with the SEC by KKR through the web site maintained by the SEC at www.sec.gov. Free copies of the final prospectus (when available) and other documents filed with the SEC can also be obtained by directing a request to KKR, 9 W. 57th Street, Suite 4200, New York, New York 10019

Annex A

PRELIMINARY UNAUDITED PRO FORMA SEGMENT INFORMATION

The following preliminary unaudited pro forma segment information for the year ended December 31, 2007 and the three months ended March 31, 2008 gives effect to:

• the acquisition by KKR & Co. L.P. (“KKR”) of all of the outstanding limited partner interests in KKR PEI Investments, L.P. (the “Acquired Partnership”) from KKR Private Equity Investors, L.P. (“KPE”) and the assumption by KKR of all of the liabilities of KPE in exchange for newly issued common units and contingent value interests in KKR (the “Acquisition”); and
• certain aspects of the internal restructuring transactions that have been or will be effected by the KKR Group prior to the completion of the Acquisition (the “Restructuring Transactions”).

This preliminary unaudited pro forma segment information is based on historical segment information of the accounting predecessor of KKR (the “KKR Group”) and historical financial information of the Acquired Partnership and gives effect to the aspects of the Restructuring Transactions and the Acquisition described herein as if they had occurred on January 1, 2007 by applying the adjustments described in the accompanying notes. Such adjustments are based on information that is currently available and determinable and on assumptions that management believes are reasonable in order to reflect, on a pro forma basis, the impact of the transaction aspects described herein on the historical segment financial information of the KKR Group.

This preliminary unaudited pro forma segment information is included for informational purposes only and is preliminary in nature due to the fact that not all information relating to the Restructuring Transactions and the Acquisition is currently available and determinable. This information does not purport to show the pro forma impact of any transactions or arrangements relating to the Restructuring Transactions and the Acquisition other than those specifically described herein or the pro forma impact of any transactions or arrangements on the financial condition of the reportable business segments of the KKR Group or the combined statement of financial condition and statements of income of the KKR Group presented in accordance with generally accepted accounting principles in the United States (“GAAP”). In addition, this information does not purport to show the actual segment or financial statement results that the KKR Group would have had if the Restructuring Transactions and the Acquisition had occurred on the date indicated, or had KKR operated as a public company during the periods presented, or for any future period.

This preliminary unaudited pro forma segment information is subject to change as additional information concerning the Restructuring Transactions and the Acquisition becomes available or determinable. This information will also differ from any pro forma financial information of the KKR Group that gives effect to the impact of the Restructuring Transactions and the Acquisition on the face of the combined financial statements of the KKR Group that are presented in accordance with GAAP. See “Reconciliation of Segment Reporting to Financial Statement Reporting and Net Income,” “Basis of Presentation,” “Notes to Preliminary Unaudited Pro Forma Segment Information — Transactions and Adjustments Excluded from Pro Forma Presentation.” You are cautioned not to place undue reliance on this information.

Basis of Presentation

Financial Statements

The KKR Group is considered the predecessor of KKR for accounting purposes and its historical combined financial statements will be the historical financial statements of KKR following the completion of the Restructuring Transactions and the Acquisition. In accordance with GAAP, the historical combined financial statements of the KKR Group consolidate a number of funds that are sponsored by the KKR Group, despite the fact that the KKR Group has only a minority economic interest in those entities. This consolidation is due to the substantive controlling rights and operational discretion that the KKR Group maintains over such entities through its general partner or managing member interests and the fact that non-controlling interest holders do not hold any substantive rights that would enable them to impact the ongoing governance and operating activities of such entities. These consolidated entities, which include the Acquired Partnership, are collectively referred to as the “Consolidated Entities.”

As a result of the consolidation of the Consolidated Entities, the combined financial statements of the KKR Group reflect the assets, liabilities, revenues, expenses and cash flows of the Consolidated Entities on a gross basis. The majority of the economic interests in the Consolidated Entities, which are held by third-party investors, are reflected as non-controlling interests. Substantially all of the management fees and certain other amounts that the KKR Group earns from the Consolidated Entities are eliminated in combination. However, because those amounts are earned from non-controlling interest holders, the KKR Group’s allocable share of the net income from the Consolidated Entities is increased by the amounts eliminated. Accordingly, the consolidation of the Consolidated Entities does not have a net effect on the amounts of income before taxes, net income or partners’ capital that are reported by the KKR Group.

