KKR & Co. L.P.
KKR & Co. L.P. (Form: 8-K, Received: 02/09/2017 06:09:24)




UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549
______________
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): February 9, 2017

KKR & CO. L.P.
KKR FINANCIAL HOLDINGS LLC
 
(Exact name of registrant as specified in its charter)  
 
Delaware  
(State or other jurisdiction
of incorporation)
001-34820
001-33437
 
(Commission
File Number)
26-0426107
11-3801844
 
(IRS Employer
Identification No.)
 
9 West 57 th  Street, Suite 4200, New York, NY  
555 California Street, 50th Floor, San Francisco, CA  
(Address of principal executive offices)
10019  
94104  
(Zip Code)
 
(212) 750-8300
 
(415) 315-3620
(Registrant's telephone number, including area code)

NOT APPLICABLE  
(Former name or former address, if changed since last report)  
 
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
o
 
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
o
 
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o
 
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
o
 
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))








Item 2.02    Results of Operations and Financial Condition

On February 9, 2017, KKR & Co. L.P. (“KKR”) issued a press release announcing its financial results for the quarter and year ended December 31, 2016. While the release may contain certain information regarding KKR Financial Holdings LLC (“KFN”), KFN will be separately reporting its financial results for the quarter and year ended December 31, 2016 in its annual report on Form 10-K.
The press release is furnished as Exhibit 99.1 to this Report.
As provided in General Instruction B.2 of Form 8-K, the information in this Item 2.02 and the exhibit furnished by this Form 8-K shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall they be deemed to be incorporated by reference in any filing under the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such a filing.

Item 9.01    Financial Statements and Exhibits.
(d)     Exhibits
Exhibit No.
Description
Exhibit 99.1
Press release of KKR & Co. L.P., dated February 9, 2017, announcing its results for the quarter and year ended December 31, 2016 (This exhibit is furnished and not filed)







SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, each of the registrants has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
KKR & CO. L.P.
By: KKR Management LLC, its general partner

 
By:    /s/ William J. Janetschek          
Name: William J. Janetschek
Title: Chief Financial Officer
 
KKR FINANCIAL HOLDINGS LLC

Date: February 9, 2017
By:    /s/ Thomas N. Murphy         
Name: Thomas N. Murphy
Title: Chief Financial Officer
 
 







EXHIBIT INDEX

Exhibit No.
Description
Exhibit 99.1
Press release of KKR & Co. L.P., dated February 9, 2017, announcing its results for the quarter and year ended December 31, 2016 (This exhibit is furnished and not filed)





IMAGE5.JPG
KKR & Co. L.P. Reports Fourth Quarter and Full Year 2016 Results
_________________________________________________________________________________________________________________________________________________________________________
NEW YORK, February 9, 2017 - KKR & Co. L.P. (NYSE: KKR) today reported its fourth quarter and full year 2016 results.

GAAP net income (loss) attributable to KKR & Co. L.P. common unitholders was $171.0 million and $287.1 million for the quarter and full year ended December 31, 2016, respectively, compared to $32.3 million and $488.5 million in the comparable periods of 2015. On a diluted basis, net income (loss) per common unit was $0.35 and $0.59 for the quarter and full year ended December 31, 2016, respectively, compared to $0.07 and $1.01 in the comparable periods of 2015. GAAP KKR & Co. L.P. Capital - Common Unitholder equity was $5.5 billion (1) as of December 31, 2016, or $12.06 , per outstanding common unit.

For the quarter ended December 31, 2016, After-tax Economic Net Income (Loss) and After-tax Economic Net Income (Loss) per adjusted unit were $339.2 million and $0.40 , respectively, compared to $70.5 million and $0.08 for the quarter ended December 31, 2015. After-tax Distributable Earnings and After-tax Distributable Earnings per adjusted unit eligible for distribution were $389.9 million and $0.48 , respectively, for the quarter ended December 31, 2016 compared to $168.6 million and $0.21 for the quarter ended December 31, 2015.

For the full year 2016, After-tax Economic Net Income (Loss) and After-tax Economic Net Income (Loss) per adjusted unit were $575.6 million and $0.68 , respectively, compared to $1,028.3 million and $1.21 for the full year 2015. After-tax Distributable Earnings and After-tax Distributable Earnings per adjusted unit eligible for distribution were $1,527.7 million and $1.89 , respectively, for the full year 2016 compared to $1,452.7 million and $1.78 for the full year 2015.

Highlights

Economic Net Income was $383 million for the fourth quarter and $794 million for the year ended December 31, 2016, driven by strong realized performance income

Private Markets monetization activity was the primary driver of After-tax Distributable Earnings of $390 million for the fourth quarter and $1,528 million for the year ended December 31, 2016

Assets Under Management and Fee Paying Assets Under Management were $130 billion and $101 billion as of December 31, 2016, respectively, up 8% and 11%, respectively, compared to December 31, 2015

Book value was $9.8 billion as of December 31, 2016, or $12.15 per outstanding adjusted unit

KKR Prisma and PAAMCO to form Strategic Partnership to create one of the largest firms in the liquid alternatives industry (2)  

KKR's regular distribution per common unit of $0.16 was declared for the quarter ended December 31, 2016

An incremental $250 million has been authorized to repurchase common units. Additionally, beginning with the results for the quarter ending March 31, 2017, KKR intends to increase its regular quarterly distribution to holders of its common units from $0.16 to $0.17 per common unit per quarter.
___________________________

“We performed well in 2016 and progressed across our capital raising, investment performance, monetization and strategic initiatives,” said Henry R. Kravis and George R. Roberts, Co-Chairmen and Co-Chief Executive Officers of KKR. “We generated $1.5 billion of After-tax Distributable Earnings for the year and our Fee Paying Assets Under Management grew 11%.  Operating fundamentals across the firm remain strong, and we are encouraged by our momentum." 

