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August 9, 2010

KKR & Co. L.P. Announces Second Quarter 2010 Results 1

NEW YORK, Aug 09, 2010 (BUSINESS WIRE) -- Assets under management ("AUM") totaled $54.4 billion as of June 30, 2010, up from $46.9 billion as of June 30, 2009.

Economic net income ("ENI") was $433.1 million for the second quarter of 2010, down from pro forma2 ENI of $613.5 million for the second quarter of 2009. ENI was $1,107.9 million for the first six months of 2010, up from pro forma ENI of $616.0 million for the first six months of 2009.

Fee related earnings ("FRE") were $63.3 million and $153.7 million for the second quarter and the first six months of 2010, respectively, up from pro forma fee related earnings of $53.3 million and $92.9 million in the comparable periods of 2009.

GAAP net income attributable to KKR & Co. L.P. was $29.9 million and $143.7 million for the second quarter and first six months of 2010, respectively3.

Book value was $5.0 billion on a segment basis representing $7.37 per unit as of June 30, 2010.

KKR declares a second quarter distribution of $0.08 per common unit.

KKR received an A rating from Fitch and an A- rating from Standard & Poor's, in each case with a stable outlook.

Consolidated Results

KKR's consolidated GAAP results for the quarter and six months ended June 30, 2010 included net income attributable to KKR & Co. L.P. of $29.9 million and $143.7 million, respectively, and net income attributable to KKR & Co. L.P. per common unit of $0.15 and $0.70, respectively. For the quarter and six months ended June 30, 2009, net income attributable to KKR & Co. L.P. was $365.8 million and $311.2 million, respectively. The decrease from both prior periods was primarily due to the following factors that were not applicable to the quarter and six months ended June 30, 2009 as a result of the Business Combination that occurred on October 1, 2009: (i) the allocation of approximately 70% of the earnings of KKR to KKR Holdings L.P., (ii) the issuance of equity-based awards which resulted in the recognition of non-cash compensation charges, and (iii) the recognition of corporate income tax expense.

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1 Certain financial measures contained herein, including fee related earnings and economic net income, are not presented in accordance with accounting principles generally accepted in the United States of America ("GAAP"). See page 7 for a reconciliation of such measures to financial results prepared in accordance with GAAP.

Information contained herein relating to KKR's reportable segments are presented prior to giving effect to the allocation of income between KKR & Co. L.P. and KKR Holdings L.P. and as such represent the business in total.

2 On October 1, 2009 KKR and KKR & Co. (Guernsey) L.P. completed a transaction to combine their businesses (the "Business Combination"). Amounts indicated in this press release as being presented on a pro forma basis give effect to the Business Combination and related transactions as if they were completed on January 1, 2009. See notes to KKR's unaudited reportable segments on page 23 of this press release for a summary of the applicable adjustments as a result of the Business Combination.

3 For the second quarter and first six months of 2009, GAAP Net income attributable to KKR & Co. L.P. was $365.8 million and $311.2 million, respectively. The 2010 and 2009 GAAP periods are not directly comparable as GAAP financial information prior to October 1, 2009 did not reflect certain adjustments that are applicable for periods after October 1, 2009 as a result of the Business Combination. See "Consolidated Results".

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Total Reportable Segments

Management 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 funds that KKR manages. In addition, there are other components of KKR's reportable segment results that differ from the equivalent GAAP results on a consolidated basis. These differences are described in the Notes to the Unaudited Reportable Segments on page 23.

AUM was $54.4 billion as of June 30, 2010, a decrease of $0.3 billion or 0.6% compared to AUM of $54.7 billion as of March 31, 2010. The decrease was primarily due to distributions and redemptions, partially offset by an increase in the fair value of KKR's private equity portfolio.

Fee paying assets under management ("FPAUM") were $41.6 billion as of June 30, 2010, a decrease of $0.9 billion or 2.1% compared to FPAUM of $42.5 billion as of March 31, 2010. The decrease was primarily due to changes in foreign exchange related to Euro denominated commitments and invested capital in KKR's private equity funds as well as distributions and redemptions.

FRE was $63.3 million for the quarter ended June 30, 2010, an increase of $10.1 million or 18.9% compared to pro forma FRE of $53.3 million for the quarter ended June 30, 2009. For the six months ended June 30, 2010, FRE was $153.7 million, an increase of $60.8 million or 65.4% compared to pro forma FRE of $92.9 million for the six months ended June 30, 2009. The increase over both comparative periods was due primarily to (i) higher transaction fees in the private markets segment as a result of the closing of more fee generating investments, (ii) higher capital markets fees as a result of increased activity within the capital markets and principal activities segment, and (iii) incentive fees earned in the public markets segment. These increases were partially offset by higher compensation expense as a result of improved performance and increased other operating expenses in connection with the expansion of KKR's business.

For the quarter ended June 30, 2010, ENI was $433.1 million, a decrease of $180.4 million or 29.4% compared to pro forma ENI of $613.5 million for the quarter ended June 30, 2009. The decrease primarily reflects lower investment income resulting from lower levels of gains relating to KKR's principal investments and lower net carried interest in its private equity portfolio. While the fair value of KKR's investments increased during the second quarter of 2010, the amount of net unrealized gains was lower than the amount recorded during the second quarter of 2009.

For the six months ended June 30, 2010, ENI was $1.1 billion, an increase of $491.9 million or 79.8% compared to pro forma ENI of $616.0 million for the six months ended June 30, 2009. The increase reflects higher investment income resulting from higher levels of gains relating to KKR's principal investments and higher net carried interest in its private equity portfolio.

Private Markets

AUM in the private markets segment was $41.0 billion as of June 30, 2010, an increase of $0.1 billion or 0.2% compared to AUM of $40.9 billion as of March 31, 2010. The increase was primarily due to an increase in the fair value of KKR's private equity portfolio, partially offset by distributions as a result of realizations.

FPAUM in the private markets segment was $35.3 billion as of June 30, 2010, a decrease of $0.6 billion or 1.6% compared to FPAUM of $35.9 billion as of March 31, 2010. The decrease was primarily due to changes in foreign exchange related to Euro denominated commitments and invested capital in KKR's private equity funds as well as distributions as a result of realizations, partially offset by new capital raised.

FRE in the private markets segment was $42.1 million for the quarter ended June 30, 2010, a decrease of $9.2 million or 18.0% compared to pro forma FRE of $51.3 million for the quarter ended June 30, 2009. The decrease was due primarily to higher compensation expense and other operating expenses in connection with the expansion of KKR's business, partially offset by higher transaction fees as a result of the closing of more fee generating investments.

FRE in the private markets segment was $98.3 million for the six months ended June 30, 2010, an increase of $4.9 million or 5.3% compared to pro forma FRE of $93.4 million for the six months ended June 30, 2009. The increase was due primarily to higher transaction fees as a result of the closing of more fee generating investments, partially offset by higher compensation expense and other operating expenses in connection with the expansion of KKR's business.