While the consolidation of the Consolidated Entities does not have a net effect on the amounts of income before taxes, net income or partners’ capital reported by the KKR Group, the consolidation does significantly impact other aspects of the combined financial statement presentation of the KKR Group. This is due to the fact that the assets, liabilities, income and expenses of the Consolidated Entities are reflected on a gross basis while the allocable share of those amounts that are attributable to non-controlling interest holders are reflected as single line items. The single line items in which the assets, liabilities, income and expense attributable to non-controlling interest holders are recorded consist of “non-controlling interests in consolidated entities” in the statement of financial condition and “non-controlling interests in income of consolidated entities” in the income statement.

Segment Information

The historical segment financial information of the KKR Group is presented as a supplemental disclosure for the reportable business segments of the KKR Group in accordance with Statement of Financial Accounting Standards No. 131, “Disclosures about Segments of an Enterprise and Related Information” (“SFAS 131”). This standard is based on a management approach, which requires segment presentation based on the financial reporting used by management to make operating decisions, assess performance and allocate resources. The KKR Group currently operates through two reportable business segments: Private Equity and Fixed Income. All inter-segment transactions are eliminated in the segment presentation.

Management of the KKR Group makes operating decisions, assesses performance and allocates resources based on financial and operating data and measures that are presented without giving effect to the consolidation of any of the Consolidated Entities. As a result, unlike the reporting in the combined financial statements of the KKR Group, the KKR Group’s segment reporting does not give effect to the consolidation of the Consolidated Entities. The exclusion of the Consolidated Entities in segment reporting results in the inclusion of management fees and incentive fees in fee income that would otherwise be eliminated in combination, the exclusion of investment income and expenses that are attributable to non-controlling interests held by third-party investors and the exclusion of corresponding charges and credits that are accounted for as non-controlling interests in the income of consolidated entities.

Given the differences between the combined financial statement presentation and the segment reporting of the KKR Group, the preliminary unaudited pro forma segment information presented in this document, including the adjustments described in the accompanying notes, will differ from pro forma financial information of the KKR Group that gives effect to the impact of the Restructuring Transactions and the Acquisition and related adjustments on the KKR Group’s combined financial statements. This preliminary unaudited pro forma segment information should not be considered as a substitute for pro forma financial information of the KKR Group that gives effect to the impact of the Restructuring Transactions and the Acquisition and related adjustments on the KKR Group’s combined financial statements or for the combined financial statements of the KKR Group presented in accordance with GAAP. For a reconciliation of management’s reporting of the historical segment information of the KKR Group and preliminary unaudited pro forma segment information of KKR to the historical combined operating results of the KKR Group and the preliminary unaudited pro forma combined operating results of KKR, see “Reconciliation of Segment Reporting to Financial Statement Reporting and Net Income.”

Restructuring Transactions

Acquisition of Non-Controlling Interests in Fixed Income Segment

In the historical combined financial statements, the KKR Group held all of the equity interests in the parent of the management companies for the KKR Group’s credit strategy funds other than certain non-controlling interests that allocated 35% of the net income generated by the parent company to the non-controlling interest holders. On May 30, 2008, the KKR Group entered into an agreement to acquire all of these non-controlling interests for cash consideration (the “KFI Acquisition”). As a result of the KFI Acquisition, the KKR Group now owns all of the equity interests in the parent of the management companies for its credit strategy funds and is entitled to all of the net income and cash flows generated by the management companies.

Conversion into a Holding Partnership Structure

Prior to the completion of the Acquisition, the business of the KKR Group will be reorganized under two new partnerships (the “Group Partnerships”) of which KKR will serve as the ultimate general partner. The reorganization will involve a contribution of equity interests in the KKR Group that are held by KKR principals in exchange for newly issued Group Partnership units. No cash will be received in connection with such exchanges. As a result of these transactions, the Group Partnerships will hold all of the controlling and non-controlling interests in the entities that are consolidated in the historical combined financial statements of the KKR Group other than:

• controlling and economic interests in the 1996 Fund and such fund’s general partners, which interests will not be contributed to the Group Partnerships due to the fact that the general partners of those funds are not expected to receive meaningful proceeds from further realizations of investments;
• non-controlling economic interests in the KKR Group that will allocate to a former KKR principal and such person’s designees an aggregate of 1% of the carried interest received by general partners of the KKR funds and 1% of any other earnings of the KKR Group until a future date;
• non-controlling economic interests in the KKR Group that will allocate to former KKR principals and their designees a portion of the carried interest received by the general partners of the KKR Funds with respect to investments made during the tenure of such former KKR principals with KKR; and
• non-controlling economic interests in the KKR Group that will allocate to current and former KKR principals all of the capital invested by or on behalf of the general partners of the KKR funds before the completion of the Restructuring Transactions and the Acquisition and any profits thereon.