__________________________________________________________________________________________________________________________________________________________________________
Note: Certain financial measures, including economic net income ("ENI"), After-tax ENI, After-tax distributable earnings, book value, adjusted units and outstanding adjusted units, are not presented in accordance with accounting principles generally accepted in the United States of America (“GAAP”). See Exhibits C and D for a reconciliation of such measures to financial results prepared in accordance with GAAP.

(1) GAAP KKR & Co. L.P. Capital - Common Unitholder equity represents only that portion of the business held by KKR & Co. L.P. and does not include the economic interests that are held by KKR Holdings L.P. Our reportable segments are presented prior to giving effect to the allocation of ownership interests between KKR & Co. L.P. and KKR Holdings L.P. and as such represent the business in total.

(2) The announced transaction to combine KKR Prisma and PAAMCO is subject to the satisfaction of customary closing conditions, including the receipt of requisite regulatory approvals.


Page 1



GAAP RESULTS COMMENTARY
Fees and Other
On January 1, 2016, KKR adopted ASU 2015-02, which resulted in the de-consolidation of most of KKR's investment funds that had been consolidated prior to such date. When an investment fund is consolidated, management fees, fee credits and carried interest earned from consolidated funds are eliminated in consolidation and as such are not recorded in Fees and Other. The economic impact of these management fees, fee credits and carried interests that are eliminated is reflected as an adjustment to noncontrolling interests and has no impact to Net Income Attributable to KKR & Co. L.P. As a result of the de-consolidation of most of our investment funds, the management fees, fee credits and carried interests associated with funds that had previously been consolidated are included in Fees and Other beginning on January 1, 2016 as such amounts are no longer eliminated. We adopted this guidance using the modified retrospective method. As a result, restatement of prior period results is not required and prior periods presented under GAAP have not been impacted.
Fees and Other were $481.5 million and $1,908.1 million for the quarter and year ended December 31, 2016, respectively, compared to $307.9 million and $1,043.8 million in the comparable periods of 2015. The net increase in both periods was primarily due to the inclusion of carried interest gains earned from investment funds that are no longer consolidated in the 2016 period and an increase in management fees driven primarily by fees earned from investment funds that are no longer consolidated in the 2016 period. These increases were partially offset by an increase in fee credits incurred, driven primarily by fee credits associated with investment funds that are no longer consolidated in the 2016 period and a decrease in monitoring fees in our Private Markets business.
Expenses
Total expenses were $452.8 million and $1,695.5 million for the quarter and year ended December 31, 2016, respectively, compared to $525.1 million and $1,871.2 million in the comparable periods of 2015. The decreases in both periods were primarily due to a lower level of carry pool allocations reflecting a lower level of appreciation in the value of our private equity portfolio.
Total Investment Income (Loss)
As indicated above, on January 1, 2016, KKR adopted ASU 2015-02, which resulted in the de-consolidation of most of KKR's investment funds that had been consolidated prior to such date. Effective with the adoption of ASU 2015-02, investment income earned from our investment funds that had previously been consolidated is not included in the statement of operations.

Total investment income (loss) was $440.1 million and $762.6 million for the quarter and year ended December 31, 2016, respectively, compared to $1,488.6 million and $6,169.1 million in the comparable periods of 2015. The decrease in both periods was primarily attributable to the impact of investment funds that are no longer consolidated in the 2016 period.

TOTAL REPORTABLE SEGMENTS RESULTS COMMENTARY
Segment Revenues
Total segment revenues were $664.4 million for the quarter ended December 31, 2016, compared to total segment revenues of $487.6 million for the quarter ended December 31, 2015. The increase was principally attributable to net investment income from our Principal Activities segment in 2016 compared to investment losses in 2015. This increase was partially offset by (i) a lower level of carried interest gains in the current period as compared to the prior period and (ii) lower monitoring fees in the current period primarily due to a non-recurring monitoring fee of $55.5 million net of associated fee credits received in 2015 in our Private Markets segment. The lower level of carried interest is primarily due to a lower level of net appreciation in KKR's private equity portfolio in the fourth quarter. For the quarter ended December 31, 2016, KKR's private equity portfolio appreciated 3.4%.
Total segment revenues were $1,865.3 million for the year ended December 31, 2016, compared to total segment revenues of $2,505.9 million for the year ended December 31, 2015. The decrease was principally attributable to a lower level of carried interest gains and net investment losses in the 2016 year compared to net investment gains in the prior year. The lower level of carried interest for the year ended December 31, 2016 is primarily due to a lower level of net appreciation in KKR’s private equity portfolio. For the year ended December 31, 2016, KKR's private equity portfolio appreciated 11.9%.
Economic Net Income
ENI was $383.2 million for the quarter ended December 31, 2016 , compared to ENI of $144.7 million for the quarter ended December 31, 2015. The increase was primarily attributable to higher total segment revenues as described above as well as a decrease in total compensation and benefits reflecting a lower level of fees and carried interest generated in the 2016 period.
ENI was $794.4 million for the year ended December 31, 2016 , compared to ENI of $1,298.0 million for the year ended December 31, 2015. The decrease was primarily attributable to lower total segment revenues as described above, partially offset by a decrease in total compensation and benefits reflecting a lower level of fees and carried interest generated in the 2016 period.