ENI in the private markets segment was $155.1 million for the quarter ended June 30, 2010, a decrease of $67.8 million or 30.4% compared to pro forma ENI of $223.0 million for the quarter ended June 30, 2009. The decrease was due primarily to lower net carried interest. Greater unrealized gains in KKR's private equity portfolio this quarter drove higher gross carried interest, however, this increase was more than offset by increases in the allocation to the carry pool and management fee refunds as a result of certain funds becoming carry-earning in 2010.

ENI in the private markets segment was $348.9 million for the six months ended June 30, 2010, an increase of $136.6 million or 64.3% compared to pro forma ENI of $212.3 million for the six months ended June 30, 2009. The increase was due primarily to higher gross carried interest driven by greater unrealized gains in KKR's private equity portfolio. This increase was partially offset by increases in the allocation to the carry pool and management fee refunds. As of June 30, 2010, the amount subject to management fee refunds, which may reduce carried interest in future periods, totaled $68.8 million.

Public Markets

AUM in the public markets segment was $13.4 billion as of June 30, 2010, a decrease of $0.4 billion or 2.9% compared to AUM of $13.8 billion as of March 31, 2010. The decrease was primarily due to redemptions, partially offset by new capital raised during the quarter.

FPAUM in the public markets segment was $6.3 billion as of June 30, 2010, a decrease of $0.3 billion or 4.5% compared to FPAUM of $6.6 billion as of March 31, 2010. The decrease was primarily due to redemptions, partially offset by new capital raised during the quarter.

FRE in the public markets segment was $11.8 million for the quarter ended June 30, 2010, an increase of $9.8 million compared to pro forma FRE of $1.9 million for the quarter ended June 30, 2009. For the six months ended June 30, 2010, FRE was $27.4 million, an increase of $24.8 million compared to pro forma FRE of $2.7 million for the six months ended June 30, 2009. The increase in both comparative periods was due primarily to incentive fees earned from KKR Financial Holdings LLC ("KFN") as a result of KFN's financial performance exceeding certain required benchmarks in the 2010 periods. No such fees were earned in the corresponding periods in 2009.

ENI in the public markets segment was $12.2 million for the quarter ended June 30, 2010, an increase of $11.7 million compared to pro forma ENI of $0.5 million for the quarter ended June 30, 2009. For the six months ended June 30, 2010, ENI was $28.4 million, an increase of $27.9 million compared to pro forma ENI of $0.6 million for the six months ended June 30, 2009. The increase in both comparative periods was due primarily to incentive fees earned from KFN as a result of KFN's financial performance exceeding certain required benchmarks in the 2010 periods. No such fees were earned in the corresponding periods in 2009.

Capital Markets and Principal Activities

FRE in the capital markets and principal activities segment was $9.5 million for the quarter ended June 30, 2010, an increase of $9.4 million compared to pro forma FRE of less than $0.1 million for the quarter ended June 30, 2009. For the six months ended June 30, 2010, FRE was $27.9 million, an increase of $31.1 million compared to pro forma FRE of $(3.1) million for the six months ended June 30, 2009. The increase in both comparative periods was due primarily to an increase in overall capital markets transaction activity resulting from an improvement in the capital markets environment from the prior period as well as the continued buildout of this business.

ENI in the capital markets and principal activities segment was $265.8 million for the quarter ended June 30, 2010, a decrease of $124.3 million or 31.9% compared to pro forma ENI of $390.1 million for the quarter ended June 30, 2009. The decrease was due primarily to lower levels of net unrealized appreciation of KKR's principal investments when compared to the prior period.

ENI in the capital markets and principal activities segment was $730.5 million for the six months ended June 30, 2010, an increase of $327.4 million or 81.2% compared to pro forma ENI of $403.1 million for the six months ended June 30, 2009. The increase was due primarily to higher levels of net unrealized appreciation of KKR's principal investments when compared to the prior period.

CAPITAL AND LIQUIDITY

As of June 30, 2010, KKR had an available cash balance of $508.1 million and $314.1 million of outstanding debt obligations. As of June 30, 2010, KKR's availability for further borrowings was approximately $1.6 billion (which does not include a $500.0 million revolving credit facility for use in its capital markets business that was undrawn as of June 30, 2010).

KKR recently received an A rating from Fitch and an A- rating from Standard & Poor's, in each case with a stable outlook.

As of June 30, 2010, KKR's portion of total uncalled commitments to its investment funds was $1,070.8 million, consisting of the following (amounts in thousands):

Commitments

Private Markets

2006 Fund $ 414,634
European III Fund 384,080
Asian Fund 171,254
E2 Investors (Annex Fund) 29,295
Natural Resources I 7,500
Other Private Markets Commitments 348
Total Private Markets Commitments 1,007,111

Public Markets

Mezzanine Fund 45,000
Capital Solutions Vehicles 18,700
Total Public Markets Commitments 63,700
Total Uncalled Commitments $ 1,070,811

DISTRIBUTION

A distribution of $0.08 per common unit will be paid on September 8, 2010 to unitholders of record as of the close of business on August 24, 2010.

SUBSEQUENT EVENTS

KKR has elected not to proceed with the proposed public offering of $500 million in KKR common units and has applied to withdraw the related registration statement with the U.S. Securities and Exchange Commission.

CONFERENCE CALL

A conference call to discuss KKR's financial results will be on held Tuesday, August 10, 2010 at 10:00 AM EDT. The conference call may be accessed by dialing (888) 661-5167 (U.S. callers) or +1 (913) 981-5520 (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 Relations section of KKR's website at http://www.kkr.com/kkr_ir/kkr_events.cfm. A replay of the live broadcast will be available on KKR's website or by dialing (888) 203-1112 (U.S. callers) and +1 (719) 457-0820 (non-U.S. callers) / pass code 4833378, beginning approximately two hours after the broadcast.

From time to time we may use our Web site as a channel of distribution of material company information. Financial and other important information regarding the Company is routinely posted on and accessible at the Investor Relations section for KKR at www.kkr.com. In addition, you may automatically receive email alerts and other information about us by enrolling your email by visiting the "Email Alerts" area in KKR's Investment Relations section.

ABOUT KKR

Founded in 1976 and led by Henry Kravis and George Roberts, KKR is a leading global alternative asset manager with $54.4 billion in assets under management as of June 30, 2010. With over 600 people and 14 offices around the world, KKR manages assets through a variety of investment funds and accounts covering multiple asset classes. KKR seeks to create value by bringing operational expertise to its portfolio companies and through active oversight and monitoring of its investments. KKR complements its investment expertise and strengthens interactions with investors through its client relationships and capital markets platforms. KKR is publicly traded on the New York Stock Exchange (NYSE: KKR). For additional information, please visit KKR's website 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 KKR's beliefs, assumptions and expectations of its 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 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 assets under management, fee paying assets under management, fee related earnings, economic net income, committed dollars invested, uncalled commitments and book value, 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 risk that the anticipated benefits of the business combination with KKR & Co. (Guernsey) L.P. may not be achieved; the general volatility of the capital markets; changes in 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; and the degree and nature of KKR's competition. 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 Registration Statement on Form S-1 (Reg. No. 333-165414) and other filings with the SEC, which are available at www.sec.gov.