The controlling and economic interests in the 1996 Fund and the general partners of the 1996 Fund described above will no longer be reflected in the combined financial statements of the KKR Group following the completion of the Restructuring Transactions and the Acquisition, due to the fact that such interests will not be acquired by the Group Partnerships. The other non-controlling economic interests described above (the “Other Interests”) are currently reflected in the partners’ capital of the KKR Group, but will be accounted for as non-controlling interests in consolidated entities from and after the completion of the Restructuring Transactions, because such interests will be held at a subsidiary level. The allocable share of income and expense attributable to the Other Interests will be accounted for as non-controlling interests in income of consolidated entities. The allocable share of capital attributable to the Other Interests will be accounted for as non-controlling interests in consolidated entities.

Acquisition

In connection with the Acquisition, KKR will acquire all of the assets of KPE, including the limited partner interests of the Acquired Partnership and assume all of the liabilities of KPE in exchange for newly issued common units and contingent value interests (“CVIs”) in KKR. The common units of KKR issued to KPE unitholders will represent 21% of the outstanding limited partner interests in KKR upon the completion of the Acquisition, assuming that all Group Partnership units indirectly held by current KKR principals are exchanged for newly-issued KKR common units on a one-for-one basis and excluding any equity grants made under KKR’s equity incentive plan. KKR principals will hold their Group Partnership units through KKR Holdings, L.P. (“KKR Holdings”). See “Note (IV) under Transactions and Adjustments Excluded from Pro Forma Presentation” for a description of the exchangeability of Group Partnership units for KKR common units.

The CVIs issued by KKR reflect the terms of a purchase price adjustment mechanism (the “PPAM”) embedded in KKR’s interests in the Group Partnerships. Under the PPAM, KKR will be entitled to a variable amount of newly issued Group Partnership common units or cash, at the election of KKR Holdings, on the third anniversary of the issue date in the event that the trading price of a KKR common unit over an averaging period plus the cumulative distributions paid on a KKR common unit from the issue date are less than $22.25. Any consideration required to be delivered by the Group Partnerships to KKR will be paid by KKR to the CVI holders as follows:

• If the PPAM is settled by the Group Partnerships with newly-issued Group Partnership common units, KKR will issue an equivalent number of its own additional common units to CVI holders in settlement of the CVIs. A corresponding number of Group Partnership units held by KKR principals through KKR Holdings will then be cancelled.
• If the PPAM is settled by the Group Partnerships with cash, KKR principals will through KKR Holdings contribute cash to the Group Partnerships in an amount equal to the cash settlement price of the CVIs. The Group Partnerships will distribute such cash to KKR, which will then deliver the cash to CVI holders in settlement of the CVIs.

The consideration payable under the PPAM will be subject to a cap, such that the maximum consideration delivered in respect of the PPAM (and ultimately to the CVI holders) will not exceed 0.2857 common units per CVI or $4.94 of cash per CVI. The actual amount of consideration delivered under the PPAM (and ultimately to the CVI holders), if any, may be lower and will ultimately depend on the trading price of KKR common units and the amount of distributions made thereon.

Upon completion of the transactions described above, KKR will directly or indirectly contribute all of the limited partner interests in the Acquired Partnership (and in certain cases direct assets of the Acquired Partnership) to the Group Partnerships in exchange for newly issued partner interests in the Group Partnerships (“Group Partnership units”). Units in one of the Group Partnerships will be held through an intermediate holding company that will be taxable as a corporation for U.S. federal income tax purposes. See Note (III) under “Transactions and Adjustments Excluded from Pro Forma Presentation.” The Group Partnership units will provide KKR with a 21% economic interest in each of the Group Partnerships and allow KKR to share ratably in the assets, liabilities, profits, losses and distributions of the Group Partnerships. The balance of the Group Partnership units will be held by current KKR principals through their interests in KKR Holdings and will be accounted for in the consolidated financial statements of KKR as non-controlling interests in consolidated entities.

All amounts in the following tables and notes to preliminary unaudited pro-forma segment information are in thousands ($000s).