Page 2



AUM and FPAUM
AUM was $129.6 billion as of December 31, 2016 , a decrease of $1.5 billion, compared to AUM of $131.1 billion as of September 30, 2016. Distributions to limited partners of our private equity funds arising from realizations and distributions made in our Public Markets segment were offset primarily by (i) new capital raised in our private equity and credit businesses and (ii) an increase in the fair value of our private equity portfolio.
FPAUM was $101.5 billion as of December 31, 2016 , an increase of $8.3 billion, compared to FPAUM of $93.2 billion as of September 30, 2016. The increase was primarily attributable to new capital raised principally in our Private Markets businesses reflecting our Americas Fund XII entering its investment period. This increase was partially offset by distributions in our Public Markets segment and distributions to limited partners of our private equity funds arising from realizations. Additionally, there were decreases in the fee bases of certain funds entering their post investment periods, the most significant of which was our North America Fund XI.
DISTRIBUTIONS AND OTHER
A distribution of $0.16 per common unit has been declared, which will be paid on March 7, 2017 to holders of record of common units as of the close of business on February 21, 2017 . Under KKR's current distribution policy for its common units, KKR has made equal quarterly distributions to holders of common units in an amount of $0.16 per common unit per quarter. Beginning with the financial results to be reported for the first quarter of 2017, KKR intends to increase its quarterly distribution to common unitholders to $0.17 per common unit per quarter.
A distribution of $0.421875 per Series A Preferred Unit has been declared and set aside for payment on March 15, 2017 to holders of record of Series A Preferred Units as of the close of business on March 1, 2017. A distribution of $0.406250 per Series B Preferred Unit has been declared and set aside for payment on March 15, 2017 to holders of record of Series B Preferred Units as of the close of business on March 1, 2017.
The declaration and payment of any future distributions on preferred or common units are subject to the discretion of the board of directors of the general partner of KKR and the terms of its limited partnership agreement. There can be no assurance that future distributions will be made as intended or at all, that unitholders will receive sufficient distributions to satisfy payment of their tax liabilities as limited partners of KKR or that any particular distribution policy for common units will be maintained.
Since the announcement of our $500 million common unit repurchase program on October 27, 2015 through February 3, 2017, KKR has repurchased 31.7 million common units for $459 million. In addition, equity awards representing 5.2 million common units were canceled for approximately $79 million to satisfy tax obligations in connection with their vesting. In total, 36.9 million common units have been retired on a fully-diluted basis over this period. In addition, KKR has announced an incremental $250 million has been authorized to repurchase common units. This amount is in addition to the $41.2 million remaining under its current repurchase program. Common units may be repurchased from time to time in open market transactions, in privately negotiated transactions or otherwise.
SUPPLEMENTAL INFORMATION
A slide presentation containing supplemental commentary about KKR's financial results for the fiscal quarter and year ended December 31, 2016 may be accessed through the Investor Center of the KKR website at http://ir.kkr.com/kkr_ir/kkr_events.cfm . The presentation will be referenced on the conference call discussed below.
CONFERENCE CALL
A conference call to discuss KKR's financial results will be held on Thursday, February 9, 2017 at 10:00 a.m. ET. The conference call may be accessed by dialing (877) 303-2917 (U.S. callers) or +1 (253) 237-1135 (non-U.S. callers); a pass code is not required. Additionally, the conference call will be broadcast live over the Internet and may be accessed through the Investor Center section of KKR's website at http://ir.kkr.com/kkr_ir/kkr_events.cfm . A replay of the live broadcast will be available on KKR's website or by dialing (855) 859-2056 (U.S. callers) or +1 (404) 537-3406 (non-U.S. callers), pass code 54397246, beginning approximately two hours after the broadcast.
From time to time, KKR may use its website as a channel of distribution of material company information. Financial and other important information regarding KKR is routinely posted and accessible on the Investor Center for KKR & Co. L.P. at http://ir.kkr.com/kkr_ir/kkr_events.cfm. In addition, you may automatically receive email alerts and other information about KKR by enrolling your email address at the “Email Alerts” area of the Investor Center on the website.

Page 3



ABOUT KKR
KKR is a leading global investment firm that manages investments across multiple asset classes including private equity, energy, infrastructure, real estate, credit and hedge funds. KKR aims to generate attractive investment returns by following a patient and disciplined investment approach, employing world-class people, and driving growth and value creation at the asset level. KKR invests its own capital alongside its partners' capital and brings opportunities to others through its capital markets business. References to KKR’s investments may include the activities of its sponsored funds. For additional information about KKR & Co. L.P. (NYSE: KKR), please visit KKR's website at www.kkr.com and on Twitter @KKR_Co.
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 KKR’s beliefs, assumptions and expectations, taking into account all information currently available to it. These beliefs, assumptions and expectations can change as a result of many possible events or factors, not all of which are known to KKR or are within its control. If a change occurs, KKR’s business, financial condition, liquidity and results of operations, including but not limited to AUM, FPAUM, ENI, ENI after taxes, after-tax distributable earnings, capital invested, syndicated capital, uncalled commitments, cash and short-term investments, net realized investment income, book value, and quarterly distributions, 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: the general volatility of the capital markets; failure to realize the benefits of or changes in KKR’s business strategies including the ability to realize the anticipated synergies from acquisitions or strategic partnerships; 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; and the degree and nature of KKR’s competition. All forward looking statements speak only as of the date hereof. KKR does not undertake 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 business strategy is focused on the long term and financial results are subject to significant volatility. Additional information about factors affecting KKR is available in KKR & Co. L.P.’s Annual Report on Form 10-K for the fiscal year ended December 31, 2015, filed with the SEC on February 26, 2016, quarterly reports on Form 10-Q for subsequent quarters and other filings with the SEC, which are available at www.sec.gov .
___________________________

CONTACT INFORMATION
Investor Relations:                        
Kohlberg Kravis Roberts & Co. L.P.                 
Craig Larson                        
Tel: +1-877-610-4910 (U.S.) / +1-212-230-9410            
investor-relations@kkr.com                     

Media:
Kohlberg Kravis Roberts & Co. L.P.
Kristi Huller
Tel: +1-212-750-8300
media@kkr.co m

Page 4



KKR
CONSOLIDATED STATEMENTS OF OPERATIONS (GAAP BASIS - UNAUDITED)
(Amounts in thousands, except common unit and per common unit amounts)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Quarter Ended
 
Year Ended
 
 
December 31, 2016
 
December 31, 2015
 
December 31, 2016
 
December 31, 2015
Revenues
 
 
 
 
 
 
 
