At KKR Financial Holdings LLC, our objective is to remain patient and disciplined in our allocation of capital to generate attractive returns for our investors through a combination of distributions and capital appreciation. Through our multi-asset class strategy, we invest in those asset classes that will generate the most favorable risk-adjusted returns, while still allowing us to maintain our status as a real estate investment trust (REIT) and our exemption from regulation under the Investment Company Act of 1940. The multi-asset class strategy also diversifies our portfolio, minimizing or eliminating many of the risks that might be associated with our investment portfolio such as geographic concentration risk, asset class concentration risk, market risk, or credit risks.

Our income is generated primarily by the net interest spread, or the difference between the interest we earn on our investment portfolio and the cost of financing our portfolio.

When KKR Financial Holdings LLC is compared with other pure broker/dealers, BDCs, commercial REITs, residential REITs, specialty finance and banks, it provides the following key value creation advantages:

• diversified asset mix
• minimal regulatory constraints
• favorable cost structure
• funding efficiency
• attractive distribution