* * * * *

KKR
CONSOLIDATED AND COMBINED STATEMENTS OF OPERATIONS (GAAP BASIS - UNAUDITED)
(Amounts in thousands, except unit and per unit amounts)
Quarter Ended Six Months Ended

June 30, 2010

June 30, 2009

June 30, 2010

June 30, 2009

Revenues
Fees $ 87,070 $ 51,482 $ 193,101 $ 90,552
Expenses
Employee Compensation and Benefits 348,621 47,907 714,152 93,449
Occupancy and Related Charges 9,510 9,781 19,195 18,666
General, Administrative and Other 58,046 28,477 135,770 65,880
Fund Expenses 14,409 11,557 24,777 24,485
Total Expenses 430,586 97,722 893,894 202,480
Investment Income (Loss)
Net Gains (Losses) from Investment Activities 1,031,568 2,218,980 3,318,121 1,498,131
Dividend Income 147,373 76,942 590,280 77,642
Interest Income 56,152 31,780 104,455 58,862
Interest Expense (10,134) (20,092) (23,961) (42,370)
Total Investment Income (Loss) 1,224,959 2,307,610 3,988,895 1,592,265
Income (Loss) Before Taxes 881,443 2,261,370 3,288,102 1,480,337
Income Taxes 31,283 159 44,735 1,690
Net Income (Loss) 850,160 2,261,211 3,243,367 1,478,647
Less: Net Income (Loss) Attributable to
Noncontrolling Interests in Consolidated Entities 676,816 1,895,385 2,663,946 1,167,404
Less: Net Income (Loss) Attributable to
Noncontrolling Interests Held by KKR Holdings L.P. 143,437 - 435,678 -
Net Income (Loss) Attributable to KKR & Co. L.P. $ 29,907 $ 365,826 $ 143,743 $ 311,243
Net Income Attributable to KKR & Co. L.P. Per Common Unit (a)
Basic $ 0.15 $ 0.70
Diluted (b) $ 0.15 $ 0.70
Weighted Average Common Units
Basic 204,902,226 204,902,226
Diluted (b) 204,902,226 204,902,226

(a) Prior to the Business Combination, KKR's business was conducted through a large number of entities as to which there was no single holding entity and no single capital structure upon which to calculate historical earnings per common unit information. Accordingly, earnings per common unit information has not been presented for historical periods prior to the Business Combination.

(b) For the quarter and six months ended June 30, 2010, 478,105,194 of KKR Holdings units have been excluded from the calculation of diluted earnings per common unit given that the exchange of these units would proportionally increase KKR & Co. L.P.'s interests in KKR's business and would have an anti-dilutive effect on earnings per common unit as a result of certain tax benefits KKR & Co. L.P. is assumed to receive upon the exchange.

KKR
RECONCILIATION OF TOTAL REPORTABLE SEGMENTS FEE RELATED EARNINGS AND ECONOMIC NET INCOME
TO NET INCOME ATTRIBUTABLE TO KKR & CO L.P. (GAAP BASIS - UNAUDITED)
(Amounts in thousands)
Quarter Ended Six Months Ended
June 30, 2010 June 30, 2010
Total reportable segments fee related earnings $ 63,336 $ 153,725
Investment income 370,589 955,380
Less: Income attributable to noncontrolling interests (874 ) (1,250 )
Economic net income (loss) 433,051 1,107,855
Income taxes (31,283 ) (44,735 )
Amortization of intangibles and other, net (1,341 ) (3,857 )
Non-cash equity based charges (227,083 ) (479,842 )
Allocation to noncontrolling -
interests held by KKR Holdings L.P. (143,437 ) (435,678 )
Net income attributable to KKR & Co. L.P. $ 29,907 $ 143,743
Quarter Ended Six Months Ended
June 30, 2009 (a) June 30, 2009 (a)
Total pro forma reportable segments fee related earnings $ 53,265 $ 92,917
Investment income 560,788 523,950
Less: Income attributable to noncontrolling interests (566 ) (873 )
Pro forma economic net income (loss) 613,487 615,994
Allocation to carry pool 22,741 22,433
Carry allocated to former KKR principals 38,144 29,262

Income on capital invested by or on behalf of KKR principals prior to completion of the Business Combination

38,734 14,836
Economic interests associated with the KKR 1996 Fund 36,889 26,569
Elimination of management fees paid by KPE prior to completion of Business Combination 9,409 17,641
Financial results of KPE (388,753 ) (404,334 )
Certain compensation adjustments (4,251 ) (8,502 )
Income attributable to noncontrolling interests 532 928
Total actual economic net income (loss) $ 366,932 $ 314,827
Income taxes (159 ) (1,690 )
Amortization of intangibles and other, net (947 ) (1,894 )
Net income attributable to KKR & Co. L.P. $ 365,826 $ 311,243

(a) The 2009 segment financial information is presented on a pro forma basis to give effect to the Business Combination and related transactions as if they were completed on January 1, 2009 whereas the 2009 GAAP financial information is presented on an actual basis. Accordingly, the reconciliations of segment financial information to GAAP financial information for the 2009 periods is presented in two parts: (i) a reconciliation of 2009 pro forma segment financial information to 2009 actual segment financial information, and (ii) a reconciliation of 2009 actual segment financial information to 2009 actual GAAP information.

KKR
STATEMENTS OF OPERATIONS AND OTHER SELECTED FINANCIAL INFORMATION
TOTAL REPORTABLE SEGMENTS (UNAUDITED)
(Amounts in thousands)
Quarter Ended Six Months Ended
Actual Actual Pro Forma* Actual Pro Forma*

June 30, 2010

March 31, 2010

June 30, 2009

June 30, 2010

June 30, 2009

Fees
Management and incentive fees:
Management fees $ 110,669 $ 111,029 $ 109,019 $ 221,698 $ 216,657
Incentive fees 8,350 12,500 - 20,850 -
Management and incentive fees 119,019 123,529 109,019 242,548 216,657
Monitoring and transaction fees:
Monitoring fees 20,512 22,532 20,954 43,044 42,914
Transaction fees 37,441 55,534 14,376 92,975 14,567
Fee credits (15,278 ) (14,267 ) (8,794 ) (29,545 ) (10,516 )
Net monitoring and transaction fees 42,675 63,799 26,536 106,474 46,965
Total fees 161,694 187,328 135,555 349,022 263,622
Expenses
Employee compensation and benefits 49,431 52,253 38,684 101,684 78,705
Other operating expenses 48,927 44,686 43,606 93,613 92,000
Total expenses 98,358 96,939 82,290 195,297 170,705
Fee Related Earnings 63,336 90,389 53,265 153,725 92,917
Investment income (loss)
Gross carried interest 229,494 323,211 195,213 552,705 145,070
Less: allocation to KKR carry pool (96,029 ) (99,382 ) (27,606 ) (195,411 ) (28,303 )
Less: management fee refunds (17,907 ) (83,740 ) - (101,647 ) -
Net carried interest 115,558 140,089 167,607 255,647 116,767
Other investment income (loss) 255,031 444,702 393,181 699,733 407,183
Total investment income (loss) 370,589 584,791 560,788 955,380 523,950

Income (Loss) before noncontrolling interests in Income of consolidated entities

433,925 675,180 614,053 1,109,105 616,867

Income (Loss) attributable to noncontrolling interests

874 376 566 1,250 873
Economic Net Income (Loss) $ 433,051 $ 674,804 $ 613,487 $ 1,107,855 $ 615,994
Assets Under Management $ 54,398,300 $ 54,708,700 $ 46,865,800 $ 54,398,300 $ 46,865,800
Fee Paying Assets Under Management $ 41,643,400 $ 42,528,900 $ 41,994,700 $ 41,643,400 $ 41,994,700
Committed Dollars Invested $ 1,113,200 $ 1,142,700 $ 562,900 $ 2,255,900 $ 580,900
Uncalled Commitments $ 13,264,200 $ 14,234,800 $ 14,695,766 $ 13,264,200 $ 14,695,766

* All amounts indicated in this press release as being presented on a pro forma basis give effect to the Business Combination and related transactions as if they were completed on January 1, 2009. See notes to KKR's unaudited reportable segments on page 23 of this press release.