 
Fees and Other
 
$
481,475

 
$
307,923

 
$
1,908,093

 
$
1,043,768

Expenses
 
 
 
 
 
 
 
 
Compensation and Benefits
 
283,751

 
306,942

 
1,063,813

 
1,180,591

Occupancy and Related Charges
 
15,463

 
17,295

 
64,622

 
65,683

General, Administrative and Other
 
153,602

 
200,858

 
567,039

 
624,951

Total Expenses
 
452,816

 
525,095

 
1,695,474

 
1,871,225

Investment Income (Loss)
 
 
 
 
 
 
 
 
Net Gains (Losses) from Investment Activities
 
333,808

 
1,197,879

 
342,897

 
4,672,627

Dividend Income
 
19,866

 
140,397

 
187,853

 
850,527

Interest Income
 
268,615

 
320,569

 
1,021,809

 
1,219,197

Interest Expense
 
(182,141
)
 
(170,282
)
 
(789,953
)
 
(573,226
)
Total Investment Income (Loss)
 
440,148

 
1,488,563

 
762,606

 
6,169,125

 
 
 
 
 
 
 
 
 
Income (Loss) Before Taxes
 
468,807

 
1,271,391

 
975,225

 
5,341,668

 
 
 
 
 
 
 
 
 
Income Tax (Benefit)
 
5,800

 
27,341

 
24,561

 
66,636

 
 
 
 
 
 
 
 
 
Net Income (Loss)
 
463,007

 
1,244,050

 
950,664

 
5,275,032

 
 
 
 
 
 
 
 
 
Net Income (Loss) Attributable to
 
 
 
 
 
 
 
 
Redeemable Noncontrolling Interests
 
(13,092
)
 
7,371

 
(8,476
)
 
(4,512
)
Net Income (Loss) Attributable to
 
 
 
 
 
 
 
 
Noncontrolling Interests
 
296,789

 
1,204,422

 
649,833

 
4,791,062

 
 
 
 
 
 
 
 
 
Net Income (Loss) Attributable to KKR & Co. L.P.
 
179,310

 
32,257

 
309,307

 
488,482

 
 
 
 
 
 
 
 
 
Net Income (Loss) Attributable to Series A Preferred Unitholders
 
5,822

 

 
17,337

 

Net Income (Loss) Attributable to Series B Preferred Unitholders
 
2,519

 

 
4,898

 

 
 
 
 
 
 
 
 
 
Net Income (Loss) Attributable to KKR & Co. L.P. Common Unitholders
 
$
170,969

 
$
32,257

 
$
287,072

 
$
488,482

 
 
 
 
 
 
 
 
 
Net Income (Loss) Attributable to KKR & Co. L.P. Per Common Unit
 
 
 
 
 
 
 
 
Basic
 
$
0.38

 
$
0.07

 
$
0.64

 
$
1.09

Diluted
 
$
0.35

 
$
0.07

 
$
0.59

 
$
1.01

Weighted Average Common Units Outstanding
 
 
 
 
 
 
 
 
Basic
 
451,154,845

 
461,374,013

 
448,905,126

 
448,884,185

Diluted
 
484,312,804

 
489,704,787

 
483,431,048

 
482,699,194

 
 
 
 
 
 
 
 
 

















_______________________________________________________________________________________________________________________________________________________________________________________

Note: On January 1, 2016, KKR adopted ASU 2015-02, which resulted in the de-consolidation of most of KKR's investment funds that had been consolidated prior to such date. Effective with the adoption of ASU 2015-02, assets, liabilities, and noncontrolling interests from our investment funds that had previously been consolidated are no longer included in the statement of financial condition. We adopted this guidance using the modified retrospective method. As a result, restatement of prior period results is not required and prior periods presented under GAAP have not been impacted.

Page 5



KKR
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (GAAP BASIS - UNAUDITED)
(Amounts in thousands, except common unit and per common unit amounts)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
As of
December 31, 2016
 
As of
December 31, 2015
 
 
 
 
 
Assets
 
 
 
 
Cash and Cash Equivalents
 
$
2,508,902

 
$
1,047,740

Investments
 
31,409,765

 
65,305,931

Other
 
5,084,230

 
4,688,668

Total Assets
 
39,002,897

 
71,042,339

 
 
 
 
 
Liabilities and Equity
 
 
 
 
Debt Obligations
 
18,544,075

 
18,714,597

Other Liabilities
 
3,340,739

 
2,860,157

Total Liabilities
 
21,884,814

 
21,574,754

 
 
 
 
 
Redeemable Noncontrolling Interests
 
632,348

 
188,629

 
 
 
 
 
Equity
 
 
 
 
Series A Preferred Units
 
332,988

 

Series B Preferred Units
 
149,566

 

KKR & Co. L.P. Capital - Common Unitholders
 
5,457,279

 
5,547,182

Noncontrolling Interests
 
10,545,902

 
43,731,774

Total Equity
 
16,485,735

 
49,278,956

Total Liabilities and Equity
 
$
39,002,897

 
$
71,042,339

 
 
 
 
 
KKR & Co. L.P. Capital Per Outstanding Common Unit - Basic
 
$
12.06

 
$
12.12


































_______________________________________________________________________________________________________________________________________________________________________________________
Note: On January 1, 2016, KKR adopted ASU 2015-02, which resulted in the de-consolidation of most of KKR's investment funds that had been consolidated prior to such date. Effective with the adoption of ASU 2015-02, assets, liabilities, and noncontrolling interests from our investment funds that had previously been consolidated are no longer included in the statement of financial condition. We adopted this guidance using the modified retrospective method. As a result, restatement of prior period results is not required and prior periods presented under GAAP have not been impacted.