KKR Group Historical Total Reportable Segment Information Three Months Ended March 31, 2008
		Private Equity				Fixed Income				Total Reportable Segments				(e) Acquired Partnership Historical Information
Management Fees		$	78,833			$	16,127			$	94,960			$	—
Advisory Fees			37,740				3,333				41,073				—
Incentive Fees			—				—				—				—
Total Fee Income			116,573				19,460				136,033				—
Employee Compensation and Benefits			43,412				4,651				48,063				—
Other Operating Expenses			48,561				4,154				52,715				14,748
Total Expenses			91,973				8,805				100,778				14,748
Fee Related Earnings			24,600				10,655				35,255				(14,748	)
Investment Income (Loss)			(148,310	)			(85	)			(148,395	)			(253,287	)
Non-Controlling Interests			65				3,805				3,870				—
Economic Net Income (Loss)		$	(123,775	)		$	6,765			$	(117,010	)		$	(268,035	)

KKR Group Total Reportable Segment Pro Forma Information After Adjustments for the Restructuring Transactions and the Acquisition Three Months Ended March 31, 2008
		Total Reportable Segments Historical				Adjustments for Restructuring Transactions				Acquired Partnership and Adjustments for Acquisition				Total Reportable Segments As Adjusted (100%)				Allocation to KKR Holdings (79%)				Total Reportable Segments Pro forma (21%)
Management Fees		$	94,960			$	—			$	(13,470	) (f)		$	81,490			$	—			$	81,490
Advisory Fees			41,073				—				—				41,073				—				41,073
Incentive Fees			—				—				--	(f)			—				—				—
Total Fee Income			136,033				—				(13,470	)			122,563				—				122,563
Employee Compensation and Benefits			48,063				(17,585	) (d)			—				30,478				—				30,478
Other Operating Expenses			52,715				(21	) (a)			1,278	(f)			53,972				—				53,972
Total Expenses			100,778				(17,606	)			1,278				84,450				—				84,450
Fee Related Earnings			35,255				17,606				(14,748	)			38,113				—				38,113
Investment Income (Loss)			(148,395	)			14,437	(a)			(252,755	) (g)			(386,713	)			—				(386,713	)
Non-Controlling Interests			3,870				(41,665	) (b) (c)			(2,676	) (h)			(40,471	)			(243,423	) (i)			(283,894	)
Economic Net Income (Loss)		$	(117,010	)1		$	73,708			$	(264,827	)		$	(308,129	)		$	243,423			$	(64,706	)

¹ For the six months ended June 30, 2008, Economic Net Income for the total reportable segments of the KKR Group on a historical basis is expected to be between $80 million and $120 million. See “Forward-Looking Statements” in the press release to which this Annex is attached.

KKR Group Private Equity Pro Forma Information After Adjustments for the Restructuring Transactions and the Acquisition Three Months Ended March 31, 2008
		Private Equity Historical				Adjustments for Restructuring Transactions				Adjustments for Acquisition				Private Equity As Adjusted (100%)				Allocation to KKR Holdings (79%)				Private Equity Pro-Forma (21%)
Management Fees		$	78,833			$	—			$	(12,817	) (f)		$	66,016			$	—			$	66,016
Advisory Fees			37,740				—				—				37,740				—				37,740
Incentive Fees			—				—				—				—				—				—
Total Fee Income			116,573				—				(12,817	)			103,756				—				103,756
Employee Compensation and Benefits			43,412				(16,194	) (d)			—				27,218				—				27,218
Other Operating Expenses			48,561				(21	) (a)			—				48,540				—				48,540
Total Expenses			91,973				(16,215	)			—				75,758				—				75,758
Fee Related Earnings			24,600				16,215				(12,817	)			27,998				—				27,998
Investment Income (Loss)			(148,310	)			14,437 (a	)			3,355 (g	)			(130,518	)			—				(130,518	)
Non-Controlling Interests			65				(37,979	) (b)			(95	) (h)			(38,009	)			(50,964	) (i)			(88,973	)
Economic Net Income (Loss)		$	(123,775	)		$	68,631			$	(9,367	)		$	(64,511	)		$	50,964			$	(13,547	)

KKR Group Fixed Income Pro Forma Information After Adjustment for the Restructuring Transactions and the Acquisition Three Months Ended March 31, 2008

Fixed Income Historical

Adjustments for Restructuring Transactions

Adjustments for Acquisition

Fixed Income As Adjusted (100%)

Allocation to KKR Holdings (79%)

Fixed Income Pro-Forma (21%)

Management Fees

$