KKR
STATEMENTS OF OPERATIONS AND OTHER SELECTED FINANCIAL INFORMATION
PRIVATE MARKETS SEGMENT (UNAUDITED)
(Amounts in thousands)
Quarter Ended Six Months Ended
Actual Actual Pro Forma Actual Pro Forma

June 30, 2010

March 31, 2010

June 30, 2009

June 30, 2010

June 30, 2009

Fees
Management and incentive fees:
Management fees $ 97,046 $ 98,160 $ 97,089 $ 195,206 $ 192,698
Incentive fees - - - - -
Management and incentive fees 97,046 98,160 97,089 195,206 192,698
Monitoring and transaction fees:
Monitoring fees 20,512 22,532 20,954 43,044 42,914
Transaction fees 20,128 25,114 10,400 45,242 10,400
Fee credits (13,872 ) (10,077 ) (8,794 ) (23,949 ) (10,516 )
Net monitoring and transaction fees 26,768 37,569 22,560 64,337 42,798
Total fees 123,814 135,729 119,649 259,543 235,496
Expenses
Employee compensation and benefits 38,463 40,841 30,811 79,304 63,430
Other operating expenses 43,237 38,671 37,498 81,908 78,678
Total expenses 81,700 79,512 68,309 161,212 142,108
Fee Related Earnings 42,114 56,217 51,340 98,331 93,388
Investment income (loss)
Gross carried interest 228,413 322,840 195,213 551,253 145,070
Less: allocation to KKR carry pool (95,597 ) (99,233 ) (27,606 ) (194,830 ) (28,303 )
Less: management fee refunds (17,907 ) (83,740 ) - (101,647 ) -
Net carried interest 114,909 139,867 167,607 254,776 116,767
Other investment income (loss) (1,462 ) (2,594 ) 4,520 (4,056 ) 3,089
Total investment income (loss) 113,447 137,273 172,127 250,720 119,856

Income (Loss) before noncontrolling interests in Income of consolidated entities

155,561 193,490 223,467 349,051 213,244

Income (Loss) attributable to noncontrolling interests

436 (250 ) 513 186 933
Economic Net Income (Loss) $ 155,125 $ 193,740 $ 222,954 $ 348,865 $ 212,311
Assets Under Management $ 41,031,100 $ 40,943,100 $ 33,686,100 $ 41,031,100 $ 33,686,100
Fee Paying Assets Under Management $ 35,317,500 $ 35,901,900 $ 36,813,800 $ 35,317,500 $ 36,813,800
Committed Dollars Invested $ 1,055,500 $ 995,500 $ 562,900 $ 2,051,000 $ 580,900
Uncalled Commitments $ 11,901,100 $ 12,844,300 $ 14,695,766 $ 11,901,100 $ 14,695,766
See notes to KKR's unaudited reportable segments on page 23 of this press release.
KKR
STATEMENTS OF OPERATIONS AND OTHER SELECTED FINANCIAL INFORMATION
PUBLIC MARKETS SEGMENT (UNAUDITED)
(Amounts in thousands)
Quarter Ended Six Months Ended
Actual Actual Pro Forma Actual Pro Forma
June 30, 2010 March 31, 2010 June 30, 2009 June 30, 2010 June 30, 2009
Fees
Management and incentive fees:
Management fees $ 13,623 $ 12,869 $ 11,930 $ 26,492 $ 23,959
Incentive fees 8,350 12,500 - 20,850 -
Management and incentive fees 21,973 25,369 11,930 47,342 23,959
Monitoring and transaction fees:
Monitoring fees - - - - -
Transaction fees 2,330 5,823 - 8,153 -
Fee credits (1,406 ) (4,190 ) - (5,596 ) -

Net monitoring and transaction fees

924 1,633 - 2,557 -
Total fees 22,897 27,002 11,930 49,899 23,959
Expenses
Employee compensation and benefits 7,474 7,142 5,426 14,616 10,579
Other operating expenses 3,673 4,165 4,603 7,838 10,724
Total expenses 11,147 11,307 10,029 22,454 21,303
Fee Related Earnings 11,750 15,695 1,901 27,445 2,656
Investment income (loss)
Gross carried interest 1,081 371 - 1,452 -
Less: allocation to KKR carry pool (432 ) (149 ) - (581 ) -
Less: management fee refunds - - - - -
Net carried interest 649 222 - 871 -
Other investment income (loss) (126 ) 508 (1,411 ) 382 (2,071 )
Total investment income (loss) 523 730 (1,411 ) 1,253 (2,071 )

Income (Loss) before noncontrolling interests in Income of consolidated entities

12,273 16,425 490 28,698 585

Income (Loss) attributable to noncontrolling interests

110 145 19 255 27
Economic Net Income (Loss) $ 12,163 $ 16,280 $ 471 $ 28,443 $ 558
Assets Under Management $ 13,367,200 $ 13,765,600 $ 13,179,700 $ 13,367,200 $ 13,179,700
Fee Paying Assets Under Management $ 6,325,900 $ 6,627,000 $ 5,180,900 $ 6,325,900 $ 5,180,900
Committed Dollars Invested $ 57,700 $ 147,200 $ - $ 204,900 $ -
Uncalled Commitments $ 1,363,100 $ 1,390,500 $ - $ 1,363,100 $ -
See notes to KKR's unaudited reportable segments on page 23 of this press release.
KKR
STATEMENTS OF OPERATIONS AND OTHER SELECTED FINANCIAL INFORMATION
CAPITAL MARKETS AND PRINCIPAL ACTIVITIES SEGMENT (UNAUDITED)
(Amounts in thousands)
Quarter Ended Six Months Ended
Actual Actual Pro Forma Actual Pro Forma
June 30, 2010 March 31, 2010 June 30, 2009 June 30, 2010 June 30, 2009
Fees
Management and incentive fees:
Management fees $ - $ - $ - $ - $ -
Incentive fees - - - - -
Management and incentive fees - - - - -
Monitoring and transaction fees:
Monitoring fees - - - - -
Transaction fees 14,983 24,597 3,976 39,580 4,167
Fee credits - - - - -
Net monitoring and transaction fees 14,983 24,597 3,976 39,580 4,167
Total fees 14,983 24,597 3,976 39,580 4,167
Expenses
Employee compensation and benefits 3,494 4,270 2,447 7,764 4,696
Other operating expenses 2,017 1,850 1,505 3,867 2,598
Total expenses 5,511 6,120 3,952 11,631 7,294
Fee Related Earnings 9,472 18,477 24 27,949 (3,127 )
Investment income (loss)
Gross carried interest - - - - -
Less: allocation to KKR carry pool - - - - -
Less: management fee refunds - - - - -
Net carried interest - - - - -
Other investment income (loss) 256,619 446,788 390,072 703,407 406,165
Total investment income (loss) 256,619 446,788 390,072 703,407 406,165