Page 6



KKR
STATEMENTS OF OPERATIONS AND OTHER SELECTED FINANCIAL INFORMATION
TOTAL REPORTABLE SEGMENTS (UNAUDITED)
(Amounts in thousands, except unit and per unit amounts)
 
 
 
 
 
 
 
 
 
 
 
 
Quarter Ended
 
Year Ended
 
 
December 31, 2016
 
September 30, 2016
 
December 31, 2015
 
December 31, 2016
 
December 31, 2015
Segment Revenues
 
 
 
 
 
 
 
 
 
 
Management, Monitoring and Transaction Fees, Net
 
 
 
 
 
 
 
 
 
 
Management Fees
 
$
198,137

 
$
201,508

 
$
195,072

 
$
797,862

 
$
732,033

Monitoring Fees
 
12,228

 
11,091

 
94,128

 
64,354

 
264,643

Transaction Fees
 
68,271

 
111,354

 
107,320

 
344,274

 
364,994

Fee Credits
 
(22,356
)
 
(47,392
)
 
(59,375
)
 
(131,628
)
 
(219,620
)
Total Management, Monitoring and Transaction Fees, Net
 
256,280

 
276,561

 
337,145

 
1,074,862

 
1,142,050

Performance Income (Loss)
 
 
 
 
 
 
 
 
 
 
Realized Incentive Fees
 
23,449

 
3,659

 
7,209

 
33,346

 
19,647

Realized Carried Interest
 
503,176

 
350,469

 
207,211

 
1,256,208

 
1,027,154

Unrealized Carried Interest
 
(285,616
)
 
70,351

 
112,388

 
(420,372
)
 
163,545

Total Performance Income (Loss)
 
241,009

 
424,479

 
326,808

 
869,182

 
1,210,346

Investment Income (Loss)
 
 
 
 
 
 
 
 
 
 
Net Realized Gains (Losses)
 
969

 
170,078

 
(81,343
)
 
371,563

 
337,023

Net Unrealized Gains (Losses)
 
141,276

 
136,740

 
(128,765
)
 
(584,423
)
 
(391,962
)
Total Realized and Unrealized
 
142,245

 
306,818

 
(210,108
)
 
(212,860
)
 
(54,939
)
Interest Income and Dividends
 
69,101

 
71,185

 
85,907

 
322,857

 
411,536

Interest Expense
 
(44,264
)
 
(47,506
)
 
(52,174
)
 
(188,761
)
 
(203,085
)
Net Interest and Dividends
 
24,837

 
23,679

 
33,733

 
134,096

 
208,451

Total Investment Income (Loss)
 
167,082

 
330,497

 
(176,375
)
 
(78,764
)
 
153,512

Total Segment Revenues
 
664,371

 
1,031,537

 
487,578

 
1,865,280

 
2,505,908

Segment Expenses
 
 
 
 
 
 
 
 
 
 
Compensation and Benefits
 
 
 
 
 
 
 
 
 
 
Cash Compensation and Benefits
 
95,260

 
101,967

 
121,036

 
395,016

 
409,992

Realized Performance Income Compensation
 
215,650

 
159,151

 
85,766

 
538,321

 
418,718

Unrealized Performance Income Compensation
 
(112,786
)
 
29,393

 
45,351

 
(161,510
)
 
66,927

Total Compensation and Benefits
 
198,124

 
290,511

 
252,153

 
771,827

 
895,637

Occupancy and Related Charges
 
14,914

 
15,877

 
16,666

 
62,400

 
62,657

Other Operating Expenses
 
67,806

 
55,123

 
68,978

 
234,348

 
233,618

Total Segment Expenses
 
280,844

 
361,511

 
337,797

 
1,068,575

 
1,191,912

Income (Loss) attributable to noncontrolling interests
 
334

 
760

 
5,100

 
2,336

 
16,007

Economic Net Income (Loss)
 
383,193

 
669,266

 
144,681

 
794,369

 
1,297,989

Equity-based Compensation
 
37,970

 
50,270

 
37,376

 
186,227

 
186,346

Pre-tax Economic Net Income (Loss)
 
345,223

 
618,996

 
107,305

 
608,142

 
1,111,643

Provision for Income Tax (Benefit)
 
(2,335
)
 
12,611

 
36,797

 
10,282

 
83,363

Preferred Distributions
 
8,341

 
8,201

 

 
22,235

 

After-tax Economic Net Income (Loss)
 
$
339,217

 
$
598,184

 
$
70,508

 
$
575,625

 
$
1,028,280

 
 
 
 
 
 
 
 
 
 
 
After-tax Economic Net Income (Loss) Per Adjusted Unit
 
$
0.40

 
$
0.71

 
$
0.08

 
$
0.68

 
$
1.21

Weighted Average Adjusted Units (Fully Diluted Basis)
 
839,268,845

 
837,504,674

 
852,446,702

 
841,304,836

 
851,099,066

 
 
 
 
 
 
 
 
 
 
 
Other Operating Measures (1) :
 
 
 
 
 
 
 
 
 
 
Fee Related Earnings
 
$
116,407

 
$
142,253

 
$
180,848

 
$
537,419

 
$
610,496

After-tax Distributable Earnings
 
$
389,874

 
$
461,498

 
$
168,618

 
$
1,527,696

 
$
1,452,656

 
 
 
 
 
 
 
 
 
 
 
Assets Under Management
 
$
129,555,700

 
$
131,101,800

 
$
119,544,300

 
$
129,555,700

 
$
119,544,300

Fee Paying Assets Under Management
 
$
101,473,400

 
$
93,153,800

 
$
91,720,500

 
$
101,473,400

 
$
91,720,500

Capital Invested and Syndicated Capital
 
$
2,461,500

 
$
4,392,000


$
3,382,200

 
$
12,199,700

 
$
12,393,300

Uncalled Commitments
 
$
37,791,300

 
$
38,267,300


$
29,457,100

 
$
37,791,300

 
$
29,457,100

 
 
 
 
 
 
 
 
 
 
 


_______________________________________________________________________________________________________________________________________________________________________________________
Note: See "Notes to Reportable Segments" for more information about certain non-GAAP financial measures and Exhibits C and D for a reconciliation of such measures to the financial results presented in accordance with GAAP.

(1) See Exhibit A "Other Information" for the definition and calculation of Fee Related Earnings and After-tax Distributable Earnings.

Page 7



KKR
SCHEDULE OF SEGMENT REVENUES AND OTHER SELECTED FINANCIAL INFORMATION (UNAUDITED)
(Amounts in thousands)
 
 
 
 
 
PRIVATE MARKETS
 
 
 
 
 
 
 
Quarter Ended
 
Year Ended
 
 
December 31, 2016
 
September 30, 2016
 
December 31, 2015
 
December 31, 2016
 
December 31, 2015
Segment Revenues
 
 
 
 
 
 
 
 
 
 
Management, Monitoring and Transaction Fees, Net
 
 
 
 
 
 
 
 
 
 
Management Fees
 
$
112,046

 
$
117,795

 
$
122,703

 
$
466,422

 
$
465,575

Monitoring Fees
 
12,228

 
11,091

 
94,128

 
64,354

 
264,643

Transaction Fees
 
18,581

 
53,223

 
40,000

 
132,602

 
144,652

Fee Credits
 
(10,537
)
 
(37,127
)
 
(51,567
)
 
(103,579
)
 
(195,025
)
Total Management, Monitoring and Transaction Fees, Net
 
132,318

 
144,982

 
205,264

 
559,799

 
679,845

Performance Income (Loss)
 
 
 
 
 
 
 
 
 
 
Realized Incentive Fees
 

 

 

 

 

Realized Carried Interest
 
503,176

 
350,469

 
207,211

 
1,252,370

 
1,018,201

Unrealized Carried Interest
 
(284,674
)
 
53,339

 
137,438

 
(416,060
)
 
182,628

Total Performance Income (Loss)
 
218,502

 
403,808

 
344,649

 
836,310

 
1,200,829

Investment Income (Loss)
 
 
 
 
 
 
 
 
 
 
Net Realized Gains (Losses)
 

 

 

 

 

Net Unrealized Gains (Losses)
 

 

 

 

 

Total Realized and Unrealized
 

 

 

 

 

Interest Income and Dividends
 

 

 

 

 

Interest Expense
 

 

 

 

 

Net Interest and Dividends
 

 

 

 

 

Total Investment Income (Loss)
 

 

 

 

 

Total Segment Revenues
 
$
350,820

 
$
548,790

 
$
549,913

 
$
1,396,109

 
$
1,880,674

 
 
 
 
 
 
 
 
 
 
 
Assets Under Management
 
$
73,815,500

 
$
75,181,600

 
$
66,028,600

 
$
73,815,500

 
$
66,028,600

Fee Paying Assets Under Management
 
$
52,204,800

 
$
44,010,300

 
$
45,307,400

 
$
52,204,800

 
$
45,307,400

Capital Invested  (1)
 
$
868,700


$
2,370,600


$
1,464,000

 
$
6,344,000

 
$
6,279,500

Uncalled Commitments
 
$
31,478,700


$
31,839,100


$
22,766,300

 
$
31,478,700

 
$
22,766,300



PUBLIC MARKETS
 
 
 
 
 
 
 
Quarter Ended
 
Year Ended
 
 
December 31, 2016
 
September 30, 2016
 
December 31, 2015
 
December 31, 2016
 
December 31, 2015
Segment Revenues
 
 
 
 
 
 
 
 
 
 
Management, Monitoring and Transaction Fees, Net
 
 
 
 
 
 
 
 
 
 
Management Fees
 
$
86,091

 
$
83,713

 
$
72,369

 
$
331,440

 
$
266,458

Monitoring Fees
 

 

 

 

 

Transaction Fees
 
12,387

 
10,748

 
8,183

 
30,155

 
28,872

Fee Credits
 
(11,819
)
 
(10,265
)
 
(7,808
)
 
(28,049
)
 
(24,595
)
Total Management, Monitoring and Transaction Fees, Net
 
86,659

 
84,196

 
72,744

 
333,546

 
270,735

Performance Income (Loss)
 
 
 
 
 
 
 
 
 
 
Realized Incentive Fees
 
23,449

 
3,659

 
7,209

 
33,346

 
19,647

Realized Carried Interest
 

 

 

 
3,838

 
8,953

Unrealized Carried Interest
 
(942
)
 
17,012

 
(25,050
)
 
(4,312
)
 
(19,083
)
Total Performance Income (Loss)
 
22,507

 
20,671

 
(17,841
)
 
32,872

 
9,517

Investment Income (Loss)
 
 
 
 
 
 
 
 
 
 
Net Realized Gains (Losses)
 

 

 

 

 

Net Unrealized Gains (Losses)
 

 

 

 

 

Total Realized and Unrealized
 

 

 

 

 

Interest Income and Dividends
 

 

 

 

 

Interest Expense
 

 

 

 

 

Net Interest and Dividends
 

 

 

 

 

Total Investment Income (Loss)
 

 

 

 

 

Total Segment Revenues
 
$
109,166

 
$
104,867

 
$
54,903

 
$
366,418

 
$
280,252

 
 
 
 
 
 
 
 
 
 
 
Assets Under Management
 
$
55,740,200

 
$
55,920,200

 
$
53,515,700

 
$
55,740,200

 
$
53,515,700

Fee Paying Assets Under Management
 
$
49,268,600

 
$
49,143,500

 
$
46,413,100

 
$
49,268,600

 
$
46,413,100

Capital Invested (1)
 
$
1,592,800


$
1,484,400


$
1,742,600

 
$
4,642,200

 
$
5,244,900

Uncalled Commitments
 
$
6,312,600


$
6,428,200


$
6,690,800

 
$
6,312,600

 
$
6,690,800



_______________________________________________________________________________________________________________________________________________________________________________________
(1) For the periods reported, capital invested for the Private and Public Markets segments reflects the portion of such capital, if any, that has been invested by KKR’s Principal Activities segment. See Exhibit A “Other Information” for the definition of capital invested.