Income (Loss) before noncontrolling interests in Income of consolidated entities

266,091 465,265 390,096 731,356 403,038

Income (Loss) attributable to noncontrolling interests

328 481 34 809 (87 )
Economic Net Income (Loss) $ 265,763 $ 464,784 $ 390,062 $ 730,547 $ 403,125
See notes to KKR's unaudited reportable segments on page 23 of this press release.
KKR
STATEMENTS OF OPERATIONS
TOTAL REPORTABLE SEGMENTS - ACTUAL (UNAUDITED)
Quarter Ended June 30, 2010
(Amounts in thousands)

Private Markets Segment

Public Markets Segment

Capital Markets and Principal Activities Segment

Total Reportable Segments

Fees
Management and incentive fees:
Management fees $ 97,046 $ 13,623 $ - $ 110,669
Incentive fees - 8,350 $ - 8,350
Management and incentive fees 97,046 21,973 - 119,019
Monitoring and transaction fees:
Monitoring fees 20,512 - - 20,512
Transaction fees 20,128 2,330 14,983 37,441
Fee credits (13,872 ) (1,406 ) - (15,278 )
Net monitoring and transaction fees 26,768 924 14,983 42,675
Total fees 123,814 22,897 14,983 161,694
Expenses
Employee compensation and benefits 38,463 7,474 3,494 49,431
Other operating expenses 43,237 3,673 2,017 48,927
Total expenses 81,700 11,147 5,511 98,358
Fee Related Earnings 42,114 11,750 9,472 63,336
Investment income (loss)
Gross carried interest 228,413 1,081 - 229,494
Less: allocation to KKR carry pool (95,597 ) (432 ) - (96,029 )
Less: management fee refunds (17,907 ) - - (17,907 )
Net carried interest 114,909 649 - 115,558
Other investment income (loss) (1,462 ) (126 ) 256,619 255,031
Total investment income (loss) 113,447 523 256,619 370,589

Income (Loss) before noncontrolling interests in Income of consolidated entities

155,561 12,273 266,091 433,925

Income (Loss) attributable to noncontrolling interests

436 110 328 874
Economic Net Income (Loss) $ 155,125 $ 12,163 $ 265,763 $ 433,051
See notes to KKR's unaudited reportable segments on page 23 of this press release.
KKR
STATEMENTS OF OPERATIONS
TOTAL REPORTABLE SEGMENTS - ACTUAL (UNAUDITED)
Quarter Ended March 31, 2010
(Amounts in thousands)

Private Markets Segment

Public Markets Segment

Capital Markets and Principal Activities Segment

Total Reportable Segments

Fees
Management and incentive fees:
Management fees $ 98,160 $ 12,869 $ - $ 111,029
Incentive fees - 12,500 - 12,500
Management and incentive fees 98,160 25,369 - 123,529
Monitoring and transaction fees:
Monitoring fees 22,532 - - 22,532
Transaction fees 25,114 5,823 24,597 55,534
Fee credits (10,077 ) (4,190 ) - (14,267 )
Net monitoring and transaction fees 37,569 1,633 24,597 63,799
Total fees 135,729 27,002 24,597 187,328
Expenses
Employee compensation and benefits 40,841 7,142 4,270 52,253
Other operating expenses 38,671 4,165 1,850 44,686
Total expenses 79,512 11,307 6,120 96,939
Fee Related Earnings 56,217 15,695 18,477 90,389
Investment income (loss)
Gross carried interest 322,840 371 - 323,211
Less: allocation to KKR carry pool (99,233 ) (149 ) - (99,382 )
Less: management fee refunds (83,740 ) - - (83,740 )
Net carried interest 139,867 222 - 140,089
Other investment income (loss) (2,594 ) 508 446,788 444,702
Total investment income (loss) 137,273 730 446,788 584,791

Income (Loss) before noncontrolling interests in Income of consolidated entities

193,490 16,425 465,265 675,180

Income (Loss) attributable to noncontrolling interests

(250 ) 145 481 376
Economic Net Income (Loss) $ 193,740 $ 16,280 $ 464,784 $ 674,804
See notes to KKR's unaudited reportable segments on page 23 of this press release.
KKR
STATEMENTS OF OPERATIONS
TOTAL REPORTABLE SEGMENTS - PRO FORMA (UNAUDITED)
Quarter Ended June 30, 2009
(Amounts in thousands)

Private Markets Segment

Public Markets Segment

Capital Markets and Principal Activities Segment

Total Reportable Segments

Fees
Management and incentive fees:
Management fees $ 97,089 $ 11,930 $ - $ 109,019
Incentive fees - - - -
Management and incentive fees 97,089 11,930 - 109,019
Monitoring and transaction fees:
Monitoring fees 20,954 - - 20,954
Transaction fees 10,400 - 3,976 14,376
Fee credits (8,794 ) - - (8,794 )
Net monitoring and transaction fees 22,560 - 3,976 26,536
Total fees 119,649 11,930 3,976 135,555
Expenses
Employee compensation and benefits 30,811 5,426 2,447 38,684
Other operating expenses 37,498 4,603 1,505 43,606
Total expenses 68,309 10,029 3,952 82,290
Fee Related Earnings 51,340 1,901 24 53,265
Investment income (loss)
Gross carried interest 195,213 - - 195,213
Less: allocation to KKR carry pool (27,606 ) - - (27,606 )
Less: management fee refunds - - - -
Net carried interest 167,607 - - 167,607
Other investment income (loss) 4,520 (1,411 ) 390,072 393,181
Total investment income (loss) 172,127 (1,411 ) 390,072 560,788

Income (Loss) before noncontrolling interests in Income of consolidated entities

223,467 490 390,096 614,053

Income (Loss) attributable to noncontrolling interests

513 19 34 566
Economic Net Income (Loss) $ 222,954 $ 471 $ 390,062 $ 613,487
See notes to KKR's unaudited reportable segments on page 23 of this press release.
KKR
STATEMENTS OF OPERATIONS
TOTAL REPORTABLE SEGMENTS - ACTUAL (UNAUDITED)
Six Months Ended June 30, 2010
(Amounts in thousands)