Page 8



KKR
SCHEDULE OF SEGMENT REVENUES AND OTHER SELECTED FINANCIAL INFORMATION (UNAUDITED)
(Amounts in thousands)
 
 
 
 
 
 
 
 
 
 
 
CAPITAL MARKETS
 
 
 
 
 
 
 
 
 
Quarter Ended
 
Year Ended
 
 
December 31, 2016
 
September 30, 2016
 
December 31, 2015
 
December 31, 2016
 
December 31, 2015
Segment Revenues
 
 
 
 
 
 
 
 
 
 
Management, Monitoring and Transaction Fees, Net
 
 
 
 
 
 
 
 
 
 
Management Fees
 
$

 
$

 
$

 
$

 
$

Monitoring Fees
 

 

 

 

 

Transaction Fees
 
37,303

 
47,383

 
59,137

 
181,517

 
191,470

Fee Credits
 

 

 

 

 

Total Management, Monitoring and Transaction Fees, Net
 
37,303

 
47,383

 
59,137

 
181,517

 
191,470

Performance Income (Loss)
 
 
 
 
 
 
 
 
 
 
Realized Incentive Fees
 

 

 

 

 

Realized Carried Interest
 

 

 

 

 

Unrealized Carried Interest
 

 

 

 

 

Total Performance Income (Loss)
 

 

 

 

 

Investment Income (Loss)
 
 
 
 
 
 
 
 
 
 
Net Realized Gains (Losses)
 

 

 

 

 

Net Unrealized Gains (Losses)
 

 

 

 

 

Total Realized and Unrealized
 

 

 

 

 

Interest Income and Dividends
 

 

 

 

 

Interest Expense
 

 

 

 

 

Net Interest and Dividends
 

 

 

 

 

Total Investment Income (Loss)
 

 

 

 

 

Total Segment Revenues
 
$
37,303

 
$
47,383

 
$
59,137

 
$
181,517

 
$
191,470

 
 
 
 
 
 
 
 
 
 
 
Syndicated Capital
 
$


$
537,000


$
175,600

 
$
1,213,500

 
$
868,900


PRINCIPAL ACTIVITIES
 
 
 
 
 
 
 
 
 
Quarter Ended
 
Year Ended
 
 
December 31, 2016
 
September 30, 2016
 
December 31, 2015
 
December 31, 2016
 
December 31, 2015
Segment Revenues
 
 
 
 
 
 
 
 
 
 
Management, Monitoring and Transaction Fees, Net
 
 
 
 
 
 
 
 
 
 
Management Fees
 
$

 
$

 
$

 
$

 
$

Monitoring Fees
 

 

 

 

 

Transaction Fees
 

 

 

 

 

Fee Credits
 

 

 

 

 

Total Management, Monitoring and Transaction Fees, Net
 

 

 

 

 

Performance Income (Loss)
 
 
 
 
 
 
 
 
 
 
Realized Incentive Fees
 

 

 

 

 

Realized Carried Interest
 

 

 

 

 

Unrealized Carried Interest
 

 

 

 

 

Total Performance Income (Loss)
 

 

 

 

 

Investment Income (Loss)
 
 
 
 
 
 
 
 
 
 
Net Realized Gains (Losses)
 
969

 
170,078

 
(81,343
)
 
371,563

 
337,023

Net Unrealized Gains (Losses)
 
141,276

 
136,740

 
(128,765
)
 
(584,423
)
 
(391,962
)
Total Realized and Unrealized
 
142,245

 
306,818

 
(210,108
)
 
(212,860
)
 
(54,939
)
Interest Income and Dividends
 
69,101

 
71,185

 
85,907

 
322,857

 
411,536

Interest Expense
 
(44,264
)
 
(47,506
)
 
(52,174
)
 
(188,761
)
 
(203,085
)
Net Interest and Dividends
 
24,837

 
23,679

 
33,733

 
134,096

 
208,451

Total Investment Income (Loss)
 
167,082

 
330,497

 
(176,375
)
 
(78,764
)
 
153,512

Total Segment Revenues
 
$
167,082

 
$
330,497

 
$
(176,375
)
 
$
(78,764
)
 
$
153,512

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


Page 9



KKR
BALANCE SHEET
TOTAL REPORTABLE SEGMENTS (UNAUDITED)
(Amounts in thousands, except per unit amounts)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
As of
 
 
 
As of
 
 
 
 
December 31, 2016
 
 
 
December 31, 2015
 
 
Cash and Short-term Investments
 
$
3,387,673

 
 
 
$
1,287,650

 
 
Investments
 
6,958,873

 
(1)  
 
8,958,089

 
 
Unrealized Carry
 
1,213,692

 
(2)  
 
1,415,478

 
(2)  
Other Assets
 
1,611,678

 
 
 
1,613,139

 
 
Corporate Real Estate
 
161,225

 
 
 
154,942

 
 
Total Assets
 
$
13,333,141

 
 
 
$
13,429,298

 
 
 
 
 
 
 
 
 
 
 
Debt Obligations - KKR (ex-KFN)
 
$
2,000,000

 
 
 
$
2,000,000

 
 
Debt Obligations - KFN
 
398,560

 
 
 
657,310

 
 
Preferred Shares - KFN
 
373,750

 
 
 
373,750

 
 
Other Liabilities
 
244,676

 
 
 
291,537

 
 
Total Liabilities
 
3,016,986

 
 
 
3,322,597

 
 
 
 
 
 
 
 
 
 
 
Noncontrolling Interests
 
19,564

 
 
 
127,472

 
 
Preferred Units
 
500,000

 
 
 

 
 
 
 
 
 
 
 
 
 
 
Book Value
 
$
9,796,591

 
 
 
$
9,979,229

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Book Value Per Outstanding Adjusted Unit
 
$
12.15

 
 
 
$
12.18

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Last Twelve Months Ended
 
 
 
 
December 31, 2016
 
 
 
December 31, 2015
 
 
 
 
 
 
 
 
 
 
 
Return on Equity (After-tax Economic Net Income (Loss) ) (3)
 
6%
 
 
 
10%
 
 
 
 
 
 
 
 
 
 
 
Return on Equity (After-tax Distributable Earnings) (4)
 
16%
 
 
 
14%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

_______________________________________________________________________________________________________________________________________________________________________________________
Note: As of December 31, 2016 , KKR had a $1.0 billion revolving credit facility, which was undrawn. In addition, KKR has a $500.0 million revolving credit facility for use in its capital markets business, which was undrawn as of December 31, 2016 . As of December 31, 2016 , KKR’s portion of total uncalled commitments to its investment funds was $2.6 billion . See Exhibit B for details.

See reconciliation in Exhibit D for calculation of Outstanding Adjusted Units.

(1) See schedule of investments that follows on the next page.

(2) Unrealized Carry
 
 
As of
 
 
 
As of
 
 
 
 
December 31, 2016
 
 
 
December 31, 2015
 
 
Private Markets
 
$
1,141,610

 
 
 
$
1,340,556

 
 
Public Markets
 
72,082

 
 
 
74,922

 
 
Total
 
$
1,213,692

 
 
 
$
1,415,478

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

(3) Return on Equity (After-tax Economic Net Income (Loss) ) measures the amount of after-tax economic net income generated as a percentage of capital invested in KKR’s business. Return on equity is calculated by dividing After-tax Economic Net Income (Loss) on a trailing twelve-month basis by the average book value during the period. We believe this measure is useful to unitholders as it provides a measure of the overall profitability of KKR’s businesses as a percentage of net assets in KKR's business.
(4) Return on Equity (After-tax Distributable Earnings) measures the amount of income excluding the impact of mark-to-market gain (losses) generated as a percentage of capital invested in KKR’s business. It is calculated by dividing after-tax distributable earnings on a trailing twelve-month basis by the average book value during the period. We believe this measure is useful to unitholders as it provides a measure of the overall profitability of KKR’s businesses, excluding the impact of mark-to-market gains (losses), as a percentage of net assets in KKR's business.

Page 10



KKR
SCHEDULE OF INVESTMENTS (1)
TOTAL REPORTABLE SEGMENTS (UNAUDITED)
(Amounts in thousands, except percentage amounts)
 
 
As of December 31, 2016
 
 
 
Investments
 
Fair
Value
 
 
 
Private Equity Co-Investments and Other Equity
 
$
1,733,215

Private Equity Funds
 
1,087,783

Private Equity Total
 
2,820,998

 
 
 
Energy
 
559,050

Real Estate (3)
 
747,562

Infrastructure
 
223,953

Real Assets Total
 
1,530,565

 
 
 
 
 
 
Special Situations
 
713,733

Direct Lending
 
88,918

Mezzanine
 
23,856

Alternative Credit Total
 
826,507

CLOs (4)
 
585,078

Liquid Credit
 
180,620

Specialty Finance
 
202,837

Credit Total
 
1,795,042

 
 
 
 
 
 
Other
 
812,268

 
 
 
Total Investments
 
$
6,958,873

 
 
 
Q416EARNING_CHART-45922.JPG

 
 
As of December 31, 2016
 
 
 
 
 
Significant Investments: (5)
 
Fair
Value
 
Fair Value as a
Percentage of
Total Investments
First Data Corporation (NYSE: FDC)
 
$
1,094,159

 
15.7
%
KKR Real Estate Finance Trust Inc.
 
289,723

 
4.2
%
WMIH Corp. (NASDAQ: WMIH)
 
220,896

 
3.2
%
Natural Gas Midstream Investment
 
134,478

 
1.9
%
Oil & Gas Royalties Investment
 
119,700

 
1.7
%
Total Significant Investments
 
1,858,956

 
26.7
%
 
 
 
 
 
Other Investments
 
5,099,917

 
73.3
%
Total Investments
 
$
6,958,873

 
100.0
%
 
 
 
 
 


_______________________________________________________________________________________________________________________________________________________________________________________
(1) Investments is a term used solely for purposes of financial presentation of a portion of KKR’s balance sheet and includes majority ownership of subsidiaries that operate KKR’s asset management and broker-dealer businesses, including the general partner interests of KKR’s investment funds.

(2) General partner commitments in our funds are included in the various asset classes shown above. Private Equity and Other Equity includes KKR private equity funds, co-investments alongside such KKR sponsored private equity funds and other opportunistic investments. However, equity investments in other asset classes, such as real estate, special situations and energy appear in these other asset classes.  Other Credit consists of liquid credit and specialty finance strategies.

(3) Includes our ownership of approximately $289.7 million in KKR Real Estate Finance Trust Inc. that is not held for investment purposes and is held at cost.

(4) Includes approximately $227.4 million of CLOs that are not held for investment purposes and are held at cost.

(5) The significant investments include the top five investments (other than investments expected to be syndicated or transferred in connection with new fundraising) based on their fair values as of December 31, 2016 . The fair value figures include the co-investment and the limited partner and/or general partner interests held by KKR in the underlying investment, if applicable.

Page 11



KKR
ASSETS UNDER MANAGEMENT (UNAUDITED)
(Amounts in thousands)
 
 
 
 
 
 
 
 
 
Private
Markets
Segment
 
Public
Markets
Segment
 
Total
Reportable
Segments
Quarter Ended December 31, 2016
 
 
 
 
 
 
September 30, 2016
 
$
75,181,600

 
$
55,920,200

 
$
131,101,800

New Capital Raised
 
1,791,700

 
2,682,600

 
4,474,300

Distributions
 
(4,422,000
)
 
(2,727,800
)
(1)  
(7,149,800
)
Change in Value
 
1,264,200

 
(134,800