Private Markets Segment

Public Markets Segment

Capital Markets and Principal Activities Segment

Total Reportable Segments

Fees
Management and incentive fees:
Management fees $ 195,206 $ 26,492 $ - $ 221,698
Incentive fees - 20,850 - 20,850
Management and incentive fees 195,206 47,342 - 242,548
Monitoring and transaction fees:
Monitoring fees 43,044 - - 43,044
Transaction fees 45,242 8,153 39,580 92,975
Fee credits (23,949 ) (5,596 ) - (29,545 )
Net monitoring and transaction fees 64,337 2,557 39,580 106,474
Total fees 259,543 49,899 39,580 349,022
Expenses
Employee compensation and benefits 79,304 14,616 7,764 101,684
Other operating expenses 81,908 7,838 3,867 93,613
Total expenses 161,212 22,454 11,631 195,297
Fee Related Earnings 98,331 27,445 27,949 153,725
Investment income (loss)
Gross carried interest 551,253 1,452 - 552,705
Less: allocation to KKR carry pool (194,830 ) (581 ) - (195,411 )
Less: management fee refunds (101,647 ) - - (101,647 )
Net carried interest 254,776 871 - 255,647
Other investment income (loss) (4,056 ) 382 703,407 699,733
Total investment income (loss) 250,720 1,253 703,407 955,380

Income (Loss) before noncontrolling interests in Income of consolidated entities

349,051 28,698 731,356 1,109,105

Income (Loss) attributable to noncontrolling interests

186 255 809 1,250
Economic Net Income (Loss) $ 348,865 $ 28,443 $ 730,547 $ 1,107,855
See notes to KKR's unaudited reportable segments on page 23 of this press release.
KKR
STATEMENTS OF OPERATIONS
TOTAL REPORTABLE SEGMENTS - PRO FORMA (UNAUDITED)
Six Months Ended June 30, 2009
(Amounts in thousands)

Private Markets Segment

Public Markets Segment

Capital Markets and Principal Activities Segment

Total Reportable Segments

Fees
Management and incentive fees:
Management fees $ 192,698 $ 23,959 $ - $ 216,657
Incentive fees - - - -
Management and incentive fees 192,698 23,959 - 216,657
Monitoring and transaction fees:
Monitoring fees 42,914 - - 42,914
Transaction fees 10,400 - 4,167 14,567
Fee credits (10,516 ) - - (10,516 )
Net monitoring and transaction fees 42,798 - 4,167 46,965
Total fees 235,496 23,959 4,167 263,622
Expenses
Employee compensation and benefits 63,430 10,579 4,696 78,705
Other operating expenses 78,678 10,724 2,598 92,000
Total expenses 142,108 21,303 7,294 170,705
Fee Related Earnings 93,388 2,656 (3,127 ) 92,917
Investment income (loss)
Gross carried interest 145,070 - - 145,070
Less: allocation to KKR carry pool (28,303 ) - - (28,303 )
Less: management fee refunds - - - -
Net carried interest 116,767 - - 116,767
Other investment income (loss) 3,089 (2,071 ) 406,165 407,183
Total investment income (loss) 119,856 (2,071 ) 406,165 523,950

Income (Loss) before noncontrolling interests in Income of consolidated entities

213,244 585 403,038 616,867

Income (Loss) attributable to noncontrolling interests

933 27 (87 ) 873
Economic Net Income (Loss) $ 212,311 $ 558 $ 403,125 $ 615,994
See notes to KKR's unaudited reportable segments on page 23 of this press release.
KKR
BALANCE SHEETS
TOTAL REPORTABLE SEGMENTS (UNAUDITED)
(Amounts in thousands, except unit and per unit amounts)
As of June 30, 2010
Private Markets Segment Public Markets Segment

Capital Markets
and Principal
Activities Segment

Total Reportable Segments
Cash and cash equivalents $ 159,131 $ 13,844 $ 335,151 $ 508,126
Investments - - 4,450,147 (a) 4,450,147
Unrealized carry 360,520 872 - 361,392
Other assets 124,223 56,066 30,621 210,910
Total assets $ 643,874 $ 70,782 $ 4,815,919 $ 5,530,575
Debt obligations $ - $ - $ 314,051 $ 314,051
Other liabilities 123,604 11,570 31,426 166,600
Total liabilities 123,604 11,570 345,477 480,651
Noncontrolling interests (1,057 ) 222 19,414 18,579
Partners' capital $ 521,327 $ 58,990 $ 4,451,028 $ 5,031,345
Book value per unit (b) $ 0.76 $ 0.09 $ 6.52 $ 7.37
As of December 31, 2009
Private Markets Segment Public Markets Segment Capital Markets and Principal Activities Segment Total Reportable Segments
Cash and cash equivalents $ 51,015 $ 9,089 $ 496,554 $ 556,658
Investments - - 4,108,359 4,108,359
Unrealized carry 156,149 - - 156,149
Other assets 154,964 53,319 55,219 263,502
Total assets $ 362,128 $ 62,408 $ 4,660,132 $ 5,084,668
Debt obligations $ - $ - $ 733,697 $ 733,697
Other liabilities 84,936 12,300 85,802 183,038
Total liabilities 84,936 12,300 819,499 916,735
Noncontrolling interests 130 527 14,392 15,049
Partners' capital $ 277,062 $ 49,581 $ 3,826,241 $ 4,152,884
Book value per unit (b) $ 0.41 $ 0.07 $ 5.60 $ 6.08
(a) See Capital Markets and Principal Activities segment schedule of investments that follows in this press release

(b) Book value per unit is based on 683,007,420 units on a fully diluted basis giving effect to the common units that may be issued by KKR & Co. L.P. upon exchange of units in KKR Holdings L.P. for KKR common units.

KKR
CAPITAL MARKETS AND PRINCIPAL ACTIVITIES SEGMENT - SCHEDULE OF INVESTMENTS
(Amounts in thousands, except percentage amounts)

As of June 30, 2010

Fair Value as
Fair a Percentage

Investment

Cost

Value of Investments
Private Equity Investments:

Co-investments in portfolio companies of private equity funds:

Dollar General Corporation $ 183,332 $ 577,233 13.0 %
HCA Inc. 201,444 455,037 10.2
Alliance Boots GmbH. 301,352 268,913 6.0
The Nielsen Company B.V. 156,839 219,574 4.9
Biomet, Inc. 151,443 151,443 3.4
NXP B.V. 250,000 125,000 2.8
U.S. Foodservice, Inc. 100,000 90,000 2.0
First Data Corporation 135,258 81,155 1.8
Energy Future Holdings Corp. 200,000 60,000 1.3
ProSiebenSat.1 Media AG 226,913 42,592 1.0
KION Group GmbH. 128,058 26,975 0.6
PagesJaunes Groupe S.A. 235,201 25,681 0.6
Capmark Financial Group Inc. 137,321 -- --
2,407,161 2,123,603 47.7
Private equity funds:
KKR 2006 Fund L.P. 1,176,414 1,239,622 27.9
KKR Millennium Fund L.P. 197,664 178,721 4.0
KKR European Fund, Limited Partnership 160,690 165,796 3.7
KKR European Fund III, Limited Partnership 156,810 152,976 3.4
KKR Asian Fund L.P. 123,382 140,372 3.2
KKR European Fund II, Limited Partnership 96,387 68,161 1.5
KKR E2 Investors, L.P. 10,961 12,723 0.3
1,922,308 1,958,371 44.0
Other Investments 411,179 368,173 8.3
Total Investments $ 4,740,648 $ 4,450,147 100.0 %
KKR
CAPITAL MARKETS AND PRINCIPAL ACTIVITIES SEGMENT - SCHEDULE OF INVESTMENTS (CONTINUED)
(Amounts in thousands, except percentage amounts)

As of June 30, 2010

Fair Value as
Fair a Percentage

Investment

Cost

Value of Investments
Significant Aggregate Investments: (a)
Dollar General Corporation $ 264,880 $ 798,952 18.0 %
HCA Inc. 260,920 574,420 12.9
Alliance Boots GmbH 443,114 407,054 9.1
Biomet, Inc. 256,358 256,358 5.8
The Nielsen Company B.V. 172,841 240,698 5.4
1,398,113 2,277,482 51.2
Other Portfolio Companies (b) 2,931,356 1,804,492 40.5
Other Investments 411,179 368,173 8.3
Total Investments $ 4,740,648 $ 4,450,147 100.0 %
Investments by Geography:
North America $ 2,559,013 $ 2,995,747 67.3 %
Europe 1,771,306 1,029,109 23.1
Asia Pacific 410,329 425,291 9.6
Total Investments $ 4,740,648 $ 4,450,147 100.0 %
Investments by Industry:
Healthcare $ 1,019,662 $ 1,290,725 29.0 %
Retail 600,909 1,072,761 24.1
Financial Services 901,688 569,798 12.8
Media/Telecom 763,570 409,289 9.2
Technology 467,304 372,520 8.4
Industrial 338,061 268,244 6.0
Energy 456,923 267,954 6.0
Consumer Products 171,290 177,822 4.0
Other 21,241 21,034 0.5
Total Investments $ 4,740,648 $ 4,450,147 100.0 %
(a) The significant aggregate private equity investments include the co-investment in the underlying portfolio company and the limited partner and/or general partner interests equal to the pro rata share of KKR's private equity fund investment with fair values in excess of 5% of the Capital Markets and Principal Activities Segment investments balance as of June 30, 2010.
(b) Other portfolio companies include aggregate private equity investments in portfolio companies with individual fair values less than 5% of the Capital Markets and Principal Activities Segment investments balance as of June 30, 2010.
KKR
ASSETS UNDER MANAGEMENT AND FEE PAYING ASSETS UNDER MANAGEMENT
(Amounts in thousands)
Assets Under Management
Private Markets Segment Public Markets Segment Total Reportable Segments
AUM as of March 31, 2010 $ 40,943,100 $ 13,765,600 54,708,700
New Capital Raised 184,900 144,700 329,600
Distributions (811,800 ) (512,500 ) (1,324,300 )
Foreign Exchange (299,400 ) - (299,400 )
Change in Value 1,014,300 (30,600 ) 983,700
AUM as of June 30, 2010 $ 41,031,100 $ 13,367,200 $ 54,398,300
Fee Paying Assets Under Management
Private Markets Segment Public Markets Segment Total Reportable Segments
FPAUM as of March 31, 2010 $ 35,901,900 $ 6,627,000 $ 42,528,900
New Capital Raised 184,500 144,300 328,800
Distributions (110,300 ) (512,500 ) (622,800 )
Foreign Exchange (660,100 ) - (660,100 )
Change in Value 1,500 67,100 68,600
FPAUM as of June 30, 2010 $ 35,317,500 $ 6,325,900 $ 41,643,400
KKR
INVESTMENT VEHICLE SUMMARY (UNAUDITED)
As of June 30, 2010
(Amounts in millions, except percentages)
Investment Period Amount

Private Markets

Commencement

Date

End

Date

Commitment Uncalled

Commitments

Percentage Committed by General Partner

Invested

Realized Remaining

Cost

Fair Value
Traditional Funds
E2 Investors (Annex Fund) 8/2009 11/2011 $ 523.8 $ 389.0 4.3% $ 134.8 $ - $ 134.8 $ 155.1
European Fund III 3/2008 3/2014 5,721.4 3,878.5 4.7% 1,842.9 - 1,842.9 1,723.2
Asian Fund 7/2007 7/2013 4,000.0 2,306.9 2.5% 1,693.1 - 1,693.1 1,988.5
2006 Fund 9/2006 9/2012 17,642.2 4,636.7 2.1% 13,005.5 711.7 12,303.2 13,885.9
European Fund II 11/2005 10/2008 5,750.8 - 2.1% 5,750.8 658.3 5,439.1 3,598.9
Millennium Fund 12/2002 12/2008 6,000.0 - 2.5% 6,000.0 5,523.1 4,385.3 5,509.6
European Fund 12/1999 12/2005 3,085.4 - 3.2% 3,085.4 6,214.3 565.6 1,929.3
Total Traditional Funds 42,723.6 11,211.1 31,512.5 13,107.4 26,364.0 28,790.5
Co-Investment and Other
Co-Investment Vehicles Various Various 1,847.7 432.5 Various 1,415.2 189.9 1,357.7 1,874.5
Natural Resources I 3/2010 (1) 257.5 257.5 2.9% - - - -
Total Co-Investment and Other 2,105.2 690.0 1,415.2 189.9 1,357.7 1,874.5
Private Markets Total 44,828.8 11,901.1 32,927.7 13,297.3 27,721.7 30,665.0

Public Markets

Capital Solutions Vehicles Various Various 1,187.7 934.5 Various 253.2 - 253.2 264.7
Mezzanine Fund 3/2010 3/2015 428.6 428.6 10.5% - - - -
Public Markets Total 1,616.3 1,363.1 253.2 - 253.2 264.7
Total $ 46,445.1 $ 13,264.2 $ 33,180.9 $ 13,297.3 $ 27,974.9 $ 30,929.7

(1) Third anniversary of the first acquisition.

KKR
DISTRIBUTION CALCULATION
(Amounts in thousands, except unit and per unit amounts)
Quarter Ended
June 30, 2010
FRE $ 63,336
Realized cash carry 16,343
Less: local income taxes (1,720 )
Less: noncontrolling interests (874 )
Gross distributable earnings 77,085
Earnings attributable to KKR & Co. L.P. (30%) 23,126
Less: estimated current corporate income taxes (6,990 )
Plus: tax distribution -
Net cash available for distribution 16,136
Outstanding KKR & Co. L.P. units 204,902,226
Distribution per KKR & Co. L.P. unit $ 0.08

During the second quarter of 2010, $0.0290 of U.S. federal tax withholding per KKR common unit was withheld on behalf of KKR unitholders by various entities through which KKR operates its businesses as required under U.S. tax laws. This amount will be reported as a distribution in each KKR unitholder's 2010 Schedule K-1 for U.S. federal tax reporting purposes.

Prior to July 15, 2010, distributions made to KKR & Co. (Guernsey) L.P. (a Guernsey limited partnership formerly listed on Euronext Amsterdam), by KKR Management Holdings Corp. (a Delaware corporation) were subject to U.S. federal tax withholding at a rate of 30%. By July 15, 2010, KKR & Co. L.P. (a Delaware limited partnership) was listed on the New York Stock Exchange in replacement of KKR & Co. (Guernsey) L.P. as the relevant publicly traded partnership of KKR's unitholders, and KKR & Co. L.P. became the successor of KKR & Co. (Guernsey) L.P. for U.S. federal tax reporting purposes. Because distributions between U.S. entities generally do not give rise to a withholding obligation, distributions by KKR Management Holdings Corp. to KKR & Co. L.P. are not subject to U.S. federal tax withholding.

To the extent the distribution for the quarter ended June 30, 2010 by KKR & Co. L.P. to its unitholders is allocable to non-U.S. persons for U.S. federal tax reporting purposes, withholding is expected to be imposed by the intermediaries through which those unitholders own their KKR & Co. L.P. units based upon the Qualified Notice to be issued by KKR & Co. L.P. prior to the time of such distribution.

DISTRIBUTION POLICY

For the purposes of KKR's distribution policy, its distributions are expected to consist of an amount initially consisting of (i) FRE, (ii) carry distributions received from KKR's investment funds which have not been allocated as part of its carry pool, and (iii) certain tax distributions, if any. This amount is expected to be reduced by (i) corporate and applicable local taxes if any, (ii) noncontrolling interests, and (iii) amounts determined by KKR to be necessary or appropriate for the conduct of its business and other matters as discussed above.

The declaration and payment of any distributions are subject to the discretion of the board of directors of the general partner of KKR & Co. L.P. and the terms of its limited partnership agreement. There can be no assurance that distributions will be made as intended or at all or that such distributions will be sufficient to pay any particular KKR unitholder's actual U.S. or non-U.S. tax liability.

Notes to the Unaudited Reportable Segments

The reportable segments are presented prior to giving effect to the allocation of income between KKR & Co. L.P. and KKR Holdings L.P. and as such represents the business in total. KKR's allocable portion of FRE and ENI would be calculated as approximately 30% of the amounts presented less applicable income taxes.

The FRE and ENI previously reported for periods prior to October 1, 2009 did not reflect certain adjustments that are applicable for periods after October 1, 2009 as a result of the Business Combination, which include items such as:

  • the exclusion of approximately 40% of the carry allocated to KKR principals pursuant to its carry pool;
  • the exclusion of carry allocated to former KKR principals;
  • the exclusion of the capital invested by or on behalf of the general partners of KKR's private equity funds before the completion of the Business Combination and any returns thereon;
  • the exclusion of the economic interests associated with the KKR 1996 Fund;
  • the elimination of management fees paid by KKR & Co. (Guernsey) L.P. formerly known as KKR Private Equity Investors, L.P. ("KPE"), prior to the Business Combination, to KKR's management companies;
  • the inclusion of the financial results of KPE; and
  • certain compensation adjustments including: (a) the exclusion of bonuses earned by certain of KKR's principals which will not be borne by public investors and (b) the inclusion of salaries for KKR's senior principals.

Given the significance of these adjustments, the comparisons to all periods prior to October 1, 2009 in this press release are on a pro forma basis giving effect to the adjustments above. For a further discussion of adjustments related to the Business Combination please refer to KKR's registration statement on Form S-1 (Registration No. 333-165414), which is available at the SEC's website at www.sec.gov.

Key performance measures used in evaluating KKR's reportable business segments are summarized below. These measures are used by management for its segments in making resource deployment and other operational decisions.

Fee related earnings ("FRE") is comprised of segment operating revenues, less segment operating expenses. The components of FRE on a segment basis differ from the equivalent U.S. GAAP amounts on a combined basis as a result of: (i) the inclusion of management fees earned from consolidated funds that were eliminated in consolidation; (ii) the exclusion of expenses of consolidated funds; (iii) the exclusion of charges relating to the amortization of intangible assets; (iv) the exclusion of charges relating to carry pool allocations; (v) the exclusion of non-cash equity charges and other non-cash compensation charges; (vi) the exclusion of certain reimbursable expenses and (vii) the exclusion of certain non-recurring items.

Economic net income ("ENI") is a measure of profitability for KKR's reportable segments and is comprised of: (i) FRE; plus (ii) segment investment income, which is reduced for carry pool allocations and management fee refunds; less (iii) certain economic interests in KKR's segments held by third parties. ENI differs from net income on a U.S. GAAP basis as a result of: (i) the exclusion of the items referred to in FRE above; (ii) the exclusion of investment income relating to noncontrolling interests; and (iii) the exclusion of income taxes.

Assets under management ("AUM") represent the assets from which KKR is entitled to receive fees or a carried interest and general partner capital. KKR calculates the amount of AUM as of any date as the sum of: (i) the fair value of the investments of KKR's investment funds plus uncalled capital commitments from these funds; (ii) the fair value of investments in KKR's co-investment vehicles; (iii) the net asset value of certain of KKR's fixed income products; and (iv) the value of outstanding structured finance vehicles. You should note that KKR's calculation of AUM may differ from the calculations of other asset managers and, as a result, its measurements of AUM may not be comparable to similar measures presented by other asset managers. KKR's definition of AUM is not based on any definition of AUM that is set forth in the agreements governing the investment funds, vehicles or accounts that it manages.

Notes to KKR's Unaudited Reportable Segments (Continued)

Fee paying AUM ("FPAUM") represents only those assets under management from which KKR receives fees. FPAUM is the sum of all of the individual fee bases that are used to calculate KKR's fees and differs from AUM in the following respects: (i) assets from which KKR does not receive a fee are excluded (i.e., assets with respect to which it receives only carried interest); and (ii) certain assets, primarily in its private equity funds, are reflected based on capital commitments and invested capital as opposed to fair value because fees are not impacted by changes in the fair value of underlying investments.

Committed dollars invested is the aggregate amount of capital commitments that have been invested by KKR's investment funds and carry-yielding co-investment vehicles during a given period. Such amounts include: (i) capital invested by fund investors and co-investors with respect to which KKR is entitled to a carried interest and (ii) capital invested by KKR.

Uncalled commitments represent unfunded capital commitments that KKR's investment funds and carry-paying co-investment vehicles have received from partners to contribute capital to fund future investments.

The following should be considered when reviewing KKR's reportable segments:

Fee Credits require KKR to share a portion of any monitoring and transaction fees received from portfolio companies with limited partners in certain of its investment funds. Fee credits exclude fees that are not attributable to a fund's investment in a portfolio company and generally amount to 80% of monitoring and transaction fees after fund related expenses are recovered.

KKR Carry Pool represents a portion of the carried interest earned in relation to certain of KKR's active and future investment funds and co-investment vehicles that will be allocated to its principals, other professionals and selected other individuals.

Management Fee Refunds represent 20% of any cash management fees earned from limited partners in the event that certain of KKR's investment funds recognize a carried interest. At such time as the fund recognizes a carried interest in an amount sufficient to cover 20% of the management fees earned or a portion thereof, carried interest is reduced, not to exceed 20% of management fees earned.

Noncontrolling interests represent economic interests that will (i) allocate to a former principal an aggregate of 1% of profits and losses of its management companies until a future date and (ii) allocate to a third party investor an aggregate of 2% of the equity in its capital markets business.

SOURCE: KKR & Co. L.P.

Kohlberg Kravis Roberts & Co. L.P.
Investor Relations:
Jonathan Levin, +1-877-610-4910 (U.S.) / +1-212-230-9410
investor-relations@kkr.com
or
Media:
Peter McKillop or Kristi Huller, + 1-212-750-8300
media@kkr.com

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